Coyote Blog

Kevin Drum claims that "we" haven't learned anything from the Deepwater Horizon disaster (the BP oil rig that exploded five years ago in the Gulf, killing a number of people and creating a large oil spill).

What is his evidence?  Has he looked at oil company drilling practices and found them unchanged since the disaster?  No, he does not mention any evidence based on observed drilling practices one way or another.  His sole evidence that "we" have not learned anything is that the US Government has not shut down drilling in the Gulf and has not passed any new laws.

This is almost a caricature of progressive thinking -- nothing matters except what the government does.  But presumably oil companies have been influenced by the cost of the disaster on BP.  So far BP has paid out about $30 billion (billion with a B) in reparations and restoration expenses and may be facing another $20 or so billion in fines based on a 2014 court decision.  All this ignores the loss of the platform itself, of access to the resource below the platform, and of BP's reputation.

One would presume that the prospect of losing $50+ billion would be enough to get the attention of private companies and cause them to make changes to their procedures.  I suppose it is also possible that they completely ignored this, but Drum offers no evidence one way or another.  To him, anything not done by the government is irrelevant.

The government claims to be making huge profits on its greentech loan program, despite losses at companies like Solyndra.

The U.S. government expects to earn $5 billion to $6 billion from the renewable-energy loan program that funded flops including Solyndra LLC, supporting President Barack Obama’s decision to back low-carbon technologies.

The Department of Energy has disbursed about half of $32.4 billion allocated to spur innovation, and the expected return will be detailed in a report due to be released as soon as tomorrow, according to an official who helped put together the data.

The results contradict the widely held view that the U.S. has wasted taxpayer money funding failures including Solyndra, which closed its doors in 2011 after receiving $528 million in government backing. That adds to Obama’s credibility as he seeks to make climate change a bigger priority after announcing a historic emissions deal with China.

Even Kevin Drum calls partial BS on this:

And yet....I'd still remain a bit cautious about the overall success of the program. Out of its $32 billion in approved loans, half represent loan guarantees to nuclear power plant developers and Ford Motor. These are not exactly risky, innovative startups. They're huge companies that could very easily have raised money without government help, and which represented virtually zero danger of default. If DOE is including returns from those loans in its forecast, color me unimpressed.

The genuinely risky half of the loan program is called Section 1705, and it includes everything that most of us think of as real renewable energy projects (wind, solar, biofuel, etc.). DOE hasn't broken that out separately.

I call further BS.  It turns out this program is actually losing money, not making money.

1. This "study" is a classic case of assuming your conclusion. The reason the risky parts of the portfolio would lose money is if they don't pay off over the next 20 years or so they have to run. But all the study says is "The $5 billion to $6 billion figure was calculated based on the average rates and expected returns of funds dispersed so far, paid back over 20 to 25 years." In other words, if the loans turn out not to be risky, they won't be risky. LOL.
2. I bet they are not accounting for things like Ivanpah, there the holders of the government loan are looking to pay off the government loan with .. a government subsidy. So if you squint, the loan to Ivanpah looks profitable, but no rational person would come to that conclusion about the program as a whole.
3. Ivanpah is just a subset of a larger problem. Companies like Tesla get government subsidies (and their customers get subsidies as well) from dozens of sources. Is it really a win for taxpayers if they pay back their government loan with government money?
4. They count the 37 basis points above treasury rates that they charge as "profit". This is crazy. I run a fairly large business. No business is getting Tbills +37 BP loans. Heck, since Tbills are at about 0%, this means they are loaning money to private concerns at less than 1%. This is a crazy large subsidy.  I could make money in over a 2-5 year period in just about anything if I could borrow at effectively 0%.
5. Worst of all, they are not using present value.  Let's say their average spread from the Bloomberg article is 100 BP over treasuries.  That means that ignoring loan losses on a $32 billion portfolio they are making a spread of $320 million a year.  Over 20-25 years that is $6-7 billion.  Less some large loan losses that is $5-6 billion.  But notice I never discounted.  This is just adding up nominal interest spreads over 25 years.  This is insane.  Absolutely no private investor on the planet would think like this.  If you discounted the interest spread payments at any reasonable risk-adjusted rate**, then the net present value may already be less than losses in Solyndra and others and thus already in the hole, even without considering future losses.  This report is an embarrassing political exercise, not a serious economic analysis.

