Oil Getting Too Cheap (again)

The price of crude oil tumbled 3.9% today. This is good news for the economy but it presents both a challenge and an opportunity. We need higher fuel prices to encourage conservation and the development of alternatives. I have advocated this many times. If you follow some of the links in the linked article you will soon be bored, but you will admit that I am consistent. As the price approaches $55 a barrel, it is time to think of ways to keep the price of fuel from falling.

I advocate a tax on oil to keep the prices up. The big oil companies obviously are not up to the job. Where is price gouging when you need it? You can see why I can never run for elected office. I suppose we could tax only foreign oil. It is always popular to stick it to someone else.

Seriously, anyone who cares about a cleaner environment, getting out from under the influence of foreign despots and improving our long-term economic prospects should appreciate this point of view. Unfortunately, driving cheap trumps these concerns for many.

Posted by Jack at October 30, 2006 6:56 PM
Comments
Comment #191598

Jack, why not just cap imports? That would have the effect of raising prices and it wouldn’t just affect the transportation sector.

Why not be more severe with our fuel efficiency and emissions standards? We lag behind many countries.

We both see the same problem, but I guess I tend to think in terms of lots of smaller steps, which I’ve discussed ad nauseum in other posts, while you favor one huge step. My approach would seem to have the advantage of mitigating the effects on the economy. I guess I don’t see this as a problem with one big solution but rather lots of little ones.

Posted by: Trent at October 30, 2006 7:28 PM
Comment #191602

Jack,
You sound like a flaming liberal. Let the market drive the price, and what is up with global warming? Why does it matter if there is global warming, we are all going to be killed by an asteroid before to long anyway.

Posted by: Earl at October 30, 2006 7:41 PM
Comment #191607

Earl, well, if earth is gonna get wiped out anyway, I say party hardy, as people did when they thought so in the past.

Cutting oil consumption is important for more than just global warming reasons. Some folks out there who don’t like us can control the spigot; better for us to get off our addiction, don’t you think?

The market will drive the price up if OPEC really takes a hard line with us. Better to do it on our terms, don’t you think?

Posted by: Trent at October 30, 2006 7:49 PM
Comment #191622

Jack,

Although I agree that we need to ween our dependence and move away from fossil fuels, for all of the reasons stated above, I do not agree with artificial pricing. My company, livelihood etc, depends on gas to get from one account to the next. The elasticity of my pricing does not allow for a constantly fluctuating fuel surcharge in order to keep up with the expense.

I looked for an alternative fuel small truck.
None of the companies make one. My in town routes are less than 50 miles per day, so anything would do as long as it hauls supplies and my workers to the jobs. I even volunteered to be a test bed for someone. no luck. Larger companies can buy propane vehicles, like UPS, FED-EX, Schwans etc. But the conversions are not cost effective on a small scale. My personal habits have changed a little, but my business is growing and I welcome the cut in expenses at this juncture. Keeping me pissed at the costs isnot going to further the cause. Provide the alternative in fuel and I will certainly look into it.

Fuel does account for a goodly portion of the refined oil, but packaging and plastics are also in that mix. How about reducing the flashy packaging and some of the dependence on plastics?

Posted by: scottp at October 30, 2006 8:16 PM
Comment #191633

Jack, the first people to be hit hard by this punative tax you propese would be the poor, the middle class, and small business owners like scottp above.

The additional expenses incurred by the big players—airlines, shipping companies, manufacturing and retail corporations, etc—would simply be passed on to consumers at first, and over time would erode the economy. Parodoxically making it less instead of more likely that anyone would be willing to employ costly energy-efficent technologies.

The technologies are the problem at this point. I’d rather see the economy boom as a result of low fuel prices and see the tax revenues grow that way instead of as result of a growth-inhibiting tax.

There are enough of us out there who are only too willing to choose fuel-efficient alternatives if the technology is at least somewhat equal. That’s just going to take time, and considering the market for it and the dollars to be made, there all kinds of people trying to develop the technology as we speak. But let’s not hamstring our economy in the meantime.

Posted by: Neo-Con Pilsner at October 30, 2006 9:00 PM
Comment #191639
We need higher fuel prices to encourage conservation and the development of alternatives.

Jack:

Look at the statistics, (I don’t have them handy) gas consumption is consistent whether the price of gas is high or low. People don’t conserve when they need to get to work (at least that’s what the stats say.)

Perhaps high prices will rally people to develop alternative fuel, or at least get people mad about it so they’ll compel other people to develop alternative fuel, but no way will raising the price of gas discourage consumption, unless you raise it astronomically.

Just a suggestion, instead of angering the consumer by making gas unaffordable, why not just regulate the oil industry by limiting the amount of gas that can be distributed by the oil companies…if that’s your goal.

I would never advocate that, or even condone it, but it seems like that would be more efficient…

Posted by: Alex Fitzsimmons at October 30, 2006 9:12 PM
Comment #191640

What stupid thing to propose: “Let’s increase money revenue to the gov’t so that 1) fuel doesn’t become to inexpensive and 2) politicians can have fun spending our money on programs that don’t work and enrich their friends and family.”

Since when is that a “Conservative” idea?

Let’s try this: while the price of oil is low, let’s start drilling for domestic sources of oil and develop our nuclear power capabilities so when the Saudi scum suckers try to exploit their economic advantage we can tell them to screw off.

Posted by: David at October 30, 2006 9:16 PM
Comment #191645

As far as I’m concerned, here it is in a nutshell:

Unnecessary and excessive energy consumption (i.e, buying a giant truck when you don’t need one) is a life-style/personal identity choice. Therefore you can’t change it by making it more costly any more than you can force people not to get expensive and unnecessary cosmetic surgery, or convice them to buy a $10 handbag from K-Mart instead of a $1000 handbag from Saks Fifth Avenue.

People drive giant vehicles that they don’t need for reasons of status, knowing full-well that doing so is more expensive, and they will contine to do so even if you hit them with a few more dollars at the pump.

In fact, the more expensive it becomes, the more status will be attached to it—sad but true.

What needs to occur, and I have no idea how to go about this, is to attach status (and perhaps even patriotism) to being fuel-efficient instead of wasteful.

Posted by: Neo-Con Pilsner at October 30, 2006 9:28 PM
Comment #191654

Trent

We already have the high prices and have adapted to them. I propose only to keep the price high. If we could really do it right, we could tax as it approaches $55 a barrel and phase it out when it gets around $75 (adjusted for inflation).

Earl

Yes, I am sorry for that.

Scottp

I think an oil tax could make your life easier by making the prices more predictable and eventually by encouraging alternatives that will take the place of those things you now get from oil.

The reason we use so much oil today is that it is the cheapest and easiest alternative. As long as it remains this, we will not develop alternatives. BTW – any alternative will be more expensive than oil below about $50 a barrel. Oil is a really cheap alternative. It requires almost no labor to bring it out of the ground. There is no alternative that can compete with that. Oil is the ideal fuel if you leave out the environmental and geopolitical aspects. That is why we use it.

Neo con

We have a chicken and egg problem. We do not develop alternatives because oil is so cheap and easy. In fact, IF oil is so cheap and easy it is kind of stupid to develop alternatives. What a tax would do is make it pay some of the externalities.

