Democrats & Liberals Archives

Think Big, Really Big

Temporary suspension of the world’s lowest gas taxes and $100 rebates are not going to help ease the approaching energy crisis. America needs to think big, using rational thought and not lobbyist influence, if it is to survive the impending blow to our standard of living. Personally, I think a reality check might help right the wasteful course we’re on.

Robert Kuttner, a co-editor of The American Prospect, wrote an article entitle, "Apollo, Already!" recently. In it, he said:
But, to spare the honest, hardworking American people who live paycheck to paycheck as much grief as possible something bold must be done. No more half-assed attempts at fixing a problem everyone knows how to fix. Cut the corporate welfare, quit financing both sides of an un-winnable war and grow a spine.

It's not as if serious people didn't see this coming. Europe, for example, spends about half of what the United States does on energy, relative to GDP. But Europe has entirely different policies on everything from mass transit to building codes to gas taxes. Brazil makes more than half of its motor fuels from domestic renewable ethanol. Japan is far ahead of the United States in the development of efficient hybrid cars.

Japan recognized long ago alternative types of vehicles were needed to maintain humanity's level of consumption. Japan and Europe build cities around mass transit, and let cars fill in the gaps. Brazil uses sugarcane to produce ethanol. Sugarcane, by the way, yields eight times more energy than corn, which is what the U.S. plans to use. Corn, in fact, uses as much energy to process as it yields in ethanol. We can thank the big corn push on the corn industry lobby. Someone always has to get paid.

Our use of ethanol in gasoline blends is so screwed up that it's actually hurting us. Arizona Congressman John Shadegg actually suggested something the Wall Street Journal thought was a good idea, and that was to suspend the outrageously high tariffs on imported ethanol. We use over ten different blends of gasoline in this country. That means that gasoline produce for California might not be made to the same standard that Missouri requires. So, if Missouri has a shortage of its required type of gasoline blend it can not use California blend (if California has a surplus). Instead, consumers in Missouri will face higher prices and shortages. Genius!

Kuttner goes on to say:

Had we begun adjusting to the need for a post-petroleum economy during the first and second oil shocks, three decades ago when Jimmy Carter was ridiculed for wearing that cardigan, or even 10 years ago when “Ozone Al" Gore was mocked for taking seriously the threat of global warming, we would not be getting robbed quite so helplessly at the pump by a collusion of oil barons and their Republican enablers.

It's fine that politicians of both parties want to give voters some election-year price relief at the pump. But even if a huge windfall profits tax were enacted and the proceeds used to lower retail gas prices, that would be a massive policy default and a win for business as usual.

Big Oil is only doing what it's allowed to do. You can hate the Yankees all you want (and I do), but they only spend what the game allows them to. It's been said over and over, but don't hate the players, hate the game. It is the federal government who has the power to put its foot down and make change. What are the oil companies going to do if you cut them off? Bitch about lower profits? The American consumer is their bread and butter.

Bush thought his marginal presidential victory in 2004 was a mandate from the American people. He's taken that charge and ruined nearly everything he's touched. He could revive the last few years of his presidency and leave a legacy different than the one of incompetence he's crafted thus far. Kuttner finished with:

America needs an Apollo-scale program to shift to renewable energy and more efficient vehicles. If the United States acts soon, it needn't lower the standard of living; it just needs to stop donating so much of Americans' incomes to the oil companies and prevent them and their allies from dictating national energy policy.

No more baby steps, no more bending over for special interests. Kick the corporate whores out of your offices and work on a solution. Both Democrats and Republicans need to grow spines, suck it up and make the tough decisions with no thought of campaign donations, reelection or what someone else might think. The solution is clear and the time is now.

Posted by Vihar Sheth at May 11, 2006 11:35 AM
Comments
Comment #147265

Drop a bomb on DC and start from scratch!

Posted by: Sonny! at May 11, 2006 12:58 PM
Comment #147268

The time for change into a more energy efficient and wise energy sourced is economy is NOW. No excuses. If we don’t the cost and or the fall could be HORRIFIC.

Here’s something everyone should seriously consider:

http://www.earthshipbiotecture.com/

Check it out and think about how much you WASTE on non-renewable energy consumption that you continue to have to pay for everyday! It’s money out of your pocket and into the pockets of those industries invested in business as usual. Save yourself a fortune and do the right thing as well.

RGF

Posted by: RGF at May 11, 2006 1:19 PM
Comment #147272

Why do you the Europeans use less. It costs more. See Petro Prices. In Norway (which is a big energy producer) gas costs about $6.25 per U.S. gallon. Germany & UK is about $6.00.

Higher prices work to create alternatives and conservation.

Be responsible. You cannot BOTH complain about high gas prices and claim you are in favor of alternatives. As long as oil is the cheapest alternative, you will get oil.

I wrote a whole post (actually a couple) about this. You guys like to find fault and fulminate, but all your sound and fury signifies nothing unless you are willing to address the key factor, which is price.

We need higher oil (and gas) prices and we need more nuclear energy (the French get 78% of their electricity from nukes. Can’t we do as well as the French?)

BTW - we have access to any alternative technologies others have developed. Why don’t we use them? Please repeat, as long as oil is the cheapest alternative, we will use oil. Raise the price and we will use alternatives.

Posted by: Jack at May 11, 2006 1:40 PM
Comment #147281

Jack,

You are at least part right about the high prices, but that is not the whole story. It can also be pointed out that the oil companies have a vested interest in the status quo. The first thing Bush did when he took office in his first term was to implement a new energy policy that cut all grants or assistence of any kind into alternative energy research and development. I understand the desire for industry to drive such forces, but clearly is more interested in the status quo and excercising as much political power as possible to maintain the status quo right up until the end. BAD IDEA! This new policy also was HEAVILY stilted in favor of secondary energy company marketers, a niche which was almost entirely ENRON’s, at the time. We already know what ENRON did to manipulate the California enrgy market to the direct detriment of every rate payer in California!

