Oil Price Boom Expected Following Pandemic Crash

If history is a guide, an oil price boom is coming after the pandemic-generated crash.

While the near-term demand picture is highly uncertain, as people reconsider their travel and work habits, this latest bust, the worst of them all, is unlikely to hasten the demise of oil.

“The only way to get away from the boom-bust cycle is to get off of oil,” said Bob McNally, president of Rapidan Energy Group and the author of a book on the topic called Crude Volatility.That’s really tough because there are no scalable substitutes. As a result, we expect a thirstier world will collide into insufficient supply, and crude prices will have to rise sharply to balance the market.”

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Largest Bakken Producer Shuts In Almost All Production

By David Middleton – Re-Blogged From WUWT

Continental Resources Halts Shale Output, Seeks to Cancel Sales
Devika Krishna Kumar and Liz Hampton, Reuters

Fri, 04/24/2020 – 04:20 AM

The largest oil producer in North Dakota has halted most of its production in the U.S. state and notified some customers it would not supply crude after prices dived into negative territory this week, people familiar with the matter said.

Continental Resources Inc., the company controlled by billionaire Harold Hamm, stopped all drilling and shut in most of its wells in the state’s Bakken shale field, three people familiar with production in the state said April 23.

Global oil prices have plunged because of excess supplies and tumbling demand due to the coronavirus crisis.

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US Becomes A Net Fossil Fuel Exporter

By Chris White , From The Daily Caller– Re-Blogged From WUWT

The United States notched the country’s first month of exporting more petroleum products than it imported, according to newly released federal data. The news comes as Democratic presidential candidates campaign on nixing fossil fuels.

The U.S. exported roughly 89,000 barrels of fossil fuels per day during September, according to data the Energy Information Administration (EIA) released Nov. 29. That’s the first full month the U.S. has exported more than it imported since the U.S. began tracking such data in 1949.

A decade-long increase in fracked gas production is fueling the numbers. Former presidents Jimmy Carter and Barack Obama, among others, spent years promising to make the U.S. energy independent. Presidential candidates from both parties made similar pitches throughout the years.

“This is a very big deal, not just rich in symbolism but marking a major and tangible benefit to the U.S. economy,” Daniel Yergin, vice chairman of IHS Markit, told reporters Tuesday. He authored a book “The Prize” in 2008 that fleshed out how big oil became a dominant form of energy.

He added: “It’s the end of an era that began with the oil crises of the 1970s.” Yergin was referring to the decade when Middle Eastern countries and giant oil cartels used their oil reserves as a weapon against Western nations.

The recent uptick in exports came as fracking of shale deposits stretching from Texas to New Mexico exploded over the last decade.

“Shale completely turned it around,” Yergin said. “The world has never seen growth at this scale this fast. It’s almost as though, in number of barrels, that the United States added a second Saudi Arabia within its own borders.” Obama can also claim some responsibility for the export uptick as well.

The former president signed legislation in late 2015 ending the decades-old ban on crude oil exports. U.S. oil production doubled between 2009, when Obama took office, to 2016, while natural gas production shot up 50 percent in that time. The boom took place on state and private lands.

Imports from OPEC fell to 1.5 million barrels per day in March, which is the lowest level since March 1986, the EIA reported in June. EIA said at the time that OPEC imports fell “as domestic crude oil production has increased.”

The U.S. became the world’s largest producer of fracked natural gas in 2012, surpassing Russia. Natural gas also passed coal as the country’s leading source of electricity in July 2017.

Meanwhile, many of the 2020 Democratic presidential candidates are campaigning on bludgeoning the oil industry.

Sen. Elizabeth Warren, for instance, introduced a bill in October that would, if passed, block construction on ports that export natural gas.

The Massachusetts Democrat pegged her 2020 presidential campaign on holding oil companies responsible for supposedly contributing to global warming. Warren has not responded to the Daily Caller News Foundation’s request for comment on her campaign’s anti-oil positions.

