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Higher oil production in Saudi Arabia in 2012 as the Saudis support U.S. sanctions against Iran.

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This issue of the Economist magazine looks at Saudi oil price cuts and the future for shale oil in the world's energy mix. In the short run overleveraged companies in the shale oil business in the U.S. will be affected by oil prices below $50 a barrel. The Economist points out that shale oil deposits are extensive in the U.S. and other parts of the world. The upfront costs are as little as $1.5 million for drilling a well. As a result the economics of shale will depend on new advances in technology and efficiency to bring costs down below existing costs averaging of about $57 a barrel, with some producers at costs of $35 a barrel. Because of technology advances anticipated in the field it points to shale oil as a reliable source of low cost oil supplies in the future, keeping oil prices lower than in the past and much less subject to manipulation by cartel pricing or oil price shocks. The lower volatility and lower level of oil prices will be good for the rapidly growing economies in Asia and the developed economies of Europe and the U.S., and for countries in Latin America such as Argentina with large shale deposits....

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U.S. oil imports from Saudi Arabia increased by about 20% in 2012, increasing dependence on the volatile Middle East region.

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The former head of contracts at state owned National Oil Corporation of Libya calls for American rules to be issued by the S.E.C. that require strong transparency standards for western oil companies, and limit the scope for corruption in dealings with the national oil company that ocurred during the Gaddafi regime.

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The lack of ample natural gas supplies has hurt Mexico's manufacturing sector. Pemex has focussed on crude oil production and Mexico imports natural gas from Texas. BBVA Bancomer estimates a loss of 3.6% of manufacturing output in the last year from the lack of natural gas produced in Mexico from its large gas reserves.

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Consultants Wood Mackenzie say it will take about 3 years for Libya to get back to normal oil export levels of 1.5- 1.8 million barrels a day. It will take time to rebuild damaged oil refineries after the war against the Gaddafi regime.

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The increase in natural gas supplies from shale in the U.S. is dampening the interest of energy companies in the development of nuclear reactors. It is also changing the whole trajectory for energy sources in the U.S. The Energy Information Administration's forecasts for new additions of power generation capacity 2010-2035 show that natural gas will be the dominant source with 58.1%, nuclear is only 4%. Wind is 13% and other renewables including solar is 16%, giving renewables about 29%. Coal and fossil fuels are at 8% and hydropower 1.6%. This is a major development in the energy industry, for the U.S. efforts to reduce dependence on imported energy supplies.

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The International Energy Agency estimates year end 2011 oil output from Libya at 700,000 barrels a day.

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The increased oil supply in the Middle East will come largely from Saudi Arabia and Iraq by 2015. By 2020 the increased oil supply from Iraq will surpass increased Saudi production, when compared with 2009, according to the International Energy Agency. Iraqi production is currrently 2.7 million barrels a day. This jumps significantly in coming years. JBC Energy expects Iraqi oil output to increase to about 8 million barrels a day by 2020. This is a result of modernization and participation of foreign oil companies in the Iraqi oil industry. Comparitively Libyan output shows only a small increase.

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This report says fewer jobs alone is not going to reduce inflation, US inflation is propelled by factors beyond economic theory. The Phillip's Curve is a inverse relationship between unemployment and inflation that was a convenient tool for the 1960's to get the economy to do well with low unemployment at 4% with moderate inflation. It was torn apart by high inflationary expectations in the 70's. In today's world Robert Gordon of Northwestern University suggests central banks consider inflationary embedded expectations, supply shocks and cost push as in the pandemic 2021-2022, and demand changes. The job that Mr. Powell at the Fed has is lowering inflationary expectations by reducing private sector investment and job creation by raising the cost of capital through interest rate increases. Yet today the government is a huge partner in capital investment for America in clean energy and infrastructure building which means job creation remains strong as it has in America. President Biden's effort to reduce pharmaceutical costs and for inflation reduction by fighting price increases through stealth fees, has at the same time cut into inflation. So as lower demand and increased supply in 2022 as the government better manages the supplies of energy, including release of oil stocks from the national reserves. Explained- The Phillips curve is an inverse relationship between unemployment and inflation observed by a New Zealand economist William Phillips in a paper in 1958 based on British unemployment and inflation data1861-1957. Economist Robert Samuelson turned it into a textbook concept as a simple tradeoff in 1960 more inflation gets you less unemployment- which fit the period of the 60's- but warned that it could change over time. Milton Friedman and others during the 1970's period of high inflationary expectations setting rejected it. In reality Mr. Phillips never meant for economists like Samuelson to generalize from his statistical observation of data on the British economy before 1958 and apply it to the US for the closing decades of the 20th much less the 21st century. ...