Interesting interview Billy. It presents a bullish view of our economic
future, based on Cowen's thought that, "In my view sustainable economic
growth is more dependent on energy than the share of the energy sector in
GDP would indicate. Energy-intensive investments are more likely to build
for our future, compared to the productivity mess known as our service
sector."
In The Graduate, the key economic advice to the fresh graduate was
"plastics". Based on Cowen's interview, I would say, "substitution
technologies that will allow greater use of gas to power transportation."
Chris
------------------------------------------
Christopher P. Hahn, Ph.D.
Constructive Agreement, LLC
<mailto:[email protected]> [email protected]
P.O. Box 39, Bozeman, MT 59771
(406) 522-4143 (406) 556-7116 fax
------------------------------------------
From: [email protected]
[mailto:[email protected]] On Behalf Of [email protected]
Sent: Friday, October 11, 2013 7:51 AM
To: [email protected]
Cc: [email protected]
Subject: [RC] The Shale Boom, Just Getting Started: Interview with Tyler
Cowen
OilPrice.com
The Shale Boom, Just Getting Started: Interview with Tyler Cowen
By James Stafford <http://oilprice.com/contributors/James-Stafford> | Wed,
25 September 2013
Thanks to the shale boom, markets already perceive the trade balance
optimizing, energy prices are cheaper than they would otherwise be and we've
even cut carbon emissions. And we are only getting started, according Tyler
Cowen, New York Times best-selling author and one of the most influential
economists of the decade.
While we aren't likely to get past the American public's irrationality over
gas prices at the pump and their confusion about why this hasn't translated
into lower gas prices, that doesn't change the fact that our shale boom is
only just beginning to affect the global economy. The only question is who
will be the next to latch on to this revolution
Cowen gives us the long view in his most recent book,
<http://www.amazon.com/Average-Is-Over-Powering-Stagnation/dp/0525953736/ref
=sr_1_1?ie=UTF8&qid=1379935030&sr=8-1&keywords=average+is+over> "Average is
Over: Powering America Beyond the Age of Great Stagnation", and in an
exclusive interview with Oilprice.com, he discusses:
. Why energy-intensive investment is our real future
. Why peak oil isn't an issue for at least 3 decades
. Why Syria is impossible to predict
. Why US gas exports are a win-win situation
. How the US shale boom has benefited the economy
. How the shale boom is just getting started
. What the general public doesn't get about gas prices
. Why we can't do much to stop energy market manipulation
. Who's right about climate change? Wait and see.
Interview by James Stafford of Oilprice.com
Oilprice.com: You have written at length about "Great Stagnation" and its
relation to technology and natural resources. How do we trace the "Great
Stagnation", and are we seeing the end of our unexploited natural resources?
Tyler Cowen: The Great Stagnation first shows up in the data in 1973, when
income growth slows and productivity growth falters. It's hard to avoid the
conclusion that this has something to do with the end of the age of cheap
energy. In my view sustainable economic growth is more dependent on energy
than the share of the energy sector in GDP would indicate. Energy-intensive
investments are more likely to build for our future, compared to the
productivity mess known as our service sector.
I do not, however, think we are seeing the end of unexploited natural
resources - just look at fracking. But every now and then we take a pause
before extraction technologies race ahead once again. We've been living in
that pause for much of the last 40 years--a scary thought.
Oilprice.com: Should we still be talking about "Peak Oil"?
Tyler Cowen: I don't see "peak fossil fuel" being a binding constraint over
most of the next 30 years. That said, new supplies take a while to come to
market, and the global economy is still constrained by oil supply scarcity.
This was evident during the price spike dating from the time of chaos in
Libya. There just wasn't enough oil for the global economy to manage a
higher growth rate, and only now is the US economy moving beyond that
constraint. India still faces it.
Oilprice.com: There are rival theories concerning what a potential US direct
intervention in Syria would do to oil prices. How do you see this playing
out?
Tyler Cowen: It would depend what we do and when we do it, and in any case I
don't see this as an easy matter to predict. Perhaps the best prediction is
that the situation festers and we don't have a direct US intervention at
all.
