The Amount of Oil Used by North America
In a recent blog, I talked about how shale gas is changing North America’s energy needs, and how that could change the way that the world works. The effect is starting to be felt.
A quote from “MISH’S Global Economic Trend Analysis”
Another Plunge in 3-Month Rolling Average of Petroleum and Gasoline Usage. …….U.S. petroleum and gasoline usage for (the 3 months) December-February 2012 compared with the same three months in prior years. ….courtesy of reader Tim Wallace.
Note that petroleum usage is back to December 1995 thru February 1996 levels. Gasoline usage is back to December 2001 thru February 2002 levels.
While we argue about the high cost of gas, and the high cost of oil, consumption in the USA is actually falling.
The Long Term Effect on Productivity
Let’s talk about the effect of this on productivity and economic expansion in the USA. Prosperity in the Middle East and in third world oil producing countries, which is so dependent of oil exports to the USA, Europe, and China, will fall, as oil exports to North America fall.
China and Europe do not yet seem to have similar shale gas supplies, but as the technology matures, a similar change could occur there.
In the meantime, the USA will be importing less from the middle east, reducing pressure on the price of oil, and very importantly – reducing the outward flow of US dollars to the Middle East. As the export of US dollars shrinks, the efficiently and productivity in North America will grow. Prosperity will grow in the USA. It is inevitable.
The Advantage of Cheap Energy
Firstly, the masses of environmental laws and regulations will become less relevant because the environmental issues will be significantly less. The ability to create new business and economic prosperity in the USA will grow. The hoards of litigation, consultants, environmentalists and hangers-on will find less prosperity and business will be less harassed. There will be more jobs and more money for all.
Productivity Advantage
The greatest supply of shale gas currently appears to be in North America. China and other countries do not seem to have similar supplies, although I suspect they also will find adequate reserves in due course.
In the meantime, energy costs in the USA will drop significantly, to the point that the USA will have a significant cost advantage over manufacturing and transportation in other parts of the world.
In addition to the current economic advantages that the USA has, such as rights and freedoms, property rights, and all the rest, the USA will have a energy cost advantage. An advantage that will promote prosperity in the USA.
Now consider where you want to invest – in US multinationals and US based companies? Or elsewhere?
Homeland Security
One of the largest effects of the 9/11 attacks, was the creation worldwide of this massive new employer, called Homeland Security in the USA, and different names elsewhere. The growth of this industry has been stupendous. Some say that without this industry soaking up so many unemployed during the recent downturn, the recession would have been much deeper. How ironic!
Consider where the funding for terrorism worldwide comes from. Indirectly it comes from oil money flowing into the Middle East. When this flow of money slows, those regimes will have to start worrying about how they care for their own people, rather than contributing vast sums to terrorism.
So indirectly, shale gas will put a large damper on terrorism. Travel will become easier. Crossing borders will become easier. Bureaucracy will diminish (although somehow that never seems to happen). Life will become freer.
Guess what else will happen? Deficits will reduce, and the growth in economies will start escalating much faster than existing debt. The debt problem will reduce in significance.
How strange Capitalism is. It works in very funny ways, but it works.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.
