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Jackson Hole: The good points are that Kevin Warsh indicated that money is important and suggested the Fed should not commit to a future path of interest rates. He also said the Fed must take the blame for the inflation of the 2020s:

There is one signal nobody can miss: The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank. And that is where it belongs.

Not fiscal policy (Fed’s job to offset) and not supply shocks (NGDP overshoot was just as bad). It was the Fed.

On the negative side, we still don’t have a clear policy. We have a “task force”. The Fed nods toward 2% inflation and high employment, but that’s too vague to be useful. They need something specific like NGDPLT.

More links:

Unlike Los Angeles, the big Texas cities see the advantage of more housing:

In the meantime, urban areas such as Dallas, Fort Worth and San Antonio seem to be embracing SB 840. In Dallas, city boosters said the law could help them become more competitive with the suburbs when it comes to attracting residents and new companies.
The suburbs will “be sorry they’ve limited access to housing,” said Linda McMahon, executive director of Dallas Economic Development Corporation. “If you don’t have housing availability at various price points, your economy is going to stagnate. That’s a reality.”

This San Francisco project is a rare bright spot in California.

Americans seem unable to find a happy medium. According to The Free Press, we’ve swung from too much wokism to too little wokism:

Gabe Einhorn, a tech entrepreneur, took to X last month to share his dismay after an Ivy League student refused to interview with him, citing a single reason: The student was “not interested in working for a Jew.”
At the time, Einhorn blurred out the applicant’s name; but internet sleuths quickly discovered that he was a 19-year-old Cornell University student named Austin Franco, and circulated his bio across the platform.
In the old days, that might’ve spurred a cancellation campaign; instead, it’s made Franco a minor celebrity. This week he was interviewed on Piers Morgan’s talk show, where he doubled down on his bigotry in front of countless live viewers. Now, online fans have raised over $25,000 to fight his “unlawful doxxing”—and they did it through a platform called GiveSendGo, which has emerged as a more permissive crowdfunding alternative to GoFundMe.

Here’s Liz Wolfe:

I am very torn on this, and don't want my libertarian card revoked: "Late last year, I walked roughly a mile from downtown Seattle to the working-class neighborhood of Little Saigon and came upon a montage of human despair," writes Michael Powell for The Atlantic. "An open-air drug market stretched along the intersection of 12th and Jackson: about 250 people, many smoking fentanyl or bent over in the thrall of the drug, tilting as if mid-fall. Three women lay passed out on the sidewalk, their chests slowly rising and falling, while fellow addicts stepped over them and dealers made sales.

Before turning in your libertarian card, please consider that these sights occurred in a place where:

Drugs are illegal.
Building affordable SRO apartments for the homeless is illegal.
Police often fail to enforce laws against petty crimes.

Those things are important!

Matt Yglesias has a post discussing polls that suggest China has become more popular than the US in most countries. This caught my eye:

China has dramatically cut oil imports, single-handedly absorbing 74 percent of the total global reduction in imports through a mix of rationing and drawing down its existing stockpiles. The Chinese government is a repressive autocratic regime, and so we never get really clear reporting on exactly what their thinking is. They surely have their own reasons for reacting this way. But the upshot is that while the United States has inflicted great economic harm on various countries around the world, China’s extraordinary steps have limited the harm to much less than initially expected.
So you have Trump picking pointless fights and making people mad for no reason and then plunging the world into a dire economic situation. Meanwhile, China is actually taking constructive action to improve things.
China has also been flooding the world with what seem to be affordable, high-quality electric cars, which is good for the environment and for the economic health of oil-importing countries.

According to this video, the LAX people mover fiasco is almost a textbook example of how all aspects of American civic culture are in free fall. Dishonest contractors, an incompetent airport authority, a local media that doesn’t ask questions, politicians that are completely clueless. The city of LA desperately needs a Bloomberg-type to clean up the mess, but I don’t see one on the horizon. Sad. (Ditto for Chicago.)
I don’t know if privatizing LAX would help, but it can’t get any worse.
What country has these characteristics?
a. Elects actors to be president
b. Presidents enrich themselves while in office
c. The president orders drug suspects to be executed without a trial

That’s right, it’s the Philippines!

Liz Wolfe quotes a GOP staffer:
“Everyone knows what the problem is: The organizations that bring young staffers to Washington, D.C. have spent the last decade prioritizing blind ideological loyalty instead of competence or intelligence,” a senior GOP congressional staffer told Politico. “We have a generation of rabid, incompetent idiots.”
Still don’t believe Hanania?
Wuhan is one of a half dozen giant southern Chinese cities where a SARS pandemic was likely to originate. They also have a virus research lab. All sorts of otherwise intelligent people find that fact to be some sort of amazing coincidence. Meanwhile, all of the Achilles tears in the past several NBA playoffs occurred with players wearing number zero, for which the odds are 160,000 to 1 against. And I don’t see any intellectuals finding this coincidence to be at all interesting. People really are fooled by randomness.
There’s no such thing as public opinion, example #1362:

What does this mean? ¯\_(ツ)_/¯

We need to pay more attention to predictions that don’t come true?

Remember when the excess males problem from one-child policy was supposed to cause societal upheaval in China?

Turns out…nothing. The « bare branches » generation would be adults by now. But China is the opposite of disorderly.

What can we learn from false predictions? Incorrect premises?

