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Entries in US (269)

10:57AM

Chart of the day: Economist's listing of top 15 natural gas resources

On the unconvential (shale): the usual list that I work with, with the addition of Russia as #3 in world.  Most experts don't talk all that much about Russia because, with all their conventional gas, there's not a great need to exploit.

But the real kicker for me in the charts is the bottom right one, which is a stunner: by 2030 the projection that gas, coal and oil all converge in the high 20s as basically equal shares in world primary energy usage.  Several stories here:

 

  • Gas displacing coal (not surprising)
  • Long slow increase in nat gas production/use
  • And then the true stunner of such a huge drop in oil (about 45% in 1970 to high 20s in 2030).

 

Fascinating stuff.

11:57AM

Where China and the US are clearly collaborating

Nifty WSJ full-page report in mid-June entitled, "Beneath a war of words, money paints a different China-U.S. picture."  The subject?  Chinese investments in US renewable energy efforts.

Just like in the case of hydraulic fracking, we see the Chinese eager to collaborate.

Naturally, as the less advanced technology economy, the Chinese are eager to go beyond collaboration into . . . ahem . . . aggressive collaboration, let's say.  But let's be honest: that's the incentive for the less-technologically gifted party in any technological investment. For the more advanced party, the goal is an expanded pool of opportunity over time:

Read the headlines and you find a war of words between the U.S. and China over clean energy, with the two countries trading barbs over whether Chinese solar-panel makers are dumping their wares onto the U.S. market at prices so low they're illegal. Follow the money more broadly, however, and you see something different: clean-energy investors and executives from the two countries starting to do deals.

Chinese businesses, typically with Beijing's support, are beginning to buy stakes in U.S. clean-energy companies and projects, often with Washington cheering. The deals span technologies from cleaner ways to burn coal to cheaper ways to use renewable power.

Each side has reasons to expand this capital flow. The Americans get the Chinese money and, with it, access to China's vast market, which is far hungrier for clean-energy innovation than the U.S. The Chinese get U.S. technology to help sate their soaring energy demand, and a place to invest that looks positively low-risk compared with their home turf.

As for the fears? Money talks - no matter the language.

One reason is economic. Federal stimulus money for the energy industry is tapering off, and other federal clean-energy subsidies, many of which failed to deliver enough bang for the buck, are likely to get pared back, too. More than ever, U.S. clean-energy companies could use the help of China's investors and consumers.

Another reason is environmental. Many clean-energy technologies are getting cheaper but are still too expensive to compete against conventional fossil fuels. The only way they stand much chance of gaining real scale is if the world develops and deploys them in the most economically efficient way: across national borders. Moreover, if American clean-energy technologies aren't deployed in China, where air pollution is thick and greenhouse-gas emissions are rising, then whatever cleanup those technologies accomplish on U.S. soil won't much matter.

Thank God for the logic of businesspeople.  Imagine if the Pentagon could aspire to such thinking.

12:12PM

Chart of the day: Why US ag subsidies are going away

From an Economist story about how Congress will eventually dismantle the ag subsidies long distributed to US farmers and ag corps.

11:35AM

Something to watch re: global stability

FT piece on how the intense heat and drought currently across most of the US farm belt is causing grain futures to rise.

From lead:

Few farmers in America's corn belt have seen anything like it. Only weeks ago, they were looking at a record-breaking harves.  Those hopes are fast turning into a mirage.

The hote summer in the US, the world's biggest exporter of corn, soyabeans and wheat, could have far-reaching effects on global agricultural markets, where memories of the 2008-08 food crisis are still fresh and price have been volatile on the back of a drought in South America.

Indiana is a big corn and soybean producer, and I can tell you that, after a very dry winter and unusually non-rainy spring, we haven't seen significant (more than half an inch) rain since 1 May.  We are thus phenomenally dry - as in, unless you irrigate your lawn, you're done mowing (as I have been) for about 4 weeks now.

Example of US corn: farmers here planted 5% more acreage this year, and under reasonable circumstances, there were very solid expectations for record harvest.

Point being, we are looking at very far-reaching - as in, global - repurcussions on food prices, which - by extension, determine a lot of political stability in countries with high import requirments (Southwest Asia leads the way) and where well over half of family household budget is spent on food (virtually the entire Gap).