All of this leaves out the inherent cronyism of the whole exercise.

** I would argue that in many of these loans, and despite interest rates charged in the 0-2% range, the government was taking an equity risk.  Worse than equity risks -- these are essentially venture capital investments risks with T-bill returns (note the one private comment on the returns in the Bloomberg article is from a venture capital investor in greentech).   The taxpayers are bearing all the risk but getting none of the returns.  Any discount rate for these risks under 15-20% is far too low.

We and our children will be paying for the recent spate of government fiscal incompetence for literally decades.  This letter I got from our payroll company provides a small but pointed reminder of this.  Here is the key graf:

Can you imagine getting a note in January from Amazon.com, saying their costs last year were higher than they expected and they were going to send you an additional bill?  Or how about BP sending all its customers a note saying that the cleanup costs in the Gulf cost it a lot of money and that they would all get an extra bill for X cents per gallon of fuel they purchased last year from BP?

Update: So in other words, I was hiring people in Florida in August of 2009, and will not find out until sometime in 2011 the true cost of this labor, because only now am I being told what taxes I have to pay on this labor.  And people wonder why businesses are reluctant to hire.  We may think we have a Constitutional ban on ex post facto law, but businessman know this is BS.

A while back in my Forbes column on the incentives faces by government workers, I wrote

People sometimes say that problems involving difficult trade-offs are hard for government bureaucracies to handle. This isn't true--most of these trade-offs are in fact easy for them to handle, because the outcome is as predetermined as a river's path through a well-worn valley. The problem is having these trade-offs made well.

Most of the tough decisions in the Gulf involve violating a rule or standard practice for which an agency and its staff have specific accountability for compliance. This is balanced against the opportunity to gain some benefit that is outside of the agency's responsibility and for which it will not be rewarded or punished. An example would be the administration's ban, at EPA insistence, of what BP ( BP - news - people ) claims is the most effective oil dispersant because it is potentially toxic. Does this dispersant's toxicity create more or less harm than the lost opportunity of preventing a lot of oil from entering coastal wetlands? The answer doesn't matter, because there was only one way the EPA was ever going to rule on this--their employees are easily able to duck blame for any damage from the spill, but they would be right on the firing line if even a single living creature was provably harmed by their allowing the dispersant to be utilized. Fear of blame for consequences of an action outweigh the opportunity costs of inaction every single time.

We see this again in this video, where school teachers and nurses in California argue that it is better to allow kids to die from their inaction than to take an action (e.g. dispense a life-saving medication)  that might have harmful consequences.

This is a follow-up to my opinion piece in Forbes the other day.  Remember, this outcome is not somehow preventable by having "our, smarter guys" in charge -- it is an inevitable result of the information and incentives of government organizations.

Three days after the BP oil spill in the Gulf of Mexico began on April 20, the Netherlands offered the U.S. government ships equipped to handle a major spill, one much larger than the BP spill that then appeared to be underway. "Our system can handle 400 cubic metres per hour," Weird Koops, the chairman of Spill Response Group Holland, told Radio Netherlands Worldwide, giving each Dutch ship more cleanup capacity than all the ships that the U.S. was then employing in the Gulf to combat the spill....

