Ed Yardeni on Texas’ Oil Problem

by Marilou Long on January 27, 2015

in Energy,housing,interest rates

From Ed Yardeni’s Morning Briefing today:

The problem was caused by Houstonians and other Texans contributing to a flood of oil supplies. Several oil market observers have observed that shale oil output isn’t likely to decline in response to lower oil prices until the second half of the year. Indeed, while the price of crude has dropped by over 50% since last summer, US crude oil field production rose to 9.2mbd during the 1/16 week. Leading the way higher is production in Texas, which rose to 3.8mbd, up 2.3mbd from the first week of 2011. As a result, US crude oil inventories rose to a record high for early January at 397.9 million barrels.

Not surprisingly, Texans are now wondering if they could be heading for a crash comparable to what happened during the oil bust and banking crisis of the 1980s. An article (http://www.wsj.com/articles/plunging-oil-prices-test-texas-economic-boom-1420428781) in the 1/4 WSJ titled: “Plunging Oil Prices Test Texas’ Economic Boom,” observed: “The Lone Star State’s economy has been a national growth engine since the recession ended, expanding at a rate of 4.4% annually between 2009 and 2013, twice the pace of the U.S. as a whole.” Furthermore, one in seven jobs created nationally during the 50-month expansion were in Texas.

A banking crisis is unlikely this time. However, there is already some evidence that the oil industry’s latest misfortune is trickling down to the state’s economy. Yesterday’s release of the Dallas Fed regional survey for January showed a sharp decline in the production index (from 16.4 in December to 0.7) and in the new orders index (from 2.7 in December to -7.7). However, the employment index remained above zero at 9.0. Texas has a more diversified and more services-oriented economy than it did during the 1980s oil bust.

The good news is that lower oil prices amount to a huge windfall for US consumers, which should more than offset the bad news for the US oil industry. Previously, Debbie and I estimated that the current drop amounts to more than $200 billion in fuel savings for Americans. That certainly explains why Bloomberg’s Consumer Comfort Index has been soaring in recent weeks to the highest since July 2007.




Gold, Inflation or Deflation

by Laura Ehrenberg-Chesler on January 22, 2015 in currencies

I distinctly remember about 2 years ago hearing from a number of clients that they were convinced rampant inflation was imminent.  Many of these individuals were buying physical gold and storing it in a bank, or in a safe.  In spite of the major injection of liquidity over the past six years from Central Banks [...]

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State of the Union Preview – courtesy The Wall Street Journal

by Marilou Long on January 20, 2015 in Fiscal Policy
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“The Progressive Case for Fracking” – courtesy the Wall Street Journal

by Marilou Long on December 30, 2014 in Energy

The breathtaking drop in the price of oil has been one of the biggest surprises of 2014.  This opinion piece in the WSJ today is a good summary of the forces driving the price of oil right now.  From the linked article: As the American people and companies shift more of their consumption to cheaply produced [...]

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Book Review/Holiday Wishes

by Laura Ehrenberg-Chesler on December 17, 2014 in Crossvault Capital

Our good friend and PR mentor Alan Weinkrantz, who helped us develop our blog, suggested that on occasion we should post a personal recommendation or book review.  So, since the Holiday season is upon us, I thought it would be a good time to share a book recommendation. This year I read the “Border Trilogy” [...]

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The downside of the downside in Oil

by Laura Ehrenberg-Chesler on December 11, 2014 in Economic Indicators

This morning Ed Yardeni had an interesting analysis of the downside of the recent and precipitous drop in oil prices. 1) OPEC losing market share. According to Bloomberg, OPEC yesterday lowered its production projection for 2015 by about 300,000 barrels a day, to 28.9mbd. That’s about 1.2mbd less than the group’s 12 members pumped during [...]

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Government Spending Deal Reached

by Marilou Long on December 10, 2014 in Fiscal Policy

The possibility of a government shutdown that could undermine investor confidence appears very low now.  From the linked New York Times article: WASHINGTON —  Congressional leaders reached a deal Tuesday on a more than $1 trillion spending package that would fund most of the federal government through the current fiscal year. But because negotiations on the [...]

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Oppenheimer’s Fadel Gheit on the Outlook for Oil

by Marilou Long on December 2, 2014 in Commodities
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Make it Count

by Laura Ehrenberg-Chesler on November 20, 2014 in lifestyle

Today is my birthday so I figured I could put up a repeat post that is one of my favorites from a few years ago.  My gift to our readers from Nike. “You only live once but if you do it right once is enough”  Mae West    

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Japan Slides into Recession

by Marilou Long on November 18, 2014 in Foreign Markets

Japan’s second quarter GDP fell -1.6% after falling -7.3% in the first quarter.  U.S. markets rallied sharply in October after Japan announced more efforts to stimulate their economy.  Prime Minister Abe has now announced that the planned hike in the consumption tax to 10% will be postponed.  From the linked article: The release earlier Monday of data showing [...]

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