10:16AM

India's exploding energy requirements

Good article start, which, in true inverted pyramid fashion, gets all the work done right up front.

India is facing an energy crisis that is slowing economic growth in the world's largest democracy.

At stake is India's ability to bring electricity to 400 million rural residents—a third of the population—as well as keep the lights on at corporate office towers and provide enough fuel for 1.5 million new vehicles added to the roads each month.

Shortages of coal, oil and natural gas will require India to import increasing amounts of high-cost fossil fuels, say energy experts, risking inflation and putting the country in stepped-up competition with China, Japan and South Korea. Buying oil from Iran, one of India's biggest suppliers, is tougher because of U.S. and European sanctions aimed at curbing Tehran's nuclear ambitions.

With annual demand expected to more than double in the next two decades to the equivalent of six billion barrels of oil, the energy crunch threatens to knock India off its growth path. The national economy has already slowed amid paltry business investment and stalled reforms. It tallied just 5.3% growth in the quarter that ended March 31, the lowest level in almost a decade and well shy of the country's 9% goal.

With annual demand expected to more than double in the next two decades to the equivalent of six billion barrels of oil, the energy crunch threatens to knock India off its growth path. The national economy has already slowed amid paltry business investment and stalled reforms. It tallied just 5.3% growth in the quarter that ended March 31, the lowest level in almost a decade and well shy of the country's 9% goal.

The charts above lay out the problem:  Electricity growth is pretty much a proxy for GDP growth.  If you want to grow your economy fast, you have to grow your grid capacity similarly.  China is getting it done. India is not.

The oil imports stuff is pretty classic for the trajectory: roughly a 5-fold increase since just 2004.  I see this growing demand expressed in deals I'm structuring.

But the one that jumped out at me, per the recent Wikistrat sim on "North America's Energy Export Boom," was the coal shortfall now covered by imports.  Our sim was mostly about natural gas, of course, but the displacement effect in electricity generation means we have a lot of stranded coal capacity emerging here in the US - coal that could go abroad effectively because it's energy quotient is world class.  The story describes recently constructed coal-burning electricity-generation plants that are operating below capacity - or worse, are idled - for lack of coal.

I've seen industry estimates by US coal experts that say India will be a prime source of export growth over the next couple of decades.  This article makes clear the "why."

6:00AM

The Apprentice . . . without that jackass Trump

Fascinating WSJ piece from a few days back describing how German companies excel at training up their poorly prepared new workers so well that they're starting to spread their best practices globally.  It's basically a revival of classic apprenticeship training, and apparently German firms like VW are so good at it that companies and states and the fed in the US are looking to copy their methods.

Why?

There are 600,000 skilled, middle-class manufacturing jobs in the US that are - get this! - currently unfillable.

The VW HR person's blunt statement:

We've learned it is better to build our own workforce instead of just relying on the market.

VW's apprenticeship program runs 3 years.

I've gotten asked such questions about the US education system for years at my briefings all over America.  And I've always answered with some variation on the need for companies to both train up poorly prepared workers and reach down into educational systems to do much the same (what if VW oversaw the same sort of thing - for profit - at the right colleges/votec/institutes/etc.?).

But I've never actually come across an MSM article that captured it like this one does.

More:

In Germany, nearly two-thirds of the country's workers are trained through partnerships among companies, technical schools and trade guids. Last year, German companies took on and trained nearly 600,000 paid apprentices

Nice numerical symmetry there - huh?

Story talks also about Charlotte community college that is pursuing the same sort of collaboration with 18 local firms - mostly European.  As one German exec put it:

We think we've found the missing link in the education system between high school and starting college.

In the U.S., falling into that gap costs lifetime earnings that are stunning.

This seems like a way of filling in that void.

It's one of those everything-old-is-new-again stories.

12:43PM

The political/generational impact of the Great Recession

Check out this bit from today's NYT:

In the four years since President Obama swept into office in large part with the support of a vast army of young people, a new corps of men and women have come of voting age with views shaped largely by the recession. And unlike their counterparts in the millennial generation who showed high levels of enthusiasm for Mr. Obama at this point in 2008, the nation’s first-time voters are less enthusiastic about him, are significantly more likely to identify as conservative and cite a growing lack of faith in government in general, according to interviews, experts and recent polls.

