Life Without Oil

Originally published in Flourishing February 2012

Today, it’s common wisdom – if that’s the right word – to think of our environment as something that starts out healthy, but that we’ve messed up. The worst thing we produce, it is alleged, is “oil”. That just drives me crazy, because it’s the inverse of my entire life’s experience. Yours, too.

In the very early 1950’s, I attended kindergarten at Simpson Elementary School in Russell, Kansas. Our family lived in a rented house – a shack really – a few blocks away on Elm Street (no, not that Elm Street). I remember the day an oil-drilling rig pulled into our unpaved driveway and backed up across the street into the vacant lot next to my friend Nancy’s house. A few weeks later, the rig pulled out and a pump was installed; a black oil storage tank, too. Ker-thump, ker-thump, ker-thump. I was fascinated to watch the head of that pump bob up and down; and it never stopped. Drilling to China, maybe. Ker-thump, ker-thump – twenty-four hours a day. Like a beating heart. I don’t remember being frightened or otherwise damaged by the well, but I do remember that my mother was worried about a polio outbreak in our town that summer that had killed or crippled several neighborhood children about my age.

A few years later, from about the age of ten, my friends and I would swim in the Saline River as it flowed through the Bemis (oil) Field in Rooks County, Kansas between Hays and Plainville. The Boy Scout troop of which I was a member had access to a small cabin and skeet-shooting range in the area. Local oil producers had suspended some of their pipelines above the river, hanging them on steel cables. The pipelines occasionally leaked, but we weren’t concerned about the thin glassy film floating on the river’s surface; we were too busy watching for snakes. The suspended lines were also an adventuresome way to cross the river, swinging as they did from our shifting weight and a gusting high plains wind.

If you had been there with me, you would know that I was more endangered by the campfires we built from cow dung and fallen cottonwoods—or by the aforementioned snakes – than by the oil all around us. We strained and then boiled the drinking water we got from the river, not to rid it of oil – that floats to the top and is easily avoided by dipping your pail more deeply into the stream – but of bird droppings and other such “natural”, non-floating contaminates.

Amazingly, here I am, more than fifty years later, timeworn perhaps, but undamaged by the oily environment of my youth. The greatest risks to my health now seem to be appetite and sloth.

As I look back, I sometimes compare my life with oil to the life of Carl Petterson, Linda’s great-great-grandfather. When Carl came to America from Sweden more than one hundred and twenty five years ago, his first Kansas home was a sod-covered dugout in what is now the Green Mound neighborhood of southeastern Mitchell County. Even a kerosene lamp would have been a luxury for Carl, as I’m sure it might have been for some your ancestors. His nights were lit only by the moon, firewood, and lightning.

Carl didn’t have creosote posts or diesel-powered tractors. He fenced his eighty acres with hand-hewn limestone post-rock, and he walked his plow behind a horse. Still, Carl did well enough to leave five acres of his land for a church, and another five for the church cemetery, where Linda and I will be buried.

Today, his descendants can cultivate his eighty acres and mow his cemetery in less time than it took Carl to hitch up his horse and plow.

I could, of course, tell a similar story about Isaac Martin Harvey, who was born in London, and his son George Washington Harvey, who was born in Peoria, Illinois. They settled together on land that now forms the bottom of Lake Afton west of Wichita and south of Goddard. You know that Afton is a man-made lake providing an important water supply to area residents, as well as a relaxing place for recreation. It was developed in the 1930’s–and is currently maintained—with the use of machinery powered by refined derivatives of oil.

Contrary to modern assumptions, nature doesn’t give us a healthy environment to live in. For those who think that oil and oil pipelines are “dirty” and “unnatural”, I suggest reading some history* about more “natural,” pre-industrial times—or visiting a country where people are still living in “natural,” pre-industrial conditions. One might study places and times where the streets and streams were (and are) filled with both human and animal excrement; where childhood mortality exceeded (and still exceeds) fifty percent; where walking is the standard mode of transportation; and where gas stations and power plants are unheard of. I could go on, but you know all this. Many of you have been there and done that.

We in America live in an environment where the air we breathe, the water we drink, and the food we eat will not make us sick; and where we can even cope with natural catastrophes like Greensburg and Joplin. These are achievements made possible by cheap and abundant energy, e.g. oil. We can live this way only by getting machines—powered mostly by oil and its derivatives—to do more than ninety-nine percent of our physical, and even mental, work for us.

Products derived from oil are what we need to build and maintain comfortable, climate controlled homes. We need oil to produce and transport vast quantities of fresh and frozen food, to build hospitals, and to manufacture pharmaceuticals and orthopedic devices; etc., ad infinitum.

