Ken Nelson

 
Bigger than any bank, but you didn’t know it was a bank

You may think British Petroleum is an oil company. And it is, sort of. What it really is is a finance company. It leverages its huge asset base (cash, cash flow, oil rights, physical assets) to get cheap credit that it then loans out to others at a higher price.

You didn’t know this?  Well, that is understandable. Do you think Obama and his crew know it? Or care?  They should. By trying to take down BP for their own political gain they could mess up  a precariously balanced, extremely leveraged,  and highly interconnected international finance system where BP is a major player in the 615 TRILLION dollar company to company finance market (also known as OTC or over-the-counter).

OTC is where the real work of global business happens. It is where money is loaned, risk managed, and profits made.

If trillions in BP backed financial instruments, such as derivatives, credit synthetic options, credit default swaps, and other global arbitrage instruments, fail the result could be a deleveraging and liquidity crisis that makes the Lehman Brothers event that precipitated billions in government bailouts look like a hot spring versus Krakatau.

For more on the risk BP financials threads pose, read this helpful article, Sultans of Swap, by Gordon Long.

You can ignore or take to heart his predictions. I find it useful to really know what BP is and why we need to tread carefully in what we impose on it.  This isn’t to say that companies can grow too big to be accountable, but with the good of large companies come plenty of risks. We can’t really have one without the other.

What I suggest is that Obama’s political skin isn’t worth, to the rest of us anyway, another, bigger, 2008 deleveraging event.

We can really only go one of two ways on these things. No controls, but make sure the players are playing with their money (not ours). OR do not permit these types of markets at all.  Government half regulating, 1/4 crony, and 1/4 witless cannot keep up with the pace and complexity of these markets that in many ways welcome regulation as just another thing they can arbitrage.

I favor letting them do their own thing, with their own money. They will learn to not dig holes they can’t climb out of if we aren’t there to bail them out.

A strong President that cared for America, the world, and wanted to improve it would do this.  Instead we have who we have.

Put another way, since there seems to be no end to the financial rape this Government wants to perform on its citizens, they COULD AT LEAST invest the money wisely.  Instead… we have who we have.

Via NASA

Here is a picture of the whole gulf:

BP sure screwed up but is trying to fix it. The Feds screwed up and are trying to use it.

Keith Hennesey lays out how easy it is to waive the Jones Act (he organized it twice during the Bush Administration) and let whatever ships want to help us with the oil spill help.

Jones Act waivers are in the news because of the Gulf oil spill.  I would like to contribute to that discussion by sharing my experiences coordinating the Jones Act waivers for President Bush in the wake of Hurricanes Katrina and Rita.  In 2005 I served as the Deputy at the White House National Economic Council.

Read it and this will make more sense.

At the heart of the issue with Obama’s administration is that he, and those he has placed in power, fundamentally don’t care about Americans. Obama cares about himself. And his staff and appointees care about precise causes or economic interests, and they just can’t seem to do anything well that isn’t in their area of focus. They are activists with agendas not managers with competence.

What incentive would an eco-kook who hates oil drilling have to stop this mess?  And what skills would they bring to the table?  Yet that is the sort of person the Administration put in charge of monitoring oil drilling.   BP made a boo-boo, but in doing so they are  highlighting just how foolish our government is.

"The U.S. government will become insolvent before BP does," said Bruce Lanni, a stock analyst with Nollenberg Capital Partners.

From this article.

If you factor in tax offsets, I suspect BP will end up whole, and the US government down quite a bit on this oil spill.

 
4500 feet too deep

Sarah Palin, correctly, says that radical environmentalists are hurting the environment they claim to love.

“Extreme deep water drilling is not the preferred choice to meet our country’s energy needs, but your protests and lawsuits and lies about onshore and shallow water drilling have locked up safer areas. It’s catching up with you. The tragic, unprecedented deep water Gulf oil spill proves it.”

It would help, Sarah, to think of them not as caring about the environment, but as radical socialists concerned more with economic distribution and outcomes than with whales or other “natural” things.

In this way, btw, radical environmentalists are like radical ACLU types.  Radical enviro kooks threaten the environment, just as radical ACLU kooks are a large threat to liberty.

Little is actually what it is claimed to be in liberal la la land.

Some solar advocates put up a map of the small areas needed to be covered with solar panels to “power the world”:

I note with some dissatisfaction that my house is covered by a solar shield.  Their assumptions mysteriously are missing. I’m assuming, for instance, this is peak output. Does it include night time?  Does it include cloudy days?  Should all of the US suffer because St. George has thunderstorms for a few days?

Solar fanatics just don’t think things through.  I want nuclear plants that can be all over, generate lots of power, and ARE ALWAYS TURNED ON!

John Droz Jr. has an interesting presentation debunking renewable energy’s potential.

Although he is a PhD the presentation is geared towards non-scientific average citizens.

Read the whole thing… it is loaded with useful comparisons like this one:

Fake!

John Hinderaker at Powerline offers a nice summary of the global warming fraud:

The ‘manufacture’ of a ‘man-made’ warming trend, when there is none, likely involved (i) selection of stations that showed a trend, and (ii) inadequate correction for purely local warming influences such as the ‘urban heat island’ effect (see HTCS Figs 7 and 8; and the recent extensive publications of Joe D’Aleo and Anthony Watts).

He misses just plain algorithm error and software bugs that also contributed.

He also introduces a new term that I think will be useful “hoaxer”. That is what we should call anybody relying on this faulty science – like Al Gore or Obama – who I doubt care  a lick about the science but love the money it brings them and the damage they can do to our economic system while using it.

Big fuel cell claims to be better than all the rest
But customers seem to be in it for the major tax breaks and PR so far…

This seems cool:

A Silicon Valley firm has unveiled a device that it says could revolutionize the way that we produce and consume electricity.

