Saturday, October 01, 2011

Base Zero Math

I really don't get it. Instead of backtracking, it seems a US Congressman is continuing to insist that 2 counties in Pennsylvania have zero unemployment rates.   I guess it counts as equivocation in saying 'virtually' zero.

While academics and others may debate the veractiy of the official unemployment rate calculation, it is still the truth that the widely cited unemployment rate is by far one of the most understood metrics out there. So there is no ambiguity as to what data is being referred to when you cite the 'unemployment rate'. and the source: it is generated for the most part with data direct from the state of Pennsylvania and the Current Population Survey.

If you have any doubts about just how high county unemployment rates are in Pennsylvania right now, you can easily check them out yourself. In fact if you were to round to the nearest decade, every county in Pennsylvania is closer to 10% unemployment than zero. This all gives 'new math' a whole new dimension.

Of course, since he said it, folks like the American Petroleum Institute (API) (which really should know better.. they know numbers) are repeating it.  See their blog post:  Good News Friday. 0% Unemployment.  

Not like there isn't positive Marcellus related news out there.  From the Globe and Mail today:  Shale Gas Gives Plastic Sector a New Lease on Life.

What is worth reading also is from the WSJ:  How North Dakota Became Saudi Arabia.  Since everyone is saying Marcellus is making Pennsylvania the next Saudi Arabia..  I am not sure what it means any more to be Saudi Arabia in the first place.  Of course, that WSJ article was really talking about oil.  ND also has natural gas, but in an earlier NYT last week there was this: In North Dakota, Flames of Wasted Natural Gas Light the Prairie.

So our Saudi Arabia is based entirely on a commodity the other Saudi Arabia finds so relatively value-less it is burning it off for free.    Hmm.

or is the oil boom coming as well?  Hmmmmm.

Finally..  since I am really talking about supply side economics in all of that.  I do note that my natural gas bill is likely going down and would concur it is in at least part.. possibly large part.. due to natural gas development here and the new supply it is generating.  What is odd though is that not all local gas companies are lowering their prices.  Out there closer to the new drilling there are some natural gas rates actually rising

Here is the fundamental question though.  The industry says this is all merely the beginning of a huge new supply of gas we will all benefit from.  OK.  It is also true that natural gas prices are pretty low now.  What will happen to natural gas markets when the bulk of all this new shale gas comes online?''

and more on just plain misreading numbers.  There is a news item today from various sources.  NPR's Stateimpact and Jim R. caught it, then the Trib followed up today on the factoid that popped up of Washignton counting ranking 3rd in percentage of job growth among large counties.  Now note the Marcellus Shale coaltion's version of it which seems to say Washington County's growth was 3rd among all 3,141 county equivalents in the nation.  Uh.. no.  Read the BLS release.  Washington County is #3 among not 3,141, but of 322 of the largest counties.  They actually reference the 3,141 number to emphasize the point.  The biggest deal? No, but just missing 90% of the counties makes for a somewhat different story.  Probably worth mentioning that Washington County, PA is one of the smallest counties to actually make that list which probably impacts why it pops up in a percentage job growth statistic.


Anonymous The Wiz said...

What will happen to natural gas markets when the bulk of all this new shale gas comes online?

Contrary to what most people think, a thousand wells drilled over five years will not add a thousand wells' worth of production to the system. Gas wells produce roughly 70% of their lifetime total in the first three years and deplete rapidly after that. So new wells must be continuously drilled to keep up supplies. To have a major impact on supplies, there needs to be more and more wells drilled year after year. Or develop new methods to enhance a well's production.

Both, larger numbers of new wells and enhanced production techniques, will happen but so will increased usage of natgas. There is a big move to boost it for transportation use. Using natgas for electrical generation is rapidly accelerating. And the chemical/plastics/pharma industry use of natgas is also expanding.

I expect natgas to stay cheap relative to other forms of energy but to not drop much from where it currently is or even slowly rise. The cheaper it gets, the more alternative uses for it will be developed.

Saturday, October 01, 2011 10:12:00 PM  
Anonymous BrianTH said...

We don't want to be Saudi Arabia. We want to be Norway.

