Free Markets, Free People
The following statistics were released today on the state of the US economy:
Housing starts rebounded 6.9% in June, to a 0.760 million annual rate. Housing permits, an indicator of future activity, fell -3.7% to a 0.755 million annual rate.
The Mortgage Bankers’ Association reports mortgage applications rose 16.9% last week, with purchases down -0.1%, and re-finance applications up 22.0%.
Update: The Fed’s Beige Book report on the economy, while still troubling, was a bit more optimistic than expected. Retail sales, housing, loan demand, and inflation were moderately positive. Manufacturing is still weak, however. Overall, though, the report indicates a weakening recovery and sluggish economy. The strength in retail sales also is at odds with the official reporting, which indicates substantially more weakness than the Beige Book reports.
Did most of you know about this?
The U.S. Energy Information Administration’s (EIA) June energy report says that energy-related carbon dioxide fell to 5,473 million metric tons (MMT) in 2011.
That’s down from a high of 6,020 MMT in 2007, and only a little above 1995′s level of 5,314 MMT.
Better yet, emissions in the first quarter of 2012 fell at an even faster rate — down 7.5% from the first quarter of 2011 and 8.5% from the same time in 2010. If the rest of 2012 follows its first-quarter trend, we may see total energy-related carbon dioxide emissions drop to early-1990s levels.
Wow. Victory for the enviro crowd, yes? Regulation has succeeded, right? The government has turned the tide?
Nope. In fact it has nothing to do with the enviro crowd, government or regulation.
Two dirty words: Hydraulic fracking. Two more for good measure: Natural gas. And the dirtiest word of all: Markets.
Those three have combined, via a price point that has stimulated demand and made the conversion of coal plants economical to drive down emissions as they produce electricity more cheaply and efficiently. This trend began in 2007 and is now having a real effect:
Increasingly, power plants are turning to natural gas because it has become abundant, and therefore cheap. And though technology is improving our ability to reduce emissions from coal usage, natural gas is still a much cleaner source.
Natural gas, given the extensive finds and the exploitation, is much cheaper than coal now. In fact:
Indeed, natural gas has just passed an important milestone. As noted by John Hanger, energy expert and former secretary of the Pennsylvania Department of Environmental Protection: "As of April, gas tied coal at 32% of the electric power generation market, nearly ending coal’s 100-year reign on top of electricity markets."
That’s how it works in markets, or is supposed too. The fact that emissions are down is an actual side benefit of the process. And it is a process that has managed to work despite government and environmental groups like the Sierra Club’s interference or attempted interference in the process (the Sierra Club has declared war on natural gas and fracking after accepting millions in previous years from the natural gas industry).
It is a part of the creative destruction of the capitalist process. Coal will still have its uses, but just as it was replaced as a primary fuel for heating homes last century, it is now being replaced as a primary fuel for generating electricity for the same reason – there is a cheaper and more efficient fuel (which also happens to have fewer emissions) that is easier to produce and deliver than coal.
At some point coal producers will either have to reinvent themselves or find something else to do. And on the other side, opportunities will expand within the natural gas industry as more and more demand builds.
But shhhhh. Don’t want anyone knowing this all happened because of markets. Why that would hurt the argument that it requires government intrusion, regulation and the pressure of environmental groups to make things like this happen.
Can’t have that.