Posted tagged ‘Fracking Revolution’

Must Reads For The Week 7/18/15

July 18, 2015
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

Minimum Wage Impact: Garment Industry Eyes Move Out Of L.A. City Limits, at economicpolicyjournal.com. This isn’t a shock to us. Less is demanded at a higher price than a lower price. This includes labor.

Retailers Expected To Raise Prices Or Cut Jobs To Pay For Minimum Wage, at thegardian.com. Even in a more socialist country like Great Britain economic forces are always at work. They can’t be legislated or wished away even with the best of intentions.

Judge To Bakers: No Free Speech For You, by Rachel Lu, at thefederalist.com. Not only where the owners of the bakery fined $135,000 because they wouldn’t bake a wedding cake for a same-sex marriage. They were also told by the Judge they were told they were not allowed to continue to state their intentions to abide by their moral beliefs. This is what happens when our constitution is bastardized to mean protecting group rights instead of individual rights. Our constitution protects the individual from coercive government.

Wallingford Police Look Into Complaint About Nazi, Confederate Items Sold At Flee Market, at myjournalrecord.com. Someone called and complained that they were offended that these items were being sold. I’ve looked in the constitution and I can’t find where is says an individual has a right to “not” be offended. This and the story above show that we are becoming a nation with zero mental toughness. When you whine about someone offending you, you give that person power that they wouldn’t have if you weren’t offended.

“Chattanooga Shootings: Why Should We Make It Easy For Killers To Attack Our Military, by John Lott, at johnrlott.blogspot.com. Look at the gun free zone sign on the front door of the military recruiting station in the picture on this post. One thing we know for sure, the sign didn’t stop the shooting. The question is did it provide an easy target for the terrorist? Why would you advertise that don’t have the means to stop an attack?

Taxpayers Have Now Spent $3.5 Million To Find Out Why Lesbians Are Obese, by Elizabeth Harrington, at freebeacon.com. This study is examining why three-quarters of lesbians are obese, but gay men are not. Why do we need to spend all this money to know why anyone is obese. I’ll give you the reason for free. An individual is obese because he chooses to take in more calories than he burns off. If it was more important for him to be thinner he would choose differently.

38 Ways College Students Enjoy ‘Left Wing Privilege’ On Campus, by Tal Fortgang, at time.com. College is just the next indoctrination camp your kids attend after their initial brainwashing in grade school and high school.

Saudi America” Has Been The World’s Largest Petroleum Producer For 29 Months In A Row, by Mark J. Perry, at Carpe Diem blog. Where would the American economy be without the shale revolution?

Youth Unemployment In The SPIG, at economicpolicyjournal.com. Youth unemployment in Spain, Portugal, Italy, and Greece is reaching an average of 45%. This is how you produce a generation of people who will vote for a centrally planned economic socialist system. Unfortunately they can’t vote economic forces out of existence.

An “Austrian” Economist’s Advice For Greece And The EU, by Richard Ebeling, at epictimes.com. This is our heavy lifting for the week. Top down central planning is the problem, and individual liberty is the solution. Greece is just the most recent experiment with socialism.

 

Free Market Fracking Trumps Government Solutions When It Comes To Producing Energy

June 23, 2015

Mark J. Perry at CarpeDiemBlog visited the Bakken oil fields in North Dakota and has written about what he learned in these two must read posts titled, Ten Things I Learned On My Summer Trip To The Bakken Oil Fields Part I click here, and Part II click here. These articles tell the story about every aspect of fracking. You will be amazed when you read how fracking works, from walkable drilling platforms, directional drilling, frac sand, 3-D seismic imaging, and geo-steering to name a few.

Even though Saudi Arabia is trying to drive the price of oil down in an attempt to make it unprofitable for American Fracking to produce oil at the lower price, hydraulic fracturing is becoming an increasingly more cost-effective way of extracting oil from the ground due to the advances in technology and human ingenuity. What’s left of Americas culture of freedom has produced a fracking miracle. There are so many known and yet to be known areas of our economy that are poised for a miracle if Government will just get out of the way.