In sharp contrast to Dutch preparedness before the fact and the Dutch instinct to dive into action once an emergency becomes apparent, witness the American reaction to the Dutch offer of help. The U.S. government responded with "Thanks but no thanks," remarked Visser, despite BP's desire to bring in the Dutch equipment and despite the no-lose nature of the Dutch offer --the Dutch government offered the use of its equipment at no charge. Even after the U.S. refused, the Dutch kept their vessels on standby, hoping the Americans would come round. By May 5, the U.S. had not come round. To the contrary, the U.S. had also turned down offers of help from 12 other governments, most of them with superior expertise and equipment --unlike the U.S., Europe has robust fleets of Oil Spill Response Vessels that sail circles around their make-shift U.S. counterparts.

Why does neither the U.S. government nor U.S. energy companies have on hand the cleanup technology available in Europe? Ironically, the superior European technology runs afoul of U.S. environmental rules. The voracious Dutch vessels, for example, continuously suck up vast quantities of oily water, extract most of the oil and then spit overboard vast quantities of nearly oil-free water. Nearly oil-free isn't good enough for the U.S. regulators, who have a standard of 15 parts per million -- if water isn't at least 99.9985% pure, it may not be returned to the Gulf of Mexico....

The Americans, overwhelmed by the catastrophic consequences of the BP spill, finally relented and took the Dutch up on their offer -- but only partly. Because the U.S. didn't want Dutch ships working the Gulf, the U.S. airlifted the Dutch equipment to the Gulf and then retrofitted it to U.S. vessels. And rather than have experienced Dutch crews immediately operate the oil-skimming equipment, to appease labour unions the U.S. postponed the clean-up operation to allow U.S. crews to be trained.

Via Alex Tabarrok:

New Environmental Protection Agency regulations treat spilled milk like oil, requiring farmers to build extra storage tanks and form emergency spill plans.

Local farming advocates says it's ridiculous to regulate a liquid with a small percentage of butter fat the same way as the now-infamous BP oil spill.

"It's just another, unnecessary over-regulation by the government just lacking any common sense," said Bill Robb, dairy educator for Michigan State University Extension...

The EPA regulations state that "milk typically contains a percentage of animal fat, which is a non-petroleum oil. Thus, containers storing milk are subject to the Oil Spill Prevention, Control and Countermeasure Program rule when they meet the applicability criteria..."

I was thinking today, what must the families of the 11 people killed on the Deepwater Horizon be thinking?  Their losses are never mentioned in any news reports I see.  Its all about getting oil on the ducks.

Sure, I am pissed off about the enormous damage to the Gulf Coast as well.  But I got to thinking, were I the engineer that made the wrong risk/safety decisions here, what would I feel most guilty about?  I was put in that position for years in a refinery, constantly asked, "is this safe" or "can we keep running" or "do we need to shut down" or "is that vibration a problem?"  These are difficult, because in the real-world of engineering, things are not ever perfectly safe.  But never-the-less, if I had made the wrong call here, I think I would be feeling a lot worse about the 11 dead people than a number of dead fish and birds.  Perhaps my priorities are out of whack with the times.

By the way, TJIC has a great post on risk and cost in the real world of engineering.  I agree with his thoughts 100% from my experience as a troubleshooter / engineer in the field making just these decisions.

Look, we all trade off safety in order to save time and expense.

Do you put on your seat belt when moving your car from one point in the driveway to another?

Do you buy the car that costs twice as much, because it's got a 1% increase in crash survivability?

Did you pay $40k to get industrial fire sprinklers installed in your house?

Do you have a home defibrillation machine?

There is nothing wrong, in the abstract, with trading off safety in order to save time and expense.

The question is whether BP did this to a level that constitutes "gross negligence".

The media is portraying the $20 billion BP spill fund as a result of tough talk from the President.  I think it was a lifeline that BP grabbed with great relish (so does the stock market, as their stock price has risen slightly in the day and a half since).

BP faces absolute bankruptcy from the torts resulting form this current spill, along with some criminal charges.  Its best hope is to negotiate a deal, Chicago-style, with the US government.  In exchange for a cash fund that will sound really large in the press but likely will fall short of actual claims, Congress will pass a law limiting its liability to just+ the settlement fund.  The public justification will be that the settlement fund will provide much quicker and more efficient compensation to victims -- which might even be true.

