• 2 minutes Rational analysis of CV19 from Harvard Medical School
  • 4 minutes While U.S. Pipelines Are Under Siege, China Streamlines Its Oil and Gas Network
  • 7 minutes Renewables Overtake Coal, But Lag Far Behind Oil And Natural Gas
  • 50 mins Joe Biden the "Archie Bunker" of the left selects Kamala Harris for VP . . . . . . Does she help the campaign ?
  • 24 hours China wields coronavirus to nationalize American-owned carmaker
  • 2 hours Trump Hands Putin Major Geopolitical Victory
  • 1 day Open letter from Politico about US-russian relations
  • 2 hours Those Nasty White People and Camping Racism
  • 17 hours COVID&life and Vicious Circle: "Working From Home Is Not Panacea For Virus"
  • 7 hours Brent above $45. Holding breath for $50??
  • 2 days US will pay for companies to bring supply chains home from China: Kudlow - COVID-19 has highlighted the problem of relying too heavily on one country for production
  • 15 mins The Truth about Chinese and Indian Engineering
  • 16 hours Oil Tanker Runs Aground in Mauritius - Oil Spill
  • 2 days Trump is turning USA into a 3rd world dictatorship
  • 4 days Trumpist lies about coronavirus too bad for Facebook - BANNED!
  • 3 days Liquid Air Battery
  • 3 days What the heroin industry can teach us about solar power (BBC)
Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Premium Content

Is This Indicator A Warning on Energy's Most-Loved Firms?

A series of data came across my desk yesterday from an unusual source. That made me wonder if the U.S. onshore oil boom is headed for tougher times.

Mortgage data.

The numbers came from the National Association of Home Builders (NAHB). Who this week published their "Leading Markets" index. Showing which parts of America are showing the highest levels of activity in terms of economic growth and home price increases.

This week's survey was cheered by the housing industry as good news. Showing that many markets across the U.S. have returned to pre-recession levels.

But there's something odd about which markets have seen a rebound. Take a look at the list below of the strongest local housing markets:

Baton Rouge
Honolulu
Oklahoma City
Austin
Houston
Harrisburg
Pittsburgh

It's immediately obvious that with the exception of Hawaii, all of the best-performing U.S. housing markets are clustered around shale oil and gas. In Texas, Oklahoma, Louisiana, and Pennsylvania.

The pattern becomes even clearer looking at the NAHB list of strongest small metro areas: Odessa and Midland, Texas; Bismarck and Grand Forks, North Dakota; and Casper, Wyoming. North Dakota of course being driven by the Bakken oil play.

On the one hand this is great news for the oil business. Showing just how strong the U.S. shale "miracle" has been. And proving that resource development can be a powerful driver for economic growth.

But it also sounds a warning. Showing just how much money is being pumped into the local economies of shale-producing regions.

Such an influx of cash into small places will cause big inflation. That's of course a pain for homebuyers and anyone who happens to be on a low income here. But it's also an issue for oil companies themselves. Inflation will hit labour and services costs, and rates for needed supplies in drilling and pipeline construction.

Such cost escalation is a silent killer of play economics. We've seen such costs erode investment returns before. In places like the Canadian oil sands and the Australian LNG sector.

This is going to be a mounting issue for much-loved shale producers in America. Watch out.

Here's to small town blues,

By. Dave Forest


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News