ANIMATION OF HYDRAULIC FRACTURING

 

GOVERNMENT IS AGAINST LOW COST ENERGY

The Federal Government has spent billions of our tax dollars trying to make “green energy” a viable alternative to fossil fuels, at the same time they are trying to hamper the fracking revolution. Here is what I wrote in a previous post titled Politicians “Affordable” Ideas Must Obey Economic Forces.

“Market forces are more powerful than the hoped for results of central planners. The most recent example of this is the boom in oil and natural gas production, created by hydraulic fracturing [ fracking],which is taking place on private land in spite of Government policies. Our politicians shut down some Government lands to oil exploration, and made the process of getting permits for exploration on remaining lands more time-consuming [costlier]. They used their power, and our tax dollars, to promote and invest in, “green energy”. Green energy was going to create new jobs and lead our economy into the future; do you remember Van Jones the Green Jobs Tzar. As always, the plans by our best and brightest politicians, must be obedient to economic forces. Green energy has, and is, going bankrupt, in spite of being propped up by Government incentives  and our tax dollars. They tried to make carbon based fuels more expensive through regulation, and green energy more affordable through tax payer subsidies; and even with all this Government help, the economic reality that green energy produces less energy at a higher cost, and carbon based fuel produces more energy at a lower cost, can’t be overcome.”

“This article titled, “Fracking Revolutionized American Energy As Green Energy Failed“, by Conn Carroll at washingtonexaminer.com, shows how the President went all in on green energy, at tax payers expense. We are witnessing what Robert Bradley Jr., at masterresource.org, has stated so well, “When Government tries to pick winners and losers, it typically picks losers. Why? Because in a free market consumers pick winners to leave the losers for Government”

Related ArticleGovernment Investment Or Government Waste, at austrianaddict.com. Look at the list of failed government subsidized  green energy companies in this post.

Related ArticleThe Hidden High Cost Of Green Energy, at austrianaddict.com.

 

Decreased Gasoline Demand + Increased Oil Supply = Lower Gas Prices

January 6, 2015

supply and demand market economy - stock photo

Gas prices have been dropping since July, and the overriding factors responsible for this drop are our old friends supply and demand. Even though Government interventions such as regulations, taxes, and electronically printed counterfeit money are factors that have to be adjusted for by the pricing process of the free market, or what’s left of the free market, supply and demand overwhelmingly determine prices.

PRICES COORDINATE PRODUCTION AND CONSUMPTION OVER TIME

Prices are how consumers demands for scarce resources, and producers supplies of scarce resources are coordinated at any particular moment in time. The law of supply and demand states that, more will be supplied and less will be demanded at a high price, and less will be supplied and more will be demanded at a low price. Prices are constantly adjusting for all the variable factors (including Government interventions) that go into the process of production and consumption.

In an article from July titled, Gasoline Consumption Is Down: Why?, we showed that consumption of gasoline in the U.S. has slowly declined by 66% over the last eight years. Look at the full chart here.

Year           Thousands of Gallons Per Day (April)
2006            61,020.8
2007            57,354.7
2008            56,307.4
2009            51,215.6
2010            46,016.2
2011            41,555.0
2012            29,684.0
2013            28,179.6
2014            20,109.1

We stated in the July article that “Since demand is low, the price should eventually go down“. This is coming true, even though we forgot to look at the “supply” side, of the law of supply and demand. If we look at the price of oil over the last six years, checkout the chart here,  we see that it has been trading on average of around $90 a barrel. We know that more will be supplied at the higher price according to the law of supply and demand. This higher price over time has allowed fracking to become a profitable way of extracting oil from the earth. In spite of the Governments attempt to slow down, or shut down, fracking by taking Federal land off-line for shale oil production, the supply of oil in the U.S. has almost doubled since 08 because of the fracking boom that has taken place on private land in Texas, North Dakota, Pennsylvania, and parts of Ohio. Under normal market conditions, when the underlying commodity (oil) used to produce a consumers good (gasoline) costs less, the price of the consumers good usually goes down.

