Category — International

“Human beings create more than they destroy.”

- Julian Simon, The Ultimate Resource 2 (Princeton, N.Y.: Princeton University Press, 1996), p. 580.

When the tide comes in, all boats rise.

Saskatchewan’s mining industry has begun a period of unprecedented growth that promises to last for decades.  And while Prince Albert is not at the mouth of the bay, we are in the bay, and our boats are rising as well.  Prince Albert is seeing record building permits issued, but few local items to exactly explain why.

With a current tax incentive and confidence in the future, PotashCorp began a series of expansions seeing $5.8 billion being poured into Saskatchewan.  It is the “mother of all economic stimulus packages,” seeing spending, on a per capita basis, double the American and triple the Canadian governments’ stimulus packages.  Better yet, this investment is new money into our province, money generated from other countries, so we did not see the debt burden that others’ have. [Read more →]

“[T]here is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.”

- Henry Hazlitt, Economics in One Lesson. quoted here.

At Cafe Hayek, economist Donald Boudreaux, Professor of Economics at George Mason University, wrote an open letter to Fox News host Bill O’Reilly’s opposition to exporting U.S. oil to other countries. O”Reilly has a populist streak, and he is prone to seeing the seen and not the unseen when it comes to economics, a sin indeed to economics as a science.

Professor Boudreaux is a master educator and prolific letter writer on behalf of common-sense economics. Read his explanation about why the namesake of the O’Reilly Factor 1) gets his economics wrong and 2) fails to see the implication of his own argument to himself as exporting his services

Dear Mr. O’Reilly:

You’re all lathered up because U.S. oil companies are exporting much of their refined gasoline and heating oil to other countries and thereby putting upward pressure on fuel prices here in America.  You conclude that these companies have a moral obligation not to export so much….

Economics

First some economics.  Selling in the global market encourages firms to build larger factories and refineries that, in turn, enable outputs to be produced at lower costs per unit.  So while in the short-run rising exports of oil products can cause fuel prices here to spike, the long-run effect might well be lower prices because of larger, more-efficient scales of operation.  [Read more →]

[Ed. Note: This concludes Douglas Southgate's review of Ecuador’s claims of “reckless environmental damage” against Chevron, and through them international oil companies (IOCs). Part I challenged the facade that Ecuador's passive view of its own resources led to exploitation by Big Oil; Part II examined the economic benefits of fossil-fuel development in the country.

This post refutes the charge that environmental damage is the responsibility of foreign firms alone. Indeed, it is the state company, Petroecuador, that was chiefly responsible for environmental despoliation in the Amazon region. These postings are timely in light of a recent article in The New Yorker, [1] a new book about the construction of a trans-Andean pipeline, [2] and other literature in which IOCs’ actions in Ecuador are criticized.

Billions for Government, Nada Environment

Opponents of petroleum development in the Amazonian lowlands (Oriente) of eastern Ecuador maintain that damage to the region’s natural resources has been the result of IOCs’ dominance of the country. But in the first of three postings about the anti-oil campaign, I show that the Ecuadorian government actually exercised considerable power in its dealings with foreign companies. Soon after petroleum was discovered in the Oriente, Ecuadorian authorities obliged IOCs to spend tens of millions of dollars on transportation infrastructure in order to facilitate colonization, in which the firms had no real interest. [Read more →]

[Ed. Note: This series addresses key issues at the heart of Ecuador’s claims of “reckless environmental damage” against Chevron, and, through them, international oil companies (IOCs). Part I challenged the facade that Ecuador's passive view of its own resources led to exploitation by Big Oil. Part III tomorrow addresses the misperception that environmental damage in this small, South American nations is the responsibility of foreign firms alone.]

 Oil and gas has been a 40-year economic driver in Ecuador. With the national treasury benefiting from oil and gas revenue, any lack of socioeconomic progress during the last decades cannot be blamed on international oil company (IOC) profit-making there.

Indeed, no serious observer claims that Ecuador has failed to experience development. Criticism has focused instead on waste and misallocation of the large cash bounty that multinational investment created for Ecuador.

Who Got the Money?

Much of the blame for misallocation rests with the uniformed services, which have received a sizable portion of the country’s petrodollars. Military expenditures averaged 45 percent of the national budget from 1972 through 2000, which has enabled the armed forces to acquire a fleet of oil tankers, an airline, and other commercial enterprises.[1] However, oil wealth also has been spent on social services and subsidies for the public at large.

Despite waste, corruption, and misallocation, gross national income (GNI) per capita improved during this period. So did non-economic indicators of human well-being, including the infant mortality rate (IMR) and life expectancy at birth, thanks to better water supplies and public sanitation, wider access to pharmaceuticals, and, most importantly, improved nutrition.