Great Ed West blog post arguing that Denmark is the best country. Here’s just a small portion of the reasons:

It’s also far more common for children to walk the streets unaccompanied there.
On top of this, a quarter of Danish children aged between 7 and 14 have part-time jobs, something which is hugely important for later social development. . . .
Denmark has given the highest proportion of its GDP to Ukraine since 2022. . . .
Although unable to resist, the Danes famously behaved with great humanity under Nazi occupation, managing to ferry almost their entire Jewish population to the safety of Sweden. . . .
After Argentina invaded the Falklands, Denmark was one of five EEC countries to immediately agree to sanctions, although the other four all joined soon.
Denmark also had the highest casualty rate among American allies in Afghanistan, losing 43 servicemen in the war to avenge 9/11. . . .
Danish teenagers drink more than any other country. As many will have seen in Another Round, a charming, heart-warming film about four middle aged men descending into alcoholism, Danish teenagers celebrate their exams with booze ups- the studenterkørsel - in which they celebrate by riding around in lorries, dressing up as sailors, and drinking loads of beer.

And there’s lots more.

LOL, MAGA voters prefer “Tom Smith” to “Amir Hassan”?

Trump-backed candidate in battleground Michigan district loses to opponent who dropped out
Amir Hassan lost to Tom Smith, who had suspended his campaign but is now jumping back into the race for the purple 8th District.

Paging Richard Hanania.

American prejudice against China seems to be waning:

More significant is a generational gap that transcends ideological divides. Pew finds that just 32 per cent of Republicans and 10 per cent of Democrats aged between 18-49 label China an enemy (the respective figures for those 50 and older are 55 and 18 per cent). Remarkably, according to a November 2025 Carnegie Endowment survey, only 27 per cent of 18- to 29-year-olds think that their lives would become “worse” were China’s power to overtake America’s (52 per cent aged 65 and older do). And according to a March 2026 Searchlight Institute survey, 62 per cent of those aged 18-34 want the US to “co-operate with China and improve US-China relations”, whereas just 29 per cent want it to “stand up to China”. . . .

Strikingly, according to a May 2026 American Compass survey, 82 per cent of Gen Z respondents say that the bilateral economic relationship has been “very good” or “more good than bad” for the US over the past quarter-century, and 68 per cent want to encourage Chinese investment.

Glad to see more and more people coming around to my view.

Halina Bennet has a good post on the evils of NIMBYism:

The project and others like it are a direct result of Nevada’s housing and land shortages. The state needs an estimated 120,000 additional affordable homes but has little land available for development because about 85 percent of it is federally owned and set aside for other purposes like recreation. It is estimated that the state will run out of land to develop by 2032.

NIMBYs would have us believe that Nevada, Canada and Australia have high housing prices because they’ve run out of land.

There’s a fundamental incompatibility between populists and the business community. It was only a matter of time before this happened:

President Donald Trump has always liked to boast about the loyalty of his voters. But in South Texas, where the construction industry is being battered by immigration raids, industry leaders are starting to defect from the Republican Party. It’s a remarkable shift in political allegiance in a region that Trump dominated in 2024. . . .
He recalled that when immigrants were surging across the border during the Biden administration, “You would see these ‘Trump trains’ in South Texas with half a mile of trucks with Trump flags on them. Today, there’s the same thing, but the flag is now ‘F-- Trump,’” he told me. Trump’s approval in Texas is at an all-time low, at 43%, according to the Texas Politics Project, with 52% of the state voters unhappy with this performance. . . .
Speakers described how they once supported Trump because he promised to close the border and focus on deporting criminal aliens but now feel betrayed by an indiscriminate mass deportation agenda. They also said they themselves shoulder some of the blame.
“Let’s be real, we voted for it,” said Ronnie Cavazos, chairman of the South Texas Builders Association. “So whose fault was it?”

The entire article is worth reading.

Janan Ganesh:

I prefer another answer. We don’t in fact live in interesting times. Only historical ignorance gulls us into mistaking this for an era of unusual chaos.
The inflation rate in 2022 was about half what it was at the turn of the 1980s. The wars of today are localised and inconclusive. Technocrats have become deft at mitigating what should be all-consuming disasters, whether financial or biomedical, with a bailout here and a furlough there. A visitor to 2026 from a couple of generations ago would notice the low levels of violent crime, the general material comfort and the racial peace before noticing the joker in the White House or even the talk of war. [Orson] Welles was right. Upheaval is a creative spur. There is just less of it than people are able to perceive. That the 38th film of the Marvel Cinematic Universe is a cultural event is embarrassing, and in a sense our highest achievement.

No surprise here (from the FT):

Charlie Chesbrough, senior economist at Cox, said “stubbornly high gas prices — with no relief in sight — and historically weak consumer confidence have not discouraged new-vehicle buyers, as might be expected”.

I’d have said, “as might be expected if consumer confidence surveys were still meaningful. Apparently, they are not.”

This Bloomberg graph made me smile:

The ability to “fight inflation” caused this? Or did inflation cause (most of) this? (It’s nominal GDP.)

This graph in The Economist suggests that the fall in China’s working age population will be much more dramatic than the fall in their overall population (which itself is quite dramatic.)

Here’s Ricardo Hausmann on the new pharma tariffs:

On July 31, tariffs on patented pharmaceuticals took effect: up to 100 per cent, with a 15 per cent rate for the EU. America imports some $200bn of pharmaceuticals a year, with Ireland the largest single source.
But an “Irish” drug import is, in economic substance, largely US knowledge income coming home: the Irish subsidiary holds the patent, and the pill crosses the Atlantic at a transfer price stuffed with intellectual-property rent. . . . Ireland pays out income to foreign investors equivalent to roughly a quarter of its GDP every year.
A tariff on those imports is therefore, to a first approximation, a tax levied by the US government on the foreign earnings of US companies. The likelier corporate response — redomiciling the intellectual property to America — would narrow the measured trade deficit without moving a single factory. The same bad accounting that started this fight would then declare victory in it.
The US trade deficit is the shadow cast by an invisible surplus: the world’s payments for American knowledge and American safety. Tariffs did not move the shadow. The new ones are aimed, with impressive precision, at the thing that casts it.

