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Thursday, June 30, 2011
Why the NYT-Liberal Assault on Shale Gas? How About the Volt?
The New York Times has devoted more than four thousand words to the impending crisis of shale gas over the past four days. The attack began with a full-page investigative report in its Sunday edition. The barrage continued and Wednesday’s edition featured calls by Democrats for Congressional investigations.
You would think the NYT and its Congressional supporters would welcome a new technology that increases domestic energy, lowers the price of a clean fuel, turns us from an importer to an exporter, and creates new jobs.
Why this all-out assault? They need to rub “Big Energy’s” face in the mud in the mainstream press and the halls of Congress to divert attention from real problems.
What is the beef? According to the NYT and Congressional Democrats, the evil energy giants have hatched another nefarious plot to dupe the gullible Federal Energy Information Agency, uninformed investors, and the general public into accepting an “irrationally exuberant” picture of the industry.
E-mails obtained through open-records worry that gas “may not be as easy and cheap to extract from shale formations, and that companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves.” The NYT praises skeptics “who question endorsing shale gas without understanding its economics.” They even complain “that dozens of black churches in Fort Worth signed leases on the promise of big money,” risking their tax exempt status.
This frontal assault on shale gas shows a profound lack of understanding of technology, economics, business, and energy.
Extracting gas from shale is a new technology that combines two established technologies – horizontal drilling and water flooding (which has been used at least since the 1950s). As a new technology, we have no history to predict the future. Even with the best and most honest of efforts, we do not know how to extrapolate reserves from existing wells, and what the eventual extraction costs will be. With such uncertainty, there will be a wide variety of estimates of reserves, some optimistic, some pessimistic. No one knows the truth at this point. There is nothing sinister on the part of those who choose to be optimists. All major innovations are made by optimists, not pessimists.
The reserves of any underground resources that can be economically extracted depend on prices now and in the future. If gold rises to $5,000 per ounce, there will be a new gold rush in the United States. The problem is that we do not know the future prices of natural gas. All we know is that it has fallen dramatically since shale oil extraction began. As long as we do not know the future price, there is no way to know the amount of reserves that can be extracted at a profit.
Presumably investors worth their salt know these two facts. They also know enough not to rely on a federal bureaucracy to make their investment decisions. After all, shale gas companies are not selling shares at Wal-Mart. Investors who are optimists will invest. Pessimists will not. Technology and market forces will decide who is right, not the NYT or Congress.
The NYT attack ends with a truism: “If natural gas ultimately proves more expensive to extract from the ground than has been predicted, landowners, investors and lenders could see their investments falter, while consumers will pay a price in higher electricity and home heating bills.” Yes, if shale gas is a bust, investors will lose and prices will be higher, but what’s new? Why all the fuss? Why should this be Congress’s business?
My two pieces of advice:
First, to the natural gas industry: Avoid at all costs federal subsidies of cars powered by natural gas. This will give the federal government the right to stick its nose into your business.
Second, to the NYT and democratic members of Congress: Obtain e mails of internal discussions of the Volt or of lithium battery manufacturers to see whether investors, taxpayers, and consumers are being sold an “irrationally exuberant” picture. I may have to wait a long time before the NYT takes me up.
You would think the NYT and its Congressional supporters would welcome a new technology that increases domestic energy, lowers the price of a clean fuel, turns us from an importer to an exporter, and creates new jobs.
Why this all-out assault? They need to rub “Big Energy’s” face in the mud in the mainstream press and the halls of Congress to divert attention from real problems.
What is the beef? According to the NYT and Congressional Democrats, the evil energy giants have hatched another nefarious plot to dupe the gullible Federal Energy Information Agency, uninformed investors, and the general public into accepting an “irrationally exuberant” picture of the industry.
E-mails obtained through open-records worry that gas “may not be as easy and cheap to extract from shale formations, and that companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves.” The NYT praises skeptics “who question endorsing shale gas without understanding its economics.” They even complain “that dozens of black churches in Fort Worth signed leases on the promise of big money,” risking their tax exempt status.
This frontal assault on shale gas shows a profound lack of understanding of technology, economics, business, and energy.