Alex Fitzsimmons

Actually consumption is very sensitive to price. During the price hikes during Katrina, demand dropped significantly. Energy efficiency has been growing since the 1970s. It improved rapidly until the mid 1980s. Improvements slowed through the 1990s. IN 1998, when prices were very low, nobody cared about efficiency. Check those links in my original articles. I covered them back then. Check out the links on energy intensity in this article.

David

This is not my conservative idea. It just makes sense. I am not the only “conservative” to propose it. I cannot find all the links, but I have seen it in WSJ. I found this recent one:
Raise the Gas Tax

THe problem with your proposal is that when prices are low we neither drill much nor develop alternatives. Why should anybody do those things when they will just lose money?

Posted by: Jack at October 30, 2006 9:46 PM
Comment #191663
We have a chicken and egg problem. We do not develop alternatives because oil is so cheap and easy. In fact, IF oil is so cheap and easy it is kind of stupid to develop alternatives. What a tax would do is make it pay some of the externalities.

Jack, do you honestly believe that a tax would lead to developing new technologies? How?

Do you have so much faith in how the government appropriates tax dollars to think that a tax generated as a result of what you propose would go to developing alternative fuel instead of evaporate in pork?

This is a job for the market. Private companies, knowing what huge profits they could get, are hard at work on developing alternative fuels and engines. Let them do their thing. American enterprise is very good at solving these problems IF there is a demand.

Even a succesfull government program to develop fuel efficient schemes will FAIL if suburbanites still prefer to drive around in their expensive SUVs and are willing to pay whatever extra is required to maintain the status they believe that brings.

Posted by: Neo-Con Pilsner at October 30, 2006 10:14 PM
Comment #191666

Jack,

The United States is projected to have 400 million people by 2040. Over the next 25 years, the EIA does not project significant increases in gas prices. I agree that making gas expensive would have an effect on consumption, but I do not believe it would lead to lower consumption. It would only lower the rate of the increase.

Even if we artifically kept gas at $75 a barrel, I don’t think that alone would suddenly make alternative fuels more economical. Yes, it would help, but not enough I think.

I truly believe the solution is to continue R&D in making alternative fuels and energy efficient technologies more cost affordable. I’m not a fan of nuclear plants, and don’t think we will produce the huge numbers of them we would need to make large conversions to electricity-powered vehicles possible, but, yeah, I see more of them, too. Our most abundant source of energy is coal; we have the ability now to convert coal to electricity, liquid fuels, and hydrogen with zero or near zero emissions — continued R&D to get the cost done should be a national priority. There are a host of R&D projects we are working on now; I’d like to see our relatively small investment in them dramatically increased. That would have a much much smaller effect on the economy than raising gas prices, which would hurt small businesses and the middle and lower classes tremendously. Something we can do right now is get serious about CAFE standards. Because I’m feeling particularly non-partisan, I will point out that not only has Bush caved to the automobile lobby on these standards, so did Clinton. Our standards are a joke. We’ve had very shockingly small efficiency gains over the last 50 years, while other countries have done much better. Would that alone solve our problems? Of course not, but it is one of the many steps we need to take.

I don’t want to repeat all the stuff I’ve written about in other threads. I do encourage you to look at the raw numbers at the EIA site and see for yourself the projections.

Posted by: Trent at October 30, 2006 10:24 PM
Comment #191670

David,

Increased U.S. production of oil will not have a large effect on imports. Look at the EIA site to see how disturbingly small the effect of full explotiation of ANWR oil will have. The Cheney energy plan, imo, was very wrongheaded, and for the life of me I don’t know what they were thinking, because the numbers are publically available and not hard to understand. The cynic in me can understand the rationale, but for the sake of civil discussion, I’ll let that go.

Posted by: Trent at October 30, 2006 10:33 PM
Comment #191671

The truth is the boom in energy stocks indicates the investment required to improve the long-term viability of alternative energy sources has already begun.

In Toledo, OH (not CA, where there’s a major push for green energy) there are two solar cell manufacturers, one major ethanol supplier, and at last count four windmills within an hour drive.

The price isn’t there yet to make these options viable for all our needs, but they’re building the infrastructure now to prepare for that day. Don’t be in too much of a hurry to artificially raise the price. The cost of the alternatives has some room to fall yet, too.

Posted by: geardaddy at October 30, 2006 10:35 PM
Comment #191689

Ever hear of incentives to conserve? I drive a diesel, saves fuel, but its more expensive than gas? I see your thinking applied here. So diesel is dead in US. Europe went diesel a long time ago. we could get rid of forien oil if we supported diesel in US. We wont get rid of fuel consumption, it drives our economy, duh.
Maybe we should tax blogs, the libs would’nt mind. Raise prices, how very very big government….. again, stupid!

Posted by: Ross at October 30, 2006 11:45 PM
Comment #191690

Are you sure ya aint a closet liberal Jack?
Don’t worry to hard though. As soon as the elections are over the prices will go back sky high again. Then you can be happy again that working folks will once again be forced to decide between feeding the kids or getting to work.

Posted by: Ron Brown at October 30, 2006 11:51 PM
Comment #191697

Is there a recent diversion here from more political issues?
It just seems there’s been a shift away from the usual rosy rhetoric to other, more benign issues.
Why is that?

Posted by: d.a.n at October 31, 2006 12:11 AM
Comment #191698

I’m here in Canada. The price of gas climbed to $1.10 canadian. It now rests at 80 to 85 cents, There are alternitives many taxies and buses run on natural gas. Then there is diesel. Tax is a flat 8% sales.
What does Canada do that the U.S. can’t or won’t?
There is no large taxation to spark intrest in alternitives! Canada leads the way in researching biofuel and hybreeds, There is no pollution tax.
k

Posted by: kuzriel at October 31, 2006 12:12 AM
Comment #191707

d.a.n.
“Why is that?”

Maybe to encourage some people to stop their cut and paste blogging.

Posted by: Don at October 31, 2006 12:32 AM
Comment #191711

Geardaddy has it right, I believe. Alternative fuels are coming. The technology and alternatives we have now…aren’t quite enough… but we are very close to having competitive vehicles on the market. 10 years ago the alternatives to gas were few, and only diesel was worth the investment as a consumer. Now hybrids are mass-produced. Presently they cost too much, but they deliver a better system than the alternatives of 10 years ago. I expect these “specialty” vehicles will be a cost-neutral option within another 10 years.

Useful fuel-cell cars and cars with instant-charge batteries (in the experimental stage now) may be on the scene as soon as 15 years. Gas stations will be selling purified water and inta-charges before we know it.

All the gloom-n-doom about oil controlling our lives will be much reduced. We will no longer need oil for fuel long before we run out of it. Along with that, the nations dependent upon oil revenues will slowly lose their ability to control the prices. Our biggest worry is that their economies and governments will be de-stabilized before we are totally free from their yoke.

Posted by: Don at October 31, 2006 12:55 AM
Comment #191713

Jack, I agree with you, Those short sighted enough to beleive the oil will last forever will only understand after the fact.

Where has all the oil reserves come from that EIA would consider no significent increase in gas prices for the next 25 years?

