America wins one despite it all

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Dave Saxton
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America wins one despite it all

Postby Dave Saxton » Sat Dec 20, 2014 3:28 am

I can't say it any better:

http://www.nationalreview.com/article/3 ... rich-lowry



"The old Republican rallying cry “drill, baby, drill” was supposed to be simplistic sloganeering masquerading as policy.

It turns out that it represented transformative wisdom. The fall in the price of oil — about 40 percent in the past several months, down to less than $70 a barrel — is largely the result of the U.S. drilling, and then drilling some more, baby.

Big drops in the price of oil usually accompany recessions and are caused by declining demand. Not this one. Lackluster demand from Europe and China is a factor, but the driver is the American shale boom that is perhaps the most wondrous national achievement of the past decade. No one would have predicted it. To the contrary, experts predicted the opposite. In 2008, the International Energy Agency was projecting U.S. production would decline or remain flat for decades. Prior to the recession, the price of oil peaked at nearly $150 a barrel, and with global demand rising, it looked like it would remain at an elevated level forevermore.


But now the U.S. is producing over 3 million barrels a day more than it did several years ago. As Robert Bryce of the Manhattan Institute points out, this is like adding another Kuwait to world oil production. The Marcellus Shale in Pennsylvania alone, he writes, has added another Iran to world natural-gas production.

Perhaps President Barack Obama can be forgiven for not understanding the consequence of this, given his attenuated understanding of complex market forces — like supply and demand. As recently as 2012, he was confidently asserting that “we can’t just drill our way to lower gas prices.” Drivers enjoying the $1 drop in the price of gas since May might beg to differ.

The lower price of oil is an almost unalloyed good. A recent Wall Street Journal story was headlined “Tumble in Oil Prices Spurs New Bets on Global Growth.” Who can quibble with higher projections of global growth, including in the United States?

The drop in the price of oil, and the resulting reduction in the price of energy, is a boon to American consumers. The fall in gas prices puts tens of billions more dollars in their wallets.

It is a boon to the working class. Households making less than $50,000 a year, according to the Wall Street Journal, were spending more than 20 percent of their after-tax income on energy in 2012. The number had been only 12 percent in 2001.

It is a boon to industry. It reduces the costs of manufacturing and transport.

It is a boon to automakers. Lower gas prices are helping drive a surge in sales of trucks and SUVs that are more profitable for Detroit than small cars.

It is a boon to agriculture. It reduces the price of plowing and harvesting, and makes fertilizer cheaper.

All of this is in keeping with the great truth that cheap, abundant energy has always contributed immeasurably to American prosperity. That makes it all the more perverse that the Left wants to make energy more expensive in its war on fossil fuels, its push for ever more stringent environmental regulations, and its quixotic campaign against global warming. Environmentalists rue that the decline in energy prices makes alternative energy even more uneconomical.

According to the Institute for Energy Research, “Nearly every barrel of new U.S. oil production can be attributed to the use of horizontal drilling and hydraulic fracturing technologies.” The Left hates fracking and would love, if it could, to hamstring it.

The Obama administration is pushing new regulations on everything from coal-fired power plants to, perhaps soon, methane. If it had its way, it would impose a tax on carbon, and it wants to lead the world in restricting the use of fossil fuels in the name of combating climate change.

The assumption of the administration has always been that fossil fuels represent the past, when they are, in reality, powering the American economy into the future. “Drill, baby, drill” indeed."


http://www.nationalreview.com/article/3 ... rry-kudlow



"We all know that the American energy revolution, led by the new technologies of hydraulic fracturing and horizontal drilling, has created a flood of new shale-oil and natural-gas production that has overwhelmed world markets and driven prices down by roughly 40 percent. End-of-week crude oil closed near $57 a barrel, and the national average gasoline price finished at $2.60.

No matter what the naysayers are trying to sell, the new energy reality is unambiguously good for the U.S. and global economies. There may be some dislocations among countries, sectors, or companies, but the overwhelming impact is positive.

