While superficially the November Beige Book [7], which is chronically bad at spotting actual trends as was the case in the 2005-2007 period when it came to the housing bubble and the BB had absolutely no warnings about what only in retrospect would be a glaringly obvious bubble, was among the more optimistic ones seen in recent months (there were only 13 instances of "weather" in the document), here is what the Fed's assessment had to say about the only thing that matters currently for the US economy (in addition to the soaring US Dollar of course): oil.
Excerpts:
- Energy and mining activity was higher on net, though lower oil prices were a concern for the oil industry in the Atlanta and Dallas Districts.
- Chemical manufacturers in the Boston District indicated that the falling price of oil relative to natural gas had made U.S. producers less competitive, because foreign chemical producers rely more heavily on oil for feedstock and production.
- Atlanta reported that the recent drop in oil prices led firms to reevaluate their operations, though steady production is anticipated for both deepwater and onshore drilling; in the Dallas District, lower oil prices weighed on the outlook for drilling activity.
- Several Districts cited the decline in the price of oil over the reporting period and its effects on gasoline and diesel fuel prices.
- One firm in the chemical industry cites falling oil prices as a problem because chemicals are produced in the United States using natural gas whereas in the rest of the world, they are produced using oil. As a result, the fall in oil prices over the last few months has made foreign rivals more competitive, partly reversing U.S. chemical firms’ prior advantage resulting from declines in the price of natural gas relative to oil in recent years
- We heard several reports indicating that although there is some financial belt-tightening by exploration and production companies, drilling programs should continue in most regions even though medium-term projections for oil and gas prices are at low levels.
- Rail shipments of agricultural products were up and volumes of chemical products, such as crude oil, liquefied natural gas, and sand for hydraulic fracturing, posted double-digit increases from a year ago
- Industry contacts reported that the recent drop in oil prices led regional exploration and production firms to evaluate operational flexibility, cost-management strategies, and extraction technologies, although steady production is anticipated in both deepwater and onshore drilling.
- In early November, oil and gas exploration activity decreased in North Dakota... Despite recent declines in oil prices, officials in North Dakota expect oil production to continue increasing over the next two years.
- Respondents remained optimistic about future drilling but were closely monitoring the price of oil, which was close to many firms’ breakeven price. Oil prices were at a four-year low due to signs of an oversupplied global market and were expected to weaken marginally in coming weeks. Total revenues in the energy sector were expected to decline somewhat as a result of lower oil prices.
- Outlooks remained optimistic, but some contacts noted concerns about the potential effect of declining oil prices on the District economy.
- The price of West Texas intermediate crude oil fell sharply over the reporting period, resulting in a notable decline in gasoline and diesel prices. The price of natural gas dropped slightly as well, reflecting rapid growth in inventories.
- Work related to mergers and acquisitions picked up, while demand for legal services from oil and gas companies slowed in response to increased uncertainty regarding future oil prices.
- Respondents noted increased optimism as year-end figures pointed to solid growth in 2014, although some contacts whose clients are in oil and gas production said they expect a possible slowdown in business because of declining oil prices.
Altogether, there were 37 instances of the word "oil" in the November Beige Book. Expect this number to soar in the coming months.