Sen. Bernie Sanders of Vermont is also campaigning against the oil industry.  “What we have to do is tell the fossil fuel industry that their short-term profits are not more important than the future of this planet,” he said during the fifth Democratic debate.

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Weekly Climate and Energy News Roundup #379

The Week That Was: October 5, 2019, Brought to You by www.SEPP.org

By Ken Haapala, President, Science and Environmental Policy Project

Quote of the Week – “Man, once surrendering his reason, has no remaining guard against absurdities the most monstrous, and like a ship without rudder, is the sport of every wind. With such persons, gullibility, which they call faith, takes the helm from the hand of reason and the mind becomes a wreck.” —Thomas Jefferson (1822)

Number of the Week: Almost 64%


 

Contradiction in Studies: The latest report of the UN Intergovernmental Panel on Climate Changes, The Ocean and Cryosphere in a Changing Climate, contains many dire warnings of alarming sea level rise from oceans warming much faster than “previously thought” and Polar Ice melting much faster than “previously thought.” Of course, who “previously thought” what is not clear, though the word previously surely refers to a time when the “science was settled.”

In the approved Summary for Policymakers of the IPCC study are numerous graphs showing dire sea level rise of almost 5.5 meters (18 feet) by 2300 – 280 years from now.

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Another Failed Energy Prediction: Peak Oil Demand

By David Middleton – Re-Blogged From WUWT

BP’s ‘Peak Oil’ Demand Prediction Falls Flat

By Jude Clemente, February 22, 2019

Always mandatory reading, BP just released its Energy Outlook 2019
It has caused quite a stir again this year.

But, this time the commotion that I see surrounds BP’s forecast that the global war on plastics will be the main factor in cutting global oil demand faster than previously expected. As such, for the first time BP’s outlook predicted a “peak” in oil use. At 13 million b/d, global petrochemical feedstock is 13% of total oil demand.

This is part of a growing trend in recent years where BP continues to see “much slower” growth in new oil demand going forward (see Figure).

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U.S. Set To Pump More Oil Than Russia And Saudis Combined

In a major shift, the United States is set to produce more oil and liquids than Russia and Saudi Arabia combined by 2025.

In Rystad Energy’s base case oil price scenario, US liquids production is forecast to surpass 24 million barrels per day over the next six years, thereby outpacing the combined output from Russia and Saudi Arabia.

oil rigs

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Weekly Climate and Energy News Roundup #345

The Week That Was: 2019-01-26,Brought to You by www.SEPP.org

By Ken Haapala, President, Science and Environmental Policy Project

Quote of the Week: “Advances are made by answering questions. Discoveries are made by questioning answers.”— Bernhard Haisch, astrophysicist [H/t William Readdy]

Number of the Week: 250 Million MW short

Observations or Theory? Last week’s TWTW discussed the weather engine, a process illustrated in a graph in the Kiehl and Trenberth’s paper on the “Earth’s Annual Global Mean Energy Budget.” Energy from the sun causes water vapor and evapotranspiration to rise in the atmosphere, then condense into liquid water (or ice) in the upper troposphere giving off latent heat centered about 9 to 11 km (30,000 to 36,000 feet). This was the apparent source of the tropical “hot spot” used by climate modelers and the UN Intergovernmental Panel on Climate Change (IPCC) and its followers. It provided the argument in the 1979 Charney Report that an increase water vapor would dramatically increase the greenhouse gas effect of carbon dioxide (CO2).

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Weekly Climate and Energy News Roundup #336

Brought to You by www.SEPP.org, The Science and Environmental Policy Project

By Ken Haapala, President

Quote of the Week: “I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.” ― John Stuart Mill [H/t Matt Ridley]

Number of the Week: $1,096/MWh – An increase of 22 times

USGCRP Prophecies: On November 23, the US Global Change Research Program (USGCRP) released the second volume of its two-part series on human caused global warming. The first volume. the “Climate Science Special Report (CSSR)” supposedly discussed the physical science but was largely confined to projections from poorly tested global climate models and physical events unrelated to increasing carbon dioxide. The current release came in time for the upcoming 24th Conference of Parties (COP-24) of the UN Framework Convention on Climate Change (UNFCCC) in Katowice Poland. According to official announcements, this conference will additionally include “the 14th session of the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol (CMP) and the third part of the first session of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA 1-3)” – international bureaucratic science at its best.

