August 2007 – Page 3 – artdiamondblog.com

Easily Available Capital and Technology Lower Barriers to Entry in Oil Industry

"Cobalt scientists analyze data to help pinpoint oil deposits." Source of caption and photo: online version of the NYT article cited below.

(p. 1) HOUSTON. JOSEPH H. BRYANT, still boyish-looking at 51, jostles with glee among tens of thousands of people here at the Offshore Technology Conference, one of the energy industry’s biggest trade fairs. He is surrounded by newfangled technologies occupying more than half a million square feet of display space: drills stuffed with electronic sensors, underwater wells shaped like Christmas trees, mini-submarines and pipes, pumps, tubes, gauges, valves and gadgets galore.

“There is every little gizmo you need to make this business work,” Mr. Bryant says, joyously. He stops at a plastic model of an offshore oil rig, an exact replica of a huge platform he commissioned while running BP’s business in Angola a few years ago. “I love this stuff.”

Like the pieces of a giant puzzle, the parts showcased here could fit together and build an oil company — and that’s exactly what Mr. Bryant set out to do two years ago after a 30-year career directing energy projects for the likes of Amoco, Unocal and BP. With a team composed largely of retired energy executives, he wants to hunt for oil in the deep waters of the Gulf of Mexico or offshore West Africa, challenging Big Oil in its own backyard.

The American oil patch, once left to languish during an extended period of low oil prices, is on the rebound. Wildcatters like Mr. Bryant are ready to pounce. With oil prices now hovering around $60 a barrel — three times higher than they were throughout the 1990s — the industry is expanding at a pace last seen decades ago.

“The oil industry has changed dramatically in the last 20 years,” Mr. Bryant says. “Barriers to entry have dropped significantly. It doesn’t matter if you’ve been in the business 100 years or 100 days.”

Easily available capital and technology, once the preserve of traditional oil companies, are reordering the business. Investors are lining up to finance energy projects while leaps in computing power, imaging tech-(p. 7)nology and collaborative online networks now allow the smallest entities to compete on an equal footing with the biggest players.

“There’s a lot of money out there looking for opportunities,” said John Schaeffer, the head of the oil and gas unit at GE Energy Financial Services. “It seems like everyone wants to own an oil well now.”

Still, oil exploration remains a costly business fraught with peril. While the odds have improved, success is elusive; three-quarters of all exploration wells come up dry, either because there is no oil or because geologists miss its exact location. All of which means that Mr. Bryant’s start-up, Cobalt International Energy, which plans to begin drilling next year, faces formidable hurdles.

“There’s no sugar-coating this — at the end of the day, it’s a high risk venture,” Mr. Bryant says. “Financially, we’re definitely wildcatting. It’s either all or nothing.”

For the full story, see:

JAD MOUAWADA. "Wildcatter Pounces; Oil Riches Lure the Entrepreneurs." The New York Times, Section 3 (Sun., May 20, 2007): 1 & 7.

Wildcatter entrepreneur "Joseph H. Bryant started Cobalt." Source of caption and photo: online version of the NYT article cited above.

The Courage of Milton Friedman

The following two paragraphs are from a paper I am currently working on.

Milton Friedman wrote a Newsweek column many years ago that caused a firestorm of anger among his colleagues in the economics profession. Friedman’s argument was that, in general, the government is not going to do a good job of identifying the best and most productively innovative economists. In particular, he argued that economics funding by the National Science Foundation (NSF) had made the economics profession more mathematical than was appropriate.

Even his ‘Chicago’ colleagues, who were otherwise inclined to be sympathetic to his work, were appalled: Robert Lucas wrote against Friedman in the New York Times, and Zvi Griliches spoke against him before Congress.