If one wants a model, just look at the tobacco settlement.  While they vilified them, the government in fact made tobacco companies their partners.  Since the settlement, the government has in fact stepped in to protect the large tobacco companies from competition and price erosion, in large part to protect parties to the settlement from loss of market share to parties who are not on the hook to pay out large sums to the government.  By the way, note that the vast majority of the tobacco settlement money did not go to its stated purpose of tobacco education and health care costs, but into the general funds to support politicians' whims.

This is how things work in the corporate state (and, I suppose, in organized crime).  Once you have an entity like BP vulnerable and under your control, the last thing you want is for them to die.  You want to milk them for years, both for cash and political support, the quid pro quo for being kept alive.

Update: OK, it seems I can't be original.  Others are thinking this too

Bruce McQuain has this take from Obama's oil spill speech last night:

The rest of the speech was an exercise in what Obama does best "“ selling smoke. He begins it with a false premise:

But a larger lesson is that no matter how much we improve our regulation of the industry, drilling for oil these days entails greater risk. After all, oil is a finite resource. We consume more than 20% of the world's oil, but have less than 2% of the world's oil reserves. And that's part of the reason oil companies are drilling a mile beneath the surface of the ocean "“ because we're running out of places to drill on land and in shallow water.

Of course his claim about drilling in deeper water because we're running out of places to drill in shallow water is false. 97% of the shallow water on the Outer Continental Shelf -97%- has been placed off limits by government. The oil companies are forced into deeper water not by the lack of oil, but by government refusing to allow them to drill there.

As an aside, Daniel Foster makes a great point:

There's an added layer of irony here as well. As Planet Gore contributor Chris Horner rehearses at length in his book Power Grab, the prime architect of the cap-and-trade idea was "” you guessed it "” former BP CEO Lord John Browne. So there is a special kind of cognitive dissonance going on in the juxtaposition of BP bullying and carbon tax cheerleading.

Update, via Planet Gore:

So you have a Nobel winner who knows nothing about oil running the Energy Department and you have an environmental lawyer who knows nothing about drilling as the head of MMS, the oil-drilling regulatory body.

So, choosing key people in the Energy department and MMS based on their knowledge of about 2% of the energy world (wind and solar) is a problem?

Progressive green web site the Thin Green Line takes on subsidies for petroleum products, saying that reducing such subsidies could immediately have a major impact on CO2 production.  Fine with me, I am no fan of subsidies by governments of any private activities, though I don't live in fear of CO2.

However, the author, trying I guess to buff his progressive credentials in a sort of typical knee-jerk for green writers, tries to imply all this largess is somehow flowing to large oil companies, and the implication is that western nations like the US are subsidizing folks like Exxon and BP:

The timing couldn't be better: With BP's oil continuing to pollute the Gulf Coast, the question of how much our alliance with the oil industry really costs us is at the front of the everybody's mind.

The International Energy Agency released an early draft of a report documenting, for the first time ever, how much the fossil fuel industries get in subsidies each year (H/T Grist). The timing is, of course, coincidental: The IEA's work stems from an agreement made at this years G20 conference that subsidies of fossil fuel industries should be phased out as part of international efforts to reduce carbon emissions.

So "” drum roll, please! "” how much money are the energy giants taking in? $550 billion a year.

But the author is, I believe, misunderstanding the study and the underlying economics (no surprise there from a green progressive writer).  This is from a study of 37 developing, not rich, nations.  There is no way these guys are paying $550 billion in cash into private oil company pockets.  In fact, most of these countries barely let the private oil companies even play, or force them into some marginal operator role subservient to their state oil company.

If these countries are subsidizing producers at all, the vast majority who are getting such largesse are large state-run companies, not western private oil companies.