The best and most effective change to wiser energy consumption will come SOONER than the market requires and those that make the change soonest will reap the greatest rewards. I don’t want price to drive it. Those forces are behind the time compared to the wiser movers.

I am not in anyway connected with Earthship-biotecture or with Mike Raynolds. I do believe he is a visionary whose time has come. I would love to see how much energy could be saved by whole cities being built with these principles in mind. If we wait for the price of various energy sources to get us there by force…it will far too late for far too many. It simply takes too much to switch entire economies over. Oil and coal are like some kind of economic narcotic we can’t get rid of easily. I drive, but I will get a hybrid just as soon as the vehicle I drive now becomes ready to retire.
I’d go electric if it was feasable. I LOVE what Portland, Oregon is doing! Wow! I wish that kind of thinking was more prevalent among governments of all scales.

I cannot fathom why it is that although we were pioneers of rail-raods in the past, we have shifted over to carrying so much of our goods by tractor-trailer rigs, now. It’s wasteful and foolish. But nobody is going to like the expense of expanding and modernizing the rails across the country, are they? Will we have to wait for the price of gas to get so high that we are forced to rebuild the rail-road infrastructure? I don’t price to be the only driving force behind switching to wiser energy sources. If weit for that, I feel certain it will far too great an expense to make the switch. It could cost us dearly in economic stability in the world. Let’s get wise BEFORE it comes to that. BEFORE it’s too late, if it isn’t already.

RGF

Posted by: RGF at May 11, 2006 2:09 PM
Comment #147290

Drop a bomb on DC and start from scratch!

Posted by: Sonny! at May 11, 2006 2:27 PM
Comment #147296

“Raise the price and we will use alternatives.”

On the contrary, higher prices is not enough. The problem is that, yes, the rest of the industrialized world has higher gas prices and yes, they use more mass transit. This has *not* stopped world oil demand from growing and were the US to cut back on its oil use through simple market mechanisms, this does not guarantee at all that alternatives would suddenly accellerate in development. Rather, with higher gasoline prices, commerce will slow (as it already has shown signs of doing in the retail sector this month and last), and the economy itself will slow, thereby bringing us potentially into recession wherein the available free capital for investment in alternative energy development will *drop* rather than increase.

Ultimately, because companies are focused from quarter to quarter rather than years ahead, most companies including energy companies focus on making money with what they do now and put far less effort into figuring out how they’re going to make money 10 years from now.

For companies to push hard into alternative energy they will have to have clear and financially beneficial reasons for doing it now, rather than hoping they can do something later.

In fact, one need only look through the clutter of bankrupt companies in US history to see that it is very common for the big companies to simply let time pass them by and go out of business because they aren’t prepared to profit in a new business. Make no mistake about it, turning Exxon into an alternative energy company is a completely new and totally different business - and the catch is that it is companies like Exxon that have the resources to do so, lack any reason for working on a trasition when their current business is the most profitable that its been in their histories.

I believe there are things that we can do to incentivize alternative energy. For instance, in Germany, they have a program to install solar power and once you’ve paid the installation costs through the additional power generation you can then sell your surplus power back to the power company.

A similar program in the US with tax credits to utility companies would be a good step, imho.

Additionally, since Republicans continue to block higher fuel standards, why not provide a tax credit based on fuel efficiency on a per auto basis such that an auto company’s tax liability is reduced as they produce higher fuel efficiency cars and sell them. Perhaps start at 40mg city/50mpg highway and for every 5 mpg better fuel economy, 10% of the profit on the auto’s sale is excluded from taxation. This is just a theoretical example to illuminate the point.

Likewise, for oil companies that are pumping oil off of US owned property (i.e. we the people own that land and are owed a royalty on the oil that’s pumped), since the Bush administration doesn’t want to take the tarrif, instead, take the tarrif, but double the deduction for every dollar an energy company puts into alternative energy sources and incentives themselves. Likewise, allow energy companies to deduct investments in alternative energies at higher ration than 1:1 - say 150% such that every dollar invested in alternative energy development produces a tax savings of $1.50.

The ultimate problem that we are facing is that there simply isn’t a huge push to replace oil as the #1 source of US energy. It’s not so important that autos use lots of gasoline as it is that it takes 1,000-2,000 barrels of oil to produce a single auto. Computers, TVs, baby carriages, food, clean water, you name it, everything we depend upon relies on energy and primarily oil.

Everyone’s oil dependency continues to grow and higher energy costs don’t appear slowly over years when we are at peak production. Rather, they spike upward, and not just 10% or 20% every few years, but 50% and 100% as we’ve seen over the last 1 year and 5 years, resp. R&D can’t pop out new solutions simply because oil went up 50% in a year. It takes many years, and at our current rate of R&D, decades, to come up with truly viable alternatives. The infrastructure to build millions of solar pannels, wind mills or hundreds of nuclear power plants simply does not exist and it won’t appear in a year or two because of $10/gallon gasoline. Rather, surging energy prices in a short period of time are far more likely to cause recession and *less* capital to be available for building alternative energy infrastructure.

The capital that exists *today* needs to be incentivized to being invested in alternative energy R&D and infrastruction now and not in 5 years when there really is a crisis.

The CEO’s of most companies are perfectly happy to make record profits now and not worry about going totally bankrupt in 30 years.

Look at a perfect, current day, example of this. Microsoft decided that it must invest billions in new technologies to become more of an internet platform if it is to survive and compete as a company. When Microsoft announced this, they got hammered in the market. Investors want them to milk their Office and Windows franchises. This is a company with over 50 billion in cash and investors would rather see higher dividends and more stock buybacks than they want to see Microsoft re-inventing itself to be a dominant growing company 10 and 20 years from now.