Matt Yglesias shares my views on the under-appreciated importance of monetary policy:

This [the end of Reconstruction in 1876] is part of a larger class of phenomena where political consequences that are very interesting to normal people are driven by extremely tedious technical minutiae of monetary policy.
That’s because monetary policy is almost unique in the landscape for its mix of being extremely boring and not the kind of thing a normal person has strong convictions about but also being extremely consequential for short-term economic prosperity, which in turn is a huge deal for election outcomes.
Adolf Hitler’s rise to power, to take probably the most important example of this, had a lot of deep roots in the ideological foundations of German nationalism and the trauma of World War I. But Germany was also in a very deep recession in 1932 and pulled out of said recession fairly quickly once Hitler took power. People talk a lot about the hyperinflation of the early Weimar years (1919–23), but that was successfully brought under control. In 1928, with the economy ravaged neither by inflation nor by depression, the Nazi Party finished in ninth place with 2.6 percent of the vote. The Communists were in fourth at 10.6 percent. By 1930, the Depression was in full swing and the Nazis were in second place and the Communists were in third. If the Brüning cabinet had a more effective monetary response to the economic crisis, you can imagine that the neither-Nazi-nor-Communist parties would have done a bit better in 1930 and way better in 1932 and Nazism doesn’t happen. Instead, Hitler took power and the country experienced a rapid economic recovery that entrenched him swiftly.
On a smaller scale, you also see this with Trump and 2016. There are all kinds of deep reasons behind his rise. But the election was extremely close, and I was saying at the time that it was a mistake of Janet Yellen to be preemptively tightening monetary conditions while inflation remained below 2 percent. I think it’s very plausible that slightly different decision-making from the Fed would have led to slightly more votes for Hillary Clinton and thus a very different trajectory of recent American history.
The moral of the story is that for all the ink that gets spilled on hot-button political disputes, the single most underrated thing in politics is getting the technical aspects of macroeconomic policy right.

It isn’t just the public that doesn’t understand this stuff, historians are almost equally in the dark.

How bad is anti-China bias? Check out this excerpt from a long Foreign Affairs article on China:

If the world faces a China crisis, Beijing will be unlikely to lead the response. China has yet to demonstrate any capacity for or interest in assuming the position that Washington has held since World War II, which includes steering the global economy through crises such as the Asian financial crisis in 1997, which spread to Russia and Brazil, and the global financial and subsequent eurozone crisis of 2008–12. Even if the next crisis is made in China, the cleanup is likely to fall, as it often does, on the United States and the institutions it anchors.

China’s stimulus helped to lead the world out of a deep recession in 2009, and China’s willingness to dramatically reduce oil exports prevents Trump’s misguided Iran War from causing a devastating global oil shortage. Meanwhile the US has become the world’s leading cause of economic instability, recklessly picking fights with both our allies and our adversaries. And yet we are asked to believe that Trump’s America is the grown-up in the room, whereas China is the irresponsible country.

In fairness, the article goes on to criticize Trump. But why ignore the elephant in the room when suggesting that America is the world’s leader?

The FT has a good piece on how the world is evading Trump’s tariffs, at a substantial efficiency cost:

Here’s the thing: it’s very likely true that there is a lot of cheating, not just rules-of-origin evasion but the simpler frauds of mislabelling or misvaluing consignments. I’ve written before about the latter issue in the context of foreign companies acting as “importers of record” in the US.
But the reality is that the more tariffs you impose, the higher the incentive is to cheat. Poisoning consumers with bathtub gin is not a good thing, but Prohibition made it profitable. The administration evidently did not see widespread evasion coming. It’s a bit like Brexit. Navarro is fulminating at the subversion of his plans by a world he did not understand and therefore did not plan for. It’s not something to be celebrated as an outcome of public policy, but then again, you have to admit it’s pretty funny.

And the John Puri of the National Review has an excellent article summarize all the various ways that the tariff policy has failed to achieve its objectives. It turned out to be even worse than I expected (a low bar.)

Are tariffs simply a tax to raise federal revenue? If so, Trump should have made sure he was on firmer legal footing before he imposed them. July was the third consecutive month that refunds for the previous round of tariffs, which the Supreme Court ruled invalid, exceeded revenue from replacement duties. Are tariffs intended to reduce the trade deficit, a harmless accounting figure that Trump nonetheless loathes? That was never going to happen, as the trade deficit necessarily mirrors the United States’ investment surplus. The balance of trade has seen no significant change since before the tariffs. Tariffs are certainly not a negotiating tool to get partners to agree to freer trade across the board, as some defenders argued. Of the handful of deals Trump has signed, all of them left most U.S. tariffs in place, and most have been vitiated by subsequent presidential decrees.
More sophisticated protectionists maintain that the purpose of tariffs is — or at least, should be — to grow the U.S. industrial base by ensuring demand for what it produces. Set aside the issue of whether America’s industrial output is really lower than it used to be (it’s not), and whether the sector’s declining employment is primarily due to foreign competition (also untrue). Empirically, Trump’s tariffs have shown no sign of boosting American industry.
Domestic industrial production is flat. Manufacturing employment has continued falling since tariffs were imposed. These may not be fair indicators, as it would take time for new tariff-induced factories to come online. But investment in manufacturing facilities is also down, and most industrialists are complaining about tariffs rather than celebrating them.

So why don’t we stop the madness? Why doesn’t Congress rescind the stupid tariffs it enacted? You say Congress never passed these laws? They don’t even approve of the tariffs? Isn’t America a democracy?

