Saturday, May 26, 2012

How American Ingenuity Will Change the World Again

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There's a simplistic formula for making money in America.

First you have smart people come up with an idea and develop that idea. They then find wealthy people to financially assist them in bringing their idea to fruition (private equity). A company is born and the the idea becomes a viable product or service. The product or service is marketed and is provided to consumers at the best price possible while the company provides it in the most efficient manner possible.

In the end, everyone make money including the people who developed the idea, the financial backers who took a risk and those who subsequently work for the company. Consumers get what they want at a good price as the industry develops, expands and becomes even more efficient.

Notice that I did not mention government assistance or regulation at all in the above formula.

We're seeing that play out in an industry that we were not even key players in a decade ago.

Natural gas is second only to oil in making the world run. Ten years ago, the US was a player but not a large one. Russia ruled the natural gas markets in Europe and Asia and used that power to hold continental Europe by the balls.

Enter some smart people who developed hydraulic fracturing that allowed natural gas once thought untouchable to be removed and sold. This has been so successful that the price of natural gas--used in everything from power plants to boilers--has dropped dramatically keeping prices reasonable in Obamanation.

To be honest, this is the only truly successful sector in America since Obama took office and he's doing everything he can to kill it through regulations, but I digress.

Today, natural gas can be bought for $2 per million cubic feet in the US but in Asia is ten times that amount. We are sitting on something that, properly exploited will ensure a strong America for decades.

Some issues still remain--such as restrictions on exports instituted by politicians who don't know the first thing about energy and environmentalist's screaming just to scream--but the industry is one of the few bright lights in an otherwise gloomy economic world.

Here's a must read.

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