Scared to Debate

Nancy Pelosi, Harry Reid, and Robert Byrd are so scared of the idea of a debate on offshore drilling on the US Continental Shelf that they've decided to just not allow any debate on it.

Pelosi is going to refuse to bring it up in the House, and Byrd; with Reids consent; has decided to cancel committee meetings for fear that a drilling amendment might get attached to an appropriations bill.

Why the fear? Because gas prices have reached the tipping point, where people are now wanting to put their pocketbooks ahead of the (overblown, my thought) evironmental concerns about such drilling. The general public supports the idea now that they've been hit with $4.00 per gallon gasoline for their SUV and minivan. The money folks behind the Democratic party don't support it, and in politics we know when the choice is $$ or the people, well follow the money.

There are enough "Blue dog Democrats" and oil state Democrats in congress, that when combined with the GOP would pretty well assure passage of an off shore drilling bill. That would be a stunning defeat for the Pelosi/Reid/Obama end of the party, which can't handle the idea of a loss to Republicans on any issue much less a core belief issue of the environmental end of the party. So to avoid the defeat, they'll just dodge the issue.

Hopefully, come November, the folks who are being ignored (you and I) remember this episode show the folks who've decided we don't even need a debate where the door is.

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McCain's Flip-Flop on Drilling

John McCain finally came to his senses (flip-flopped) on the issue of off shore drilling on the continental shelf for oil. Maybe gas at $4 bucks a gallon finally got him to realize that no matter how much we claim we want to be environmentally friendly, oil will still be running our economy for 50 or so years. Maybe he realized, finally that energy independence won't consist of the sun, and wind alone, and that producing our own oil AND developing alternatives aren't mutually exclusive.

Barack Obama, on the other hand, is sticking to the same, very old, line from the environmentalists "that oil won't reach the market for 5 years"; last week it was 10 years. Maybe he should acknowledge that if we'd been drilling since the first moratorium on shelf drilling was passed 27 years ago, we would have stopped hundreds of millions of barrels of oil per year from be bought from tyrants, despots, and unstable countries.

Will the McCain, (or Bush) plan for the shelf bring pump relief immediately? No, it won't. But it will show up sooner than 5 years. Simply put oil is sky high based on speculation that supplies are going to get tighter and tighter. If you open up reserves holding 20-30 billion barrels of oil, (a 1960's estimate), suddenly that supply doesn't look as tight as it did. The market starts seeing more supply being available, and suddenly the futures position on oil isn't as tempting as it was.

For those who say "but we need to develop alternatives" consider the best alternative most folks site is hydrogen. To get enough hydrogen to replace oil, cost effectively and as a net energy gain, the only way to do it is cracking natural gas. We are currently a net importer of that resource also. (Thanks Congress!!!)

The Eastern Continental Shelf reserve holds hundreds of TRILLIONS of cubic feet of natural gas, which also could be used in cleaner burning electric generation, to reduce the use of heating oil in the North east, etc. But unless we drill there, we don't get to use it. We get to buy it from Canada, Trinidad, and Egypt.

Consider a few other thing about getting off of oil. Aircraft aren't going to fly on solar power or fuel cells anytime soon. Trains aren't going to run on either efficiently, nor are large trucks. Steel isn't going to be produced (cost effectively) using electricity as the sole heater of the metals. And thousands of daily items from sandwich and garbage bags to baby bottles require petroleum products to produce. In other words, Oil is going to stick around for a long time. The question is where do we get it, here, or from Hugo Chavez?

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Good for the GOP

The Republicans in the US Senate today blocked the Democrat's windfall profits gimmick, oops, tax from getting a vote on the floor. The bill needed 60 votes to get past a GOP filibuster, and only got 51, signalling it's death, for now.

While Barack Obama and others have claimed the GOP sold out the working class, that's simply class warfare rhetoric that wouldn't pass a basic economics test. How exactly does increasing taxes on oil companies help the working class? For those who failed to take, or just plain failed Econ in their sophomore year of High School, here's a hint, it wouldn't lower prices, it would raise them. Raising costs on producers has never lowered prices to consumers.

Some features of the bill sounded good, as campaign year sound bites but also fail the basic econ test. For instance, the idea that part of that tax could be abated by investing the money in refinery expansion. The problem, there is nothing in the bill to reduce the regulatory and legal hurdles that keep refinery expansion from happening quickly. It takes years to get approval, and past the judges, to do such expansion. Since the taxes aren't abated until the money is spent, it doesn't seem like a "win win" for the refiners.

Second, the idea that congress can somehow help lower the price of oil by "curbing speculation" is a folly. The solution was to require more collateral for oil trading on the market, and regulating US investments in energy in foreign mercantile exchanges. The first would just drive trading out of the US. The second would likely lead to a pull of foreign money from our markets, as other countries "regulated" their people trading across borders. Then suddenly this wouldn't look like such a good idea.

