The US became the world’s No. 1 hydrocarbon-based energy producer in 2013 thanks to our abundant supply of shale oil and gas. No other country in the history of modern oil production has added more production so quickly than the United States. This points to the unsurpassed ingenuity of American entrepreneurs, as well as the economic benefits a free marketing brings to our country. Many thanks to Mark J. Perry of the American Enterprise Institute for providing these slides in conjunction with his appearance on The Oil & Gas Digital Marketing Podcast. You can connect with Mark across the interwebs here: American Enterprise Institute: http://www.aei.org/ Carpe Diem Blog: www.aei-ideas.org/channel/carpe-diem/ Twitter: twitter.com/Mark_J_Perry

1. “Navigating the US Economic Recovery:
A Year in Review and a Look Ahead”
First Merit Bank
January 30, 2014
by
Mark J. Perry, Ph.D.
Professor of Economics, University of Michigan-Flint
Resident Scholar, The American Enterprise Institute
Carpe Diem Blog

2. US fossil fuel production reached a record high in 2013, as US rose to
become the world’s No. 1 hydrocarbon-based energy producer in 2013
US Production of Natural Gas and Oil, 1975-2013 (est.)
46
44
Qu adrillion BTUs
42
40
America's Shale
Revolution
38
36
34
32
Sou rce: Departm ent of Energy
30
1975
1980
1985
Carpe Diem Blog
1990
1995
2000
2005
2010

3. US oil output in Jan. 2014 will be the highest in any month since June 1989
Weekly US Crude Oil Production
January 1988 to January 2014
Barrels per
day (1,000s)
9,000
8,000
America's Shale
Revolution
7,000
6,000
5,000
4,000
3,000
Source: Department of Energy
1990
1995
2000
Carpe Diem Blog
2005
2010
2015

4. Oil output increased 1M barrels per day in 2013, the largest annual
increase since beginning of US commercial oil production in 1859
Change in Annual US Crude Oil Production, 1860 to 2013
1,200
1,000s of barrels per day
20 13 I nc rease
of 1M bpd
800
400
0
-400
Sou rc e: EI A
1875
Carpe Diem Blog
1900
1925
1950
1975
2000

5. Texas oil output doubled in last 2 years to 2.75M barrels/day in Oct.,
highest output since 1980 and was 35.5% of US oil in Oct. As a separate
country, Texas would be 9th largest oil-producing nation in world.
Texas Oil Production, January 1981 to October 2013
2,800,000
Barrels per day
2,400,000
Oil Output Doubled between
May 2011 and October 2013
2,000,000
1,600,000
1,200,000
800,000
Source: EIA
1985
Carpe Diem Blog
1990
1995
2000
2005
2010

6. The US now has three super-giant oil fields, out of only ten
ever worldwide, to produce 1M bpd at peak production
Oil Production: Permian Basin, Eagle Ford and Bakken
January 2007 to January 2014 (est.)
1,400,000
1,200,000
Source: Energy Inform ation Adm inistration
Barrels per day
Perm ian Basin
May 20 11
1,000,000
Eagle Ford
May 20 13
Bakken
Dec . 20 13
800,000
600,000
400,000
200,000
0
2007
Carpe Diem Blog
2008
2009
2010
2011
2012
2013
2014

7. Record-high natural gas production in the US at the end of 2013
27% increase since 2007, mostly from shale gas
2.6
U.S. Natural Gas Production: Gross Withdrawals
January 1994 to October 2013
2.5
2.4
Trillion cubic feet
2.3
12-Month Moving Average
2.2
2.1
2.0
1.9
1.8
Carpe Diem Blog
Sou rce: EI A
1995
2000
2005
2010

8. Abundant US shale gas in last 5 years reversed a decade-long upward trend
in gas prices, and helped save users $100B per year vs. 2008 prices
$16
Monthly Real US Spot Price for Natural Gas
January 1994 to December 2013
$14
$12
Per Million BTUs
in 2013 dollars
$10
$8
$6
$4
$2
Carpe Diem Blog
Sou rc e: EI A
$0
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014

9. Compared to US, Natural Gas Prices are 3X higher in
Europe and 5X higher in Asia, S. America
World Natural Gas Prices, November 2013
$20
Source: Federal Energy Regulatory Com m ission
$16
Per MM BTUs
15.3
14.7
15.6
15.6
15.6
13.7
$12
10.4
10.7
10.9
$8
$4
3.2
Carpe Diem Blog
nt
in
a
a
A
rg
e
or
e
K
n
Ja
pa
hi
na
C
ra
zi
l
B
In
di
a
n
Sp
ai
K
U
el
gi
um
B
U
S
$0

10. Lowest net US petroleum imports last year since 1986
Net US Petroleum Imports: Share of US Consumption
1986-2013 (through November)
65%
60%
55%
50%
45%
40%
35%
34.0%
30%
Carpe Diem Blog
Source: EIA
1990
1995
2000
2005
2010
2015

11. In 2013, US will be more energy self-sufficient than in any year since 1987
US Energy Production as a Share of US Energy
Consumption, 1987 to 2013 (Through September)
88%
84.5%
84%
80%
76%
72%
68%
Carpe Diem Blog
Sou rce: Departm ent of Energy
1990
1995
2000
2005
2010
2015

12. Some indications point to a manufacturing renaissance
in the U.S., partly as a result of the lowest nat gas
prices in the world
Since January 2010, 568,000 new manufacturing jobs
have been added to the US economy, and production
rebounded to new highs in 2013.
Industrial production, Durable Manufacturing and
Motor Vehicle and Parts Production all reached new
highs in 2013, and are solidly above pre- recession
levels.

