Marketplace - Record oil output with fewer rigs

Episode Date: March 5, 2024

The U.S. produces more crude oil than any other country, but the number of active oil rigs has fallen by nearly 70% since 2014, the Energy Information Administration reports. How can that be? The answer is a combination of innovation and financial pressure. Plus, the non-alcoholic beverage market booms, the U.S. Patent Office decides AI can’t be credited as an inventor and household debt burdens are on the rise.

Repeat after me, people. 70% of this whole economy. 7-0%. That is why we talk about consumers so very much. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Tuesday today. This one is the 5th of March. Good as always to have you along, everybody. We talk a lot, yes, we know, about the spending habits of the American consumer on this program. Goods versus services, falling inflation versus rising incomes. We wade into familiar ground again today for news on how people are spending their hard-earned dollars, in particular, how they are making them stretch. Target announced fourth quarter profits today, right around $1.4 billion in the last three months of 2023. That's up from a year ago. Interestingly, though, sales for this year, 2024, are going to be somewhere in

the range of flat to 2%. Target does have a plan, though. Private label. The groceries and clothing and kitchen appliances that Target itself owns can thus price for cheap and thus get good profit margins. In fact, private label sales across grocery and other retailers hit an all-time high last year, so says the Private Label Manufacturers Association. But there is an art, and also a science, to making your private label seem, you know, just as good as the other stuff on the shelf. Marketplace's Matt Levin gets us going. Even though it feels like I spend half my waking hours at Target, I was pretty surprised to learn they have over 45 private label brands. You might know some of them. There's Good & Gather for the slightly cheaper organic granola, Threshold for the slightly cheaper bath towels,

but there's also Spritz for party supplies, and Mondo Llama for art supplies and California Roots for your Cabernet Sauvignons. Retail analyst Sucharita Kodaly at Forrester says the average Target customer probably doesn't know those brands are private label, which is part of Target's strategy. What having another brand enables you to do is sometimes just create different design, packaging, and you can, you know, it may create the veneer of, oh, this is like a cool new brand that you may be wanting to try. Consumers generally want their food and clothes and beauty items cheaper, but they don't want to feel cheap buying them. Katie Thomas is at the consulting firm Kearney. The reality is price does communicate

some kind of quality, typically. So the retailers started to realize I can actually get a little closer to these name brand products. And it actually in some ways legitimizes me, especially if I'm still a little bit cheaper. Private label products are also a good deal for retailers. They don't have to split sales with name brands. They can also give house brands the best shelf real estate because they own the shelf. But David Swartz at Morningstar Research says private labels aren't a cure-all for every retailer.

He points to the clothing chain Kohl's, which dropped several private label clothing lines, even though they comprised a big chunk of sales. What Kohl's found is that it didn't really drive traffic to the store. Their ads will still show brands like Nike and Adidas. National brands that Kohl's thinks might be a bigger draw. I'm Matt Levin for Marketplace. Wall Street on this Super Tuesday.

Not really so super, actually. We'll have the details when we do the numbers. Artificial intelligence is, and I believe this is only taking slight poetic license, everywhere. And as it spreads ever more, federal agencies that make the rules for this economy are trying to keep up. One of them, the United States Patent and Trademark Office, is out with some new guidance on AI and intellectual property. To work us through the legalese, we've gotten Janet Fralick back on the phone. She is at Fordham Law School. Professor Fralick, welcome back to the program. Thanks so much. Happy to be here. Since last we spoke, there is new guidance, I guess, out from the Patent and Trademark Office on AI in patent creation. What's the news? That's right. So the Patent and Trademark Office has

issued guidance clarifying whether an artificial intelligence machine can be an inventor on a patent. Essentially, it's saying, who gets the money from the patent? Is it AI or is it going to be a person? And don't leave me hanging. And the Patent Office says it's not AI. It's going to be the person. So they say inventors have to be human. AI can't be an inventor. But AI can be used in the invention process, yes? That's right. And that wasn't clear before the patent office issued these guidances. The patent office says that inventions where AI is used to help come up with the invention are,

I'm going to use the legal language here, are not categorically unpatentable. Digging apart the legalese here, talking about a scenario where a person is using AI to make an invention. The person can be listed as an inventor, but you don't also have to name the AI. And the reason that mattered is because it wasn't clear that those joint person AI inventions would actually be patentable at all. Okay. So if I'm an inventor of what have you, this is good news for me. It expands the scope and reach of my intellectual powers, I suppose. If I'm like open AI and AI is my product and I want it to be as useful as ever, I'm probably not too happy. Well, I think it's probably good all around, actually.

