{"id":682,"date":"2013-05-11T11:14:31","date_gmt":"2013-05-11T16:14:31","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=682"},"modified":"2013-05-12T08:13:47","modified_gmt":"2013-05-12T13:13:47","slug":"shale-gas-bashing-gone-wrong","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2013\/05\/11\/shale-gas-bashing-gone-wrong\/","title":{"rendered":"Shale Gas Bashing Gone Wrong"},"content":{"rendered":"

There are some very poor \u201cjournalism\/reporting\u201d on the internet.\u00a0\u00a0 Businessinsider.com seems to be getting worse.\u00a0\u00a0I give them credit for being good entertainment at times.\u00a0 I usually just laugh and scoff at the poor articles and move on.\u00a0\u00a0 However this latest attempt of journalism\/reporting hit home with me – <\/span>12 Reasons The American Energy Boom Is Totally Overrated<\/span><\/a> .\u00a0 I didnt read Michael Levi’s book that may have sparked this.\u00a0\u00a0 I believe Michael would have been more logical and less sensational than BI, given I do follow Michael’s work.<\/span><\/span><\/p>\n

The biggest oversight is the fact the low natural gas price over the last few years have allowed the population to have much more disposable income.\u00a0 This is very simple math as I showed in<\/span> my previous blog I did last year in January<\/span><\/a>.\u00a0 In that blog, I showed at least a savings of $193 billion dollars.\u00a0 Adding 2012 figures into the analysis total savings are now $283 billion. \u00a0One needs to remember energy is just a MEANS to an end.\u00a0\u00a0 Having energy by itself is worthless.\u00a0 Therefore anything to reduce the cost of the means adds directly to the benefit of society.\u00a0 <\/span><\/span><\/p>\n

Let me go graph by graph and refute and\/or elaborate where they should have.<\/span><\/span><\/p>\n

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BI:\u201cAccording to the BEA, the U.S. mining sector, which includes oil and gas production, contributed a measly 7\/100ths of a point to the 2.2 GDP growth we saw in 2012\u201d.\u00a0 Please don\u2019t just focus on what they are highlighting, but notice the largest item of growth is manufacturing.\u00a0 Having lower cost power and more disposable income allows this gain.<\/span><\/span><\/p>\n

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BI: \u201cEnergy intensive industries are adding about 10% less value than all manufacturers.\u201d Energy intensive industries take many years to develop due to their large capital investments needed.\u00a0 It is not reasonable to expect the uptick in the energy intensive sectors first.\u00a0 As pointed out in my blog my first year point of shale impact started in 2008.\u00a0\u00a0 The graph above shows only to 2011 \u2013 hardly any time for people to believe and put billions into a project requiring low gas prices.<\/span><\/span><\/p>\n

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BI: \u201cRelative to the rest of the economy, the energy intensive industries aren’t outperforming.\u201d\u00a0 My response would be similar to the point above.\u00a0 \u00a0The graphic is even worse since only up to 2010.<\/span><\/span><\/p>\n

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BI: \u201cEnergy comprises just a tiny 2% of US of manufacturing costs.\u201d\u00a0 There is a multiplier effect for energy cost in manufacturing.\u00a0\u00a0 Materials are clearly a large part of manufacturing.\u00a0\u00a0 How do you think you get materials such as aluminum to make cars?\u00a0 Though Auto, HVAC, Engines, Electronics, Machinery, Transportation, Electrical Equipment shows little energy cost they are highly dependent on the cost of energy per the materials.\u00a0 Materials are not naturally produced as the BI \u201creporter\u201d would like you to believe.<\/span><\/span><\/p>\n

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BI: \u201cAnd only handful of industries are truly energy intensive.\u201d\u00a0 This is a chicken and egg issue.\u00a0 The reason our economy has shifted to be less energy intensive is because of the cost of energy and labor increased relative to the rest of the world.\u00a0\u00a0 With sustainable lower energy cost there will be a change in the above profile.\u00a0 This is another failure to think and deduce a wrong conclusion. \u00a0It takes a certain amount of time before energy intensive industries come back, but they will if we don\u2019t mess it up.<\/span><\/span><\/p>\n

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BI: \u201cThe volume of petroleum imports have long been declining, and have moved independent of prices.\u201d\u00a0 This is less to do with shale.\u00a0\u00a0 Shale\u2019s focus is natural gas not oil.\u00a0\u00a0 The oil decline has more to do with the price of the global oil markets.<\/span><\/span><\/p>\n