However, my guess (and I have not seen the report yet) is that what they mean by most of these subsidies is actually selling fossil fuels to their citizens at below-market prices.  These subsidies are not transfers of state dollars to oil companies at all, but below-market pricing of oil products to consumers by state-run oil monopolies.   The people getting subsidized here are poorer consumers, not private oil companies.  Countries like China, Iran, Iraq and even Venezuela (run by progressive heart throb Hugo Chavez) sell petroleum products way below market prices to their citizens.  I am fairly certain this is the half trillion dollar subsidy the report refers to.

So we have the ultimate irony of a "progressive" lamenting government-subsidized energy for poorer people in developing nations.  Wow, I never thought I would say this, but if this is the progressive position, I agree with it.  The whole situation does highlight the difficult tension between development and CO2 reduction programs, and reinforces my argument that aggressive worldwide CO2 abatement will mainly hurt the poor.

Conservatives, nominally supporters of smaller government and free markets, are yet again torpedoing these principles in the name of short term political expediency.  In order to score a few fleeting points against Obama, they are calling him out over the BP oil spill, saying that this is his Katrina, a massive failure both in regulation and response.

That's stupid.  One can certainly raise some questions about the government -- why have they been collecting an oil spill cleanup tax but not any oil spill cleanup capability or equipment, why are we driving oil companies out of easy oil in shallow waters to crazy-hard oil in deep waters.  But this is not Obama's fault nor the government's fault.  This is BP's fault.  They screwed up and started the spill, and it was they that had no contingency plan for such a disaster.  And its going to cost them a staggering amount of money, as it should.

After all, what are the feds going to do?  They certainly can't be expected to maintain the expertise to deal with this kind of thing, particularly in cutting-edge deep water.  Which is why Obama has had to resort mostly to joggling BP's elbow demanding that hey hurry.

We have the incredible sight of Conservatives, rightly, saying that more regulation could not have prevented the financial crisis because regulators are any better than industry participants in spotting problems when entering uncharted territory.  But here we have exactly the same situation and Conservatives are hammering on Obama for not being authoritarian enough or regulating enough.

Postscript: One of the few things the Obama administration has done is demand BP stop using a certain oil dispersant chemical because it is toxic.  Duh.  So is all the oil.  Which is probably why BP ignored him.  Government is terrible with this type of decision.  We have something really bad happening that we can't control.  But we can make it less bad by doing X, but X has some downsides as well.   In the heat of battle, when discretion is required, government will choose the sin of omission (letting more oil reach the shore) over the sin of commission (using a toxic dispersant), even if this decision is irrational.  In their incentive system, the sin of commission is impossible to sluff off on someone else.  The sin of omission can always be blamed on BP, or Bush, or whoever.  This is one reason why government bureaucratic rules are often so detailed and prescriptive -- given these incentives, certain decisions will never be made in the heat of battle by bureaucrats unless their actions are guided by detailed rules, which then give them cover.

Postscript #2: I think the media has tended to underestimate the difficulty here.  5000 feet of water is really deep and complicated to work in, orders of magnitude harder than shallow water, which in turn is orders of magnitude harder than on land.  In a way, its actually kind of amazing that BP has sealed this thing, given that the Soviets, in much less difficult leaks, reportedly had to resort to nukes to seal the well.

Life is too short to spend much time on the Democratic Underground, but this article by Ernest Partridge popped up in one of my Google watch lists.  I highlight only because it contains this straw man:

The dogmatism of free market absolutism resides in the belief that the unregulated market never fails to be beneficial to all; the belief, in other words, that there are no malevolent effects of unconstrained market activity, no "back of the invisible hand." From this belief follows the insistence that the free market is self-correcting, and that there is thus no need for regulation � that, in Ronald Reagan�s enduring words, "government is not the solution to our problems, government is the problem."

I can't think of any thoughtful defender of capitalism and free markets that ever would have said that the market "never fails" or that it is "beneficial to all" or that there are never bad outcomes or that the market is perfectly self-correcting.

