Driving down the New Jersey Turnpike for many decades drivers would smell the foul smell; and see the lights of the giant refineries, and wondered why on earth would someone name it the garden state. Then the refinery lights went down and slowly the production moved to the gulf states as it became more expensive to move oil stocks up to feed them in the North East. As the lights went out it seemed a portent sign of the decline of America and its petroleum industry and the oil majors sought profits and capacity outside the United States. Europe with its North Sea oil, the Middle East with its huge capacity of cheap oil and Asia with its burgeoning demand became the standard bearers for new refining capacity additions. A death knoll on American refineries; and the general demise of its petro chemical industry, was being called by talking heads on major TV channels. They saw only a continued downward spiral; as costs remained high, and capacity utilization suffered. Even today the North East continues to import a major part of its consumption from abroad.
Little known to them; there were still some ingenious folks around the gulf coast; who were ready to take the risks, to turn things around. Their efforts paid off around two years ago, as the major refiner’s added capacity at an unprecedented scale to fulfill growing American demand and also to add surplus capacity for exports. “All these companies are expanding their export terminals—Valero, Shell, Marathon Petroleum, all of them,” said Fadel Gheit, senior energy analyst at Oppenheimer. “Any companies with refining assets on the Gulf Coast are expanding their export terminals. …The profitability is not that clear, but the trend is very clear.” From being an importer just three years ago; today the US has become the largest exporter of refined petroleum products led by Diesel, airplane fuel and gasoline. The death of the US industrial capacity was prematurely announced it seems; and now it is well on its way from not only being the bread basket of the world, but also the refiner for the world. The petroleum hydrocracking industry is exploding it seems; and it is driven by cheap gas and shale oil, and at the current rate it will add substantially to the rate of GDP growth in the US. Trade deficits as a result will be driven down; and Europe with its higher cost of gas and petroleum products from the previous Russian republics, will continue to suffer.
President Carter had warned decades ago during the fuel crisis; that the US needs to become much more energy efficient, if it is to survive as a leader in economic development. It has taken decades for the conservation efforts to pay off and with President Obama’s declaration of still higher fuel standards for the auto industry; demand in the US will continue to fall over the next decades, as old cars are retired and replaced with far more fuel efficient vehicles. At the same time the US is finally looking seriously at renewals; and wind, solar, nuclear, ethanol, biomass and anything else that can be technically possible, is being explored and developed. Venture capital and investments in developing the fuel of the future continue, from the risk takers and entrepreneurs. The greening of America will have long term repercussions for the rest of the world; as more efficient cars, trucks, trains, planes, houses, appliances, buildings and cities develop. Warren Buffet is buying up solar plants; as if they were going out of style, and as I fly across the US I see more wind farms cropping up. After decades of decline new nuclear plants have been cleared for development and will come online to support the growing electricity needs of this vast land.
The national debt is an embarrassment to some; as we owe trillions to the Japanese and Chinese and anyone else, who wants the safe haven of US treasuries. In fact those folks are wise, as they are investing in the greatest economic engine known to man. What counts is that America continues to grow its economy, invests in new research and development and converts it into new technical products and industrial production continues to grow its GDP; all else is just rustling of paper representing doomsday scenarios. Talking heads will come and go; but it is the ingenuity of the people and the will to pursue the next big thing, that will make or break us. Today forward thinking people are placing risky bets on refinery expansions; and tomorrow the lights may go down on these ventures, leaving idle capacity and major losses. Yet I thank these enterprising folks; as at least they have a vision to be the best and largest in the world, and are leading us to a brighter and more efficient tomorrow.