Not too long after Friedman’s article came out, I praised it during one of the sessions of a Liberty Fund colloquium held in California. After the session, a very distinguished economist came up to me, and started talking about the Friedman article in a very irritated and animated manner. He said that what Friedman wrote in the article, might be true, but he shouldn’t have written it in a public forum.[i] He said that within the NSF, the physicists have always been opposed to funding economics, and that Friedman’s article gave the physicists just the ammunition they needed. I remember distinctly that after this conversation, the distinguished economist got into his very large and very expensive car and drove off. To the cynical, it may also be worth mentioning that this economist had received very substantial funding from the NSF.

I also remember mentioning to George Stigler my disappointment that Lucas had written contra Friedman, and Stigler gave me his cynical smile, and said that I should have expected that Lucas, and the rest of the profession, would defend NSF funding.

[i] Most of the conversation I remember in broad terms, but specifically, I remember he said something very close to: ‘Friedman shouldn’t air the profession’s dirty laundry in public.’

The reference for the Friedman article, is:

Friedman, Milton. "An Open Letter on Grants." Newsweek, May 18 1981, 99.

Private Companies Beat Government in Accessible and Affordable Health Care

A CVS pharmacy MinuteClinic. Source of photo: online version of the WSJ article cited below.

It’s Friday evening and you suspect that your child might have strep throat or a worsening ear infection. Do you bundle him up and wait half the night in an emergency room? Or do you suffer through the weekend and hope that you can get an appointment with your pediatrician on Monday — taking time off your job to drive across town for another wait in the doctor’s office?

Every parent has faced this dilemma. But now there are new options, courtesy of the competitive marketplace. You might instead be able to take a quick trip on Friday night to a RediClinic in the nearby Wal-Mart or a MinuteClinic at CVS, where you will be seen by a nurse practitioner within 15 minutes, most likely getting a prescription that you can have filled right there. Cost of the visit? Generally between $40 and $60.

These new retail health clinics are opening in big box stores and local pharmacies around the country to treat common maladies at prices lower than a typical doctor’s visit and much lower than the emergency room. No appointment necessary. Open daytime, evenings and weekends. Most take insurance.

Much like the response to Hurricane Katrina, private companies are far ahead of the government in answering Americans’ needs, this time for more accessible and more affordable health care. Political leaders across the country seeking to expand government’s role in health care should take note.

For the full commentary, see:

GRACE-MARIE TURNER. "Customer Health Care." The Wall Street Journal (Mon., May 14, 2007): A17.

Dinner with Hayek

Recently (6/10/07) at dinner with a group of foreign graduate students at George Mason University, I learned that one of the students was from Venezuela, and so I mentioned to her that one of my friends during my graduate student days at the University of Chicago had been from Venezuela, and that he had been responsible for bring F.A. Hayek to speak at the University. When I said his name was “Cartea,” she said that she had had a professor named Cartea who was an admirer of Hayek, but who had unfortunately died in an accident a few years ago.

This was surprising and distressing news.

Cartea had charisma, and was not afraid to use it. He was not always a model of responsible behavior, but he had such child-like enthusiasm, that it was hard to be mad at him for long. One of his main weaknesses is that he loved books. Often he would bring me his latest purchase from the Seminary Co-op Bookstore, hold it up, and say in his inimitable accent and cadence: “Pure Gold!”

In Chicago, I had a car, and Cartea did not. He asked if I would drive him to pick up Hayek and Hayek’s wife at the airport. When we got to the airport, Cartea was hungry and wanted to stop and get a hamburger. I thought it was not prudent to take the time to do this, but Cartea was insistent, and we stopped.

We ended up getting to the gate just barely by the time of the Hayeks’ scheduled arrival (these were the innocent pre-terrorism days when you could actually meet guests at their gate). But to our dismay, we learned that the flight at arrived early, and apparently Hayek had grabbed a cab to the University.

So we drove to the Center for Continuing Education where the Hayeks were staying. There we learned that they had headed to the then-best restaurant in Hyde Park, called something like the “Courtyard.”

At some point along the way, while still in the airport I think, Cartea purchased a single rose. We walked into the restaurant, and found the Hayeks. And then, with a charm that I could admire, but not imitate, he flamboyantly presented the rose to Mrs. Hayek, to her obvious delight. (I do not remember what he said, or how he explained-away our absence from at the airport—I do remember that the word “hamburger” did not pass his lips.