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As Oil Plunges, Energy Junk Bonds Turn Dangerous — Again

By John Rubino – Re-Blogged From Dollar Collapse

Back in 2014 oil was falling and hundreds of billions of dollars of energy junk bonds and leveraged loans looked to be at risk. Wolf Street had this to say at the time:

Oil and Gas Bloodbath Spreads to Junk Bonds, Leveraged Loans. Defaults Next

The price of oil has plunged nearly 40% since June to $65.63, and junk bonds in the US energy sector are getting hammered, after a phenomenal boom that peaked this year. Energy companies sold $50 billion in junk bonds through October, 14% of all junk bonds issued! But junk-rated energy companies trying to raise new money to service old debt or to fund costly fracking or off-shore drilling operations are suddenly hitting resistance.

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Resurgent US Oil Industry

By Rick Mills – Re-Blogged From http://www.Silver-Phoenix500.com

Crude oil prices dropped from $110 a barrel in the summer of 2014 to about $30 in January 2016. The effect on oil producers and oil-producing countries was dramatic. The Russian ruble plunged, and the Canadian dollar slipped to below 70 cents US for the first time since 2003, kicking the country into recession and snuffing out the oil boom in Alberta. Many foreign companies operating in the high-cost Canadian oil sands pulled up stakes.

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PetroDollar System In Trouble As Saudi Arabia Continues To Liquidate Foreign Exchange Reserves

By SRSrocco – Re-Blogged From http://www.Silver-Phoenix500.com

The U.S. PetroDollar system is in serious trouble as the Middle East’s largest oil producer continues to suffer as the low oil price devastates its financial bottom line.  Saudi Arabia, the key player in the PetroDollar system, continues to liquidate its foreign exchange reserves as the current price of oil is not covering the cost to produce oil as well as finance its national budget.

The PetroDollar system was started in the early 1970’s, after Nixon dropped the Gold-Dollar peg, by exchanging Saudi Oil for U.S. Dollars.  The agreement was for the Saudi’s only to take U.S. Dollars for their oil and reinvest the surpluses in U.S. Treasuries.  Thus, this allowed the U.S. Empire to continue for another 46 years, as it ran up its ENERGY CREDIT CARD. 

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China makes ‘flammable ice’ breakthrough in South China Sea

By Alec Macfarlane – Re-Blogged From CNN/Money

China is talking up its achievement of mining flammable ice for the first time from underneath the South China Sea.

The fuel-hungry country has been pursuing the energy source, located at the bottom of oceans and in polar regions, for nearly two decades. China’s minister of land and resources, Jiang Daming, said Thursday that the successful collection of the frozen fuel was “a major breakthrough that may lead to a global energy revolution,” according to state media.

This is what flammable ice looks like

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Venezuela Chaos: The Biggest Threat to Cheap Oil

Venezuela’s deepening chaos could soon create tremors in the global oil markets.

Already in an economic and humanitarian crisis, Venezuela’s oil production — the country’s sole lifeline for revenue — has hit a 13-year low.

As the situation worsens, Venezuela’s oil output could plunge even lower. A new report by Columbia University’s Center on Global Energy Policy calls Venezuela a “growing supply risk for oil markets in 2017.”

Oil prices are currently around $45 a barrel, a dramatic drop from about $110 two years ago. The main reason for the low prices is that there’s too much supply globally. However, the line between oversupply and a shortage in the oil market is thin, and Venezuela could tip the scale in the opposite direction.

