America’s Energy Boom: Is Independence Closer Than We Think?

Economist and oil expert Philip Verleger recently discussed America’s current energy boom and its implications at the Peterson Institute for International Economics.  He is currently a private consultant on energy issues and a former senior economist with the Council of Economic Advisers and the Treasury Department during the Carter Administration.  As an oil and energy analyst for almost 40 years, he says he has never seen anything like the current energy boom that the United States is currently enjoying, emphasizing that the U.S. could soon be a net oil and energy exporterVerleger is not the only one catching on to this development.  In late March, a major article was published in The New York Times highlighting these changing circumstances.

Verleger now recognizes that the U.S. will be a low-cost producer of energy well into the future, projecting that domestic production will have a “50, 70, maybe 80% cost advantage,” subsequently enticing companies to return production back to the United States.  In this new environment, every increase in global prices will now be a competitive advantage for U.S. and its exports moving forward, providing a base for stronger economic growth than many of the other industrialized countries.

For years, many administrations had sought the “high-cost solutions” to energy independence driven by major investments in alternatives, but now we finally have the “low-cost solutions.” In looking at the causes behind this change, he states that major oil companies left the United States and abandoned production, but reduced costs and size of computers allowed smaller companies to compete technologically and develop smaller fields untouched by large companies.  Another contributor was the development of the energy futures markets that stabilized prices and built inventories, enabling investment growth.  Verleger noted the key role of regulators that have mandated fuel economy improvements, the use of ethanol in gasoline, and other environmental regulations.  The auto industry itself has also been a factor, changing business models in the wake of its 2009 “near death experience.” Further contributing to price declines, domestic gasoline demand has been falling between “5 and 6% year over year” as well.

Looking to the future, Verleger is quite optimistic.  He believes these circumstances lay the foundation for a U.S. competitive advantage that will last for at least 10 to 15 years, maybe even 30 years.  He predicts that this phenomenon will add one-half to a full percentage point to the U.S. GDP growth rate through both consumption and investment.  However, he is still cautious on a few fronts.  First, he worries that major oil companies will be unable to compete in this low-cost, low-price environment.  Second, we must significantly improve our infrastructure. Finally, he doesn’t think the U.S. will become protectionist of this advantage through export quotas, but he says that the temptation will be there and will be difficult to fight.  Nevertheless, these changes are likely to strengthen the dollar and trade balances, help to control debt and deficits, and enhance overall economic competitiveness.

 

Posted by: Brian Gowen

Photo Credit: Oil well pump jacks courtesy of flickr user Richard Masoner / Cyclelicious

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Emerging Global Trends in Advanced Manufacturing

In continuing its focus on the future of manufacturing in the United States and around the world, PAGE hosted a report launch from the Institute for Defense Analyses Science and Technology Policy Institute (STPI) on the future of advanced manufacturing both at home and abroad.  Commissioned by the Office of the Director of National Intelligence,   Emerging Global Trends in Advanced Manufacturing identifies and outlines key developments within this sector that are likely to affect both the national and economic security of the United States well into the future.  The study placed heavy attention upon the critical, emerging trends in advanced manufacturing, how they align with the investment and growth interests of nations around the world, and what the industry is expected to look like decades down the road.

The report defines advanced manufacturing as intended to improve existing or create entirely new materials, products, and processes.  While advanced manufacturing products and processes are occurring across a broad swath of industries, STPI identifies four primary “technology areas” that are or will be significantly influenced by advanced manufacturing: semiconductors, synthetic biology, additive manufacturing, and advanced materials/integrated computational materials engineering.

As outlined in the study, the current tsunami of technological change is expected lend tremendous energy to the expansion of advanced manufacturing over the long term.  The report pinpoints five major trends in innovation that will play a major role in that growth: the “increasingly ubiquitous role of information technology” as it drives data creation; the increasing role of modeling and simulation; rapid changeability; supply chain management that is continuously transformed by globalization; and the prominence of sustainable manufacturing.

But how do we promote the development of advanced manufacturing? The above question is critical in today’s job-focused, growth-centered public discourse.  The report outlines key factors that enable this development.  Especially important for policymakers are those that affect location choice among firms.  In their presentation, the STPI researchers highlighted market size and growth, co-location or clustering, access to skilled labor, and access to natural resources.

At its conclusion, the report did make a few projections about the state of advanced manufacturing both 10 and 20 years down the road.  In ten years, advanced manufacturing is highly likely to be data intensive and largely automated.  Systems will increasingly be globally linked, thus necessitating investments in cyber and network infrastructure by firms.  It will be much more energy and resource efficient as well.  In twenty years, the study predicts that manufacturing will be atomically precise with a heavy focus on mass customization.