Conditions in 1967

At the time when oil was discovered in the Oriente, mean GNI in Ecuador ($260) was barely half the Latin American and Caribbean average ($478); only in Haiti’s GNI per capita was appreciably lower. [2] The country’s standing in terms of non-economic measures was a little better. [Read more →]

[Ed. Note: In this three-part series, Douglas Southgate, an economist and professor at Ohio State University, addresses key issues at the heart of Ecuador’s claims of “reckless environmental damage” against Chevron, and, through them, international oil companies (IOCs). Part II and Part III will address two other charges: that the small, South American nation has benefited little from energy-resource development, and that environmental damage is the responsibility of foreign firms alone.  These postings are timely in light of a recent article in The New Yorker,[2] a new book about the construction of a trans-Andean pipeline,[3] and other literature in which IOCs’ actions in Ecuador are criticized.]

Part I in this series challenges the charge from the Ecuadorian régime’s (and its U.S. backers) that:

(1) Ecuador was an innocent seduced by the siren song of Big Oil, and became a vassal to their interests;

(2) Ecuador’s relationship to its oil potential was merely passive; and

(3) Oil development monies did not benefit Ecuador.

In fact, the country moved aggressively to capture the lion’s share of the benefits created by private investment. Nationalization and taxation left the government with 97.3 percent, or $22.7 billion, of the monetary returns created by the concession originally developed by Texaco and Gulf between 1972 (when production and exports began) and 1992 (when the state oil company gained complete ownership of the concession).[1]

The Legal Setting

Continuing appeals of a February 2011 ruling by a district court in the Amazonian lowlands of eastern Ecuador and charges of fraud leveled against plaintiffs’ counsel [4] are recent and noteworthy developments in a legal campaign launched nearly two decades ago against Texaco, which along with Gulf Corporation began drilling for petroleum in the region during the 1960s and which has been affiliated since 2001 with Chevron. [Read more →]

The European Energy Review has published a comprehensive article on the EU energy policy, entitled “Europe’s green energy chaos” by Andrew MacKillop (sometimes appearing as McKillop), an independent energy analyst and project advisor who has written on energy topics for over 35 years, and who worked for the European Commission’s Directorate-General of Energy as a policy expert in the 1980s.

EU policy can be summarized as 20-20-20 by 2020. Catchy isn’t it? It means 20% improvement in energy efficiency, 20% reduction in emissions, and 20% use of new renewable energy sources – all by 2020.

When publicized, the EU plan was (properly) criticized by the Economist and Dieter Helm, the chairman of the ad-hoc committee established by the EU to provide expert advice. MacKillop’s critical analysis of the current problems of government-heavy energy policy is spot on.

Government Planning in the Name of Markets

The EU energy plan inverts free markets and industrial government planning as discussed by MacKillop:

The climate and energy package makes heavy use of the notion that by preventing pipelines, power transmission lines and electric power stations being controlled by one company or entity, even if this entity is publicly owned and accountable to all democratic procedures for its control, will enable a “free market” that will create an upsurge in activity by small businesses who will gain entrance to the market. The usual way this notion is sold to voters and to the public is the claim this will automatically produce cheaper energy and more jobs, with additional climate and environment protection frills thrown in as needed.

In reality, the climate and energy package favours large industrial conglomerates in the energy sector and, as we know, Europe’s energy market liberalisation since 1996 has coincided with some of the largest energy price rises for final consumers in recent history. [Read more →]

“Wind turbines are manufactured out of oil and gas, transported using oil and gas, are extremely intensive on landscapes (the cement plugs are mammoth and often require cement factories to be built nearby in order to accommodate chains of turbines in construction), are well known to cause harm to human health when sited too near (some expert physicians suggest 10 mile setbacks), and the international bird and bat kills annually are respectively estimated at eight million and sixteen million.”

Dear Honourable Premier Alward, and Honourable Minister of Energy, Mr. Leonard

Congratulations on the release of the New Brunswick Energy Blueprint.

There are many encouraging features to this thoughtful document, and it is easy to see that a generally balanced, sensible and sensitive approach has been achieved, after consulting many experts.

I would like to comment on the “renewables” section, Section Eight [pp. 20–21], which addresses, as part of your energy platform, a commitment to wind power. It is encouraging to see that wind power for your beautiful province is not celebrated as a “cornerstone technology.” It is encouraging that your report cautions about the wind’s variability, the high cost of this power, and the omnipresent need for backup.

Wind Energy (Section Nine) [p. 22] states: [Read more →]

Across the European Union, solar energy is facing tough love conditions as its feed-in-tariffs (FiT) face déjà vu in another round of reduction.

Like in the classic Tale of Two Cities, the world of solar energy today seems filled with the excitement of seeing its revolutionary potential realized by rapid growth, while fearful that falling prices, changing feed in tariff subsidies and looming government deficits will overwhelm it first.

There is no denying solar energy’s promise and potential.  Its rapid growth is a worldwide phenomenon.  Lately I have been catching up on the news reports and changing solar situation in Europe.  A recent report prepared by Ernst & Young for UK’s Solar Trade Association confirmed what we already knew that solar PV prices are falling so fast that by 2013 they will be half of what they cost in 2009. But keep in mind for for on-grid applications, conventional power sources fueled by shale gas in particular are improving too.

New EU Realities

The EU’s big aspirations for a clean energy, low emissions future had run up against government budget deficits. Consequently, the mother’s milk of feed-in-tariffs for qualifying renewables is vulnerable to rapid modification.