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Slippery Oil Prices Plunge Over Cliff Into Bear Market

By David Haggith – Re-Blogged From Great Recession Blog

Oil today plunged quickly below $40 per barrel, taking oil prices down more than 20% from their high a little over a month ago. That officially defines a bear market in oil. As of today, oil has also moved below its 50-day, 100-day and 200-day moving averages. July has again turned out to be a huge disappointment for oil producers who mistakenly thought price recovery had come to stay.

In addition to the dark clouds I presented last week, here is a list of newly developing reasons and ways that oil prices are continuing to slide toward $30 per barrel … as I’ve predicted all along:

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Destroying Crude Oil Price Rally – Something Dark Emerges from the Tar Pits and Oil Sands

By David Haggith – Re-Blogged From Great Recession Blog

The crude oil price rally has been completely destroyed, though I’ll admit I was wrong when I predicted crude oil prices would plummet in March or April as the perfect storm developed against oil prices. Instead, they rallied. In spite of that, I continued to believe my error was in timing and not in fact — not in the fact that another harsh fall in oil prices was beating a path to our doors.

Crude oil prices beaten down by a storm still building

So, I continued to write articles about the forces building against oil prices, even in the face of a strong rally, which many believed would set a new position for oil for the remainder of 2016. That storm has, as of today, completely clawed back the post-March rally by taking crude oil prices back to a three month low and to where they stood at the start of the year as well. West Texas Intermediate just struck $42/barrel today.

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The OPEC Epoch Is Over – Where Are Oil Prices Headed Now?

By David Haggith – Re-Blogged From Great Recession Blog

The fate of oil companies and nations hangs in the balance of oil prices. Russia could go broke. Some think that’s by US design. Saudi Arabia could experience its Arab Spring if oil prices remain too low too long. And OPEC is dead. That’s the biggest news in this new century for oil.

The House of Saud has stated clearly many times now and again this week in an even more emphatic manner that it intends to move the oil market from decades of OPEC price manipulation to a raw supply-and-demand equation. Rigging the price of oil was the raison d’être of the cartel known as the Organization of Petroleum Exporting Countries, and that function has now ended. But people are slow to get their heads around such big news.

Saudi Arabians enjoyed a tax-free environment as long as oil paid the bills and cheap subsidized fuel. Huge revenue from oil enabled constant pay-offs to the powerful that stabilized the state. All of that has ended or is at risk of ending as the Saudis seek to rebalance their state budget in the face of huge declines in revenue. So, changing the pricing structure of oil is a perilous change of course for the House of Saud, which tells you how serious they are about transforming the market back to a free market.

It’s fraught with peril for all. Among oil companies and banks, it’s not just the little leaguers that are hurting. Royal Dutch Shell reported an 83% decline in profits year on year. Most oil companies reported significant drops in profit for the first quarter of 2016, though many saw their stock values soar upon reporting because investors had feared an even worse hit. Their banks have reported the same.

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Oil Price Prospects

cropped-bob-shapiro.jpg   By Bob Shapiro

Crude oil prices have fallen from $100+ two years ago to around $37 today, after going under $30 briefly last month. Not surprisingly, there are differing views on the direction of prices going forward.

Lets look at where we are now.

The Shale Boom has catapulted the US to the top world producer spot, surpassing Saudi Arabia. This has greatly reduced US imports of oil and is a major contributor to the price break we’ve seen. As an aside, the US Balance of Payments has been much reduced by US Shale Oil production, even though the Deficit once again is running at over $500 Billion a year.

But, there are other factors greatly affecting the supply-demand balance for oil.

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Oil and the Dollar

cropped-bob-shapiro.jpg   By Bob Shapiro

Crude Oil prices broke down from $100+ about a year and a half ago. Since then, there has been minimal fallout in the US oil patch, mostly due both to price guarantees built into many contracts and to the availability of loan money.

As the price of oil still lingers in the $30 range (today at $33+), and as all that borrowed money carries interest which must be paid, oil shale producers will start to be pinched more and more this year.