Extracting gas from shale is a new technology that combines two established technologies – horizontal drilling and water flooding (which has been used at least since the 1950s). As a new technology, we have no history to predict the future. Even with the best and most honest of efforts, we do not know how to extrapolate reserves from existing wells, and what the eventual extraction costs will be. With such uncertainty, there will be a wide variety of estimates of reserves, some optimistic, some pessimistic. No one knows the truth at this point. There is nothing sinister on the part of those who choose to be optimists. All major innovations are made by optimists, not pessimists.
The reserves of any underground resources that can be economically extracted depend on prices now and in the future. If gold rises to $5,000 per ounce, there will be a new gold rush in the United States. The problem is that we do not know the future prices of natural gas. All we know is that it has fallen dramatically since shale oil extraction began. As long as we do not know the future price, there is no way to know the amount of reserves that can be extracted at a profit.
Presumably investors worth their salt know these two facts. They also know enough not to rely on a federal bureaucracy to make their investment decisions. After all, shale gas companies are not selling shares at Wal-Mart. Investors who are optimists will invest. Pessimists will not. Technology and market forces will decide who is right, not the NYT or Congress.
The NYT attack ends with a truism: “If natural gas ultimately proves more expensive to extract from the ground than has been predicted, landowners, investors and lenders could see their investments falter, while consumers will pay a price in higher electricity and home heating bills.” Yes, if shale gas is a bust, investors will lose and prices will be higher, but what’s new? Why all the fuss? Why should this be Congress’s business?
My two pieces of advice:
First, to the natural gas industry: Avoid at all costs federal subsidies of cars powered by natural gas. This will give the federal government the right to stick its nose into your business.
Second, to the NYT and democratic members of Congress: Obtain e mails of internal discussions of the Volt or of lithium battery manufacturers to see whether investors, taxpayers, and consumers are being sold an “irrationally exuberant” picture. I may have to wait a long time before the NYT takes me up.
Tuesday, June 28, 2011
Thomas Friedman’s Shock Therapy (Insight into the Liberal Mind)
Thomas Friedman’s friends appear to be disgusted with American politics. They have concluded that the two parties think only of reelection and their special-interest constituencies. They cannot imperil their chances of reelection by doing the four things -- spend, cut, tax and invest -- that must be done simultaneously “if we have any hope of maintaining American greatness.”
Friedman’s disgusted friends are looking for a serious Third Party candidate to “deliver shock therapy to the corrupt, encrusted, two-party duopoly now running the show in America.”
In my vocabulary “shock therapy” describes a rapid course of transition from planned socialism to capitalism. Therefore, I expected more than I got from Friedman’s shock therapy, which consists of the following four points:
1) More stimulus to keep the economy from slipping back into recession.
2) An accompanying credible long-term plan for spending and deficit reduction — e.g., the Simpson-Bowles deficit-reduction plan.
3) New revenues (a gas tax and a carbon tax) to “reinvest” in education, infrastructure and government-funded research to push out the boundaries of knowledge.
4) Assorted other things like “shrinking” our presence in Afghanistan and raising mandated mileage standards on new cars.
Friedman opines that his hypothetical “spend, cut, tax and invest” platform is sure to attract his reasonable, sophisticated, and intelligent friends from both sides of the aisle.
I interpret it as a platform that elected liberals are too cowardly to pass for fear of voter backlash.
Why is this program the liberal Holy Grail?
Friedman’s “spend, cut, tax and invest” raises government spending now (bigger government), despite the failure of the massive fiscal and monetary stimulus of the past few years. (If once you do not succeed, try, try again). In return, Congress adopts Simpson-Bowles, which cuts spending and deficits over the long run (and perhaps never) by a combination of spending cuts and, yes, TAX increases.
But wait: Friedman is talking about cuts in “spending” not in “investment.” Government spending on research, infrastructure, green technology and other fads in liberal favor can boom because of new dedicated revenue from national gas and carbon taxes. No, the gusher of new tax revenue will not go into deficit reduction but into new windmills, bullet trains, and studies of the sex habits of mice, without which our economy cannot survive in the twenty-first century. I guess, in Friedman’s mind, we will have no innovation, no technological progress unless it is ordered and paid for by the state.
