Houston Chronicle vs. Petroleum: The Latest

Oil “worthless”? Under this standard, the commercial airline and cruise industries are worthless, as are the people who can’t effectively work from home.

Normalcy is not the future the anti-oil Houston Chronicle wants to see, an extreme editorial position that combines Green New Deal advocacy with Trump Derangement Syndrome in an election year.

On Sunday April 26, the Editorial Board of the Houston Chronicle published “Remember the People Behind Industry; Put Those Working in Oil and Gas First, Above Free Market Ideology.” The lead Sunday op-ed was meant to soften up the entrepreneurs, politicians, and citizens of the oil capital of the nation and world.

The op-ed was bad, even offensive, penned by a monolithic editorial board (no conservatives or libertarians allowed) that is beholden to climate alarmism and government-forced energy transformation.

The New York Times of Houston goes so far as to intellectually censor those of us who rebut (refute?) the Green New Deal ideology. It is as if there is not a viable case that climate alarm is exaggerated, and dense, mineral energies have distinct environmental advantages over biomass, industrial wind turbines, and on-grid solar panels. (Planet of the Humans, anyone?)

The editorial (in yellow) is parsed with my comments.

Here in Texas, where free market capitalism is a religion, some leaders are showing an open-mindedness we desperately need.

Comment: Wrong. It has been and is political capitalism, not free-market capitalism in Texas, from market-demand proration in the old days to Enron more recently. Free-market energy policy has been the exception, and not the rule in history; today, the upstream Texas oil lobby is after many of the ten (10) major government interventions. [1]

For the rest of the world, the price per barrel of oil is a barometer for economic health. For Houston, the world’s energy capital, it’s a kind of electrocardiogram. When a barrel of dropped temporarily to negative $37, it set off a regional heart attack.

Comment: Does the Chronicle understand that this price was for a few deals out of thousands in a freakish moment?

If Houston’s worth is heavily defined by something suddenly deemed worthless, what does that say about our city, about us? It says markets are fickle. Job losses are painful. No industry is impervious. But yes, we still power the world. We just have less time than we thought to find a way to do it smarter.

Comment: Oil “worthless”? Under this standard, the commercial airline and cruise industries are worthless, as are the people who cannot work from home.

People are confined because of a Pandemic, and oil prices have collapsed because the demand for mechanized transportation fell by nearly one-third because of the Pandemic. (Global supply, meanwhile, increased.)

Once people are liberated, they will drive, fly, and cruise. Maybe even take a train. Expect oil prices to slowly climb and asset revaluation and redeployment to bring the industry back to life. But normalcy is not the future the anti-oil Houston Chronicle wants to see, an extreme editorial position that combines Green New Deal advocacy and Trump Derangement Syndrome in an election year.

According to economists at the Federal Reserve Bank of Dallas, the true rate of unemployment in Texas is at least 12.4 percent. The Chronicle’s Erin Douglas reports that the national rate could spike to near 20 percent with folks across the Houston region joining the unemployment rolls.

Mitchell Graff is the co-founder of a small independent oil company. A lean six foot six, he embodies the Texas spirit we celebrate — the risktaking unconventional behind our recent good times. When private equity for exploration dried up in late 2019, though, he had to close shop and went back on the job market. He expected to search for three to six months.

“There is an old saying in oil and gas — good times are good and bad times are bad,” Graff says. He built up his savings during the good times but now he is expecting 12 to 18 months before finding new employment.

Comment: The current oil Depression is certainly not the industry’s fault or the result of normal consumer behavior. It has nothing to do with that amorphous goblin, climate change, either.

In hopes of limiting the carnage, two small companies, Parley Energy and Pioneer Natural Resources, convinced the Texas Railroad Commission to consider “extraordinary, limited and temporary government intervention” to mandate production cuts and thereby stabilize prizes.

Comment: This is political capitalism, not free-market capitalism. Did these companies hedge their forward oil production? Can mandatory proration be fair and effective without the other oil states and foreign nations joining in? (See more tough questions here.)

For Commissioner Ryan Sitton and Chairman Wayne Christian, opening up that conversation was a big departure from their previous free market evangelism.

Comment: Has one member of Chronicle editorial board read a book about the oil industry and politics before the 1980s? Such Left, Progressive authors as Robert Engler chronicled how state market-demand proration in Texas, Oklahoma, Louisiana, and the other oil states was politics first and economic rationality last.

“Free market evangelism” is a smear term, by the way, not much above climate “denier”.

Even if the commission acted now to curb production, though, it would be “too little, too late” according to Amy Myers Jaffe, a senior fellow for energy and the environment at the Council on Foreign Relations. The drop in demand for oil is too steep, the world’s storage tanks too full.

