Executives from throughout the world met at the World Economic Forum and all seemed to agree on one thing: American is indeed back both economically and in its role as a world leader! Certainly if the Republicans, Democrats, or President Obama had been in attendance, they would have certainly taking credit for this dramatic turnaround. Although Louisiana was mentioned at the recent World Economic Forum in Davos Switzerland, it was us they should have been applauding.
Exactly how did the US jump from recession to a booming economy overnight? Why suddenly are eight out of the ten most valuable companies in the world now located in the United States? Could it be through the shale revolution (remember Louisiana’s role) the US has finally been able to crush the influence of OPEC?
Louisiana’s Shale Industry
When the shale revolution began, it took drillers almost three weeks to complete a well. Shale drillers have now cut that time to an average of 14 days. Industry experts expect their associated costs of production to continue to fall as their level of experience increases. Shale producers are able to “turn the spout on and off” almost on demand. They pose a direct threat to the historic monopoly enjoyed by the members of OPEC.
OPEC’s response has been to continue pumping oil, regardless of low prices and low demand. The beneficiaries of low energy prices are many. Experts feel low energy costs benefit approximately 97% of the US economy. The other 3% is composed mainly of companies and individuals in the oil and gas industry. Within the shale industry, cost of production runs around $80 per barrel. With oil at the mid-$40s per barrel, it becomes difficult for small independent shale companies in Louisiana to continue their operations. With oil expect to remain in the $40-$50 range for the next year, there will be some major pain felt in the Louisiana economy.