Critics are quick to note the similarities between today and the Nixon-Ford-Carter 1970s.
Now, we can add one more parallel.
The U.S. once again is an oil exporting country.
Somewhere in the bowels of of the monstrous $1.1 trillion spending bill Congress rammed through Dec. 18 can be found approval for the U.S. to flip the “on” switch to the oil spigot for global customers. The first shipments likely are on the water now, or they will be soon.
What it means to consumers, who have had little to cling to in a stubbornly moribund economy, is unclear. The U.S. Energy Information Administration did a study how exporting U.S. oil might affect U.S. motorists, who have grown accustomed, once again, to paying $2 or less per gallon to fuel their cars and trucks.
The EIA study predicted little or no change in the price of gas for U.S. consumers. Of course, the report had the usual caveats that delved into markets, production and other unpredictable scenarios.
In other words, their guess is as good as ours. And, since it’s the government, let’s assume it’s not as good.
We do know the energy industry has been sagging. The fracking boom of recent years brought prices down and pushed the U.S. into potential position of world dominance in terms of oil and gas production, creating a real possibility of the ever-elusive “energy independence.”
Analysts noted, however, that it came with a cost. This new production pushed prices below profit level, and created excess supplies with nowhere to go.
Indeed, over the past 12 months, the U.S. energy sector lost 122,000 jobs –14.2 percent, according to Creighton economist Ernie Goss.
Phil Flynn, energy analyst with Chicago-based Price Futures Group, thinks Goss might be underestimating.
“I think it’s even higher than that; it’s horrible,” Flynn said last week.
It’s the little-discussed dark side of the lower cost of oil. In short, cheap oil — crude was selling at $36 a barrel last week, compared to around $145 in 2008 — has led to lower returns for oil companies that had taken advantage of the fracking boom of just a couple of years ago.
The thing is, fracking has helped create a boom in domestic oil and gas production — a boom that returned the U.S. to a position of potential global dominance, with the Organization of Petroleum Exporting Countries in apparent disarray.
OPEC couldn’t agree to accelerate production when it met at the end of 2014, so Saudi Arabia went rogue and decided to meet the competition on its own terms.
Oil supplies increased, and prices came down — to the delight of motorists everywhere.
A boom in domestic oil production had created demand for lower-skilled workers to fill jobs that paid six figures, Flynn pointed out.
“You had kids coming out of engineering schools getting signing bonuses for hundreds of thousands of dollars,” he said.
That came crashing down in 2015.
“Now, a lot of those high-paying jobs are going away,” Flynn said.
Exporting U.S. oil and gas creates an outlet that could reverse the sector’s downturn, said Flynn, who supports the idea.
“It is a positive for the economy,” he said. “One of the things that has hampered energy industry is our inability to compete with OPEC on a global scale.”
However, analysts, including Flynn, already are predicting the price of oil to go up in 2016 — maybe even by July, Flynn noted.
That can’t be good for motorists.
It’s tough to know how this will play out. It’s certainly a victory for the oil companies, who now have the world at their disposal.
Don’t bet on them filling any of those job vacancies anytime soon. And, don’t bet on cheap gas for the long-term.
We’ve learned too much about the caprices of the oil market to wager so carelessly.
History can be a cruel teacher.
This article was written by Jim Offner from Waterloo-Cedar Falls Courier, Iowa and was legally licensed through the NewsCred publisher network.