I was reading this past week about the explosion of oil shale development in the United States, and about how and why it's driving the recent plunge in oil prices. It's quite a story. If all you know about fracking is the shrieking you've heard from liberals about it causing earthquakes, you really owe it to yourself to get the truth.
Fracking requires you to drill a hole several miles deep, then turn at a 90-degree angle and drill several more miles in order to get at fossil fragments that have been in the ground for millions of years. And that's just the process of getting to them. That doesn't even get into the challenge of production and distribution.
What's amazing is that this actually is being done safely, and it's getting results. Domestic crude oil production has increased by 3.6 million barrels a day in less than four years--flooding the market with more product and putting prices into a free-fall thanks to the increase in supply.
Now a lot of people think oil companies can pretty well print money because there is so much demand for their product. But it doesn't really work that way. For one thing, oil companies develop their infrastructure and their staffing based on certain revenue estimates. When they produce more and drive prices down, their revenue often falls short of their estimates.
That doesn't mean you should shed a tear for them, of course. They're in a business and they're competing for market share--all while having to balance production strategies, pricing strategies, expenses . . . they're dealing with what every business has to deal with. There's not a thing in the world wrong with that. If they get it right, they'll make a fortune and you'll get excellent products at a reasonable price. If they don't get it right, they could face real problems.
But every major step forward in our economy, and in our standard of living, comes from people like this taking risks in the hope of realizing a major reward. This has never come from government and never will. Government can help in certain ways--with good infrastructure, with growth-friendly tax policies, and with a light approach on regulation so innovation isn't choked off. I'd say the government's performance is mediocre on the first and abysmal on the other two.
Once the technology for producing oil from shale is really perfected, it will probably drive the price down even further--and then the producers will have to figure out how to make a profit off even lower prices. If they can, no one will benefit more than consumers of the product--and that includes a lot more than just individuals. It also includes trucking firms who ship goods across the country, the manufacturers who hire them to do it and the retailers who receive shipments from them.
You may not realize this, but the biggest truck fleet in America belongs to Wal-Mart. How much more price-competitive could Wal-Mart or any other gigantic retailer become if their shipping costs could be reduced as a result of an oil glut and falling prices? If a low-income person shops at Wal-Mart to save money, this would offer a much more tangible and lasting benefit than any government program--and it wouldn't cost taxpayers a dime.
This is why we should always root for the private-sector innovators looking to perfect a new idea get rich as a result. If they get rich, it will mean an awful lot of other people were better off as a result. The next time some liberal tries to make the case that some people are poor because other people are rich, keep that in mind. In the real world it works exactly the opposite of what they think.
I was reading this past week about the explosion of oil shale development in the United States, and about how and why it's driving the recent plunge in oil prices. It's quite a story. If all you know about fracking is the shrieking you've heard from liberals about it causing earthquakes, you really owe it to yourself to get the truth.
Fracking requires you to drill a hole several miles deep, then turn at a 90-degree angle and drill several more miles in order to get at fossil fragments that have been in the ground for millions of years. And that's just the process of getting to them. That doesn't even get into the challenge of production and distribution.
