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Buy Low, Sell High — and Build

That advice comes not from Gordon Gekko and his friends on Wall Street, but rather from James Hamilton, a prominent academic economist and observer of the petroleum market. Hamilton writes:

If you can figure out a way to find resources whose value in their current use is not very great– in other words, if you buy low– and redeploy them somewhere else where their value is much greater– in other words, sell high– then you will not only add to your personal wealth, you will be creating new wealth for society as a whole. The process of allocating resources to their most efficient use is the heart of what drives economic growth. The fact that individuals have a strong personal incentive always to be looking for better ways to do that is the primary factor responsible for the standard of living that we enjoy today.

What is an oil economist doing writing about wealth creation? Hamilton shows us with a simple example:

On Friday, you could buy a barrel of light, sweet crude oil produced in North Dakota for less than $81. On that same day, oil refiners in Port Arthur on the coast of Texas were paying around $110 to import a similar grade of oil produced in Nigeria. That’s $30 worth of incentive to you to try to figure out a way to transport oil from North Dakota to Port Arthur in order to replace a barrel of imported Nigerian oil with Williston sweet. As a nation, if we could divert some of the resources we are currently devoting to pay for oil imported from Nigeria, and use them instead to enable the Port Arthur refinery to get its oil from North Dakota, we will become richer.

You don’t have to be an oil expert to come up with the best solution for that: pipelines. This wealth effect is yet another reason that the Obama administration’s capitulation to green hacktivist hysterics over the Keystone XL pipeline is a loss for anyone concerned about the immediate well-being of the nation over far-flung hypotheticals.

Great, the skeptic replies, but how do we know the wealth effect isn’t the same sort of abstract idea with little real world merit? Well, Hamilton points out that a private company (who, unlike certain government-funded green technology companies have to worry about their bottom line) has offered to build a key part of the project…for free…with just a signature.

The president is still studying the matter. Via Meadia is with the economists on this one: sign, Mr. President, sign.

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  • vanderleun

    Since it is such a no-brainer the outlook for signing is dim indeed.

  • Kris

    I am reminded of this:

    North Dakota Stuck Using More-Costly Railroads to Move Oil. “Right now, about 25% of North Dakota’s oil travels by rail. According to the CBS News report that ‘will increase exponentially with increased oil production and the shortage of pipelines.’”

    ” And who has a big stake in Burlington Northern? A guy in Omaha named Buffett.
    And by having TransCanada tie its Keystone XI to the border crossing approval you can’t get a segmented line from Montana to Port Arthur, TX that the Bakken field could tie into. That is the concept. A collector system named the BakkenLink runs down to Montana from ND and ties into Keystone XI (known as MarketLink). A twofer you might say.
    So, in a way it is a Win-Win for Obama – He wins his Green base and his Crony Capitalism base. Pretty clever, eh?”
    They win, we lose. As usual.

  • cubanbob

    If Obama had a brain…… but then again if he did he wouldn’t be who he is.

  • a nissen

    “Learning to read actively is one of the most important things you can do; get this right and a lot of other things fall into place.”

    Ah so, cagey of you, WRM, not to also share Jim Hamilton’s “invites” in that it would have made yours easier to see.

  • pedant with a small background in thermodynamics

    I think refusing to sign is entirely in line with the platform on energy and the environment that Obama published on the website very early in his term. Furthermore, a careful parsing of the relevant bits of one of his campaign speeches left me unsurprised at several of the gems contained in that platform.

    If you voted for Obama, and exercised due diligence in doing so, I think it entirely reasonable to expect this turn of events as a result.

  • It is, sadly enough, “dilemmas” like this that make you wonder if Obama has a brain cell working. Or more likely, his are hopelessly to hostage to one or more of the abovementioned lobbies. Still, we’re told on good authority to pray for our rulers . . .

  • Kris

    JR@6: “we’re told on good authority to pray for our rulers”

    As in: “Grant them wisdom.”


  • a nissen

    No one has time to suspend judgment until all pertinent facts are in, but here are a couple cases at least attempting to parse approximate guesses.

    First, the Seattle Times, basing their opinion on what they know about Washington’ s SEPA (modeled upon NEPA):

    Second, is the WSJ pundit O’Grady, offering a Q&D job of investigative reporting of how Obama was given a choice between “use this law, forget all the others” and “see you in court” (the Briar Patch). (subscription likely required)

    This pudding reader? Gone after more succinct information.

  • a nissen

    A better take on some of the facts, e.g,,those 3 reviews? Two draft EIS and one challenged FEIS—

    An extensive sharing of opinions of facts by various interests—

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