The Economy

Dumb dumb dumb populist BS.

The E&P companies are not in the business of paying leasing fees and spending billions of dollars to try to develop fields that often net them nothing, just for the sake of hoarding acreage. Joe Biden knows that, but that isn't doesn't make for a good boogyman.

Those leases are for fixed periods of time. Just because you lease land, doesn't mean you are going to have the ability to pull oil or gas out of the ground profitably. They often spend billions of dollars trying to develop a project in one of those leased areas, in addition to the leasing fees they pay the Federal government. There is every market incentive to either get oil or gas out of the ground or get the hell out of dodge. Which is what actually happens.

It already is lose it or use it, in effect, because nobody wants to sit on a money pit. All this legislation would do is make it even more unpredictable for anyone thinking about entering a lease, which will make them think twice about doing it.

But to hear dishonest politicians talk about, it's as simple as popping a well anywhere once you get an initial drilling permit, and it's guaranteed to produce for you. It's not. It takes time and work to get a project going that can produce oil and nat gas in quantities that allow you to bring it to market in an economic way. They are often unsuccessful. And they give back the land and move on already, when they are.

 

Only 8 percent of what they found were explicit subsidies, as in they were given money taken from others that they didn't actually earn. I don't have their numbers in hand, but I am fairly certain that none of that 8 percent of direct subsidies was happening in the United States.

The rest breaks down to two things. The first requires you to redefine subsidy. Anyone who takes any deduction -- say a mortgage deduction on their taxes -- is subsidized, using this logic. Sorry. Allowing people to keep what they earned and own is not a subsidy, unless the idea is that everyone has a claim on your stuff, and if they are kind enough to allow you to keep what you earned, they are subsidizing you somehow.

The second puts an environmental cost on their extracting oil and gas from the ground that presumably the rest of us pay for. Which would be fine to extract from them, if it is really quantifiable. The problem is, in one breath the same exact politicians who have made that an issue and were threatening those companies and creating uncertainty for them, are now pillorying them for not drilling ENOUGH, because the monetary inflation the Fed hit us with (at the behest of those same politicians) has made those politicians unpopular.

That is the bullshit that the average person just reading the headlines from their dishonesty sometimes doesn't connect. Just months ago (we're not talking years), the Biden administration was doing contrived calculations like the one from the IMF that you linked to, to create a "real cost" of climate change (which they set at $51 for every ton of carbon dioxide generated by burning fossil fuels) and were trying to hit the E&P companies with that cost via regulation and decisions about drilling permits on public land.

Then a bunch of Republicans sued over it, and a political hack of a judge in some district court issued an injunction. The response from Biden was to halt all new leases and permits.

The problem was, like the gang that can't shoot straight, at the same time the price of gas was rising and creating more and more unrest, so in the next breath (literally a month later), you are now getting that "use it or lose it" populism to try to deflect from their schizophrenic actions.

Just my 2 cents. The Federal government has land to lease. If they want to value that land higher than the E&P companies do, because of that 51 cents per ton of carbon thing they came up with, they should do it. If that makes it unprofitable to drill, those companies won't bite. If that means less supply, then people should understand the reason for it and understand that it means the price of oil and gas is probably going to be higher than what they are used to, and that it will price some people out (i.e. -- less demand). That comes at a cost to overall economic growth and our standards of living. It's perfectly fine to societally say this is a choice between two things nobody wants, and we are making a choice in favor of climate change. But at least be honest about it.

 

The consensus number was 490K. The whisper numbers were more like 530K.

It came in at 431K.

It's a miss, but not the most egregious miss ever. And they revised last month's number up, which blunts some of the miss.

I had a back and forth with someone about the jobs number a few months ago when what they reported was a 3-sigma beat of the estimates -- and I got into the reasons why (namely that they continually change their seasonal adjustments to make the number into whatever the politicians who run things need it to be on that particular Friday).

People hang on the headline number, but this is the most meaningless number ever conjured at this point. It's a joke. I think the goal this month, honestly, was not to come out with a number so out of whack with the estimates that it makes them look as ridiculous as they have lately. They succeeded, for the most part.

 

BTW, the only real significance for this month's number related to whether the Fed is going to raise the overnight rate by 50 basis points at their upcoming meetings. That number created no controversy about it -- and they have been preparing markets for it, even if those markets are still pricing in a complete reverse back to even greater accomodation the same as every other time they have tried to get off the zero bound since the financial crisis.

The difference this time is the inflation, which backs them into a corner. So it will be interesting to see how it plays out.

 

The survey methods work. Worked for a long, long time. They rendered the survey meaningless by creating more and more convoluted adjustments to the survey results, always created out of thin and air sprung on everyone with no notice. Even if the numbers themselves were not that reliable, if they are consistent from month to month, it would paint a pretty conclusive picture of the direction things are going. But when you randomly create adjustments to make the numbers say whatever you need them to say, you lose that consistency too. In February, they took a survey that showed a drop of 2.8 million jobs and reported a gain of 467K jobs (creating that ridiculous 3-sigma beat of estimates). The problem wasn't the survey, it was a new covid seasonal adjustment that they created (and I do presume it was because Biden needed a conversation changer).