Friedman’s “spend, cut, tax and invest” is nothing more than a stealth program for ever larger and more intrusive government, in which the liberal state can pass out favors to its crony capitalists and labor allies.
A truly bold Friedmanian Third Party candidate could set the gas and carbon taxes high enough to raise total government spending to half the economy. With this accomplishment, we can at last join the genteel European brotherhood of enlightened welfare states, and Thomas Friedman can return to foreign affairs, where he belongs.
Thomas Friedman’s friends appear to be disgusted with American politics. They have concluded that the two parties think only of reelection and their special-interest constituencies. They cannot imperil their chances of reelection by doing the four things -- spend, cut, tax and invest -- that must be done simultaneously “if we have any hope of maintaining American greatness.”
Friedman’s disgusted friends are looking for a serious Third Party candidate to “deliver shock therapy to the corrupt, encrusted, two-party duopoly now running the show in America.”
In my vocabulary “shock therapy” describes a rapid course of transition from planned socialism to capitalism. Therefore, I expected more than I got from Friedman’s shock therapy, which consists of the following four points:
5) More stimulus to keep the economy from slipping back into recession.
6) An accompanying credible long-term plan for spending and deficit reduction — e.g., the Simpson-Bowles deficit-reduction plan.
7) New revenues (a gas tax and a carbon tax) to “reinvest” in education, infrastructure and government-funded research to push out the boundaries of knowledge.
8) Assorted other things like “shrinking” our presence in Afghanistan and raising mandated mileage standards on new cars.
Friedman opines that his hypothetical “spend, cut, tax and invest” platform is sure to attract his reasonable, sophisticated, and intelligent friends from both sides of the aisle.
I interpret it as a platform that elected liberals are too cowardly to pass for fear of voter backlash.
Why is this program the liberal Holy Grail?
Friedman’s “spend, cut, tax and invest” raises government spending now (bigger government), despite the failure of the massive fiscal and monetary stimulus of the past few years. (If once you do not succeed, try, try again). In return, Congress adopts Simpson-Bowles, which cuts spending and deficits over the long run (and perhaps never) by a combination of spending cuts and, yes, TAX increases.
But wait: Friedman is talking about cuts in “spending” not in “investment.” Government spending on research, infrastructure, green technology and other fads in liberal favor can boom because of new dedicated revenue from national gas and carbon taxes. No, the gusher of new tax revenue will not go into deficit reduction but into new windmills, bullet trains, and studies of the sex habits of mice, without which our economy cannot survive in the twenty-first century. I guess, in Friedman’s mind, we will have no innovation, no technological progress unless it is ordered and paid for by the state.
Friedman’s “spend, cut, tax and invest” is nothing more than a stealth program for ever larger and more intrusive government, in which the liberal state can pass out favors to its crony capitalists and labor allies.
A truly bold Friedmanian Third Party candidate could set the gas and carbon taxes high enough to raise total government spending to half the economy. With this accomplishment, we can at last join the genteel European brotherhood of enlightened welfare states, and Thomas Friedman can return to foreign affairs, where he belongs
Friedman’s disgusted friends are looking for a serious Third Party candidate to “deliver shock therapy to the corrupt, encrusted, two-party duopoly now running the show in America.”
In my vocabulary “shock therapy” describes a rapid course of transition from planned socialism to capitalism. Therefore, I expected more than I got from Friedman’s shock therapy, which consists of the following four points:
1) More stimulus to keep the economy from slipping back into recession.
2) An accompanying credible long-term plan for spending and deficit reduction — e.g., the Simpson-Bowles deficit-reduction plan.
3) New revenues (a gas tax and a carbon tax) to “reinvest” in education, infrastructure and government-funded research to push out the boundaries of knowledge.
4) Assorted other things like “shrinking” our presence in Afghanistan and raising mandated mileage standards on new cars.
Friedman opines that his hypothetical “spend, cut, tax and invest” platform is sure to attract his reasonable, sophisticated, and intelligent friends from both sides of the aisle.
