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WHO IS JOHN GALT The Oklahoma Energy E_P Economy.ppt

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					The Oklahoma Energy E&P Economy
Who is John Galt?

Karr Ingham, Economist



                  Annual Meeting of the
           Oklahoma Independent
           Petroleum Association
                         June 8, 2008
The Oklahoma Energy Index


   A Partnership Presentation of
  The OIPA and Oklahoma Secretary
     of Energy David Fleischaker
The Oklahoma Energy Index

   Composite index, based at 100.0 in Jan
    1995
   Calculated using a comprehensive
    group of Oklahoma E&P indicators
   Tracks growth rates, cycles and trends
    in Oklahoma energy E&P industry
     OEI Components

   Crude oil and natural gas prices paid to producers
   Rig count, intents to drill
   Volume and value of Oklahoma crude oil and
    natural gas production
   Industry employment
   Energy E&P Stock Index
                                                           Oklahoma Energy Index
                            300.0
                                                                                                                       April 2008

                            250.0
                                                                                                                              249.1
Index (Base=100 Jan 1995)




                            200.0


                                                                         Aug. 2001            Sept.
                            150.0
                                                                                              2002
                                           March 1997             July
                                                                  1999
                            100.0



                             50.0



                              -
                                    1995


                                             1996


                                                    1997


                                                           1998


                                                                  1999


                                                                         2000


                                                                                2001


                                                                                       2002


                                                                                                  2003


                                                                                                         2004


                                                                                                                2005


                                                                                                                       2006


                                                                                                                              2007


                                                                                                                                     2008
                            “Gambling is illegal at Bushwood, sir – and I NEVER slice.” Judge Smails,
                                    Caddyshack - 1980
                  Monthly Average Crude Oil Price Paid to
                    Oklahoma Producers 1995 - 2008
              $140.00

                                                                                               April 2008           $122.45
              $120.00


              $100.00
Price / bbl




               $80.00


               $60.00


               $40.00


               $20.00


                $0.00
                       95



                               96



                                       97



                                               98



                                                       99



                                                               00



                                                                       01



                                                                               02



                                                                                       03



                                                                                               04



                                                                                                       05



                                                                                                               06



                                                                                                                       07



                                                                                                                               08
                    19



                            19



                                    19



                                            19



                                                    19



                                                            20



                                                                    20



                                                                            20



                                                                                    20



                                                                                            20



                                                                                                    20



                                                                                                            20



                                                                                                                    20



                                                                                                                            20
      “Strikeouts are boring, and besides that, they’re fascist. Throw some ground balls.
               They’re more democratic.” Crash Davis, Bull Durham 1988
                    Daily Crude Oil Posted Prices
                          April – June 2008
$140.00


                                                            Peak?
$130.00




$120.00




$110.00




$100.00




 $90.00




 $80.00




“Now go away, or I shall taunt you a second time!” French Castle Guard, Monty
        Python and the Holy Grail - 1975
                        Natural Gas Prices Paid to Oklahoma
                          Producers, Monthly 1995 - 2008
          $12.00



          $10.00



           $8.00
$/mmBTU




           $6.00



           $4.00



           $2.00



            $-
                   95



                          96



                                97



                                      98



                                            99



                                                  00



                                                        01



                                                              02



                                                                    03



                                                                          04



                                                                                05



                                                                                      06



                                                                                            07



                                                                                                  08
                 19



                         19



                               19



                                     19



                                           19



                                                 20



                                                       20



                                                             20



                                                                   20



                                                                         20



                                                                               20



                                                                                     20



                                                                                           20



                                                                                                 20
      “Fear? That’s the other guy’s problem.” Louis Winthorpe III, Trading Places, 1983
                            Monthly Value of Oklahoma Crude Oil
                                 & Natural Gas Production
             $2,000.0

             $1,800.0

             $1,600.0

             $1,400.0

             $1,200.0
$ Millions




             $1,000.0

              $800.0

              $600.0

              $400.0

              $200.0

                 $0.0
                       95



                               96



                                       97



                                               98



                                                       99



                                                               00



                                                                       01



                                                                               02



                                                                                       03



                                                                                               04



                                                                                                       05



                                                                                                               06



                                                                                                                       07



                                                                                                                               08
                    19



                            19



                                    19



                                            19



                                                    19



                                                            20



                                                                    20



                                                                            20



                                                                                    20



                                                                                            20



                                                                                                    20



                                                                                                            20



                                                                                                                    20



                                                                                                                            20
       “What hump?” Igor, Young Frankenstein - 1974
                 Oklahoma Monthly Rig Count
  250



