Fact No. 1: China has cornered the market on solar power panels.
Fact No. 2: Indonesia has cornered the market on wind turbine parts.
Fact No. 3: Natural gas, and to a growing extent crude oil, are American-made products.
Fact No. 4: Natural gas and crude oil are fueling an industrial renaissance in the United States.
I can keep on going but unless you’ve been living in a cave somewhere you know by now that the U.S. is undergoing a major transformation of its industrial and manufacturing base thanks to abundant, cheap and most importantly, reliable supplies of natural gas and crude oil. There remain several important issues still to be resolved such as LNG and crude oil exports, fracking disclosures, emissions controls and improved safety standards for transporters.
Something else to consider will be the industry’s reaction if oil prices in particular continue to slide. Though their stocks have fallen victim to a bear market in recent weeks, oil companies are still profiting at $80 a barrel while gasoline prices now below $3 a gallon in some areas are delighting the driving public. Yet those of us who have been around long enough recall how easily oilmen panicked in past downturns and have to wonder if there will there be any effect on pipeline construction.
Now retail is reaping the benefits of the energy boom. A Bloomberg report Oct. 17 entitled “Shale Boom Helping American Consumers Like Never Before,” puts energy in a positive scenario that even the detractors can’t deny. Noting that oil traders have had a 27% dip in global price, gasoline has dropped over 50 cents a gallon from the year’s high in April. Since the average U.S. household uses about 1,000 gallons of gas annually, they are saving an average of $500. So we are spending $230 million a day less on gasoline than during the Fourth of July, a spokesman for AAA told the news service.
Put another way, consumers are paying $5-15 less to fill their tanks than they were four months ago, the AAA spokesman said. Lower fuel costs are having a residual effect in the supermarket where food costs fell 0.7% in September, most notably in eggs, baked goods and meat, IHS economist Michael Montgomery pointed out.
“The two most observed prices by consumers are food and energy and they play the largest role in forming consumer opinions about inflation, providing a little more room for luxuries rather than facing a squeeze from necessities,” Montgomery wrote in a research note quoted by Bloomberg.
Adds David Hackett, president of Stillwater Associates: “That sounds like Christmas presents, going out to dinner, being able to do something.” With retail prices expected to rise by 4.2% over the holiday season as compared to last year – excluding motor vehicles, gasoline and food purchases – according to IHS, this means something.
In fact, the public’s expectations for the economy are at the highest level in nearly two years, Bloomberg reported. Data from their Consumer Comfort Index found that consumer confidence increased to 51 last month, the highest since November 2012 and a surge from 41.5 in September when retail prices fell 0.3%.
That might not mean much to California billionaire Tom Steyer, whose avowed purpose is to block the Keystone pipeline and other infrastructure in the name of climate change. But I bet his buddies like Bill McKibbon, founder of 350.org, aren’t complaining about the lower fuel prices he’s paying while jetting around the world still trying drum up opposition to oil and gas development; neither is Jane Kleeb, president of Bold Nebraska, who is saving considerably in gasoline as she motors around her state trying to maintain the dwindling opposition against Keystone.
Let’s allow Chris Christopher Jr., director of IHS’s U.S. consumer economics group, to have the final word from his Oct. 15 report quoted by Bloomberg. Americans, he said, have always had a peculiar relationship with gasoline. Though it consumes less than 5% of the average person’s disposable income, it has “an undue influence on confidence” because of how gas is sold and paid for.
“When you go over to that pump and you squeeze that liquid into your car, you’re seeing the amount going higher and higher, and that’s an unusual way of consuming something. It’s the way we purchase it. It’s immediate. Gasoline is different from almost any other consumer item.”
The truth is that opposition is declining because the public is actually participating in the benefits being wrung from oil and gas development. Nothing says it better than a heavier wallet, cleaner air and rising employment.