Posted by: j2t2 at October 31, 2006 12:59 AM
Comment #191726

Not to worry, Jack. When Bush finishes laying our military in strike position of Iran, the price will jump. When Bush invades Iran, the price will bankrupt our nation. The Iranians are already preparing their plan to retaliate in the most comprehensible way possible against the U.S. (the largest oil importer) the oil infrastructure of the Middle East. By comparison, we haven’t even seen high prices for energy yet.

And no, don’t look to China or India to relinquish their oil contracts so more supply can be freed up to assist the U.S. in fighting its war on Iran. There is a reason corporate America is lobbying the White House already against invading Iran.

Think it will have any effect on a lame duck president who has no further elections to look forward to?

Posted by: David R. Remer at October 31, 2006 1:43 AM
Comment #191737

Axel,

People don’t conserve when they need to get to work (at least that’s what the stats say.)
… instead of angering the consumer by making gas unaffordable, …

At least one of these two incompatible assertions is wrong. Could be both.

Posted by: Philippe Houdoin at October 31, 2006 5:19 AM
Comment #191738

Pilsner,

People drive giant vehicles that they don’t need for reasons of status, knowing full-well that doing so is more expensive,

*And* more polluting,

… and they will contine to do so even if you hit them with a few more dollars at the pump.

In fact, the more expensive it becomes, the more status will be attached to it—sad but true.

What needs to occur, and I have no idea how to go about this, is to attach status (and perhaps even patriotism) to being fuel-efficient instead of wasteful.

Easy. Just show them how selfish and stupid you think they are. An huge part of Europeans show this, and SUVs are not anymore that hype. Now people get more positive status attached to their hybrid cars, solar cells or biothermic installations, while SUVs drivers get negative status.

It’s a question of society values. Until most americans will stop see bigger as always better, it wont change.

Posted by: Philippe Houdoin at October 31, 2006 5:34 AM
Comment #191740

Welcome To The Land Of Oz.

We complained that the price was too high, now we are going to complain that the price is to low, and we should add a tax to the price so that it will go back up.

I do not know about anyone else, but hope that the price keeps going down and down and down and down and down and down and down and down and down!!

Charlie George

Posted by: Charlie George at October 31, 2006 6:10 AM
Comment #191742

My Name Is Roger

I think that someone somewere needs to invent a form of transportation that does not use gas or oil.

I have read that there are people working on this, and if this is true, our government needs to get behind them and back them up.

I know the big oil companies would not like this, and will do what they can to stop it, but it needs to be done.

Roger A Conservative Christian Republican

Posted by: ROGER at October 31, 2006 6:22 AM
Comment #191748

Don,

You are right. Alternative fuels are coming; heck, we make them now. That’s all factored into the EIA projections! (See page 96; heck read the whole excerpt, and then read the whole report on energy.) The next annual report should come out in February; I’m very interested in seeing how the spike in prices this summer factors into projections.

Here’s the deal. Energy intensity is expected to continue to decline, but energy consumption is expected to rise, because the gains in efficiency are more than outweighed by the gains in demand. Four hundred million people in the U.S. by 2043, you know.

Jack, this administion is NOT doing a good job on energy as you claimed somewhere recently! This is not a partisan slam, just the truth. Here’s an exercise for those interested. How much are we spending in R&D on alternative fuels and energy efficiency technologies? I’ve posted this before. The numbers tell the story; we are not making energy independence a national priority. This should have the urgency of the Apollo program.

Posted by: Trent at October 31, 2006 7:16 AM
Comment #191757

Hey Jack, my wife and I have plenty of money to burn. You push that gas price up just as High as you like. Oh, and all the jobs you destroy….My wife and I wont lose ours. Heck, make it 70 dollars a gallon and see who squeals the most, democrats or Republicans!

First off, lose the global warming weapon that the democrats like to swing around to keep american from having the energy it needs.

And if we can take the environmental weapon out of the hands of the libs…we could replace nearly all those coal and gas fired plants down and replace them with nuclear power. We could also build more nuke powered plants on top of that and have rechargeable cars that use clean nuclear powered energy.

But first we have to take energy policy away from the democrats who have been holding this nation hostage for years to their environmental blackmail. The environment has become a political weapon of the left and no longer gets the real attention it deserves.

We need nuclear plants so we can stop polluting our atmosphere. We need to drill for our own oil so we can stop depending so much on foreign oil. And we need more energy not less.

By the way, are you aware the Ted Kennedy kept Massachusetts from installing a wind power farm because it was ‘too close to his house’? That in Texas environmentalists are keeping Texas from installing wind power due to bird migratory paths? That in Vermont locals are waging all out legal war to stop just a few wind powered generators from going in because it will spoil their view?

Not only is wind power not THE answer, apparently it’s not even AN answer because no one is willing to put the succors up in their back yard.

So lets put the false arguments aside that man is warming up the planet and the US must therefor go back to living in mud huts (while China and India expand massively) and lets wage the real war…fight radical environmentalists so we can Save the environment AND have the energy we need.

Posted by: Stephen at October 31, 2006 9:07 AM
Comment #191758

Tony Blair has hired Gore to advise him on how to proceed in regards to the environment and global warming. Remember when people were saying there was no difference between Gore and Bush? How ridiculous. We would have had a lockbox, and already been working on this problem. Also, there’s no way Gore would have started some asinine war with no evidence.

http://news.yahoo.com/s/ap/20061030/ap_on_sc/britain_global_warming

Posted by: Max at October 31, 2006 9:11 AM
Comment #191763

Jack,

You state that when prices are low, we neither drill much nor develop alternatives. “Why should anybody do those things when they will just lose money?”

Well, what if we changed the paradigm? In other words, why keep giving billions of dollars in tax breaks and incentives to the oil companies who are already awash with cash, and siphon those perks over to the development of alternative fuel technologies instead?

Yeah, the petroleum lobby probably wouldn’t like that. But a boy can dream.

Posted by: Darth Independent at October 31, 2006 9:35 AM
Comment #191766

Jack,

I’m all for the tax, though it will really hit the poor, who have no gas alternative options. I’m just desperate. But you know what else I think would work? Giving American companies incentives to come up with alternative forms of energy. Ration people’s gas, like we did during WWII. If the American people understood the threat we are facing, and were asked to sacrifice - they would, voluntarily. That’s what I believe and history has shown.

Posted by: Max at October 31, 2006 9:52 AM
Comment #191779

The oil prices will go up as soon as the election is over. What is happening here is “price fixing” by the oil companies to support the Republicans. Make no mistake. The prices WILL go up after the election.

Posted by: James at October 31, 2006 10:50 AM
Comment #191796

James -

Oooh! It’s Halloween! The ghouls are coming to get you!

Tomorrow you’ll feel better. Oh, and the oil companies do not “fix” the cost of crude oil, by the way, in case you hadn’t heard. They do some micro-management at the pumps (usually by only a couple of cents one way or the other).

Posted by: Don at October 31, 2006 11:19 AM
Comment #191808

Neo Con

My goal is to keep the price of oil high. How it is done is a different issue, but if the price must be high, I prefer that we get a bigger cut. I do not expect that the money raised will necessarily be spent wisely. Our experience with government involvement in energy is not encouraging. But the price alone will encourage the good things I talk about.

Trent

The higher prices encourage R&D. A big government mandated program would probably work as well as Carter’s synfuels initiatives. When the price goes up, people think of alternatives. When the price is low, only a fool would bother to make investments.