  200



  150



  100



   50



    0
        95



                96



                        97



                                98



                                        99



                                                00



                                                        01



                                                                02



                                                                        03



                                                                                04



                                                                                        05



                                                                                                06



                                                                                                        07



                                                                                                                08
     19



             19



                     19



                             19



                                     19



                                             20



                                                     20



                                                             20



                                                                     20



                                                                             20



                                                                                     20



                                                                                             20



                                                                                                     20



                                                                                                             20
“I’m so rich, I wish I had a dime for every dime I have.” Arthur Bach, Arthur - 1981
   Oklahoma Energy E&P Payroll Employment
55.0


50.0


45.0


40.0


35.0


30.0


25.0


20.0
     95



            96



                   97



                          98



                                 99



                                        00



                                               01



                                                      02



                                                             03



                                                                    04



                                                                           05



                                                                                  06



                                                                                         07



                                                                                                08
   19



          19



                 19



                        19



                               19



                                      20



                                             20



                                                    20



                                                           20



                                                                  20



                                                                         20



                                                                                20



                                                                                       20



                                                                                              20
 “I AM serious. And don’t call me Shirley.” Dr. Rumack, Airplane - 1980
                                                    Oklahoma Energy Production Stock Index
                                                                Chesapeake Energy, Devon Energy
                                                                    Unit Corp., XTO Energy,
                                                               Newfield Exploration, Apache Corp.,
                                                        St. Mary Land & Exploration, Quest Resource Corp.
                            1,000.0
                                                                                                                   April 2008
                             900.0
                                                                                                                      846.2
INDEX (Base=100 Jan 1995)




                             800.0

                             700.0

                             600.0

                             500.0

                             400.0

                             300.0

                             200.0

                             100.0
                                      1995




                                             1997




                                                          1999




                                                                           2001




                                                                                             2003




                                                                                                            2005




                                                                                                                     2007
“There’s a man in the toilet selling after-shave. Now, what’s that all about?” Hank Gordon,
          Doc Hollywood - 1991
(Who IS John Galt?)
                         Oklahoma Total Employment and
                         Energy E&P Employment (April)
           1,800.0


           1,600.0


           1,400.0


           1,200.0
Millions




           1,000.0
                                                                                             Total
                                                                                             O&G
             800.0


             600.0


             400.0


             200.0


               -
                     1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008



           “You’re KILLIN’ me, Smalls.” Hamilton Porter, The Sandlot - 1993
               Oklahoma Energy E&P Employment as %
                   of Total Employment 1995 - 2008
 3.5%


 3.0%


 2.5%


 2.0%


 1.5%


 1.0%


 0.5%


 0.0%
        1995




               1996




                      1997




                             1998




                                    1999




                                           2000




                                                  2001




                                                         2002




                                                                2003




                                                                       2004




                                                                              2005




                                                                                     2006




                                                                                            2007




                                                                                                   2008
“Roses are red, violets are blue, I’m schizophrenic and so am I.” Bob Wiley, What
         About Bob? - 1991
                    Oklahoma Year-Over-Year Job Growth
                 (April )Total Emp. and Oil & Gas Industry Emp.
            40.0
                                 37.7
                                              36.0
            35.0


            30.0
                                                           27.2            27.3

            25.0
Thousands




            20.0


            15.0
                    11.9

            10.0
                                                     5.9                          6.3
             5.0                                                  4.1
                           2.7          3.2


             -
                      2004        2005         2006         2007            2008



    “Baseball is like church. Many attend; few understand.” Leo Durocher
          Oil & Gas Jobs Added as % of All Jobs
      Added Over Last Five Years in Oklahoma (April)
25%
           23%                                                    23%


20%

                                          16%
                                                           15%
15%




10%
                           8%



5%




0%
           2004           2005            2006             2007   2008



       “No soup for you!” The Soup Nazi, Seinfeld - 1995
                            Oklahoma Job Creation
                                 2003-2008
                  160.0
                              140.1
                  140.0

                  120.0

                  100.0
      Thousands




                   80.0

                   60.0

                   40.0
                                                               22.2
                   20.0

                    0.0
                              Total                            O&G



“Seven years of college, down the drain.” John “Bluto” Blutarski, Animal House - 1978
Oklahoma’s Energy E&P Industry Drives
 Oklahoma Economy and Employment
• DIRECT energy E&P jobs added result in
  indirect job growth many times over
• Assuming an industry employment multiplier of
  4.0, total job creation as a result of energy E&P
  activity in Oklahoma is over 88,000 jobs over
  last five years
• Direct and indirect employment as result of
  energy E&P activity in Oklahoma accounts for
  over 60% of all jobs created over last five years
                            Oklahoma Total Economy and
                               Energy E&P Economy
                $160,000