The final folly of the bill was the reduction of tax breaks to oil companies. Now, I'm not necessarily in favor of them. But let's think about this logically. The 10 billion or so they are talking about are tax breaks given to oil companies who invest in domestic production, and alternative fuels. Congress would like to take those breaks back, and give them to other people to............ find ways to produce more domestic energy, and look at alternative fuels! ARGHHHH!

Here's a few things to keep in mind about the profits of energy companies. The numbers are big, but the percentage isn't that great. For example, Exxon Mobile and Chevron had profit margins of 10.85% and 8.61% respectively according to Capital IQ. Bank of America on the other hand, had a 21.03% margin, Baxter Health Care, 15.12%, Apple Computer 15.13%, Yahoo!, 14.89%.
Will Congress decide that the profit margins of Apple and Yahoo, being 33% higher than Exxon have to have a "windfall" tax on them, also?

Good for the GOP, it takes balls to stand up in an election year, with high fuel prices, to the demagoguery of the Democrats. If you are one of the (evidently) millions of stooges who think anything in Congress's bill would have actually lowered your price at the pump, I've got a Lake in Central Wisconsin for sale, come see me.

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Time For A Carbon Tax?

Vox Pop (a Chicago Tribune blog) has an article up claiming it's time for a carbon tax in the US to reduce global warming, and discourage the use of carbon based fuels, and help ease oil consumption.

First, the writer ignores (nearly completely) the fact that any carbon tax will be passed on to consumers. Wake up, that's how it works, it becomes a "cost" and prices are adjusted to deal with it.

The other problems are three fold, as we've seen lately more scientific groups are questioning the underlying premises of global warming. Secondly, we have no coherent energy policy in place to reduce carbon based fuels use. Finally, we are no longer the driving force behind energy prices going up. Former third world countries like China and India are driving up the price of oil as their consumption grows.

On the first point, even if global warming is a hoax, development of altnerative, cleaner burning fuels isn't a bad idea. Forcing it through taxation, which is really forcing the choice of staying in the US and moving to China or India or Mexico, without a carbon tax is not great for staying competitive.

As far as energy policy, we need a system that lets energy companies get off of carbon based fuels without the litigation/NIMBY runaround they have now. Why are we building coal fired plants when nuclear are more efficient and less costly over their life? Because it costs less in litigation, and takes less time to get them on line.

States like Wisconsin have mandated 10-15% of electricity sold in the state come from "renewables" in the next decade or so. But the state is also a tort hell, and everytime someone wants to build a windmill the protectors of bats and geese show up to stall them. And let's face it, the north ain't a great place for solar farms.

We also need a policy that encourages domestic production of oil (as pointed out by Vox Pop), instead of hampering it at every turn.

On the final point, our increased taxes will have no effect on the increased use in newly emerging economies in Asia and Eastern Europe. In fact, if behavioral patterns of business hold up, a US Carbon Tax would probably INCREASE use in those countries, as companies expanded or moved to them, expanding their economies.

The biggest problem with the carbon tax debate is that the US editorials and environmental elitists don't get that it's not 1950 anymore. We aren't the only engine in the world economy like we were then. There are places other than the US and Western Europe who are also helping to drive oil prices, and polute the world. Those places will benefit from bad US energy policy, just like the Middle East and Hugo Chavez do today.

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It Takes 10 Years

One of the reasons we keep hearing about not drilling for oil in the Alaskan Wildlife Refuge, from just about everyone opposed, is that it will take 10 years to actually get oil to the market.

Oddly, had we started drilling there in 1991, when George H.W. Bush proposed it, and Democrats filibustered the idea to death, or 1995, when Bill Clinton vetoed the budget because of an ANWR provision, we'd be seeing that oil on the market today. In fact, it would have been there for the last 3-6 years.

Robert J. Samuelson of the Washington Post points out the fantasy world of the folks opposed to exploration in the US in a column today, and says "Start Drilling". He not only suggests ANWR, but the coastal shelf and deep Gulf of Mexico areas.

He points out some inconvient truths for the folks stonealling drilling projects and exploration in the Gulf. Environmentalists complain about the possibility of huge oil spills caused by hurricanes. Yet we've been drilling in the gulf for decades, had dozens of hurricanes hit hundreds of rigs, and the "massive spill" there has yet to occur.

Ethanol has proven on the world food market that it's not the answer to energy independence. Higher fuel standards here will help, slightly. But they won't make up for the increased use of oil in China, Brazil, India and other emerging markets. Those markets have helped increase world demand by nearly 25% in the last 15 years. The only way back to reasonably priced fuel is increasing supply.

I pointed out a few days ago that even if we start pumping from ANWR that oil won't end up in US gas tanks, we've got no where to refine it on the west coast, and transporation to the gulf where there is some capacity is too expensive. However, if you put 5% of the US demand on the world oil market, it does help with price stability.