So if you're open AI, maybe you were hoping for an outcome where you, the AI developer, was going to have an ownership stake in all of these inventions. Sure, that would have been the best case scenario. Let's say this is the second best case scenario because it incentivizes people to use your product. People who use your product can still get a patent on whatever that end product is. And so I think it's good all around. I may be skipping a generation or two of generative AI development, although maybe this is already happening. I don't know. But at some point, AI is going to be able to invent something all by its lonesome. Then what happens? Yes, that's right. And AI has actually

already done that. Oh, good. The future is here. And it's still developing. And that case has been heard by courts and seen by the patent office. And the patent office says here, if AI was the only one to develop the invention, if there were no people involved at all, that's probably not patentable. So you probably can't have just AI going off. Well, they can invent it, but they probably can't get a patent on it. There's a little bit of whack-a-mole here, right? Because this technology is developing incredibly fast. Federal bureaucracy, for all of its nimbleness sometimes, simply can't keep up, right?

We, the government, is going to be behind. Maybe. What the Patent Office is trying to do is issue flexible guidelines that will apply as technology develops. And, you know, this is not a new problem. Technology has developed for many centuries, many millennia. Laws have proved able to adapt. Sometimes they're general enough that they can adapt.

And the Patent Office has issued general guidelines that hopefully will take us through, although who knows, the future is changing. But they've said they can revise as necessary. Jennifer Freilich at Fordham Law. Professor Freilich, thanks for your time, Emma. I appreciate it. Thanks so much.

I think we told you about this when the data came out. It's from the Federal Reserve Bank of New York, that households in this economy are getting deeper and deeper in debt. $17.5 trillion in the fourth quarter of last year. That's a better than 1% increase over Q3. Car loans and credit cards are the main culprits, affecting mostly younger borrowers. are the main culprits affecting mostly younger borrowers. Also, though, for all of us, the dollar amount we're all paying for interest on that debt as a percentage of our incomes has been moving up sharply over the past year. Marketplace's Sabri Beneshour takes a look at what's going on there. In just the final three months of last year, we added to our household debt $271 billion. That is 19% higher than the average for that time of year over the last two decades. Cassie Happy is with WalletHub. Not only are we adding more to those balances, but what we're paying in interest to pay off those balances has been growing as well.

That is because the Federal Reserve has been raising interest rates, and that has hit credit cards hard. Ted Rossman is with Bankrate.com. We see right now 49% of credit card holders carry debt from month to month. Three years ago, 39% of card holders had debt. The average rate on that credit card debt reached 22.8% last year, a record high. On the other hand.

Incomes have gone up quite a bit. We are more able to carry the debt we're taking on. It doesn't always feel that way. I think if you say this to the average American, they're like, you know, what wage gains? You know, my rent is up, my grocery bill's up. But when you look at the interest we're paying as a percentage of our income, things are not nearly as bad as in decades past. Loretta Roney is CEO of InCharge Debt Solutions, a nonprofit credit counseling agency.

She says today's interest rates, as high as they are, aren't that high. When I bought my very first house in 2007, my interest rate was 6%, and I thought that was fantastic, especially if you compare that to the 80s when they were up in the teens. Today, though, we are hopefully just getting to some kind of balance between income and debt. Roni says we are many years away from some kind of crisis tipping point where our debt gets beyond our ability to pay it off. In New York, I'm Sabri Beneshour for Marketplace. Credit card bills and car payments and all the interest

Sabree was just telling us about, you got to choose where to cut back, right? And according to Gallup, young people in this economy are spending less money and less time on at least one activity, drinking, alcohol. Gallup says 62% of adults under 35 drink at all. That's down 10 percentage points in the past 20 years, which makes this a pretty good time to be business adjacent to those who are sober or sober curious. Marketplace's Savannah Marr has that one. Happy Accidents is a distillery bar with some quirks in Albuquerque's Knob Hill neighborhood. There's grass turf on the ceiling, tropical lemur wallpaper, and 41 creatively named cocktails on the menu. What's your favorite?