And, how do we travel across the country and around the world, very often for the sole purpose of safely enjoying the most beautiful parts of nature, which pre-industrial people had neither the time nor the energy to do? Oil.

I know that you believe in making decisions based on facts, not fantasies. So, consider the fact that so-called “green” technologies have given us no evidence that they can produce the plentiful, cheap, reliable energy that a modern and healthy human environment requires. Despite more than forty years of government subsidies, which draw resources from more viable and freely chosen purposes, and utopian “green” fantasies incessantly promoted by the government, the media, and in our schools, only two percent of the world’s energy comes from solar and wind technologies. Even that two percent must be backed up by conventional power-generating sources like nuclear, coal, hydro, natural gas—and oil. The sun is helpless at night; and even in Kansas, the wind is calm sometimes. But, these are the least of the obstacles to “green” energy efficiency. The laws of physics pose far greater, even insoluble, problems.

I know I’m old-fashioned: I still believe in a day’s work for a day’s pay and stuff like that. But it’s amazing to me that we’re so gullible as to take energy advice from politicians who tell us to trust our health and prosperity to unproven unprovable and wasteful “green energy” technologies. All the while, they condemn as “dirty” the very energy source—oil—that has brought us the cleanest, healthiest, most prosperous environment in the history of mankind.

Go figure. There are literally billions of people around the world who yearn for a liquid fuel, carried through a magnificently stout pipeline – or any pipeline – to help them create a modern human environment for themselves and their families. Yet here we are, so pleased with our own “green-ness” that we take the practical and affordable energy we get from fossil fuels for granted. And now, we’re actually putting another clamp on the aorta of our energy-driven, oil-dependent economy by postponing the proven, subsidy-free, Keystone XL Pipeline.

Our nature as human beings is to use our intelligence to create more livable and more comfortable environments for our families and ourselves. Dug-outs and dung fires will no longer do. Moreover, in America, we don’t need rulers or czars to dictate or approve what, where, and how we can produce and transport the energy our lives require. Perhaps I digress, but I don’t think so.

We are intelligent and independent individuals living in a society dedicated to liberty and prosperity. As such we have every right and obligation to embrace market-based energy production and privately financed transportation systems; in particular, the Keystone XL Pipeline which is needed now to bring oil from Canada to America’s gulf coast refineries.

The Keystone XL Pipeline would double the capacity of the existing Keystone from 591,000 barrels of oil per day to 1.3 million barrels. The CEO of Gulf Oil estimates that Keystone XL would save American consumers about $.20 per gallon on the price of gasoline. Alternatively of course, we can continue to import that oil from Saudi Arabia. No joke, that’s another price we’ll pay for being “green”.

So, the “dirty oil” objection is really just a dirty trick. Every energy source creates some kind of unpleasant byproduct. I’ve already mentioned firewood and cow dung, and I trust your experience is close enough to my own, that no further detail is needed. I could tell you about the side-effects of mining the materials that go into solar panels and windmills, and the incredible amount of coal and oil that goes into manufacturing, transporting, and assembling their parts, but you can easily intuit all of that for yourself. The “dirty oil” objection is just a shell game used by scoundrels—and that is exactly the right word—to divert our attention from the fact that they really don’t want any kind of industrial development at all.

Let me say it again, plainly: Virtually every necessity and convenience of modern life depends on the production and flow of oil—a Herculean task. It is sheer fantasy to imagine that the likes of Solyndra or Beacon Power will ever match the life-enhancing power of North America’s great oil industry. mh

* A good place to start is Civilization and Capitalism, 15th-18th Century, Vol. I: The Structure of Everyday Life, Fernand Braudel, University of California Press, 1992.

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Web Tips

Originally published in Flourishing January 2012

Are you wondering how working while collecting Social Security will affect your benefits?  Are you having trouble managing all of your monthly expenses?  Perhaps you want to start an education savings plan for your child or grandchild, but are wondering which type is right for you.  To help with these difficult questions, Family Wealth Management LLC has a wealth of resources available to you on our website.

Simply go to http://www.lpladvisorweb.com/michael.harvey/ and click on Downloads in the Client Center drop down menu.  Available to you at no charge is information on retirement plans, long term care insurance, Medicare, Social Security, estate planning, education funding, and much more. 

The information is in easy to view formats, such as PDF and Excel spreadsheets.  Some, like the Monthly Budget Spreadsheet, can even be personalized for your unique circumstances.  Visit our website often, as we’re always looking for, creating, and adding new and useful content to help you manage your money.  ab

Faulty Lens Follow-Up

Originally published in Flourishing January 2012

In the November issue of this newsletter, I discussed the Occupy Wall Street protestors, saying that they were viewing the world through a “faulty intellectual lens”.  The point of the article was that many of the protestors are confused.  Among other things, they don’t understand the “capitalist function”, which is to provide financing for the improvement of the human condition.

