The Snake Oil Well, Running Dry


Via Instapundit, it seems that T. Boone Pickens is slowing down his plans to save America by getting us to buy wind power from him.

Over the past two days, Boone spoke at events where he said that the wind project is having trouble getting financing because of the credit crunch.

He was also quoted saying that falling prices of natural gas, used in power plants, are making his wind project less economical.

Another possible factor (albeit smaller) is the defeat of California's Proposition 10, a plan to provide rebates that was heavily funded by Pickens because of the potential windfall to his business. reason was critical of that set-up early this year, and Pickens spent a lot of his time dealing with criticism in a conference call I participated in last month. But the biggest problem I had with Pickens' year-long campaign was his populist angle that our purchase of oil from other countries was "the largest wealth transfer in the history of mankind." Steven Milloy put it best.

Contrary to Pickens' demagoguery, "wealth transfer" is a term generally used in the context of estate planning, where money is simply "gifted" to heirs.

Our purchases of foreign oil, in contrast, are more reasonably known as "trade" — and trade is good.

Americans are not simply petro-junkies who mainline crude oil for the masochistic high of watching gas pump numbers spin faster. We produce goods and services with imported oil more than any other people on this planet.

The Pickens TV and PR campaign was one of the most sophisticated I've ever seen: not only did he get Al Gore and the presidential candidates to give him cover, I remember an Ohio voter who said she didn't like McCain or Obama so she'd write in Pickens. (Pickens' gravelly Texas accent was a big help, I think: as Ross Perot could tell you, there's something more politically attractive about a plains tycoon than, say, a Silicon Valley billionaire.) But I'm not weeping that his $57 million campaign isn't getting him what he wanted this year.

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  1. That whole “wealth transfer” line really bugged me. If anything it is a wealth transfer going the other way. If I were an average Saudi, I would look around and think “gee we have all this oil that Westerners take and use to make really productive and wealthy economies and in return we get a bunch of money that goes to our elite who in turn sends it back to the west for manufactured goods that only our elite enjoy. Why can’t we keep our oil here and use it for ourselves?” Back in the day, a relationship where by one country produces raw materials and another produces manufactured ones was called mercantilism and the raw material produced was thought to be getting screwed. Now it is called a wealth transfer. Go figure.

  2. The thing I never got is why he needed Californians to pass a bill to build wind plants in the Great Plains.

  3. So I can stop worrying about longer and longer days now? Or would the windmills make the earth spin faster?

  4. John, petro states don’t want to “keep the oil” because they have such an excess of it. The logical inclination would be to build refineries and chemical production plants so that the source country produces both raw material and end product, though the power relationships probably factor into this a lot. You can’t have a growing middle class working skilled jobs and demanding things like rights.

    In fact it’s a mystery to me why Venezuela hasn’t made more effort to break into the gas industry. Protectionist gas policies?

  5. I’d be interested to see what happens when oil consumption jumps back up to 2007 levels. The recession is giving us a reprieve, but I still think it would be foolish to give up on wind, nuclear and solar just because prices have fallen as much as they have. We need to have SOME preperation for geologically limited oil and gas supply in the near future.

  6. “In fact it’s a mystery to me why Venezuela hasn’t made more effort to break into the gas industry. Protectionist gas policies?”

    It is hard to transport gas. Gas has a bad habbit of exploding. Safer and easier just to ship the oil and refine it where it is used.

    You are absolutely right about middle eastern countries not wanting to manufacture themselves. In an ideal world you would want to build the chemical plants where you pump the oil. But, the last thing the Saudi Royal family wants is a bunch of middle class, educated engineers demanding a say over their lives.

  7. Boone wasn’t going to make much, if anything, on wind power. He was going to rake it in on the backup gas-fired power plants that are needed on days the wind isn’t blowing.

  8. not only did he get Al Gore and the presidential candidates to give him cover

    Don’t forget the 60 Minutes interview.

  9. Actually, he wanted the wind farm land through eminent domain to pipe water down.

    The Saudi’s are starting to get smart with their energy wealth. They’re starting to build aluminum smelting plants because it’s such an energy intensive process and energy is dirt cheap. Plus, it’s a good diversification. My guess is in the next couple of decades, the Middle East will become a major player in aluminum production.

  10. Tip to Dave W: quoting Steve Milloy does less than zero to support your argument. The guy is a dedicated shill for Big Oil of the “Thank You For Smoking” variety.

    I quite liked Picken’s wind farm ideas, but I thought his idea for switching all the cars to run on natural gas was nuts. From both an economic and environmental point of view, natural gas is best used in highly efficient electricity generation plants.

  11. “Our purchase of oil from other countries is the largest wealth transfer in the history of mankind.

    And that wealth should be getting transfered to ME!”

  12. The problem with the “wealth transfer” is that ME countries hang onto their petrodollars, buy Treasuries or bail out American banks, but generally do not demand the same output of American goods that we do. Thus we have a trade deficit, which I believe has been recently discovered to be a Bad Thing.

    I like to think I understand economics, but I can’t quite figure out how our economic/trade policies have gotten us into this position. I know that American manufacturing has declined while consumer demand has gone up, with IOU’s covering the difference. But how did this happen and how would classical liberal policies have prevented this situation?

  13. Boone’s football team got beat, natural gas is down, and GE won’t just give him the turbines. Bad month for Boone. The guy paid my tuition, I’ve met him a couple of times and I like the guy, but never doubt that Boone does what he does to make money. I don’t think that he would ever deny that either.

  14. In his recent Daily Show appearance Boone said natural gas is best used in trucks, not autos. That’s his new recipe for energy independence.

  15. Boone needs a bailout!

  16. Watched Boone on . . . not Colbert, but the other quasi infotainment news guy’s show last night on the Comedy Channel. He wasn’t proposing all cars go to natural gas, but that 18 wheelers, and all the big, hauling type trucks should, because battery power just won’t cut it for the big rigs. Despite myself, I liked him, he was funny, at ease, and made some good points.

  17. The thing I never got is why he needed Californians to pass a bill to build wind plants in the Great Plains

    The California bill was rent-seeking.

    He was going to reinvest the rent in, well, something — ostensibly the wind plants.

  18. Mike, go Pokes. And your right, T. Boone is about the $$, always has been, always will be.

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