April 23, 2009

Obama’s Oil Tale Wrong on Timing; Today’s Government Would Have Stopped What He Described

DrakeOilExploration1859.jpgIn addition to his abuse of the word “exploration” and his false claim that he has “often said” that he supports additional drilling for oil and natural gas within the U.S. and off its shores, President ‘Prompter Barack Obama misstated the timing of his tale of a pioneering oil man by a “only” a century (picture at right is from “The Story of Oil in Pennsylvania“).

Beyond that, his fond recounting of the history of Pennsylvania’s first meaningful oil discovery ignores the likelihood that if the regulatory regime in place today had been around at the time, not a single drop of oil might have made it to any kind of marketplace.

Here, from a transcript of his speech Wednesday in Newton, Iowa, is Obama’s recitation of the story of Edwin Drake (bolds are mine):

Think about it: Roughly a century and a half ago, in the late 1950s, the Seneca Oil Co. hired an unemployed train conductor named Edwin Drake to investigate the oil springs of Titusville, Pa. Around this time, oil was literally bubbling up from the ground — but nobody knew what to do with it. It had limited economic value, and often all it did was ruin crops or pollute drinking water.

Now, people were starting to refine oil for use as fuel. Collecting oil remained time-consuming, though, and it was back- breaking, and it was costly. It wasn’t efficient, as workers harvested what they could find in the shallow ground. They had to literally scoop it up.

But Edwin Drake had a plan. He purchased a steam engine and he built a derrick and he began to drill.

And months passed. And progress was slow. The team managed to drill into the bedrock just a few feet each day — each day. And crowds gathered and they mocked Mr. Drake. They thought him and the other diggers were foolish.

The well that they were digging even earned the nickname, “Drake’s Folly.” But Drake wouldn’t give up. And he had an advantage: total desperation. It had to work. And then, one day, it finally did.

One morning, the team returned to the creek to see crude oil rising up from beneath the surface. And soon, Drake’s well was producing what was then an astonishing amount of oil, perhaps 10, 20 barrels every day.

And then speculators followed and they built similar rigs, as far as the eye could see. In the next decade, the area would produce tens of millions of barrels of oil.

And as the industry grew, so did the ingenuity of those who sought to profit from it, as competitors developed new techniques to drill and transport oil to drive down costs and gain a competitive advantage in the marketplace.

Now, our history is filled with such stories, stories of daring talent, of dedication to an idea even when the odds were great, of the unshakable belief that, in America, all things are possible.

Now of course, 1-1/2 centuries ago was the late 1850s, not 1950s. But I haven’t seen the establishment media call any attention to Obama’s latest teleprompter-driven error (someone who was thinking while speaking instead of simply reading from a script might have caught the error and corrected it on the fly), and I don’t expect them to.

But more importantly, if the regulatory regime built over the past 75-plus years had been around at the time, it would probably have prevented Mr. Drake from drilling in the first place. The EPA would have found a few puddles in the area, called them untouchable “navigable waters,” and prohibited any kind of development in a many square-mile area.

If he had somehow been allowed to continue, safety inspectors would have forced Drake to buy all kinds of safety equipment for the workers who were scooping up oil in shallow ground, and subjected him to harassing OSHA inspections.

Environmental and NIMBY (Not In My Back Yard) purists would have forced him though noise-reduction regulations to use slower and less efficient drilling methods.

When the oil started bubbling up, the Justice Department, at EPA’s prodding, would have prosecuted Drake for ruining crops and polluting drinking water, and class-action lawyers would have sued him on behalf of all farmers and residents in the path of the related aquifer.

If they had by some miracle allowed him to continue, Congress and the Pennsylvania legislature would have demanded royalties, income and property taxes, forcing Drake to charge at least twice as much to make a profit, thereby slowing the acceptance of oil as a viable fuel for decades, and similarly holding back the country’s advancement into the Industrial Age.

Other readers can probably come up with other indignities Mr. Drake would have had to endure. Suffice it to say that it would not have been pretty. Obama’s contemporaries would more than likely have made Edwin Drake’s efforts impossible.

Cross-posted at NewsBusters.org.

Word Abuse: Media Ignores Obama’s False ‘As I’ve Often Said’ Reference to ‘Exploration’

OffshoreOilRigStraight from UPI’s transcript of Barack Obama’s Earth Day remarks in Newton, Iowa yesterday — in the midst of flights that reportedly expended 9,000 gallons of jet fuel — here is the President’s take on this country’s oil dependency (bold is mine

Twenty percent of what we spend on imports is the price of our oil imports. ….. It’s the cost we’ve known ever since the gas shortages of the 1970s.

And yet for more than 30 years, too little has been done about it. There’s a lot of talk of action when oil prices skyrocket like they did last summer, and everybody says we’ve got to do something about energy independence. But then it slips from the radar when oil prices start falling like they have recently. So we shift from shock to indifference, time and again, year after year.

We can’t afford that approach anymore, not when the costs for our economy, for our country and for our planet is so high.

So on this Earth Day, it is time for us to lay a new foundation for economic growth by beginning a new era of energy exploration in America.