So, I was very pleased to read* about protestor Tracy Postert.

Tracy has a PhD. in biomedical science, with a specialty in pharmacology.  Frustrated at being unable to find a job in academia, she held signs in Zucotti Park saying “Reagan Sucks”, and “I’ll Vote After the Revolution”.  (Yes, the logic escapes me, too.)

Tracy finally realized that those signs weren’t helping her find a job, and she put up a new one: 

PhD. Biomedical Scientist Seeking Full Time

Employment—Ask Me for My Résumé

And, what do you know?  Wayne Kaufman, Chief Market Analyst at John Thomas Financial (located at14 Wall Street) saw her sign, read her résumé, called her in for an interview, and offered her a job analyzing medical companies as potential investments.

She accepted.

Tracy is now studying to become a Chartered Financial Analyst, saying, “I want to get a perfect score.”

Q.E.D. (quod erat demonstrandum) The way you look at things really does make a difference.  mh

*Occupier Gets an Occupation, nypost.com, December 5, 2011.

The Pessimists’ Dead-End

Originally published in Flourishing January 2012

In 1957, Bennett Cerf, then CEO of Random House, took a chance on a wildly dystopian and philosophically radical novel.  You may have heard of it—more than seven million copies have been sold, and many of its author’s personal papers are now housed in the Smithsonian—Atlas Shrugged, by Ayn Rand.

I mention Atlas here, because its author is now widely perceived to have been incredibly prescient.  For example: One of the most interesting characters in the novel, Ellis Wyatt, had figured out how to get oil from shale, a crazy idea back in 1957.  Like today’s high tech oil and gas producers, Wyatt’s genius had the potential to lift the nation’s economy out of a deep recession. In the novel, government leaders conspired with their business cronies and political supporters to destroy a railroad needed to transport crude oil from Wyatt’sColorado oil fields to distant refineries.  Equivalently today (December 20, 2011), after three years of environmental studies, our President and Congress are still fighting over the construction of a similarly needed pipeline.

But pessimists and dystopians, please make a note:

In the real world—sooner or later—rational economic self-interest trumps political ideology, always. 

And, increased oil and natural gas production, along with an efficient transportation and pipeline system, are in the best interests of American businesses, American job-seekers, and American consumers.  So, let’s get right to the good news.

Shale gas production is not just increasing, it’s growing almost exponentially.  In 2010, shale gas production represented 29% of natural gas wells completed and 27% of total natural gas production in the U.S.  By 2020, it’s expected that shale gas production will more than double, and by 2035 shale gas will represent 60% of all American natural gas production. IHS Global1, a respected worldwide research firm, estimates that the value of the natural gas extracted from shale will grow from about $26 billion in 2010 to $72 billion in 2020, and more than $153 billion by 2035; and that estimate assumes that natural gas prices will increase at a rate less than the overall inflation rate.

In 2010, shale gas production contributed about $76 billion to domestic GDP, and more than $18.6 billion to federal, state, and local government tax and royalty revenues.  Those numbers are expected to triple to $231 billion and $57 billion by 2035.

At a time (2010) when jobs were—as they are now—seemingly in short supply, the shale gas industry supported more than 600,000 American jobs.  By 2035, that number is expected to grow to 1.6 million.

And, here is why I’m really excited about the potential expansion of the shale gas industry:  Increasing production of natural gas could mean lower energy costs, and lower energy costs could mean a new industrial renaissance forAmerica.  According to the IHS study, increasing production of shale gas could lower the cost of manufacturing in many critical American industries. 

Among the possible beneficiaries, the electric utility industry is likely to move away from coal and toward natural gas as a fuel for its generating plants.  Exports of PVC and related products manufactured in theU.S.have already tripled since 2007 as a percentage of total production.  Other chemical producers, including agricultural chemical manufacturers, and aluminum, steel, and cement producers could benefit, too.

This is all confirmed by another new study2 by Pricewaterhouse-Coopers,   which found that seventeen chemical, metal, and industrial manufacturers commented in their 2011 SEC filings that shale gas developments drove demand for their products, compared to no—zero—such statements just three years ago.

 The PwC study also says that it’s very likely that there will be a significant return of manufacturing from offshore in coming years—as many as one million new jobs by 2025—especially to areas of the country friendly to shale gas production and/or with easy pipeline access. 

Labor costs overseas and corporate tax rates at home could be negative factors, but don’t pooh-pooh these more positive conclusions too quickly, as tax and labor conditions could change suddenly, dramatically, and favorably, too.