In fact, the U.S. economy is already getting better. Recent numbers on jobs, retail sales, consumer confidence, small-business confidence, ISMs, and business investment point to a 3 percent growth rate rather than the tepid 2 percent pace of the prior five years.

And it’s likely that oil prices will stay low or drop a bit lower.

The International Energy Agency’s new forecast for 2015 shows a global reduction in demand growth of 900,000 barrels a day versus a previous projection of an increase of 1.1 million barrels a day. But U.S. production is expected to increase by 685,000 barrels a day next year. So besides American technological breakthroughs, this oil-price-drop story is a triumph of the free-market forces of supply overwhelming demand — all while the OPEC cartel dissolves before our eyes.

As economist John Ryding puts it, “The oil supply curve is shifting outward at a faster pace than the oil demand curve, which argues against a rebound in oil prices in 2015.”

But there is another important angle to this story: Looming behind the falling price of oil is the return of King Dollar.

Since the middle of 2011, the dollar has appreciated by over 20 percent. Year-to-date it has gained 10 percent. Meanwhile, gold has fallen nearly 40 percent since 2011 and oil has dropped 40 percent in the past six months.

Since the U.S. dollar is the world’s reserve currency, commodities are priced in dollars. Hence a strong greenback generates lower commodity prices — oil, gold, and everything else. This was the case during the Reagan 1980s and the Clinton 1990s. But when the dollar collapsed during the Bush 2000s, gold, oil, and other hard assets like housing exploded upward to the detriment of the economy.

Now, however, as King Dollar seems to be on the mend, commodity prices are falling and the purchasing power of money for consumers and businesses is going up. Those greenbacks in your wallet or bank account are worth more and can buy more on the open market. Inflation stays low. Global capital flows to America.

Regrettably, neither the Bush nor Obama administrations particularly cared about the plight of the dollar. However, at a recent conference at the Federal Reserve Bank of Philadelphia, Paul Volcker, the greatest American central banker since World War II, argued that the main goal of the Federal Reserve is to defend the dollar’s stability. He also said he doesn’t understand why the Fed has adopted a 2 percent inflation target. He asked, “Do we want prices to double every generation?”

(It’s important to note that while the Fed can print excess money, the U.S. Treasury Department has statutory authority over dollar buying-and-selling operations. But then again, it’s crucial to note that the U.S. Congress has constitutional authority over the value of our money.)

When Volcker was undersecretary of the Treasury during the Nixon years, he argued against the inflationary dollar devaluation that occurred when the U.S. broke the Bretton Woods link to gold. Though he never publically said it, there is ample evidence that when Volcker ran the Fed, he was targeting (or carefully watching) the movement of gold, broad commodity indexes, and the dollar as he restrained the money supply to conquer inflation.

Alan Greenspan often talked publically about the significance of gold as an inflation proxy during his first three terms as Fed chair. But unfortunately he gave up the discipline in his last years at the Fed.

And today, no one in U.S. officialdom is talking gold, commodities, or the dollar. But the Fed has actually been tighter than people think, because only a small fraction of its QE bond buying and reserve creating circulated through the economy. And now it’s given up QE altogether. And next year it will begin to cautiously raise its target rate on the long road to normalization. This all helps King Dollar.

And with a new Republican Congress, there’s the enhanced prospect of lower business taxes, which would grow the economy faster. More support for the dollar.

So I will argue simply that a strong dollar and lower oil prices are unambiguously good for the economy. Naysayers be gone."
Entering a night sea battle is an awesome business.The enveloping darkness, hiding the enemy's.. seems a living thing, malignant and oppressive.Swishing water at the bow and stern mark an inexorable advance toward an unknown destiny.

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aurora
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Re: America wins one despite it all

Postby aurora » Sat Dec 20, 2014 1:46 pm

Quote Dave:
"So I will argue simply that a strong dollar and lower oil prices are unambiguously good for the economy. Naysayers be gone."