The US says AI consumers must “pick a side”. Trump picks China:

The AI arms race heats up: “The U.S. is preparing to ‌tell dozens of countries they must pick sides in the artificial intelligence race with China, warning they will be excluded from a U.S.-led AI coalition if they also sign up for Beijing’s competing framework,” reports Reuters. “Washington last year launched the Pax Silica initiative aimed at securing supply chains for AI models, semiconductors and critical minerals, amid a fierce technology rivalry with Beijing….By pressing countries to choose sides the U.S. hopes to starve China of resources in a race to make the most sophisticated AI, which could be used for military or economic dominance.”
At the same time, the Trump administration appears to be set to financially benefit from the growth and sophistication of Chinese AI models. World Liberty Financial, a Trump family–backed crypto firm, offers tokens that are then used by WorldClaw, which Reuters calls “a Hong Kong–based venture offering artificial-intelligence models developed by Chinese companies.” According to Reuters, “43 of the 90 models available through WorldClaw’s website, or nearly half, were developed by Alibaba, Baidu, Z.ai and other Chinese technology companies the Trump administration says pose risks to national security and intellectual property.”

So where is our mythical “manufacturing renaissance” supposed to take place? Where will we build the steel mills and aluminum smelters that we need? Probably not Marin County, California. So how about in the most middle American state of them all? Here’s a Bloomberg headline and subhead:

Trump Supporters Imperil $4 Billion Aluminum Plant Central to His Industrial Push

Oklahoma residents fear toxic emissions, threatening an effort to restore US industrial might.

Well, it was a nice idea. Perhaps it could be built in China.

Tyler Cowen directed me to a Lucy Ives article discussing Paul Celan:

I struggled to articulate my emotions as I moved through these pages. I almost certainly read the collection in the early 2000s and, composing this review, read it three more times. I was startled by “Backlight,” which offers a version of Celan one encounters only in summary form in his poems: a writer concerned with narrative irony. The last of “Backlight’s” prose units is the most sharply delineated:

“He taught the Law of Gravity, furnished proof after proof, but people turned deaf ears. Then he took off into the air and, floating there, repeated the lesson. Now people believed. But nobody was surprised when he did not come down again.”

Here Celan explores his longstanding concern with the language of persuasion and its pro forma aspects. The protagonist is able to convince his audience to accept the truth of a major law of the physical world only by performing an impossible act (according to the law in question). Despite the witnesses’ new credence, they have no expectation that the speaker himself will obey. It seems to please them when their instructor confirms their own earlier beliefs—permitting them, in this way, to accept what he has to say, while simultaneously invalidating the content of his words. The speaker is put, as we say, into an untenable position.

For years, I’ve been tirelessly promoting the theory that markets are efficient and asset price bubbles don’t exist. The view that business cycles are caused by unforecastable policy mistakes. I haven’t made much headway. Perhaps it will take a successful prediction on my part to finally convince the skeptics.

Public policy in the world’s most democratic nation:

Switzerland and China agreed on a new trade accord that almost entirely removes tariffs on Swiss exports, as Beijing tries to increase ties in Europe amid its ongoing rivalry with the US for global influence.
The deal grants 99.8% of Switzerland’s current exports to China tariff-free treatment, the Swiss government said in a statement Thursday. Swiss investors will also get better access to the Chinese market.

Voters are dumb? Yeah, if you treat them like stupid people. But if there are treated like adults and given real responsibility?

Back in 2022, I did a post describing seven characteristics of nationalism, and how it differs from patriotism. This was the first:

1. Fake history, which glorifies the past and denies a country’s past crimes

And here is what our president spends his time on when his policies don’t seem to be working:

Donald Trump wants Washington museums to be less ‘woke’ on US slavery

Matt Yglesias has some very astute comments on so-called “public opinion”:

A much more interesting question is how you navigate tensions between what people say they want and what outcomes they would welcome. An obvious example is price controls. It’s clear that with the cost of living on everyone’s mind there is now pretty overwhelming polling support in favor of price controls. I think politicians should take this seriously. What they should not do is imagine that if they impose price controls on beef and then supermarkets start running out of beef, that voters are going to say “this is good, this is what I wanted, good job.” Voters are sometimes wrong about stuff and — worse — they’re just not very reflective or self-critical.

Intellectuals view “price controls” in legalistic terms. For the public, it’s more like “Please do something to address the high price of beef.”

States I’ve lived in (red) and visited (green):

I hope to visit several of the others next year. (Am I cheating to include Delaware based solely on I-95? I had to pay Delaware for the privilege, so I feel I deserve to include it.)

Sometimes, I feel like in live in Naples:

Well, almost:

Saddleback Mountain is actually taller than Vesuvius.

The Economist has a couple good articles on how AI might introduce some additional inefficiencies into the the tort system:

AI, like a heat-seeking missile, can lock on to the most obscure provisions of the law—and create carnage. The impact on Britain’s employment tribunals (courts that resolve disputes between employers and workers) illustrates a phenomenon emerging everywhere. AI-induced demand is overwhelming bureaucracies built for the analogue age—from Dutch municipal-tax appeals to the Canadian privacy regulator to parking-ticket tribunals in every major city. In Britain workers now ask large language models, rather than human lawyers, to help them sue their bosses quickly and cheaply. Claims have surged and backlogs grown. A case filed today may not be heard until 2030.
Free, AI-powered legal advice should be good news for workers. Instead, it is proving to be a tragedy of the commons. For workers with genuine grievances, the surge in demand means longer waits for justice. For employers, it means bigger legal bills to respond to claims, both well-founded or fantastical. In the age of AI, a system intended to provide access to justice suffers from, if anything, too much access.