What should really bother environmentalists is that a China Cuba consortium is about to start exploration and drilling in the deep waters of the Gulf of Mexico. If their doomsday scenarios prove true, who would they rather have in charge, the US companies, where there might be some legal recourse, or China and Cuba, who don't really care what we think?

Energy independence isn't going to come quick, or easy, and as ethanol has proven, there are unintended consequences for the "no new oil" mantra of envirnomentalists. The real question is, do we look for independence with a common sense approach that includes more US oil, and alternative, or do we keep up this charade that we can ween ourselves off oil completely, with no pain?

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Clueless

What does Hillary Rodham Clinton have in common with truck drivers? Cluelessness, that's what. Hillary has suggested that we take a "gas tax" break from Memorial Day to Labor Day (good idea) which would save drivers 18 cents a gallon at the pump.

However; and this is where she's clueless; she would like to make up that money with a "windfall profits tax" on oil companies. Now, I'm no business genius, but I know that taxes are a cost on business, and to make up profits, they pass costs on to consumers. So just how much will my gas price go down if I only replace one tax with another?

Then there are the truck drivers who are rallying in DC today complaining (rightfully) about high prices. The problem is that the folks in DC can't do much, short term, to lower them. They've been missing long term chances since the mid-90's by not doing anything to ease the litigation burden on oil companies that want to increase their refining capacity, or opening any new areas to oil exploration.

The truckers would like to see an end to the export of oil from Alaska. They are clueless on this. You see, we don't have the refining capacity on the west coast to handle that oil, and the shipping costs of sending it to the Gulf Coast is prohibitive, and would raise, not lower the price of gas. To ship from Alaska to Mississippi, Louisiana and Texas would require either small enough tankers to get through the Panama Canal, or trips around South America. Small tankers are inefficient and the trip around South America is a long one. The oil companies actually keep their (and your) cost down by selling what can't be refined on the west coast on the world market.

They'd like to see the national petrolum reserve opened up, which would give a brief respite from prices, but not huge. Most of our refineries are working at capacity right now, so you wouldn't be able to do much with that oil, except sell it on the world market to lower prices. No guarantee it would come here, and odds are it would end up in China and India. Both of which have excess refining capacity.

Truckers, for some reason, think that by revoking some of the exploration tax breaks that oil companies are given will somehow reduce the price of oil. Again, I'll go back to Business 101, if you increase the cost of business (exploration in this case) those costs will be sent back to the consumer.

You'd think truckers would get most of that, many of them have been raising the rate per mile they charge to haul cargo due to higher costs. Evidently they think that theirs is the only business that has to make up for higher costs somehow.

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Joe & Hugo

Joseph Kennedy is taking a lot of heat for an ad here in the Boston area, touting "our friends from Venezuela" for helping with low cost heating oil for Kennedy's Citizens Energy program.

Some of the criticism is unfair, in my mind, because the program has had contracts with Citgo since 1978, long before Hugo Chavez was thought of as a possible leader of the country. One the other hand, some of Joe's responses to his detractors are, well, typical Kennedy bullshit.

Connie Mack (R-Fla) has been the biggest opponent of Joe's ads, calling them propaganda for Chavez, a man who has sworn himself as an enemy of the US. Joe took umbrage to that and mad a few statements of his own (from the AP):

Kennedy fired back by saying that if Mack wants to create a moral litmus test for oil-exporting countries and other trade partners, the congressman should hold Saudi Arabia, Kuwait, Russia and China to the same standard.

“Once we’ve followed the Mack Doctrine and refused oil from every country that fails to meet our disciplined moral standards, I’m sure you’ll enjoy your walks to Washington, because there certainly won’t be fuel to fly you there,” Kennedy wrote to Mack.

Unfortunately, for Joe, he's got a few problems with his thought line. While we, as a country, don't approve of some of the things that go on in the places he mentioned, the leaders of NONE of those countries has called our President "the Devil", or suggested they'd like to start a revolution here, or sworn that we should fall. Hugo, on the other hand, has. It's a fact Joe finds easy to ignore, but the rest of us shouldn't.

Speaking of Hugo, evidently he's having issues keeping folks at home. (According to the Wall Street Journal) The US Consulate in Caracas says that Visa applications are up over 40% in the last year, as Venezuelans try and get out of the country.

The oil company that Joe calls a friend is losing people left and right as it's nationalized. Hundreds have moved to Canada, Mexico and other oil producing states where they can still earn a buck, and not worried about being fired for not supporting "El Presidente".

The soon to be nationalized phone and power companies are having the same issue. Evidently workers who opposed Hugo in the last election have started to be purged. Those who don't support his new programs are trying to get out before they get the axe, too.

Technorati Tags: Joe Kennedy, Hugo Chavez, Venezuela, Oil, Politics, Connie Mack

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