Cyber currencies and their underlying technology, the largely self-imposed drama in the US and UK, and the North Korea’s apparent acquisition of nuclear capability are among the significant macro developments this year. There is another development that like the others was a long time in the making, but seem to have reached a critical mass. It is the US prowess in the energy sector. It can have far-reaching political and economic significance.
The US oil imports continue to fall. Last week, the US imported about 1.77 mln barrels a day net, which is the least since 1990. There were some transitory factors, like the problems of Keystone Pipeline, that may have limited Canadian oil exports to the US. However, net oil imports for the month as a whole could be the lowest since 1973. Recall that at its peak 12 years ago this month; the US was importing 14 mln barrels a day.
The US produced 9.68 mln barrels of oil a day last week. It is set to surpass 10 mln barrels a day early next year. Global growth is helping lift US exports, which are almost 6% this year. Oil exports have nearly doubled and do not appear to have peaked. It is not just shale either. Last week, the US also exported 1.21 mln barrels of gasoline a day. As a byproduct of the oil output, the US natural gas production is also surging and having an impact on prices and exports. It is indeed conceivable that the US is a sustained exporter of carbon fuels.
The competitive pressure on other carbon exporters is increasingly important. While OPEC and the cooperating non-OPEC countries are set to extend their output restraint through the end of next year, there is a concern in some quarters that there is some risk of overdoing it. A continued rise in oil prices could accelerate US output and put OPEC behind the curve again. The price of Brent and WTI have more than doubled off its low set early last year. Some economists note that US recessions have, as a rule, often follow a doubling of oil’s price. There were a number of false positives when oil doubled not recessions by recessions. Also, with more production in the US rising faster than domestic demand, perhaps the dynamics are changing. The US economy has accelerated recently, and appears set to record its third consecutive quarter of above 3% growth at an annualized pace.