The Bloom Energy Server, publicly shown for the first time on February 24, mixes gas and air to produce electricity via a clean chemical reaction. Originally developed to provide power on Mars, the invention could soon be powering our homes, dramatically reducing our reliance on the fossil-fuel powered electricity grid for energy.

But a few things concern me… First, their website doesn’t really explain how it works.  Second, it is littered with “sustainable” and “green” and “environment” which usually means “please subsidize me”. And third, Arnold Schwarzenegger and Colin Powell were at the unveiling.

Bloom claims they will have a device that costs $3,000 and can power a house in 10 years:

The scientists behind the project hope that a pint sized version of the Bloom Energy Server could soon make its way into the home. At its launch, Bloom Energy boss Dr. KR Sridhar showed a brick sized device that he claimed could power a house. The firm reportedly aims to make these available for less than $3,000 (€2213), although Sridhar warned that domestic applications such as powering electric vehicles and mixing with solar energy could take another ten years.

10 years is essentially forever.  So, it may be real, but I’ll consider it  useless hype because at that pace it isn’t going to help anybody but those willing to lose money trying to save a planet that doesn’t need saving or those unwilling to lose money but happy to get  money taken by force from me (i.e. a subsidy).

It could be cool, but probably isn’t.

More reading here.

About $10 bucks at Wal-Mart

Everything Obama touches turns to crap. Even the simple process of weatherstripping a home.

ABC News reports that the General Accountability Office will declare today that the Energy Department has fallen woefully behind — about 98.5% behind — the 593,000 homes it initially predicted would be weatherized in the Recovery Act’s very first, very chilly year.

But no matter how little gets done the government bureacracy has to be paid, so they’ve spent $522 million dollars to do just 9,100 homes – at a amazing value price of just $57,362 per home.

BTW: The reason it goes to crap when Obama touches it is that he touches it with GOVERNMENT.

You are a greenie. You buy a hybrid even though the math doesn’t work out. You don’t mind, you love doing your part for Gaia.  Eventually science catches up and the math does work, likely through the creation of nifty lithium batteries.

Thorium reactors come on line, electricity becomes cheap, and every night you top off your new electric car.  Everybody joins you.

What happens?

Well it becomes quite conceivable that lithium, your new batteries most important part, becomes the new economic king maker.

And Bolivia takes top honors:

Soon the Organization of Lithium Exporting Countries (OLEC) forms a cabal to control the price of lithium and to make themselves “players”.

This scenario might work out fine. But I’m sure the typical Greenie advocating a shift to electric cars hasn’t given a whit of thought as to were the geopolitical cards will land.

I use a made up word, “historisis” to describe why we do things in our software that we could do better but don’t. History forced us down a path, and it is too difficult/expensive/long to backtrack and move down another.

“Historisis” happened to our nuclear program also back in the 50’s and 60’s.  Historisis forced us from a method of nuclear power that:

• had zero risk of meltdown
• was VERY efficient
• left little to no radioactive mess
• used a locally abundant fuel

to one that could (and did) melt down, used an expensive fuel and caused radioactive trouble for thousands of years.   No, we didn’t use that method. We used uranium based fission instead. Why? We needed plutonium to make hydrogen bombs:

Uranium reactors had already been established, and Hyman Rickover, de facto head of the US nuclear program, wanted the plutonium from uranium-powered nuclear plants to make bombs.

The calculus and exigencies of the Cold War caused historisis that derailed nuclear energy in this country for 50 years.

Read the nuclear energy article above and you will understand that we still pay the costs of the Cold War today.

The Economist has a helpful overview of the coming technology in nuclear energy production:

The six most promising “generation IV” designs identified by the GIF from an original list of over 100 concepts depart markedly from the light-water moderated, once-through models that dominate the existing fleet. Even those reactors that draw upon aspects of current designs add some new twists.

Of the six, I like the one they wrote the least about – the Molten Salt Reactor, in particular the Liquid Fluoride Thorium Reactor (LFTR) variant:

One form of MSR, the liquid fluoride thorium reactor (LFTR), has garnered particular enthusiasm among those who regard thorium as an attractive replacement for uranium and plutonium in the fuel cycle. (Thorium is both cheaper and more abundant than uranium.) According to Kirk Sorensen, an engineer at NASA who also runs a blog on the merits of the thorium cycle, natural thorium provides at least 250 times more energy per unit than natural uranium.

Anyway, read the whole thing… 

H/T/ Commenter Carl

Randal Hoven over at American Thinker thinks about the “just in case” argument supporting expensive action on C02 and finds it “flawed”:

The average annual temperature in Memphis, Tennessee is 62.3^o F.  The temperature of Lexington, Kentucky is 54.9^o F.  That is a bigger difference than the IPCC’s worst-case scenario.

Could mankind handle that kind of adaptation – moving from Memphis to Lexington in the next 100 years?

Thomas Friedman thinks it’s worth $2 trillion a year to avoid even the slightest probability of that.

He also notes that:

• We are now in what is called an interglacial period, or the time between ice ages.  Previous interglacial peaks were three degrees warmer than now.  In Antarctica, these previous peaks were actually six degrees warmer.
• Since the last ice age, the oceans rose about 400 feet.  Most of that occurred before the pyramids were built (and well before modern use of fossil fuels), but the trend for hundreds of years up to the present has been rising sea levels.

Basically, we aren’t causing whatever “it” is and even if we were $2 trillion / year would require a catastrophe eliminating 2/3rds of the planet GOP to be cost effective.

In other words… doing something about global warming is stupid in two ways… first it isn’t real, second it will hurt more than it helps.