By Institute for Energy Research ——Bio and Archives--June 28, 2011
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Many big shots in the [oil] business, who later denied it, literally prayed for us amateurs in government "to save us else we perish." A few years later, when most of them, for one reason or another, found salvation, few sinners remembered their prayers. Such is human nature.[1]Talk freedom and free enterprise, practice rent-seeking. Today's big shot, T. Boone Pickens, once talked endorsed individual enterprise and small government. "We must reduce the influence of big business in Washington," he said in his first autobiography in 1987. "The way to do that is to kill the protectionist game."[2] But contrary to his previous beliefs, the former oil and gas producer and energy trader and investor has spent tens of millions of dollars in recent years lobbying for a government-enabled energy transformation. As originally formulated several years ago, the Pickens Plan proposed to employ the powers of government to have 1) wind turbines displace natural gas in the electrical generation market and 2) natural gas back out petroleum in the transportation market. Wind would gain the electricity generation market, natural gas would be repositioned to fuel motor vehicles, and oil would be displaced altogether. Wind would unambiguously win, natural gas would hold its own, and oil would lose. T. Boone did not get enough federal subsidy and abandoned his aggressive plan to build the world's largest wind farm. Viola, he dropped the electricity component of his plan. T. Boone since has focused on transportation, specifically to convert the heavy truck market (via generous taxpayer help) from diesel to natural gas. Such would presumably be an incremental market to aid natural gas prices. But is government favor really the only way to go for the gas industry as Pickens believes? Self-Help, Free-Market Style In the face of low prices for its product, an industry can do two things in a free market. One is to reduce supply. For gas producers, that means producing less in the face of a supply-increasing technology boom. To this end, drilling rigs are being redirected to oil prospects from gas plays. Between April 2010 and April 2011, according to Baker-Hughes, the natural gas rig count fell from 973 882. "More rigs are being directed toward oil instead of gas largely because of the large price disparity between the two fuels on an energy-equivalent basis," the U.S. Energy Information Administration recently noted. "On April 21, 2011, the number of active oil-directed rigs exceeded the number of gas-directed rigs for the first time since April 28, 1995." The other choice is to increase demand. Several self-help measures are being incited by relative energy prices for natural gas interests to:
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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.