Polls show that Americans under 30 are still inclined to support Mr. Obama by a wide margin. But the president may face a particular challenge among voters ages 18 to 24. In that group, his lead over Mitt Romney — 12 points — is about half of what it is among 25- to 29-year-olds, according to an online survey this spring by the Harvard Institute of Politics.  And among whites in the younger group, Mr. Obama’s lead vanishes altogether.

Among all 18- to 29-year-olds, the poll found a high level of undecided voters; 30 percent indicated that they had not yet made up their mind. And turnout among this group is expected to be significantly lower than for older voters.

“The concern for Obama, and the opportunity for Romney, is in the 18- to 24-year-olds who don’t have the historical or direct connection to the campaign or the movement of four years ago,” said John Della Volpe, director of polling at the Harvard Institute of Politics. “We’re also seeing that these younger members of this generation are beginning to show some more conservative traits. It doesn’t mean they are Republican. It means Republicans have an opportunity.”

There is the strong evidence that a minority-white/majority non-white America favors the Dems long term, but history also says that an extended "tough time" favors the GOP, especially when you remember that the average voters behaves - over the course of his or her life - much like a car-buyer, meaning your first "purchase" typically creates a brand loyalty that is highly consistent over your life (meaning, it has an imprinting function that is profound).  Simple example:  If the first car you buy is a Ford, you will  - on average - buy more Fords over the rest of your life than any other car - hands down.  Same is true in voting for president.

Point being, while the demographic shift will still favor Dems (as currently defined) against Republicans (as currently configured), this long recession will have its own profound imprinting impact as well.  I see it in kids through the prism of my 20-year-old daughter (now in college).  They face a hostile labor market not unlike the one my generation faced in the early 1980s.  Between that point and 2008, college-age cohorts faced a fantastically (in historical terms) consistent positive labor environment. But my impression is that those days are gone - probably for good given the competitive landscape now created by a maturing globalization.

So, again, you have your demographic trends and you have your economic realities trend.  Both are profound influencers. I'm just saying nothing is carved in stone in terms of long-run trends, especially as I expect both parties to be significantly reshaped by these dueling trends over the next decade or so.

Still, I see little in any of these reports that convinces me Obama will fall in the Fall.

1:01PM

Chart of the day: US economic interdependence with globalization

From the Financial Times and very interesting.

Key fact:  goods and services trade only 1/5th of US economy in 1980.  Now it's one-third.

 


Other key data:

 

  • US outward FDI stock 13% of GDP in 1990 and 33% now.
  • Inward is 9% in 1990 and 24% now.
  • So combined = 22% of GDP in 1990 and 57% now.

 

We also have the highest percentage of foreign born citizens since 1920.

1:06PM

Time's Battleland: CHINA | The Perfectly Ironic Chinese Foreign Direct Investment

Tuesday’s Wall Street Journal story of how Chinese state bank (China Development Bank) is pumping $1.7 billion into two long-stalled redevelopment projects in the San Francisco Bay area – namely, Hunter’s Point (a Navy base until 1974) and Treasure Island (same until 1996) — is worth noting.

Read the entire post at Time's Battleland blog.


11:37AM

Asians become America's top incoming immigrant cohort

From WSJ story noting that fastest-growing pop groups "supplies US with skilled workers."

And before you start griping about too many Asian immigrants:

Half of Asians have a college degree, compared with 30% for all Americans, and their median annual household income is $66,000, versus $49,000 for Americans as a whole.

Asians are more likely than the overall U.S. population to be married, or to live in a multigenerational household, and their children are more likely to be raised in a two-parent home, the report says.

"Asians exceed Americans on educational credentials and socioeconomic markers of success despite being predominantly first-generation immigrants," Mr. Taylor said. He added this sets Asians, three quarters of whom are foreign-born, apart from previous waves of immigrants.

So plenty to like.

The key reason why China ages 3x faster than America over the next four decades (PRC's median age rises from 36 to the late 40s by 2050 while America goes from 36 to just under 40) is that America takes in immigrants - Asians and Latinos.

