From Scarcity to Abundance: How the Energy Boom is Transforming

America’s Economy

Presentation to the 2014 Economic Summit Federal Reserve Bank of Dallas

Bernard L. Weinstein, Ph.D.

Associate Director, Maguire Energy Institute Cox School of Business

Southern Methodist University Dallas, Texas

The opinions expressed are solely those of the presenter and do not reflect the opinions of the Federal Reserve Bank of Dallas or the

Federal Reserve System.

June 18, 2014

NEW BOOM IN THE OIL PATCH

TYPICAL FRACKING PAD SITE IN PENNSYLVANIA

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

Prod

uctio

n (b

bl/d

ay)

Country (*OPEC Member)

Top Oil Producers in 2013

Source: International Energy Agency

LUXURY HOUSING IN THE BAKKEN: $2500 PER MONTH

MACONDO EXPLOSION AND OIL SPILL

Offshore Potentially Recoverable Federal Oil and Natural Gas Resources

681.4

592.3

156.5 160.5 157 107.2 114.9 102.8 81.5 71.1

0

100

200

300

400

500

600

700

800

U.S. RussianFederation

Canada Iran Qatar China Norway SaudiArabia

Algeria Indonesia

Billi

on C

ubic

Met

res

Country

Top Natural Gas Producing Countries in 2012

Source: BP Statistical Review of World Energy June 2013

Top Gas Exporting Countries, 2011

02468

101214161820

Bcfd

Source: Deloitte, Exporting the American Renaissance; Global Impacts of LNG Exports from the united States, Jan. 2013

Cove Point, Maryland LNG Facility to Export Marcellus Gas

PROTESTING COVE POINT

CURRENT LEGISLATIVE AND REGULATORY RESTRICTIONS ON ENERGY INVESTMENT

• Keystone XL pipeline • Restrictions on oil and natural gas exports • Limitations on drilling offshore and on federal

lands • Renewal fuels standard (ethanol mandate) • Cross-state air pollution rule and utility MACT • EPA greenhouse gas limits for power plants • Proposed fracking regulations from EPA and DOI

Gross domestic product

Source: Commerce Department

Real Economic Growth

-7%

-5%

-3%

-1%

1%

3%

5%

7%

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2010 2011 2012 2013 2014

1Q 2014: 0.1%

In percent, seasonally adjusted:

Source: U.S. Department of Labor

2013 2014

U. S. Jobless Rate

0%

2%

4%

6%

8%

10%

12%

J F M A M J J A S O N D J F M A

April ‘14: 6.3%

-500-400-300-200-100

0100200300400500

J A S O N D J F M A M J J A S O N D J F M A

Monthly change, in thousands

Source: Labor Department

April ’14: 288,000

2012 2013 2014

Nonfarm Payrolls

0%

5%

10%

15%

20%

25%

30%

35%

2012 2013 2014 2015 2016 2017 2018

Chan

ge in

Pro

duct

ion

Year

Cumulative Change in Oil Production 2012-2018

U.S.

Non-OPEC Excluding U.S.

OPEC

Source: International Energy Agency

100.0

120.0

140.0

160.0

180.0

200.0

220.019

88-0

1-01

1989

-01-

01

1990

-01-

01

1991

-01-

01

1992

-01-

01

1993

-01-

01

1994

-01-

01

1995

-01-

01

1996

-01-

01

1997

-01-

01

1998

-01-

01

1999

-01-

01

2000

-01-

01

2001

-01-

01

2002

-01-

01

2003

-01-

01

2004

-01-

01

2005

-01-

01

2006

-01-

01

2007

-01-

01

2008

-01-

01

2009

-01-

01

2010

-01-

01

2011

-01-

01

2012

-01-

01

2013

-01-

01

Thou

sand

s

Month

US Oil and Gas Jobs January 1988 through April 2013

US Oil and Gas Jobs(Thousands)

Source: Bureau of Labor Statistics

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Perc

ent

Month

Percent Change in Employment January 2008–April 2013

Total NonfarmPayroll Employees (inthousands)

Oil and GasExtraction Employees(in thousands)

-1.87%

+24.81%

13.55%

23.54%

66.08%

12.64%

19.13%

2.50%

13.07%

2.81% 5.17% 6.37%

0%

10%

20%

30%

40%

50%

60%

70%

U.S. Texas Pennsylvania Colorado Louisiana

Gro

wth

State

GDP Growth, U.S. vs. Selected Energy Producing States 2008-2012

Mining SectorReal GDP

Total Real GDP,All Industries

Source: Bureau of Economic Analysis

17.54%

30.20%

75.36%

20.24%

5.61%

-2.84%

4.70%

-1.22% -0.91%

0.53%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

U.S. Texas Pennsylvania Colorado Louisiana

Gro

wth

State

Employment Growth, U.S. vs. Selected Energy Producing States 2008-2012

Mining andLoggingEmployees

Total NonfarmEmployees, AllIndustries

Source: Bureau of Labor Statistics

-600 -400 -200 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

KentuckyVermont

DelawareMissouri

WisconsinNew HampshireMassachusetts

West VirginiaArkansas

KansasLouisiana

South DakotaPennsylvania

AlaskaWyoming

TennesseeNew Mexico

IowaMontana

HawaiiSouth Carolina

NebraskaIdaho

GeorgiaOregon

D C Minnesota

MarylandNorth Dakota

OklahomaNevada

ColoradoNorth Carolina

VirginiaUtah

WashingtonArizona

New YorkCalifornia

FloridaTexas

Job Gains and Losses by State:

Dec. 2000 – Mar. 2014

MaineRhode IslandIndiana

New JerseyConnecticut

AlabamaMississippi

IllinoisOhioMichigan

Texas added 36.4% of the jobs in the U.S. during this 13+ year period.

110 Years of Oil and Gas Production in Texas

Total statewide jobs provided or supported by the oil and gas industry

0%

2%

4%

6%

8%

10%

12%

14%

0

10000

20000

30000

40000

50000

60000

70000

80000

Unem

ploy

men

t Rat

e

Thou

sand

Bar

rels

Year

Monthly Crude Oil Production and Unemployment Rate in Texas and California 2000-2013

California Crude Production

Texas Crude Production

California Unemployment Rate

Texas Unemployment Rate

Sources: Energy Information Administration and Bureau of Labor Statistics

THE “PETROSTATE” OF AMERICA

WE’RE NUMBER 1!