Across the EU countries, feed-in-tariffs are being reduced or at least re-evaluated for affordability about every six months.  France is the latest country to announce changes in its feed-in-tariff regime. The UK is scheduled to follow suit slashing its feed in tariff rates in August 2011. [Read more →]

“I wrote this book because the rising cost of energy is an increasingly important feature of the political landscape, as it massively affects the cost of living for families across Britain. Excessive green taxes make everything from driving to work to taking a well-earned holiday more expensive and make it a lot harder for manufacturers to compete and keep employing people here in Britain.

Motorists are particularly hard hit and unfairly penalized well beyond the cost of maintain the roads and the environmental harms their emissions create. The Government need to give families a better deal and cut unfair green taxes.”

- Matthew Sinclair, Press Release, Let Them Eat Carbon (London: TaxPayers Alliance: August 2011)

Matthew Sinclair, director of the TaxPayers’ Alliance, has penned an educational tract to get his fellow countrymen to reconsider what in their good graces has been accepted as sort of a public duty–to buy into climate/energy alarmism and to do their fair share.

In addition to covering all aspects of Britain’s green taxes, what they are and why they were implemented, the book (available from Amazon here) examines subsidies for renewable energy; emissions trading; windfall profits for industry; and environmentalist and corporate lobbying. The introduction (see excerpts below) is downloadable.

Press Release

The biggest threat to taxpayers right now is expensive new green taxes and subsidies. In the first ever mainstream book on this subject … Matthew Sinclair has exposed how this is the critical new threat to family finances. With rising fuel bills and petrol prices, it will be a defining feature of the political landscape over the coming year.

‘Let Them Eat Carbon’ shows how Fuel Duty is putting huge pressure on motorists. An energetic campaign against the tax is arguing for it to be frozen for the rest of this Parliament, after the cut at the last budget, and is among the most popular on the new government e-petition website.

Increases in Fuel Duty and other green taxes have frequently been justified by the need to cut greenhouse gas emissions, but estimates in the new book show that argument isn’t credible. Providing new figures and using a method pioneered in earlier studies for the TaxPayers’ Alliance and used by researchers at the Department for Transport, it finds that green taxes were excessive compared to the harms they are meant to address: [Read more →]

[Editor note: This press release from Toronto Wind Action and Great Lakes Wind Truth (Canada) was released yesterday. Press reaction and key facts are presented at the end. Also see Ms. Lange's previous post, Ontario Update: Offshore Wind Moratorium Decision Hangs Tough, Onshore BAU Targeted (April 8).]

“After being challenged by the Ontario Liberals for the past six months to “show us your plan,” Tim Hudak, leader of the Ontario Conservative party, did just that on Tuesday. In a speech that outlined what could well become the defining issue of the coming Ontario election, Mr. Hudak promised to take down the key elements of Premier Dalton McGuinty’s green energy program.”

- Parker Gallant, “Ontario’s Power Trip: The End of FIT,” Financial Times, May 10, 2011.

Ontario received an early Christmas present yesterday with the  announcement by Progressive Conservative Opposition Leader Tim Hudak that if elected, his government will cancel the $7 billion  Samsung deal (Canadian) and revisit hydro deals. Such would negate the FIT (Feed In Tariff) programs that fill the coffers of developers at the expense of power users, large and small.

Hudak is electable, and his green-reform initiative follows on the heels of the strong victory by Prime Minister Stephen Harper, whose Tory Party now has full control of the House of Commons. Ontario’s rebellion against Big Wind should hearten the sister grassroots rebellion in the United States–and scare the super-lobby American Wind Energy Association.

The Samsung deal, in particular, was privately honed and constructed to give Korean business opportunities a fine edge in getting power to the grid, as well as more business incentives in construction for solar and wind turbines.

It is time to return to fair power rates for Ontario. “This (Samsung) deal is a rip-off…we’ve got to cut our losses,” Hudak said today. Quoting “odious deal,” Hudak implied that when new governments must govern with previously deadly or economically unfair deals, it obviously cannot be shackled and have government business paralyzed with that unfairness. It was clear that Hudak, if elected Premier, would not be tied and bound by the widely despised secret Samsung deal, spawned by former Minister of Energy George Smitherman.

Sherri Lange, Founding Director of Toronto Wind Action and Executive Director, Canada, Great Lakes Wind Truth, praised the announcement. For years, her grass roots groups and others have been educating government leaders, calling for and obtaining moratorium votes, such as the boat turning Toronto and Region Conservation Authority Moratorium for offshore wind turbines. “From a “talk to the hand” kind of arrogance at Queens Park to finally getting a substantial reversal of turbine woes in the province from Mr. Hudak, feels like a breath of air,” Lange said today. “There are seven families we know of who have had to abandon or leave their homes due to ill health. There are likely many more who have not self-reported and who are living in cottages or family homes.

There are over 100 more people who have reported serious health concerns. This expansion of business in the province (and if that business is economically viable is highly questionable), over human health and environmental concerns is not acceptable.”

More to Do

Lange also expressed the hope that Mr. Hudak will expand on his energy platform in the days to come. She hoped today that victims of wind will have compensation for suffering and be allowed to have full restitution. [Read more →]