A separate article in the same magazine looks at the effect on the planning process:

Take planning. Officials have developed tools to speed up housing approvals by giving an initial verdict on whether a plan is compliant with the law. Yet local authorities report a surge in AI-generated objections to proposed developments. They are often more effective: AI-aided submissions will cite planning codes and legal precedents chapter and verse. For £45, Objector AI, a platform, will scan a wodge of planning documents, draw up the legal grounds for opposition and write a speech to read out at a public meeting.

To be clear, I still expect AI to lead to faster economic growth. But the speed of the transformation is likely to disappoint some people in Silicon Valley.

Auckland has had some success deregulating housing construction. Here’s the Financial Times:

The city, whose population has risen from 1.3mn in 2010 to 1.8mn in 2025, has in the past decade rezoned 75 per cent of its residential land, allowing single-storey family homes with lawns and garages to be replaced by taller, narrower, terraced town houses. . . .

After an intense building flurry, Auckland’s housing stock is now 618,849 units, which is 101,000 more than a decade ago, equating to a 19.5 per cent rise, according to a 2025 policy paper by Greenaway-McGrevy, James Allan Jones and Chris Crow.
Meanwhile Auckland house prices, with a median value of just over NZ$1mn (US$587,000), have lost a quarter of their value in that timeframe.

It’s not clear that the zoning reforms were the only factor, but the rise in construction of townhouses has been quite impressive:

Matt Yglesias explains why the left is lukewarm on YIMBYism:

But there is a deep reluctance, notably among leftist intellectuals, to admit that we are just correct and a radical program of land-use-law reform would largely solve the single biggest economic problem facing the country.
Because if we can solve the single biggest economic problem facing the country with a liberalizing reform, that calls into question the larger project of overthrowing “neo”-liberalism and replacing it with a new post-liberal economic order.

35. Andy Smarick has an interesting discussion of executive power:

Gorsuch implies a question we and members of the Court simply can’t ignore: If it’s wrong for agencies with executive power to operate independently of the president, isn’t it wrong for the president to control agencies with legislative and judicial powers? Said another way, if we’re going to jealously guard the president’s control of executive authority, shouldn’t we jealously guard Congress’s control of legislative authority and the judiciary’s control of judicial authority? This appears to be what he has in mind: “From here, the only sure path is to finish the journey we start today and restore legislative and judicial powers to where they belong: in Congress and the courts.”

Bloomberg describes a disaster that recently hit Gary, Indiana:

Of the 370,000 customers of the Northern Indiana Public Service Company (NIPSCO) who lost power the day of the storm, just a little more than 3,000 were still without it on Tuesday, most of them in Gary. NIPSCO has promised to restore most power by the end of the day. But that relief has come far too slowly for far too many people; just five days ago, 21,000 Gary residents, nearly a third of its people, had been in the dark for 10 days. . . .
On hot, humid August nights, the lack of power forced people to choose between opening their windows to let in the air but also disease-carrying mosquitoes or to keep their windows shut and stew, as the Chicago Sun-Times documented.

I can sympathize. I grew up 150 miles from Gary and experienced the same lack of AC, but for 20 years.

PS. Solidarity with the good guys, who are being bullied:

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The US Strategic Petroleum Reserve (SPR) is the largest crude oil storage facility in the world. It’s capable of storing 714 million barrels of oil, slightly less than 10% of the US’s annual oil consumption. Built in response to OAPEC’s 1973 oil embargo, the SPR was created to insulate the US from oil supply shocks: to make up for shortfalls and prevent steep price increases should oil imports be interrupted. In the years since its creation, it has become one of the most frequently used energy policy tools in the US’s arsenal.

The SPR has gotten a great deal of attention lately, as the Trump administration has steadily delivered oil (around 120 million barrels as of this writing) from the reserve in response to Iran closing the Strait of Hormuz. Much of this attention has centered on technical factors related to how much oil can safely be released from the reserve: various folks have claimed, for instance, that the minimum safe operating level of the SPR is 300 million barrels of oil (a level that it went below the week of August 7), and below that damage to the storage facility can occur.

It’s not clear if the specific claim about the 300 million barrel level is true, but due to the way the SPR was constructed, it does indeed have limits on how much oil can be removed from it and how many times it can be emptied. Given the ongoing importance of the SPR, it’s worth understanding how it was built and how it works now.

Origins of the Strategic Petroleum Reserve

Almost as soon as oil became strategically important to the US, people began floating the idea of stockpiling it for emergencies. The first strategic stockpiles of petroleum in the US were created for the military: a Naval Petroleum Reserve (NPR) was created in 1912 by setting aside land containing oil deposits in California, and by the 1920s there were four NPR sites across the country.1 During WWII, Secretary of the Interior Harold Ickes advocated stockpiling petroleum “for military and civilian needs,” and was appointed president of the Petroleum Reserves Corporation, a government corporation that tried (but failed) to gain control over Middle East oil fields for emergency reserve purposes. In 1952, President Truman’s Materials Policy Commission proposed maintaining an emergency oil reserve, and President Eisenhower suggested creating one following the disruption of oil imports during the Suez Crisis.

But it wasn’t until the 1973 OAPEC oil embargo that the idea for a petroleum reserve for both civilian and government use stuck. By the early 1970s, the US’s demand for petroleum was increasingly outpacing domestic production, making the country more and more dependent upon imports; between 1963 and 1970 the US’s surplus oil capacity (how much domestic production could be boosted in the event of a crisis) had fallen by 75%, and between 1967 and 1973 US oil imports more than doubled. When OAPEC declared an oil embargo in October 1973, the impact on the US was immediate; gas prices jumped by over 40%, and widespread gasoline shortages occurred.