This chart is from carpediemblog.

oil

THE MARKET CHOOSES FOSSIL FUELS AS THE WINNER OVER GREEN ENERGY

This shale revolution is an example of prices working their magic, by not only discovering new oil reserves, but also in using new technologies to find new methods of extracting the oil. It is sad and funny at the same time to see how this administration went all in for funding (investing in) green energy, only to find out that politicians and bureaucrats aren’t smart enough to be in the venture capital business (here). They thought their green energy “investments” would lead job creation in our new green economy. In fact, if it wasn’t for the jobs created by the shale oil revolution, there would be no job growth in the U.S. since 08.

This chart is from carpediemblog.

texasemp

Green energy companies that received your tax dollars have gone bankrupt (here). Think of all the tax payer funded resources, capital, time, and labor that has been wasted, because politicians and bureaucrats don’t understand, or don’t care, that price coordinated markets are more efficient in allocating scarce resources to their most valued uses, according to consumer demands, than Government central planners could ever be. Green energy will only become viable when it’s unsubsidized cost is lower than our current way of supplying energy. The discovery of new oil reserves has pushed the chance for green energy becoming a viable alternative to fossil fuels  much farther into the future. Unless an exponential advance in green energy technologies happens that reduces the cost per unit of green energy, compared to cost per unit of energy from fossil fuels, green energy will remain a quixotic crusade for the left.

WHAT HAPPENS NOW THAT THE PRICE IS FALLING

The process of supply and demand is always trying to find an equilibrium point. In an ever-changing world, this equilibrium point is always just out of reach of wherever the economy is at any given time. It’s difficult to understand that the future equilibrium point we are moving toward, is a creation of what individuals are doing in real-time. We also have to understand that economic data is a snap shot of what has happened in the past. And knowing that history is by its very nature tardy, we should also know that economic data has already been factored into the future equilibrium point that the economy has been trending toward both yesterday and today. And we also know that point will change tomorrow.

Since the price of oil and gas is falling, we know two things will happen or are already happening. 1) Less gas and oil will be supplied at these lower prices, and 2) more gas and oil will be consumed at these lower prices. The decisions that individuals are making about consumption and production of gas and oil at these lower prices, are already setting the stage for the next price shift upward. When this will take place nobody really knows. Look how long it took for gas and oil prices to go down from their highs over the last six years.

Here are a few things to think about.

1) If demand doesn’t increase a lot at these lower prices, it tells me the economy isn’t as strong as the experts have been telling us. Gas and oil are the energy that drives our economy. As economic activity increases more gas and oil will be consumed. If consumption levels stay close to the levels we have seen in the above charts, we will know how healthy our economy is.

2) If the price of a barrel of oil isn’t high enough to cover the cost of fracking a barrel of oil, fracking will begin to slow, and in some cases wells will have to be shut down. This isn’t good or bad, it is just the reality of changing market conditions.

3) How much of the fracking revolution is a bit of a bubble activity? We know the Fed has electronically printed trillions of counterfeit dollars over the years that, as Jim Grant says, “is money in search of mischief”. This counterfeit money has ended up in the financial markets and is searching for a higher rate of return. I’m sure this counterfeit money has found its way into the fracking industry. This counterfeit money is pulling future production and consumption into the present before it would have come to exist in an unhampered market. Any bubble part of the fracking industry will eventually be liquidated. This liquidation is the cure, it will purge speculative investment from the fracking industry, helping find the right amount of production that can be supported by true market conditions. This liquidation won’t happen if the Fed, along with politicians and bureaucrats, bail out the speculative investors. Lets hope they hate the oil industry enough to allow it to self correct.

