Category Archives: Business

The Unveiling

White Knight Two will be rolled out for the general public today in Mojave. Scaled Employees had a private rollout yesterday.

[Late morning update]

Clark Lindsey has the Virgin press release.

I don’t understand why they say that this is environmentally friendly. Compared to what? If they’re still going with the hybrid, it presumably burns rubber, and has CO2 as a combustion by-product. What’s so friendly about that, compared to, say, LOX/kerosene? Just marketing hype, I guess.

[Update mid afternoon]

Clark Lindsey has a lot more links.

Has The Oil Bubble Burst?

Maybe. These were clearly unsustainable prices–the only question was how long it would take them to drop. And what do you know? The market works:

Gas may be getting just a bit cheaper, but major changes in how Americans live and drive are already in motion.

Car buyers have been fleeing to more fuel-efficient models. U.S. sales of pickups and sport utility vehicles are down nearly 18 percent this year through June, while sales of small cars are up more than 10 percent.

While slashing production of more-profitable trucks and SUVs, automakers have been scurrying to build their most fuel-efficient models faster.

Toyota Motor Corp., which hasn’t been able to keep up with demand for its 46-miles-per-gallon Prius hybrid, said last week it will start producing the Prius in the U.S. and suspend truck and SUV production to meet changing consumer demands.

Ford Motor Co. and General Motors Corp. also have announced plans to increase small car production, and GM has said 18 of the 19 vehicles it is launching between now and 2010 are cars or crossovers.

And what do you know, they didn’t do it because their intellectual superiors in Congress passed a law making them. They did it because gas was four bucks a gallon. Maybe people aren’t the stupid sheep that technocrats think they are.

The Finance Crisis

Explained, by Iowahawk:

I know what you’re saying — “who invited the fat chick to the Twister party?” Certainly, all of us (with the possible exception of Randy) wish she wasn’t here. But it’s important to remember that fat chicks are often an important source of party supplies, and we must take the good with the bad. In the same way, Fannie Mae supplies the critical financial weed and beer to keep our national economic party going.

The numbers are complex, but let me boil it down for the economic layperson. Fannie Mae is a government company type thing that has a large pile of money, which I will call “A”. The first thing it does is create $20 million bonuses for high performance executives like Franklin Raines, James Johnson and Jamie Gorelick, which I will call “B.” Next, it allocates an amount “C” to lobbyists to make sure important Congressmen always get a thoughtful holiday card from Fannie Mae. After subtracting B and C from A, they are left with D, which is lent to homebuyers. These homebuyers then pay back the amount E, which, when subtracted from D, leaves F, the amount Congress has to come up with. In order to keep this important financial system humming along at peak efficiency, it is necessary that you, the taxpayer, are F’ed.

RTWT, and save the Dave!

Economic Idiocy

The Dems are finally starting to come to their senses about energy production, but not quite:

One idea floated by Reid would require that whatever oil is drilled in newly opened areas would need to be sold in the United States.

This is pure, unadulterated economic ignorance. Senator Reid, go to the board and write one hundred times, “OIL IS FUNGIBLE.” WTF difference does it make where the oil is sold? The important thing is to get it on the market. If we are pulling new oil off the north slope, it might make sense to ship it to Japan, improving our balance of trade with them, and relieving them of the cost of shipping it all the way from the Persian Gulf. It might in fact make sense to simply ship new oil from the Gulf of Mexico to Gulf refineries, but that should be a market decision, not an arbitrary and idiotic political one. “Energy independence” is an economic myth.

And then, we have this:

Democrats also want any compromise plan to include investments in clean and renewable energies, a crackdown on oil speculators and proof that the oil and gas companies are fully utilizing land that is already leased for exploration.

What does a “crackdown on oil speculators” mean? It’s called a futures market, and a lot of people play. It serves a function of reducing risk for many in the industry. “Speculation” is simply a dirty word for “investment.” This new scheme where people can buy gasoline ahead of time at a fixed price? That’s speculation, folks.

