Alex Epstein — VOICES for REASON

To me, the most interesting part of a recent New York Times feature describing corruption in the relationship between certain oil companies and the Minerals and Management Service is a passing reference to what the Gulf Coast was like before deepwater drilling.

For years, fading interest in the Gulf of Mexico had punished the local economy and left Louisiana to mourn its “Dead Sea.” Now, rising oil prices and new technology were setting off the deep-water version of a gold rush.

We have heard endless stories about how the oil spill has “ruined” the Gulf–the same Gulf the administration is now admitting it is already safe to eat from. But while the dangers of drilling accidents have been overblown, the fundamentally productive, life-giving nature of oil drilling has been largely evaded. We should remember that it was oil drilling that brought the “Dead Sea” to life.

Image: Wikimedia Commons

In case anyone believed that the reckless lending and borrowing of the housing boom would never happen again, read this story: “The Return of the $1,000 down mortgage.” Once again, borrowers are putting essentially zero money into the house they buy, encouraging them to buy houses they can’t afford and to walk away if the value of their houses decline.

If you are wondering how the government is letting this happen, you’ve got it backwards; as was the case leading up to the financial crisis, the government is making it happen through its many manipulating tentacles:

This offer does not come from a subprime lender, looking to reel in thousands of unqualified and ill-advised homebuyers, only to slap them with add-ons, fees and variable rates. It is not a teaser or a trick. The advertisement references a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks.

The pilot program is called “Affordable Advantage,” and it has now been adopted by three states — Massachusetts, Wisconsin and Idaho. (Other states, such as Pennsylvania, California and Colorado, have similar state programs.)…Fannie Mae helped to create Affordable Advantage after the state government agencies tasked with expanding homeownership found they were having trouble doing their job.

The idea that it is the government’s job to “promote homeownership” or create “stimulus” is the root cause of the financial crisis. This idea was carried out by the Federal Reserve, Fannie Mae, and Freddie Mac. Until that idea dies and these entities lose their power to manipulate the economy, the financial carnage will just continue.

Image Source: Wikimedia Commons

As an advocate of laissez-faire capitalism and a champion of America’s abundant oil use, it is rare that I get taken to task for being too tame in my defense of oil and in my expose of oil’s anti-industrial opponents.

But a superb letter to the editor in Tuesday’s Wall Street Journal by Paul Gilmour does just that. Responding to my point in my op-ed last week that oil spill hysteria ignores that “large amounts of oil enter the ocean every year through naturally occurring oil seeps,” he writes:

the situation is even more idiotic than the one Mr. Epstein describes.

Most of the oil in the Santa Barbara Channel and on nearby beaches comes from natural leakage of buried reservoirs, not man-made spills. Europeans who visited the area in the 16th century reported the sea was covered by a “sheen of oil, visible for as far as the eye could see,” and that local Indians waterproofed baskets and canoes with tar collected on beaches. It is estimated that, yearly, these seeps release the equivalent of one third of the oil spilled by Exxon Valdez.

Seeps of oil are common in coastal California, having given rise to such place-names as Oil Creek, Oildale, Brea (Spanish “tar”) and Coal Oil Point. By far the best known is the La Brea Tar Pits, located in downtown Los Angeles.

Wouldn’t it be nice if reporters actually told us this stuff, instead of only reporting things that reaffirm to them that oil is an “addiction”?

President Obama’s latest radio address celebrated the 75^th anniversary of Social Security and promised to protect it against “privatization.”

Seventy-five years ago today, in the midst of the Great Depression, Franklin Roosevelt signed Social Security into law, laying a cornerstone in the foundation of America’s middle class, and assuring generations of America’s seniors that after a lifetime of hard work, they’d have a chance to retire with dignity.  We have an obligation to keep that promise; to safeguard Social Security for our seniors, people with disabilities, and all Americans–today, tomorrow, and forever.

Actually, we have an obligation to retire Social Security as soon as possible. As I wrote in “Don’t Save Social Security,”

Under Social Security, lower- and middle-class individuals are forced to pay a significant portion of their gross income–approximately 12 percent–for the alleged purpose of securing their retirement. That money is not saved or invested, but transferred directly to the program’s current beneficiaries–with the “promise” that when current taxpayers get old, the income of future taxpayers will be transferred to them. Since this scheme creates no wealth, any benefits one person receives in excess of his payments necessarily come at the expense of others.

