How to Fix the US Economy in one move.


How to Fix the US Economy in one move.

Posted on Apr 28, 2016 by Paul White

Recently I was thinking about the cause and effect of our global ecomony.  When I came to the conclusion of how the president could in one move put millions of americans back to work in one move.  Ban the import of oil

When the price of oil was at all time highs just a few years ago, there was a surge in energy startups.  Thousands of companies started popping up to get in on the massive profits.  The result was an increase the amount of oil being put on the market.  This plus a slowing global economy, and regulators banning speculators from the oil markets cause the price to drop.  

Normally OPEC would lower production in an attempt to bring the price back up, but the price was so low, they couldn't afford to do so.  Middle eastern countries and russia are highly dependent on Oil revenues.  To lower production would just cause other countries to increase production.  Its become almost like mining Bitcoin, where your yields are directly tied to what portion of the pie you control.  Over the years the USA has been producing more and more oil within our own borders thanks to advances in directional drilling and Fracking.  

As the price of oil has gone up over the past 6 years, so has the number of companies getting into the oil business.  The Rig count went from 400 back in 2010 to a peak of 1600 in Oct 2014.  Based on numbers I have seen online each land based Rig employs about 135 people.  Keep in mind these are good paying jobs with most paying $100K / year.  Soon after the peak in Oct 2014, the dropping oil prices forced many companies to shut down hundreds of their Rigs, as the costs out weighted the benefits.

Currently in Houston there are over 100K people unemployed from the Oil and Gas Industry.  The trickle down economics has not been good for local businesses.  Even if the general population is enjoying $1.75 / gallon at the pumps, the job losses out weigh the benefits.  I have talked to people who work in the services industry who said they would rather pay $3.50 / gallon to drive to work, as it would mean more customers and better tips.

The strange thing is even with all the Rigs being shutdown, US oil production number are still at all time highs.  We are still pumping over 9 Million Barrels a day.  The USA consumes on average 19.4 Million Barrels a day.  We are importing everything else.

How do we fix the economy and the Oil Industry?

  1. Stop the import of Foreign Oil.
  2. The Price of Oil within the USA would sky rocket back to over $100 / barrel.
  3. Millions of people would be employed with good paying jobs to bring our old rigs back online.
  4. The price of oil on the global market would drop as a result of the USA which consumes more than 20% of the Oil from not buying its oil off the global markets, forcing many countires that depend on oil revenues to panic ( Gives the USA more leverage )
  5. Within 10 years Oil prices within the USA stabilize back down levels around $70 / barrel.  This is a result of continued improvements in MPG, and the incease in hybrid and electric cars, plus increased oil production from more Rigs being brought online.

 

Some people say that won't work.  The result would be massive oil shortages and rationing. But remember this is not the 1970s.  Cars today get over 30 MPG, and thanks to Fracking we have new ways to increase production to meet demand.  Sure the price of Gasoline might rise to $3.00 a gallon, but would you rather pay that than to have us waste trillions on foreign wars that are based on nothing more than protecting our supply of oil.  We can let the Saudis fend for themselves.  Keep that money within our own borders, and grow our economy.  

 

 

 


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