Thus, CEOs are short sighted because investors force them to operate that way. Investors want profits now and growing earnings now and they don’t want to see massive R&D costs in doing something different. Microsoft learned this a couple of weeks ago and the oil companies probably already know that if they started cutting their earnings with massive increases in R&D into alternatives that the markets would slam their stocks and stock holders would be furious with management.

So simply having higher gas prices, in my opinion, will not do the trick. There need to be longer term incentives that produce financial benefits for companies to do so in the near term to shift the US away from its oil dependency.

Posted by: cbp at May 11, 2006 2:53 PM
Comment #147299

An important thing to remember is the the era of cheap oil is pretty much over. (Yes, in inflation adjusted terms maybe it is not more expensive, but that’s not the issue.)

Even though there may be billions of barrels of oil yet to discover, it simply will not be cheap to get it out of the ground. The “cheap” fields have all been discovered and are pumping round the clock. Focusing on supply won’t bring costs down, because the companies won’t pump it unless they get the return they want.

That means we have to focus on reducing demand. Everything should be pursued, from CAFE standards, to hybrids, to alternative fuels and technologies, to making mass transit an attractive alternative. No one thing will solve the problem.

Posted by: Steve K at May 11, 2006 2:58 PM
Comment #147332

Those of you talking about Europe and Japan’s use of mass transit are missing one thing — differences in population density. Mass transit works in Europe because it’s a necessity. Cities are crowded, and the highways and parking aren’t enough to handle everyone driving.

I live in Indianapolis. We have about 1 million people here, but they’re spread out, and the highway system is well laid out (although it has been overloaded in recent years). For the most part, you can drive anywhere in town in under 30 minutes, so the only people using mass transit here are those who don’t have cars.

Now, compare that to Chicago. By comparison, Chicago has terrific mass transit. Why? Because their roads suck. There are people in Chicago who own brand new BMWs, and yet take the train to work. It beats sitting for an hour and a half in downtown traffic. And parking is even worse (unless you count the highways — the Dan Ryan becomes a parking lot during rush hour).

Good mass transit isn’t the result of good city planning — it’s the result of POOR city planning. The idea that “Japan and Europe build cities around mass transit” is simply false. Check your history books — cities like London, Paris, and Rome existed LONG before mass transit. With road systems that weren’t originally designed for automotive traffic, mass transit is a must.

So, unless you plan on relocating large portions of the American population, mass transit isn’t the solution to this problem.

Posted by: Rob Cottrell at May 11, 2006 4:56 PM
Comment #147342

RGF

The demise of the railroads was to a great extent caused by another big government program - the Interstate Highway system.

This is a good example of a trade off. The Interstate system gave us a lot of freedom and a lot of wealth. It also is what let millions of Americans afford a decent home. But it caused the destruction of inner cities and got us attached to the car. It is useful to recall that planners in the 1950s and 1960s were almost all in favor of decentralized, auto based cities. Consider that our current situation is to a great extent the result of government initiative.

The other thing that most people overlook is that while our passenger rail is not good, our freight rail is the best in the world and getting better. The Europeans only wish they could move as much by rail as we do.

I would also say that nothing can come to the market sooner than the market needs it. We may make things that nobody wants, but nobody wants them. We have to remember that we use oil because it is cheap and easy to obtain compared with alternatives. It is also relatively clean. An auto made today produces only about 1/25 the pollution a new car did in 1975. We are currently unhappy with oil, but it was a good choice at the time.

Cbp

Price is essential and enough. We saw work after Katrina and we are see it happening now. It is how it always works.

A price is a perfect incentive. If the price doubles, you save twice as much for every gallon of gas you save. Think of our recent history. In 1998 gas was about a dollar a gallon. You could fill your SUV for $30 and if you used a tank of gas each week it cost you $30 a week. If you decided to get a car that got twice as good mileage, you had an INCENTIVE of $15 a week. Now at $3 a gallon, you INCENTIVE has risen to $45 a week. How much more could the government subsidize this guy.

Our experiences with government programs to increase energy supply, such as Carter’s synfuel debacle, don’t inspire confidence. We have been down that road before and found nothing good.

Steve

You assume people are too stupid to know what they need. When oil was cheap, why not use it? If I offer you two ways to do something that create the same result, do you choose the more expensive option? We use oil because it is cheap. When it stops being cheap we will change, as we have in the past.

Rob

You have a good point about transit. Our city patterns were created by the car. That is why changing to something else will cause some pain. But if we feel it is necessary, we have little chance.

Posted by: Jack at May 11, 2006 5:32 PM
Comment #147371

I’m pleased to hear that we are doing well in the area of hauling freight by rail. If that is true then we are at least on the right track(pardon the pun). Now I wonder we could be more efficient over-all if we modernized pasenger rail.

RGF

Posted by: RGF at May 11, 2006 7:33 PM
Comment #147385


There was once a time in America when nearly every city and town had it’s own electric trolly system. In the 1930’s General Motors, Firestone Tire and Rubber and Standard Oil of Ohio joined together in a massive conspiracy to bribe mayors and city counsels to sell their systems to these corporations. The corporations shut down the systems, tore up the tracks and sold the right of ways to developers. The electric systems were replaced with GM buses riding on firestone tires and filled with standard oil gas. The corporations were taken to federal court and convicted of conspiracy and bribery. The judge fined each corporation 1 dollar.

Not to many years ago the city of L.A. was faced with the possibility of having to triple deck their highways or build mass transit systems. When they looked into probable sites for stations and tracks, they discovered that the best routes were along the paths of the old electric trolly systems which were now covered with houses.

