It’s January. The presidential campaign now begins in earnest, with the first primary this month in New Hampshire. How might this affect the oil and gas industry?
“Hang on to your ten-gallon hats.” That was the message of keynote speaker Amy Holmes at the Independent Petroleum Association of America’s annual meeting in November. The radio and CNN political commentator told attendees, “It’s going to be a rollercoaster election. This is going to be more fun than watching sports or ‘Dancing with the Stars’.”
The 2010 midterm tsunami was stunning not only for its Republican color but for its strong and lingering effect, she said. There was a huge swing among independent voters away from the Democratic Party they supported in 2008. Republicans won 56% of the indie vote in 2010, their best showing since 1982. The GOP captured nine governors’ chairs as well.
Those indies may do it again. A recent Gallup poll indicates they are still trending more conservative than they were in 2008. The mood of the electorate, Holmes said, can be summed up in three simple words: “Not very good.”
That could translate to an all-Republican government as the most likely scenario for 2012, according to a recent report from Fried-man Billings Ramsey, written in late November, right after the Super Committee failed to reach agreement on trimming the federal deficit.
“Early 2012 could be an opportunity for investors to begin looking beyond Europe and the volatile U.S. debt policy to the increasing probability that Republicans will win the White House,” the FBR report says. “If the Republicans nominate a candidate with ‘electability,’ we believe that investors will quickly begin discounting the President’s chances for reelection.
“While we certainly recognize that politics and elections are a volatile business and that anything can and will happen over the next 11 months, we believe that if the election were held today, the most likely scenario would be an all-Republican government (House and Senate majority/Obama loses reelection).”
Nearly two dozen Senate seats are up for grabs and the GOP only needs to win four of these to gain control of the Senate.
For the industry, it looks like several of the most threatening regulatory and tax ideas may be rolled back, if a Republican sweep is indeed coming. Already, the EPA has rolled back by six months several things—but not all—that it would have required of energy companies and refineries.
For the public, the economy is still the main issue. For U.S. employers, who are not hiring, one of their main worries is what their energy costs will be, Holmes said.
The oil and gas industry is part of the solution for job creation, lower-cost energy supply and the economy. But that message has to be hammered home in Congress. The voting public, too, needs to hear. Here are just a few of the facts:
Onshore independent producers provide 4% of the gross domestic product (GDP) of this country and the multiplier effect across the economy is huge. We recently heard of a Kansas royalty owner seeing drilling for Mississippi Lime under his land. His first-month check was $400,000.
A new IHS study says the shale gas industry now supports more than 600,000 jobs; by 2015 that’s predicted to grow to nearly 870,000. Nearly $1.9 trillion in capital investments are expected to be made between 2010 and 2035. The shale-gas contribution to the U.S. GDP will be more than $118 billion in 2015.
In 2009, U.S. oil production rose for the first time in decades and it is still climbing. In 2011, U.S. exports of petroleum products (gasoline and diesel) were the highest in 62 years.
Unemployment has been virtually eliminated in North Dakota, and some think that will happen in South Texas, parts of Pennsylvania and maybe, eastern Ohio.
Cal Dooley, president of the American Chemistry Council, testifying before Congress in September, said increased ethane production from the Marcellus and other gas shales might create 400,000 new jobs in the chemical/plastics industry and add $132 billion in additional economic activity.
North America might even become the lowest-cost place to produce polyethylene, a surprising development that would put it in direct competition with low-cost Middle East and Asian producers. Some believers are contemplating the possibility of ethane exports to Europe, speakers said at Hart Energy’s third annual DUG-East Conference and Exhibition in Pittsburgh.
If current production trends continue, U.S. oil and liquids output could double from today’s level by 2016, catapulting us atop the heap as the largest such producer in the world—and by the way, halving our crude oil imports.
We don’t know which of these events will come true. But even if we give all these projections a 50% haircut, an astounding American energy future lies ahead. Do your part to get the word out, and insist that political candidates measure up on energy.
For more commentary from Leslie Haines, see the blog
“Leslie’s Notebook” at OilandGasInvestor.com? .
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