Even before the embargo, in response to tightening oil supplies and frequent threats from Middle Eastern countries to withhold oil, the Nixon administration commissioned a study on the impact of a major oil supply disruption from the National Petroleum Council. The council’s report, released a few months before the embargo, suggested that a large petroleum reserve could act as a buffer for import shortfalls. It considered several possibilities for storing the oil, including simply leaving known reserves in the ground and aboveground steel tanks, but concluded that the most cost-effective method would be underground storage in caverns hollowed out from large salt deposits known as “salt domes.” A subsequent report by the newly created Federal Energy Administration, formed following the oil embargo (and which later became the Department of Energy), likewise suggested that underground salt dome storage was the most economical way of storing large quantities of petroleum.

This suggestion became a reality in 1975, when Gerald Ford signed the Energy Policy and Conservation Act. Among the bill’s provisions was a mandate to establish a petroleum reserve of up to 1 billion barrels to “diminish the vulnerability of the United States to the effects of a severe energy supply interruption.” Construction on the SPR began in 1977.

Constructing the SPR

When planning the SPR, several options for storing the petroleum were considered, including using large numbers of idle oil tankers. But ultimately it was decided that the best option was what the National Petroleum Council and the Federal Energy Administration had both recommended: storing the oil in large, underground salt caverns.

Salt domes are enormous underground salt structures, potentially miles deep and miles across, formed when geologic forces push underground deposits of rock salt up through the rock above. They were first discovered in the mid-19th century, and began to be surveyed extensively in the early 20th century after oil was discovered near a salt dome at Spindletop in Texas: as the salt pushes up into the rock above, it can create pockets around the dome where oil and gas can accumulate. Because rock salt is largely impermeable to oil or gas, hollowed-out caverns within salt domes were a potentially attractive place to store large amounts of crude oil.

Salt dome, via Louisiana State Exhibit Museum.

These caverns can be created by a process known as “solution mining”: drilling a well down into the salt dome and pumping water into it. The water dissolves the salt, and the resulting salty brine gets pumped back out, leaving behind a void where the salt had been. Mining rock salt by using water to dissolve it had been practiced in Europe for hundreds of years, but modern solution mining — drilling a well into an underground salt deposit and pumping water into it — first began around the 1860s–1870s in New York.2 By the 1970s, solution mining had become a widely used method for mining salt. Companies like Morton Salt used solution mining to obtain salt for food products, and Dow Chemical used solution mining as a source of chemical feedstocks.

Initially, the underground caverns created by solution mining were simply abandoned. But by the mid-20th century, they had begun to be used for underground storage. In the 1940s Canada first considered solution-mined caverns for underground storage, and beginning in the 1950s it had become a popular method of storing liquefied petroleum gas (LPG) in North America and Europe. By 1976, private firms in the US had created over 900 solution-mined caverns, with a total storage capacity of 300 million barrels. For storing unprecedented amounts of petroleum, solution-mined salt caverns were the obvious choice, and that’s what was chosen to create the Strategic Petroleum Reserve.

The Texas-Louisiana Gulf Coast was chosen as the location for the reserve: not only did the area have numerous salt domes that could be utilized for storage, but it was close to existing oil and gas infrastructure, making it easier to fill the reserve and draw it down when required.

Construction would be split into three phases. In Phase I, several existing salt caverns would be converted into crude oil storage at five sites along the Gulf Coast:

Four caverns at Bryan Mound, in Texas.
Five caverns at West Hackberry, in Louisiana.
Six caverns at Bayou Choctaw, in Louisiana.
Three caverns at Sulphur Mines, in Louisiana.

In addition to these solution-mined caverns, the SPR would also use a conventionally mined salt mine at Weeks Island in Louisiana. Collectively, the Phase I sites would give the SPR 248 million barrels of capacity. And because the caverns already existed, they could begin to be filled with oil quickly.

In Phase II, 29 new solution-mined caverns would be created at these sites, adding another 290 million barrels of storage capacity. In Phase III, a new site would be added at Big Hill in Texas, which would bring the total storage capacity to 750 million barrels.

Due to political pressure to get oil stored as soon as possible, the construction schedule was compressed, and the first oil entered the SPR in 1977. But the project was soon mired in setbacks. The Federal Energy Administration employees tasked with overseeing the project had little experience in managing large construction projects, and cost control proved difficult. Material and equipment specifications were created before plans were fully complete, creating problems when the selections later proved to be unsuitable. Equipment such as pumps was often chosen because of availability, not because it was best suited for the job, resulting in breakdowns and costly workarounds. Contractors taking advantage of management inexperience engaged in “extensive fraud”; used valves were sold as new, and drill bits were purchased, stolen, and then re-sold back to the government. One contractor was indicted for stealing 18 truckloads of equipment worth $427,000; another was accused of making off with $8 million worth of petroleum bound for Bayou Choctaw and pumping in “hazardous and toxic wastes” instead (though the government denied that this occurred). By the late 1970s, over two dozen SPR fraud cases were being investigated simultaneously.

And while the SPR project was broadly popular, it nevertheless had its share of opponents who tried to slow down the project. The governor of Louisiana, Edwin Edwards, felt the SPR was wasteful government spending and led a “virtual one-man crusade” against the project, using various environmental protection regulations to slow it down until he was sufficiently convinced that it would benefit Louisiana. Among the concessions Edwards was able to extract were slowing down site conversions to minimize the loss of local jobs, and getting the SPR office located in Louisiana instead of the originally planned Houston.

