This page was last updated on January 8, 2013.
What oil boom?; Christina Sarson; Beaver County Times; January 4, 2013.
Previous Sarson letters I critiqued were “Anger won’t fix pipes,” “Industry should be taxed for protection,” “Global warming is beyond ‘bigot’,” and “No reason to bar gays from military.” Two letters I did not critique were “Taxing the pavement” (9/8/11) and “Do the benefits outweigh the risks?” (10/5/10). The latter letter is no longer on the BCT website. In “Taxing the pavement,” Ms. Sarson appears to imply she believes in manmade global warming.
In January 2012, Ms. Sarson initiated an e-mail exchange with me that lasted about a month. I forgot about Ms. Sarson’s last note (her third in the exchange) to me until I ran across it while writing this critique. I wrote two replies at the time; the first addressed Ms. Sarson’s comments about some issues. After that, and based on the complete thread, I wrote a second reply indicating the more I read her note, the more I came to believe continuing our exchange would benefit neither of us. I was on the fence about which reply to send. Eventually, this exchange fell off my radar screen and it appears I sent neither reply.
Below is a detailed critique of the subject letter.
“According to the Dec. 30 article, ‘Traveling with full tanks,’ there are more than 20 times the oil coming out of the Northern Plains by train since 2009, and the pipelines are positively gushing with the stuff.”
[RWC] According to the EIA, “the oil coming out of the Northern Plains” amounts to only about 750,000 barrels/day as of October 2012, about 11% of total domestic production, 5% of domestic production plus imports, and 0.9% of worldwide production. At the same time, however, Gulf of Mexico production is still between 400,000-600,000 bpd below its 2010 peak of 1.7 million bpd. The increase of North Dakota production just about offsets the drop in Gulf of Mexico production.
“Consumer gasoline prices have risen fairly steadily since 2009, after dropping from the 2008 spike. Environmental catastrophes aside, with multinational corporations extracting domestic oil using taxpayer subsidies, how can we say that domestic nonrenewable fuel extraction is the way of the future? Is it even working for us currently?”
[RWC] I don’t know what point Ms. Sarson is trying to make. For about the last two years, gasoline prices have been bouncing between about $3.10/gal and $4.00/gal. Right now it looks like we’re near the bottom of a cycle. If Ms. Sarson’s point is gasoline prices should be lower because of increased Northern Plains production, a lot of things (demand, supply, dollar strength, et cetera) affect prices. In the case of supply, a source that supplies less than 1% of worldwide production will have a negligible effect on prices by itself. That’s why it’s important not to exclude an area from crude-oil production unless absolutely necessary.
As I’ve written since at least 2005, there’s no question the oil and gas industry needs no subsidies, tax breaks, et cetera. That’s my position for all businesses, not just oil and gas.
To which “taxpayer subsidies” does Ms. Sarson refer? My experience is when someone complains about “taxpayer subsidies” for “multinational [oil and gas] corporations” and other industries they don’t like, those “subsidies” or “loopholes” turn out to be provisions (deductions, exemptions, etc.) of the tax code available to all businesses. For example, all businesses can deduct most business expenses like employee pay, depreciation, raw materials, etc. from their gross income for tax purposes. That said, not all businesses/industries have the same expenses so some provisions don’t apply to all businesses. For example, if a business doesn’t make capital investments, that business has no depreciation expenses to deduct.
I found no Sarson letters complaining about grants/subsidies/loan guarantees for “green” energy companies like Solyndra, A123 Systems, Ener1, Abound Solar, et cetera. As a reminder, these four companies eventually filed for bankruptcy after receiving hundreds of millions of dollars in grants/subsidies/loan guarantees paid for by local, state, and federal taxpayers. It appears Solyndra alone will cost federal taxpayers about $528 million and tax-credit sweeteners throw in to attract private investors could cost us a few hundred million dollars more. Adding insult to injury, A123 Systems (Red Chinese) and Ener1 (Russian) went under foreign ownership as part of their bankruptcy proceedings. I also found no complaints about the government bailouts of Chrysler and GM.
Ms. Sarson appears to imply if you support “domestic nonrenewable fuel extraction” you believe that alone will solve our energy challenges. I’ve written before I have no problem with “green” energies and I think most of us believe we should exploit all economically and technically viable energy sources. By “economically viable” I mean the ability to compete in the marketplace without subsidies, tax credits, et cetera. This is the same position I take with all forms of energy production. What I take issue with is pinning our present and future solely on “green” energies while tying our hands behind our back regarding domestic production of coal, hydro, natural gas, nuclear, and oil-based energy. Instead, we need to let the marketplace do its job without government interference beyond that deemed necessary by limited-government principles. This is not the position of most leftists most of the time. Indeed, as soon as “green” energies get close to commercial viability, they are no longer deemed “green.” We’ve seen this already with some hydro, wind, and solar projects.
As for “Is [domestic nonrenewable fuel extraction] even working for us currently?,” the answer is “yes.” “Nonrenewable fuel extraction,” domestic and foreign, provides the vast majority of our energy needs. That said, I don’t know what Ms. Sarson means by “working for us.”
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