4) If demand doesn’t increase at these lower prices, the price will eventually go up. If the amount of gasoline we use remains at a certain level whether the price per gallon is $2.00 or $3.00, what do you think the price will be? Put another way, if overall revenue is greater at the higher price than the lower price, the higher price will be charged.

5) Many say this lower price will stimulate the economy, because people will have money to spend on other things. While every increase in productivity helps the overall economy become wealthier; do we know what part of the increase in productivity in the oil industry is represented by what consumers save at these lower prices? The money that is not represented by an increase in wealth as a result of becoming more productive, doesn’t create anything new. Depending on how each individual chooses to use the money he saves at the pump, it is just going to be shifted from the oil and gas industry to a different sector of the economy.

6) When the price of oil and gas went up, the market (which means individuals) adjusted their activities around the new price. These adjustments ultimately helped produce the lower price that exists today. Individuals will now start to adjust their activities to the new lower prices. Whatever results from these new adjustments, even as the price goes up, is exactly what should happen.

7) Since gasoline consumption has been decreasing for years, State and Federal Governments have been collecting less tax revenue. With the price of gas going down, watch out for politicians and bureaucrats starting to talk about raising the gasoline tax, in order to repair and build highway infrastructure.

CONCLUSION

Prices coordinate supply and demand, according to what each individual desires in relation to the inherent scarcity that exists for any economic good or service. Prices don’t cause this scarcity, prices reveal the degree of the underlying scarcity.

Related ArticleIs The Economy; Growing, Shrinking, Or Exactly Where It Should Be?, by austrianaddict.com.

Related ArticleCapitalism vs. Crony Capitalism, by austrianaddict.com.

 

here are some

Must Reads For The Week 10/18/14

October 18, 2014
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

Scientists Have Debunked These 5 Common Myths About Red Meat, at businessinsider.com. First, I posted this because the video made me hungry for a medium rare steak. Second, these myths about red meat had to have come from some other “scientist”. I guess science is up for debate.

The Corruption Of Science, by William O’Keefe, at economicpolicyjournal.com. Everything is political, even science. Here is an excerpt from the article, “I want to …talk about … the rise of what has been called consensus science. I regard consensus science as an extremely pernicious development that ought to be stopped cold in its tracks. Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled. …Let’s be clear: the work of science has nothing whatever to do with consensus. Consensus is the business of politics.”

The Nightmarish Politics Of Ebola, by John Cassidy, at newyouker.com. Everything  is political, from the name of the Washington Redskins, to Ebola. As much as I hate politics, it is part of  the reality we live in. Even this article trying to decry the politics of Ebola, is a political article. When it comes to analysis of any event, the first question the cable news anchors ask is, “How will this help or hurt the (President, republicans, democrats, congress)” pick one. I don’t care about Ebola politically. I care about Ebola from an epidemiological stand point. When everything is politicized, Government is to big and intrusive. We are living in the chaotic middle ground between central planning and individual freedom.

The Increasing Precision And Efficiency Of Revolutionary Drilling Technologies Has Made US World’s Greatest Producer, by Mark J. Perry at carpediemblog. The US is now the leader in oil and natural gas production thanks to entrepreneurs and technology. Supplying more oil to the market has helped drop the price of oil. The law of  supply and demand is right again. Drill baby drill.

More Schumpeterian Innovation In Ride-Sharing Service Uber, And Another Reason Big Taxi Is Doomed, by Mark J. Perry, at carpediemblog. The upstart competitor (Uber) is putting its efforts into finding ways to serve the consumer better, which in turn expands its business. The status quo monopoly (Taxi Cartel) puts its efforts into trying to keep the upstart competitor out of the market. The consumer will decide which strategy is the best.

The 10 Deadliest Jobs In The US, at economicpolicyjournal.com. Producing a higher standard of living has a cost in lives. But a higher standard of living not only saves lives, it also makes it possible to support a higher population.

