Liberty: More powerful than a government mandate

Thomas Donlan, editorial page editor for Barron’s, focuses his latest commentary on an important lesson to be learned from recent developments in the American energy sector.

It’s not always true that the government must subsidize something to get more of it for the people. That is the default setting among politicians, as we can see from our national surpluses of grain, milk, unemployment, nonprofit companies, disabilities, and mortgage debt.

There is another way. Consider the sudden expansion of natural gas and oil produced by hydraulic fracturing and horizontal drilling.

Because of a mysterious force unknown to most politicians, the U.S. now produces a third more natural gas and a third more oil than it did six years ago. U.S. production of oil and associated liquids in 2012 was 11.1 million barrels a day, almost what it was in 1985. By 2015 or 2016, it should surpass the old record production level set in 1970.

The mysterious force is liberty. It is the right to own and control private property and the right to enter enforceable contracts.

The technologies of fracking and horizontal drilling were developed and applied by oily entrepreneurs who wanted to get filthy rich and were willing to risk small fortunes in hopes of making large ones.

More importantly, the resources were accessible because they lay under private land and they belonged to the landowners. In other countries, the government owns all sub-surface property rights.

Even the U.S. would never have developed fracking and horizontal drilling so fast and so effectively if all of the promising territory had been under federal or state government control or under leases already held by big oil companies. Risk-averse bureaucrats would have found reasons for delay, as they have in northern Alaska, California, and the Florida side of the Gulf of Mexico. Big energy companies would have exploited their opportunities slowly and carefully, with due regard for keeping market prices high.

Luckily for Americans, markets for fracking were themselves fractured among thousands of competing drillers and millions of owners of potential drilling sites.

No comments yet. You should be kind and add one!

Our apologies, you must be registered and logged in to post a comment.