Some shale oil companies will close up shop this year, and some banks with huge oil company non-performing loans also will go bankrupt. And lets not forget the collateral damage to quite a few others businesses whose sales depend on the soon to be out of business companies.

Production will be lost, at least until the price of oil rises a bit. Then there are producers which will run their wells until they’re dry (shale oil wells have a relatively short producing life span). If oil prices remain low, these producers will not replace production right away, so some additional supply decreases will occur.

The cutbacks over the next year or two will be offset by new supply elsewhere, for example Iran as they resume selling oil following the end of sanctions.

So, what could cause oil prices to rise, saving the bacon of the marginal US shale oil producers?

One possibility, both directly and indirectly, is a reversal of the soaring US Dollar, which rose over 20% during the 2nd half of 2014.

Without that rise in the Dollar, oil might be 20% higher than today, or a little over $40 a barrel.

The rise in the Dollar itself was caused in part by the Yen carry trade. As the Japanese Economy foundered, and as the Central Bank kept interest rates significantly lower than the FED did here in the US, speculators were able to borrow in Yen, using the Yen to buy Dollars. Those Dollars bought Treasuries and US stocks, helping to explain rising markets last year.

US markets rose to unsustainably high PE Ratios, at the same time that the rising Dollar was hurting corporate profits. US multinationals’ overseas profits, while still growing in the local markets, started falling in US Dollar terms. The “strong” Dollar also made US domestic companies less competitive with imports, cutting sales and profits.

High PE Ratios, together with falling profits, are a recipe for a severe pullback (50% or more) in US stocks. Falling expected returns on all that borrowed money likely will cause considerable unwinding of much of the Yen carry trade. As the Dollars are withdrawn from US markets to buy Yen to repay the loans, the Dollar will fall.

Oil Drilling

Assuming the Congressional Republicans keep their word and refuse Mr Obama’s proposed $10 a barrel oil tax, I expect the falling Dollar to raise the oil price to make many proposed shale projects profitable.

So, for 2016, expect:

  • A few oil producer bankruptcies
  • A couple of banks with oil patch exposure to fail
  • The US markets to fall quite a bit further from here
  • The US Dollar to fall 20% or so
  • The oil price to go up over $40

All this does not factor in any additional craziness coming out of Washington (and the FED), or collateral damage from a market crash. We certainly could see quickly rising unemployment and CPI numbers, even after the hacks in the agencies massage the numbers.

Why Oil Prices are Likely to Remain Low for the Foreseeable Future – Shale 2.0

By Anthony Watts – Re-Blogged From http://www.WattsUpWithThat.com

Shale Revolution Changes Everything

How the Shale Revolution Has Reduced Geopolitical and Price Risk

shale2-0

Opec was on the verge of claiming victory over its North American rivals last night after its strategy of squeezing out the shale industry by flooding the markets with oil appeared to be vindicated. The oil producers’ cartel said that falling prices would force lower production from its rivals by the end of this year, with American and Canadian producers particularly affected. –Marcus Leroux, The Times, 19 January 2016
When oil prices tick up, thousands of profit-seeking investors make individual decisions

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Weekly Climate and Energy News Roundup #191

The Week That Was: August 8, 2015 – Brought to You by www.SEPP.org

By Ken Haapala, President, Science and Environmental Policy Project

The New Plan: On August 3, the Obama Administration announced its plan to control the production of electricity in the US in the name of protecting the planet from human-caused climate change, even though climate change has been occurring long before humanity existed. The administration’s plan is embodied in a 1560-page regulation released by the EPA titled the Final Rule, “Clean Power Plan” (CPP), to be published in the Federal Register sometime in the future. It is not until the rule is published in the Federal Register that activities such as litigation against it can begin, without the courts considering the litigation premature. The most important rules are on power plants operating today rather than those to be built or those which have to be modified or re-built.

