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Wednesday, December 30, 2015

Fracking is beating terrorism


As longtime readers know, I have a fondness for George Phydias Mitchell, the Texas wildcatter who at age 79 and facing bankruptcy still pursued the oil industry's Holy Grail of hydraulic fracturing -- and succeeded. I devoted a chapter to him in "Exceptional Americans 1."

Mitchell died at 94 in 2013, but he gave the technology he left behind transformed the world. No longer are Western nations hostage to dictators in the Middle East, Nigeria, and other hellholes. Fracking opened oil reserves everywhere, including North Dakota. This cuts off the money supply that finances Muslim terrorism.

That's right, capitalism is doing what our socialist government refuses to do: Fight terrorism. The falling oil prices have little negative effect in teh United States. We simply stop drilling. But the drop in oil prices devastate Muslim socialist governments -- contrary to the liberal party line, the two are quite compatible. They are inefficient. Even though their drilling costs are low, their production costs are high because in a socialist economy there is no incentive to be efficient; in fact, the incentives are to be inefficient because the more people you hire, the more friends and relatives you put on the payroll.

The gravy train stopped.

From Zero Hedge:
As we outlined in great detail earlier this week, Riyadh is expected to run a 13% deficit in 2016. That's actually in line with expectations and comes on the heels of a better than expected 2015 when the red ink somewhat inexplicably came in at between 15% and 16% of GDP as opposed to the 20% the market was expecting. That’s bad news for prices as it means the Saudis are holding up better than most observers anticipated. Riyadh can thus continue its war of attrition with the US shale complex for longer.
Also, remember that Saudi Arabia came into 2015 with virtually no debt, which means they can borrow to offset the SAMA burn. At $30/bbl, Saudi Arabia could hold out for nearly two years with no subsidy cuts and more than 3 years as long as they finance 50% of spending in the debt market. Now that the subsidy cuts are a reality, those figures rise materially.
To put that in perspective, Democrats were running 40% deficits in 2008, 2009 and 2010.

Low oil prices mean the West no longer subsidizes the terrorism, the beheading of homosexuals, the slaughter of Christians, and the stoning of women by Iran, Saudi Arabia, and other brutal Muslim regimes.

We also no longer pay for the social services that keep the people happy. Governments have been known to collapse under such circumstances, although who knows what fresh hell will replace them.

God bless you, George Mitchell and the capitalism that produced you.

2 comments:

  1. "Even though their drilling costs are low, their production costs are high because in a socialist economy there is no incentive to be efficient; in fact, the incentives are to be inefficient because the more people you hire, the more friends and relatives you put on the payroll." Sounds like blue states and blue cities, committing their residents' taxes to government unions and government boondoggles.

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  2. Congrats, Don, for getting a number or mentions and links from Instapundit!

    ReplyDelete