                $140,000


                $120,000


                $100,000
   $ Millions




                                                                                        Total
                 $80,000
                                                                                        O&G

                 $60,000


                 $40,000


                 $20,000


                    $-
                           1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


“This is U.S. History. I see the globe right there.” Jeff Spicoli, Fast Times At Ridgemont
          High - 1982
                 Oklahoma Energy E&P Economy
                     as % of Total Economy
16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%
        1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


“I spilled spot remover on my dog. Now he’s gone.” Steven Wright, Comedian
         Gross Production Tax as Percent of
         All Oklahoma State Taxes Collected
                                    (FY Ending June)
   16%
                                                                       15%

   14%
                                                              13%
                            12%                                                12% *
   12%                                                11%
                                             10%
   10%

    8%              7%               7%

    6%      5%

    4%

    2%

    0%
           1999     2000    2001     2002    2003     2004    2005     2006    2007




Agnostic, Dyslexic Insomniac: Lays awake at night and wonders if there really is a dog.
          All Taxes Paid by Energy E&P Industry as Percent
           of All State Tax Collected (Est., FY Ending June)
  35.0%



                                                                      30.0%
  30.0%


                                                             26.0%
                                                                                25.0%
  25.0%
                           22.2%                    21.5%
  20.0%                                    19.0%


  15.0%
                   12.3%           12.6%

  10.0%    8.8%


  5.0%




  0.0%
            1999    2000    2001    2002     2003     2004     2005     2006     2007




“It’s about time, Benny. My clothes are goin’ outta style.” Michael „Squints‟
          Palledorous, The Sandlot - 1992
    3 – 15 – 30
Oklahoma‟s Energy E&P Industry,
          comprising
              3%
 of total employment, makes up
             15%
of the state‟s economy, and pays
             30%
       of all state taxes.
 Who is John Galt?




  Or, more appropriately,


Who is Ellis Wyatt?
John Galt

Central character and male hero
in Ayn Rand‟s 1957 classic novel




      ATLAS
    SHRUGGED
Other „Atlas Shrugged‟ Heroes
   Dagny Taggart – Taggart Railroad

   Hank Rearden – Rearden Steel
                 and, of course
   Ellis Wyatt – Wyatt Oil Company
     The heroes are industrial giants and
            economic contributors
The Looters and the Moochers
Politicians, bureaucrats, media, members
 of the „cultural elite‟, and even others in
 industry who exist on the backs of the
 contributors, and engineer policies
 designed to punish the successes of the
 contributors and „equalize‟ the economic
 landscape in the name of the „greater
 good‟.
Original Title
“The Strike”
One by one, the contributors remove
 themselves, their talents and their
 production from society and from the
 economy, to a secret community where
 they benefit from one another‟s
 contributions, but the broader
 economy/society does not.
The Industry is Under Fire
   Politicians, consumers and the cultural elite are
    indignant
   Entitlement mentality
   Apparent lack of understanding, much less
    appreciation
   Ceaseless proposals to disrupt functioning
    markets
   “BIG OIL” routinely hauled in front of Congress
    to account for their purported unethical,
    perhaps even fraudulent activities and profits
Food Prices Are Increasing
(due in part to Ethanol)

              When will


       “BIG CORN”
 be called to account by Congress?
Housing Prices Increased Dramatically
(that bubble is bursting)

               When will


        “BIG WOOD”
  be asked to explain its contempt for
    the working people of America?
 What If……..
…the talents, contributions (and production) of
 the nation‟s energy producers were instantly
 removed from the marketplace?
…there was no gasoline at ANY price?
…the switch is flipped, but the lights don‟t
 come on?
…the things we take for granted are no longer
 available to us?
 And What If……..


… producing states were instantly denied the
 tax revenue provided by the industry?

(Strangely, only in energy is PRODUCTION
  taxed, in addition to consumption)
Sound Energy Policy


 Ditch           the taxes

 GET            OUT OF THE WAY
“There’s no crying in baseball!” Jimmy Dugan, A League of Their Own, 1992
     The Oklahoma Energy E&P Economy
     Who is John Galt?

     Karr Ingham, Economist



                          Annual Meeting of the
                   Oklahoma Independent
                   Petroleum Association
                                June 8, 2008

“…unless you’re a Rangers fan.” Karr Ingham, 2008

				
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