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Morning Brief: U.S. Energy Extraction Grows as Consumption Declines

by Renewing America Staff
March 23, 2012

A fuel-efficient Toyota Prius is seen in front of an oil pumpjack in Fellows, California in April, 2010. (Lucy Nicholson/Courtesy Reuters) A fuel-efficient Toyota Prius is seen in front of an oil pumpjack in Fellows, California in April, 2010. (Lucy Nicholson/Courtesy Reuters)

High oil prices, improved extraction technologies and declining demand have reduced U.S. dependence on foreign energy (NYT).  Demand decreased as the recession and higher gasoline prices led Americans to drive less and to buy more fuel efficient vehicles.  Oil is a globally traded commodity, so prices have remained high even as domestic oil production rose from almost 5 million barrels a day in 2008, to nearly 5.7 in 2011 and imports of all liquid fuels fell from 60 percent in 2005, to 45 percent in 2011.  Global trading of natural gas is limited; booming domestic production drove prices down 46 percent in 2011 and gas storage facilities are approaching capacity limits (WSJ).

CFR’s Michael A. Levi was quoted in the New York Times article.  He is the David M. Rubenstein Senior Fellow for Energy and the Environment and regularly discusses energy policy and markets on his blog, Energy, Security, and Climate.

Infrastructure. Read more on how upgrading the nations aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.

International Trade and Investment

Tourism to United States Rises

The International Trade Administration of the Department of Commerce announced the growth of foreign tourists and tourism spending in 2011.  The number of international visitors rose 4 percent in 2011—reaching 62 million—while spending increased 14 percent.  This growth in tourism is estimated to have supported an additional 103,000 jobs.  Efforts to stoke further growth include the Obama administration’s recently created Task Force on Travel and Competitiveness that seeks to reduce the difficulties many foreigners face in scheduling a vacation in the United States.

CFR’s Ted Alden discusses the need to accelerate improvements to the speed and safety of the U.S. visa system.  Inefficiencies in the current system reduce U.S. competitiveness by discouraging tourism, foreign investment and international business.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Corporate Regulation and Taxation

Deutsche Bank Restructures to Avoid Dodd-Frank Capital Requirements

Deutsche Bank restructured its U.S. operations to avoid Dodd-Frank capital requirements (FT).  The Dodd-Frank Act requires foreign banks’ subsidiaries that are structured as bank holding companies to meet capital levels required of U.S. firms.  Large investment banks restructured themselves into bank holding companies during the financial crisis to access aid programs from the Federal Reserve. Deutsche Bank’s restructuring follows a similar move by Barclays in 2010, and has prompted the Fed to review capital requirements placed on foreign banks (FT).

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

Education and Human Capital

Student Loan Debt Exceeds $1 Trillion

The Consumer Financial Protection Bureau reported that aggregate student loan debt now exceeds $1 trillion (WSJ).  As the pay gap between college and high school educated workers continues to grow, a greater number of students are choosing to enroll in college and take on educational debt.  Debt is also boosted by rising tuition rates and repayment penalties as former student fall behind on payments.  While the growth in college education increases the capability of the U.S. workforce, the increasing level of indebtedness among young Americans may cause many to postpone buying a home or getting married.

U.S. Workers are Less Mobile

The Harvard Business Review suggests that the difficulty some firms face in filling open positions—despite persistent unemployment—may be partially explained by a decline in workforce mobility.  The Census Bureau reported that the percentage of Americans who changed residences between 2010 and 2011 was 11.6 percent, the lowest since 1948.  While surveys indicate that 44 percent of workers are willing to relocate for a career opportunity, many are stuck in their current homes; 23 percent of homeowners are “underwater” on their mortgages.  This provides an edge to more mobile workers—particularly fresh graduates—and to professions that can be done remotely.

The HBR article also acknowledges that the growing gap between workers’ skills and employers’ needs is a primary explanation for the difficulty employers have in filling some openings.  CFR’s Ted Alden discusses the shortage of skilled workers in the U.S. manufacturing pipeline and the need for firms, governments, and unions to work together to encourage young people to pursue manufacturing careers, and schools to increase relevant education.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

Innovation

Corporate Venture Funding Rises

The Wall Street Journal reported that venture capital investment by corporations rose in 2011, but is still below pre-recession highs.  Corporations are increasing their investment in early stage start-ups, rather than waiting to acquire more mature ventures.  Corporate investments rose 27 percent in 2011, from $2.6 to $3.3 billion.  Budding entrepreneurs who secure corporate cash get funding and a strategic partner with deep industry expertise.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Steven J. Markovich holds an MBA from the University of Chicago’s Booth School of Business.

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