Posts Tagged ‘Gulf of Mexico’

North Dakota’s Booming Economy Grew 7.1 percent in 2010

Wednesday, July 13th, 2011

Guess which state’s economy grew at a significantly faster pace than the nation’s measly 2.9 percent?  According to a report from the Department of Commerce, it’s North Dakota, whose economy expanded a robust 7.1 percent in 2010.The key driver behind both North Dakota’s success is drilling for oil.  Historically, North Dakota’s mining sector — which includes oil — was quite small compared to its overall economy.  That has undergone change in recent years due to new technology that makes it possible to tap billions of barrels of oil in a remote area of North Dakota known as Bakken. American oil demand was relatively flat last year — but that made no difference in North Dakota.  Mining surged 59 percent, primarily because businesses were working to build the infrastructure to support this young industry in the Bakken region.  “North Dakota has a lot of untapped shale oil, and developing that field may have attracted a lot of investment and a lot of employment into the state,” said Luke Popovich, a spokesman for the National Mining Association.

By 2015, the new fields could yield as much as two million barrels of oil a day — more than the entire Gulf of Mexico produces now.  This new drilling is expected to raise American production by a minimum of 20 percent over the next five years.  Within 10 years, it could reduce oil imports by more than half.  “That’s a significant contribution to energy security,” said Ed Morse, head of commodities research at Credit Suisse.

Among the other states, one of the prevailing themes impacting growth is the ongoing housing slump – which was most evident in Nevada and Arizona.  Several states — including Indiana, Massachusetts and Oregon — saw a manufacturing comeback for autos, high-tech equipment and machinery.

The states seeing the greatest growth in 2010 after North Dakota include New York at 5.1 percent; Indiana at 4.6 percent; Massachusetts at 4.2 percent; and West Virginia at 4.0 percent.

Wyoming was the loser with its $34 million GDP falling 0.3 percent in 2010. It’s because the majority of Wyoming’s coal is used to generate electricity — and when demand for energy declined. last year, it was a setback for Wyoming’s mining industry.  With the energy sector rebounding and coal prices soaring, Wyoming is likely to fare better in 2011. Wyoming performed very differently from North Dakota in 2010.  Mining is a well established segment of the economy, accounting for approximately one third of the entire state’s GDP.  When energy demand fell and oil prices barely picked up in 2010, Wyoming’s GDP was badly hurt.  “When the economy is just flat or just limping along, you can expect a state like Wyoming to really take it hard,” Popovich said.

After Wyoming, the slowest growing states are Nevada at -0.2 percent; Arizona at 0.7 percent; Oklahoma at 0.7 percent; and Montana at 1.1 percent.  States like Delaware, which rely heavily on manufacturing of soft goods such as plastic, struggled due to weak consumer demand and competition from producers overseas.

“It’s only been fleshed out over the last 12 months just how consequential this can be,” said Mark Papa, chief executive of EOG Resources, the first company to use horizontal drilling to tap shale oil.  “And there will be several additional plays that will come about in the next 12 to 18 months. We’re not done yet.”

Pre-Crisis Credit Levels Will Return Slowly

Wednesday, August 4th, 2010

 Fed Governor Elizabeth Duke says full recovery from the recession will take time.  As the nation gradually recovers from the Great Recession, several years are likely to pass before lending returns to pre-crisis levels, according to Federal Reserve Governor Elizabeth Duke.  The return of credit growth is far slower than during any business cycle of the last four decades with the sole exception of the 1990 – 1991 recession.  At that time, consumer credit required three years and commercial real estate nearly nine years to recover, Duke said in a recent speech.

Since December of 2008, the Fed has kept its target interest rate at zero to 0.25 percent in an effort to reduce the cost of borrowing and help the economy recover from the Great Recession.  Even so, loans held by commercial banks slid by approximately five percent in 2009.  “Just as the causes for the decline in lending are multifaceted and complex and took time to evolve, the solutions will likely be equally difficult and will take time to fully work,” Duke said.  She is the sole former commercial banker to serve on the Fed’s Board of Governors.  “We at the Federal Reserve, meanwhile, will continue to do everything we can to encourage a return to a healthy credit environment.”

According to data released by the Federal Reserve, consumer borrowing increased in April for the first time in three months.  The Fed’s Open Market Committee notes that household spending is restrained by “high unemployment, modest income growth, lower housing wealth and tight credit.”  Duke said that “Just looking at the statistics, it is not hard to construct a scenario in which consumer demand for credit remains sluggish for quite a while.  Household net worth dropped about 25 percent during the crisis, about 20 percent of mortgage borrowers lack equity in their homes and consumers are quite burdened by debt payments.”

Bernanke Sets Sights on the Growing Deficit

Wednesday, June 23rd, 2010

Ben Bernanke has the deficit jitters.  Federal Reserve Chairman Ben Bernanke is warning that – even as the nation struggles to recover from the worst recession in 75 years – Congress must deal with an “unsustainable” level of debt.  “Our nation’s fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession,” Bernanke said in testimony before the House Budget Committee.

Although Bernanke admits that the deficit was a necessary evil designed to bring the nation out of a deep recession, it has to be addressed in the long term because of the European debt crisis.  The budget deficit gap will narrow as the economy improves and stimulus programs are phased out.  The Fed chairman still sees several drags on the economy.  First and foremost is the jobless rate, which stands at 9.7 percent nationally, as well as the housing market that is plagued by foreclosures and short sales – of which 4.5 million are expected this year.  The good news is that the Fed’s recently updated Beige Book found that consumer and business spending are up slightly.  There is limited growth in the manufacturing, non-financial services and transportation sectors.

The housing market is expected to remain flat, thanks to the expiration of government-funded subsidies.  According to the Mortgage Bankers Association, the number of people applying for mortgages has fallen to its lowest level in 13 years.  Tourism also is down, partly because of the Gulf of Mexico oil spill.  Inflation also is low, making it probable that the Fed will keep the benchmark U.S. interest rate close to zero.