Yesterday’s excerpt from Mark Mills and Peter Huber’s book The Bottomless Well showed how people consume energy to discover and create more energy through technological advances. Today’s excerpt from Robert Bradley’s 2009 book Capitalism at Work: Business, Government, and Energy makes a similar point, that there are no such thing as “natural” resources. As he writes, “Resources without man are not resources.”
His name is not found in economics textbooks or histories of economic thought. Where it does appear, his Germanic surname is often misspelled. His contribution is virtually unknown in the world’s vast mineral-resource industries today. Government policies owe little or nothing to him. Yet Erich Zimmermann (1888–1961) developed a new theory to explain why fixity and depletion were the wrong way to view minerals in an economic and business sense.
Zimmermann’s 1933 World Resources and Industries began a line of analysis that would explain a paradox of economic life—the growth of supposedly “depletable” supply, whether measured as current production or known reserves. …. Economists from Jevons forward focused on a conception of known resource quantities that, by definition, depleted as they were mined and consumed. Future production costs would rise as mining progressed from superior to inferior deposits. Resource prices were destined to increase in the face of continuing demand and, certainly, demand growth. The increasing scarcity of mineral resources might be gradual or rapid, but the direction was not in doubt, even allowing for improved exploration and extraction technology.
Zimmermann rejected this outside-in view that saw resources as a knowable, fixed quantity. Such a perspective was for the natural sciences, not economics. Instead, he started from the inside out: “the appraising mind of the economic decision-maker.” Resources, defined as “the environment in the service of man,” exist only from “human wants and abilities.” Resources without man are not resources. The interaction between man and environment is central.
[click to continue…]
Stimulus spending on environmentalist policy is a green albatross around the neck of President Barack Obama. Inspectors General are having a field day auditing stimulus-funded programs for so-called “green jobs,” and the media LOVES stories about wasted taxpayer money. What started as a sop to his environmentalist base, now threatens to become a slow-drip nightmare of negative press. The timing couldn’t be worse for the President. It takes time to disburse scores of billions of dollars, so we are only now starting to scrutinize stimulus spending. By November 2012, we’ll be able to account for most of the money, and unless the current trend changes radically, the Executive in Chief is going to look conspicuously incompetent.
Here’s the back-story: In early 2009, the Executive and Legislative branches of government had a popular mandate to defibrillate America’s moribund economy with a huge injection of taxpayer dollars. Instead of limiting this “stimulus” to state bailouts and infrastructure spending, the Obama administration (led by climate “czar” and former EPA administrator Carol Browner) and the Congressional majority (led by House Energy and Commerce Chair Henry Waxman (D-Beverly Hills)) also sought to advance environmentalist policy. As a result, the American Recovery and Reinvestment Act, a.k.a. the stimulus, included almost $70 billion in spending for green jobs and renewable energy infrastructure.
Every single link along the green energy supply chain was showered with subsidies. There was funding for green jobs training, funding for factories to make green products, and funding to incentivize demand for green goods and services. It was as like a green Gosplan!
[click to continue…]
Yesterday’s excerpt from Daniel Yergin’s new book The Quest showed how even preeminent scientists have fallen for poor predictions about future energy supplies. Today’s excerpt explains why. In their myth-crushing book The Bottomless Well: The twilight of fuel, the virtue of waste, and why we will never run out of energy, Peter Huber and Mark Mills argue that the quantity of raw fuel matters less to energy security than our ability (both technological and political) to extract the fuel. In this passage, they make the counter-intuitive point (one of many in this book) that energy consumption, rather than limit our supply of energy, actually increases it.
Though he was prepared to go quite a bit deeper when he turned on his steam-powered drill in Crawford County, Pennsylvania, in 1859, Colonel Edwin Drake struck oil at 69 feet. The first “deep water” oil wells stood in 100 feet of water in 1954. Today, they reach through 10,000 feet of water, 20,000 feet of vertical rock, and another 30,000 feet of horizontal rock.
Yet over the long term, the price of oil has held remarkably steady. Ten-mile oil costs less than 69-feet oil did, and about the same as one-mile oil did two decades ago. Production costs in the hostile waters of the Statfjord oil fields of the North Sea are not very dfiferent from the costs at the historic Spindletop fields of southeast Texas a century ago. There have been price spikes and sags, but they have been tied to political and regulatory instabilities, not discovery and extraction costs. This record is all the more remarkable when one considers that the amount of oil extracted has risen year after year. Cumulative production from U.S. wells. alone has surpassed a hundred billion barrels.
The historical trends defy all intuition. It is easy enough to thank human ingenuity for the relatively steady price of a finite and dwindling resource and leave it at that. But there is a second part to this story: it is energy itself that begets more energy. Electrically powered robots pursue new supplies of oil at the bottom of the ocean. Electricity purifies and dopes the silicon that becomes the photovoltaic cell that generates more electricity. Lasers enrich uranium that generates more electricity that powers more lasers. Power pursues the energy that produces the power.
[click to continue…]
Below is an interesting excerpt from Daniel Yergin’s new book The Quest: Energy, Security, and the remaking the modern world, an epic 700-page journey through worldwide energy history. The passage describes how even the preeminent scientists from ages past have fallen for phony fears about energy.