\u00a0\"\"<\/a><\/span><\/p>\n

 <\/p>\n

BI: \u201cMexico has long enjoyed abundant natural gas reserves, but it too hasn’t seen its energy-intensive industries go gangbusters.\u201d\u00a0 Mexico has enjoyed abundant amount of oil also.\u00a0\u00a0 This has more to do with the political structure and the inefficiencies in their market.\u00a0\u00a0 Their infrastructure is so bad they import electricity from the US. <\/span><\/span><\/p>\n

\u00a0\"\"<\/a><\/span><\/p>\n

 <\/p>\n

BI: \u201cEnergy as a share of gross output has declined to a little over 3%, but it’s almost certainly more a function of oil prices resetting after spiking in 2008.\u201d This is so wrong in so many ways.\u00a0\u00a0 Half the graph is based on a very poor forecast.\u00a0\u00a0 The EIA forecast models I have debunked several times on my blog.\u00a0 Just because an agency says something doesn\u2019t make it so, particularly since you can look at their old forecast and see they have a poor track record.<\/span><\/span><\/p>\n

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BI: \u201cAmerica’s current account deficit is narrowing, but Morgan Stanley says it’s unclear whether energy will have a material impact on this.\u201d\u00a0 I don\u2019t see this supporting the stance that shale is not impactful.\u00a0\u00a0 In addition the own statement of \u201cunclear\u201d they should have left it out of the analysis.<\/span><\/span><\/p>\n

\u00a0\"\"<\/a><\/span><\/p>\n

 <\/p>\n

BI: \u201cEmployment in the oil and gas industry is less than 1% of the national total, according to Morgan Stanley.\u201d\u00a0\u00a0 Employment in the oil and gas industry is not the target.\u00a0 As noted energy is a means to an end.\u00a0 You use energy because it allows you to do something.\u00a0\u00a0 The cheaper the energy the more things get created.<\/span><\/span><\/p>\n

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BI: \u201cEven in Texas, the oil and gas industry and its support services constituted just 6.5% of all jobs.\u201d\u00a0 Why would you want a sector who only allows you to do something be the major portion of your economy?\u00a0\u00a0 Energy is creator of jobs which should be focused in the use of energy not the finding or developing.<\/span><\/span><\/p>\n

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BI: \u201cEmployment in energy intensive industries has picked up, but the rate trails that of the rest of the economy.\u201d\u00a0 As I pointed out in many points above, the energy intensive industry takes time to develop given the billions required.\u00a0 A new steel or chemical plant is not cheap.\u00a0 They are assets which will last decades. Making an investment decision takes time to build a sustained belief in lower natural gas price – just\u00a0few years back gas was forecasted to $8+\/mmbtu.\u00a0\u00a0 The shale revolution is only in its 4th year.<\/span><\/span><\/p>\n

Very funny the next article\u00a0in BI after this shale article\u00a0is the SOLAR BOOM!\u00a0\u00a0 Well, I bet they will discuss how many jobs are created.\u00a0 Once again having an energy source which requires lots of manpower is not something to strive for.\u00a0 Having employment in using <\/strong>energy by creating something to better society should be the goal.<\/span><\/span><\/p>\n

This was a very poor article by BusinessInsider.\u00a0\u00a0 I hope Henry Blodget does a better job screening.\u00a0 My appreciation for BI has dropped over the past year.\u00a0\u00a0 The page creation machine will eventually get you if you don\u2019t manage your quality.<\/span><\/span><\/p>\n

Energy is a means to an end.\u00a0 The shale revolution is advantageous to the US if we let it be.\u00a0\u00a0 I believe carefully constructed regulation and enforcement should be implemented to constrain the bad actors, but we should not villianized a whole sector out of ignorance.<\/span><\/span><\/p>\n

Your Energy Analyst,<\/span><\/span><\/p>\n

David K. Bellman<\/span><\/a><\/p>\n

614-356-0484<\/span><\/span><\/p>\n

\u201cWhat is the hardest thing in the world – To think\u201d Ralph Waldo Emerson.<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

There are some very poor \u201cjournalism\/reporting\u201d on the internet.\u00a0\u00a0 Businessinsider.com seems to be getting worse.\u00a0\u00a0I give them credit for being good entertainment at times.\u00a0 I usually just laugh and scoff at the poor articles and move on.\u00a0\u00a0 However this latest attempt of journalism\/reporting hit home with me – 12 Reasons The American Energy Boom Is […]<\/p>\n","protected":false},"author":1,"featured_media":14,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,3],"tags":[34,203,49,95,13],"class_list":["post-682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-natural-gas","tag-economy","tag-employment","tag-oil","tag-shale","tag-shale-gas"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=682"}],"version-history":[{"count":8,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/682\/revisions"}],"predecessor-version":[{"id":696,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/682\/revisions\/696"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/14"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}