Posted by: jlw at May 11, 2006 8:24 PM
Comment #147389

Before we praise Brazil too much for their ethanol policy, shouldn’t we get the facts on the farmland to. Just how much Amazonian jungle was razed?

I’d just like to know the facts.

Posted by: Michael Tuchman at May 11, 2006 8:31 PM
Comment #147393

RGF

People prefer to drive if they can and if the prices of gas are low enough. We have created an infrastructure and price system that makes that possible. The first step would be price of gas.

I have seen people change their habits - this year - because of higher prices. Our local metro is getting record use and it goes up with each price rise.

Re passenger rail between cities (not commuters), it works only in a few dense corridors. In our large and diverse country, I am not sure if passenger rail will catch on.

jlw

Mass transit in a place like LA is a problem. It has grown too large. You could have transit in the original urban zone, but when people come from farther out, they will be unenthusiastic about getting out of their cars and onto transit. And we need massive parking areas.

The key chokepoint of the auto is parking. IF we just would stop SUBSIZING parking (which we do through building codes and regulations) we would go a long way to mitigating this problem.

If you are interested in the subject, take a look at a book called “The High Cost of Free Parking”.

Sometimes private cars is the best way to go. It depends on the density and travel habits of the population. The price will allow for this sort of diversity of options. Government fiat decides for people.

Posted by: Jack at May 11, 2006 8:40 PM
Comment #147397

Jack,

I just don’t agree with you about price being the solution. By the time price exerts enough pressure to FORCE the change to efficient energy use and better energy sources…it will be too late to avert the catastophic expense of a necessrrily immediate change. We may already be there and yet the change that needs to happen still has insufficient momentum. When the automotive age dawned, cars were luxury items for the wealthy. Now all segments of society find themselves in NEED of the auto just to function, work, buy food etc. We cannot afford to wait for a solution necessitated by prices. It MUST come quicker.

RGF

Posted by: RGF at May 11, 2006 8:54 PM
Comment #147411

As much as the “price at the pump” is a hassle, energy for transportation is only about 1/4 of the total energy usage in this country. While alternate car fuels would be nice, they’re not where the biggest changes need to be made.

If you want to solve our energy problems, you need to start with the large power plants. Research into nuclear, geothermal, tidal, solar, and other such energy sources is more important than what blend goes into your car.

If we’re gonna find an energy source that’s cheaper than oil, it’s gonna be on a large scale anyway. And once we have that, technologies like hydrogen power will allow us to translate that efficiency to the automobile.

Jack/RGF,

You both make some interesting points. I think the answer lies in the middle. Jack’s right that the population isn’t going to adopt a new energy source until the price point is lower than that of oil. But RGF’s right that we really don’t want to wait until the price of oil is unbearable before finding cheaper solutions. Investing money NOW could yield a lower-cost alternative BEFORE the cost of oil bankrupts us all.

The last thing we want is an ultra-high oil price, and no alternative but to pay it.

Posted by: Rob Cottrell at May 11, 2006 9:28 PM
Comment #147457

“Price is essential and enough. We saw work after Katrina and we are see it happening now. It is how it always works.”

It did nothing after Katrina - consumption stayed the same. Therefore your analagy has no meaning.


“A price is a perfect incentive. If the price doubles, you save twice as much for every gallon of gas you save.”

Doubled prices will not push forward technology development one or more decades. Only capital can do that. If/when the price doubles, it simply means that the oil business will be even more lucrative than it is now.

Long before that we will see a slowdown and potentially a global depression. You cannot double energy costs and expect consumption of food, air conditioning, restaurants, air travel, etc to stay the same.

Without massive investments today we will not have alternatives to supplant the current oil economy and the result of growing scarcity will be a choke on economic growth very likely resulting in the reversal of our current standard of living backwards 50 or so years.

“Our experiences with government programs to increase energy supply, such as Carter’s synfuel debacle, don’t inspire confidence. We have been down that road before and found nothing good.”

Apparently you did not actually read what I wrote. I did not once, not a single time suggest any government program. I suggested *tax* incentives - lower tax rates - a very *conservative* approach to spurring investment.

Eliminate half of air travel, auto travel, multiply the cost of food, pretty much ever consumer good that is made and the net be a massive shrinking in airlines, restaurants, tourism for starters.

Once the economy heads south from oil based inflation, the US will be sitting on an economy that cannot grow due to the cost of energy and a debt of 9 trillion dollars or so that will strangle the USs ability to apply capital - the dollar is undoubtably headed for collapse with our current trade and fiscal deficit trajectories.

We were already headed for a dollar that becomes worthless with our current borrow and spend course and hyper inflationary energy costs will simply hasten the demise of the US economy.

We’ve created an almost perfect storm of negative factors for future US growth.

Further, if you want to look at government programs that are *relevant* (though I didn’t suggest a *SINGLE* government program I will remind you), try the Manhattan Project, the Apollo space program and the Internet for starters.

Contrary to what people like to assert, it is the massive US investment in technology through direct programs and grants to Universities that got us to the technological level we are at today.

Farmers did not suddenly decide to urbanize and go to college. Rather, Eisenhower put massive subsidies into universities as well as grants and the GI bill to students and the US freshmen population at our colleges went from around 200,000 in 1950 to roughly 2,000,000 by 1960. A 10:1 increase.

It was government investment in science and technology that got us our nuclear defenses as well which in turn spun off entire industries along the way.

Heck, I use a car nav unit to find my way within 20 feet of wherever I’m driving *because* of government investment in sattelites and global positioning technology.

The reality is that government investments in technology pay off big time. The US economy would be several hundred billion dollars a year smaller and very likely growing much less quickly if it were not for the Internet.