Irresponsible ‘Education‘ , and We Can Still Salvage Enough Of The Constitution To Remain A Free And Democratic Nation, by Thomas Sowell, at jewishworldreview.com. These are two great articles by my favorite author, and are truly must reads. Thomas Sowell always makes you think. He also makes you debate, with yourself, about how you arrived at the way you think about different subject matters.

 

Must Reads For The Week 10/11/14

October 10, 2014
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

How Michelle Obama’s Daughters Eat vs. The Rules She Has Set Down For Public School Kids, at economicpolicyjournal.com. The fact that the ruling elite don’t have to abide by the rules they impose on the benighted masses is one thing. The more important point is, a  Government that has the power to make this mandate has too much power, and is therefore tyrannical.

How The Real World Reacts When Minimum Wage Laws Raise The Cost Of Labor Above What It Produces, at economicpolicyjournal.com. Here is the money quote from the article,“If government could transform unskilled entry-level positions into middle-income jobs, the Soviet Union would be today’s dominant world economy. Spain and Greece would be thriving.”

Mayo Clinic To Bring A Medical Kiosk To An Employer Near You, by Jeff Hansel, at m.postbulliten.com. Health care “affordability” would have taken care of itself if politicians in the Democrat party would have passed legislation that moved healthcare toward a free market system instead of passing “The Affordable Care Act”. This article is an example of markets reducing costs and providing a better product for the consumer.

Obamacare Causes Wal-Mart To Cut Benefits For Some Part Time Workers, by John Lott, by johnrlott.blogspot.com. This is the opposite of what you read about in the above post regarding the Mayo Clinic. Government intervention in the free market produces outcomes that have higher costs and inferior products.

3D Printing Entire Homes And Neighborhoods May Be Just Around The Corner, by Michael Krieger, at libertyblitzkrieg.com. Technology is in the process of changing how we do things in ways we can’t even imagine. Technology is advancing  faster than Government can regulate it (the fracking revolution is another example). This gives me hope that at some point, our current experiment with big government will someday be a chapter in history that people will read about and say, “what made them think that would work”.

Common People Do Not Carry This Much Currency”. How Police Justify Theft via Civil Asset Forfeiture Laws, at zerohedge.com. Taking money without probable cause, is only going to escalate the tension between police and citizens. Watch the video in this post, it makes great points in a humorous way.

Hong Kong Ranks First In Economic Freedom, The US Is Twelfth, at freetheworld.com. We were ranked second in ‘2000’ , but a decade of regulation, Fed counterfeiting, loss of property rights, and growth of Government has us cheering, “we’re number 12, we’re number 12”! We are not moving toward more individual, economic, and political freedom.

How The US Ranks In Corporate Tax Rates (Not Pretty), at economicpolicyjournal.com. The US has the highest corporate tax rate in the world! We’re number 1, We’re number 1!

Upcoming Anniversary: Oct. 1st Will Mark 18 Years Of No Global Warming, by Barbara Hollingsworth, at cnsnews.com. The evidence doesn’t match the chicken little rhetoric.

A Decade After Welcoming Wind, States Reconsider, by Sean Murphy, at eaglefordtexas.com. Here is a quote form the article, “Today, many of the same political leaders who initially welcomed the wind industry want to regulate it more tightly, even in red states like Oklahoma, where candidates regularly rail against government interference.” Politicians used Government subsidies and tax breaks to allow an industry to exist that would have probably had problems competing in a free market. Government picked the winner. Now they want to regulate an industry that wouldn’t have existed without the previous regulation. Here is my advice; repeal all regulations pertaining to wind, and allow the market to pick the winners and losers.

Reasons For Political Hope, by Bruce Thornton, at victorhanson.com. I know it’s hard to believe, but I am optimistic that freedom will win out over tyranny. It may not seem like it right now but there are signs that we are starting to wake up.