Our immigrant nation status remains our greatest long-term strength.  China will belong to the old-crew powers come 2050.  America will be sitting with the young-crew great powers (India, Brazil, Turkey, South Africa, Indonesia, etc.).

10:40AM

Time's Battleland: NATIONAL SECURITY - What the Wisconsin Recall Says About the Future of the U.S. Military

Governor Scott Walker survives his nasty recall vote earlier this month, a dynamic triggered by his brutal reshaping of Wisconsin’s public sector unions.  Pundits are interpreting all this in terms of November and what it means for President Obama’s chances in that crucial swing state, but I see a bellwether for the future of U.S. national security.

Read the entire post at Time's Battleland blog.

11:28AM

An accurate if overwrought description of the Chinese economy

Wang v. Bo - preview of coming clashes!Got it via a friend who read Krugman's post on this post. Here's the Krugman's site, and here's the original post.

Hempton's description is correct, by everything I know.  He's just a bit much on the name calling ("China is a kleptocracy of a scale never seen before in human history.")  Krugman reads the post and sees, per his usual pessimism, a system bound to implode.

What Hempton describes is a form of capital expropriation of the Asian variety.  It is different in style than what happened in the West (super-low wages) because it focuses on abusing the average Chinese citizens' savings to prop up state-run enterprises while allowing the elite to siphon off extraordinary profits. But understand that Japan and South Korea did much the same, so yeah, the scale is magnificent but the dynamic is familar.

The system is right for China in terms of preventing instability and allowing for an overall rise in GDP per capita that generates a massive middle class (in sheer numbers, less so as a percentage of total population).  It'll be right until the people can't stand it anymore (populist anger) or the global economy can't stand it anymore (the export-driven growth and general mercantilism) or the national economy can't stand it anymore (the heavy reliance on public investment).

Now, Hempton's take is all righteousness to point of sounding like a Marxist, which is correct enough and ironic enough, but, you know, Marx was right on a lot of things.  He just couldn't imagine a political system smart enough and flexible enough to bend at the point of near-breaking.  In the West, he didn't believe democracies could pull it off - except they did.

Now, we Westerners can't image single-party states in the East managing the same.  Except Japan did actually move off the model - to a certain extent.  South Korea has done it much better.  China approaches the historical moment when it must happen; when it must turn into a system ruled by the middle.  

Will it become a recognizable democracy?  So many experts will tell you that cannot happen due to Asian civilization.  I personally find that bullshit and always have.  It won't resemble Western democracy but it will define - just like Japan and South Korea have - Eastern democracy (and yes, that concept makes some experts' heads burst into flames once they scream, "INCONCEIVABLE!").  

Here again, I think Marx is right in saying that capitalism is so revolutionary that it remakes societies.  It just does at the pace of generational change - duh!

China's system works in expanding capitalism throughout China and creating tremendous (and real) growth and in networking China with the global economy.  It works just like America's system of global governance through the absorption of export-driven growth and debt-financing-as-a-reserve-currency and providing (with all that cheap money) military Leviathan services worked for expanding globalization for about 25 years in the long expansion from the early 1980s through the late 2000s.  It works until it works itself into an imbalance that requires correction and new rules and new policies, etc.  It works until it succeeds too much and thus stops working - simple as that.

What always happens when a system like either of those reaches its apogee of success and no more success can be had is that the critics come out in droves and go ape-shit in their condemnations.  Suddenly, not only is the created imbalance bad, but the entire system is evil and all that came through it is viewed as a complete fraud.

This is way over-the-top analysis and Hempton's piece is chock full of it.  But it's this kind of Cassandra crying that signals you're reaching the endpoint and system-failure-triggering-revolutionary-solutions is nearing.

So yeah, an accurate description, and yeah, way over-the-top in its gloom-and-doomism.  

Why have the Chinese people allowed this system to unfold and expand and reach such imbalance?  Because it's delivered the country and a great deal of them a far improved life - simple as that.  

Why will the Chinese people progressively rebel against the system now and in the future?  Because it's reached the point where it stops working as well as it did in the past - in large part because China hits the same shift point between extensive and intensive growth that all risers hit - again, simple as that.