No doubt had this same “all government programs are bad” mentality existed in 1974 the Internet would never have been funded and instead such people would have expected businesses to have the vision to simply go build a nationwide network themselves in hopes of it paying off in 20 years.

The real world doesn’t work that way and never has. The US’s investment in its infrastructure (power, roads, air traffic control system, the internet, nuclear energy, you name it) are all results of *GOVERNMENT* *PROGRAMS* and pretty successful at that. Without these *government* *programs* we would not have anywhere near the economy we do now much less the wealth to field the military we have or to defend ourselves against terrorism or much else.

Even so, I suggested tax incentives to spur R&D as a first step - go back and read that - it is absolutely a prototypical conservative approach to incenting investment in R&D through the private sector.

A knowledgable conservative would recognize this fact and a liberal could agree because the goals are more alternative energy sources.

It was a suggestion that *should* appeal to someone on either party line.

Unlike most of the folks here, I am not a conservative or liberal. I’m a former Army Captain and a pragmatist. I want to see solid solutions to problems and knee jerk ideology is pretty useless and borders on the absurd when our nation’s future is at stake.

Posted by: cbp at May 12, 2006 12:04 AM
Comment #147490

cbp,

I think you got the right idea. Investing in research and development of new and renewable energy sources SHOULD appeal to both parties. It seems, however, that our enire political system has been hijacked by the interests that now fund it: Corporate lobbying. I know it sounds a little cynical, but that is what I see. The influence exerted at the beginning of Bush’s first term might never have surfaced had ENRON managed to survive as a company. The demise of ENRON gave us a window into how politics works today. More has surfaced to support this lately: Abramoff and Delay, for instance. It’s enough to make me wonder to what extent our government still answers to the people. We have known for decades that our reliance on oil was dangerous and yet Bush’s first action was to cut all research and grants in the area of alternative energy development. It seems so completely short sighted I find it hard to believe it really happened, but it did. The GOP USED to be the environmental party, but that was long, long ago during Teddy’s tenure. The solution HAS to be completely above politics, though. That means that now, more than ever, we need to keep vigilent eyes on where our politicians are getting their funding and on who is bending their ear.

RGF

Posted by: RGF at May 12, 2006 1:37 AM
Comment #147537

You would think Karl Rove and company would realize how to save his boss’s sorry ass amd launch this mission. But maybe he’s too busy trying not to get indicted, or maybe their masters will not allow these puppets to dance in that direction. The Dems oughta take this opportunity away from Bush and propose it themselves. Then at least they’d have a positive agenda.

Posted by: gergle at May 12, 2006 4:04 AM
Comment #147555

Chp

You may not be a liberal or conservative in ideology, but you have bought into the liberal premises that we need a massive government program to solve the problem AND that program will work much better than the last time we did it (synfuels)

First, government programs can work. Conservatives know that. The free market requires rule of law and reasonable regulation. Government is good at tasks that have a single goal and where there is reasonable consensus about the methods. You get space programs, Interstate highways etc.

Government also can fund research and create infrastructure. Energy is more complicated. The synfuels program in the 1970s showed how hard it can be.

With energy we really have the solutions currently available, but we don’t use them for a simple reason that oil is still cheap. Despite all our gnashing of teeth, we pay less of our income for energy than we did in 1980. Nobody is really looking for a solution. The big government program is just a dream.

Ask yourself this. It may be true that the U.S. has not invested as much in research (this actually is not true, but assume it). We Americans are not the only ones who are smart. If others are working on the problem, why have they still not come up with this silver bullet AND when they do, why can’t we just copy it? You recall that is what the Japanese did in the 1950s. In fact that is what we did when we industrialized. Of course, this is a counter factual, since the U.S. spends a fortune on research, both public and private.

http://www.usatoday.com/money/industries/energy/2005-09-14-gas-demand_x.htm ">Demand for gas slumped after Katrina, lowing prices. There was a story on NPR today on how higher prices are affecting demand now. Sometimes we don’t see an actual decline in demand at first, but we get a decrease in growth. It is easy to miss trends, since investment in alternatives takes time to show up. But we saw them clearly over the course of several years from the 1970s until now. The price of energy clearly affects consumption and development of alternatives.

Posted by: Jack at May 12, 2006 8:21 AM
Comment #147572

“You may not be a liberal or conservative in ideology, but you have bought into the liberal premises that we need a massive government program to solve the problem AND that program will work much better than the last time we did it (synfuels)”

No, I did not. Now, either you cannot read or you are intentionally distorting what I said or you do not know the difference.

Go read what I wrote. I talked about *********TAX CREDITS******** for alternative energy R&D and infrastructure.

This would *****LEAVE MORE MONEY IN THE POCKETS OF COMPANIES***** to develope alternative energy sources and infrastructure.

This is a PROTOTYPICAL CONSERVATIVE APPROACH to solving a problem - let PAY LESS TAXES and INSTEAD INVEST IN ALTERNATIVE ENERGY.

“With energy we really have the solutions currently available, but we don�€™t use them for a simple reason that oil is still cheap”

No, WE DO NOT. We DO NOT have the capacity to build millions of solar panels. WE DO NOT have the infrastructure to produce gassified oil to the tune of millions of barrels a day. WE DO NOT have the capital investments to produce millions of barrels of oil a day from shale oil deposits. At our current rate of investment, we will NOT have these capabilities for decades and long before then the cost of energy will make our current standard of living non-viable. It is that simple.

“We Americans are not the only ones who are smart. If others are working on the problem, why have they still not come up with this silver bullet AND when they do, why can�€™t we just copy it?”

Because America has *lead* the entire *world* in technology development and turning over our future to *hoping* that someone else *will* SOLVE OUR PROBLEMS FOR US completely DISCARDS PERSONAL RESPONSIBILITY FOR OUR FUTURE.