Gosh, that sounds positively capitalist. You would think the guy is finally going to let the oil companies do what they do best.

Not a chance. Here, from later in the speech, is (I think, because he never used any variation of “explore” anywhere else in the speech) how President ‘Prompter defines “exploration” (bolds are mine):

As I’ve often said, in the short term, as we transition to renewable energy, we can and should increase our domestic production of oil and natural gas. We’re not going to transform our economy overnight. We still need more oil; we still need more gas. If we’ve got some here in the United States that we can use, we should find it, and do so in a environmentally sustainable way.

“If” we’ve got some? There’s literally trillions of dollars worth of oil and natural gas within US borders and off US shores — and hundreds of billion of dollars in royalties the cash-starved government could be collecting.

“If” we can use it? Words fail.

The idea that Obama “has often said” that we should increase exploration and production is a flat-out falsehood.

A Google News Archive search between April 1, 2007 and November 6, 2008 on “Obama opposes drilling” (in quotes) came back with 13 hits supported by over 900 related items. The dates of the results ranged from June 17, 2008 to November 4, 2008. The relevant phrases include these:

  • “Obama opposes drilling in the Arctic National Wildlife Refuge in Alaska”
  • “Obama opposes drilling in US coastal waters”
  • “Barack Obama opposes drilling on and offshore to reduce gas and oil prices”
  • “Mr. Obama opposes drilling. Opposes nuclear. Opposes coal. He and Harry Reid believe wind, solar and ethanol are the answers”
  • “Like McCain, Democratic presumptive nominee Barack Obama opposes drilling in the ANWR, but he also reportedly supports maintaining the offshore moratorium”
  • “Obama opposes drilling in US coastal waters, and says allowing exploration now wouldn’t affect gasoline prices for at least five years”
  • “Barack Obama opposes drilling for oil, mining for coal, building nuclear power plants. If he’s elected president, gas prices will rise to $5 a gallon ….”
  • “Third, Obama opposes drilling for oil in and around America itself.”
  • “Obama opposes drilling off the US coasts, saying it won’t do anything to change the price or availability of oil for more than 10 years, and maybe more ….”

What was that about “As I’ve often said”?

The best that might be said is that Obama might have meekly flip-flopped last summer to appear open to the idea of increased exploration. But it was meaningless political posturing that, despite his speech Wednesday, has no apparent carryforward value. The meaningless of the summer flip-flop, to the extent that it occurred, is obvious, because at the same time Obama was championing a ridiculous windfall-profits tax on energy companies that, if ever enacted, would likely bring any thoughts of further domestic exploration and production to a screeching halt.

As usual, the establishment media is not challenging Obama’s ridiculous claim. In fact, right on cue, the Associated Press even risibly used the word “exploration” its story headline:

APobamaEnergyExplorationHline042209

One thing is for sure: When anyone explores for reliable truth in AP dispatches, they all too often find a dry hole.

Cross-posted at NewsBusters.org.

AutoNation’s 1Q Profit Reinforces How Badly GM and Chrysler Are Hurting, and How Minor They Are Becoming

Of all the things for CNN to pick as an e-mail alert topic, AutoNation’s profitable first-quarter results seemed quite an odd selection. But there it was:

CNNautonationEmail042309

It appears that CNN wanted harried readers who wouldn’t dig deeper to think that the “auto industry” as a whole is recovering, or at least stabilizing, and that maybe there’s even a way out for General Motors and Chrysler that doesn’t involve a real bankruptcy.

Memo to CNN: Nice try, no sale. A desktop review of AutoNation’s situation indicates that it is holding its own precisely because is relatively less dependent on Detroit’s output than dealers as a whole, and less dependent domestically on Government, er, General Motors and Chrysler than it is on Ford.

CNN’s actual report on AutoNation’s results by Peter Valdes-Dapena told us how much sales declined in each of the company’s major segments, but failed to tell us how important each segment is:

AutoNation, the country’s largest car dealer chain, posted a profit for the first quarter of 2009 despite a 43% decline in new vehicle sales, and said it expects to see improved sales in the second half of the year.

Shares of AutoNation rose 7% in Thursday trading.

“We are very pleased with the performance of AutoNation (AN, Fortune 500) as we remained solidly profitable during the first quarter,” Autonation CEO Mike Jackson in a company statement.

….. Sales for the industry overall declined by about 46% compared to the same period last year, according to figures cited by AutoNation.

AutoNation’s income from domestic vehicle sales declined 47% in the first quarter compared to last year. Import vehicle sales declined 45% and premium luxury car sales declined 31%.

Auto dealers have been hit hard by declines in auto sales driven by a poor economy and tight credit. Sales of domestic vehicles, particularly those of General Motors and Chrysler, have been effected by concerns over the automakers business prospects.

Moving beyond Valdes-Dapena’s obvious writing errors (“income” and “sales” aren’t the same thing, and the correct verb in the final sentence should have been “affected”), the omission of the segment information presents an incomplete picture.

