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| Photo credit: ©istockphoto.com/Mayumi Terao |
On the verge of 2013’s second half, the previously moribund commercial/industrial construction sector, which was hit hard during the Great Recession, is displaying increasing signs of recovery.
According to Industrial Info Resources, a Texas-based publication focusing on the varied categories comprising commercial and industrial projects, the chemical processing industry seems particularly far along in recovery mode. This has been typified by a multiplicity of new projects getting underway as the year is unfolding.
In addition to the accelerating demand for chemical end-use products, the recovery has been aided by the availability of low-cost natural gas “feedstock.” Facilitating such cost effectiveness have been record-low prices and the resources made possible by hydraulic fracturing (fracking), which is also on its way to making the United States oil independent as it unleashes the world’s leading natural gas potential.
Some of America’s multibillion-dollar chemical corporations, such as DuPont and Dow Chemical, are rushing to expand their U.S.-based facilities to take advantage of this feedstock advantage. There is even a move by some of America’s leading multinational conglomerates to relocate back into the United States because of the cost advantage reversal.
Some of these companies now are lobbying against a potential export of liquid natural gas, which would raise prices above the dirt-cheap level made possible by this natural gas supply expansion. A massive natural gas export sector would almost certainly instigate price increases, which would match the double, triple or even greater price levels now charged by Russia, Qatar, Iran and Algeria. Since natural gas is global, this situation also would raise prices across the complete span of domestic U.S. usage.
Although natural gas-related businesses are a prime example of the construction rebound, the industrial sector as a whole is showing new signs of life. These can be attributed to both the record 320 million U.S. population plus an unexpectedly powerful export sector.
Although the commercial sector is boosted primarily by aspects of health-care and living facilities for the aged, a better-than-expected retail sector also is responding to a growing hotel subsector and expanding fast-food chains such as Panera, McDonald’s and Starbucks. Despite the nation’s struggle with a runaway debt and deficit, enough demand is emanating from our subdued economy to generate the need for additional facilities or upgrading those existing.
EPA regs face headwinds
The Democrat-controlled Senate is increasingly bucking the White House/EPA partnership that is throttling America’s buoyant energy development with further restrictive legislation.
Media outlets practically muffled as a significant news item the Senate majority vote that demands the go-ahead of the long-suspended Trans-Canada XL oil pipeline. With seven Democratic senators joining a united Republican front, this nonbinding resolution — long-supported by the GOP-controlled House — unveiled a trend of Senate majorities favoring restraint of EPA restrictions in the future.
Although the rationale behind this push-back of environmental extremism can be explained as the EPA undercutting economic progress, it’s no coincidence that the Democratic senators who have joined the GOP minority are up for re-election in states with a Republican-leaning bias.
This rising awakening toward the antibusiness attitude of the EPA is welcome news for those who understand the significance of fracking. They also understand that the free flow of Canada’s oil must be facilitated, and they want to put a halt to the increased utility and transportation costs that environmental extremists continue to impose on America’s consumers.
The U.S. Senate, by preliminary votes, has indicated its opposition to the revival of “cap-and-trade.” Former Vice President Al Gore’s questionable plan would reward low emitters of carbon dioxide and greenhouse gases by allowing them to “sell their under-usage” to those corporate entities that have exceeded the artificially imposed limits. The Gore-invented “brokerage” to handle these transactions would gain sizable fees from this arrangement.
Currently, the administration is proffering legislation to substantially decrease the amount of sulfur in gasoline. This move is now in the process of going forward in the form of a new EPA initiative, despite warnings by the refineries that this would raise the cost of gasoline by a minimum of 10%.
Those who thought that the departure of former EPA head Lisa Jackson might usher in a more balanced approach by the EPA may be shocked to learn that a list of increased regulations is already in the process of being thrust on America’s businesses, and the U.S. economy in general.
The hope here is that concern for holding their seats in the 2014 midterm elections will continue to keep the affected senators opposed to EPA extremism.
Cash flow ‘armistice’
Have you noticed the headline shift away from economic issues? The hue and cry in the months leading up to the Nov. 6, 2012, general elections filled the airwaves and print pages with warnings of gloom and doom if one side or the other got its hands on the till of the ship of state.
This tension was heightened during the “lame-duck interval,” topped by the fiscal cliff and followed by the sequestration showdown. In each case, the political antagonists in Congress and the White House backed away from Armageddon and came up with a patchwork quilt of compromise to avoid a political firestorm that could have been suicidal for either party.
This temporary armistice was engendered by nominal expenditure cuts by government agencies, topped by a display of minimal self-imposed salary cuts by President Obama and several cabinet members.
With this postponement of inevitable debt/deficit decisions to Oct. 1, the start of fiscal 2014, both political parties hope to allow the ponderous U.S. economy to maintain its equilibrium.
No grand-bargain resolution on entitlement cutbacks or further raising of top-bracket income taxes is in sight. Only the fear of the upcoming mid-term elections in November 2014 has a chance to force anything resembling a reasonable solution between the House of Representatives and the Senate/White House during the intervening period. In the meantime, social issues as well as the North Korean and Syrian foreign policy travails have surfaced with a vengeance.
Also sharing the spotlight are the Second Amendment gun-ownership debate, a newly minted immigration policy, a rewrite of the marriage institution and a resurfacing of the Roe vs. Wade abortion issue. Then there’s the never-ending Jodi Arrias murder trial, which seems to have caught the fancy of millions of TV-watching American escapists.
In the meantime, the U.S. economy, beset with an unresolved unemployment burden, is holding its own on the better-than-expected plus side. What has propped up the economy monetarily are the hundreds of billions of dollars flowing into the United States to buy up fixed and liquid assets of all types, along with continued “safe-haven” support of U.S. debt paper. This is accomplished by auction bids, keeping the yield curve at record lows with adequate coverage.
It’s a lucky break for the United States that, compared to every other country in the world, America still looks to be the best investment bet — not only under existing government mismanagement but for many years to come.
