Hadrian, the third of the “five good emperors” of Rome, ruled from 117 to 138 in a time of consolidation of the Roman Empire. Best known for building Hadrian’s Wall, which marked the northern most reach of the Roman Empire, his policy focus was securing the Empire by leveraging its strengths rather than overextending its reach. Hadrian had a disciplined attention to detail and focused on the infrastructure needed not only to defend the Empire’s territory but leverage its resource potential and revenue growth.
Today’s economy is marked by uncertainty and volatility at home and abroad. This uncertainty is causing businesses to hoard cash—at last estimate about $1.4 trillion worth.
We have a huge federal deficit, a broken housing situation, and looming costs for unsustainable entitlement programs promised for generations by spend-now, pay-later politicians. Incrementalism is becoming unsustainable in the face of these mega-problems.
Most Americans want their president to succeed, but Obama’s policies seem out of touch with our economic realities, his style too partisan, and his poor performance leaving “Yes We Can” blowing in the wind. Next year’s election portend a sharp break from the more-rather-than-less government status quo of President Obama.
America Is Not Alone
Emerging markets around the world—including China, Brazil, and India—face daunting economic problems. That adds to uncertainty because faster emerging-market growth was expected to help developed-world countries recover. Instead they face rising inflation, rising wages, falling exports as prices rise and thus slower growth and weakening economic fundamentals.
The MSCI Emerging Market equity index fell 0.6% year to date after rising 16.4% in 2010 and 74.5% in 2009. Brazil’s and India’s government yield curves are inverting with short-term rates higher than long term yields screaming “recession ahead,” as investors take lower long-term rates anticipating declining yields in the economic contraction.
China faces an economy with rising inflation and slowing growth from its frenetic pace forcing the government to raise wages, tighten controls or face serious economic dislocations that risk the social unrest it fears so much. Rising cost of China exports is good for Vietnam and other lower-cost countries successfully winning away manufacturing contracts. The signals are clear that the emerging markets are not going to save the world’s economy from bad fundamentals, poor judgments, and unsustainable spending behaviors or policies.
The EU has its own set of economic problems to face ranging from saving the PIGS to Germany’s knee-jerk reaction to Japan’s nuclear tsunami problems to the uncertainty over the efficacy of NATO evidenced most recently by Libya and the difficulty extricating ourselves from Afghanistan without the government and its economy collapsing.
An Energy Hadrian Wall
America ’s future needs a Hadrian Wall, not to isolate ourselves or withdraw from the rest of the world but to secure the foundation of America’s finances, markets and our ability to project military and economic power around the world. That foundation of financial strength and integrity will allow the U.S. to remain the market of choice for the world.
In a world of uncertainty and volatility, the bright spot in America’s economic future has been the unqualified success of unconventional oil and gas exploration and production right here at home and the prowess of America’s energy technology in 3D seismic, horizontal drilling and hydraulic fracturing to keep the door from being slammed shut by overzealous regulators.
As more and more drilling rigs leave the Gulf of Mexico for lack of permits to drill, we are learning that Exxon has discovered three substantial new oil finds in the Gulf of Mexico that have a combined conventional potential of more than 700 million barrels of recoverable oil plus natural gas.
At the same time Exxon has also bet big again on unconventional gas E&P with its acquisition of Phillips Resources and TWP Inc for $1.69 billion adding about 317,000 acres for exploration in the Marcellus shale basin. The message from Exxon is clear—some of the best opportunities for energy production growth are right here at home. And ExxonMobil’s view is shared by other oil and gas finders–and should be repeated time and again.
Alaska Governor Sean Parnell is focused on refilling the trans-Alaska pipeline where falling oil production has reduced pipeline flows to an average of about 640,000 barrels a day creating increased maintenance and operating problems. The state has been unable to persuade the Federal Government to permit additional drilling and oil production in Alaska and fears falling oil flow will cause the shut-down of the pipeline which would then have to be dismantled according to the laws governing it. At its late-1980s peak the Trans-Alaska pipeline moved 2.1 million barrels of oil a day from the North Slope. Alaska has recoverable oil potential to again refill the pipeline to meet domestic energy demand if the Government will permit it.
To restore confidence and jump-start economic growth, U.S. policymakers must unleash the job-creating, revenue-producing, investment-inducing potential of domestic energy production.
America’s Hadrian’s Wall is domestic energy production because it signals more powerfully than anything else that America intends to restore its economic strength and act in its strategic best interest because doing so is good for America and good for the global economy. The building blocks of America’s version of Hadrian’s Wall include:
Turning on America’s domestic energy production will send a powerful and unmistakable signal that America is again open for business.
Doing so in a way that assures that the energy and technology to fuel domestic economic growth in manufacturing, trade, exports and services will be available and the Government and business are aligned to make it happen will reduce uncertainty and unleash the hoarded cash sitting on the sidelines just when President Obama needs it most.