We cannot simply “play the lottery” and hope that a number comes up somewhere around the world to save our nation’s economy.

That’s just plain absurd.


“There was a story on NPR today on how higher prices are affecting demand now.”

Precisely. And what does that lower demand result in? How about slowing or stopping retail sales growth, airline travel, tourism, business travel, for starters.

So, if what you are saying is true, then $10/gallon gasoline will be wonderful and everything will get better. The problem is that it will *not*. What would happen instead is that US economic growth would grind to a halt and we would go into recession.

Which means - company’s making less profits or loosing money - ergo, less capital for energy alternatives. Government revenues dropping - ergo, borrowing more and having even less options to provide TAX INCENTIVES FOR ENERGY ALTERNATIVES.

So once again I DIDN’T SUGGEST ANY GOVERNMENT PROGRAMS, NOT ONE TIME - I SUGGESTED TAX INCENTIVES.

You write well enough to suggest that you just don’t bother reading things before replying - start reading first.


Go back and re-read my original post and find ONE SINGLE GOVERNMENT PROGRAM THAT I SUGGESTED. JUST ONE.

You can’t because I didn’t.

Posted by: cbp at May 12, 2006 9:27 AM
Comment #147579

Jack,

Price is the most powerful force at play here — I’ll agree to that. Even with recent price increases, oil is still cheap compared to the alternatives. Until that changes, oil will still be our primary energy source.

Oil prices are rising, though, and alternative energy prices are falling. When those two lines intersect, we’ll see big changes. That’s just market forces at work.

The big question, though, is “When will they intersect?” Gas is at $3/gallon right now. When they intersect, will gas be at $5, $10, $20, or higher? The higher that intersect point, the more we’ll suffer during the transition.

Government can’t stop these market forces, but it can adjust the factors that they work off of. Government subsidies (whether through tax cuts, “rebate checks”, or whatever) are the simplest options:

1) Subsidizing oil purchases — On the surface, this seems like a good idea (and is probably the most likely to win elections). But it’s really a bad idea. It doesn’t change the actual cost of oil. We’re still paying for it through taxes — it just seems cheaper at the pump. This will affect the market by INCREASING the intersect point (because we’ll THINK that oil is cheap when it really isn’t).

2) Subsidizing alternate energy sources — This will have the opposite effect. We’ll be paying the same for the alternate sources (through taxes), but they’ll seem lower at the “pump”, so we’ll accept them sooner. This will lower the intersect point, and encourage a switch away from oil sooner. On the downside, our total energy costs will go up because we’re stitching away from oil before the “true” intersect point. But, if those investments went into R&D -now-, they would allow the price to drop faster, thus lowering the intersect point even further.

The other factor to consider, though, is one that market forces don’t take into account — the environment. Getting energy from oil and coal is VERY polluting. Cleaner energy sources will pay off in lower pollution long before they pay off at the pump.

Posted by: Rob Cottrell at May 12, 2006 10:11 AM
Comment #147595

Rob,

Yes, you sum this up well.

It is not necessary to have any government programs per se, but rather to simply create near term financial incentives through tax credits and incentives for alternative energy sources.

This was precisely my point - I do not think that Jack understands that a tax credit is not a “liberal government program” as he falsely accused me of suggestig.

I think that perhaps because the name of this site is Democrats and Liberals, Jack cannot relate to or get his head around someone proposing a *lower* taxation solution to solve an alternative energy problem.

The point was that by using conservative mechanisms to achieve so called “liberal goals” (i.e. alternative energy and less US oil dependence - which doesn’t seem all that liberal or conservative, frankly) it should be possible to form consensus and move forward.

Posted by: cbp at May 12, 2006 10:59 AM
Comment #147655

cdp

Sorry to bother you. Although you have no reason to get upset. When you questioned my Katrina assumption, I merely corrected you w/o saying you coudn’t read etc.

You buy in to the liberal line was the belief implicit in your statement that government had the wisdom to choose the best among possible energy alternatives, which they would help or hinder.

A tax subsidy can be useful, but it is not the silver bullet and sometimes misses the target. A good example is ethanol. I generally support ethanol, but the subsidies and tax breaks favor politically strong feedstocks (corn) and methods. It might be that a better feedstock is cellulous, but we would give a head start to corn. Tax law is very precise about picking winners and losers and some government bureaucrats or politicians do the choosing.

I am not arguing for not using government. Only use price. In other columns, I have advocated taxing oil to make sure it stays above $50/barrel. In this way we are choosing to disadvantage oil, but we are not choosing among the alternatives.

A tax break and a subsidy behave exactly the same way from the accounting point of view. If you subsidize or give tax breaks to particular fuels, you are not lowing the cost overall to society. You are just moving it and making it less efficient.

We already are making massive investments in energy. You may know that in 1979 nuclear power accounted for about 14% of our electrical needs. Now it is 20%. The percentage has risen even though we are using more energy generally. How could that happen since we didn’t construct any significant new capacity? Better efficiency due to research. Check into the money being spent by private firms on fuel cells, ethanol production, biomass, solar etc. But it all still comes down to prices.

Some people seem to have a moral problem with oil and they are under the false assumption that it will just be gone someday soon. $40/barrel oil might be gone, but there is more than enough $80/barrel oil. At higher prices, people begin to use other alternatives. They substitute other forms of energy or different lifesyles etc. It works by itself and it works very well if it is allowed to do so.

Energy is important. Food is more so. If the price of beef or pork rises rapidly, would you advocate a massive government program to create alternatives? Or would you understand that people would substitute chicken or grains at a certain price.