13. Industrial production has now made full recovery and ended
last year at record high level. Motor vehicle production at
record high, 8.8% above 2007
Industrial Production, Durable Manufacturing and Motor
Vehicles and Parts, January 2007 to December 2013
120
Recession
Indexes = 100 in 2007
+8.8%
110
+3.7%
+1%
100
90
80
Motor Vehicles and Parts
Durable Manufacturing
Industrial Production
70
60
50
40
Carpe Diem Blog
Source: Federal Reserve
30
2007
2008
2009
2010
2011
2012
2013
2014

14. With record high output in 2013, US manufacturers’ 2013 profits were 32%
higher than before Great Recession. Profits last year will be close to a record
high, and auto industry profits are on track to set a new record.
US Manufacturing Corporations
After-Tax Profits, 1993-2013 (est.)
$600
Billions
Source: Census Bureau
est.
$500
$400
$300
$200
$100
19
9
19 3
9
19 4
9
19 5
96
19
9
19 7
9
19 8
9
20 9
00
20
0
20 1
0
20 2
0
20 3
0
20 4
05
20
0
20 6
0
20 7
0
20 8
09
20
1
20 0
1
20 1
1
20 2
13
$0
Carpe Diem Blog

15. 12 Factors Favoring US Production
1.
Manufacturing wage growth in China (15%) and a 4% jobless
rate vs. wage growth in the U.S. (1.0%) and 6.7% jobless rate
2.
New 2-tiered union contracts have made U.S. labor costs in
some industries more competitive than ever before
3.
Shipping Costs, $100/barrel Oil, Delivery Time
4.
Real U.S. natural gas prices are back to late 1990s levels, 75%
below 2005-2006 peak, cheapest natural gas in the world
5.
Quality Issues and Delivery Delays for overseas production,
especially for small and medium size firms
6.
Lack of safeguards on intellectual property overseas

16. 12 Factors Favoring U.S. Production
7.
Less flexibility for making changes when production is 8,000
miles away
8.
Innovation, automation, robotic costs are coming down –
“China labor is cheap, but robots work for less,” and you
“Innovate around cheap labor.”
9.
“Made in USA” preference has made a comeback, especially
with a high jobless rate and “jobless recovery”
10. Manufacturing profits are at record-high levels
11.
Cheap land and industrial property in U.S.
12. Advanced, smart manufacturing and 3-D printing favor some
US production over China and Asia

17. Boston Consulting Group, May 2011
• Within the next five years, the US is expected to
experience a manufacturing renaissance as the
wage gap with China shrinks and certain US
states become some of the cheapest locations for
manufacturing in the developed world.
Sometime around 2015, manufacturers will be
indifferent between locating in America or China
for production for consumption in America.

18. 2013 Was the “Year of the US Housing Recovery,” First year of annual
gains in home prices in every month since 2006. Prices are now 8.9%
below 2007 peak, and have been increasing +8% YoY for last 5 months.
FHFA Monthly Purchase-Only Index
January 2000 to November 2013
240
8.9% below 2007 peak
220
June 2008
200
180
160
Index = 100 in
January 1991
140
120
Source: Federal Housing Finance Agency
2000
2002
2004
2006
Carpe Diem Blog
2008
2010
2012
2014

19. The Global Economic Picture

20. World Trade and World Industrial Production Were Both at Record
High Levels in November, Led by Strength in Emerging Economies
Source: CPB Netherlands Bureau for Economic Policy Analysis
World Trade Volume and World Industrial Production
January 2005 to November 2013
U.S. Recession
140
+9.9% above
2008 peak
Indexes = 100
in 2005
130
+9.3% above
2008 peak
120
110
World Trade
World Industrial Output
100
Source: CPB
Carpe Diem Blog
90
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

21. World Stock Market Capitalization Ended 2013 at New Record
High; Above Pre-recession 2007 Peak by $2.5T and by 4%
Trillion s (T)
in USDs
$70
World Stock Market Capitalization
January 1996 to December 2013
$65 .3T
$62.8 T
$60
U.S. Recession s
Sh aded
$50
$40
$30
$29.1T
$20
$10
Carpe Diem Blog
Source: World Federation of Exch anges
1996
1998
2000
2002
2004
2006
2008
2010
2012

22. 1.
2.
3.
4.
5.
6.
Summary of US economy 4.5 years into the 12th
economic expansion since WWII:
Forecasts call for 2.7% real GDP growth in 2013, followed
by growth of 3.0% this year and next year
2013 was the “year of the housing recovery” and we may
see a return of home prices in 2014 to previous 2007 peak
US energy revolution is at the forefront of the economic
expansion – domestic oil and gas, thanks to technology
Manufacturing and automotive sectors are coming back
and are also at the forefront of the recovery
Labor market is slowly healing, has a long way to go
Final charts illustrate the current and future US economy

23. Billions of
2005 Dollars
$16,000
Real US GDP vs. Employment, 2002:Q1 to 2013:Q3
Thousands
of Persons
+5.6% 152,000
Recession
$15,600
150,000
Real GDP (left)
Employment (right)
$15,200
148,000
$14,800
-2M jobs
146,000
$14,400
144,000
$14,000
142,000
$13,600
140,000
$13,200
138,000
Carpe Diem Blog
Sources: BEA, BLS
$12,800
2002
2004
2006
136,000
2008
2010
2012

24. US stock prices vs. corporate profits
$2,000
US Corporate Profits vs. S&P 500 Index, 1990 to 2013
Billion s
2,000
$1,600
1,600
S&P500 Index
(right scale)
$1,200
1,200
Tec h
Bu bble
$800
800
$400
Corporate Profits
(left scale)
400
$0
1990
1995
2000
2005
2010

25. Thank you!
Carpe Diem Blog
http://www.aei-ideas.org/channel/carpe-diem/