CNN’s failure to report this information has nothing to do its lack of availability. Today’s press release from AutoNation includes lots of relevant data. Let’s start with this (bolds are mine):

AutoNation has three operating segments: Domestic, Import, and Premium Luxury. The Domestic segment is comprised of stores that sell vehicles manufactured by General Motors, Ford, and Chrysler; the Import segment is comprised of stores that sell vehicles manufactured primarily by Toyota, Honda, and Nissan; and the Premium Luxury segment is comprised of stores that sell vehicles manufactured primarily by Mercedes, BMW, and Lexus.

This is important: The Domestic Segment includes all of GM, Ford, and Chrysler. Vehicles in the other two segments are entirely manufactured by foreign-based companies.

With that in mind, here were the income (i.e., profit) results in each segment during the first quarter, also in the press release:

Domestic – Domestic segment income for the first quarter of 2009 was $15 million compared to year-ago segment income of $38 million. First quarter Domestic retail new vehicle unit sales declined 47%.

Import – Import segment income for the first quarter of 2009 was $30 million compared to year-ago segment income of $56 million. First quarter Import retail new vehicle unit sales declined 45%.

Premium Luxury – Premium Luxury segment income for the first quarter of 2009 was $41 million compared to year-ago segment income of $51 million. First quarter Premium Luxury retail new vehicle unit sales declined 31%.

Thus, over 80% of the company’s quarterly segment income ([$41+$30] divided by [$41+$30+$15]) came from the non-Domestic segments.

As to unit sales, it’s obvious that AutoNation’s product mix was more heavily weighted to Import and Premium Luxury Vehicles than the market as a whole. Beyond that, in the Domestic segment, even though Ford is still a semi-distant runner-up to GM alone nationwide, AutoNation sold almost as many Ford vehicles as GM and Chrysler combined (again, all in the press release):

AutoNation1Q09salesBreakdown

Sorry, CNN and Mr. Valdes-Dapena. You can’t push generalized mush into my e-mail box and expect to get away with it. AutoNation is well-positioned because:

  • It relies more heavily on non-Detroit vehicles.
  • The Detroit company it disproportionately depends  on the most compared to the market as a whole “just happens” to be the one that isn’t going through de facto nationalization.

Kindly drive those two points into your heads, plus this: AutoNation will, from all appearances, be among the survivors.

Cross-posted at NewsBusters.org.

Latest Pajamas Media Column (‘Going Galt Got Going Last Summer’) Is Up

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 8:27 am

It’s here. Instant thanks to Instapundit for linking to it.

I will post it here at BizzyBlog Saturday morning (link won’t work until then) after the blackout expires.

The column expands on what I had to say in the latter portions of last week’s column, and explains how and why the POR (Pelosi-Obama-Reid) Economy that began in June of last year has caused tax collections to plummet to an extent that is far beyond what one would expect based on the not-annualized 1.74% contraction in the economy that occurred during 2008′s second half.

A reappearance of last week’s howls of outrage from Leftists allergic to fact-based presentations is likely.

_______________________________________________

UPDATE: Totally related, from Rich Karlgaard at PJM — “Scared CEOs Hamper Economic Recovery.” Well of course:

Investors sense that the economy is at a crossroads. A political crossroads.

Here is what I mean. The U.S. economy has turned the corner. Not dramatically, but enough to notice that things are better than they were six weeks ago. Where do we go from here? If the president and Congress and regulators would just leave matters alone–go on a long vacation, say–the economy would show positive growth by the second half of this year. Call me nuts, but I think a second-quarter positive surprise would be possible.

….. Let me say this again. The yield curve predicts growth. Check. Consumer sentiment is ticking up. Check. But CEO confidence is lousy, and CEOs are (not) spending accordingly. Whoops. This begs the question: Why are CEOs in such a low mood?

….. This is (because of) the risk of Obama’s willingness to “do what it takes.” The words sound positive and action-oriented. But in practice, “do what it takes” really means “anything can happen.” Tearing up of legal contracts … that can happen. Limits to salary and travel … that can happen. Bullying by the Environmental Protection Agency … that can happen. Nationalization of General Motors and Citigroup … that can happen. Nobody knows for sure. Government is sorting it out, day by day.

The yield curve predicts good news. Consumers are bored with the recession and are ready to come back. But CEOs are nervous about deploying capital, and for good reason.

Thus the U.S. economy is not sharply turning the corner toward recovery, as it should be doing at this point in the cycle. It is turning, but very tentatively. That’s why the recovery will be modest, lumpy and disappointing.

Instapundit’s reax: “Or is it (CEOs’ caution) just a case of going ‘John Galt?’”

I’d say a lot are on the fence, and it wouldn’t take a lot to push them to the Galt side.

Also, a hospital CEO e-mailed Instapundit, saying that “I am doing exactly what he (Karlgaard) says here – hunkering down before the government take over of health care hits.”

By the way, health care was the jobs-adding star of the mid-2000s. What do you think it will be if P-O-R succeed in their attempt at de facto nationalization of health care?

UPDATE 2: Even if not exhibiting Galt-like behavior, the “hunkering down” just described, while wondering what the government is going to do to you and your business, indisputably holds back and/or mitigates a recovery.