The pleased Hayek invited us to join them for dinner. We did. It was just me, Cartea, and the Hayeks, and it stuns me to think that of the four, only I am still alive.

I would like to be able to report that some deep issues of classical liberal political theory were discussed, but if they were, I have no memory of that. My memory is that the discussion was mainly of a personal, small-talk variety. For example, one or both of the Hayeks had long wanted to view a solar eclipse, so they had recently flown to somewhere in the world where such an eclipse had occurred.

And I remember Hayek teasing Mrs. Hayek for delaying their being together by marrying someone else before Hayek, and I remember her teasing him back that he should have made his intentions clear earlier. (This was the second Mrs. Hayek; at some point I learned that he had divorced the first Mrs. Hayek.)

I only have a couple of other memories of this visit of Hayek to Chicago. One was when (the next day?) Cartea had me drive Hayek to a press conference downtown. Hayek thought I was going the wrong way, and was annoyed. I was pretty sure I was going the right way (and it turned out I was right), but it was stressful for a graduate student to be disagreeing with an insistent, and highly admired, Nobel-prize-winner.

Another disjointed memory is that sometime during the visit I asked him to sign my copy of the first volume of Law, Legislation, and Liberty. This he did with a disdainful frown, seeming to be annoyed that I would bother him with such a foolish request.

(Note one: I do not remember when the dinner described above occurred, although it could be learned; I bet David Theroux of the Independent Institute would remember. I was at the University of Chicago from the fall of 1974 through the spring of 1981; and I think the Hayek visit occurred sometime during the latter half of this period.)

(Note two: this was not the first time I had encountered Hayek. I drove down to St. Louis with Joe Cobb and another libertarian Chicago student whose name I regrettably cannot remember. I believe that it was on this occasion that I had a good talk with Phylis Schlafly’s son, who made an articulate economic argument against patents; I think he even gave me an article by someone to bolster his case. Ben Rogge introduced Hayek. What I remember about the introduction was that in part of it, Rogge made a polite, but strong, swipe at Ayn Rand, saying I think, that Hayek’s thinking was a much sounder grounding for a libertarian philosophy. Rogge knew I was a strong Rand enthusiast, so I imagined that he was making the comment mainly for my benefit. Before the introduction, Rogge offered to take me over to introduce me to Murray Weidenbaum, who was at the event. I regret that out of some temporary shyness, I declined the offer. Anyway, on the way back from St. Louis, the discussion was so intense and interesting that I neglected to attend to the gasoline indicator, and we ran out of gas in some small town in Illinois. I managed to get us to the town gas station, but it was closed because the owner, and all employees, were attending some local social function. We ended up having to stay overnight in this God-forsaken berg. Joe was very mad at me.)

(Note three: the blog entry above was written on 6/11/07.)

Liberal Actor Paul Newman Endorses Nuclear Power

Paul Newman. Source of photo: http://www.philly.com/dailynews/columnists/howard_gensler/7660986.html

WASHINGTON: Venerable actor Paul Newman, known for his movies, his auto racing and his organic salad dressings, weighed in Wednesday on a nuclear power plant in New York’s suburbs that some fear is a terrorist magnet.

The Indian Point plant is safer than military bases he has visited, Newman said.

Newman, the star of such films as "Cool Hand Luke," "Hud" and "Butch Cassidy and the Sundance Kid," visited the facility in Buchanan, New York, on Monday, according to Jim Steets, a spokesman for Entergy Nuclear, the company that owns Indian Point.

The veteran actor, restaurateur and organic-food producer praised the nuclear power facility as an important part of the region’s energy future because it does not produce greenhouse gases, which contribute to global warming.

For the full story, see:

"Renaissance man Paul Newman endorses nuclear power plant some consider a risk to New York." International Herald Tribune (Weds., May 23, 2007).

