Iraq’s Oil Boom

Here’s some good news from a country that could use some good news:  Iraq is experiencing an oil boom.  The country has achieve a 20 percent increase in exports and is now pumping out almost 2.5 million barrels of oil a day.

The increase in production is especially impressive because Iraq has done it despite the bombings and other acts of violence that continue to plague the country.  The government has made port improvements that have allowed for the increased exports and has managed to engineer an increase the flow of oil.  Iraq is now pumping crude at a rate seen only once since Saddam Hussein took power in 1979, and plans to increase its production even more next year.  Indeed, Iraq’s announced goal is to pump 10 million barrels a day by 2017.

This is good news for the world — Iraq’s production has helped to hold down oil prices and has reduced Iran’s oil power — but it is especially good news for the people of Iraq.  People are back at work in the oil fields and ports, oil revenues are pouring into the country, and internal improvements are being made to allow for increased production.  Of course, there are still serious concerns about the ongoing sectarian violence in the country, about corruption and favoritism, and about a fledgling government that has had difficulty governing.  It remains to be seen whether those concerns are exacerbated by the incoming oil money or whether the cash allows the competing factions to paper over their differences and agree upon their shares of a rapidly expanding pie.

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Mill, Baby, Mill!

In Ohio we are getting a first-hand look at the ripple effect in the economy when America’s energy resources are tapped — and it has been a real economic boon.

As I’ve mentioned before, eastern Ohio is home to the Utica shale formation, an incredibly deep layer of rock that apparently is a rich repository of natural gas, oil, and other highly valued “wet gases.”  Drilling wells requires steel pipe, and because the Utica shale formation is so deep underground it requires lots and lots of pipe.  As this New York Times article reports, the need for pipe caused by the resurgence in natural gas drilling in the continental United States has helped to fuel a resurgence in the Ohio steel industry, which has seen expanding steel mills and the hiring of new workers to handle the skyrocketing demand.

The effects don’t stop there.  The owners of the property on which the wells are being drilled have been paid for the privilege and therefore have more money to put into their local economies.  The fracking method used to extract the gas and oil requires lots of water, so trucking companies have expanded their tanker fleets to meet the demand.  And all of the truck drivers, oil drillers, geologists, and drilling engineers who work in Ohio’s oil patch have to eat and sleep and work, which means that hotels, motels, and restaurants in the area are busier than they’ve been in years and the demand for office space has increased, too.

In short, Ohio’s economy demonstrates the good things that can happen when energy resources are located and tapped.  As the Ohio story shows, developing our oil and gas resources — a proven commodity with a proven market that doesn’t require government subsidies or wasteful stimulus spending — is a sure means for an economy to grow its way out of this unending recession.

Thanks to Richard for sending me the linked article.

Upbeat About The Utica Shale

Eastern Ohio — home to many depressed communities and unemployed residents — is becoming a boom area thanks to a rock formation called the Utica Shale.

The Utica Shale lies far below the surface under parts of eight states.  Geologists believe that it may contain huge reserves of natural gas and oil and that one of the best areas to get at the resources is eastern Ohio.   Big oil companies are moving into the area, buying lease rights and getting ready to drill in earnest.  Today one of those companies, Chesapeake Energy Corp., said that initial wells in the Utica Shale showed strong production, which has heightened the interest even more.

Because the Utica Shale is so far below the surface, the companies use deep and horizontal drilling technology and then apply a technique called hydraulic fracturing, or “fracking,” to free the resources from the shale.  Environmentalists argue that fracking poses undue risk of groundwater contamination, but the oil companies contend the process is not dangerous and has been used safely for years.

For the citizens of eastern Ohio, the Utica Shale find is an economic godsend.  The sale of lease rights are making landowners wealthy, oil companies are setting up shop in the area, and the eventual extraction of the natural resources will produce a host of new construction and long-term blue collar and white collar jobs.  The state will want to ensure that the wells are operated safely, of course, but the impetus to develop the resources and bring jobs to the area seems irresistible.

It’s hard not to contrast the Utica Shale boom with the government effort to spur green energy.  Oil and gas companies are spending billions of dollars to get at natural resources that have proven value and can be obtained using established technology.  They have moved rapidly to identify the potential resources, obtain drilling rights, and erect rigs and start work.  And this burgeoning economic activity has not required costly government subsidies, slow-moving government bureaucracies, or politicized, heavily lobbied programs that advantage one manufacturer over another.

This textbook lesson in the speed, nimbleness, and efficiency of capitalism will create new wealth and lots of new jobs in Ohio that cannot be moved overseas.  All of which should lead everyone to ask:  if we want to immediately create jobs here in America, why isn’t the government making sure there are no unnecessary barriers to the development of our other existing natural resources?