US Rust Belt Boom: Oil Investing for the Next 100 Years


I just spent two solid days at a conference on energy development in regional shale plays of Pennsylvania-Ohio-West Virginia, called Marcellus and Utica.

Let me tell you, investment opportunities near where I live in Pittsburgh are eye-popping! Today I want to give you a hint of what’s coming.

Like the man says, ‘Follow the money.’

According to a room full of geologists, lawyers, business executives, bankers, land-men, drillers, engineers, state regulators and more, oil and gas resources of just these two rock formations are beyond astounding. I’m talking about the Utica and Marcellus shale formations.

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In fact, here in western Pennsylvania, we may be sitting on one of the five largest energy plays in the world – smack in the middle of the old ‘Rust Belt’ of America! This new energy investment cycle will last for a century or more, while enriching countless households.

Unless you’re close to the energy business, it can all be kind of hard to absorb. In fact, long-time Pittsburgh residents look at me funny when I say that the city – the region, really – is transforming into ‘Houston of the northeast’. They just don’t get it.

Here’s an illustration. I was eating lunch downtown the other day, with a local newspaper reporter. The guy prides himself as an expert on local and state politics. We discussed energy development and what it means to Pennsylvania. The reporter mentioned that the recent wave of capital investment is ‘mostly rural‘. It’s happening ‘out in the hills and weeds,‘ he said. Finally, he added, ‘It’s payday for cow-farmers.

Suddenly, as if on cue, a great big, dark blue truck came rumbling down the street, right outside, amidst all the urban buildup. The truck had the name Schlumberger (SLB) painted on the side. Oh, how I wish I’d been carrying my camera. People were gawking at the vehicle like it was some alien craft from outer space.

I looked at my reporter-acquaintance. ‘Hey,‘ I said, ‘looks like the Schlumberger guy is hauling money to cow-farmers here in the ‘big evil city,’ too!

This will go on for a long time to come, and it’s all investable.

This investment opportunity and increased domestic energy production could not have come at a more favourable time, for many reasons. In terms of national energy security, for instance, things in the Middle East are bad and getting worse. It’s not overstating the case to say that the Middle East source of global energy supply is problematic on the best of days.

Again and again here, I return to the Middle East Oil Wars scenario. The so-called ‘Arab Spring’ of 2010 and 2011 has faded away. It was a desert mirage in any case.

Here in the West, many people have a unique conceit about the desirability of our own culture, certainly for ‘foreigners’. It’s part of a psychological tendency to mirror-image other people – to think that they want what we want because it’s just so wonderful and cool, yadda, yadda. It’s part of how we feel good about ourselves, I suppose.

Thus a couple of years ago, when protesters in, say, Egypt came along with their smart-phones and Twitter accounts, a lot of people believed that fundamental change was afoot. Egypt would be the next great democratic transition or such – it would westernise. Not at all. (I sure didn’t believe it. In fact, I recommended my readers sell Apache Oil Co. – a company with at-risk Egypt exposure.)

Today the image of social media protesters in Tahrir Square has vanished. It’ll be a long time before we see anything like that again in Egypt – if it ever returns. Looking back, it’s fair to say that the Arab Spring thing was fake history, created by media spin.

Fake history, in the sense that the Arab Spring did NOT accomplish what its supporters falsely promised. Closed societies are still closed. Unfree places are still unfree. Violent locales are still violent. In the end, Arab Spring made unstable places even more unstable. Western ideas of ‘human rights’ have certainly not replaced the traditional, devout Islamic approach that uses the Koran as a sort of constitution.

Arab Spring certainly failed to neuter Al Qaeda and its offshoots, which are now more active and widespread than ever before. In Egypt, the Muslim Brotherhood played a game of ‘Good Terrorist’/’Bad Terrorist’ with the US, such that President Obama and his US ambassador to Egypt were humiliated and are now among the most hated faces in that ancient land.

Presently, Egypt – and while we’re at it, Libya, Tunisia, Yemen and more – is back to where things were before Arab Spring. Meanwhile Syria is in the middle of a knock-down, no-quarters, multi-sided civil war.

Arab Spring or no, the Middle East remains a region of nation-states ruled by military guys and flinty bureaucrats whose institutions are, at best, legacies of British and French colonialism coloured by many decades of Soviet-style authoritarianism.

Sticking with the Egypt theme, former President Hosni Mubarak will never return to power. But then again, Egypt has many cadres of shrewd, cold-blooded generals who are more than prepared to run a near-insolvent oligarchy that survives on foreign aid from other wealthy Arab nations.

