18 Aug 2014

The Ban on Exports of U.S. Crude Oil Is Bad Economics

Oil, Shameless Self-Promotion 19 Comments

My latest IER post. An excerpt:

To see why the logic behind the crude oil export ban makes little sense, change commodities. For example, should the U.S. government make it illegal for American farmers to ship wheat out of the country? After all, don’t we want to make bread as affordable as possible for American households? Or what about banning the export of pharmaceuticals? Don’t we want to keep drug prices as low as possible in the United States? How about jet airplanes or heavy equipment—should American producers of these items be prohibited from selling them in foreign markets?

Also, in case you think I’m just making a generic free-trade argument, you should click the link to see that ironically, the ban on U.S. exports arguably makes gasoline more expensive for U.S. motorists. Here’s a taste of the logic:

First, realize that if there are no restrictions on the import or export of gasoline, then the U.S. price of gasoline is the same as the world price…At the same time, the ban on U.S. crude exports (if it has any effect at all) means that the U.S. crude price is lower than the world price. U.S. producers of crude would like to be able to sell abroad at the higher world price, but this is illegal, so they must be content to sell within the United States at the lower U.S. price.

Now, the U.S. government suddenly lifts the ban on crude exports: what happens? The immediate response is that U.S. oil producers begin shipping crude abroad, to fetch the higher world price. In the new equilibrium, the price that American refiners must pay for crude has risen, because now they are effectively competing with crude buyers all over the world.

In the new equilibrium, with more total crude oil being produced on Earth each day, it stands to reason that refiners across the globe will end up producing more total gallons of gasoline each day. Since the U.S. government’s policy shift wouldn’t have directly affected any motorist’s demand for gasoline, the increased quantity brought to market can only be sold at a lower price per gallon at the pump. The free-flow of gasoline across borders ensures that the price of gas in the U.S. is always the world price, meaning that a lower world price for gasoline translates into lower prices at the pump for Americans, too.

I include estimates from different sources about what the actual reduction on U.S. pump prices could be, if the U.S. government allowed the export of U.S. crude oil.

17 Aug 2014

That’s My King!

Religious 11 Comments

14 Aug 2014

You Might Be in Serfdom

Big Brother, Shameless Self-Promotion 178 Comments

With apologies to Jeff Foxworthy, my latest LibertyChat article. Lots of pictures! An excerpt:

* If the FAA imposes a no-fly zone above Ferguson “to provide a safe environment for law enforcement activities,” then you might be in serfdom.

* When the police start arresting peaceful journalists covering the story, then you just might be in serfdom.

* When the same two political parties have controlled the White House since the Pierce Administration in 1853, you might be in serfdom.

14 Aug 2014

Potpourri

Potpourri 7 Comments

==> Various reactions to Robin Williams; I am not endorsing anything in here (except Norm MacDonald’s): An Objectivist, someone who wants to “normalize” suicide, and Matt Walsh in his controversial post that I actually don’t think was as bad as people claimed. This guy talks about why funny people often suffer from depression. If I weren’t so bogged down with the Night of Clarity I would pontificate myself on all of this. In any event, I have literally lost social media “friendships” over the reaction to Robin Williams. So there ya go.

==> Scott Sumner on a kinda sorta Krugman Kontradiction.

==> I was skeptical at first, but this article argues that the Michael Keaton (Tim Burton) Batman was better than the more recent reboot.

13 Aug 2014

Oil Production: We’re #1! We’re #1! USA USA!

Oil, Shameless Self-Promotion 32 Comments

When I was growing up, we had it constantly drilled into our heads how awful the 1970s had been because the U.S. was “dependent on foreign oil.” That was the (ostensible) reason for the energy conservation campaigns and government policies to encourage the switch to non-fossil fuels. I remember seeing statistics talking about how the world and/or U.S. (depending on the stat) only had “x years of oil left” at current rates of consumption.

I walk through the economics of this faulty mindset in the beginning of this speech on energy issues at the recent Mises University conference. But also check out this Bloomberg article from last month:

The U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs the nation’s economic recovery, Bank of America Corp. said.

U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries this year with daily output exceeding 11 million barrels in the first quarter, the bank said in a report today. The country became the world’s largest natural gas producer in 2010. The International Energy Agency said in June that the U.S. was the biggest producer of oil and natural gas liquids.

Oil extraction is soaring at shale formations in Texas and North Dakota as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing, or fracking. The surge in supply combined with restrictions on exporting crude is curbing the price of West Texas Intermediate, America’s oil benchmark…

U.S. oil output will surge to 13.1 million barrels a day in 2019 and plateau thereafter, according to the IEA, a Paris-based adviser to 29 nations. The country will lose its top-producer ranking at the start of the 2030s, the agency said in its World Energy Outlook in November.

Here is EIA data on historical U.S. crude output, but be careful this just focuses on “crude” and not the broader category including all liquids:

US crude historical

Back in 1984, if someone had said that in 30 years the U.S. would be the world’s leader in crude production, why that would have been as ridiculous as claiming that the New York Times would talk about the president’s “secret kill list” without causing a revolution.

11 Aug 2014

Robin Williams on Golf

Humor 3 Comments

Lots of naughty words, proceed with caution.

11 Aug 2014

More on “Risky Business”

Climate Change, Shameless Self-Promotion 4 Comments

Part 2 at IER of my commentary on “Risky Business,” the climate change analysis co-chaired by Michael Bloomberg, Hank Paulson, and Thomas Steyer. An excerpt:

Thus we see the fundamental flip-flop: Rubin’s long quotation from page 44 can only make sense if the Report is urging a globally-coordinated government crackdown on carbon emissions. Yet on the very next page, Snowe claims that “we” (which presumably means the Americans reading the report, which focuses on regional U.S. impacts) have the power to avert this catastrophe.

These two claims do not fit together. Even if policymakers took Rubin’s advice to “act now” and immediately halted all further U.S. carbon dioxide emissions forever, this draconian move would only make global temperaturesone-tenth of a degree Celsius cooler in the year 2100 than they would otherwise be, if the U.S. government took no action.

Incidentally, here is the video compilation I made the graphics guy at IER assemble, in response to Paulson saying he knows about risk management and that’s why we should take him seriously as he lectures us on climate change:

 

10 Aug 2014

The Importance of Willpower and Wisdom

Religious 19 Comments

My son and I were discussing spiritual matters and came up with these observations, which may interest some of you:

==> If you give your soul to the Lord, you may suffer greatly in this life (look what happened to Jesus, who obeyed His Father perfectly), but you will receive eternal bliss.

==> If you give your soul to the Devil, you may bask luxuriantly in this life (we can’t know, but probably some members of the Bilderberg Group come to mind), but you will receive eternal torment.

As I told my son: “Not everyone believes in this stuff, but suppose for the moment that that really is the tradeoff: What’s the wise choice?”

Now, for those of you who don’t “believe in this stuff,” notice that it still serves a useful metaphorical role. People talk about “selling your soul” all the time, even atheists; this is a real thing.