Yes, we can call it all sorts of names and point fingers, and pull our hair, and predict all manner of doom.

But you know what?  China ain't going anywhere.  The system will adapt.  

No, it won't be pretty, but the Asian version of capitalism adapts just like the Western version did.  Eventually the rich find they have enough and want to protect their wealth through enhanced social stability - even more equality - if that's what it takes.  Eventually, the rank-and-file see that they've eaten enough bitterness on behalf of China so that they deserve a better cut.

If China hits the same roughly-five-decades-mark on single-party rule and then spasms toward democracy, like so many other Asian nations have in their individual "rises," then that democratizing point probably arrives in the 2020s (but between now and then, expect tons of apres moi, le deluge handwringing that will mentally prep the Chinese people for the coming change).  I am convinced China cannot make it past that point in history and wealth creation (by 2030, a per capita GDP of about $20,000) without going full democratic (always with some Asian/Chinese twists, mais oui).

But, as we know, China is doing everything so fast in comparison to Japan and South Korea and other predecessors.  But it's also far larger (which is why EVERYTHING in China is the "biggest in human history" - puhleaze!), meaning we can't forget the extensive growth still to come in the interior provinces, where well over a half-billion poor people live.

China's rich coast must integrate its still-impoverished/poorly developed interior just like the rich-and-rising American East integrated its Wild West from 1865 to about 1900. Those were wild and crazy years, full of booms and busts and robber barons galore.  But that mounting angry populism eventually segued into a progressive era of tremendous progress, one that cemented the middle class as the republic's political center.

To me, the most fascinating question out there (besides the Fracking Revolution in energy) is, How fast does China's democratization process arrive?  China still has to make that interior growth happen, but, because it lacks true democracy, it's got this restive coast.  Already, you see this dichotomy reflected in the Party between the coastal, cosmo "princelings" and the far-more-red interior hard-core types more rooted in the Party's past.  You also saw it in the dramatic showdown between Chongqing's Bo Xilai (with his Maoist revival) and Guangdong's Wang Yang. This is classic red state-v-blue state stuff!

So yeah, the big political fights (and accompanying democratization) are coming.  They'll just unfold within the Confucian mindset of the system, which will actually help a great deal in keeping this thing from exploding.

So yeah, China is deep into that journey of transformation that we've seen so many predecessing systems experience as "punishment" for their successful rises within capitalism.  That's why, in my mind, there's no question that between now and 2030, all the changes desired by the West and many Chinese will come to pass - albeit in a manner that is particularly Chinese.  So no, I do see the power of culture and civilization in the "how" part; I just don't think it prevents or obviates the "what" part.

So read Hempton's piece.  Read Krugman's blog.  Just understand that none of this is all that unprecedented.  It's just the latest chapter in capitalism's expansion. Yes, it's a crucial one alright.  You add China to the mix and you go from a "global economy" to globalization - pure and simple.  But China won't be the last story in this epic cycle.

So don't wear yourselves out on fear and hyperbole - as "SHOCKING!" and entertaining as these "discoveries" are.

10:39AM

Chart of the day: US natural gas price versus Europe's versus Asia's

Found here.

Pretty compelling case for export, ja?

11:17AM

Chart of the day: Fish-stock sustainability index

From the Economist.

NOAA (National Oceanic and Atmospheric Admin) reports that a record six fed fisheries are re-certified as healthy last year.  

After a decade of similar progress, 86% of America's roughly 250 federally monitored commercial fish stocks were not subject to overfishing; 79% were considered healthy.

The lesson:  don't let fishermen run things and - even more importantly - keep the idiot politicians out of the mix. Instead, the ones who do the best management are . . . the scientists.

More evidence of the sheer stupidity of US politics - and the GOP in particular:

And the politicians are still interfering. On May 9th the House passed legislation forbidding NOAA from developing an innovative means of apportioning fishing quotas, known as catch shares. These are long-term, aiming to give fishermen a stake in the future of their fisheries; market-based, since they can be traded; and, in practice, good for fish. Sadly, the two Republican congressmen behind the ban consider they have been designed “to destroy every aspect of American freedom under the guise of conservation”.