Anyway, I think it is interesting the petrochemical angle doesn't get more play in the propaganda war--which cuts both ways, I suppose, so maybe that is the explanation why neither side wants to open up a new front.

Sunday, October 02, 2011 9:45:00 AM  
Blogger C. Briem said...

We want to be Norway.

The problem is that the only Yinzer who has ever been to Norway is Bill Peduto. He might even be one of a few who could find it on a map even. I almost got to Tromsø once.

We are kind of the opposite of Norway aren't we when it comes to how we are developing energy?

Anyway. I am going to take the Hurtigruten some say. On my personal bucket list somewhere after the Trans Siberian Railroad.

Sunday, October 02, 2011 10:10:00 AM  
Anonymous BrianTH said...

I've only spent a day in Oslo, but that was nice.

Anyway, it is early yet, and I think we have some time to get things on a decent path.

Sunday, October 02, 2011 3:00:00 PM  
Blogger C. Briem said...

The cheaper it gets, the more alternative uses for it will be developed.

Sounds logical, but just does not work in reality. A decade ago NatGas was half the price it is today yet all those alternative uses didn't ever start up. During 70's when oil was costlier than it is today when adjusted for inflation.. NatGas was also the cheaper alternative by far yet nothing really got very far and very little of the NatGas infrastructure taking root back then really stuck around. I cant cite a stat, but I bet even fleet use of NatGas is down in recent decades. Pitt used to have NatGas Vanpools even for a long time. They went away some years ago.

If you look at places in the world where alternative energy systems have taken root.. they are almost all the result of heavy government regulations or subsidies or other incentives. Hard to see industry or the political will anywhere accepting all the additional costs similar measures would impose here.

For example note the backtracking on coal regulation in the news recently. I kind of wonder what worlwide prices of natgas would be if the tsunami did not put a hull shot into the world nuclear industry.

But I don't get it actually. All this historic new supply and the price of natural gas will not even be going to where it was 10 years ago? Economics is bunk I guess.

Sunday, October 02, 2011 3:17:00 PM  
Anonymous The Wiz said...

During the seventies, there was a push for natgas use in transportation and electric generation. But as natgas use picked up, production could not keep up and the price went up considerably. And the spike in crude brought about a huge increase in production of oil, bringing down the price of crude and thus gasoline and all oil derivatives. These two, higher gas and a drop in crude, stopped the conversion as a natgas transportation fuel.

Will this time be different? There is a much larger supply of natgas so the low price should hold. But horizontal drilling and hydraulic fracturing is also bringing about a jump in crude supplies, including domestic supplies. Think Bakken, Utica, Eagle Ford, offhore and more. Oil may drop enough to slow the conversion of natgas as a major transportation fuel. Only time will tell.

Sunday, October 02, 2011 9:11:00 PM  
Blogger C. Briem said...

So I still don't get it.. is natgas price going to drop to the point of inducing all these new uses.. or stay where it is which has not not had much impact for a long time. It sounds like you think supply is going up.. prices are going up yet the amount demanded is going up.

and I'd go check that history. The 1970's were one of the few decades where natural gas consuption actually went down in the US, not up.

Sunday, October 02, 2011 11:25:00 PM  
Anonymous BrianTH said...

As I understand it, the thing to look at is crude oil to natural gas price ratios, which are currently at historic highs (higher even than during the 79-82 oil price spike, I believe). People in the industry believe that if oil to gas ratios stay this high for an extended period, it will in fact induce some demand-side changes.

Exactly what demand-side changes will happen is hard to predict, but generally this theory makes sense to me--it is not so much how the price of natural gas compares to its own prices in the past, but rather how people expect the price of natural gas to compare to the prices of other substitutable commodities in the medium-term future, that will determine if there is significant investment in switching from using those substitutes to using more natural gas.

Monday, October 03, 2011 10:38:00 AM  
Anonymous The Wiz said...

To be more accurate, the OPEC-inspired high oil prices of the 70s led to an increase in natgas usage in the early 80s...until natgas went up and crude came down.

Tuesday, October 04, 2011 11:06:00 AM  

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