I interpret it as a platform that elected liberals are too cowardly to pass for fear of voter backlash.
Why is this program the liberal Holy Grail?
Friedman’s “spend, cut, tax and invest” raises government spending now (bigger government), despite the failure of the massive fiscal and monetary stimulus of the past few years. (If once you do not succeed, try, try again). In return, Congress adopts Simpson-Bowles, which cuts spending and deficits over the long run (and perhaps never) by a combination of spending cuts and, yes, TAX increases.
But wait: Friedman is talking about cuts in “spending” not in “investment.” Government spending on research, infrastructure, green technology and other fads in liberal favor can boom because of new dedicated revenue from national gas and carbon taxes. No, the gusher of new tax revenue will not go into deficit reduction but into new windmills, bullet trains, and studies of the sex habits of mice, without which our economy cannot survive in the twenty-first century. I guess, in Friedman’s mind, we will have no innovation, no technological progress unless it is ordered and paid for by the state.
Friedman’s “spend, cut, tax and invest” is nothing more than a stealth program for ever larger and more intrusive government, in which the liberal state can pass out favors to its crony capitalists and labor allies.
A truly bold Friedmanian Third Party candidate could set the gas and carbon taxes high enough to raise total government spending to half the economy. With this accomplishment, we can at last join the genteel European brotherhood of enlightened welfare states, and Thomas Friedman can return to foreign affairs, where he belongs.
Thomas Friedman’s friends appear to be disgusted with American politics. They have concluded that the two parties think only of reelection and their special-interest constituencies. They cannot imperil their chances of reelection by doing the four things -- spend, cut, tax and invest -- that must be done simultaneously “if we have any hope of maintaining American greatness.”
Friedman’s disgusted friends are looking for a serious Third Party candidate to “deliver shock therapy to the corrupt, encrusted, two-party duopoly now running the show in America.”
In my vocabulary “shock therapy” describes a rapid course of transition from planned socialism to capitalism. Therefore, I expected more than I got from Friedman’s shock therapy, which consists of the following four points:
5) More stimulus to keep the economy from slipping back into recession.
6) An accompanying credible long-term plan for spending and deficit reduction — e.g., the Simpson-Bowles deficit-reduction plan.
7) New revenues (a gas tax and a carbon tax) to “reinvest” in education, infrastructure and government-funded research to push out the boundaries of knowledge.
8) Assorted other things like “shrinking” our presence in Afghanistan and raising mandated mileage standards on new cars.
Friedman opines that his hypothetical “spend, cut, tax and invest” platform is sure to attract his reasonable, sophisticated, and intelligent friends from both sides of the aisle.
I interpret it as a platform that elected liberals are too cowardly to pass for fear of voter backlash.
Why is this program the liberal Holy Grail?
Friedman’s “spend, cut, tax and invest” raises government spending now (bigger government), despite the failure of the massive fiscal and monetary stimulus of the past few years. (If once you do not succeed, try, try again). In return, Congress adopts Simpson-Bowles, which cuts spending and deficits over the long run (and perhaps never) by a combination of spending cuts and, yes, TAX increases.
But wait: Friedman is talking about cuts in “spending” not in “investment.” Government spending on research, infrastructure, green technology and other fads in liberal favor can boom because of new dedicated revenue from national gas and carbon taxes. No, the gusher of new tax revenue will not go into deficit reduction but into new windmills, bullet trains, and studies of the sex habits of mice, without which our economy cannot survive in the twenty-first century. I guess, in Friedman’s mind, we will have no innovation, no technological progress unless it is ordered and paid for by the state.
Friedman’s “spend, cut, tax and invest” is nothing more than a stealth program for ever larger and more intrusive government, in which the liberal state can pass out favors to its crony capitalists and labor allies.
A truly bold Friedmanian Third Party candidate could set the gas and carbon taxes high enough to raise total government spending to half the economy. With this accomplishment, we can at last join the genteel European brotherhood of enlightened welfare states, and Thomas Friedman can return to foreign affairs, where he belongs
Thursday, June 2, 2011
David Brooks’ Country-Club Valedictory: It Is About You (More Drivel)
“Conservative” David Brooks’ column “It’s Not About You” (NYT May 30) is incomprehensible fluff until you realize its audience.