Brookings Harsh Critics of Bush Iraq Policies, Surprised to See Military Progress in Iraq

Please note that the commentary excerpted below was published on the Op-Ed page of the New York Times, and was written by two policy experts at the Brookings Institute, the leading think-tank of the Democratic party.

Washington. VIEWED from Iraq, where we just spent eight days meeting with American and Iraqi military and civilian personnel, the political debate in Washington is surreal. The Bush administration has over four years lost essentially all credibility. Yet now the administration’s critics, in part as a result, seem unaware of the significant changes taking place.

Here is the most important thing Americans need to understand: We are finally getting somewhere in Iraq, at least in military terms. As two analysts who have harshly criticized the Bush administration’s miserable handling of Iraq, we were surprised by the gains we saw and the potential to produce not necessarily “victory” but a sustainable stability that both we and the Iraqis could live with.

After the furnace-like heat, the first thing you notice when you land in Baghdad is the morale of our troops. In previous trips to Iraq we often found American troops angry and frustrated — many sensed they had the wrong strategy, were using the wrong tactics and were risking their lives in pursuit of an approach that could not work.

Today, morale is high. The soldiers and marines told us they feel that they now have a superb commander in Gen. David Petraeus; they are confident in his strategy, they see real results, and they feel now they have the numbers needed to make a real difference.

Everywhere, Army and Marine units were focused on securing the Iraqi population, working with Iraqi security units, creating new political and economic arrangements at the local level and providing basic services — electricity, fuel, clean water and sanitation — to the people. Yet in each place, operations had been appropriately tailored to the specific needs of the community. As a result, civilian fatality rates are down roughly a third since the surge began — though they remain very high, underscoring how much more still needs to be done.

. . .

In war, sometimes it’s important to pick the right adversary, and in Iraq we seem to have done so. A major factor in the sudden change in American fortunes has been the outpouring of popular animus against Al Qaeda and other Salafist groups, as well as (to a lesser extent) against Moktada al-Sadr’s Mahdi Army.

These groups have tried to impose Shariah law, brutalized average Iraqis to keep them in line, killed important local leaders and seized young women to marry off to their loyalists. The result has been that in the last six months Iraqis have begun to turn on the extremists and turn to the Americans for security and help. The most important and best-known example of this is in Anbar Province, which in less than six months has gone from the worst part of Iraq to the best (outside the Kurdish areas). Today the Sunni sheiks there are close to crippling Al Qaeda and its Salafist allies. Just a few months ago, American marines were fighting for every yard of Ramadi; last week we strolled down its streets without body armor.

For the full commentary, see:

MICHAEL E. O’ HANLON and KENNETH M. POLLACK. "A War We Just Might Win." The New York Times (Mon., July 30, 2007): A19.

(Note: ellipses added.)

“Just Because George Bush Said It Doesn’t Mean It’s Wrong”

Former Nebraska Senator and Governor Bob Kerrey. Source of photo: online version of the Omaha World-Herald article cited below.

WASHINGTON – Raising a lonely voice in the Democratic Party, former Sen. Bob Kerrey of Nebraska says he strongly opposes any dramatic U.S. troop withdrawal from Iraq.

Such a retreat, Kerrey says, would hand radical Islamic terrorists a substantial victory and enable them to destroy the fledgling democracy in Iraq.

In an article published Tuesday and in an interview, Kerrey said terrorists would gain safe haven from which to launch further attacks on American citizens like those of Sept. 11, 2001.

Kerrey said that if the United States shows weakness in Iraq, it will "pay a terrible price."

"The forces of al-Qaida have demonstrated a tremendous capacity, and they’ll use that capacity if we withdraw from the playing field," said Kerrey, a former two-term U.S. senator.

In the interview, Kerrey also had a message for fellow Democrats: "Just because George Bush said it doesn’t mean it’s wrong."

For the full story, see:

JAKE THOMPSON. "Kerrey says U.S. mustn’t look weak in Iraq." Omaha World-Herald (Wednesday, May 23, 2007): 1A & 2A.

