Private Sector Guts and Growth

The Wall Street Journal has an article today for people who think that we need government to thrust itself into the economy because major projects, like energy and technology projects, are too big or risky for private businesses. The article focuses on Chevron’s offshore oil development:

Chevron is leasing the Clear Leader, which floats in 4,300 feet of water in the Gulf of Mexico, to drill for oil through nearly five miles of rock. Big Oil never wanted to be here, in 4,300 feet of water far out in the Gulf of Mexico, drilling through nearly five miles of rock…

It is an expensive way to look for oil. Chevron Corp. is paying nearly $500,000 a day to the owner of the Clear Leader, one of the world’s newest and most powerful drilling rigs. The new well off the coast of Louisiana will connect to a huge platform floating nearby, which cost Chevron $650 million to build. The first phase of this oil-exploration project took more than 10 years and cost $2.7 billion – with no guarantee it would pay off….

“This is technology capable of going to the moon,” says Robin West, chairman of consulting firm PFC Energy, involving “extraordinary uncertainty, immense levels of information processing, staggering amounts of capital.” …

“What has enabled us to do that is technology,” says David Rainey, BP’s head of exploration for the Gulf of Mexico. “We have been pushing the limits of seismic-imaging technology and drilling technology.”…

The push into deeper water hasn’t always been smooth sailing. Offshore projects are expensive, time-consuming and prone to failure. Chevron boasts of a 45% exploration overall success rate in recent years, a remarkable run by industry standards, but one that also means the company has spent billions on projects that haven’t panned out.”

Bravo for gutsy and aggressive American capitalism! Chevron is taking huge investment risks, making remarkable technological advances, creating jobs, and finding new energy supplies to keep our homes bright and warm.

Political leaders in Washington should be encouraging such private business activities to pull the nation out of its slump. So rather than trying to hike taxes on multinational corporations and oil companies – as the Obama administration proposed in its budget last year – policymakers ought to be cutting corporate tax rates and making other pro-investment changes in federal tax and regulatory policies.