Having read the article thoroughly-it does to an outsider -make sense.We on the other hand- being so divided sit on our hands; and like Mr Macawber "Wait for something to turn up" Soon as somebody mentions a move to get ourselves out from under eg.Fracking for oil-the NIMBY's are out in strength making a case against-we just are not Great anymore. :( :(
Quo Fata Vocant-Whither the Fates call

Jim

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Re: America wins one despite it all

Postby frontkampfer » Sat Dec 20, 2014 8:24 pm

Conservatives have been pushing for more drilling for at least 20 years. The proof is in the prices. The whole left-green-liberal cabal wants high prices to hurt consumers and to justify green subsidies. When the supply is up and the price is down their whole argument crumbles. What is truly a shame that NY has banned fracking. This satisfies the big lib centers of NYC but hurts the rest of the state which is truly depressed. Look to other states to see the boom to their economy and tax base. But no, NY can't have that. Better to sic the cops on a poor guy selling loose cigarettes so they get that tax money than to have jobs that benefit the whole state. Drill, Drill, Drill till OPEC has to drink it!
"I will not have my ship shot out from under my ass!"

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aurora
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Re: America wins one despite it all

Postby aurora » Sun Dec 21, 2014 3:03 pm

I did not think that NYC was so narrow minded; but of course one forgets the lobbyists and their effect on those in charge of NYC's administration-all elected presumably and wishing like hell to stay in office.UK is exactly the same, but incumbents also seeking to feather their nests whilst in power and that will continue ad nauseam !!!! :evil: :evil:
Quo Fata Vocant-Whither the Fates call

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Dave Saxton
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Re: America wins one despite it all

Postby Dave Saxton » Sun Dec 21, 2014 3:47 pm

The NY fracking ban is wholey based on idealology. It is actually just making official something that has been de-facto for decades anyway. That is hardly surprizing as NY (urban NY not rural NY) is a very left leaning state in terms of politics. It is the poor and the needy in NY that will be hurt the most. It won't do one thing to help the enviroment of NY or anywhere else.

There is not any scientific evidence that fracking has hurt the enviroment anywhere, as Obama's own EPA chief, Jackson, admitted in congressional testimony. Indeed that is one of the great benifits of the revolutionary new drilling technologies; it is rather kind on the enviroment and upon wild life. In fact wind energy technology kills more wild life than drilling does. With directional drilling as many as 25 wells can be created from one drilling location. That means 25 roads and other supporting infrasture is replaced by one. Horizontal drilling turns a pay zone of perhaps 300 feet into a pay zone of perhaps three miles! There has been hundreds of thousands of wells fracked and there remains no evidence that it has hurt the enviroment.

so they get that tax money (rather) than to have jobs that benefit the whole state
.

Speaking of taxes, about once a week I see a letter to the editor crying for a carbon tax or a gas tax increase as if it's good and wholesome-darn right moral. Our nation is founded in part on the principle that taxes are immoral. Some taxes may be necessary, but that doesn't make taxes moral. Indeed energy and transportation taxes are most immoral because they are by nature very regressive. They exact a far greater percentage of incomes from the poor and middle classes than they do the rich. Using regulations and tax policies to drive up the cost of fossil fuels is most immoral because it essentially transfers wealth from the poor and the middle class to big bussiness (big green) in bed with big government. Its Gov living on the backs of the poor.

Recently a Texas state report, found that each wind energy job in Texas cost the tax payers 1.7 million dollors in subsidies. It would be far cheaper just to pay each of these workers a million a year to stay home. They would have $700,000 left over for each of these 75,000 jobs to give to the homeless or something.
Entering a night sea battle is an awesome business.The enveloping darkness, hiding the enemy's.. seems a living thing, malignant and oppressive.Swishing water at the bow and stern mark an inexorable advance toward an unknown destiny.

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Re: America wins one despite it all

Postby Byron Angel » Mon Dec 22, 2014 12:22 pm

..... It is all about consolidating absolute control over society. Programs such as "green energy" inevitably substitute regulatory fiat in place of the law of supply and demand. By doing so, government is able to subvert the market process by arbitrarily creating artificial values upon whatever goods or services it wishes to encourage, discourage, manipulate or subsume.