This borders on Know-Nothing stupid, which tells you that history can roughly repeat itself under similar circumstances.  But it's dumb stuff like this that has kept us from ratifying the UN Convention on the Law of the Sea (UNCLOS), which is really starting to hurt us as the Antarctic opens up.

Really stupid. It's like banging your head against a brick wall with these people.

 

12:54PM

Signs of the coming agricultural interdependency

FT story on Marubeni, the Japanese trading house, buying US grain trader Gavilon - a major corn trader.

Why buy it?  China's recent forays into the US corn market suggest the rise of a similar long-term relationship as did early Chinese forays on soybeans years ago.  China now regularly imports massive amounts of US soybeans. A similar long-term transactional relationship now seems in the works regarding corn.  Marubeni already has an agreement with Sinograin, a state-owned Chinese company that manages the country's strategic food reserves.

Military strategists of varying levels of economic awareness imagine the US, Japan and China fighting naval battles over the South China Sea.  Meanwhile, truly deep economic/resources dependencies - such as these in food - are cropping up all over the place. 

Guess which relationships prevail?

And no, comparing this to globalization-cum-1914 is too ludicrous a notion to process.  It isn't comparing apples to oranges; it's comparing apples to mammals.

BTW, growing up on the edge of the US corn belt (SW Wisconsin), this issue is near and dear to my heart.

11:34AM

Time's Battleland: NATIONAL SECURITY Death to “Resource Wars”!

Nice Washington Post piece on Saturday about how the “center of gravity” in global oil exploration and production is shifting to the Western hemisphere.  No, the bulk of global conventional oil reserves still sits in the Persian Gulf, but the larger point is worth exploring: we no longer project global futures where East and West logically fight over Middle East energy reserves.  Those expected long-term dynamics are collapsing right now before our eyes.

Read the entire post at Time's Battleland blog.

11:43AM

Romney's fundamental opportunity

Peggy Noonan interview in the WSJ today:

Before rallies and town meetings, Mr. Romeny always tries to have private, off-the-record meetings with voters.  "I sit down with five or six couples or individuals and just go around the table, and I ask them to tell me abou their life.  And the stories I hear suggest a degree of anxiety which is not reflected in the statistics."

More than anything else right now, what I sense when I travel the country giving speeches (Dallas two days ago) is that people don't think their kids will have better lives than they have had, and that is a fundamental shift in US thinking.

Subjective, yes?  But subjective matters in elections.

8:58AM

Here comes Chinese FDI in a very public way

This NYT story today really jumped out at me, and the Chinese just bought, in a signature Foreign Direct Investment move, the second-biggest movie chain in the US:  

The Wanda Group, a Chinese conglomerate with extensive interests in the entertainment business, has agreed to acquire AMC Entertainment, North America’s second-largest movie theater owner, in a deal that is valued at $2.6 billion, including roughly $2 billion in assumed debt, the companies said Sunday.

David Gray/Reuters

Gerardo I. Lopez, AMC’s chief executive, left, exchanged documents with Zhang Lin, vice president of the Wanda Group, during a ceremony in Beijing on Monday.

The acquisition creates the world’s largest theater group, the companies said. It also represents a significant expansion of Chinese influence in the American film industry. The industry has been looking to China for a vast new reservoir of ticket buyers for Hollywood movies, while joining Chinese investors to produce films like the planned “Iron Man 3” and teaming up to build studio facilities and a new Disney theme park in China.

The usual motives apply:  Chinese firm looking for know-how in an industry that's booming across China but isn't being as monetized as it could be - by Western standards.  For the US company, a crucial sub-plot emerges a few paras down the story:

In addition to the $2.6 billion value assigned to AMC’s debt and equity in the deal, Wanda is expected to invest $500 million for what the companies called “strategic and operating initiatives.” Mr. Wang said that the money would generally be used for renovation and other needs, but that specifics were up to Mr. Lopez and his team. Mr. Lopez said there was no plan in place for the money. But, he said, it might be used to retire debt, acquire new theaters or fix up old ones.

To me, this is a very positive development, and it's one we're going to read about countless times over the next decade. And yes, it will look and feel like Japanese money "buying up everything!" across America in the late 1980s/early 1990s.

