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A Tale Of Two Oil States

online.wsj.com

14 pointsteawithcarl17 comments

> California has the natural resources and technical expertise to be the next Texas if it wants to be. What it needs is the political will. California Governor Jerry Brown at least says he wants to drill, but his dominant Democratic Party is so beholden to the already-rich greens that the state is paralyzed.

Those poor oil companies, being outspent by the Green Party spending juggernaut!

That $80 billion number is fictional. The proper measure of the net income from extractive services must subtract the value of the decrease in oil in the ground (you don't count selling off your family jewelry as net positive wealth generated!). Valuing oil in the ground is difficult, but the net value generated by that extraction is a fraction of the 80 billion number.

"if California were more like Texas" I'm glad I was lying down when I read this line. Even if I was sitting in a chair I would have fallen out of it laughing as hard as I did. This reads more like PAC Campaign Ad than a news Article...

Treating capital as profit is just one small part of the problem. The larger issue being that fossil fuels are not sustainable. Other countries are rocketing forward (solar in germany, wind in denmark, etc) while the US is holding on to a past which is killing us.

So someone who wants to drill in CA paid Rupert Murdoch to print this article. This is propoganda, not journalism.

It's in the opinion section so it's fair game.

(FWIW I'm against drilling too)

What facts in this article do you dispute? This is a carefully researched and reasoned article that is consistent with what I know about California after living there 40 years. California's anti-drilling stance has existed since they banned offshore drilling after the Santa Barbara oil spill. The Sierra Club was formed in California (named after the mountain range there) and has a history of environmental activism. I don't think this article is much of a surprise to anyone.

Regardless of whether everything that's said is true, it is very clearly written as a persuasive piece rather than a purely informative one. Propaganda doesn't have to contain outright lies.

However, I would certainly take issue with, "The judge ordered an environmental review of the drilling process [fracking] that Texas, North Dakota and other states have safely regulated for years."

There are serious safety and environmental concerns about fracking. These include its significant water usage and the possibility that fracking might be able to trigger major earthquakes. These are both issues that are especially important to California.

Saying that fracking has been "safely regulated" seriously glosses over legitimate concerns that other states have accepted as the cost of the associated economic prosperity

It was more the tone. It was pretty blatantly playing the "real Americans" against the "coastal elites" in a way that can only be called blunt and amateurish.

On a not particularly related note, speaking as a tax-paying Californian who buys gas, The actions of California seem perfectly rational. The oil is finite; once you extract it, all you have is land that costs a bunch of money to clean up. You might as well get as much as possible out of it. Let Texas and the rest of the world sell their gas and oil into the current market; I feel pretty comfortable saying that the price of oil, long term, has quite a lot of upside. Nothing wrong with sitting on an appreciating asset.

Not that I advocate drilling in California, or increasing the amount of fossil carbon dumped into the atmosphere, but I'm not entirely convinced that oil prices will only go up. This has helped me in understanding a fundamental paradox of orthodox economics and the environmental movement, in particular the Simon-Ehrlich wager. I'm beginning to suspect Simon might have won regardless. He did in the time scale initially agreed on: a wager for the price of five metals in 1990, made in 1980. (http://en.wikipedia.org/wiki/Simon%E2%80%93Ehrlich_wager)

Energy is fundamental to the economy. It is very fundamental. If a future in which California decides it is expedient to extract the oil under its lands and waters is one in which there's been widespread economic disruption, it's possible that the total decrease in economic output would lower the price of oil.

As a practical matter, oil prices above $85/barrel have been identified as recessionary (http://www.theoildrum.com/node/7246). It's currently at $95.61 for WTI, $104.01 for Brent (http://www.oil-price.net/).

An early reference to the connection between energy (specifically oil) and economic ability was Admiral Hyman Rickover (father of the nuclear navy) in 1957. Profoundly insightful, and forshadowing much of what came to be associated with the ecology and counterculture movements: http://ourfiniteworld.com/2007/07/02/speech-from-1957-predic...

Peak oil will happen, it's merely a question of when it will (or whether it already has). The economic, political, social, and other factors associated with it may not be triggered for some time after, though again, perhaps they've already started.

And if actual fossil reserves don't limit us (coal will likely last at least a century longer, possibly more), climate impacts would have similarly devastating effects. I'm looking at US crop yields this year with concern, though the drought appears to have lessened somewhat in the midwest (while deepening elsewhere).

>Energy is fundamental to the economy. It is very fundamental. If a future in which California decides it is expedient to extract the oil under its lands and waters is one in which there's been widespread economic disruption, it's possible that the total decrease in economic output would lower the price of oil.

This is a very good point.

Edit: on a related note, though, the state can't really borrow money, and generally spends as much as it takes in. (and tax revenues vary wildly with our rapid boom-bust cycles.) - In a very real way, the worse the California economy is doing, the more each dollar of extra revenue would help.

>Peak oil will happen, it's merely a question of when it will (or whether it already has). The economic, political, social, and other factors associated with it may not be triggered for some time after, though again, perhaps they've already started.

My problem with peak oil is that we have fission technology right here, ready to go. It's way cleaner, and way safer than coal. We've got enough uranium to party for a few more generations, and many generations after that if we put some effort into using the stuff more efficiently. It's just political resistance that keeps us on coal/gas instead of fission for our 'in place' generation.

And yeah, not all of our energy use is in-place. But having a good source of cheap and mostly clean electricity? it helps a lot. Heck, there's a lot of oil about that takes more energy to extract than the oil will yield, right? if we have cheap fission power to pump in, well, more of that starts to make sense. So yeah; while cheap fission will power the gears of industry, and long-term can power much of our transport, well, it's going to be a long time before oil stops making sense for transport. (I mean, electrified freight trains? probably realistic. fission-powered container ships? maybe not so realistic.)

And also, I'm being optimistic; I'm assuming that because we have fission, and because it's proven and safe (compared to the alternatives... which is to say, not completely safe, but reasonably so.) we will overcome the political resistance before things get really bad. It's possible I'm wrong.

I'm not arguing that this article contains factually incorrect information. I am arguing that the tail is attempting to wag the dog. We know that Murdoch exercises editorial control at the WSJ even though he was originally forbidden from doing so in the original purchase agreement of the WSJ. So I stand by my point that this is not journalism but instead propoganda written for sole purpose of influencing public opinion for the sake of those with a vested interest in California oil drilling. This is not the 'Opinion' of some editor at the WSJ. This is the 'Opinion' of News Corporation and their board.

The fact that this article is presented as the 'Opinion' of the WSJ editorial board is misrepresentation. That's why I argue that this is not journalism.

I think the author is trying to convince people that California should drill more. But all this did was convince me that CA made the right decision.

The article does seem biased. It says, "California has huge reservoirs offshore" but doesn't mention the enormous BP oil spill in 2010.

CA has off shore reserves - probably true Requiring fracking to get to those reserves has challenges and has multiple concerns outlined including -- http://www.everettassociates.net/article/3509-new-study-high...

I will say this, CA is a bit more cautious than TX in general, and given the recent fertilizer explosion in TX, I'm ok with more regulation than less.

That article link doesn't work for me. Here's one that does:

http://online.wsj.com/article/SB1000142412788732469510457841...

Also, wow, the comments at the bottom of that story are shockingly dimwitted.

Well, at least we know where the WSJ stands on drilling and the environment :).

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