Best holiday wishes from the nascent Socialist Republic of North America.

B

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Re: America wins one despite it all

Postby frontkampfer » Mon Dec 22, 2014 1:29 pm

Byron Angel wrote:..... It is all about consolidating absolute control over society. Programs such as "green energy" inevitably substitute regulatory fiat in place of the law of supply and demand. By doing so, government is able to subvert the market process by arbitrarily creating artificial values upon whatever goods or services it wishes to encourage, discourage, manipulate or subsume.

Best holiday wishes from the nascent Socialist Republic of North America.

B


Spot on, Byron!

Merry Christmas and Happy New Year!
"I will not have my ship shot out from under my ass!"

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Re: America wins one despite it all

Postby northcape » Sun Dec 28, 2014 8:35 pm

However, you must not forget one thing: Hydraulic fracturing is rather expensive and pays off only at a high oil price. How high, that we will see. But don't be fooled that the shale boom is going on forever, despite that it has been a marvellous success story so far. In fact, due to the low oil price the companies, and in particular in the US, stop a lot of planned exploration in 2015. Expensive jobs, as hydraulic fracturing, will be the first to stop. So there is a market-driven regulator. I work in the industry and we already feel the budget cuts.

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Re: America wins one despite it all

Postby Byron Angel » Mon Dec 29, 2014 12:19 am

I am certain you are correct on that point, NC. No boom continues forever. I observed that in connection with the PC/LAN era; everything was "hammer and tongs" for 10 years or so; then the market became satiated and business swooned. I don't think the oil business represents an exact parallel to that, but IYO would it be fair to say that the success of the shale oil biz has "re-calibrated" the global oil market?

B

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Re: America wins one despite it all

Postby northcape » Mon Dec 29, 2014 2:20 am

Hi Byron,

I'm not sure if the oil/gas-market has been re-calibrated. The shale boom is a new player/variable in a highly volatile market. For me it is difficult to say if this market can be calibrated at all. Oil/gas is such a major business and power area in the world, so I heavily doubt it can be considered as a free market.
What is for sure, is that shale gas production is significantly more expensive (and unpredictable) than "traditional" production. I don't really follow global politics, but from that perspective it would be highly understandable that the Saudis keep on producing/delivering and therefore keep the oil price low - on long term that would re-strengthen their dominance in the global oil/gas business, in case the US have to restrict shale production simply because it is just no longer economical.

p.s.: I'm currently on your continent, and I'm also working on the last 4 pages of the Jutland translation :-) Merry Christmas and Happy New Year!

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Re: America wins one despite it all

Postby Byron Angel » Mon Dec 29, 2014 11:48 am

northcape wrote:Hi Byron,

I'm not sure if the oil/gas-market has been re-calibrated. The shale boom is a new player/variable in a highly volatile market. For me it is difficult to say if this market can be calibrated at all. Oil/gas is such a major business and power area in the world, so I heavily doubt it can be considered as a free market.
What is for sure, is that shale gas production is significantly more expensive (and unpredictable) than "traditional" production. I don't really follow global politics, but from that perspective it would be highly understandable that the Saudis keep on producing/delivering and therefore keep the oil price low - on long term that would re-strengthen their dominance in the global oil/gas business, in case the US have to restrict shale production simply because it is just no longer economical.

p.s.: I'm currently on your continent, and I'm also working on the last 4 pages of the Jutland translation :-) Merry Christmas and Happy New Year!



..... LOL - obviously I have been asleep at the switch! Hope you had a happy alpine sort of Xmas. Best wishes to you and Chi for both New Years.

Byron

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Dave Saxton
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Re: America wins one despite it all

Postby Dave Saxton » Mon Dec 29, 2014 3:53 pm

northcape wrote:What is for sure, is that shale gas production is significantly more expensive (and unpredictable) than "traditional" production.