Let me quote some key passages to illustrate:
“This year’s graduates are members of the most supervised generation in American history… they have been monitored, tutored, coached and honed to an unprecedented degree. Most will spend a decade wandering from job to job and clique to clique, searching for a role. No one would design a system of extreme supervision to prepare people for a decade of extreme openness.”
So we learn from Brooks that today’s graduates, the “most supervised in American history,” are being thrust into a “decade of extreme openness.” My own impression is that today’s latch-key, single parent, web-surfing, text-messaging graduates are among the least supervised in history. I must admit I do not understand Brooks’ “decade of extreme openness.” Graduates, it appears to me, are just entering the uncertain job market characteristic of a weak economy.
After some serious thought about who might read this column, it began to make more sense. By “graduates,” Brooks has in mind graduates of elite institutions, not college graduates in general. It is they who have been “monitored, tutored, coached and honed to an unprecedented degree.” Their mothers competed for slots in elite toddler academies in Manhattan or Cambridge. It is they who have been coached and tutored in preparatory academies and by SAT coaches. They have been “honed” for admission to Stanford or Harvard. Graduates of state schools and, even worse, junior colleges do not fit into Brooks’ picture of the country-club elite. I guess they are not the ones who count.
Now these “supervised” graduates are being thrown into a cruel world of job insecurity and, gasp, “team work.” No longer does a secure spot in Daddy’s Lehman Brothers await them.
Brooks’ advice: Instead of focusing on “finding yourself,” find a cause – a problem to solve. “It’s the things they did to court unhappiness — the things they did that were arduous and miserable, which sometimes cost them friends and aroused hatred. It’s excellence, not happiness, that we admire most.” So the greats of the past succeeded because they were willing to be miserable and friendless. They did not become great through the joy of discovery, invention or entrepreneurship.
If I had taken out student loans to graduate from a good university with a meaningful degree and David Brooks delivered this as the commencement address, I would have asked for my money back.
Let me quote some key passages to illustrate:
“This year’s graduates are members of the most supervised generation in American history… they have been monitored, tutored, coached and honed to an unprecedented degree. Most will spend a decade wandering from job to job and clique to clique, searching for a role. No one would design a system of extreme supervision to prepare people for a decade of extreme openness.”
So we learn from Brooks that today’s graduates, the “most supervised in American history,” are being thrust into a “decade of extreme openness.” My own impression is that today’s latch-key, single parent, web-surfing, text-messaging graduates are among the least supervised in history. I must admit I do not understand Brooks’ “decade of extreme openness.” Graduates, it appears to me, are just entering the uncertain job market characteristic of a weak economy.
After some serious thought about who might read this column, it began to make more sense. By “graduates,” Brooks has in mind graduates of elite institutions, not college graduates in general. It is they who have been “monitored, tutored, coached and honed to an unprecedented degree.” Their mothers competed for slots in elite toddler academies in Manhattan or Cambridge. It is they who have been coached and tutored in preparatory academies and by SAT coaches. They have been “honed” for admission to Stanford or Harvard. Graduates of state schools and, even worse, junior colleges do not fit into Brooks’ picture of the country-club elite. I guess they are not the ones who count.
Now these “supervised” graduates are being thrown into a cruel world of job insecurity and, gasp, “team work.” No longer does a secure spot in Daddy’s Lehman Brothers await them.
Brooks’ advice: Instead of focusing on “finding yourself,” find a cause – a problem to solve. “It’s the things they did to court unhappiness — the things they did that were arduous and miserable, which sometimes cost them friends and aroused hatred. It’s excellence, not happiness, that we admire most.” So the greats of the past succeeded because they were willing to be miserable and friendless. They did not become great through the joy of discovery, invention or entrepreneurship.
If I had taken out student loans to graduate from a good university with a meaningful degree and David Brooks delivered this as the commencement address, I would have asked for my money back.
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