Friday, December 9, 2011
Random ruminations from your resident curmudgeon...
As a nation, we import most of our oil from countries in the middle east, many of which are hostile to our nation and its interests. Why, you ask? The standard response is that is where the oil and energy resources are located that we as a nation need. Based on that premise, a movement to cut foreign oil imports and move toward more green alternatives, such as electric cars and solar energy, has arisen. In and of itself, that is not bad. Here is something you should know: in 1980, the U.S. government estimated that our proven oil reserves in this country was 30 billion barrels. Yet over the last 30 years, the U.S has produced 77 billion barrels of oil (source: Institute for Energy Research). So did that oil just magically appear? No. The fact is that our country has all the natural resources that we need to supply our energy needs for years to come. Consider the following (click to enlarge):
We know that much of the oil in our country is in Texas and Alaska. Perhaps we are having such a hard time finding it because all the dipsticks are in Washington.
In the last 100 years, the population of the U.S. has tripled; life expectancies have increased 70%; the per capita Gross Domestic Product has risen 600%; and standards of living have increased across all income classes. There are several reasons for this, one of which is readily available, reasonably priced energy sources. The automobile industry, for example, has grown because of reasonably priced and readily available gasoline. Petroleum based products, such as plastics, has changed our standard of living for the good and has improved our quality of life. So why are some wanting to limit the availability of these resources, which in turn will cost us more out of our pockets and in turn lower our standard of living? For some, their opposition to developing our own resources is rooted in a true philosophical belief that utilizing our own reserves of natural resources will harm the environment. The perception of the energy industry in this country of a horrific polluter (which at one time it was) drives their actions. I can respect that position. I would tell you, dear reader, that this is a minority of those that are opposed to developing our own resources. Instead, I will tell you what I always tell you- follow the money. Look closely at the government guaranties, grants, loans, and legislative support that the "alternative" energy sector has received and is receiving. There is a monumental pecuniary interest for many by promoting green energy and receiving government largess for doing so. Here is the bottom line that we should all keep in mind: environmental responsibility and stewardship is necessary and worthwhile; we cannot however, ignore the economic benefits we receive from affordable and readily available energy.
My wife is like nature: she abhors a vacuum.
Last week, the markets cheered an improvement in the unemployment rate, as the nominal rate dropped below 9% for the first time in 18 months. The stated rate was 8.6%. Here is what you should know: that "good" number is absolutely meaningless. Why? Because under the direction of the Obama administration, the labor force was arbitrarily reduced, which through a simple mathematical effect of working off a smaller base would make the number look better. In the latest calculation, over 425,000 adults that are out of work were "re-classified" (not counted) from the prior month, which shrinks the adult work force down to 64%. Where did those people go? Alien abductions? Perpetually stuck in a line at the Department of Motor Vehicles?We all know the economy is weak and the job market stinks. The blatant manipulation of the numbers is nothing more than a political ploy and cooking the books by the federal government. As investors, and more importantly as citizens, we should not be fooled.
How did I get over the hill without getting to the top?
And that, my friends, is my view.