Analysist have greatly over estimated the overall cost of fracking because they are comparing it to traditional practices. Fracking is so much more efficient. A fracked well produces at a typicaly daily rate 1400:1 compared to traditional methods. Even at $55 a barrel a fracked well can pay for its self in less than a week instead of a period of years. Moreover, because of directional drilling the same location can be made productive at relatively high production levels for years, although a specific fracked well gives up the goods relatively quickly and has compartively short life span. This means after the initial investment in supporting exploration, and production, infrastructure, additional drilling is relatively inexpensive, as well as being enviromentally friendly. The common wisdom that fracking requires $90/ barrel oil prices to be viable is not correct.

Additionally, fracked oil requires less infrastucture, and less expensive infrastructure, to bring about the refined product to market. Old refineries can handle it while meeting enviromental goals and expensive new infrastructure is not needed as much.

A great thing about the new technology is that it can be shut down and started up at will in response to the markets.

It's revolutionary, and it changes the geopolitical/economics dynamics completely.
Entering a night sea battle is an awesome business.The enveloping darkness, hiding the enemy's.. seems a living thing, malignant and oppressive.Swishing water at the bow and stern mark an inexorable advance toward an unknown destiny.

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Re: America wins one despite it all

Postby Garyt » Wed Dec 31, 2014 3:51 am

Fracking may well be a boon for US economics. But it still is a non-renewable source of energy, so work still needs to continue to find the most viable renewable energy sources, not finding the sources per se but finding which are cost effective when taking into account any building of infrastructure to support these sources.

I think far too often politicians, business owners only look at the today and keep pushing off the tomorrow leaving them ill-prepared when it comes.

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Re: America wins one despite it all

Postby Dave Saxton » Wed Dec 31, 2014 2:42 pm

When looking for solutions moving forward its important to not build upon faulty premises. For example, wind and solar do not offer a viable alternative. The math just doesn't work, both in terms of providing enough energy or economically.

There has been three big lies dominate in the public debate:

1) That wind and solar can be a viable alternative (they may help in small way but they are not the answer)

2) That co2 is causing significant climate change and it represents a existential crisis.

3) That free markets can not develop solutions given time, or that only central planning policies and rigorous regulations will force solutions such as lie number 1, based on lie number 2.
Entering a night sea battle is an awesome business.The enveloping darkness, hiding the enemy's.. seems a living thing, malignant and oppressive.Swishing water at the bow and stern mark an inexorable advance toward an unknown destiny.

Garyt
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Re: America wins one despite it all

Postby Garyt » Fri Jan 02, 2015 8:05 pm

There has been three big lies dominate in the public debate:

2) That co2 is causing significant climate change and it represents a existential crisis.


Funny. Originally the conservative policy on Global warming was to deny it. When that became untenable the next step was to claim it was not CO2 driven. Recently, many conservatives accept the science - including their leaders (eg Romney, Gingrich, McCain - even Bush eventually conceded).

Now though, it seems that at least Gingrich tries to say it is not a bad thing, that life was OK in the age of the Dinosaurs. He fails to appreciate the fact that the upheaval caused by climate change would be a huge issue. Take the US midwest, raise the average temperature about 5 degrees and you no longer have the grain belt. It may shift further north to Canada, and leave the US Midwest as an arid hot area and not very fertile area. Imagine the Dust Bowl of the 30's, but many times worse.

Most of the opposition to "believing" global warming is real comes from Energy companies, not wanting to have changes that will effect their bottom lines. And the expect the politicians they fund to be at least somewhat big energy friendly.

Unfortunately, Global warming is not something that one believe or does not believe in. It is not a matter of faith. It's real, whether one wants to believe in it or not.

It's kind of ironic - one of the big pitches of conservatiivism is personal responsibility. I always thought being personally responsible involved cleaning up my own messes, not leaving them for someone else. Closing one's eyes or sticking one's head in the sand about things like global warming and depletion of fossil fuels and leaving the mess for future generations seems very much personal irresponsibility


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