You also seem to be under the impression that all energy should be as cheap as oil was in 1998 and that a massive program will make that so. Probably not. Oil is (was) cheap because it is (was) plentiful and easily obtained. It takes very little effort or human labor to lift oil out of the ground in many places. So if we have an alternative such as ethanol and assume we have a process that can make ethanol as cheaply as we can refine oil. We still have expenses, such as growing corn (land, machines, labor, fertilizer, water, and environmental impact), moving the raw material, which is not in easy to move liquid form and that is before you refine it. Ethanol might be a good fuel, but it ALWAYS will take more labor to produce a gallon of ethanol than it takes to produce a gallon of oil, and so it is hard to see how it can be much cheaper in the long run.

We spend less of our total income on energy than our fathers or grandfathers did (if your grandfather chopped wood, think of it in an hourly rate). Energy costs are not rising. The mix changes, but we are all using more energy and paying less for it.

With the possible exception of nuclear power (which could be used to make hydrogen etc) we already are using the cheapest alternative. Energy prices will rise. Presumably so will energy efficiency, but it will more or less wash out.

Rob

I understand what you are saying, but the price should not drop either for oil or anything else. We should learn to use energy more efficiently. W/o price, there is absolutely no reason to do this. In fact if a resource is plentiful, it is stupid not to use a lot of it. Nobody is careful about the amount of air he breaths or the amount of water he drinks. Why should they?

Posted by: Jack at May 12, 2006 1:43 PM
Comment #147667

Jack,

Again, you have a wonderful grasp on Economics. But, again, there are some things that market forces don’t consider.

In fact if a resource is plentiful, it is stupid not to use a lot of it.

Unless, of course, you’ll kill yourself and everything on the planet if you use too much of it.

Oil is monetarily very cheap. But market forces don’t consider the environmental costs. Or, rather they only consider the environmental costs when those costs are localized to the user. For example, most of us don’t heat our homes drectly with coal fires anymore, because they had a major impact on the health of those who did so. But driving a “clean” automobile will not significantly impact the amount of smog that I breathe in, because my smog-breathing comes from the great city pool of smog-makers, and my “clean” car alone can’t clean the pool.

Posted by: Rob Cottrell at May 12, 2006 2:13 PM
Comment #147742

Rob

If you want to take account of the externalities, TAX oil. I have supported the taxes on many occassions.

Take a look at this from Brookings. This is something I support. In fact I wrote almost the same thing myself a couple weeks ago on the Red side. He says it better.

Posted by: Jack at May 12, 2006 6:24 PM
Comment #147783

Consider this:

When the California energy market was manipulated, Californians found their bills sextupling and more. Their were rolling black outs and brown outs and nobody could figure out why until we learned about what ENRON had been doing to manipulate the California market. Even with the price rising as high as it did, the need was too immediat eto do anything but suffer it. It would be a VERY bad idea to let this scenario play out again on a national scale, would it not? The catastrophy in California was more the result of some truely unnethical manipulations of markets and laws carried out by ENRON. It does, however, give a good idea of what things would look like if we found ourselves in IMMEDIATE need of new solutions overnite. Price is NOT the answer. We will either be wiser and have greater forsight of the impending need…or we will find ourselves running on fumes when we could have been much better off. This is not just a national decision. Each one of us can decide for our own selves how to put ourselves in a better position for the future.

RGF

RGF

Posted by: RGF at May 12, 2006 9:02 PM
Comment #147787

RGF

I hsve been on this since the late 1960s. People always say they will use less energy. They all demand a cleaner environment. But w/o the price incentive, they don’t.

In the very short term, people cannot do much to adapt, but very soon they can. AND they have. This has been our experience since 1973. It is the experience across cultures. The Europeans pay $6 a gallon for gas. As a group, they use less.

Now assume that people WILL conserve and use alternatives as they say they will. No worries. If you cut your use by 50% you will not pay more even if the price doubles. Each of us CAN decide.

So anyone telling the truth about his intentions and his concern for the environment will be fine. Those who are lying to themselves and others, or just don’t care may require a little push.

BTW - you can buy a hybrid today and use half as much gas. You can cut your driving today and save as much gas as you DON’T use. You can walk to work or buy a bike. If all those who talk about conservation and alternatives would just do this, the problem would not be a problem at all.

People just are not innocent victims. They are active participants or if you want - coconspirators.

Posted by: Jack at May 12, 2006 9:17 PM
Comment #147875

JACK,

WHOA there, slow down. I never said anything about anybody being an innocent victim. I was refering to the kinds of forces that are pushing our markets, our energy prices and consumption. I used the example of California because it illustrates how an exponential price increases resulted in catastrophy because the market and conumers could not adapt fast enough. In fact, the profiteers who engineered the nightmare, were doing all they could to ensure that no action on anybody’s part would be enough to drop their profits.

In Europe, they have a much denser population. That is to say, they live in cities that were engineered aroud horse and carriage so they don’t need to drive as far as we do. Our cities are a product of the automotive age. Of course they drive less. That’s no surprise at all. Also, the fact that they pay so much more for gas means that there is currently a better market for hybrids in Europe than there is here. There are greater savings in Europe so the hybrid market is theirs at the moment.

However, there is significant influential pressure in this country to maintain our current reliance on fossil fuels. ENRON is/was an example of how and why that is: PROFIT. As long as there are those out there who can work-influence-manipulate the market to swing profits there way on fossil fuels, then the change will be slow at best. In fact, California showed that when demand increased and prices went up, there was even MORE pressure to use fossil fuels, not less. Of course, nobody knew what ENRON was up to at the time, but the point is the rising price created a greater profit motive and in ENRON’s case, market manipulations to ensure they could still sell all they had of the high priced product. I’m not saying price isn’t a motivator. Clearly it is. It’s just that price motivates in an emergency. We would be better off making the necessary shift away from fossil fuels BEFORE it comes to that. Otherwise will be at the mercy of the next ENRON to find a way to manipulate the market reliance on the old expensive product.