If you look at improvements in energy efficiency, they are correlated strongly with price (with a little lag time) and not correlated at all with politics. As you point out, Clinton didn’t do any better than Bush and Bush didn’t do any better than Clinton (non-partisan).

Re your second post, government spending on energy R&D is not an indicator of effectiveness. Think Carter. Price works.

Ron

I am a conservative because that ideology reflects most of my priorities. I do not choose my priorities to reflect my ideology. Anyway, a tax on oil only looks liberal. I think the high price of gas is the best of not good options. If we do that, we allow the market to work to solve the energy problems. The alternative is allowing big government programs that will fail and cost a lot more.

Kuziel

I like Canada and I am sure that as a % of GDP you do very well, but I doubt it really leads the way. Despite all the bad PR, the U.S. spends fortunes on R&D in alternatives.

BTW - Canada’s per capita or per GDP CO2 emissions are very close to those of the U.S. and rising faster. In fact, ours are down a little since 2000 (must be Bush’s good works) You just have fewer peopple.

Posted by: Jack at October 31, 2006 11:47 AM
Comment #191820
In fact, ours are down a little since 2000 (must be Bush’s good works) You just have fewer peopple.

As far down as they would have been had we signed the Kyoto treaty. Btw, that treaty sure seemed like a good idea in retrospect….

Posted by: Max at October 31, 2006 12:11 PM
Comment #191857

Jack, you know as well as I do that there were many issues with Carter’s energy program, including significant opposition and its virtually elimination under Reagan. It’s too complicated to be summed up in a few sentences. Regardless, I don’t wish to rehash that debate.

My real problem with artifically raising the price of oil is that I don’t think that alone will significantly lower consumption — remember, our demand is increasing all the time. It’s not a bad idea, and at least will would take some power away from OPEC — there is the school of thought that OPEC very intelligently lowers prices (that is, opens the spigots further) after we’ve had high prices for awhile. Why? It doesn’t want us to become energy independent.

But let’s talk about prices. If we go the route of just keeping oil prices high, how high do they need to be? I know enough about the world to know we are very spoiled when it comes to energy. $3 a gallon gas is cheap, we know that — it’s only seems expensive because we are used to cheaper. How about $6? Would that do it? That is, encourage the relatively rapid development of altnerative fuels and the vehicles to use these fuels? And at the same time get other sectors besides transportation of oil? I don’t know. But I suspect the price we’d have to have to actually lower overall consumption of oil dramatically would be pretty great. A number cruncher like d.a.n. might be able to get inside the publically available EIA forecast model and and run those numbers. Heck, I might look into it myself.

At any rate, Jack, I’m not certain your proposal is politically possible. The Dems won’t raise gas taxes by much, if at all, especially after their populist rhetoric about price gouging. (Continuing the non-partisan bit here; it makes for better discussion.) I don’t seem the Repubs doing it.

Posted by: Trent at October 31, 2006 1:28 PM
Comment #191914

Wow………

And this from a school of thought student wherein
anything but free markets and the true finding
of levels (costs) is absolutely a function of the
marketplace ?

On the R & D front there will be no let up as
in a free market the commodity will eventually rise…..and in the case of crude it is a certainty.

Go to the charts,Jack,adjust for normal inflation,and voila !!!!!!!

I’m stunned by this posting of yours.

Tom Durkin

Posted by: Tom at October 31, 2006 3:58 PM
Comment #191977

Jack-

I don’t understand why the long road to the same place. Raising gas prices will eventually lead to more R & D. But meanwhile we fatten the pockets of oil companies and saudi royal families. They use that profit money to buy influence in Washington to hinder other efforts at every turn. They will promote their own products at the expense of others who were not given a couple trillion dollar head start. Remember the red car in LA? Was that “forward looking” or was it greed? The answer is greed almost every time. It is just not a level playing field under that plan unless you want to adopt some kind of revenue sharing plan which will never fly.

I really wonder about a lot of the specifics of this plan of yours to artificially raise gas prices. Not enough space to list them all here.

So wouldn’t it be more efficient to keep gas prices down, create a tax on the absurd oil profits that already exist, start enforcing (maybe increase) tax and licensing collection on those companies that are sucking up oil that belongs to the public trust and then exploiting loopholes to not pay us for it, and then use all this record tax revenues that come solely from corperate profits to directly fund research based on the idea by itself?

Posted by: Kevin23 at October 31, 2006 6:38 PM
Comment #191983

You seem to have a lot of faith that private, profit-motivated research, with constant roadblocks put up by those who stand to lose, can lead us to a solution faster than idea based, targetted government research. I think the last 20 years of having oil companies promise to be on the cutting edge of alternative technology, and then fail miserably to do anything but promote more gas guzzling should be pretty good evidence that some independent thought on the subject may be necessary. A result not tainted by greed is necessary when the core problem is not financial, yet.

There is just no money in curing diseases, only in prolonged treatment of symptoms. So there is a need to fund disease related research. There is also no money in developing alternative fuels at the moment simply for long term environmental reasons. Maybe there is some incentive to avoid the innevitable crash that will come from the supply and demand lines meeting on the backside of the curve, but much more incentive to keep expoiting what we’ve got.

These are benefits for the good of everyone in society, and it is just not profitable to benefit people in a universal way. While overall, I believe in the free market system, I also believe that sometimes relying on it can produce an unnecessary rollar coaster ride for real people.

Posted by: Kevin23 at October 31, 2006 6:57 PM
Comment #192015


Max

During that same period, the EU (Kyoto supporters) actually went up.

Trent

You are probably right about the politics, but maybe with time …

Somebody has to advocate it. Maybe it will catch on.

My goals would be to keep raising prices. As soon as we slow down, the progress stops.

Tom

I am not sure what you are asking me to do. The real price of gas is about what it was in the late 1970s. It reached an all time low about 1998. If that is what you are saying, I agree, although I do not still know how or why you are surprised.

Kevin

Several reasons. One is that government sponsored R&D probably would not produce a good result. Second is that if you keep the price down, there will be no big profits to tax. If you want to tax oil companies and you make it stick, you will have the effect of raising the price of gas. It is a back handed gas tax. But unless you can tax foreign crude, you will just be driving out American producers while giving money to the despots.

Our market economy has produced fantastic wealth and great innovation. Every generation people say that it is all over and the established firms will succeed in stopping innovation. They are wrong. Of the original components of the DOW, the biggest and best firms of their age, only ONE is still there (GE). The free market means change.

Government, on the other hand, is almost always status quo. It is controlled, by its very nature by established forces. Government programs put their money into established ventures. In your lifetime have you ever seen very much else?

I do not know if you are Republican or Dem, but do you believe the goverments we have had in your lifetimes have adequately reflected the good of everyone in society? These are the guys who call the shots.

Posted by: Jack at October 31, 2006 8:53 PM
Comment #192021

Jack,

Government-sponsored research can lead to good results. Heck, look at some of the EERE programs. Much of it is unsexy and invisible to those uniformed, but they are significant nonetheless. Without some of these programs, energy consumption would be much greater in some industries. Please, just look at the facts, look at the return for investment. I’m certainly not saying every R&D program pays off; that’s not the nature of R&D.

