Globalism is dead
Globalism can officially be declared dead after the Energy Information Administration reported that U.S. crude oil and natural gas reserves both just hit all-time-record highs.
Globalism is a corporate outsource construct that was designed in the 1970s to respond to the end of the United States' 100 years of economic dominance that was driven by domestic energy costs that averaged about one third of world costs.
With international manufacturing input costs in the late 19th century averaging 8.5% for labor and 13.5% for energy, American companies used their energy price advantage to competitively "hollow out" the British manufacturing sector. During WWI and WWII, over 50 percent of U.S. exports to Europe and Asia was oil.
But when U.S. manufacturing declined with the rapid rise in Middle East oil production, secretary of state Henry Kissinger negotiated a banking and security agreement with Saudi Arabia in 1974 to recycle oil revenues into U.S. dollars. Kissinger famously justified the deal by stating:
Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.
Petrodollar recycling became wildly profitable for Wall Street bankers and brokers as the agreement expanded to 18 oil-producing countries and $2.5 trillion in deposits. The combination of America losing its energy cost advantage and petrodollar recycling pushing up the U.S. dollar exchange rate, devastated American manufacturers and led to the massive outsourcing to skilled blue-collar jobs to China.
But EIA's 2017 "U.S. Crude Oil and Natural Gas Proved Reserves" released on November 29, documents that U.S. oil reserves hit 39.2 billion barrels, surpassing the previous peak of 39.0 billion barrels set in 1970, and its natural gas reserves reached a record 464.3 trillion cubic feet (Tcf); surpassing the 2014 U.S. record of 388.8 Tcf.
The percentage increases for U.S. fossil fuel reserves are staggering, with proven reserves for both crude oil and natural gas doubling in the last decades. The reserve rate gain accelerated last year to 19.5 percent for oil and 36.1 percent for natural gas.
United States crude oil production passed Russia and Saudi Arabia earlier this year, making the U.S. the world's largest producer for the first time since 1999. EIA predicts that U.S. oil production will average 12.1 million barrels per day (b/d) in 2019, up from 10.8 million b/d in 2018.
The U.S. passed Russia as the world's largest natural gas producer in 2009, and currently accounts for about 20 percent of world production. U.S. natural gas production increased in August 2018 to a new record of 86.9 billion cubic feet per day (Bcf/d) and EIA forecast natural gas production will average a new record 89.6 Bcf/d in 2019.
EIA credits America's return to fossil fuel dominance to innovations in natural gas horizontal drilling and hydraulic fracturing pioneered in Pennsylvania's Marcellus shale formations in 1997. The same techniques when applied to North Dakota's Bakken and Williston tight oil-bearing shale formations reversed America's 38-year downward trend in crude oil production by 2008.
Texas and New Mexico had the largest net increases in proven reserves for crude oil in 2017, adding 3.1 billion and 1.0 billion barrels of crude oil reserves last year. Pennsylvania and Texas had the largest increases in proven natural gas reserves for the same period.
Secretary of the interior Ryan Zinke told Fox Business in mid-October that crude oil and natural gas production were being constrained by outpacing pipeline takeaway capacities. Zinke commented that with new pipelines opening in 2019, he believes that crude oil production may rise to 14 million barrels of oil per day in 2020, and U.S. crude oil exports could double to 3.9 million barrels per day.
America's unique geological shale formations and abundant water resources are credited with launching the Oil Boom. U.S. technological innovations in Big Data analysis and Industrial Internet of Things process monitoring seem set to power a digital "Oil Boom 2.0."
The United States regaining its cheap energy comparable advantage is great news for the rebirth of American manufacturing and the growth of millions of U.S. high-skilled blue-collar jobs. It also represents an existential threat to China as globalism's biggest winner.