There was also broader environmental opposition. Creating the SPR caverns during Phases II and III would require creating and then disposing of large amounts of brine; while some of this brine could be pumped back underground, the lion’s share of it would be disposed of by pumping it into the Gulf of Mexico. But local fishermen, worried about the potential impact on fish and shrimp populations, objected, ultimately forcing brine disposal pipelines to extend much farther into the Gulf of Mexico than originally planned. Securing the necessary environmental permits required an enormous amount of time and effort in the first few years of the program, and by the end of 1978 the SPR Office had completed 25 NEPA-required environmental impact statements.

There were also numerous technical challenges involved with building the SPR. Phase I of construction involved converting existing solution-mined caverns, but these caverns had not been created for the purposes of petroleum storage: some of them turned out to be unsuitable; others were workable but proved to be incapable of holding as much petroleum as originally projected due to pressure limitations. Collectively, the Phase I caverns ultimately had 87 million barrels less storage capacity than first anticipated.

Technical challenges continued during Phase II, when solution mining of the new caverns began. Historically, most solution-mined caverns had been on the order of 1 million barrels in size; a few had reached the 4 million mark. But most of the Phase II caverns would be 10 million barrels or more, far larger than previous solution-mined caverns. SPR officials learned as much as they could about solution-mining caverns for petroleum storage from studying the West German petroleum reserve, which also used solution-mined caverns and was already in operation, but the much larger scale of the SPR (700 million barrels vs. Germany’s 30 million) meant that they were operating in uncharted territory. When mining began, for instance, it was found that brine could be disposed of underground much less quickly than anticipated, and that leaching took far longer than anticipated, both of which slowed down cavern construction.

Collectively, the technical, political, and managerial challenges encountered when building the SPR drove up costs and pushed back delivery dates. In 1976, the estimated cost of the SPR through Phase II was $766 million; just two years later that had risen to $1.47 billion (~$7.5 billion in 2026 dollars). The original plan called for Phase III to be complete by 1983, with 750 million barrels of crude in the ground. But the actual fill level in 1983 was roughly half that, with many caverns yet to be completed. Between 1980 and 1993, 49 new solution-mined caverns for the SPR were created, bringing its total storage capacity up to 750 million barrels, but the actual fill level would remain at just over 500 million barrels into the 2000s.

Since its completion, the SPR has continued to evolve. The small Sulphur Mines site began decommissioning in 1992, and in 1996 the Weeks Island facility began to be decommissioned when it was realized that groundwater was slowly leaking into it. And over the last 20 years three of the remaining Phase I caverns have been decommissioned, bringing the total number of storage caverns down to 60.

Operating the SPR

At a high level, the way the SPR works is relatively simple. Each cavern in the SPR is filled up with oil, which sits on top of a heavier layer of brine beneath it. To remove oil from a cavern, water is pumped down into it, which forces oil out the top. To fill the cavern back up with oil, oil is pumped in as brine is pumped out. The caverns are thus always completely full of liquid; the only thing that changes is where the oil-brine boundary is.

But this high-level description belies a lot of complexity. We think of physical infrastructure as something relatively static and unchanging, but in the SPR various forces are constantly reshaping the caverns.

One of these forces is cavern creep. The SPR caverns are thousands of feet below ground, and the weight of the ground constantly squeezes the sides of the caverns, compressing and shrinking them over time. As the caverns are squeezed, the liquid inside the caverns is pressurized, and this pressure, in turn, tends to resist further compression of the caverns. But if that pressure is relieved, which occurs during well repair operations known as “workovers,” cavern creep can accelerate. The SPR loses up to 2.4 million barrels (~0.33%) of storage capacity each year due to the effects of cavern creep, depending in part on the number and length of workovers required.

In the other direction, removing oil from the caverns requires water to be pumped into them. And when fresh water is pumped into the caverns, it dissolves some of the salt from the walls of the caverns. Every 100 barrels of water pumped in dissolves around 15 barrels of salt; removing all the oil from an SPR cavern thus increases its size by about 15%.

Because of this, SPR caverns have a finite lifespan. After enough drawdowns, the walls of the cavern become too thin to use it for storage; they can no longer withstand the stresses and may begin to leak oil into surrounding caverns or outside the salt dome itself.

Various factors affect how the walls of a cavern wear and how many drawdowns it has available. Phase II and III caverns designed specifically to store petroleum are tall and thin, like skyscraper-sized cigars, and are spaced far enough apart to allow for significant cavern growth over time. But many of the Phase I caverns, which were originally mined for other purposes, have irregular shapes or thin cavern walls that make it infeasible to use them for multiple drawdowns. These caverns are thus known as “single-cycle drawdown” caverns. There are currently 11 Phase I caverns in use at the SPR and six caverns that have one drawdown or fewer remaining.

Phase I vs Phase II cavern examples, via the DOE.

Cavern lifespan is also affected by how a cavern is used. When a cavern is fully emptied, wear on the cavern walls is relatively uniform, but if the cavern is subject to multiple partial drawdowns — removing a bit of oil, then filling it back up, then removing a bit more, etc. — this concentrates wear at the bottom of the cavern, resulting in “undesirable shapes” that can more rapidly reduce cavern lifespan. Conversely, it’s also possible to increase cavern lifespan by strategically emptying caverns in such a way as to wear the cavern into a more desirable shape.

Cavern wear is not simply “water dissolving the salt and the walls get thinner”; the geology of the SPR caverns is complex, and they can wear in complex ways. Changing stresses in the walls can cause “salt falls” (when a chunk of salt falls into the cavern) or open up cracks and fissures, causing leaks. Because of this, Sandia National Labs closely monitors SPR cavern conditions using tools like sonar. Each year it puts out a report estimating how many full drawdowns each cavern still has available. Because it can be hard to predict cavern behavior after repeated drawdowns, the maximum number of drawdowns it simulates is five (thus a cavern with five available drawdowns today might actually have several more than that available).

