Tuesday, January 20, 2015; RBN Energy -- Part 2 -- Pricing

Tweeting now: Oilfield services company Schlumberger buys 46% of Russian Eurasia Drilling Company for approximately $1.7 billion.

Active rigs:

	1/20/2015	01/20/2014	01/20/2013	01/20/2012	01/20/2011
Active Rigs	161	187	187	202	163

RBN Energy: Pricing, Part 2.

There was no open outcry trading on the CME NYMEX yesterday because of the MLK holiday but after rallying on Friday U.S. crude prices resumed their descent here in electronic trading and the London ICE Brent contract lost $1.40/Bbl to close at $48.77/Bbl. Unsurprisingly the Baker Hughes oil drilling rig count is down by 209 (13%) since December 2014 as producers take a hard look at their production budgets. Yet production is still expected to increase in the short term – in part because the rigs that are left will focus on “sweet spots”. In today’s blog “It Don’t Come Easy – Low Crude Prices, Producer Breakevens and Drilling Economics – Part 2” Sandy Fielden looks at the assumptions behind RBN’s IRR and breakeven scenario analysis.

These articles are eventually archived for subscribers only.

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Arizona, New Mexico, Nevada, Texas

The Los Angeles Times is reporting: In 2013, only 46 manufacturing operations started or expanded in California, compared with 253 in Texas.

"There's a fresh look at the whole country," said Rothrock, president of the California Manufacturers & Technology Assn. "Unless you're forced to be in California for some reason, increasingly it's hard to find reasons that you have to be here."

California's high costs for land and energy are preventing the state from grabbing its share of companies relocating production back to the U.S. from overseas markets such as China. 

Although California is responsible for about 11% of the nation's manufacturing production, the state has accounted for only 1.8% of investment in new or expanded manufacturing across the country since 2001. That compares with 6% in the 1980s, according to economic development data purchased by the association.

I would assume the shale oil boom in Texas accounted for many of the 253 new or expanded manufacturing operations in Texas last year.

Much, much more at the linked article. See next post.

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Tax Incentives Bring Jobs To Nevada

The San Jose Mercury (California) News is reporting:

RENO, Nev. -- The largest lithium battery factory in the world is getting a new neighbor at an industrial park east of Reno -- the world's biggest data center. Las Vegas-based Switch plans to invest $1 billion in the 3 million square foot "supernap" center.

It will be built on 1,000 acres at the Tahoe Reno Industrial Center, where Tesla Motors currently is building its $5 billion gigafactory to make batteries to power its electric cars.

Gov. Brian Sandoval announced the plan in his State of the State address Thursday night along with a $1 billion expansion of Switch data space in Las Vegas. "This will make Nevada the most digitally connected state in the nation,"says CEO.

The company operates two data center facilities in Las Vegas, providing security, power and cooling for stacks of thousands of servers owned by more than 1,000 clients that include eBay, Xerox, Zappos, Amazon, DreamWorks, Shutterfly and the U.S. government.

Switch's "supernap" project includes the development of a 500-mile fiber optic network it calls a "superloop" that will connect Reno, Las Vegas, Los Angeles and San Francisco and dramatically increase the speed of information traveling between the cities. 

This is really interesting. Private enterprise needs a "superloop" to carry information between Los Angeles, Silicon Valley, Hollywood, and San Francisco. The obvious place to locate the data center would be somewhere in California, perhaps Fresno. So, where does it go -- a couple hundred miles to the east. Meanwhile, Jerry Brown is looking to the 19th century model to build a new trans-continental state railroad. LOL. 

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Background Reading Before Tonight's SOTU

The Article Will Help Explain Why The President Wants To Raise Your Taxes (Again)

USA Today is reporting that US workers are being'squeezed' by health insurance costs:

State-by-state analysis also shows that in every state over the course of a decade, the cost of employer-provided health care still grew faster than incomes.

That, in turn, had led to workers footing a bigger share of the costs of their health insurance.

In fact, employee contributions to their insurance costs have risen by as much as 175% since 2003 in some cases — with workers in the south having the biggest cost burden.
The report comes after years of slow growth in overall health-care costs on the heels of the 2008 financial meltdown, and as the effects of President Obama's health-care reform law, the Affordable Care Act, are being felt. The ACA contains several provisions designed to slow the rate of health-care cost growth.

The report notes that from 2010 to 2013, on the heels of the ACA's passage, 31 states and the District of Columbia saw a slowdown in the growth of premiums charged for health insurance for workers. Twelve of those states saw at least a three-percentage-point decrease in the rate of premium inflation.

But from 2003 through 2013, in all states, the price of employer-provider insurance premiums grew quicker than the pay for the workers there.

 The president will propose higher taxes to help subsidize his "affordable care" premiums.

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Income Stagnation

Why President Obama Wants To Raise Your Taxes (Again)

The New York Times is reporting that there is little modern precedent for the income stagnation seen during the Obama adminisration:

Even as job growth has picked up in recent months, wages haven’t grown much more quickly than inflation. As a result, the government’s official statistics suggest that the typical American household makes no more than the typical household did in the final years of the 20th century.

That’s remarkable. There is little modern precedent for a period of income stagnation lasting as long as this one. Official records don’t exist before World War II. But the best estimate is that the Great Depression may be the only other modern time in which incomes for most households in the United States have grown so slowly — or not at all — for so long.

The great wage slowdown has several main causes: globalization, which has forced Americans to compete with hundreds of millions of poorer workers from around the world; technological change, which allows machines to replace human labor in new ways; the slowdown in American educational attainment, even as the rest of the world has continued to become more educated and more highly skilled; and the shifting balance of economic power, away from workers and toward companies and their executives.

This comes after a gazillion dollars in stimulus, most of which went to Solyndra.  

ObamaCare, new EPA rules, and thousands of new regulations across all sectors were inadvertently omitted by The New York Times as the main reasons for wage stagnation. We should see a small one-line correction to this story buried on page 7 of next Friday's weekend edition.