Environmentalists Unwittingly Cause Oil Producers to Disprove 'Peak'
Richard Tsong-Taatarii/Star Tribune via AP, File
Environmentalists Unwittingly Cause Oil Producers to Disprove 'Peak'
Richard Tsong-Taatarii/Star Tribune via AP, File
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One of my favorite passages early on in my class’ textbook explains one of the reasons to study economics; to be “a well-rounded thinker.”  Closely related in the next chapter is the concept of positive vs. normative statements. 

Positives can be proven, or disproven, with facts, while normatives are basically opinions.  Anyone who follows and/or partakes in political discourse these days no doubt sees how often the former is dispensed with in favor of the latter. 

One key word to look for when trying to differentiate between the two is “should.” 

Likely in response to democratic presidential nominee Joe Biden’s latest equivocation on fracking, Chris Tomlinson of the Houston Chronicle uses it three times to try to assuage “terrified” Texans about the prospect of a “low-carbon future.”

I would venture a guess that most Texans who have benefitted from the American oil renaissance aren’t “terrified” of such a transformation as much as they are being forced into it by government and academic “experts.”

That’s why he advises “communities, businesses and individuals” to “lean into” it.  The reason we should do so, obviously, is to combat climate change.

He starts his case encouragingly enough by appealing to “anyone interested in the jobs of the future,” submitting that “entrepreneurs might find profitable opportunities.”   

Then he runs into a couple obstacles familiar to market participants, namely “bringing down costs” and getting “someone to pay” for the technology needed to capture carbon, for instance.  That’s one of the four ways in his estimation that Texans can “make even more” than the “billions of dollars” we’ve made by being “one of the world’s largest emitters.”

Believing “no company will have an incentive” to do so otherwise, Mr. Tomlinson, like many other journalists, believes government has the magic wand; putting “a price on carbon.”

At least he kinda understands the concept of incentives.

Along the way, he puts forth an odd prediction that basically serves as a straw-man; that natural gas will become “more expensive.”  That’s where his case starts to slip.

If reduced CO2 emissions are the goal, natural gas use has been a primary driver in getting us there.  As it has supplanted coal as an industrial input and fuel for electric power, emissions in the U.S. have seen a fairly steep dropthis century.  Moreover, ever since the price of it has cratered from its $15-19 peak fifteen years ago, it’s been hanging out in the $2-4 range. 

Unclear is the basis for his forecast, but nevermind.

Despite Mr. Biden’s regular walk-backs of his anti-fracking flourishes, and leftists’ assurances of a gradual transition, any shift will likely have to be done aggressively.  Ironically enough, that’s partly due to some of the bureaucratic structures they already have in place.

Income/wealth inequality being one of the many things they think the state can miraculously cure, one tool they use is simply flooding society with as many artificial dollars as they can.  This comes from either spending programs, or simply turning on the printing press.

Regardless of the method, the dollar necessarily weakens in value.  That serves to drive up the price of oil since it is priced in dollars.  At first glance, that provides the price signal needed for alternative forms of energy to become economically viable.

However, it also spurs the oil industry to disprove yet again the notion of “peak oil.” 

New technology and/or processes come along (hydraulic fracturing and horizontal drilling) that allow for the release of ever-increasing reserves.  Market fundamentals take over, the price drops amid the abundant supply, and the signal vanishes.

As deflating as that short-term phenomena is for the green left, the long-term isn’t any better.

When the dollar is anchored to something of stable value, or its strength is explicitly supported, the aforementioned price signal never even happens.  Given the highly competitive nature of the industry, and fairly predictable supply and demand for energy, a steady lid on prices materializes. 

They can’t win.  Hence the likelihood of a forcible, and consequently painful transition. 

Incidentally, before these new technologies flooded the market with more oil, they did so with natural gas, hastening its use as an atmosphere-saving input.

Years ago, an executive retired from my company still mystified that, at its rock-bottom prices, it hadn’t become more of a factor in transportation, perhaps building on its position as a fleet-vehicle fuel of choice. 

The truth is it has, just not in ways he expected.

Vehicle fleets, like the delivery trucks, police patrol cars, buses, etc. can more easily utilize automobiles that run on natural gas because they have their own fueling stations.  For a growing number of drivers, their home now also doubles as one.

A buddy of mine has had a Tesla for a couple years now, and my uncle is jazzed about the one he bought more recently.  As their primary charging port is their garage, it’s important to note that natural gas has grown to supply almost half of Texans’ electricity needs, while coal’s share has dropped to barely a fifth.

If he wasn’t so bent on “manag(ing) the long-term decline” and “safe winding-down of oil and gas,” Mr. Tomlinson would see that Texans, and Pennsylvanians and North Dakotans among others, have already conquered “foreign competition” with “automation,” and soothed “environmental concerns” without being coerced.

And they’ve done so with arguably less planetary degradation than wind and solar, which he mentions several times. 

He’s one of many writers these days who feel businesses “should do this,” and entrepreneurs “should do that” to achieve a certain dreamy outcome.  One almost wonders why they don’t strike out on their own if they’re so passionate about their ideas.  Without the government to plug into “Phase 2,” they’re little more than the Underpants Gnomes from “South Park.” 

I confess to using the word “should” myself on occasion, but it’s usually in the context of how governmental bureaucrats “should” get out of innovators’ way.  They tend to do well for the rest of us without being soiled by taxpayer dollars.

Christopher E. Baecker manages fixed assets at Pioneer Energy Services, teaches economics at Northwest Vista College, is a board member of the Institute of Objective Policy Assessment, and is a member of the San Antonio Business & Economics Society.  He can be reached via email or Facebook

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