Thursday, February 28, 2013

U.S. production of crude oil surges

I must echo Mark Perry on this (check out his latest post for lots of juicy details), since it represents a big positive change on the margin that supports the outlook for the U.S. economy.


U.S. crude oil production is up 22% in the past year, and has risen by an astounding 34% in the past four years. This is more than a recovery from recession, this is effectively a whole new industry that is being built on the back of new drilling technologies.


Along with the rise in crude oil production which started 2008 has come a virtual gusher of natural gas, which in turn has resulted in a huge decline in natural gas prices. As the chart above shows, from their peak in 2008, natural gas prices have fallen almost 75%. Crude oil is largely fungible and thus determined by global market forces, so its price hasn't fallen much, but natural gas is not easily fungible on a global scale (it has to be compressed and shipped) and so U.S. gas prices have fallen significantly.


As this next chart shows, natural gas has now become extremely cheap relative to oil. This has given U.S. manufacturers who use large amounts of energy a significant natural advantage relative to those of other countries, not to mention giving consumers in many areas of the country a big break on their heating bills. These are transformative changes in the U.S. economy which are extremely positive for the future.

6 comments:

Gloeschi said...

Average gas price in NY State is above $4.

William said...

American Association of Idividual Investors

Bullish 28.4%
down 13.4
Neutral 35.0%
up 9.3
Bearish 36.6%
up 4.1

Long-Term Average:
Bullish: 39.0%
Neutral: 30.5%
Bearish: 30.5%

Th highest reading that I saw in this series was 46+ % back in January. They have tucked in their tails and turned dramatically this week. So no frothiness among these guys.

William said...

LIPPER FUND FLOW REPORT

Weekly 02/27/2013
Equity Fund Outflows -$940 Mil; Taxable Bond Fund Inflows $4 Bil
xETFs - Equity Fund Inflows $2.8 Bil;
Taxable Bond Fund Inflows $2.9 Bil

Monthly 02/22/2013 January Equity Fund Inflows $60.7 Bil;
Taxable Bond Fund Inflows $40.7 Bil
xETFs - Equity Fund Inflows $37.7 Bil;
Taxable Bond Fund Inflows $39.1 Bil

Weekly 02/20/2013 Equity Fund Inflows $2.9 Bil; Taxable Bond Fund Inflows $2.2 Bil
xETFs - Equity Fund Inflows $2.6 Bil;
Taxable Bond Fund Inflows $2.4 Bil

Weekly 02/13/2013 Equity Fund Inflows $599 Mil; Taxable Bond Fund Inflows $3.3 Bil
xETFs - Equity Fund Inflows $2.4 Bil; Taxable Bond Fund Inflows $2.9 Bil

Weekly 02/06/2013 Equity Fund Inflows $6.1 Bil; Taxable Bond Fund Inflows $2.3 Bil
xETFs - Equity Fund Inflows $4.1 Bil;
Taxable Bond Fund Inflows $3.3 Bil

No sign of over-exuberance here.

Gloeschi said...

Correlation between AAII sentiment and subsequent stock market returns over various periods is zero.

surrajcommodities surraj said...

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sathyam shonkho said...

CEO of Prodigy Oil and Gas, Mr. Shawn Bartholomae, has his own ideas about the ethanol
debacle unfolding right before our eyes. Pieces continue to come to light about the
government's use of ethanol mixed with gasoline to help promote US energy independence.
"All the ethanol brouhaha began before the US's resurgence into the oil and gas market place,
says Bartholomae.