Despite increasing momentum, the widespread development of advanced manufacturing across the United States does face many challenges, namely investment, an able workforce, regulations, and proper IP structures.  In the event commentary, it was pointed out that that America needs to “go back to the fundamentals” in order to remain competitive.  We must understand the competition and the global best practices and seek to implement them at home, ensuring that America maintains a competitive advantage in this emerging sector.

A video of the event can be found here.

Posted by: Brian Gowen

Sources: Institute for Defense Analyses Science and Technology Policy Institute

Photo Credit: David Hawxhurst/WilsonCenter

Can America Restore Its Competitive Edge?

The Wilson Center hosted a panel discussion this morning focusing on what government, business, and educators can do to restore U.S. competitiveness through long-term improvements in the K-12 education system and public policy. The event brought together five experts for a dialogue led by moderator David Wessel, Chief Economic Correspondent for The Wall Street Journal.

The panel discussion highlighted the importance of manufacturing in U.S. competitiveness. Norm Augustine, former CEO of Lockheed Martin, pointed out that advanced manufacturing is not only essential for the U.S. economy, but also for national security. Deborah Wince-Smith, president of the Council on Competitiveness, added that stimulating the growth of manufacturing hubs and clusters will help spur innovation and progress within the industry. Two of the most significant problems that need to be addressed are outsourcing and the shortage of skilled labor.

Combating outsourcing can be done through changes in corporate tax policy, Business Roundtable President John Engler asserted, such as simplifying and reducing it. This will give businesses more incentive to stay in the US. Paul Vallas, former superintendent of schools in Chicago, Philadelphia and the Recovery School District in Louisiana, adds that not only do changes need to be made at the federal level, but also at the state and local level, especially with entitlements and tax policy.

Jan Rivkin, a professor at Harvard Business School, explained that a less restrictive immigration policy can bring in a large influx of skilled laborers that many firms need. Engler pointed to heightened partisanship in politics during the last few years for keeping a comprehensive immigration policy from being pushed through Congress.

The panelists also agreed that reforms in the education system can address the shortage of skilled labor. Vallas asserted that the K-12 education system in the U.S. has failed to evolve, and identified two major issues – the school days and year are too short, and the teachers are not good enough. As such, the education system needs to be modernized and given more flexibility to adapt to changing demands. He suggested that we bring a “free enterprise system” to education; pay STEM teachers more, pay excellent teachers more, pay mediocre teachers less, and fire incompetent teachers.

A full webcast and podcast of the event is available on the Wilson Center event page.

Posted by: Pokyee Yu

Sources: The Woodrow Wilson International Center for Scholars

Photo Credit: David Hawxhurst/WWICS

Live Webcast Tomorrow: Can America Restore Its Competitive Edge?

This event is by invitation only but a live webcast will be available here at the time of the event.

Can America Restore Its Competitive Edge?

What will it take to rebuild wealth-generation and innovation in the U.S.? What are the roles of government, business, and educators and what changes must each of them make to reverse the decline in US competitiveness?

 Featuring…

Introduction by The Honorable Jane Harman—President, Director and CEO, Woodrow Wilson International Center for Scholars

Norm Augustine—former CEO, Lockheed-Martin, Chair of the National Academies Gathering Storm Committee and author of Rising Above the Gathering Storm

John Engler—former Governor of Michigan, former President of the National Association of Manufacturers, and currently President of the Business Roundtable

Paul Vallas—former Superintendent of the Recovery School District in Louisiana; former CEO of Chicago Public Schools and the School District of Philadelphia and active in restoring schools in post-earthquake Chile and Haiti

Jan Rivkin—Bruce V. Rauner Professor of Business Administration Unit Head, Harvard  Business School

Deborah L. Wince-Smith—President, Council on Competitiveness

David Wessel (moderator)—Chief  Economic Correspondent, Wall Street Journal

 Wednesday, March 28, 2012

9:30 to 11:00 a.m.

Woodrow Wilson Center, 6th Floor, Joseph H. and Claire Flom Auditorium

 The National Conversation at the Woodrow Wilson Center series provides a safe political space for deep dialogue and informed discussion of the most significant problems and challenges facing the nation and the world.

President Obama Names Nominee to Lead World Bank

On Friday, March 23, the White House officially nominated Dr. Jim Yong Kim to lead the World Bank.  Currently the president of Dartmouth College – the first Asian American to hold that position at any Ivy League university – Dr. Kim is well-known and highly respected among aid experts for his work in global health and development.  Most notably, he was the former director of the World  Health Organization’s Department of HIV/AIDS where he launched the “3 by 5” initiative, largely regarded as one of the most successful modern global health initiatives.