And if the Middle East is where we get much of the world’s oil, I say drill more wells in Pennsylvania and Ohio. For our purposes here, invest away from the turmoil – offshore, and in lands far from the troubles. I’ve laid this out many times before.

Still, how far away – or close – are those troubles? I mean, don’t dismiss the problems of Egypt just because the place is on another continent.

On that note, let’s address that terrible terrorist attack in Nairobi, Kenya. Did you follow that? Kenya is far away, yet as a senior official of the Department of Homeland Security once stated to me, ‘This is coming to a theater or mall near you.

In other words, this kind of ‘far away’ conflict is out there, and can spread like wildfire. It’s asymmetrical warfare. As raw terrorism goes, attacks like the Kenya effort require only small numbers of people with fairly low, even crude tech. That, and simple levels of organisation.

Meanwhile, rumour has it that one of the Nairobi terrorists was a Caucasian woman from Britain who the police call the ‘White Widow’ because her deceased husband was one of the 2007 London bombers. And some of the other Nairobi terrorists may have learned their jihad lessons in Minnesota – we’ll see about that.

Think about what happened. Nairobi’s Westgate Mall was oriented toward expatriates and an upper crust of local clientele. It was a soft target, as these things go. The terrorists were small in number, perhaps, but very well organised.

According to reliable accounts, ringleaders spent nearly a year plotting the attack and casing the place. For a time, the White Widow woman lived in a rented house in South Africa, which is a ‘cooling off’ locale for international terrorists, according to what I learned from a very senior South African official during one of my visits there.

The Nairobi terrorists even spent time before the attack smuggling weapons into the mall. Then when the attack went down, the terrorists started shooting and quickly seized many hostages. They separated Muslims from non-Muslims before beginning to kill the latter. (Muslims were allowed to go free if they could recite a Muslim prayer.)

Hostages fared horribly, with press accounts of barbaric torture and gruesome executions. It’s all blood-curdling. Indeed, I won’t go there but feel free to do your own due diligence.

I mention all of this because I suspect these kind of domestic, if not ‘mall terror’ stories will become more common and eventually arrive in the US or Canada. We could awaken one day to all manner of assaults on people, places and/or critical infrastructure.

Sad to say, we do NOT live in the happy, ‘flat world’ postulated by columnist Thomas Friedman of the New York Times, in his 2005 book of similar name.

So why bring this up in these pages? Well, I’m not here to regale you with tales of brutal savagery by terrorist wackos, nor train you how to resist attacks at the neighbourhood mall. But part of my editorial role is to offer advice on how to protect your wealth when – not ‘if’ – things start to get bad in critical parts of the world, not to mention close to home.

My goal is to give you solid investment ideas and perspective, while keeping you up to speed on what’s going on across literally a globe full of dangers and opportunity.

Thus I focus on oil and natural gas. Plus gold, silver, platinum, palladium, copper and related technology materials like graphite and other plastics and such.

I can’t stop the Middle East from falling off a cliff. Nor can we do much when the world’s most vicious terrorists decide to attack a mall down the street. But together, we can work to preserve your wealth in good times and bad.

Because right now, in this dangerous world, everything you value is at risk. You need to understand what’s happening. You need to think in terms of how to invest around the world’s worst problems, to defend yourself and your family.


Byron King
for The Daily Reckoning Australia

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Byron King
Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. Byron is also co-editor of Outstanding Investments.

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3 Comments on "US Rust Belt Boom: Oil Investing for the Next 100 Years"

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3 years 10 days ago
Muslim terrorism is a dead end, funded by the easy oil money from the middle east. When that runs out, it too will run out of puff like the empty balloon that it always was. As far as attacks on shopping malls and the like, it appears that it takes a certain mentality to carry out the slaughter of the innocent, one that tends to favour those who have had their humanity siphoned out of them by ideology and easy western living – hence the White Widow. Those who choose to work for a living ignore the vile teachings as… Read more »
3 years 10 days ago


3 years 9 days ago

Hey Byron,

It wouldn’t have escaped your attention that the US shale plays have lost a lot of money so far. The industry is running on hype and consuming investors’ dollars. Higher prices are required to make it pay. Is that the strategy the industry is working on, or are they anticipating large technical or efficiency improvements, or . . . . ?

Did the two day conference have much to say about the rate of well flow reduction?

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