Probably the $8 lap dance. I've always been a big fan. Bar manager Tammy Bauma mixes one up. $28 lap dance. I've always been a big fan. Bar manager Tammy Bauma mixes one up. It looks like an old-fashioned, but instead of whiskey, the main ingredient is Lapsang Souchong tea that's been smoked over pine needles. So you definitely get that foresty element that makes it a phenomenal kind of almost spirit replacement sometimes if you treat it right. Historically, non-alcoholic options at bars have been underwhelming,

says the bar's owner, Kate Gerwin. You get whatever garnish fruit they have muddled with like some type of lemon juice and soda water. But Gerwin says she and her staff take these drinks just as seriously as their traditional cocktails. We try and make sure that those cocktails have the same complexity and mouthfeel that alcohol does. So we're using things like vegetable glycerin, capsaicin oils. Those are the kinds of ingredients that can approximate the taste and the burn of alcohol. But getting non-alcoholic cocktails right takes a lot of tinkering. They're a lot more difficult to make than traditional spirits.

That's Marcus Saeke, founder of Ritual Zero Proof. His company started selling non-alcoholic spirits in 2019. Back then, he says they were niche. When we'd explain what we were selling, people would say, why would I want that? Around 2021, they stopped having to answer that question. After some quarantine overindulgence, a lot of people took a hard look at their relationship with alcohol. Consumers are seeking moderation in their consumption. Kaylee Theriault looks at the non-alcoholic drink market for Nielsen IQ. Over the last five years, she says it's seen consistent double-digit growth. Consumers are starting to expect zero-proof options, not always because they drink zero alcohol. Therialt says most people who buy alternatives are also buying traditional beer, wine, and spirits.

I definitely see these trends showing up among my inner friend group. Therialt is 30, so a younger millennial. friend group. Theriault is 30, so a younger millennial. She sees people her age sticking with non-boozy alternatives on weeknights or starting the night with an alcoholic drink, then switching over. We're enjoying a couple of nice drinks and then we're ready to get back home and not ruin the following day for us. Christine Whelan studies the wellness economy at the University of Wisconsin-Madison. She says of all of Gen Z and millennials' health-related obsessions, The movement away from alcohol is probably the best of the wellness remedies. Compared to, say, vitamins and supplements in terms of its proven positive impact on our health.

There's improved sleep, mental clarity. People tend to exercise more and to be in a better mood. Whelan says consumers replacing alcohol with zero-proof alternatives shouldn't expect to save money. They typically retail for the same price or more. But at Happy Accidents in Albuquerque, non-alcoholic cocktails actually are a little cheaper. Think $9 instead of $14. Last year, owner Kate Gerwin says they made up less than 2% of sales. We don't do it for the money. We do it because it seems like that's what hospitality should do. And high-quality non-alcoholic offerings get people in the door. People who have a partner that doesn't drink or, you know, have friends in their group

that don't drink, and then they all come in. As sometimes sobriety moves into the mainstream, Gerwin says a reputation for serving a great zero-proof drink goes a long way. In Albuquerque, I'm Savannah Marr for Marketplace. Coming up. You didn't run a background check with me, but I want you to know that I'm on parole. The economic challenges after incarceration. First, though, let's do the numbers.

Wallace, haven't heard those in a while, huh? Dow Industrials down 404 points, 1%, 38,585. The Nasdaq down 267, that's 1 2 3rd percent, 15,939. The S&P 500 down 52 points, 1% there as well, 5,078. Meta platforms suffered a massive outage today, affecting hundreds of thousands of Facebook Messenger and Instagram users all over the planet. Meta slipped 1.6%. Today, elsewhere in tech, Google parent Alphabet wilted about 0.5%. Amazon down 1.9%. Salesforce, which owns the messaging platform Slack, love it or hate it, by the way, down 5%.

Bonds rose. Yield on the 10-year T-note fell to 4.14%. You're listening to Marketplace. This is Marketplace. I'm Kai Risdahl. The United States pumps more crude oil than any other country on the planet. Strange to hear, perhaps, but true. Also strange, or curious maybe,

is that we're producing all that oil with far fewer oil rigs than we once had. As the Energy Information Administration reported today, the number of active oil rigs in this country is off nearly 70% since 2014, even as oil production is breaking records. Marketplace's Henry Epp is on that one. The oil industry used to just set up rigs in places there might have been oil drills straight down and hope for the best. But in the last couple decades, some important technological developments have come along, including horizontal drilling, says Tom Tseng at Texas Christian University. When you drill horizontally, you're going through sort of, let's call it the meat

of the oil area that's there, the pay zone. And since those horizontal wells can extend to 10,000 or more feet, Seng says, they reach a lot more oil than vertical wells. Another big change is data. Seng says digital sensors and imaging help companies find oil deposits a lot faster. The drilling engineer is literally steering these drill bits based on real-time information that the operator is receiving. As all of these technologies have matured and improved, oil rig efficiency and production has gone up. But there are financial pressures at work too.