Oilprice.com: Does the conflict in Libya provide us with insight into what
would happen to oil prices in the event of a US intervention in Syria?
Tyler Cowen: As mentioned above, the price experience and the growth
slowdown from the Libyan crisis is far from encouraging. As for Syria, China
would very much like to see a peaceful resolution of this entire situation
and they do not care per se who comes out on top. Since the US and China
want in broad terms the same thing from this conflict, there is a good
chance that can happen.
Oilprice.com: As the debate continues over whether the US should export
unlimited natural gas or keep it at home, what would be better for the US
economy over the long-run, and why?
Tyler Cowen: Trade benefits both nations. And it will encourage the supply
of gas all the more in the longer run. This is a win-win, and I see no good
reason to restrict exports.
Oilprice.com: Approvals for US LNG export projects appear to be picking up
momentum. Has the export question already been decided?
Tyler Cowen: The overall record of the US federal government is pro-business
and pro-export, and I see no reason to bet against that record this time
around.
Oilprice.com: How has the US shale revolution affected the American economy?
Tyler Cowen: Our trade balance will be coming into order and markets already
see this. Energy prices are cheaper than they would be. We've even cut
carbon emissions, unexpectedly.
Oilprice.com: What the general public remains confused about is why gas
prices are so high amidst this shale boom. How do we address this on a level
that is accessible to a general audience?
Tyler Cowen: The shale boom is just getting started, most of all on a global
level. And a lot of complicated substitutions are required for shale gas to
lower retail gasoline prices, for instance greater use of gas to power
transportation. The US public never has been very rational about the price
of gasoline, and don't expect that to change anytime soon. Gasoline is a
price which we see and pay very often, too often. That means voters remember
it all too well.
Oilprice.com: How has the US shale boom affected the global economy, and how
will US exports play into this?
Tyler Cowen: Our shale boom is only starting to affect the global economy.
The question is who else will follow suit. Russia? Argentina? Poland? We
will see, but I expect a lot more supply to come on line.
Oilprice.com: In the world of finance and banking, energy market
manipulation has become a hot topic, most recently with the scandal around
JPMorgan. How does this style of energy market manipulation affect
consumers?
Tyler Cowen: Not much at all.
Oilprice.com: Is this a trend we can't stop?
Tyler Cowen: We can't stop it easily. Consumers are not really the losers
here, rather some traders benefit at the expense of others. There is more
churn than we would like to have in prices and short-term inventories.
That's a problem, but pretty far down on my list of worries.
Oilprice.com: On a social level, with the fashion for choosing to become a
banker rather than, for instance, an engineer, are things like market
manipulation becoming ... acceptable-a sexier sort of crime?
Tyler Cowen: Finance is still where the big money is, though for fewer
people than before. This is perhaps slightly encouraging, as I would rather
see more top minds go into science, engineering, and other fields. But in
finance a smart young person can make a mark quickly, more so than in most
sciences or businesses (tech aside) so finance will remain a big draw for
young talent.
Oilprice.com: As the "debate" over climate change has taken on polarizing
political proportions, it's better to ask an economist. How can climate
change affect the economy?
Tyler Cowen: We're going to find out, I have to say.
Tyler Cowen is the Holbert L. Harris Professor of Economics at George Mason
University and General Director of the Mercatus Center. He received his PhD
in economics from Harvard University in 1987. His book
<http://mercatus.org/greatstagnation> The Great Stagnation: How America Ate
the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually)
Feel Better was a New York Times best-seller. He was recently named in an
Economist poll as one of the most influential economists of the last decade
and last year Bloomberg BusinessWeek dubbed him "America's Hottest
Economist." Foreign Policy magazine named him as one of its "Top 100 Global
Thinkers" of 2011. He co-writes a blog at <http://marginalrevolution.com/>
www.marginalrevolution.com and has recently inaugurated an on-line education
project, <http://mruniversity.com/> MRUniversity.com.
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