The Economy

One of my readers asked me for comments on the outlook for the global economy. I saw this post on Paul Kedrosky’s site which I think does a very good job summarizing the situation, which effectively, is demand exceeding supply in every dimension. [It’s actually a passage from FT].

My sense is, all the major economies – US, Europe, India, China – would be looking at Free Trade with a question mark at this point. US, particularly Obama, wants to keep jobs in the country. That desire translates into an anti-globalization, anti-free-trade rhetoric that is off-putting, but it is what it is. The declining dollar is causing food prices to rise, oil prices are sending shocks all over the world, also a function of supply-demand inequilibrium. India and China, on the other hand, will need to restrict exports to be able to feed their internal growth, whether in terms of grains or steel.

However, oil is the economic variable at heart of the entire global economy, and drives food prices, as well as wars.

One rather intriguing fact that a lot of people are trying to get their arms around is that Western Colorado, apparently, has 100 YEARS of oil, and three times as much as Saudi Arabia.
I spoke with Chet Sandberg, an expert in the field, and he pointed me to some articles. Here are some excerpts from what I gathered from a piece by Environmental News:

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The lands under consideration for oil-shale exploitation are located in sections of Colorado, Utah, and Wyoming, where the underlying Green River Formation contains an estimated 1.5–1.8 trillion barrels (bbl) of oil, of which 800 billion bbl are considered potentially recoverable. A recent RAND Corp. report calculates that at a daily production rate of 5 million bbl of oil—one-quarter of the current national usage—the reserves could last more than 400 years.

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There are both technology and business challenges, and a very significant environmental impact.

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“Of all the environmental impacts of oil-shale development, the most serious appears to be the extent to which land will be disturbed,” according to the RAND report. BLM’s EIS estimates that each oil-shale project would occupy up to 14,000 acres. Lands being considered for leases encompass 170,000 acres with wilderness characteristics, 249 miles of perennial streams, and a vast array of plant and wildlife communities, including 14 threatened and endangered species.

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It seems to me that the economic variable that can release some of the pressures is oil, so environmental issues notwithstanding, this Shale Oil reserve needs to be explored.

What do you think?