While at Dartmouth, Dr. Kim launched the Dartmouth Center for Healthcare Delivery Science, which brings together an international network of researchers and practitioners to develop new models of high-quality, low-cost healthcare.  In addition, he instituted the National College Health Improvement Project.  He also co-founded a non-profit called Partners in Health, which provides healthcare to the poor.  An anthropologist and physician by training, Dr. Kim emigrated the United States when he was just five years old.  He went on to Brown University, graduating magna cum laude and earned a medical degree from Harvard Medical School and a Ph.D. in anthropology from Harvard University as well.

Now the frontrunner for the position, Dr. Kim had not been among the names recently tossed about in the policy discourse, nor is he among the most well-known either.  The list of heavy hitters included Susan Rice, U.S. ambassador to the U.N., Senator John Kerry, former Treasury Secretary and Obama economic advisor Lawrence Summers, PepsiCo chief Indra Nooyi, and even Secretary of State Hillary Clinton.  In addition, development expert and Columbia professor Jeffrey Sachs nominated himself for the post.  Developing countries have rallied around two candidates thus far: the Nigerian finance minister and the former Colombian finance minister.

Developing countries, particularly China, continue to press for greater representation in and control over the organization that directly serves them, however it was unlikely that President Obama would have yielded to these demands, especially in an election year.  Although it is wise to encourage the increasing international role of developing nations, the nontraditional support for a non-American could have been a symbol of declining American influence that many Americans are quick to counter.  In this context, the nomination of Dr. Kim is not surprising.  Even though he is an American citizen, his immigrant – specifically Asian – background is significant and perhaps an attempt at appeasement.  Dr. Kim has minimal experience in economics, banking, or policy, so his unconventional background may indeed benefit the organization as it tackles the challenges of 21st-century development.

Posted by: Brian Gowen

Sources: The White House, The New York Times, U.S. News and World Report

Photo Credit:  Los Angeles Times (Andrew Harrer / European Pressphoto Agency)

You Are Invited: Game Change in the Asia-Pacific: The South China Sea and TPP

  THE ASIA PROGRAM, THE KISSINGER INSTITUTE ON CHINA AND THE UNITED STATES, and

THE PROGRAM ON AMERICA AND THE GLOBAL ECONOMY

 Present

 Game Change in the Asia-Pacific: The South China Sea and TPP

 Tuesday, March 27, 2012     4:00 p.m.–5:15 p.m.

5th Floor Conference Room

 Speaker:

 Takashi Terada, Professor, Doshisha University; Wilson Center Japan Scholar

 China has recently been a major force in political games in the Asia-Pacific. For example, it has succeeded in partly disengaging the United States from the trade framework in Southeast Asia by promoting “low quality” Free Trade Agreements in the region. China has also viewed the ASEAN Regional Forum and East Asia Summit as convenient non-binding and consensus-based arenas that allow Beijing to avoid dealing with hard issues such as maritime disputes in the South China Sea. The Obama administration’s much-discussed “Asia Pivot” is an attempt to reinsert the United States into regional political games and is perhaps most evident in the administration’s focus on the Trans-Pacific Partnership multilateral FTA. How is the United States’ reemergence as a regional player changing the existing components of the political game? What trade and strategic initiatives is Washington undertaking? How will other regional players, such as Japan and India, respond to American and Chinese moves?

Media organizations are requested to contact the Asia Program in advance at 202/691-4020 or asia@wilsoncenter.org. Otherwise, RSVPs are NOT necessary.  Please allow for routine security procedures when you arrive at the Center. A photo ID is required for entry. The Center is located in the southeast wing of the Ronald Reagan Building, 1300 Pennsylvania Avenue, NW, Washington, D.C. The closest Metro station is Federal Triangle on the blue and orange lines. For detailed directions, please visit the Center’s website, www.wilsoncenter.org/directions.

Imagine: How Creativity Works

A recent Economist article discussed author Jonah Lehrer’s new book, Imagine: How Creativity Works. Lehrer opposes the assumption that human creativity is a chance gift reserved only for the lucky few. His main argument is that “innovation cannot only be studied and measured, but also nurtured and encouraged.”

Lehrer drew from several different examples of firms that employ a host of methods designed to spur innovation among its employees. 3M, one of the companies the author looked into, encourages employees to engage in recreation at the workplace. Playing pinball and taking breaks can help the mind overcome mental blocks or devise a creative solution to a problem. Employees are also pushed to take risks by “spending masses on research” and by spending “15% of their time pursuing speculative ideas.”

Lehrer believes that exploring unfamiliar ground is crucial to innovation because outsiders are less restricted by the norms of that field. This is one reason why younger, and thus less experienced, people tend to be more creative. Understanding our creative potential can then give us insights into how to better harness it through various policy changes, such as easing immigration laws and “enabling more cultural borrowing and adaptation” of intellectual property.

 

Posted by: Pokyee Yu

Sources: The Economist, Jonah Lehrer

Photo Credit: How Creativity Works. By Jonah Lehrer. 304 pages. Houghton Mifflin Harcourt. $26.