Category — Subsoil Privatization
Oil Exceptionalism … Houston Exceptionalism … Texas Exceptionalism … U.S. Exceptionalism: Private Oil and Gas for the Social Good (Joe Pratt’s soulful message to the world)
“The social usefulness of well-defined property rights, free exchange, and the system of relative money prices . . . has perhaps been demonstrated most convincingly by the catastrophic failure in the twentieth century of those societies that tried to function without them.”
- Paul Heyne, “Efficiency,” in David Henderson, ed., The Fortune Encyclopedia of Economics (New York: Warner Books, Inc., 1993), p. 11.
“The wildcatters showed their gratitude to their city through their philanthropy. They were not the only ones who supported good causes in our region, but many of the foundations in Houston had their beginning in the oil and gas industries.”
- Joe Pratt, Cullen/NEH Professor in History and Business, University of Houston
George Will invoked the theme of Texas exceptionalism in a recent column pitching the state’s governor Rick Perry for the Republican presidential nomination. Whether or not one thinks Perry is the real thing (judging from his view on (mandated) wind power and tout of (government-dependent) electric vehicles, buyer beware), the point is that Texas has done relatively well because of its marked reliance on private property, voluntary exchange, and low taxation.
Relatively speaking, Texas is a free market state, and certainly Houston (the economic ‘capital’ of Texas) is a free market city. And Houston, despite its sweaty summer heat and humidity, is ranked a top world city–and the city with the lowest cost of living. And did anyone mention that Houston has the world’s top medical center and is a world-class philanthropic mecca?
Houston, not coincidentally, is the city that private oil and gas has done much to build. The nation’s oil capital began with the Spindletop gusher in 1901 in nearby Beaumont. Houston also became the natural gas capital when interstate gas pipelines were built in the middle decades of the 20th century (a story told in my forthcoming book, Edison to Enron: Energy Markets and Political Strategies).
Private oil and gas has accrued to the public good in a way that socialized oil and gas throughout the world has not. Guillermo Yeatts has stressed the general benefits of private mineral ownership, as have other posts at MasterResource.
“Oil and the Soul of Houston” (Joseph Pratt, University of Houston) [Read more →]
July 1, 2011 5 Comments
[The greatest opportunity for wealth creation in many poor countries is oil and gas development. In particular, subsoil privatization can incite resourceship and democratize wealth as explained by Guillermo "Billy" Yeatts in Subsoil Privatization for Energy Sustainability. The following post by Cyril Boynes, Jr. co-chair of the Congress of Racial Equality Uganda, contributes to this discussion.]
I am of a Christian background. However, one of my favorite people was Jewish, and another is Muslim.
The Jewish man was business professor and author Julian Simon. He taught that people are the world’s most valuable resource, and the “ultimate resource” is our creative intellect.
The Muslim is Bangladeshi banker and economist Muhammad Yunus. He says “poor people are like bonsai trees,” planted in a little pot. “There is nothing wrong with their seeds. It’s just that society never gave them an adequate soil base to grow.”
“Once the poor can unleash their energy and creativity,” Dr. Yunus continues, “poverty will disappear very quickly. The poor themselves can create a poverty-free world. All we have to do is free them from the chains that governments have put around them.”
We need freedom, and opportunities to get an education and open businesses. We need a government and legal system that protects our property rights and contracts, regulates dangerous pollution and activities, and protects us from criminals and unscrupulous business people, but without having so many rules that people and businesses cannot function properly.
But even if we have all these things, we still cannot have opportunity, health and prosperity unless we also have energy. Maybe most of all we need enough affordable, reliable electricity to power lights, ovens, refrigerators, computers, machinery, fans and air conditioners, office and hospital equipment, mobile phone chargers and other modern devices.
These technologies let us work past sundown, create good jobs, make products that people need, and provide clean water, surgical centers and countless other benefits.
That’s why Mr. Roy Innis, chairman of the Congress of Racial Equality in America, calls energy the “master resource.” He says our ingenuity is the ultimate, most important resource, because it lets us design, build and operate so many things.
However, without energy that families and businesses can afford, energy that is there every time we need it, even the most modern, creative, educated, technologically advanced country cannot function properly. People in poor countries are even more constricted, like bonsai plants in little pots.
Right here in Uganda, we have many educated, energetic, creative, hard working people. Our legal system lets us open businesses and do many other things. But outside of Kampala and other growing municipalities like Ishaka, Jinja and Gulu, most families, villages and businesses still don’t have electricity – and even in these municipalities frequent power outages create problems. Almost 30 million Ugandans never have electricity or get it only a few hours a week. [Read more →]
March 23, 2011 1 Comment
[This post by Guillermo "Billy" Yeatts (see profile at the end of the post) originally appeared at MasterResource on April 30, 2010. It is reprinted in response to the move of the Middle East toward more open, democratic, and modern societies. Can private ownership of oil and gas assets be far beyond?]
The history of oil and gas production in Latin America has been characterized by a continuing tug of war between the state as owner of the subsurface (Spanish colonial tradition) and private producers in pursuit of profits. Private participation in the industry has been limited to brief periods and restricted to specific phases of oil and gas production.
The typical pattern is that foreign oil and gas companies are allowed into a country to locate and initiate production. Once oil is flowing, governments nationalize the companies’ facilities – with or without compensation – and hand them over to government-owned and operated monopolies.
Whether the oil or gas is produced by private corporations or by a government monopoly, it is almost always the government that receives most of the profits. All too often, the money is used to keep the heads of state in power.
In the United States, by contrast, individuals own and control much of the nation’s subsurface rights to energy and other minerals. The results are starkly different. While the oil and gas industry in the United States expanded quickly, bringing prosperity to many areas that were once underdeveloped or deserted, oil revenues in other countries have propped up corrupt governments with little or no benefits to the general welfare.
State ownership of the subsurface removes incentives for risk-taking, investment, and technological innovation. Farmers and ranchers are pitted against oil development. In Latin America, the prospect of an oil or gas discovery is a farmer’s worst nightmare. They reap no financial benefit from the discovery, but they do suffer land damage and the disruption to their lives from drilling and production operations. Consequently, a landowner’s incentive is to hide any mineral wealth his property might have and to fight any attempt to exploit such wealth. [Read more →]
February 21, 2011 No Comments