August 24, 2011

What oil exploration does for a local economy

Fort McMurray - once and future boom town.
Back a few years ago the oil deposits being recovered in Alberta Canada provided a massive boom to the local economy of small towns like Fort McMurray.  The town experienced everything from housing shortages, to donut shop jobs paying $20/hour in donut shops.  Oil means jobs.  As Alberta readies for yet another boom after a lull created by the financial crisis of 2008, leadership in the United States continues to waffle on whether to take advantage of the resources of a friendly neighbor that is anxious to sell, and indeed of it's own resources that are practically stopped compared to what they could be providing.  Why this great opportunity is going relatively unnoticed is not as puzzling as it is concerning.

According to Canada's Globe and Mail the boom is kicking back in, but in stealth mode;
n the span of a few quarters, the oil sands have managed an impressive reversal. The rebound has been gradual and grabbed few headlines as companies take a measured, deliberate approach to expansions. But a silent boom has spread across the energy industry, creating both new flickers of confidence -- and a surprisingly loud echo of the problems that weighed on company finances and crippled some firms with oil production plans that proved too ambitious.

The cost of building a new oil sands project now exceeds the levels seen at the heights of 2008, when oil hit $147 (U.S.) a barrel and Fort McMurray was at the centre of a raging inflation wildfire. Suppliers that were offering 10- to 40-per-cent discounts last year have almost entirely clawed back those reductions. The number of workers in oil sands camps has topped the peak in 2008. After a year of quieter highways, the traffic jams are back in Fort McMurray, and home prices in the oil sands headquarters are back within spitting distance of their apex.

The current surge is founded in part on the remnants of the last boom. The thousands of workers building Royal Dutch Shell PLC’s Jackpine River mine, for example, have yet to finish that project, but soon will.

But new anchors are also emerging. Imperial Oil Ltd., and its new $8-billion Kearl mine, is the most obvious example. A remarkable array of smaller work has also been put in play. Companies such as Statoil, MEG Energy Corp., Connacher Oil and Gas Ltd., Devon Energy Corp., ConocoPhillips, Athabasca Oil Sands Corp., Suncor Energy Inc. and, of course, Cenovus, are each building new capacity.

Rather than the six-figure increases of the past – Shell’s Jackpine, for example, is adding 100,000 barrels per day of capacity – these new projects are building more slowly, adding tens of thousands of barrels. The smaller size of the new projects is one reason for the lower profile of this boom.
Perhaps, given the environmentalist knee-jerk resistance to bitumen oil extraction and other extraction techniques like fracking, perhaps the stealth is not so surprising.  Perhaps the smaller scale approach is meant to be both less financially risky but also under the radar.  But it hasn't stopped the local economy from booming;
On the streets, passing cars and trucks sport license plates spanning all parts of North America. Workers are once again flooding this oil-town.

"It seems to me its getting worse everyday…There's more and more people coming in for jobs working out here," says resident Elmer Olynyk.

Lineups snake onto the street at local coffee shops. Fitness centres are packed, seeing massive surges in membership. Even the local registry office is doing huge business.

"We come in and boom we're lined up at the door from the time we open to the time we close. its just so many people and so many newcomers," reveals Sonya Chatman.
It seems like an obvious candidate for a presidential jobs program.  Drill baby drill.  The spinoff, the economic multiplier effect, the scope of the opportunity beyond the confines of local economies are monumental and are screaming for proactive action.

The resources are there so why are Americans paying Saudi Arabia to employ workers there and to sell the oil to you at a massive profit?  That profit could be wholly North American, and significantly American.  What's happening in Alberta Canada is happening in North Dakota.
In the grasslands of western North Dakota, one of the country's richest oil men is using a controversial gas drilling technology to develop what could be the biggest domestic oil discovery in the last 40 years.

The oil lies underground in a shale rock formation stretching across western North Dakota, northeast Montana, and into Canada's Saskatchewan Province known as the Bakken.

Thanks to hydraulic fracturing or "fracking" and high oil prices, oil production in the Bakken has exploded.

It went from a mere 3,000 barrels a day in 2005 to 225,000 in 2010, according to the government's Energy Information Administration.

EIA thinks it will produce 350,000 barrels a day by 2035, but most analysts think that estimate is far too low.

According to Harold Hamm, president of the energy company Continental Resources, it could produce a million barrels a day by 2020.
So why not open that up?  Why not partake in the Canadian oil boom as well?  Why not also take better advantage of the massive amounts of natural gas and coal reserves that United States possesses?  Environmental concerns?  Nobody wants a scourged national landscape, not even oil companies. Those who argue about peak oil, peak coal, and a devastated landscape are living in a time warp.  The oil extraction in Alberta Canada is not the strip mining of yesteryear.  It's much more environmentally friendly.  These resources WILL be used some day.  They can be used now, by North American companies with some sense of respect for the environment at a time when the use of them will provide economic relief to a troubled economy.  Alternately, the can be used by the Chinese when they come to foreclose on American debt and paying them off in resources might be the only option available.  For environmentalists out there, take a look into China's environmental record and then re-think your position on drill here, drill now.  I'm just saying.

1 comment:

  1. Nice post! I want to subscribe this blog, but I don't know how to do, can anybody give me a hand?


Disagreement is always welcome. Please remain civil. Vulgar or disrespectful comments towards anyone will be removed.

Related Posts Plugin for WordPress, Blogger...

Share This