QuoteOriginally posted by: exCBOEWhere to begin? Are you suggesting that government revenue from the oil industry is around 4% of the price of say a gallon of gas. I don't know where to get truly reliable figure but I'll wager a black swan that it is more like 40%, or maybe 60%. Not only that, but much of the new supply is on publicly owned land. Even if not, ultimately it is the total wealth, public and private, which determine he health of our balance sheet.You are correct that the U.S. also collects royalties and rents on natural resource leases, but you might be surprised that it totals a meager $10 billion across all oil, gas, and coal leases. Retail gas taxes bring in $32 billion (but these won't increase regardless of increasing domestic energy production or export of oil). I'm not sure how you get 40% but would like to see your figures. How much tax would the U.S. collect on exports of domestic oil?QuoteOriginally posted by: exCBOEIn a strong world economy, demand for energy could easily double in a decade or two. In the meantime, energy independence is worth a lot, not to mention the (ugh) multiplier effect of extracting and converting tens of billions of barrels of oil. More to the point, demand for energy is insatiable. it will always be a choke point for economic growth. You ignore the tax revenues from a booming private sector.Demand is not insatiable and there's no reason to expect the U.S will provide a growing fraction of global oil supply. The U.S. energy industry isn't even price-competitive with U.S. borders (i.e., the U.S. must import fossil fuels), let alone on a global stage. More to the point, if the Democrats block relaxation of environmental laws or local NIMBYs block specific developments, then the U.S. won't monetize those assets.QuoteOriginally posted by: exCBOECompetition is always a risk, but in this case what is the downside? If a new, even cheaper source of energy is available, the economy will do even better. It is a classical error of anti-capitalists to underestimate the benefits from competition. We are not Saudi Arabia, with no income other than from pumping oil. What our economy needs is increasing productivity. A positive second derivative would be nice. It's not a zero-sum game.The downside competition is that Saudi oil or Chinese solar panels negate the value of U.S. energy assets. The supposed $X hundred trillion in oil, gas, and coal on U.S. lands will provide zero tax revenue if the economies of the world get their energy from non-U.S. sources. No doubt, the economies of the world are growing and will continue to grow. But that does not imply that all economies will grow. Some economies may stagnate under the weight of their debts, stifling regulation, and overweening promises of entitlements to an insufficiently productive populace. What is the probability that the U.S. will be in the growth camp and what is the probability that it will fall in the stagnation camp? S&P sees a growing chance of the latter.QuoteOriginally posted by: exCBOEThere are billions of people in the world who would like to see their children grow up healthy and educated. By "solving" the energy problem for a century or more, the growth we need may be attainable. Nobody knows the future. We may yet blow ourselves up or squander our wealth on welfare or other endless pits of demand. The question is whether we can manage the transition from the current situation to one where the government can spend a smaller share of GDP. Adding ten or twenty trillion barrels of oil worth of energy certainly improves the balance sheet.Agreed. But will the U.S. solve this problem or will others? It doesn't look like the U.S. is likely to dramatically increase budgets for science, R&D, and education in the near future. Worse, the U.S. is far behind on maintenance of critical logistical infrastructure (e..g, the Mississippi River, Houston ship channel, etc.) that would be crucial to cost competitive exports of natural resources. QuoteOriginally posted by: exCBOEThe issue of Social Security and Medicare certainly looms large in all economically advanced nations. Europe and parts of Asia are far worse off. Several years ago, in "America Alone", Mark Steyn painted a gloomy demographic picture. Several years ago, he pointed out that the birthrate in Greece practically guaranteed what we are seeing today. I doubt if anybody knows to what extent generational transfers of income from young to old and assets from dead to alive balance out over time. Fascinating topics to be sure, but not subject to glib or obvious reasoning.This seems like an argument for both the US and EU having less than AAA ratings (and Greece, Portugal, etc. have been rightly downgraded). Estimating the risk of default is less about what a country could do to grow and repay a debt, and more about the worst-case chance of being trapped. When Greece looked like it wouldn't be able to roll it's debt, the ECB stepped in. If the U.S. hits a debt-roll liquidity crisis, who will step in? Part of the S&P's logic on the U.S. is problem of partisanship, not just economic fundamentals. If the Democrats block entitlement cuts and the Republicans block revenue increases, isn't default a sufficiently likely outcome (say P=0.01%) to merit a downgrade?QuoteOriginally posted by: exCBOEThe take away is that the bond market continues to lend America money at very low rates. That is not consistent with a fear of default. If it isn't the newly economical supplies of energy, maybe it's that old fashioned reservoir of good ol' American knowhow. Your nose is accurate. America must choose between economic pain now and hypothetical warmer climates next century. How do you think the voters will react?You are right that U.S. voters probably won't vote for carbon taxes and fossil fuel phase-outs. But the bigger picture is not just in the hands of U.S. voters. Monetizing U.S. energy assets requires worldwide acceptance of U.S. oil, gas, and coal. But if the EU imposes carbon taxes on fossil-fuel derived goods and services or if China, India, and Brazil eschew foreign sources of energy, then the U.S strategy of repaying it's global debt with global oil sales will fail.****exCBOE, I entirely agree with you on many aspects of what you say about the benefits of competition and productivity growth. Where we disagree is growing chance that the U.S. in the current political climate will fail to benefit sufficiently from those factors to sustain and repay a growing public debt.