How do you think Japan got so far ahead with hybrid cars? Thirty years of government/industry investment. You know how we have caught up to the limited extent we have? By licensing hundreds of patents from the Japanese.

I know it is an article of faith with you that government programs cannot work, but much good work has been done related to energy and energy efficiency. Think what could be done if we seriously invested in R&D. Compare R&D costs on alternative fuels and energy efficiency to the cost of the Iraq War.

Posted by: Trent at October 31, 2006 9:07 PM
Comment #192030

Jack, in my lifetime, I’ve seen the government put men on the moon, I’ve seen it establish the satellite telecommunications industry, I’ve seen it break the ground to the entire microminiturized computer industry. Do you think private industry started the internet?

“Government-sponsored R&D probably would not produce a good result,” you say. Do you have ANY grounds to say that? I realize you will point to Carter’s synfuel program, but you have to ignore much demonstrably useful government R&D to make a statement like that. That’s a favorite trick, anyway. Point to something that didn’t work out, and ignore what did. I don’t need to explain the nature of R&D to you. Heck, our high-tech military — you think industry would have provided us with that without the government?

Posted by: Trent at October 31, 2006 9:46 PM
Comment #192080

Trent

The problem with energy is that it is not a problem. It is a complex of choices. At a high enough price, we have access to almost limitless energy. We currently have enough of some sorts of energy to last hundreds of years at something approaching today’s prices. This is coal. It is not acceptable for environmental reasons, but could be. Then we have nukes. Clean and could be cheap. But waste problem. Oil, great stuff except the good Lord played a joke on us by putting so much of it under bad guys. Various alternatives already work. YOu can use solar to power your house today, but it is captial intensive. All these choices would be political ones.

I came in contact with the clean coal folks in Poland. This was CLINTON times BTW. They were government funded and insisted on trying to save coal plants. There was one particularly bad plant. The Poles wanted to close it because it was old and dirty. The U.S. convinced them to retrofit it. It never really worked. The guys involved in the decision really thought they were doing good. W/o the big G bucks, they never could have done it.

Posted by: jack at October 31, 2006 11:31 PM
Comment #192086

Jack, that’s just an example that didn’t work out. I don’t know what else to say.

Posted by: Trent at October 31, 2006 11:44 PM
Comment #192105

Jack-

I need to go through these reasons because you didn’t directly address my concerns.

“One is that government sponsored R&D probably would not produce a good result.”

But they DO produce good results in medical research all the time. I work for a research based university, so I know that we get a lot of federal money to do some really cutting edge things. Those technologies have proven, especially in the medical and biotech fields, to spawn massive amounts of private R & D … which of course creates demand for high paying jobs.

This has been a major trend world-wide in this area. There are many reasons for this, but one important one is the nature of the grant program itself. It is idea based, which is to say, they fund the best, most potentially meaningful research solely because of its potential benefits to society as a whole. Thousands of highly intelligent people all over the nation apply independently for the money, which is then given to the best proposals. Everyone is on equal footing, and every plan is written is such a way as to focus on societal benefits as opposed to profit potential.

The private sector seems to gravitate only towards the safer routes…the routes that will almost always amount to short term marketing and sales booms. This is also a reason why most of the best medical research journals are in nations that provide a lot of government monetary assistance for research. This in turn spawn private industry faster and more effectively.

It seems to me that unless I see actual data that can show waste. Seeing as how the industries prone to government funding are some of the most successful, I see no reason to believe we’ve reached a point where the benefits do not more than make up for the initial investment. Can you show me hard data showing more detriment than benefit? Because I can show you numerous private research facilities in the small towns across America that are located next to places where government funded research is conducted (like public universities). And most are hiring, and paying much better than Walmart.

“Second is that if you keep the price down, there will be no big profits to tax.”

Prices ARE down, and profits ARE up…record profits actually. Use present facts…don’t duck the question.

“If you want to tax oil companies and you make it stick, you will have the effect of raising the price of gas. It is a back handed gas tax.”

But I said to tax the PROFITS…which would not effect fixed costs or the supply line one iota. Again, why change my words to duck my concern…you brought it up in the first place. I also mentioned raising licensing fees, which are also a percentage of profits, and actually collecting that money for a change. Closing loopholes that republicans are currently ignoring is vital, wouldn’t you agree? Absolutely reprehensible that companies are avoiding giving US citizens money to exploit its finite resources, right? You didn’t address anything I said, and I feel like you are trying to sidestep it by generalizing instead of using today’s facts for your case study as you started out doing when you wrote your post.

Then you go on a general lecture about government being, generally, less effective in innovation. OK…I agree with that general statement. But how does that address what I said about the situation at hand? To remind you: We are talking about the oil industry, today, and how you believe researching alternative feuls through targeted government grants is somehow less effective than letting the industry continue to do what is best for profits, hoping they just up and decide on their own to move away from existing, easily exploitable technologies. Can you not see that this is one of those areas where outside innovation needs to be fostered and promoted for the benefit of society? It will most likely be less profitable for a long time, but it will be a fresh begining of a new technology. That is what we need. The oil companies have zero incentive to do it. But it is obviously the right thing to do. AND, when shades of success arise, it will spawn incredible private interest. And high paying jobs will be created.

“I do not know if you are Republican or Dem, but do you believe the goverments we have had in your lifetimes have adequately reflected the good of everyone in society? These are the guys who call the shots.”

But it is not a backroom session of congress deciding how to spend the money. It is done by industry experts, and the money is spent only on what was in the original proposal to begin with. So why are you worried about government’s wasteful tendencies sneaking into a researcher’s mind while he is drafting a proposal? Seems far fetched, or like you have not given much thought to the specific case at hand, and its respective process.

Please clarify. And this time not with something more specific than generalizations about government v. private industry.

PS. If I seem testy it is because I have spent a lot of time addressing many of your posts in the past with what I feel are great questions, and you have never responded to me. Maybe you don’t have time, or maybe you never read them. I hope you are not avoiding answering me. You do respond to others, so I know it is not lack of opportunity. So, finally when you do respond to a question of mine, you gloss over everything as if I never said anything worth addressing specifically. Well, the specifics are my whole point. So please, indulge me.

Posted by: Kevin23 at November 1, 2006 3:37 AM
Comment #192106

Trent

It is only one example, but it is the type of thing that goes on.

Energy is not something that can be solved. Government does reasonably well when there is a clear goal. Let me ask one question. What sort of energy would a government policy produce? The answer would certainly be political. Think of the coal I mentioned or another example ethanol from corn. Why are we fixed so much on this one crop? Because of the power of corn states and firms such as Archer Daniels. I have nothing against these firms, but I recognize that government is alway controlled by established interests.

If you want something really different, you need to experiment and tolerate failure. You also need to change course. The free market doesn’t always make the right choices, but it is very good at changing its mind. Government has the deep pockets to go after the wrong solution long after a private firm would have given up.

I am not saying that government should play no role. But these should be small contributions, not a big deal moon shot type program. Higher prices (which government can give us) will stimulate innovation. They reward conservation and alternatives without making choices among them in advance. It is a better system.