Bad, stupid shit happens all the time in free markets.  For example, BP idiotically dumps a few zillion barrels of oil into the Gulf of Mexico.  In a free society, BP will be out billions of dollars in cleanup costs and damage settlements -- it might even bankrupt itself if governments allow that to happen, and thus will never again be able to do something so careless.  Markets can't prevent a first dumb action, like huge leveraged bets on ever-increasing housing prices, but markets can make sure the folks involved don't have the resources to do it again -- that is, except if governments bail them out from their mistakes.

The point is not that markets are perfect -- the point is that they are superior in both function and the retention of personal liberty to the alternative of giving governments coercive power to use force against individuals to change market outcomes.  The point is not that individuals don't do destructive things within the context of free markets.  The point is that they have a lot less power to do harmful things over long periods of time than if one gave that person coercive power in a government job backed by police forces and armies.   There is only a limited amount of damage anyone can do when they depend on the uncoerced cooperation and agreement of their counter-party.   A tobacco company CEO doesn't have a hundredth the power to ruin peoples lives as does one member of Congress. Fifty years of slimy cigarette advertising doesn't have the power of one Congressional mandate.  Go to Chicago, Detroit, Baltimore -- which has been worse for these cities -- the private campaign to sell cigarettes or the government led war on drugs?

Its clear from later in the article that the author is yet another person with a list of pet peeves who wants to use force on the American citizenry to get his way.  The author doesn't like cigarettes, so intervention with tobacco companies is a valid role for government.  OK, well I can't stand reality TV shows, so much so that I would rather be in a room of smokers than a room with "the biggest loser" on TV, but you don't see me wanting to give government power to do something about it.

But what is amazing to me is how much his examples actually make the libertarian point for limitation of government.  Try his first one:

Private Prisons. Good for the corporations: more prisoners, "three strikes" laws, mandatory sentencing. The cost to society: less rehabilitation and early release, increased government expenditures and taxes. It is noteworthy that the United States has the largest prisoner to population ratio in the industrialized world.

You have to really re-read history to come to the conclusion that American incarceration rates are mainly driven by privatization of prisons.   My sense is the causality is the other direction - we have passed crazy drug laws and mandatory sentencing for sometimes petty crimes and have had to turn to private actors with private capital to keep up with the demand to construct new prisons.

Like the author, I hate this incarceration trend, but its really a stretch to blame this on privatization.  And, I am the first to deride the symbiotic relationship between powerful corporations and the government.  I have written on any number of occasions that both political parties in this country seem to be trying to build a European-style corporate state.  So, even if I don't think he has history quite right here, I am willing to concede the point.  Because, in fact, this seems to me an indictment of exactly what he is trying to defend -- the government interventionist state.

The only reason corporations lobby the government is that the government has the unique power to coercively intervene in markets.  Corporations try to engage this power for their own benefit and to step on competitors, both current and future.  The root cause failure here is not the fact that private companies try to engage this power, but that this power exists at all.

Amazingly, he makes the same argument about war:

War, Inc. Good for the corporations (i.e., the military-industrial complex and "private contractors" such as Halliburton and Blackwater): more wars, expenditure of rockets, bombs and ammunition (requiring restocking of inventories). Cost to society: avoidance of diplomatic solutions, increased military budget and battlefield casualties, disobedience to international law (e.g., the Geneva and Nuremberg protocols).

I am staggered to see that someone who is defending giving more power to the government is simultaneously highlighting examples where this power is misused so horribly  (and what could be a more despicable crime by legislators than incarcerating more people or starting wars just to help a favored corporate interests).  I don't think wars are started primarily to help armaments manufacturers, but if they are, then this kind of failure by politicians is FAR worse than any he could point out in unregulated markets, only making my point for me.  Markets are not perfect, but the cure of government use of force is worse than the disease.