Limits of the SPR

The limited lifespan of SPR caverns, and the complex wearing forces that they’re subjected to, have led to a lot of speculation and assertion about how much oil can be safely removed from the SPR. Folks often claim, for instance, that the SPR can’t go below 300 million barrels of oil without damaging the caverns. I decided to look closely at what these limits actually are.

One limit on the SPR is that a minimum amount of “roof oil” must be kept in the caverns to prevent water at the top of the cavern from dissolving and damaging the cavern ceiling. As of 2016 this was about 12 million barrels, or around 1.7% of total SPR capacity.

Another limit you will often see mentioned is 70 million barrels: for instance, the DOE told CNBC earlier this year that 70 million barrels was the minimum amount needed to safely operate the SPR. It’s not amazingly clear what’s behind this limit, but this may be simply using the DOE’s definition of a “full drawdown,” which is when 90% of the oil in the SPR has been removed: 70 million barrels is about 10% of the SPR’s total capacity. It’s not clear if there’s an actual, physical limit at 70 million — that may be the level at which the oil-brine interface would be above the oil intake well, for instance — or if that’s simply a defined operational limit.

Above these lower limits, you see various claims about operating levels below which damage to the SPR starts to occur. Earlier this year a JPMorgan energy analyst claimed that 150–160 million barrels “must remain in place to preserve cavern stability and maintain operational flexibility.” Rapidan Energy, founded by former George W. Bush energy advisor Bob McNally, claims that this limit is at 170 million. A professor of petroleum engineering at Texas A&M, Siddharth Misra, claims that the operational limit is between 250 and 300 million barrels, below which “the risk of structural damage increases while the system loses its ability to pump oil at high speeds.” Former Biden energy advisor Amos Hochstein claims that he “know[s] plenty of people who think we can’t get near 300 [million] because physically you will damage the caverns where the oil is stored.”

Some of these claims can be verified. For instance, it’s true that draining the SPR beyond a particular point reduces the speed at which oil can be pumped out of it. Oil can only be pumped so quickly out of an SPR site, so as caverns empty the drawdown rate drops.

Additionally, because of the aging SPR infrastructure as well as the downtime needed for repairing that infrastructure, not all the oil in the SPR is available for drawdown at any given point. For instance, a recent GAO report noted that oil at several SPR sites might be unavailable during warmer months due to vapor pressure. Oil stored in the caverns gradually absorbs methane, and gradually warms up, both of which increase the vapor pressure within the oil. To be safely distributed the vapor pressure in the oil must be below a certain level, which can be achieved at a “degasification” plant. But several years ago the SPR’s degasification plant was dismantled and hasn’t yet been replaced, limiting its ability to distribute crude during warmer times of the year. More generally, the SPR has a huge maintenance backlog and has been described as being held together with “band aids.” A planned large-scale SPR renovation and maintenance program, Life Extension Phase 2, began in 2021 but was scaled back due to high costs.

There have also been various reports noting that the SPR may not have the ability to respond to a severe supply disruption below a level of 250 to 500 million barrels, and that outside of true emergencies it would be prudent to keep it above this level.3

However, no official report by the Department of Energy, the GAO, Sandia National Labs, or any other government agency mentions specific fill levels below which damage to the SPR occurs (other than the small amount of roof oil required). While Sandia puts out an annual report on the number of available drawdowns on a cavern-by-cavern basis, it doesn’t note any SPR-wide fill level limit below which damage occurs. I similarly wasn’t able to find any independent analysis or report pointing to some minimum SPR fill level and explaining specifically what drives it. So it’s not particularly clear to me what the source of claims about very high minimum fill levels is: if it’s from people talking to Sandia/DOE folks in some unofficial capacity, or if they’re inferring limits based on cavern stress data that Sandia provides but doesn’t make explicit, or something else. It’s notable to me that claims about minimum fill levels aren’t particularly consistent, and that different analysts/experts give widely different limits. It’s also notable that these claims often conflate different limits. (The Department of Energy, for its part, has denied the 300 million barrel limit.)

Conclusion

The Strategic Petroleum Reserve is the largest petroleum storage facility in the world and stores vast amounts of crude oil — over 700 million barrels — in underground salt caverns. These caverns behave in complex ways: they grow, shrink, and distort over time due to the various fluid and geologic forces that they’re subjected to, and the caverns have a limited lifespan due to water gradually dissolving the solid salt walls.

Because of these complex forces, and the gradual damage that gradually accumulates across the walls of the caverns, there’s widespread speculation and assertion that the SPR can’t be drained below some particular level without inflicting serious damage on the underground caverns.

It’s hard to know how seriously to take these claims. Many of them are made by experts, such as professors of petroleum engineering and former White House energy advisors. And there are various limits associated with removing oil from the SPR, such as the oil needed to keep water from damaging the roof of the caverns or the drop in withdrawal rates that occurs as the SPR empties. But it’s hard to find any sort of actual published estimate of these limits in a report or official document. This doesn’t mean that these claims are wrong, but it does make me wonder where the claims are coming from.

The Naval Petroleum Reserve later became part of a major presidential scandal during the Harding administration when Secretary of the Interior Albert Fall accepted bribes to let companies lease NPR lands at Teapot Dome in Wyoming.

Extracting preexisting brine deposits dates even earlier, to China around 250 BC.

The SPR also has a statutory storage limit of 252.4 million barrels, but this only applies to a particular type of release, one that as far as I know has never actually been conducted, so in practice this is a meaningless limit.