Fuels

Some years ago, when our favored dictator ran the Sudan, there appeared to be a threat that Libya might invade ... A friend of mine had just returned from the Sudan and told me that an American oil company had found a sizable amount of oil ... The Wall Street Journal had even run one of those advertising sections about the Sudan urging investment, but there was no word about an oil strike in it ... [The State Department official] was not about to admit that an American oil company was sitting on a nice pool of oil and had cut a deal with the dictator–who was, by the way, a human-rights horror.

Today all candidates proposing "energy independence" are aspiring central planners. ... Don't expect candidates ... to point out that whatever problems exist in energy are created by government. A variety of subsidies (which include U.S. foreign policy), taxes, and regulations shield energy firms and consumers from the full costs of their actions. The result is market distortion ... The only way we'll find out is ... through depoliticization of the marketplace. No privileges, no protection, no rigging of the game, whether for gasoline or ethanol, coal or nuclear, natural gas or solar.

Another problem people have with, say, gas stations that raise prices during disasters is that they sell old, cheaper gas at the new, more-expensive price. Let's say that on Monday a station fills its tanks at $2.20 a gallon and sells the gas for $2.30. On Tuesday a hurricane hits the Gulf ... The gas station operator is then informed that his next shipment of gas will cost $2.50. Should he be able to sell his remaining gas ... for a retail price based on his new cost of $2.50? Lots of people would say no. But why not? "It's not fair," might be the answer. But what is unfair?

Shale oil extraction simply isn't sustainable or self-financing. It requires enormous investor financing to get the wells producing. Returns per well quickly decline, so there's no way to recoup that investment from production. The average one-year production drop-off from existing wells is 38%. Wells more than a few years old have very little output, and most current output is from the most recently drilled wells. The so-called "shale boom" requires not only large-scale financing up-front, but continued drilling just to keep the operation going.

One of the ironies is that during depressed economic conditions, when some oil companies go broke or bankrupt, the American people take the attitude of, "That's their problem. They chose to go into the oil business, and they can't cry when it fails to pan out." But when conditions change, and demand for the product suddenly increases, Americans take the same attitude as [socialists] ...: "It's not fair for others to have more when I have less. I need the oil and gas. He's gouging me. I am 'forced' to pay these high prices. Take his product and his income away from him and give it to me."