Since the author dwells on cigarettes, just look at the so-called tobacco settlement.  Supposedly, this was the great government hammer wielded against cigarette companies to punish them for years of selling a dangerous product.  But in fact, all the settlement did was cement the market position of largest tobacco companies.  The settlement effectively made government a financial partner with tobacco companies, and since it was implemented, the government has wielded its power to protect the companies who were involved in the settlement against competition (particularly from low-price upstarts) so as to protect its own cash flow.  The position of the major tobacco companies has never been as secure and profitable.

I think the author's response would be that if we ban corporate election spending, then all would be well.  This does not pass any kind of smell test.  First, corporate giving has been effectively banned (or at least severely limited) for 20 years, and we see the staggering influence corporations have none-the-less.  We only have to look at Europe, where the troika of politicians, large corporations, and large unions run those states to their own benefit, to the detriment of all others (e.g. smaller businesses, business without political contacts, workers outside of favored fields like autos, young workers, etc.)  This symbiotic relationship occurs without campaign cash being a major element.

If you want to understand how this works, just look at recent legislation like cap-and-trad and health care.  Legislators propose some populist interventions in a market to help themselves get re-elected.  Corporations who might naturally oppose such interventions agree to support legislation in exchange for a number of subsidies and special protections. Trades occur that have little to do with campaign contributions.  Just look at the influence GE wields in getting special deals for itself.

The GM bankruptcy was a classic example.   GM is given a big taxpayer bailout and some cuts in labor costs.  In exchange for labor cost cuts, unions get the government to squash secured creditors of GM in their favor in dividing up ownership and also get some special considerations in pending health care legislation.  Secured creditors allow this to occur because they got TARP funds from the government.   Politicians get active support from GM and the UAW in getting out the vote, positive PR, etc.  The only people who lose are taxpayers, all the other automobile competitors, and workers in every other industry who must pay taxes to support auto workers special deal.

By the way, don't tell me that this is not what you want, that if only we have the right people (e.g. yourself) in power this will never happen.  Wrong.  It always happens.  Every dang time.  The incentives are overwhelming.  Given politicians the power to do that one good intervention you want, and you have also given them the power to do a thousand that you don't want.

Postscript: By the way, please do not ever take a "progressive" seriously when they say they care about the poor.  Take this for example:

Outsourcing of jobs. Good for the corporation: increased profits and return on investment of stockholders. Cost to society: poverty, loss of educational opportunities, redistribution of wealth "upward," shrinkage of customer base, economic depression.

Another way of stating outsourcing is say that it is "transferring a job from a rich American to a poor person in a developing nation."  As a country becomes richer and more educated, low-skilled jobs are not going to continue to get done by college grads.  PhD's, in general, are not going to stitch underwear.  Low skilled jobs in a wealthy society do get outsourced, and these new low-skilled jobs in developing nations become the seed or the catalyst for future wealth-creation and development.

This is one ironic problem that progressives in this country have -- even the poorest Americans would be middle class in many of the countries of the world.  If progressives really want to transfer wealth from the rich to the poor, everyone in the US would pay and no one would receive a dime, it would all flow to other countries.

I guess I could have predicted this, but I didn't know until this weekend that a variety of conspiracy theories were circulating about the BP oil platform fire and spill, including the incredibly absurd notion that the platform was torpedoed by a North Korean submarine.

I am not a military analyst, though my sense is that a North Korean submarine would have difficulty even sailing reliably to the Gulf of Mexico.  But I do know petroleum operations.  And I can say that any petroleum facility is a playground for fire, and only unwavering, intelligent management can prevent disaster  (and even then sometimes shit happens).

It seems that, like the 9/11 truthers, the arguments are based on statements that sound plausible to laymen but in fact are meaningless.  An example:

Many have concluded that the platform sunk due to sabotage of some nature. No oil spills happened when Hurricane Katrina hit the area in 2005, they note.

While hurricanes are dangerous to oil rigs, they are something rigs are designed for.    This kind of blowout likely was due to forces at work down in the borehole, meaning that the problem was thousands of feet below the surface of the ocean, where one would not even know a hurricane was present.