Under Social Security, every aspect of the government’s “promise” to provide financial security is at the mercy of political whim…

If Social Security did not exist–if the individual were free to use that 12 percent of his income as he chose–his ability to better his future would be incomparably greater. He could save for his retirement with a diversified, long-term, productive investment in stocks or bonds. Or he could reasonably choose not to devote all 12 percent to retirement. He might plan to work far past the age of 65. He might plan to live more comfortably when he is young and more modestly in old age. He might choose to invest in his own productivity through additional education or starting a business.

…

We should be debating, not how to save Social Security, but how to end it–how to phase it out so as to best protect both the rights of those who have paid into it, and those who are forced to pay for it today. This will be a painful task. But it will make possible a world in which Americans enjoy far greater freedom to secure their own futures.

To be clear, ending Social Security would not mean a George W. Bush-style “privatization” in which the government lets us invest our money in a few government-approved ways. It would mean individual ownership, as private property, of all the money Social Security now seizes. Period.

Image: Wikimedia Commons

In today’s Wall Street Journal, I have an op-ed piece entitled “Obama Follows Nixon on Oil Spill.” It explains how Richard Nixon’s anti-oil, anti-development response to the Santa Barbara oil spill of 1969 helped bring about an energy crisis–and how President Obama’s policies are ominously similar. Read it here.

In general, I have found that studying the history of oil is essential for understanding the present world. For example:

• How did so much of the world’s oil end up in the hands of dictators even though it was discovered by citizens of free countries?
• How is the history of oil connected to the history of terrorism?
• What policies led to the greatest amount of production and innovation, and what caused the least?

I cover these and many more questions in my course “The Triumph and Tragedy of the Oil Industry.” Listen to it online or download in MP3 here.

Image: Wikimedia Commons

If someone were to propose today that the United States implement a “new,” “exciting” economic idea called “socialism,” in which government central planners effectively owned and controlled the entire economy, we would surely point out that such a system has already been tried and implemented, with disastrous results.

We should do the same with the supposedly “new,” “exciting” economic idea known as the “green energy economy”–in which government central planners mandate that practical energy sources (coal, oil, natural gas, nuclear) be replaced by solar panels, windmills, dung piles, and corn fields. (Thomas Friedman’s latest column is a typical endorsement of such policies.)

There is nothing new and exciting about the “green energy economy.” There is a place overseas that has already provided stark evidence of what it means to pursue a “green energy economy,” and it’s not pretty. That place is called Europe, and it’s a testament to what happens when you force unproven, inefficient energy down people’s throat. A recent post at the free-market energy blog Master Resource explains:

Renewable energy has proved an expensive and unreliable source of energy everywhere it has been tried on a significant scale…Italy, Spain and Germany are cutting back on their taxpayer/ratepayer-funded generosity toward politically correct energies….In all, Europeans have tested the theory of a “clean energy revolution” to destruction.

For the gory details, read the whole article here.

Image: Wikimedia Commons

At a time when hostility against the oil industry is at a high, while politicians and editorial-office heroes call for “ending our addiction to oil,” it’s important to reflect on why oil is so valuable—so “addictive,” in the terminology of our time.

A couple months ago, I blogged that “Most of us think of oil simply as the stuff that puts gasoline in our car. But oil, thanks to the ingenuity of the oil industry, does so much more. For one, it’s the building block for thousands of petroleum products—everything from Blu-Ray discs to asphalt to stitches to lipstick. And it provides the safest, most powerful, most convenient fuel, not only for automobiles but for the freighters, jets, trucks, and industrial machinery that power our global economy. Oil makes every aspect of our lives better.”

In that post, I illustrated how oil was vital in making possible something as basic as an affordable, healthy breakfast. The other day, I witnessed firsthand how vital oil is in making possible a safe, effective hospital. Sitting in on a highly advanced surgical procedure, I was struck by the skill of the surgeons, the stunning advances in medical technology (almost all of which involve petroleum components), and—what I want to talk about today—everyone’s commitment to maximize safety by keeping the environment as hygienic as possible by using oil-based products at every turn.

One of the virtues of petroleum products, including plastics, is that they are incredibly resistant to bacteria, moisture, germs. Another is that they can very easily be made impermeable, protecting whatever you want from whatever you don’t want to contaminate it. They can also be made incredibly cheaply, which allows for disposable products that are never used by more than one patient.

