U.S. energy production slows to a crawl
BY MORRIS R. BESCHLOSS
PVF and economic analyst
In a recently-completed survey of energy industry activity within the lower 48 U.S. states, I was taken aback by the slowdown that has taken place in just the past two months.
Although much of this retrenchment is due to “demand destruction’ in the use of oil derivatives and natural gas, the perceived ‘war on fossil fuels’ by the Obama Administration has played its part.
Power generation is the one subsector that is still lighting a fire under those manufacturers, distributors and installers who deal in catching up with the broad segment of electricity development, which is severely lagging current and future demand.
Although coal-fired generation is still a dominant factor in powering the nation’s vast power generating sector, the upcoming Administration attempt to thwart further use of coal for new, as well as ongoing utilities, will hamper such efforts in the months and years to come.
Currently, the 104 nuclear power stations are increasing their capacity on site. With new nuclear stations in the planning stages, becoming ever more costly and time constrained, it’s doubtful whether a breakthrough in the use of new nuclear power can be anticipated in the foreseeable future, even if public opinion is more amenable.
The current activity in oil and natural gas production and development is nearing a low point, one that is not expected to recover until late in the year at the earliest. Such upward oil breakouts as the Bakken Belt in Montana and the Dakotas is at a standstill, while drilling rigs are being pulled from the Gulf of Mexico on a daily basis.
While President Barack Obama reaffirms the ongoing mantra of “energy independence,” his commitment to wind, solar and other renewables will be a long time in maturing, scuttling the drilling initiatives that had promised to narrow the rapidly expanding gap between foreign-based supply and domestic demand. Only the current oil derivatives and natural gas demand collapse is keeping America’s broad-based imports from skyrocketing.
Brand name illustriousness celebrated by Hall of Fame
What has always made pvf manufacturers so outstanding is the splendor of these well-known brandnames of such companies which have generated not only the pride of distributors, which carry them, but the mechanical contractors and maintenance engineers who install them, specifying engineers who recommend them, and project managers who insist on them.
There are dozens of brandnames still found in specs that have outlived the companies that originally produced them and brought them to market, only to eventually fall prey to business adversity and literally become extinct. But in many cases, the names outlived their progenitors, sometimes revived by new proprietors, foreign and domestic, who brought the them back to life.
Our two illustrious manufacturer inductees, Powell Valve and Anvil defied the adversity of years of business cycles, wars, mergers and acquisitions, while their brandnames continued to shine brightly.
Fortunately for both these companies, great care was taken to maintain their quality standards so as not to destroy the only fatal disease that could crush exalted brandnames — quality destruction.
When reflecting on such great names as Crane, Jenkins, Stockham, Conbraco, Centerline, Keystone, Jamesbury, Weldbend, Bonney Forge, Milwaukee, Nibco, etc., Powell and Anvil fit right into the mold.
Although Anvil and its Canadian cousin, Canvil have been owned by a number of corporate owners, their brandname has never been tarnished. Powell is probably the oldest privately owned major valve company in the business, straddling 163 years.
It’s such brandname durability that has made the manufacturing segment of the Hall of Fame so magnificent.
January trade deficit lowest in six years
“Be careful what you wish for, you might just get it.” This old adage best sizes up the anemic trade deficit posted by the U.S. in January. Due to lagging information gathering by the Department of Commerce, these numbers tend to lag a month.
However, the trend is obvious, as the $36-billion trade deficit was the lowest in six years. Before the current economic crisis, such shrinkage between U.S. exports and imports would have been greeted with hilarity, as this gap had been running almost twice the current level just a year ago. This tended to put the U.S. into ever greater debt to foreign nations.
Both exports and imports have declined sharply, casting a pall over international trade, the lifeblood of global economics growth during the current decade. It’s been a stimulant for emerging economies, with the U.S. a disproportionate global magnet.
While demand for foreign goods, especially all types of fossil fuels at a low ebb, exports- once the fastest growing American economic sector- dropped off a cliff, as world demand dried up precipitously.
Outbound shipments were bedeviled by economic downsizing overseas and the increasingly muscular dollar. Even prices in both exports and imports have been dropping, a sign of greater competitiveness in grabbing shrinking world markets by all world exporters.
As the U.S. prepared for April’s G20 conference of developed and emerging nations, Treasury Secretary Tim Geithner called for a massive infusion of international stimulus to provide the world’s poorer consumer nations with greater buying power. He is talking increasing International Monetary funding from $50 billion to $500 billion.
It seems America’s elixir for global economic problems is now going international — inducing worldwide inflation to get world nations to start buying again.
Whether this topsy-turvy approach to previous monetary “cooling off” tactics will work remains to be seen.
Climate change legislation proves early Waterloo for Obama Administration
The initial attempt to gain major momentum for the Obama Administration’s broad-based environmental initiatives is already encountering increasing opposition — from Democrats.
In a sign of future trouble for the ‘cap-and-trade’ avalanche, which was to be launched in mid-March, the heavily Democratic House of Representatives voted down a proposal to set aside more than two million acres in nine states as protected wilderness. This would have prevented drilling for oil or gas in those areas. Although supported by many House members, it fell short of the required two-thirds majority vote.
Yielding to a mini-uprising by Senators from coal-producing and rust belt states, Senate Majority Leader Harry Reid (D-Nev.) announced that he is “weeks away from introducing comprehensive ‘cap-and-trade’ climate control legislation.” It was expected to have been introduced Tuesday.
The rebellious Senators have already signaled recalcitrance for these programs unless sufficient protection for their home state manufacturing and mining interests are protected by offsetting funds.
With four states (California, Michigan, South Carolina and Rhode Island) already exceeding 10% unemployment, the Obama leadership must now decide whether to go to the mat on environmental, universal healthcare and costly renewable energy legislation issues, while the automotive industry teeters on the edge of another employment cratering precipice.
This would require ‘reconciliation rules’ which could be jammed through by requiring a simple majority in both Houses, rather than a filibuster-proof 60 in the Senate. This would likely be outside the reach of future major controversial proposals.
Although the Republicans used such a divisive tactic to force through tax cut legislation in 2003, such an initiative by the Administration now would cause an irreparable split, especially in the Senate. This could affect economic revitalization legislation, with some Democratic industrial state Senators joining a phalanx of 40 Republicans in blocking such critical issues by filibuster threats.
Author’s note: Sheryl Ryan Michalak, ceo and co-owner of Welding Outlets Inc., maker of welding outlets, branch connections and piping specialties is joining the Board of asa’s Industrial Piping Division. As the only woman president and co-founder of a significant pvf industry manufacturer, Sheryl has given unstintingly to the varied activities of the pvf Roundtable, as a multi-year director and activist.
Her interaction at all levels of industry channels has become well-known to many industry participants. As an original architect of the IPD concept in 1970, I’m delighted that another “glass ceiling” has been broken — especially with someone of Sheryl Ryan Michalak’s stature.
Morris R. Beschloss, a 53-year veteran of the pipe, valves and fittings industry, serves as pvf and economic analyst for The Wholesaler.