The Final Rule contains major changes to the draft CPP including increasing the time given to the several states to comply with the rules by 2 years. Overall, the plan mandates that the states, together, reduce their emissions of carbon dioxide (CO2) by 32 percent below 2005 levels by 2030, a more stringent mandate than 30% in the earlier version. However, mandates to the states changed in what appears to be clear political bias, with states controlled by democrats seeing their mandates reduced while those controlled by republicans seeing their mandates increased.

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Peak Oil Re-visited

By Mike Jonas – Re-Blogged From http://www.WattsUpWihThat.com

In 2012, I said that it was getting ever more difficult to increase production, and that I suspected that we were already at or close to Peak Oil, but that it was still mathematically possible that Peak Oil was many years away. Do I still think that? In a way, yes, but … well, read on …

In this article, I look at the major factors affecting oil supply, look at past oil market behaviour and how the future may develop, see what lessons can be learned from Hubbert’s Peak, and speculate on when Peak Oil will occur and what it may feel like.

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Weekly Climate and Energy News Roundup #175

The Week That Was: April 4, 2015 – Brought to You by www.SEPP.org Science and Environmental Policy Project

By Ken Haapala – Re-Blogged From http://www.WattsUpWithThat.com

On to Paris: To keep pledges made at meetings (multiple Conference of Parties (COP)) of the UN Framework Convention on Climate Change (UNFCCC), an international treaty agreed to in 1992 by the first president Bush and which went into force in 1994, 33 out of 195 countries submitted their pledges to reduce greenhouse gas emissions (particularly carbon dioxide (CO2)). These are to be agreed upon at the December COP in Paris. These pledges are called Intended National Determined Contribution (INDC). The countries that submitted pledges by March 31 included those in the European Union, the US, Russia, and Mexico.

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Why OPEC Can’t Kill the U.S. Oil Boom

By Matt Egan – Re-Blogged From http://money.cnn.com

OPEC all but declared “mission accomplished” this week in its efforts to thwart U.S. oil production. In a report Monday, the cartel predicted the U.S. shale oil boom could be over by the end of 2015.

The world has too much oil production at the moment, and it has caused crude oil prices to meltdown from over $100 a barrel in the summer to under $45 now — a six-year low.

Someone needs to scale back, but OPEC, led by Saudi Arabia, has refused to make cuts in an effort to squeeze American shale producers.

OPEC is claiming an early victory by pointing to declines in the number of U.S. drilling rigs and significant cuts in big energy’s spending plans as evidence the U.S. is caving.

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Why America’s Shale Oil Boom Could End Sooner Than You Think

Re-Blogged from Forbes, By Christopher Helman

America’s oil producers are nervous. They’ve had a great run the past few years. Domestic oil production is up 43% since 2008 to 6.5 million barrels per day, the highest level in decades. The majority of that 2 million bpd jump comes out of the two most successful new oil fields, the Bakken and the Eagle Ford. To develop these and all the other fields nationwide, the top 50 operators invested $186 billion in 2012, according to Ernst & Young. That was a record level of spending, up 20% over 2011.

You’d think that with drillers getting better, honing techniques and driving down costs, that a 20% increase in investment would bring about a more than commensurate

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An amazing chart of an amazing job-creating state; we owe a debt of gratitude to ‘Saudi Texas’ and the shale boom

Since the Great Recession started in 2008, employment has fallen along with the Labor Participation rate. It is only in the last 2 months that employment has gotten back to pre-recession levels for the US as a whole.

But, contrast two oil rich states: “Saudi” Texas and the anti-energy California. California still has 7.3% unemployment, and people & businesses are fleeing the socialist level over-regulation. In Texas, employment never fell below pre-recessionary levels, and in the last year, provided fully 1/6 of all new US employment – over 420,000 new jobs in the last year!

Please read on for the story of the Texas Miracle. (Bob Shapiro)

Mark Perry AEI   By Mark J. Perry

(Reblogged from the American Enterprise Institute)

US vs Texas Employment

The chart above shows a most amazing economic phenomenon: Since

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