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Permalink Reply by 2z248p19vqnh9 on May 17, 2013 at 4:53pm

An Interview with Steven Kopits : Association for the Study of Peak... 

Found this article quite insightful. IF I am interpreting this correctly - it's as MANY things 'in the market'...that when G/O is less expensive - people will 'travel more', but when the price of gas goes up - they get into a 'hold & wait' scenario...

Same would go 'out West'...they will dress lighter, take siesta's ( like in Mexico?), and just go at life 'easier/ more sensibly'?...what are they employee's do about THAT?

Visiting the South for the first time years ago was quite a new experience for me...Northerners put up with alot -that genetic code...so when first in mid/deep south...checked into hotel. Not that late...so went out for a bite to eat - had a long day.

When got to the restaurant - a stone's throw away...they were all sweeping the floors (quite slowly!...) and asked to be served. *Sorry, we've closed the kitchen already & are getting ready to close.*

WOW...their sign said 'close - 10pm'! It was only 9pm!! I was hungry & happy to pay for some nice food.

Sorry, but we're getting ready to close. I was in shock. Has anyone else ever had an experience such as that? NEVER!...but THAT was my first southern experience...OH, if someone says to you, "You'all come back 'n see us sometime now. Ya'hear. The pleasure was ALL ours." NOT - basically means DON'T do that...that I found quite funny too. Lip-service only (a little like what you hear with the G/O Co.'s...you don't say?! MY, oh, MY!!!).

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SO, if I'm reading this correctly...IF the gas prices get TOO high...then people basically indicate their resistance by 'just not buying'...or NOT 'buying as much' - correct?...That makes sense. - in ALL things - from the cost of food because the packaging & transport has taken too much of a bite. When before you'll sell let's say 250 of 'x'...that's been pulled back to 190...and GETTING THE PRODUCT in house has gone up 20%...it's simple math...

But 'most people' don't do their 'simple math'...they just keep doing what they're doing, then get all SHOCKED when it changes. It is like being hit by a ton of bricks & either they DO or they do NOT 'adjust'.

It costs somebody something...but when that 'something' that is being produced costs too much - people 'pull in their horns'. Right so far? They'll start by sacrificing 'small', then that will increase to bigger 'saves/pull-backs...so that they can feed their family, get to their job, stay warm, if even the small things get to be 'too extravagant' they chop that, too.

And THAT is just 'the little guy'...

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NOW we move into the 'bigger fish'....the businesses cut back, or even resist hiring. They don't cool things down as much - or put the heat up quite as far...even businesses I know have gone to having their employees take on the 'clean-up'...cutting the 'cleaning service'. They are paying their employee's anyway...there IS 'corner-cutting' - everywhere. It will be slow, but subtle...it won't be overly obvious; but it WILL show.

HOW about the G/O services themselves? THEY are affected by the costs of the very product that they are developing. Gas/Deisel prices...those MONSTER trucks cost loads to transport. The number of 'hands' on the job to get this going...the detail matters & just the necessaries. There is ALWAYS the good old tried, but true - must have for delivery/production.

It costs somebody something. Again, good article, thanks. Interesting...

As one light lights another, nor grows less - so nobleness enkindles nobleness.

Permalink Reply by Jack Straw on June 14, 2013 at 3:58pm

U.S. shale is a boon to manufacturers but not their workers

Reuters

 

Source:  http://finance.yahoo.com/news/u-shale-boon-manufacturers-not-063714...

 

By James B. Kelleher

YOUNGSTOWN, Ohio (Reuters) - This city has been down for so long, it's hard to believe what's risen up here in the heart of America's "Rust Belt."

On an industrial site littered with scrap metal, a French-Japanese joint venture called Vallourec Star has just opened a $1.1 billion state-of-the-art steel pipe mill.

The plant, the largest capital investment by a manufacturer in northeast Ohio since the 1960s and Youngstown's first new steel mill since the 1920s, is a big example of the money that has flowed into the state's industrial sector in recent years thanks to the surge in U.S. natural gas and oil drilling.

The uptick in energy exploration has prompted companies like The Timken Co. and U.S. Steel Corp. to pump hundreds of millions of dollars into their plants in the state to boost production. Wayne Struble, the policy director for John Kasich, Ohio's Republican governor, said the flood of energy-related dollars could be a major "game changer" for the state.

But state employment data, academic research and a week-long tour of half a dozen factories in Ohio suggests the shale gas revolution has been a disappointment when it comes to job creation.

"The industries benefiting are more capital intensive than labor intensive," said Tom Waltermire, the chief executive of Team NEO, the economic development agency for northeast Ohio.

"Even a manufacturing renaissance won't require the same headcount per unit of output as we had 20 or 30 years ago. If it did require that, the renaissance would never happen."

In March, a study by Cleveland State University concluded that while gas exploration had unleashed a surge in economic activity in Ohio, job growth - even in counties directly affected by the drilling - was stagnant. The employment growth that many assumed would follow the energy investment was "not yet evident," the study's authors said.