All of this was at work in the operating room. Just about all the furniture—the chairs, the cabinets, the drawers, were made of or coated by petroleum to keep them sanitary. The patient was lying on the bed, connected to durable, flexible plastic (oil) tubes that safely delivered food, coming from a sealed plastic (oil) bag that securely stored it. Another oil tube was designed to vacuum excess fluids. There were disposable foam (oil) cradles to prop up the patient’s arms or legs if necessary—made of oil to be disposable. The disposable, sterile gloves were either latex or synthetic—i.e., made of oil. Ditto for the disposable surgical masks and head-coverings. The doctors frequently needed to throw biological material away—which, thankfully they could do sanitarily with plastic (oil) trash-bags that could be taken away leaving no trace of their hazardous contents. Imagine if these products would have been made of wood, cloth, or metal. Can you imagine the corrosion, the bacteria-traps, the health risks? Infection used to be a highly common and deadly product of surgery—and lack of petroleum products was a big reason why.

Thanks both to the medical profession and petroleum products, you can have every expectation of your next trip to the hospital being a safe one.

Source: Wikimedia Commons

Another day, another major news story about Ben Bernanke’s economic prognostications. I find these stories bizarre on two levels. One, they never mention Bernanke’s obvious incentive to paint an overly-rosy picture of the economy’s future given that he wields more power over it than any other person. And two, they never give convincing evidence that Bernanke is a credible forecaster.

It’s taken for granted that Bernanke is an economic genius–a claim backed by everything but his actual track record as an economic forecaster. We hear of his distinguished academic career, the admiration in which he is held by the profession, even a near-perfect SAT score in high school. While these would be relevant if Bernanke were applying for more column-inches in Who’s Who, or a job at The Princeton Review, neither Bernanke’s academic popularity nor his IQ tell us whether his predictions hold water.

In this regard, his track record of predictions, by contrast, proves a lot:

• March 2007: “the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”
• February 2008: “I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”
• July 2008: Fannie and Freddie “…will make it through the storm,” are “in no danger of failing,” and “adequately capitalized.”

Why not write news stories about the prognostications of economists who actually predicted the financial crisis?

Image: Wikimedia Commons

One of the hallmarks of intellectual adulthood is the ability to put events in context–to gather all the the relevant facts before drawing definitive conclusions and certainly before taking drastic, long-term action. A tragic accident involving offshore oil drilling (over 1/4 of domestic production is offshore) is certainly a case calling for adult thinking.

Thomas L. Friedman disagrees. In a recent column he encouraged us not only to feel the distress President Obama tells us his 11-year-old daughter is feeling, but also to act on it by trying to get rid of oil altogether. Friedman says that President Obama’s “most important job” is

shaping the long-term public reaction to the spill so that we can use it to generate the political will to break our addiction to oil. In that job, the most important thing Mr. Obama can do is react to this spill as a child would–because it is precisely that simple gut reaction, repeated over and over, speech after speech, that could change our national conversation on energy.

. . . he has to think like a kid. Kids get it. They ask: Why would we want to stay dependent on an energy source that could destroy so many birds, fish, beaches and ecosystems before the next generation has a chance to enjoy them? Why aren’t we doing more to create clean power and energy efficiency when so many others, even China, are doing so?

Someone taking an adult perspective that puts issues in context might explain that oil is essential to our standard of living–he might explain that accidents are part of life (a part to be learned from every time, and prosecuted when appropriate)–he might explain that offshore drilling generally spills very little oil in the scheme of things (far less than natural oil seepage from the ocean floor)–and he might explain that we don’t use much “clean power” (nor does China) because solar panels and windmills are very expensive, not very reliable, and not very powerful.

But for Friedman and his ilk, “A disaster is an inexcusable thing to waste.” And it is a lot easier to foist drastic energy policies upon the nation, when people adopt the perspective on oil that he endorses.

Image source: Wikimedia Commons

Whenever you hear about the miracles of wind power, always keep in mind one thing above all: because the wind blows erratically, and sometimes doesn’t blow at all, wind power is inherently unreliable. As I wrote in a recent piece on “green energy,”

where coal, oil, and natural gas can be burned whenever power is needed, at the exact quantity needed, wind and sunlight can be harnessed only when the weather cooperates–and electricity can’t be stored [in significant quantities] for a rainy day. Thus, they are always used as supplemental, not primary, sources of power on electric grids.

An engineer friend of mine recently witnessed this fact firsthand while driving east of San Francisco. He sent me this still picture that is as good as a movie–because the windmills were not moving. As he wrote: “Good thing Californians have reliable coal and gas-fired power on the grid elsewhere; Gaia did not see fit to bless us with breeze-based power today. Hundreds of them, dead still.”