And this:

“If they were showing in good faith that they were drilling on some of the 68 million acres they have now, it might change some of our attitudes,” said Sen. Claire McCaskill (D-Mo.).

So, in order to get access to leases with high potential, they have to waste their money drilling on leases with low potential? Brilliant.

The only way to change the attitudes of people like this is Economics 101. And I doubt if even that would help.

Hofstadter’s Law

That’s the recursive bit of wisdom that Douglas Hofstadter came up with, that goes “It always takes longer than you expect, even when you take into account Hofstadter’s Law.”

Jeff Foust has a good example of it today, as he examines the state of the suborbital industry. It looks now like no one is likely to enter commercial service prior to 2010, unless Armadillo can make it. Which brings up a little problem.

When the Commercial Space Launch Amendments Act (CSLAA) was passed in 2004, the industry got regulatory relief for eight years–until 2012–in which FAA-AST would not regulate the vehicles with respect to passenger safety, as long as there were no accidents involving passenger loss. This was in recognition of the fact that a) the agency didn’t really know how to do that and b) if it attempted to do so, the industry might be still born as a result of a costly and time-consuming regulatory overburden. The eight-year period was provided to allow the companies time to develop and test vehicle design and operational concepts, with informed consent of the passengers, that would provide a basis for the development of such regulations as the industry matured (as occurred in the aviation industry in the twenties and thirties). In light of the SS1 flight in fall of that year, there was an expectation that there would be other vehicles flying in another two or three years (as Jeff notes–Virgin was predicting revenue service in 2007), which would have provided a five-year period for this purpose.

But if few, or none are flying until 2010, that leaves only two years before the FAA’s regulatory power kicks in, which will be an insufficient amount of time to meet the intended objectives of the original maturing period.

Assuming that the logic still holds (and it certainly does for me, and I assume most of the industry and the Personal Spaceflight Federation) the most sensible thing to do would be to simply extend the period out to, say, 2018. Unfortunately (at least in regard to this issue), the most sensible thing is unlikely to happen.

In 2006, control of the Congress passed to the Democrats, which means that Jim Oberstar of Wisconsin took over as chairman of the relevant committee. He was opposed to the regulatory relief, railing against it as a “tombstone mentality” (whatever that means). He was unmoved by the argument that overregulating now would save passengers, but only at the cost of none of them ever getting to fly. Being in the minority at the time, he lost the battle, but now that he’s in charge, it will be difficult, if not impossible, to get an extension from him. In fact, even an attempt to do so might result in losing it altogether if the issue is revisited under his jurisdiction.

For those hoping for what would seem to require a miracle–Republicans regaining control of at least the House, this would be one more reason to wish for that, if they’re fans of this nascent industry. Either that, or at least hope that Oberstar (and his partner in dumbness, Vic Fazio) moves to a different committee.

[Afternoon update]

Not that it affects the point in any way, but as a commenter points out, I goofed above. Oberstar is from Minnesota. I could have sworn he was a Badger.

Who Says It’s Inelastic?

Has our oil consumption dropped to 2002 levels? We’ll see what effect it has on the economy. It has to be hurting tourism.

[Late morning update]

Paul Dietz mentions Bob Zubrin’s flex-fuel crusade in comments. It looks like both candidates may be on board with a mandate for this:

The really good news is that both Senators John McCain and Barak Obama have declared their support for the Open Fuel Standard that must be adopted to ensure that each of the roughly 17 million cars we buy in this country every year are Flexible Fuel Vehicles.

Thanks, Florida!

Florida just bought 300 square miles of cane fields in the everglades to return them to wetlands. They paid $1.75 billion. That buys out US Sugar that was responsible for 10% of the US sugar lobby. In April, in response to one of Rand’s posts, I wrote that we needed to find a way to buy out big sugar. For 6 MT times $0.10 implicit subsidy/lb, that’s $1.2 billion/year. US Sugar’s share of that is $120 million per year. So $1.75B is a pretty good price for their concession.

Sweet deal, Rand! Thanks for taking one for the team as a Floridian to lower sugar prices nationwide.