But, of course, America has "suffered" these invading waves of FDI throughout our long history as a multinational economic union.  Chinese money will be just as good and useful as those of the other countries that preceeded it, and the further intertwinning of our economies will mitigate the craziness out of the Beltway crowd as they pine for a "near peer" competitor to justify the dropping floor of the defense budget.

You know, the Chinese were going to be the featured villain in the remake of "Red Dawn," but then Hollywood realized they'd be shutting themselves out of the Chinese box office, so they subbed in the North Koreans, which - of course - makes the film a complete and utter fantasy.  But it just goes to show you what all this financial connectivity leads too - cooler heads prevailing everywhere save among those fiercely dedicated fear-mongers in DC.

9:34AM

The LNG export play

Nice FT story on what Shell is saying about natural gas in the US.  Current Henry Hub price has been hanging around $2.25-2.55, which is about 3-4 times cheaper than Europe MMBTU (millions British thermal units) and bizarrely cheaper than most Asian countries are being quoted right now (more like $14-15 and moving north for the summer to almost $20 - by some predictions).

Think about that for just a second.  Natural gas in the US at something like 1/8 the price in Asia.  How long do you think that lasts?  Why should it?

To me, that's a huge LNG (liquid natural gas) market waiting to be captured by US producers.  Selling LNG ain't like moving 100,000 metric tons of diesel or jet fuel or 2 million barrels of crude in one large tanker.  Those transactions are the equivalent of one-night stands and leave your money on the dresser.  Selling LNG is more like getting married: the buyer has to have a relationship with a regasification terminal nearby.  There must be pipes that connect the end-user to that LNG terminal (only so many in the world, but plenty being built).  If no regasification terminal, then buyer needs to rent himself a regas ship ($50m a year), park it somewhere, and then connect that by pipes to the end-user.  All very complex. 

Of course, the seller must have liquefaction facilities at ports, with pipelines connecting fields.  

America is piped up like crazy and adding more pipe all the time.  We're just getting our first for-export liquefaction facility set up in Louisiana by Cheniere, which is leading the effort here to gear up for export.

All very exciting stuff, as we could be exporting - within a few years - upwards of 1/4 of our production.  Then you factor in all the coal displaced in electricity generation, and we can be exporting that high-quality stuff to Asia along with the LNG -  a win-win on trade balance and energy security.

Back to the FT piece:  the currently depressed US prices are just too low, reflecting that we're running out of storage after a mild winter and a continued production boom.  Shell's prediction?  US NG prices will double by 2015.  Expect the petrochem industries to hawk that fear like crazy, but in truth, it's a reasonable rise to just $4-6 MMBTU.

[Shell, BTW, has done a lot of exploratory drilling on NG in China and says it thinks the reserves can be developed economically.]

Shell is also "examining plans to liquefy US gas for export - which would allow it to attract higher prices, particularly in Asia - transform it into clean-burning transport fuel through gas-to-liquids technology, and use it as a feedstock for petrochemicals."  That's a quick rundown of the range of economic opportunities - in addition to displacing coal in electricity.

All good stuff and an integral part of America's coming industrial renaissance.

11:03AM

The race card cannot work on Obama, or really any national candidate going forward

WAPO story on Romney rightfully steering clear of those within GOP who, in their desperation, consider racially motivated election attacks against Obama.

The problem with this approach is that it is magnificently self-defeating - that's how America has evolved in its racial make-up.

Obama is carrying Blacks, Hispanics and Asians - plus the "minority-majority" that are women (historically far less welcoming of racially tinged messages than men, to include white women versus white men).

All three of those major minority groups tilt decisively toward Dems, and racially-tinged political messages simply reinforce that reality and perhaps lock it in for the longer term.  Simply put, as a polity, America is past all that nonsense.

And the fact that the Republicans are considering it - even among just their fringe hardcore elements - signals just how bereft of ideas and leadership and vision they really are.

And that is a very sad day for this republic, because, quite frankly, Obama does not deserve a second term and it won't be any better than the first.

But I do take comfort in this reality, being the father of one Asian female and two future African-American women.

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