When I read today that the US is now a net exporter of petroleum products (9Mo YTD exported 754m barrels of refined fuel and imported 690m barrels of crude), I am wondering why this is not a bigger headline.
As recently as 2005, US had a deficit of 900m barrels of petroleum products. That must be over $100 billion per year change in 5 years! The assumption was that US ran huge trade deficits that were offset by services surpluses (as well as usual net investment flows). And we worried that: the dollar will dive, BRICs will take over, reliance on Middle East energy, poor state of US manufacturing, loss of leadership in the energy sector, etc.
But this "Petroleum Net Exporter" has wide ranging implications:
- There are many reasons for dollar strength, beyond flight to safety.
- The euro is way overvalued; yuan is probably less overvalued than believed if actual Chinese inflation is taken into account; and, the rise of IMF SDRs seems to be an idea of desperation (at least European).
- We seem headed to Euro-Dollar goes to parity, Yuan and HK dollar merge and fix, and Japan inflation kicks in and Yen reverses.
- Enhanced recovery and increased natural gas utilization has reversed declines in North American energy production [BTW -- It would seem that Canada is the new South Africa -- except a lot bigger. The Canadian dollar is probably worth multiples of the US dollar.].
- And the US has shown that it is a pretty good "manufacturer" of refined petroleum products. Building refineries in the Middle East, Nigeria, and SA would be great businesses.
- At the same time, US has surpassed Europe as the most lucrative market for wind and solar. [It is too bad that nuclear just can't get a break.] Also, China has effectively taken over the supply side of the alternative energy industry (though they still need some chemicals and production equipment).
- This Net Exporter status is actually not too big of an issue for the Middle East and Russia etc. -- as they can still sell crude. I would guess that China, India, et. al. will soon reverse its foreign reserve accumulation -- as it imports energy and commodities. Guess that is why they are building so many windmills and solar plants. [So US becoming a net exporter -- really does not solve the "Middle East" issue. The people of the Middle East seem to be doing a pretty good job on their own in many regions, of course.]
- I wonder what China's plan is to address: labor costs in major cities becoming uncompetitive, huge amount of imports of more "downstream" foods like meat, energy/resources required to address environmental issues (even for clean water), and the increasing difficult in understanding/managing their economy as they themselves distort the global market forces.
But I digress. It would seem that we should: buy dollars (particularly TIPS) and farmland in the Dakotas (selling the mineral rights), short Euros/Gold, buy anything in Canada, focus on jobs not manufacturing in America, buy lot of solar modules and wind mills from China, and have our children study chemical and biochemical engineering (for energy, synthetic food, et. al.).
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