“Hey! Matilda, Matilda, Matilda, she take me money and run Venezuela.” Harry Belafonte, 1953
In the wake of the Keystone XL pipeline cancellation(or delay, depending on where you stand), the quantum increase in proven reserves of recoverable hydrocarbons in North America has been covered even more by those in favor of their development. It isn’t just about opening ANWR anymore. We are talking about oil and gas from North Dakota and Ohio, among other places. That’s right, Ohio!
This has to do with oil prices pretty steady close to a hundred dollars a barrel and the “fracking revolution” which is actually a refinement of long used techniques. Environmental lobbies predict near doomsday scenarios of poisoned aquifers and human caused earthquakes, while proponents feel we cannot afford not to develop these resources.
Given the Obama’ administration’s green predilection, it would seem we should expect continued opposition to traditional energy development in the US. The congress thought so when Republicans put a rider in an appropriations bill forcing Mr. Obama to say up or down within 90 days, when the administration planned to make its decision ion on the pipeline, already studied for three years, after the election this year.
Pro oil and gas folks naturally expected him to cancel it at that point so forced him to do it up front. I’m not so sure it would played out this way. Let’s try a little thought experiment.
The US is saddled with massive debt, and there is even greater liability off the books than the enormous sum the government does acknowledge. Debt free government is a thing of the past, but if we are to avoid default or monetizaton and hyperinflation, the debt to GDP ratio needs to return to historic norms, and this appears politically impossible.
So we are screwed, right?
Perhaps not right away.
The President, in his State of the Union address, while excoriating Big Oil ( who doesn’t? Not me, but I’m not a politician) announced a comprehensive plan to open up the majority of offshore potential for drilling.
Pre-election positioning or a sign of something larger?
Imagine a second Obama administration, free of any constraint, and without a need to secure its base. The administration could then open the way to massive development of hydrocarbon based energy sources. A NIxon going to China moment?
Not at all, More like Obama going to Venezuela. The revenues could be used to support his statist projects in green energy, as well as maintain and expand the welfare state – and keep the bond ratings agencies at bay as deficits grew at a slower rate.
This tack could assure democrat administrations for some time to come, but Democrat or Republican in the White House, would the government be wise enough to avoid the resource trap?
We could use the windfall to finance a sovereign wealth fund, as did Norway, squander it as did Britain, or if we really have as much as some experts figure, export it like crazy, and use the receipts to fund popular subsidies and prop up ailing nationalized industries, as in Venezuela.
Which would you bet on?
So, instead of “take me money and run Venezuela, it would be “Take the