The fear of running out of energy has troubled people for a long time. One of the nineteenth century’s greatest scientists, William Thomson–better known as Lord Kelvin–warned in 1881, in his presidential address to the British Association for the Advancement of Science in Edinburgh, that Britain’s base was precarious and that disaster was impending. His fear was not about oil, but about coal, which had generated the “Age of Steam,” fueled Britain’s industrial preeminence, and made the words of “Rule, Britannia!” a reality in world power. Kelvin somberly warned that Britain’s days of greatness might be numbered because “the subterranean coal-stores of the world” were “becoming exhausted surely, and not slowly” and the day was drawing close when “so little of it is left.” The only hope he could offer was “that windmills or wind-motors in some form will again be in the ascendant.”
Three quarters of a century after Kelvin’s address, the end of the “Fossil Fuel Age” was predicted by another formidable figure, Admiral Hyman Rickover, the “father of the nuclear navy” and, as much as any single person, the father of the nuclear power industry, and described once as “the greatest engineer of all time” by President Jimmy Carter.
“Today, coal, oil and natural gas supply 93 percent of the world’s energy,” Rickover declared in 1957. That was, he said, a “startling reversal” from just a century earlier, in 1850, when “fossil fuels supplied 5 percent of the world’s energy, and men and animals 94 percent.” This harnessing of energy was what made possible a standard of living far higher than that of the mid-nineteenth century. But Rickover’s central point was that fossil fuels would run out sometime after 2000–and most likely before 2050.
[click to continue…]
Rent-Seeker Glee
Robert Bradley, Jr., Master Resource, 14 November 2011
No Free Lunch: Green Energy Is Causing Costs To Rise for California Ratepayers
Garance Burke & Jason Dearen, AP, 13 November 2011
Obama’s Green Crony Capitalism
Peter Scweizer, Newsweek, 13 November 2011
Before Solyndra, a Long List of Failed Government Energy Projects
Steven Mufson, Washington Post, 13 November 2011
A Goldrush in Subsidies for Green Energy
Eric Lipton & Clifford Krauss, New York Times, 11 November 2011
America has an abundance of natural resources, yet our policies keep them locked up. We can’t drill in the Gulf. ANWAR is off limits. Mining is nearly impossible due to regulations. “Endangered species” threaten existing supplies.
Meanwhile resource discoveries are being made and developed the world over.
[click to continue…]
Newt Gingrich, currently campaigning for the GOP Presidential nomination, rightfully regrets appearing in a 2008 advertisement with then-House Speaker Nancy Pelosi, in which they both exhort political leaders to fight global warming (presumably by enacting a cap-and-trade policy that would ration energy use). The ad, which is available here, was produced by a global warming agitprop non-profit founded by former Vice President Al Gore.
According to the Daily Caller’s Jeff Poor, Gingrich last week told a panel on Fox’s “Special Report,” that the ad “is probably the dumbest single thing I’ve done in years.” I agree with him that the ad was a bad idea, but I don’t think it’s the dumbest thing he’s done in years. The dumbest—and also the greediest and most inhumane—of Gingrich’s recent actions is his having shilled for ethanol.
[click to continue…]
California’s environmentalist leadership is so desperate to go green that regulators will approve any renewable energy project with a high chance of being completed. Cost doesn’t matter. Nor must the project be necessary to meet the state’s renewable energy goals. The only criterion that counts is feasibility. If you can build it, state officials will approve it.
This is an outrageously low bar, yet it was the precedent set last week, when the California Public Utilities Commission, by a 4 to 1 vote, approved a 25-year contract for Pacific Gas and Electric to buy electricity generated by the Mojave Solar project, a 250-megawatt solar power plant that will soon break ground in San Bernardino County.
[click to continue…]
Senate Defeats Resolution to Rein in EPA
The Senate defeated Senator Rand Paul’s resolution of disapproval of the Cross-State Air Pollution Rule (CSAPR) on Thursday, November 10. The vote on S. J. Res. 27 was 41 to 56.
Under the Congressional Review Act, the resolution required only a simple majority. Forty-one votes was a disappointing result. It can largely be blamed on four senators, who introduced two competing bills to delay rather than block the rule. S. 1833 was introduced by Senators Dan Coats (R-Ind.) and Joe Manchin (D-W.V.). S. 1815 was introduced by Senators Lamar Alexander (R-Tenn.) and Mark Pryor (D-Ark.).
These bills allowed several Senators to vote against the resolution, while claiming that they support doing something. Since neither of these bills has any chance of getting the sixty votes necessary, this claim is entirely hypocritical.
The odd thing is that the four senators introducing these two bills represent states covered by the CSAPR, which may do serious economic damage to their economies. Perhaps they don’t care.
[click to continue…]
News You Can Use
Oil and Gas Sector Is Driving Job Growth
According to a recent report by economics consulting firm EMSI, nine of the top eleven fast-growing jobs in the nation are in the oil and gas sector. The cause of the job growth is high demand for hydrocarbon energy and also technological breakthroughs in drilling (primarily hydraulic fracturing, also known as “fracking”).
His name is not found in economics textbooks or histories of economic thought. Where it does appear, his Germanic surname is often misspelled. His contribution is virtually unknown in the world’s vast mineral-resource industries today. Government policies owe little or nothing to him. Yet Erich Zimmermann (1888–1961) developed a new theory to explain why fixity and depletion were the wrong way to view minerals in an economic and business sense.
RSS Updates 
RSS E-Mail Updates 
CEI.org