Nevertheless, the world was watching Texas. On April 14, when the railroad commission convened online, upwards of 20,000 people in 86 countries and 49 states tuned into a 10-hour meeting. Dozens submitted comments. On one side, Exxon Mobil, Marathon Oil and many others called for the free market to sort out winners and losers. The other side included a mix of strange bedfellows.

Environmentalists saw a precedent for an orderly transition to a net-zero carbon future. Others saw a need to protect energy independence and national security.

Comment: Strange bedfellows indeed. But remember that Enron was the greenest energy company in the world to the environmentalists, with Ken Lay supporting the government policy establishing a price on carbon dioxide (CO2, a nonpollutant) and investing in solar, wind, and energy efficiency.

Check out Michael Moore’s Planet of the Humans, which eviscerated biomass and wounded wind and solar. (Part II and Part III of Planet need to document the problems of these two remaining politically correct renewables.)

For yet others, it was about preventing the big companies from gobbling the struggling smaller ones and cutting more jobs.

Comment: This is political capitalism, not “free market capitalism” (see above).

We urge the Texas Railroad Commission to keep the options open.

Comment: The Chronicle wants proration politics to control Texas oil production as part of a “green” keep-it-in-the-ground policy. Industry proration proponents please take note.

Yes, the free market produced the fracking revolution and all its ensuing prosperity but we must do better by the people — the welders, lawyers, rig workers, engineers, geologists, truckers, accountants — who get cast aside and are expected to reinvent the industry once again. We must do better by the neighbors who have had to breathe in air polluted by wasteful gas flaring. We must do better for the whole world on carbon emissions. All these challenges are interrelated. Oil will make a recovery. The question is whether we keep making the same mistakes of excess and deprivation with each swing, and fail to transition over a longterm decline.

Comment: Throw the workers a welfare bone after disparaging their business as producing a socially destructive commodity….

According to Mark Finley, a former BP economist and fellow at Rice University’s Baker Institute, oil and gas provided about 55 percent of the world’s energy. Even if the Paris Climate Agreement objectives for cutting carbon emissions enough to limit global warming to two degrees Celsius are met, oil and gas will still constitute roughly 40 percent of the world’s energy.

Comment: The Paris Climate Agreement had no chance, as weak as the voluntary (“aspirational”) accord was. Wind and solar are at war with consumer-preferred, taxpayer-neutral dense mineral energy. James Hansen, the father of the climate alarm, called Paris “a fraud really, a fake.

As he waits this crisis out, figuring out health insurance for his growing family has been Graff ’s biggest challenge. He warns that many won’t be able to hang around. They may leave the industry, and Houston.

“What’s distinctive about Texas is what is above the ground,” says Finley, noting that underground shale resources are found around the world. “The reason the shale revolution hasn’t happened elsewhere is what is above the ground.”

Comment: Interesting …. Resources come from the mind, not the ground, as economists have noted. But this does not mean we can ‘reinvent” energy in disregard to the physics of mineral energies versus intermittent, dilute renewable. Renewables was cavemen energy; the market share of renewable energy was virtually 100 percent in the pre-Industrial era.

Houston reinventing itself as a different type of energy capital isn’t inevitable. We must take care of the innovators. That means managing our natural resources in a fair way and strengthening our social safety net. Call it socialism if you want but it’s necessary to sustain our beloved free market.

Comment: Ah ha, saving capitalism from itself, a New Deal argument that failed to understand that the Great Depression was government sustained, beginning with Herbert Hoover and continuing with FDR.

Contra the Houston Chronicle editorial board, Houston does not have to become the City of Enron by turning to government to subsidize what consumers do not want: (on-grid) solar panels, wind turbines, electric cars, efficiency mandates, and biofuels.

Houston needs to be Houston. The oil and gas capital of the United States–and world. Market entrepreneurship, not political entrepreneurship. Not the Green New Deal but the Real Deal of oil and gas.

————————————

[1] These are:

  • Federal loans in return for an ownership interest and/or output control
  • Federal payments for non-produced (in-the-ground) oil
  • Ethanol bailouts
  • Diplomacy/”jawboning” for global production cutbacks
  • Anti-dumping investigation/finding by the U.S. Department of Commerce
  • Market-demand proration by the Texas Railroad Commission
  • Import restrictions
  • Royalty-payment suspension on federal lands
  • “Cash for clunkers” 2.0
  • Purchases for the Strategic Petroleum Reserve (SPR)

The post Houston Chronicle vs. Petroleum: The Latest appeared first on Master Resource.

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May 6, 2020 at 09:08AM

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