Cafe Hayek
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At the White House this morning, Pres. Obama behaved very much like a North American version of a banana-republic Generalisimo: posing as a tribune of a People besieged by nebulous devils, he blames those devils for the ill-consequences of his own bad policies and announces that heâ??s unleashing his henchmen to track down and subject the devils to the Peopleâ??s justice. And as is so frequently the case with generalisimos, the devils are speculators.
I (along with many other scholars) have written on speculation and how itâ??s easily misunderstood â?? and, hence, why itâ??s so tempting for power-mongers to turn speculators into political scapegoats. See, for example, here, and here. If the spirit moves me, I might write more on the economics of speculation in the near future.
Hereâ??s a summary of his proposal to bring the speculating devils to justice.
Before signing off now, though, consider this other generalisimo feature of this morningâ??s announcement by El Supremo Gen. Pres. Obama:
But as Iâ??ve said repeatedly, the problem is we use more than 20 percent of the world's oil and we only have 2 percent of the world's proven oil reserves. Even if we drilled every square inch of this country right now, we'd still have to rely disproportionately on other countries for their oil.
Mr. Obama here is either inexcusably ignorant or heâ??s intentionally misleading his listeners. (Given the ethical qualities of successful politicians, my money is on the latter.)
Hereâ??s how The Society of Petroleum Engineers defines â??proved [not, btw 'proven'] reservesâ?:
Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations.
The very definition of proved reserves excludes petroleum that is put off limits by government regulations. Loosen those regulations, and proved reserves increase immediately and as consequence of the loosening of the regulations. I posted last month on this matter.
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