Modern Economies Run on Oil and Gas, not Electricity
It's going to be a long, cold winter in many areas of the US and the world - but it doesn't have to be. People should know that what is coming was a choice, not an inevitability.
People, even Democrats, will not be able to hold on to luxury beliefs in the face of real hardship. When people in New England and California begin to face blackouts and extreme shortages of natural gas and heating oil, when they can't charge their EV's (the repositories of their virtue) or heat their homes, even the most doctrinaire leftist is going to ask, "Who did this?"
Whether they come up with the right answer is another question entirely. They aren’t very good at this kind of thing. They will inevitably come up with the wrong answer.
They will attack the very industries they begged the Biden regime to strangle.
The leftists will call on the government for help - but that help isn't coming, largely because inflation now has a life of its own and Biden has done so much structural damage to the energy markets, there is literally nothing they can do in the near term to change anything. Biden has sold down the Strategic Petroleum Reserve to a point it is a national security issue.
The answer to the issue is so obvious. It always has been.
It is energy.
Obama went to war with the energy sector as well, just not with the reckless abandon of the idiots currently in the White House.
In 2011, I wrote that if we free the energy sector, we free the economy. The same is true today.
Victor Davis Hanson outlined a winning platform for Republicans back in 2011 (too bad they didn't listen):
"If the government were an individual household, the only way out would be to cut spending and find new sources of wealth. Given worldwide demand for food and fuel, and given recent quite astounding new finds of natural gas and oil in the Dakotas, the eastern seaboard, offshore, the American west, Alaska, and Canada, it seems that we should be hell-bent on recovering these high-value fuels through new drilling, refineries, and pipelines, including ways to power our heavy trucks and equipment on natural gas….
…We should be planting acre to acre and end nonsensical biofuel subsidies and artificial limitations on irrigation deliveries to California’s West Side and elsewhere in the West. We need a national manufacturing policy that prunes regulations and encourages investment here in the U.S., ceases talk of new taxes, repeals the trillion-dollar take-over of the health-care industry, and stops hectoring Boeing about opening a new facility or trying to shut down energy generation plants. Unemployment, food stamps, gargantuan debt, absorption of private companies, solar and wind subsidies, new environmental, labor, and financial regulations atop an existing labyrinth of red tape — all that has not led to new job creation or economic growth."
VDH was right then, and a decade later, he is still right.
One of the most significant hurdles that our economy must overcome is the lack of fuel to feed growth.
Reopening energy exploration and production in the US would have an immediate “shock” effect because hydrocarbon-based energy touches all strata of the economy and does so all at once.
Energy is the key. Energy in its various forms – electricity, oil, natural gas, and coal – is at the root of every product, process, and environment in the world. Things are made from it; it is required to fuel the processes used to create and it is required to make harsh or uncomfortable environments habitable or more comfortable for living beings. Take a basic item, food, as an example: production productivity relies on the fuel for mechanized equipment to cultivate, harvest and process, it requires the use of chemicals – seed coatings, fertilizers, herbicides and insecticides, processing and packaging requires energy to keep factories running, transport it to market and to make the sanitary packaging for mass distribution…it is clear that an increase or decrease in energy costs can have a significant impact on the cost of food.
Cheaper fuel leads to cheaper production costs of products, immediately has an impact on personal income and strengthens the balance sheet of all companies by lowering overall costs to do business. It also immediately increases employment in the E&P (exploration and production) and EPIC (engineering, procurement, installation, and construction) sectors of the oil patch.
These are all good, high paying jobs that could be created at the cost of a signature that reverses current policy.
But Biden fired Milton Friedman and replaced him with John Maynard Keynes and Karl Marx.
Keynesians believe that government involvement in the economy by “incentivizing” consumption via “stimulus” (government) spending is an appropriate way to initiate growth. Part of that is true, an increase in demand does spur consumption and generates economic growth but the caveat is that there must be a reason for the consumer to spend. The big fallacy in the Keynesian proposition is that not all spending is equal, especially if debt is involved. Government creating debt has an impact on the market for leverage by crowding private sector instruments out. If debt must be generated to spend and the net consumption is not greater than the cost of the debt, the net effect on the economy is at best zero and at worst negative…and the availability of leverage to finance growth disappears.
That is the reason sustained growth and recovery simply cannot be generated by short term bursts in government “incentivization” via public works projects that yield no economic impact (repaving roads is nice but it does not provide a benefit as long as the old road is adequate for purpose) or direct payments/tax credits to citizens who are cautious or uncertain about the future (they use that to offset current expenses or save the money and reduce spending).
But a simple change in Biden’s disastrous and destructive war on energy can generate sustainable, long-term growth. The fact is the government artificially depresses so many sectors of the economy, there are growth opportunities to exploit everywhere.
The best way to generate sustained demand is to make a product less expensive without sacrificing quality or availability. This means that working on the price side of the equation, as Keynesian economics does, while ignoring the cost side will never produce a sustained recovery or period of growth. Lower costs mean people can afford to buy more at a given level of income and not only will they buy “more” in quantity, but they are also able to buy “more” in relation to the quality as well.
The government can never do what the free market can, nor can it do it as quickly.
Turn on the oil spigot.
That is the right answer.
You are getting to the issue of productivity of government (read borrowed) investment. The best on that topic comes from Friedman:
While traveling by car during one of his many overseas travels, Professor Milton Friedman spotted scores of road builders moving earth with shovels instead of modern machinery. When he asked why powerful equipment wasn’t used instead of so many laborers, his host told him it was to keep employment high in the construction industry. If they used tractors or modern road building equipment, fewer people would have jobs was his host’s logic.
“Then instead of shovels, why don’t you give them spoons and create even more jobs?” Friedman inquired.
Drill, baby, drill!