Like the heroes in Atlas Shrugged, I have an implicit trust in the American entrepreneurial spirit. I first witnessed that spirit as a teenager among the roughnecks of Ellis County, which at the time was the highest oil producing county in Kansas.  That spirit still lives in America—especially in the shale gas and oil industry—and that’s why I’m so sure the pessimists are wrong. mh

 

  1. The Economic and Employment Contributions of Shale Gas in the United States, IHS Global Insight (USA) Inc., December 2011.
  2. Shale Gas: A renaissance in U.S. manufacturing? PricewaterhouseCoopers LLP, December 2011.

Achievement is Not Normal

Originally published in Flourishing January 2012.

Many personal attributes, such as height and IQ scores, are distributed “normally” throughout the population.  In most things, most people are near the middle of the range and very few are far away from the middle. The distribution is symmetric, which means—as in the case of height—that as many people are taller than average, as are shorter than average.  Almost no one exceeds the average in height or IQ by more than about 25%.  You could plot this on the “normal distribution” chart above.

Achievement is not like that. The highest achievers accomplish far more than the average person. For example, the best computer programmers are many times more productive than average programmers.  Think Bill Gates, whose programming and entrepreneurial genius has literally changed the world. 

Best-selling authors far outsell average authors.  Think J. K. Rowling, whose seven Harry Potter books have sold more than 350 million copies and enriched the lives of millions more.

Achievement doesn’t graph as “normal”.  Statistically speaking, it’s “log normal”.  Those few who achieve at the extreme do things that virtually no one else does. Altogether, those things—whatever they are in particular cases—don’t just add up to higher achievement, they multiply.  That’s a good thing to know.

If you’re still wondering why 20% of the population earns 60% of the income and the top 1% earns 20% of the income, that’s the reason.  They’re not “normal”.  They create extreme value.

That’s a good thing; and a good thing to know, too.  mh

Outwitting The Difficult Child

Originally published in Flourishing January 2012

The worst thing that can befall any parent is to outlive one of their children. In that regard, Linda and I have been very lucky, and a day does not pass, but that we give thanks.

I believe that it’s equally sad when a parent or grandparent has given up on their child or grandchild. This is perhaps a more common tragedy. Thankfully, we have not had that experience, either; but at times, we have had serious communication gaps.

I’m neither a psychologist nor family therapist, but here is what I think I’ve learned:

When you feel your child is shutting you out, or just talking past you; that child may be telling you something important about your own communication habits. Please know that I’m telling you this as a friend, and as a serial offender: That child may be, in effect, your family’s Jiminy Cricket.

From more than twenty years of working closely with hundreds of families, I’ve concluded that a key to the success of flourishing families is their ability to extend unconditional love, and to convey an unconditional commitment to listen non-judgmentally.

So, if you’re considering giving up on your child or grandchild, you might want, instead, to step back and ask yourself, “What message am I missing—and what opportunity is our family forfeiting—because I’m not willing to listen and learn?”  mh 

HT:  John A. Warnick, http://johnawarnick.typepad.com/seedlings

A Notable January Birthday

 

Originally published in Flourishing January 2012. 

Vernon Lomax Smith was born in Wichita on January 1, 1927.  After his father lost his job as a machinist during the Great Depression,Vernon’s family moved to a farm in western Sedgwick County.  As a teenager, he attended my parents’ alma mater,Wichita North High School, graduating in 1945. 

Vernon said that after high school, he wanted go to Cal Tech, but his high school grades weren’t good enough; so, he attended Friends University in Wichita to rehabilitate his academic record.  He then went on to earn a B.S. in Electrical Engineering from Cal Tech in 1949, an M.A. in Economics from the University of Kansas in 1952, and a PhD. in Economics from Harvard in 1955.  I guess that ain’t too bad for a farm kid. 

Dr. Smith has since held teaching and research positions at Stanford, Brown, Cal Tech,Arizona, and George Mason University, among others.  He is currently Professor of Economics at Chapman University’s Argyros School of Business and Economics and School of Lawin Orange,California; a research scholar at George Mason University Interdisciplinary Center for Economic Science; and a Fellow of the Mercatus Center.  But Wait!  There’s more:  

In 2002, Dr. Vernon Smith was awarded a Nobel Prize in Economics for his work in behavioral and experimental economics.  Most of the research that earned Dr. Smith the Nobel Prize was conducted at the University of Arizona between 1976 and 2002.

Then, at the age of seventy-eight, Dr. Smith spoke publicly for the first time about having Asperger’s Syndrome, a developmental disorder on the Autism Spectrum.  Social deficits, communication difficulties, stereotyped or repetitive behaviors and interests, and cognitive delays often characterize these disorders. 

Thank you, Dr. Smith, and Happy Birthday!

******************

I wonder….  Who—other than Vernon, and perhaps his mother—would have predicted his outstanding achievements?  mh