Posted by: Jack at November 1, 2006 3:41 AM
Comment #192108

Kevin

But they DO produce good results …

I do not say we should have no government sponsored research. What I am against is a comprehensive program on energy. I talked to Trent re. The energy “problem” is not a problem. It is the result of our choices and continued preferences. It is also a very big and complicated situation. Our government has never tackled anything so big, complex and political in peacetime. I expect some government R&D would be useful, but I would not expect much from it. And if the price of oil remains low and oil remains available, it is hard to see the incentive. We use oil today because it is a cheap and easy alternative. Why do the hard one if we have an easy one?

We often point to Brazil’s ethanol program. If you read about it, you see that it started more than 30 years ago. It almost died in the 1990s and was resurrected ONLY because of higher energy prices. And BTW we can take advantage of this technology. Why don’t we? Because oil is cheaper and easier.

The private sector seems to gravitate only towards the safer routes…

This is just not true. The private sector responds rapidly to change when there is incentive. Firms are always trying to get an advatage over competitors. Price is an incentive. IF you just exhort people to do better, they don’t. Give them a reason.
If you keep the price down, there will be no big profits to tax … I do not know how to explain this. When prices are higher, the firms involved make more profit if they cost structures remain similar. In 1998 when prices were low, the firms were not making such profits and they did not have the money or incentive to invest in new fields or R&D. An investment in oil takes 5-7 years from inception to its coming on line. Today we are living with the decisions made in 2000. In a couple of years, the investments we are making today will be online.

Re profits - You always tax profits. Oil companies pay the same sorts of taxes as other firms. The U.S. corporate tax rate is one of the highest in the developed world. Tax revenues are way up this year because of the tax on profits. In addition to corporate tax, we also tax dividend income, although at lower rate. So we tax the firm. Then we tax the shareholders of the firm. We can tax again, but we are already taxing pretty much. Last year, the big oil firms paid and average effective tax of 40%.

IN 2005, Exxon made $59.4 billion and paid $23.3 billion in taxes. The big oil companies are publicly traded. You can look up anything you want in their annual reports.

BTW oil firms make big money because they are big firms. The return on investment in oil is not particularly good. You would have made more money over the last 20 years if you invested in health care, media or many other things.

If you lower the price (and lower the profits) people will invest in other industries or not invest at all. The price is not arbitary. It is based on market conditions and expectations. If you lower it artificially, you create disincentives to produce or sell it.

Re government - in our democracy government is responsive to the people. This is a good thing. But the people like cheap energy. There will always be pressure to go the easy route or reward current stakeholders. That is why I could never be elected to public office after making these comments about the price of oil.

Posted by: Jack at November 1, 2006 4:17 AM
Comment #192119

Jack, I probably shouldn’t have used Apollo program rhetoric. I did so because I wanted to evoke a big government program that was incredibly successful, and which led to the development of technologies that have transformed our lives. But it was not a good choice for several reasons: you are right in that the energy/environmental issus are complex. I wouldn’t favor a massive government program on ethanol, for example. As I’ve said elsewhere, I don’t see single solutions; I see a host of smaller solutions that in aggregate can have an enormous effect. For example, we tend to focus on energy sources in these threads, but there is another side equally important: energy efficiency. Elsewhere I’ve said we should double or triple our investment in R&D relating to alternative fuels and energy efficiency. I’ve posted the actual figures before but don’t remember than offhand. Whatever they were, they were relatively small compared to our expenses in other areas — a few billion spread out over the host of projects. Compared to the direct and indirect subsidizing costs of oil, they are very minor. I think we can at least agree that doubling or tripling these figures wouldn’t qualify as a massive new government program. I also believe that past investments have paid off — not in returns to the government, but in hurdles overcome and in curtailment of industry costs, not to mention reduction in pollution. So much of this is unsexy that I can’t imagine the public can get very excited, but I do invite you to look at the EERE site and peruse projects and their successes. Some of the things coming out of these programs probably will change our lives — government directed research into nanotechnology, for example. Just one potential benefit — very cheap and easy to use solar panels. Get that cost down, and solar panels could be included without large overall cost in the construction of most homes, even those homes not placed in optimal locations.

Anyway, got to get to work.

Posted by: Trent at November 1, 2006 7:55 AM
Comment #192130

Slow down the amount of oil brought into the USA. Make the trades into dollar for dollar. If a country wants to sell oil or anything else to the US than they should have to buy something matching the dollar. This would stop or slow down imports, keep jobs here, and force companies to produces products that we need here.

Posted by: Roger at November 1, 2006 8:32 AM
Comment #192179

Why don’t we save a lot of tax-payer money and dissolve the DEQ and the EPA who are the ones really responsible for (U.S.) not building more refineries or nuke plants.Then us single buisness owners who are in the service ind. who pay the most taxes could afford a stupid non-conservitive idea like this.Why should any-one put more money to the gov. where they will waste it worse than your so-called big suvs use gas? Didn’t our fore-fathers build this country for freedom????I think having some-one else decide what kind of vehicle I have to drive is communist!

Posted by: mike at November 1, 2006 10:17 AM
Comment #192180

Why don’t we save a lot of tax-payer money and dissolve the DEQ and the EPA who are the ones really responsible for (U.S.) not building more refineries or nuke plants.Then us single buisness owners who are in the service ind. who pay the most taxes could afford a stupid non-conservitive idea like this.Why should any-one put more money to the gov. where they will waste it worse than your so-called big suvs use gas? Didn’t our fore-fathers build this country for freedom????I think having some-one else decide what kind of vehicle I have to drive is communist!

Posted by: mike at November 1, 2006 10:19 AM
Comment #192230

Jack-

Again, thanks for the general economics lecture, but you avoided my point. I have a series 7, a series 66, a law degree, and I’ve read the tax code. I do not need the type of general information you once again provided as it does not address the specific case confronting us. I was talking about real life, today.

You took great pains to point out to me that low oil prices mean no incentive for R & D. That is exactly WHY I asked you if government research was needed…the supply and demand lines will soon meet on the back side of the curve meaning a crash WILL come. Shouldn’t a government be proactively trying to avoid such a nightmare scenario for its people seeing as how the private sector is too busy exploiting what is left of the current resources on a global basis (in other words, they don’t take into account what is good for Americans, but only seek global profits)?

And your point about looking at their financial statements is bogus, because it doesn’t account for any of the foreign subsidiaries who were assigned certain drilling rights by the parent company so they could avoid US taxes. Those types of loopholes are being massively exploited, and it is costing us much needed tax revenues. Looking to see what is disclosed on the financial statements is often not the complete or truthful picture. Especially not in this case. After all, we are talking about companies who have fired automatic weapons at unarmed civilians in order to supress protests on oil platforms in third world nations. Tax fraud is a given. So the current non-enforcement of our laws is either intentional or completely irresponsible.

And who cares if we already have record tax revenue…we are still in more debt than ever, right? They are effectively stealing oil from the American people without paying for it, and your best solution is to ask them nicely to consider researching alternatives when they think the time is right…which will undoubtedly be too late to avoid a serious recession or depression world-wide. Of course, the rich companies will be able to survive, but not much else. Well, that seems like an obvious disaster waiting to happen. Easily correctable with a tad bit of foresight and some balls to stand up to the big oil lobby.