Again, I have no connection to this company; I just respect the vision and the foresight:

www.Earthshipbiotecture.com

RGF

Posted by: RGF at May 13, 2006 11:49 AM
Comment #147883

So higher prices in Europe encourage conservation and hybrids etc. The bad guys are trying to manipulate our market to keep fossil fuels up. Why do you disagree with my higher prices, which will encourage the good and punish the bad?

Posted by: Jack at May 13, 2006 12:04 PM
Comment #147938

Jack,

The “price floor” idea from the article you linked is an interesting idea, but I don’t think it would work in practice.

First, if the consumer would never see a price below $60/barrel, the suppliers would never have a reason to price it below $60/barrel, so the “tax revenue” would never exist (and would instead line the pockets of the suppliers).

Second, the high oil prices would guarantee that the world’s heavy crude oil would always be profitable, which would be music to the ears of a certain Venezuelan president. When you count heavy crude (which isn’t profitable when the oil price is low), Venezuela has more oil than Saudi Arabia.

Third, determining what to tax would be a logistical nightmare. Do you just tax the oil itself when it enters the country, or do you also tax products that were made from it outside the country? In other words, if a company built refineries in Mexico, and started shipping gasoline into the U.S., how much would we tax it? The last thing we want to do is outsource our refining capacity!

Posted by: Rob Cottrell at May 13, 2006 2:21 PM
Comment #147946

Jack,

In a nutshell:

EMRGENCY COSTS MORE

High prices are nothing new in Europe. So they have had a long time to effect a slow change. A slow change that was made easier by the fact that it is much easier to get around in Europe by mass-transit. They have a denser population. We, on the other hand, have an almost total reliance on the auto. A significant shift for us would take longer and be much more expensive. Especially if we wait for price to get high enough to necessitate it.

RGF

Posted by: RGF at May 13, 2006 2:37 PM
Comment #147960

Jack,

When would it be most cost effective for you to get 50-60-80 miles to the gallon? yeserday? today? tomorrow? Which would you prefer? …true, as gas prices go up you save more money tomorrow…
AS the need becomes greater, more and more people will shift to more efficient energy use. I understand that. But the sooner we make the shift…the more of us that can make the shift now…the better off we all are.

I can see a possible nightmare situation growing out of this. What if the use and consumption of fossil fuels for gas, electricity, etc. just keeps on growing while the price goes up and up. What if, then, insufficient efforts are made to kick the habit because of the influence and control being exerted by those who are profiting from the continued use of a product whose profit margin just gets better and better? …until we hit a brick wall of either EXTREMELY high price or scarcity or both.
What then, Jack?

This situation is far too dangerous and far too important for us to try to get away with ignoring it until price FORCES a change. We must make the change now even though we may still be able to afford the price of gas…just barely.

RGF

Posted by: RGF at May 13, 2006 4:29 PM
Comment #147977

RGF

We tax lots of things. I don’t think the point of tax will be too hard. We tax now. Just raise it.

Oil WILL be down below $60. In real dollars oil was higher in 1980. Nobody ever thought it would come down. By 1998 prices were at an all time low. Actually 1998 was our best chance. Had we taken action then, it would have been a lot easier. But another chance will come.

We WILL not hit a brick wall. As it is today, prices are rising more or less slowly. It just seems fast. Adjusted for inflation we are not spending much. Raise the price and people will adapt.

Posted by: Jack at May 13, 2006 6:14 PM
Comment #148302

“Sorry to bother you. Although you have no reason to get upset.”

LOL - I am not at all bothered. I’m 44 a former Army Captain and have started two companies of my own and helped start 3 others. I’ve seen many people who do what you are basically doing here - throw up nothing but negatives and not bother trying to solve a problem. These are the “cloud every problem into having no solution” types. The second category I have run across over the years is the “argue just to argue and bring up random tangential points that have nothing to do with the dialogue.”

I don’t get mad over that sort of thing. I’m just very direct and analytical. This is probably from my military background. I’m simply blunt when I read or hear silly arguments being made because I get paid to solve problems rather than to come up with reasons why they can’t be solved.

Now back to your response:

“You buy in to the liberal line was the belief implicit in your statement that government had the wisdom to choose the best among possible energy alternatives, which they would help or hinder.”

I’m not buying into anything. Again, you shift away from what was written and try to phrase things in terms of me rather than doing any useful analysis.

Your next paragraph shows this perfectly:

“A tax subsidy can be useful, but it is not the silver bullet and sometimes misses the target. A good example is ethanol”

Find anywhere where I even one time talked about a subsidy. Once again, this post was a random walk in the park having nothing to do with what I actually suggested.

This doesn’t annoy me. I just simply have a habit of cutting through the BS as I was taught to do long ago. I don’t let people throw up BS arguments in business and so I simply see no reason to do so here.

A tax credit is not the same as a government subsidy. Not only did I not propose a subsidy, but I don’t think they’re a particularly good idea. When the government employs subsidies it is unhealthy for most businesses because of the beauracracy that the government introduces and because the business becomes dependent on the government rather than itself. Perhaps not all subsidies are bad, but generally I don’t like the idea of subsidies.

“Picking the winners” as you suggest is not necessary at all.

Simply eliminate federal taxation for all forms of energy that are *not* derived from oil.

Next, implement a 150% tax credit (no payback but credit can acrue in negative earnings years) for all non-oil based energy R&D and infrastructure costs.

Done. The “winners” will be the companies that invest heavily in moving the US away from oil based dependency.

Now, I’ve said tax credit and elimate taxes about 3 times now.

This should be clear enough such that I don’t see yet another return argument about “government program” or “government subsidy” or any of the other rubbish that has nothing to do with what I said.

Posted by: cbp at May 15, 2006 11:43 AM
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