(http://link.reuters.com/qef88t)

The Vallourec Star plant, for example, will employ just 350 workers. Those jobs won't begin to make up for ones lost just a year ago, when RG Steel closed its plant here and laid off more than 1,000 workers - let alone the tens of thousands of jobs Youngstown has lost since the late 1970s, when the steel mills that drove the local economy closed.

And some recent investments, like the $100 million Timken put into a new intermediate finishing line at its Faircrest Steel Plant in Canton, are resulting in fewer, not more, jobs.

Timken's old intermediate finishing line employed more than 200 workers and processed pipe and other products in 10 days, according to plant manager Larry Pollock. The new facility, built to meet surging demand from the energy industry, employs fewer than 30 and can process the same material in as little as two hours, plant manager Larry Pollock said.

In the brightly lit and relatively quiet plant, no human hand touches the pipes as they speed down the line. Workers monitor the process at half a dozen computerized control consoles. "A lot of the old assets were standalone work centers, independently loaded and unloaded, very labor intensive," Pollock said.

Data from the state's Bureau of Labor Market Information tells the story. After bottoming out in 2010, Ohio's manufacturing sector has added nearly 42,000 jobs in recent years. But the state still has nearly 110,000 fewer manufacturing jobs today than it did in 2007, when the last recession began.

Meanwhile pay across the sector is going down, not up, according to the U.S. Bureau of Labor Statistics Quarterly Census of Employment and Wages.

Manufacturing workers in Ohio, for instance, have seen their wages fall 1.3 percent in the last year alone.

In a sign of how the labor supply is far exceeding demand, Vallourec Star got more than 20,000 applications when it solicited applications for its 350 openings online. "You can see how hungry people are," says Joel Mastervich, the company's president and COO.

HOW LONG WILL IT LAST?

Despite disappointments on the job front, the shale drilling has created a new and lucrative niche business for companies that make the steel, pipe, compressors and other products energy companies need.

Pipeline and processing companies operating in Ohio have invested $4 billion in the state in the recent years, according to the state's economic development agency.

"It's a good time to be selling stuff in Ohio," says Jack Lafield, the founder and chairman of Caiman Energy, which has formed a $1.5 billion joint venture with Dominion Energy to build plants and pipelines to process gas and non-gas liquids.

The shale boom has already spurred some companies to remake themselves. Two years ago, sales at American Road Machinery (ARM), a small metal fabricating shop in Minerva that makes truck-mounted snow plows and leaf vacuums, were in a tailspin as a result of sharp cuts in spending by cash-strapped municipalities. An exceptionally warm winter in 2011 and spring in 2012 added to the company's problems.

Nick Ballas, ARM's president, looked around at the flurry of gas drilling in his backyard and asked himself: "How do we play in this game?

Today, half of ARM's revenue comes from truck-mounted vacuum tanks and winches that are hot items with drillers and oil service companies.

But the oil and gas business is notoriously cyclical, and that has Ballas nervous. In neighboring Pennsylvania, the drilling for shale gas "went from zero to full speed to full stop in three years," he says as he eyes the half dozen unsold tank trucks parked in his yard.

A report in mid-May from Ohio's Department of Natural Resources (DNR) suggests Ballas has reason to be cautious. The report concluded that the state's shale deposit was heavy on lower-priced gas and light on more profitable oil.

Since the oil and other liquid petrochemicals believed to be trapped here were the big draw for many drillers, not the gas itself, the report raised questions about just how much demand the industrial companies will actually enjoy as a result of the Ohio shale play - and whether some may have gotten ahead of themselves as they invested to meet expected demand.

The bigger companies, including Vallourec Star, U.S. Steel and Timken, insist their huge investments in new capacity are justified by the global shale oil bonanza, not by the success or failure of any single shale play in the United States.

"We are as excited to see the things that are happening in North Dakota, Brazil, Singapore and China as we are watching what's going on in Tuscarawas County, 30 miles to the south of us," says Jim Griffith, the CEO of Canton, Ohio-based Timken.

But even before the DNR report, Timken said during its first-quarter earnings call that it was already seeing lower demand from oil and gas customers and it warned that it expected the weakness to continue through the year.

U.S. manufacturers aren't the only ones scrambling to supply the shale drillers. John Wilkinson is the 36-year-old manager of U.S. Steel's operations in Lorain, just west of Cleveland. U.S. Steel recently spent $100 million on the 100-year-old plant to build a new line to meet demand from the energy industry. "The steel industry is back," Wilkinson tells Reuters. "We're starting to see it and it's a fantastic feeling."

But Wilkinson can also tick off the names of the foreign companies that are building new plants to sell to drillers, including Tenaris SA, controlled by Argentina's Techint group and based in Luxembourg, as well as China's Tianjin Pipe Group Corp.

"In our tubular market, there's a billion tons of capacity coming onto the market in the next few years," he says. "That's what we're going to be up against."

(Editing by Patricia Kranz and Claudia Parsons)

Permalink Reply by Philip Brutz on May 23, 2014 at 3:10am

Jack, I hope you will consider continuing this discussion.  It has been an excellent education for us landowners. 

For those new to this site you may be interested in reading the older posts:

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