Anyway Jack, I’m dissappointed that you cannot articulate your positions beyond the general statements. I welcome surprise, however. Just please avoid dragging me back into the useless confines of general statements when I’m trying to talk specifically. There are so many things to discuss on this topic, starting with governemts ability to help promote good ideas for the industry that are not yet cost effective, and in doing so, create good jobs domestically as the new ideas ripple through the industry. The good ideas will eventually turn a profit, heavy private funding will come, and there will already be recognized experts and training programs in place to recuit more, making the industry able to grow larger much faster to meet the publics demands when oil skyrockets.

I think you know how business models work, generally. So isn’t it obvious that the oil companies will sink every last dime of profit into new ways of sopping up remaining oil rather than start anew? Their expertise lies in fossil feuls and its extraction. Until that is less true than not, they will spend R & D money accordingly. It is only natural because it doesn’t require huge capital investments in new equipment or personnel.

I can’t think of one good reason to not scream for government research, and fast…while the money is still there and people are not yet being overly squeezed. Can you?

What we have today is the exact opposite approach by our government: See no evil, hear no evil, speak no evil. They openned up futures and commodities markets to institutional investors making them more volitile and creating a sudden artificial demand which helped spike prices. That did nothing to help anyone but big players in the markets. They allow creative accounting and loophole exploitation to go unchecked. Everything seems to be heading in the opposite direction of what is necessary to avoid the innevitable collapse of mass oil consumption-based economies.

I never said anything about artificially lowering prices. I did say that a windfall profits tax and better enforcement are the bare minimum of what we should expect from our government if it cares at all about its citizens and their natural resources. A proactive approach to researching new technology is smart and nothing but beneficial…even to those big oil companies who are reluctant to spend its “hard-earned” profits on anything but oil extraction, because they will eventually see profit potential, and they will have capital investment money. All this means more and better jobs for longer.

The only negative is the taking of some profits today that will not be able to go straight back into exacerbating the problem by drilling more oil…equating to a minimal decrease in supply and a corresponding small increase in gas prices if all things are equal (and they never are). A VERY small price to pay (and one that is diminished by the spreading of costs globally) for long term security.

If I’m clear, your plan is to hope oil companies do all of this on their own, and that their profit-seeking will line up with what is best for US workers and consumers while avoiding unnecessary rollar coaster rides? Now that sounds like a fools bet to me…even generally speaking.

Companies are not evil, but they are predictable. We need to understand the nature of an industry before we can apply any general rule of economics to it. In this case, profits will not equate to long term solution until it is too late. I thought this was the scientifically and economically accepted view. Do you disagree?

Posted by: Kevin23 at November 1, 2006 12:07 PM
Comment #192302

Damn, Kevin, that was well stated. Frankly I don’t have the economic expertise to say what you’ve said as well as you do. All I know is that good government R&D is being conducted and that it makes sense to do more. What I believe is that market forces alone won’t get us off oil anytime soon. Having said that, isn’t Jack’s point that higher gas prices would make alternative fuels and technologies such as hybrid cars more attractive? My main objection is that, after looking at EIA statistics for years, I think we’d have to jack the price of gas very high to actually effect dramatic reduction in oil consumption, and not simply reduce the rate of increase or keep it flat. And by very high, I mean lots more than $3 a gallon. Having said that, I wouldn’t object to increased gas taxes if it were part of some sort of package that also involved increased investment in promising technologies. Part of the problem, of course, is that demand is steadily increases.

From the technology point of view, I see a host of solutions. We can’t take about oil apart from a broader discussion about energy. Take electric cars, for example. They have zero emissions, consume no gas, but the electricity doesn’t come from no where. Energy not gained from oil has to be gained from somewhere else. That’s why developments in solar panels, wind power, clean coal processes, etc., etc. are also important. Broad ranging research that doesn’t put all of our eggs in one basket is the way to go. Jack makes a good point about ethanol — the numbers don’t add up. I and others have written about ethanol before, so I won’t do that here, but I think it is clear that ethanol is not the panacea. Nuke plants are the same way. When you look at the numbers of them that will be needed, it’s hard to see them as anything more than one more contributing factor — certainly not a panacea in and of themselves.

Local production of energy, and by that I include power produced by residences fed back into the power grid, is also extremely important, which makes the coming breakthroughs (partially achieved through government-directed research) so exciting. Getting the cost of zero-energy homes down is also crucial. They are not terribly far from being cost efficient now — that frees up power that can be used for other purposes, including transportation.

In short, I see energy independence requiring a host of steps, each which in and of themselves won’t get us off oil. Focusing excusively on raising oil prices, imo, isn’t going to achieve our goals. And, when you consider political realities, it’s hard to believe either party will dare to raise oil prices enough to matter.

Government’s role should be to help get technologies ready for commericialization. The approach used by the EERE now — that is, partnerships with industry, with industry reaping the fruits of the research, is a good model, I believe, and has yielded great results. I’ll also add that these partnerships are voluntary. We need more of them. (For specifics about everything I’ve written, check out the EERE website.)

Posted by: Trent at November 1, 2006 2:23 PM
Comment #192348

Kevin

I really do not understand your point. Both of us are talking in general statement because it is a general topic. Your specifics consist of saying the oil companies are avoiding a reasonable tax. We see what their profits were and we see what taxes they paid. These numbers are very specific. You evidently have some knowledge beyond what others can see, which must mean that you have made a fantastic fortune in stocks over the last few years. If not, maybe you should question the practical value of that knowledge.

I want to keep the prices high, which will encourage others with alternatives to enter the market. Some oil companies will innovate. Other companies will enter. High price create an automatic incentive to try to come up with alternatives.

Re profits. The bottom line in profits is how much the owners make on their investment. Oil stocks have been very good this year, but not for most of the last 20 years. Oil is a cyclical industry. Maybe they hide their profits so well even they cannot find them.

If you understand the tax code, you must understand that oil firms are paying a lot of money into the treasury. If you understand basic business, you must understand that it is the return that counts, not the industry you are in. If you compare businesses, you will note that investing in oil has not been that good of an investment compared to some others. If you read the news, you will understand that no significant accusations of price gouging by oil companies were sustained.

Posted by: Jack at November 1, 2006 3:32 PM
Comment #192391

Jack-

Such narrow focus on stock price. What about growth? I think what concerns most people, myself included, is not the decisions made by shareholders and board members at public meetings. It is the decisions made by officers of the company every day, on behalf of the company’s interests. The very nature of the thing. Look, what I’m saying isn’t that corperations are inherently evil, but that people can easily manipulate the system if they have no accountability. That is government’s role in the market. Keeping a level playing field. Is it not?

OK. So now we take an industry like oil where the resource is finite. First there will be supply. The demand comes later in time. There is a relationship between the curves of these two lines on a graph. Remember this stuff from econ? So at a certain point, the demand will outgrow supply. In response, the supply line will keep rising, as it is forced to due to demand pressures.

The problem is that now there comes a point where it costs more money to collect the resource, or in this case to pump it out of the ground, because the easy reserves are tapped. As it takes more and more money to collect it, the costs rise. This brings us to today. I’m sure you are with me so far.

The real problem is that demand has not stopped rising. Oil companies, because they are run by OIL people, will have little know how to do anything but be more innovative in their collection methods. I know many people have been touting for years that the number one investor of renewable energy has been oil companies. Honestly, all I see amounting to is more and bigger cars and roads and a tax break for the companies for the sentiment.