The costs to drill new wells are quite high right now. Ellen R. Wald is at the Atlantic Council's Global Energy Center. Cement, steel, and other materials needed for new rigs got more expensive over the last few years. And investors, she says, are pushing oil companies to deliver higher profits. If companies can get more out of the wells that they have, they can make more profit by drilling fewer wells. That drive for efficiency and profit also helps explain why larger oil companies have been buying up a lot of smaller ones.

Because, says Hugh Daigle at UT Austin, It's some of the smaller companies that have been driving a lot of the innovation. So if you can't beat them, buy them. I'm Henry Epp for Marketplace. According to the Department of Justice, more than 650,000 people get out of prison every year. They have to figure out how to fit back into society. They have to find a place to live. And they have to find a job. And often education is the key to that last step.

Education they have gotten while still incarcerated. And as Marketplace's Elizabeth Troval reports, access to higher education is expanding in prisons nationwide. It was a chaotic day at work for Amber Galvan. I sat down with her at a North Houston coffee shop to hear about her new job. It was insane busy. Today, I mean, I did probably like a hundred emails. Galvan got out of prison last May and says she feels good about her gig tracking airplane parts. When I was looking for a job, I was like, I know how to interview. I know how to do this stuff, but it takes practice and, you know, a lot of rejection for somebody like me who has a background. She's grateful her new boss kept her on staff when she broke it to him.

You didn't bring this up in the interview with me. You didn't run a background check with me, but I want you to know that I'm on parole. check with me, but I want you to know that I'm on parole. It's a tight spot to be in as Galvan restarts her life after a year and a half in prison for a domestic violence charge. While in prison, her marriage ended, she couldn't see her kids, and she lost most of her personal belongings. Her mom has helped her out. She says my bill's like close to $10,000. To pay for rent, a car, her phone, insurance. Galvan is managing her own bills now and feels confident in her career path. In prison, she got a GED and took classes at Lee College in business management and logistics. The public community college educates roughly 1,200 incarcerated students a semester.

At their admin building in Huntsville, Texas, I catch up with Brandon Warren, who leads the college's re-entry program and also attended Lee College while in prison. I graduated with 128 hours, did an air conditioning certification, a construction carpentry certification, a horticulture certification, and then my actual degree was in humanities. Warren decided he wanted to support people like him going to college, which also helps them stay out of prison. My grandmother used to send me stuff. And this was when the Internet was just starting, like it was 2000, 2001. My grandmother was learning how to do the Internet, would print me off stuff.

And other people didn't have a grandma like mine so now he does that for incarcerated current and former students so if they wanted to know what is a and m's bachelor's degree in agriculture look like how much does it cost i'll go to a and m i'll print out their degree plan the cost and send it in if they want to know what are what halfway houses are in San Antonio, I'll go find that. He leads a growing re-entry team at Lee College's Huntsville Center, a rare program that has served incarcerated students for six decades. In 1994, Congress banned prisoners from receiving federal student aid through the Pell Grant. Hundreds of programs shut down as a result. But the colleges survived.

The Texas legislature decided to put aside money that would then fund, on a loan basis, people's education. So that was pretty unique for Texas, especially when we have the tough-on-crime, harsh conservative, lock them up, throw away the key. With state funding, grants and private sector funds, Lee College continued for two decades. Then when Congress restored federal student aid for people in prison in 2015, Lee College was able to teach about twice as many students. Ruth Delaney is with the nonprofit Veer Institute of Justice. As we look at the people that we have in prison, the talent that we have locked up,

and the opportunities that could await them when they come home, there's lots of reasons to get on board. Federal aid for incarcerated students is expanding. Many new colleges and universities are applying to create their own programs, following in Lee College's footsteps. In Houston, I'm Elizabeth Troval for Marketplace. This final note on the way out today brought to you by the letters B, T, and C. BTC is, of course, the ticker symbol for Bitcoin, which hit a record high today, $69,200 and change. And then it fell almost 7%.

Why? Who knows? That's just the way Bitcoin works. Our digital and on-demand team includes Kerry Barber, Jordan Mangy, Dylan Miettenen, Janet Nguyen, Olga Oxman, Ellen Rolfes, Virginia K. Smith, and Tony Wagner. Francesca Levy is the executive director

of digital and on-demand. I'm Kai Rizdahl. We will see you tomorrow, everybody. This is APM. All over the country. We need to improve reading in Wisconsin. Schools are changing the way they teach reading. I'm calling for a renewed focus on literacy.

We have gotten this wrong in New York and all across the nation. And it's happening because of a podcast. I think your podcast has changed my life. And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.