Sunday, February 07, 2016

The hanging indent

I owe my editor this. Now available and apologies for the price, but something you might want to mention to your favorite librarian to acquire.  From Routledge:  Routledge Handbook of Technology and Policy.

Chapter 9, which probably talks a lot more about Pittsburgh than it ought to, may be of interest to some who find their way here: The Role of Universities in the Evolution of Technology-Based Economic Development Policies in the United States, by Christopher Briem and Vijai Singh. 

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Wednesday, February 03, 2016

low prices, lower unemployment and signing off (for now)

We interrupt the static noise this blog has become. I even had to reset my password to log back in. 

But this little snippet of economic news sure seems so under-reported from my scan of what is going on. Anyone notice this recent story from the AP: Natural gas income from Pennsylvania forests takes big fall. How big? The story says Pennsylvania's revenue from leasing gas rights in state forests is down by half over just the recent year. That is just the beginning of the story. Note that the recent time period the story references is July through December 2015. Average natural gas prices have dropped significantly further since then. Consider the collapse in natural gas prices this week (hey, who wrote that article?) alone. Here is a headline from yesterday: Natural gas prices plunge below $2 on forecasts for warmer weather 

Natural gas price trends are worse for Pennsylvania producers.  The current realized price of natural gas in Pennsylvania is far cheaper than the benchmark prices quoted in business news. There is just too much gas here, and too few pipelines to get gas to where  markets what it to be.  Pennsylvania produced natural gas has not been above $2/MMBtu in some time, really not above $1.5MMBtu even.  Take that altogether, and given recent price trends, could future royalty payments to the state of Pennsylvania drop to literally zero?

Who cares about revenue from forests right?  The bigger question is what is happening to royalty payments for others. If royalty payments are dropping for the state of Pennsylvania, which one would hope negotiated relatively favorable contracts, what is happening to royalty payments to the average Pennsylvania landowner who sold their gas rights? How low have those income streams dropped and how is that impacting communities across the state. Then there is this related question of other revenue for other government entities which have sold gas rights on public land?

(update Feb 6. Trib looks at some of this: Slowdowns in oil, gas industries mean smaller checks for landowners  and then on Feb 10 see KDKA: Businesses Seeing Major Slowdown In Marcellus Shale Drilling Areas.  More to follow??)

Looking ahead there is a bigger issue out there.   If natural gas prices are so low right now in the middle of winter what will happen later in the year? Natural gas in storage across the country will peak about 10 months from now and there is a real issue out there is there will be sufficient storage for all the gas being produced. Remember also that storage is not likely to have a lot of next expansion given the new regulations being proposed in response to the massive gas leak in California. Mark my words, there will be a while new paradigm for gas markets come October when there may not be enough storage space for all the natural gas in the United States.Could we ever get to a point where natural gas prices in Pennsylvania go negative? Certainly no more inconceivable than negative interest rates which are becoming ever more common. Negative prices are even something that has almost happened in some North American oil markets.(that number has since been corrected to be marginally positive, but not by much)

And just a curious lack of news coverage on this other bit of economic news. This week one headline was that the Unemployment rate in the Pittsburgh region is down to 4.8. What is actually more interesting in the very same data, and even in the very same press release, is that the estimate for unemployment rate among CITY of Pittsburgh residents has dropped down to 3.8%, which is pretty amazing for an urban core city. If that statistic does not strike you as interesting, take a second to look at a brief discussion of what is considered full employment in the United States. Still, the city's unemployment rate was  not mentioned at all in the stories I see.  Just for comparison, what is the unemployment rate in the CITY of Detroit? Almost 3 times higher than in the city of Pittsburgh at 10.9% as of December 2015. Here is a related question...  How many urban core cities have significantly lower unemployment rates than the regions that surround them? See if anyone follows that thread.

Add those two stories together and what do you get?  Lots of talk of how local economic growth has been driven by shale gas development. True for sure, but to what degree? Note that natural gas production in Pennsylvania peaked last June, but it has not had that much impact on local unemployment rates. Go figure.

That's it. I do have one other pro-forma post after this, but that will be it for a while. At best little new content will be here until the very end of the year or possibly 2017.  For those checking in, thanks and take care. Didn't have time to do this earlier, so I thought I would formally Sign off (note this link will not mean much to anyone under 30 40, i.e. those who grew up on terrestrial TV)

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