The link to Kerrey’s opinion piece in the Wall Street Journal is:

BOB KERREY. "The Left’s Iraq Muddle." The Wall Street Journal (Tues., May 22, 2007): A15.

Amazon’s Jeff Bezos Attended Montessori Preschool

As a preschooler, Jeffrey P. Bezos displayed an unmatched single-mindedness. By his mother’s account, the young Bezos got so engrossed in the details of activities at his Montessori school that teachers had to pick him up in his chair to move him to new tasks.

For the full story, see:

"THE GREAT INNOVATORS; Jeff Bezos: The Wizard Of Web Retailing Amazon.com’s founder made online shopping faster and more personal than a trip to the local store." BusinessWeek (DECEMBER 20, 2004).

The above is a reprint. The original story appeared as:

Robert D. Hof. "THE TORRENT OF ENERGY BEHIND AMAZON." BusinessWeek (Dec. 14, 1998): 119.

Beebe’s “Colleagues Reacted Coolly”

Photos of strange deep sea creatures. Source of photos: online version of the NYT article cited below.

When, more than 70 years ago, William Beebe became the first scientist to descend into the abyss, he described a world of twinkling lights, silvery eels, throbbing jellyfish, living strings as “lovely as the finest lace” and lanky monsters with needlelike teeth.

“It was stranger than any imagination could have conceived,” he wrote in “Half Mile Down” (Harcourt Brace, 1934). “I would focus on some one creature and just as its outlines began to be distinct on my retina, some brilliant, animated comet or constellation would rush across the small arc of my submarine heaven and every sense would be distracted, and my eyes would involuntarily shift to this new wonder.”

Beebe sketched some of the creatures, because no camera of the day was able to withstand the rigors of the deep and record the nuances of this cornucopia of astonishments.

Colleagues reacted coolly. Some accused Beebe of exaggeration. One reviewer suggested that his heavy breathing had fogged the window of the submarine vessel, distorting the undersea views.

Today, the revolution in lights, cameras, electronics and digital photography is revealing a world that is even stranger than the one that Beebe struggled to describe.

The images arrayed here come from “The Deep: The Extraordinary Creatures of the Abyss” (University of Chicago Press, 2007), by Claire Nouvian, a French journalist and film director.

. . .

Beebe, who ran the tropical research department at the New York Zoological Society, surely had intimations of what lay beyond the oceanic door he had opened. “The Deep” brings much of that dark landscape to light, even while noting that a vast majority of the planet’s largest habitat remains unexamined, awaiting a new generation of explorers.

For the full story, see:

WILLIAM J. BROAD. "Mysteries to Behold in the Dark Down Deep: Seadevils and Species Unknown." The New York Times (Tues., May 22, 2007): D3.

(Note: ellipsis added.)

"A Ping-Pong tree sponge." Source of caption and photo: online version of the NYT article cited above.

Unintended Consequences: Hydrogen Produced with Coal

The excerpt below is from a WSJ summary of an article in the April issue of MIT’s Technology Review. If the article is correct, then hydrogen may provide one more example of why the government should stop trying to determine which technologies are best.

Hydrogen fuel is widely seen as a potentially environmentally clean alternative to fossil fuels for use in cars, but technology writer David Talbot says the perception is wrong — powering automobiles with hydrogen could actually be more polluting than gasoline.

. . .

With . . . scarce renewable energy resources, hydrogen power might wind up being produced with coal, which generates more carbon dioxide than any other energy source. That would defeat the environmental inspiration behind vehicles like the Hydrogen 7, Mr. Talbot concludes in a review of "Hell and High Water," a book by Joseph Romm, an MIT-trained physicist. A more efficient route for car makers would be to focus on high-mileage gasoline-powered vehicles. They are simpler and less sexy than hydrogen cars, Mr. Talbot says, but for now they stack up as the cleaner option.

For the full summary, see:

"Informed Reader; ENERGY; Hydrogen May Not Be Greenest Route for Cars." The Wall Street Journal (Tues., April 24, 2007): B7.

(Note: ellipses added.)