Are much lower oil prices good news for the U.S. economy? Only if you like collapsing capital expenditures, rising unemployment and a potential financial implosion on Wall Street. Yes, lower gasoline prices are good news for the middle class. I certainly would rather pay two dollars for a gallon of gas than four dollars. But in order to have money to fill up your vehicle you have got to have an income first. And since the last recession, the energy sector has been the number one creator of good jobs in the U.S. economy by far. Barack Obama loves to stand up and take credit for the fact that the employment picture in this country has been improving slightly, but without the energy industry boom, unemployment would be through the roof. And now that the “energy boom” is rapidly becoming an “energy bust”, what will happen to the struggling U.S. economy as we head into 2015?
At the start of this article I mentioned that much lower oil prices would result in “collapsing capital expenditures”. Continue reading
Last year, Russian state-controlled oil conglomerate Rosneft became the largest oil company in the world after acquiring one of its major competitors. The company has had its sights on tapping Russia’s vast, treacherous Arctic reserves, and after making a few huge deals, it looks like it now has the resources needed to do so.
Russia’s Arctic is estimated to have 25 to 30 billion tons of recoverable oil reserves, which is stunning when you consider there are around 359 billion proven reserves worldwide, including shale oil and oil sands. The only problem is that the Arctic reserves are incredibly hard to exploit, as we saw with Shell’s platform disaster earlier this year. Fields in the Kara and Barents Seas are stuck in incredibly cold and rough seas, and the huge reserves in Siberia’s Laptev, East Siberian, and Chuckchi Seas are additionally separated from population centers by thousands of miles of tundra.
Those vast oil and gas fields aren’t impossible to tap, just expensive. With oil platforms in the farthest reaches estimated to cost somewhere between $5 billion and $8 billion apiece, it should come as no surprise that the Arctic has remained quiet this long. (It’s also a reason why Soviet scientists wanted to melt the whole thing.) Continue reading