Ever since we rang in the new year, people have been speculating on an upcoming recovery. Six months, a year. . . or even two? The time frame varies with each person you ask.
For me, the interesting part is the different signs people look for as indicators that an economic recovery is in sight.
I’ve been berated countless times over these signs: the fate of the dollar; the day-to-day reports highlighting job losses; news of stronger fuel demand — there are dozens of factors that will create a light at the end of the recession tunnel, but these were among the most frequently spouted.
I’m curious to know what my Energy and Capital readers are looking for to signal a recovery. . . and to make it a two-part question, what’s your time-frame? Feel free to drop a comment below.
Even today, as oil nearly reached $72 per barrel, it’s difficult to get excited over the short term. The mighty OPEC producers are already cheating on previously announced cuts by increasing production.
Let’s be honest. . . can we really blame them for taking advantage of the latest rally?
But it’s not just OPEC looking to drill themselves out of a financial ditch. . .
Drilling Out of a Recession?
Some states aren’t waiting around for a recovery to fall into their laps.
Take Florida, for example.
Recently, Florida lawmakers have made a gambit to develop their offshore oil reserves in an attempt to help ease them out of their economic troubles. A recently-filed bill is looking to open up leases for oil drillers off the coast of Florida.
I’ll admit I was a bit surprised at the lack of protest from my Energy and Capital readers over such a move. I was half-expecting to get blasted for even bringing up the idea. That wasn’t the case at all.
In fact, one reader sounded particularly excited over the prospect: "Good for Florida. I spend about ten winter weeks there and enjoy sea-swimming on both coasts. I’ll also be happy to sit in a beach chair and watch oil rigs through my binoculars. They are more interesting than windmills."
A few were less enthusiastic, but the interesting part is the point of contention: they think we should be solely focusing on renewable energy. What I think they fail to understand is that we need to develop every source of energy we have available to us, not just pin it all on one specific resource. If there’s one thing my readers should take away from these pages, it’s this: there is no panacea for our energy troubles.
Developing Florida’s offshore oil industry is expected to create roughly 40,000 jobs or more, according to economist Hank Fishkind. According to the bill floating by, Florida would be entitled to nearly one-third of what’s generated from the offshore revenue. Just in case you’re counting, that might come out to several billion dollars per year.
I’d bet my friend in California would have appreciated that kind of help for his state’s economy. He recently received an IOU instead of a tax refund.
Side-Stepping a Recession
Naturally, some states seem luckier than others.
The areas that have managed to side-step this recession have their oil and gas industries to thank. One prolific natural gas play has allowed parts of Louisiana to shrug off the recession. Yes, you should know by now I’m referring to the Haynesville shale play.
You’ve undoubtedly heard about the sharp decline in drilling rigs at one point over the last year. The last time I checked, there was a 52% decline in domestic U.S. rigs drilling. In some states like Texas, that decline extended to about 64%.
That isn’t the case for the Haynesville.
The number of rigs operating in northern Louisiana has actually increased by approximately 20%. There’s more than 60 Haynesville wells being drilled right now. . . with nearly 150 about to be completed, and over 120 currently in production. I guess that’s what happens when you have 250 Tcf of natural gas beneath the land within state lines.
The Haynesville is generating billions in revenue for the state, and has created more than 30,000 new jobs during 2008.
Not too shabby.
Playing the Recession Defense
Whether or not oil rises to $80 a barrel or falls to $60 a barrel, investors are practically in a win-win scenario. . . and the only people not making money are the ones too afraid to get their feet wet.
However, there are a few immediate problems for investors looking to capitalize from these recession defences: Florida plans on unlocking future offshore production, but we’re looking at a few years before the political kinks are worked out and companies actually get down to drilling.
By the time the everything is said and done, the recession could very well be behind us.
Then again, there is another area that has shared the same recession-proof luck as Louisiana. You can find out more about that opportunity below.
Until next time,
Keith Kohl
Editor’s Note: There is another state that has been immune from this recession. And there’s a very specific reason I didn’t mention it today: this one play has made my readers a small fortune over the last few months.
But I would be remiss to my Energy and Capital readers if I didn’t at least give you the same opportunity to share in their success. Feel free to check out my report on this recession-proof play that is just starting to come into its own success. . . Simply click here to read this new report right now.
