Shale Oil leading to real jobs and real investment in the US

“Artificial” jobs created by subsidies and government inspired market distortions are never sustainable. As is being evidenced by the boom and bust of solar energy and wind turbines riding the wave of subsidies. But the advent of shale oil (and shale gas) is a game changer in many many ways. Fossil fuels are now no longer all “bad” (though some of this sentiment is leading to another inane “War on Coal”), and the fundamental truth that true sustainability – of necessity – requires being commercially sound and not just subsidised is taking hold again.

The US is at least 3 years ahead of Europe in exploiting shale gas and shale oil – even though the deposits in Europe are quite considerable. But Europe is still stuck in the self-righteous and self-delusional “green” policy regimes which have raised energy prices unnecessarily, helped to sustain economic stagnation and have prevented some 15 million jobs from being created. Without a paradigm shift in energy policies and a whole-hearted pursuit of shale gas and nuclear power, Europe’s return to sustainable growth is difficult to define.

Reuters: 

Thanks to the U.S. shale energy boom, the once-quiet niche of U.S.-flagged oil tankers is in unprecedented flux.

A half-dozen vessels that typically carried gasoline to Florida are now rushing crude oil along the Texas coast. Major investment at the port of Corpus Christi, which now exports more than half of all Eagle Ford shale oil, suggests more to come even as new pipeline projects promise further market shifts.

The shale oil revolution, now in its third year, has already scrambled the inland U.S. crude market, forcing pipelines to reverse direction and fuelling a revival in railway oil trade. ….. 

…… Christos Papanicolaou, director of business development for the Greenwich, Connecticut-based shipbroker Charles R. Weber Co Inc, said it’s the first time the Jones Act market has been clearly profitable in the 20 years he has worked in shipping.

“The cost of entry and the duration of contracts were such that any venture was a leap of faith,” he said. Investment in the Jones Act trade required hiring expensive unionized crews with no guarantee the ship would find a fixture.

“Nobody wanted to trade in the U.S., because there was no oil here.”

Shale oil has changed that abruptly, specifically Eagle Ford in south Texas, where output swelled from near zero to more than 500,000 barrels per day in three years. Unlike the land-locked Bakken of North Dakota, the field is less than 100 miles from the Gulf of Mexico and the “refinery row” that lies along the Texas-Louisiana coastline.

While markets have largely adapted to changes in inland trade patterns, the flux in tankers is still evolving. Each new train terminal or pipeline threatens to rewrite the economics of seaborne trade; limited tanker supply and rising rates are squeezing traditional routes like shipping fuel to Florida. …

…… The rapid build-out in infrastructure suggests more changes ahead for Gulf Coast shipping. If more tankers taking fuel to Florida switch to carrying oil, it may have to import gasoline. The state already buys much of its jet fuel, diesel and ethanol from countries like Venezuela, South Koreaand the Netherlands.

Corpus Christi port, meanwhile, is in the midst of a multi-year expansion that will add eight docks to its current 27 by June 2014 and 10 million barrels of crude tanker storage, a 33 percent gain, suggesting plans for even greater seaborne trade.

But some refiners currently taking Eagle Ford crude by tanker may soon have cheaper options. By the end of 2013, the reversal of a crude pipeline from Houston to Houma, Louisiana, will pump up to 250,000 bpd to the eastern Gulf of Mexico for rates as low as 59 cents per barrel.

That capacity would ease some of the sea traffic, but with Houston refiners receiving plenty of shale oil from the Midwest, Eagle Ford oil will likely still need a seaborne outlet.

“The growth in crude production has been so far beyond what anyone anticipated that the infrastructure just isn’t there to deal with it,” said Andrew Weissman, senior energy adviser at law firm Haynes and Boone in Washington, D.C.

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