Look at the LA area now…its a nightmare to get around, and no one uses public parks. Older cities designed for foot traffic are very different. In other words, almost our entire way of life revolves around the use of one resource. Now any solution we hatch must take this into account.

This leads us to that innevitable point where demand declines due to excessively high costs and crosses the supply curve again. This point is doomsday for anything or anyone needing that finite resource, but also the re-adjusting point. I’ve heard many estimates about this date (2012-2050) but they all agree it is coming in our lifetime.

OK…there is the general stuff. Now what is our government doing to insulate us? We don’t have to talk actual effects of policies as it can’t be accurately measured. But we can talk about the specific policies themselves, right?

I say the oil companies have thusfar proven to be anything but unfriendly towards reduction of supply and they have fought tooth and nail to keep the developing world thirsty for more. We need some well funded independent thought, I’d say. A system where the best ideas are funded solely because they are good ideas. THEN we’ll let the private sector go nuts…with plenty of experts to employ immediately. So more government funded research with a new profits tax.

Yes, I realize the oil companies pay a lot in taxes. I also realize they should be paying more. It will achieve the same result as your plan, and will allow effective R & D in the meantime to fill the void at the expense of a few (thanks to mergers) companys’ ability to purchase more holdings in Vietnam.

All we need to do is enforce our laws, audit the books, account for profits better and take a better cut of them. It won’t hurt US citizens at all, and the dividends will continue to come in as usual. Of course market manipulation by the big boys and institutional investors can now invest with their follow the leader mentalities, but who cares about 401(K) holdings that suffer in their rates of return anyway. They’re just ordinary peoples’ futures. Another specific policy curtesy of the big oil lobby in washington.

Anyway, I think the point is made. Allowing global exploitation and the effect it has had on the balence sheets of int’l companies to dictate domestic energy policy is not what I’d consider striving for innovation. That is what I’m talking about. Can you show me anything to say that global market forces have ever done anything but decimate economies dependent on a finite resource once that resource begins to run out? I honestly can’t think of any such evidence. So we’re kinda winging it here. Maybe error on the side of forethought?

Posted by: Kevin23 at November 1, 2006 5:23 PM
Comment #192435

Kevin

You got no choice about these things. Governments have not been able to repeal the law of supply and demand.

I mention the share prices, the profits, the taxes - money has to go somewhere. You cannot find it. You just contend that somehow they are ripping you off.

You evidently see a different world. I don’t want to live in your world and you would be better off in mine. Sorry you evidently cannot find it. It is called America.

Posted by: Jack at November 1, 2006 7:05 PM
Comment #192447

Jack-

What?

So I take it you always crumble when pressed for anything more indepth than waving an american flag and yelling “free market”?

No one said anything about repealing or even impeding supply and demand. You are either not reading or not comprehending. And no crap money goes somewhere. That is why I went into great detail about global growth…you know, it is where the money has been going. Did you miss that paragraph? And money has been found to be “ripped off” … but no charges were filed, which surprised every reporter who wrote about it. I am not assuming anything, Jack.

But your insistance that your “world” is better than mine is coming from a place of ignorance seeing as how you haven’t shown me any knowledge of anything I couldn’t find on an Econ 101 book sleeve. You are the one who does nothing but assume. Prove me wrong. You haven’t ansered one honest question yet. You insinuated that my position was some kind of market control. That shows an inability or a lack of wll to understand everything I’ve repeated 2 or 3 times thusfar.

Or is this par for the course where you are concerned? Sorry, but I actually value substance over simplicity, clarity or even consistency. I can even handle being wrong when I learn something new. I was hoping maybe you’d be able to show me something. I was wrong.

Posted by: Kevin23 at November 1, 2006 7:33 PM
Comment #192612

This morning I was once again reminded of the severity of the problem by this:

But the total U.S. emissions, now more than 7 billion tons a year, are projected to rise 14 percent from 2002 to 2012.

Unless we can effect a sea change in the public’s attitude, I don’t see much happening. So far all our efforts have done is reduce the rate of increase. Perhaps a huge oil tax would at least wake people up. But again, I don’t see a huge oil tax happening.

Some days it’s hard to remain optimistic.

Posted by: Trent at November 2, 2006 7:01 AM
Comment #192672

Trnet-

More bad news:

http://www.nytimes.com/2006/11/02/business/02royalties.html?th&emc=th

It seems the dept. of interior has no idea how much oil, which belongs to the American public, is being pumped out of the ground. Somehow, they managed to not keep track. Hmmm.

My favorite exerpt that actually was first reported last month:

“In September, the inspector general of the Interior Department, Earl C. Devaney, told lawmakers that top Interior officials had encouraged a culture of cronyism, ethical lapses and poor management. “Short of crime, anything goes,” he testified.”

Posted by: Kevin23 at November 2, 2006 11:24 AM
Comment #193094

Kevin2

You seem to think we can just act to impose prices, supply and demand. You want to tax oil profits and hold down prices and then assume they will still deliver the same amounts of oil.

We all get paid a certain amount and if we think it is worth it we do the work required. There are some jobs I would not do at all and some I would do for more money. The same goes for selling things. (I know this is too simple for you, but you cannot seem to see it). If you hire me to mow your lawn (and it is a small lawn) I may do it for $25. If you decide that I should only get I may not show up at all and I certainly will be looking for ways to avoid selling to you.

That is as simple supply and demand as I can get. It works for people selling and buying everything. The oil firms, with a lot of fixed investment, will respond slower than I would , but they will respond and we will all pay later.

Posted by: Jack at November 3, 2006 1:30 PM
Comment #193165

Jack-

A tax on windfall profits can be offset in many constructive ways. Ways that can even help to increase the efforts to research alternative sources of energy. You are the one who assumes too much when you say it definately decreases supply. And the tax rates are not nearly as high as in other nations, so even if it does effect supply, you can’t give me the doom and gloom prediction that they will just take their ball and go somewhere else. They desperately want to sell in the US market.

I guess the only thing I agree with you about is when you said: “The oil firms, with a lot of fixed investment, will respond slower than I would , but they will respond and we will all pay later.”

The key words there are “pay later”. That is exactly what I want to avoid if at all possible. After all, I care about my children, and their children, etc.

Posted by: Kevin23 at November 3, 2006 5:25 PM
Comment #193187

Kevin

I am in favor of tax. I think the locus of the tax should be the oil. You want to tax the firms, I guess to punish them. But do you think they will supply (or be able to supply) gas to you cheaper than they do now if you tax them? It may be economics 101, but that is not how things work.

BTW - you said you were into details. Please compare U.S. corporate tax rates with those of other developed countries. Ours are among the very highert in the world.

Posted by: Jack at November 3, 2006 6:44 PM
Comment #193194

Jack-

“BTW - you said you were into details. Please compare U.S. corporate tax rates with those of other developed countries. Ours are among the very highert in the world.”

Technically true, but very similar to every other G7 member. This is true of both marginal and statutory rates. Not sure what your point is, as a tax on windfall profits can be offset in constructive ways.

“You want to tax the firms, I guess to punish them”

Where did you get that? I would say to tax revenues related to oil extraction, refinement and distribution. Please stop assuming everything. It gets old really fast.

Posted by: Kevin23 at November 3, 2006 7:15 PM
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