This piece of evidence is funny

This conclusion has been spurred by alleged Kremlin reports that the Obama Administration has ordered a news blackout, preventing reporters from gaining access to the area or discovering information that would confirm or disprove the charges

LOL, the Obama Administration ordered a news blackout of gay protesters around the corner from the White House.

Via Tim Worstall, Gawain Towler reports this bill in front of the European Supreme Soviet Parliament:

Written declaration on fixing fuel prices
The European Parliament,"“ having regard to Rule 116 of its Rules of Procedure,
A.
Whereas we are witnessing an unprecedented rise in fuel prices, and
this scandalous surge is having a devastating effect on economic
activity in various sectors: transport and other services, industry,
agriculture and fisheries,
B. Whereas in Portugal, the major oil
companies in the first quarter of this year, vis-à-vis the first
quarter of 2007, made net profits of 22.9% (GALP), and consolidated
profits of 36.5% (REPSOL) and 63.4% (BP), which were fundamentally the
result of practising speculative pricing, as a result of the
speculative valuation of oil stocks
bought at lower prices,

1.
Calls for the establishment of a tax, for each Member State, to be
levied exclusively on these profits so as to bring them back into the
coffers of the Member State. This tax should be paid within 60 days
after the end of each quarter, with the value and scope of the levy
depending on the readiness of the oil companies to reduce their
speculative gains thanks to the 'stock effect';
2. The revenue
generated by this tax should be returned on a proportional basis to the
various economic sectors in each Member State;
3. Instructs its
President to forward this declaration, together with the names of the
signatories, to the Council, Commission, and Parliaments of the Member
States.

"depending on the readiness of oil companies to reduce their speculative gains thanks to the 'stock effect'"??  What the *&#$@% does this mean?  What economic concept are they even trying to get at?

Further, I was amazed at the statement that BP made net profits of 63.4%.  It took me a while to figure out that this was the quarter over quarter profit growth, not the profit margin.  I can't tell if these guys are just ignorant or if this is a translation issue into English, so i will give them the benefit of the doubt.  In case you are wondering, BP's net profit margin in the first quarter of 2008 was 8.3% of revenues, which in the grand scheme of industry is actually below average.

One reason fuel prices are so high in Europe is because the government takes more than half of fuel revenues in taxes:

Fuel taxes are also the central issue for truckers in Europe, because
they account for a large portion of the retail price of fuel. Unleadedgasoline
sold for $8.65 per gallon and diesel for $9.62 per gallon Tuesday in
Britain, which charges a flat $3.77 per gallon in fuel duty and imposes
a 17.5 percent consumptiontax on the total price

So, 61% (44% from the $3.77 plus the 17.5%) goes to government and 8.3% goes to the BP shareholders.  So lets tax BP shareholders more to lower the price!

Lobbying of course!  Silly rabbit. 

The wind industry's trade group spent nearly $816,000 to lobby last
year as wind companies tried to persuade Congress to extend a key tax
credit and make power companies use more renewable sources.   

Despite the efforts of the American Wind Energy Association, neither desire found its way into legislation this past year.   

The
group, whose members include General Electric Co., BP PLC, AES Corp.
and FPL Group Inc., is still pushing for the tax-credit extension after
lawmakers failed to tuck into the economic stimulus plan. The industry
argues that 116,000 jobs and $19 billion in investments are at risk if
the 1.9 cents per kilowatt-hour tax credit doesn't get a second wind.
It expires in 2008.

Here is the really, seriously amazing part:  In 2004, there were just over 400,000 people employed in the US power generation, transmission, and distribution business.  This means that, incredibly, this advocacy group is claiming nearly 30% of the electric utility industry owes their job to wind power, despite wind generating a bit less than 1% of all the power in the US.  If this is true, then here is a solution - forget the 1.9 cent subsidy, and cut some staff. 

Oh, you mean that job number probably isn't real, kind of like those municipal stadium and sports team subsidy studies.  Really?  Boy are you cynical.   

(HT Tom Nelson)