The Oil Price Conspiracy

Most conspiracy theories are as nutty as the people who believe in them and I hate to be associated with those guys in any way, but I think that there is a glaring example that we all see but don’t notice. There is an active conspiracy to periodically lower oil prices.

The oil market is not free. Governments control most crude oil and often oligarchs and despots control these governments. They make decisions based more on political than economic factors. Market forces constrain the their choices and they cannot completely ignore the forces of supply in demand, but they have stumbled on a kind of a whipsaw strategy to earn higher profits than the market would pay them in the long run by LOWERING prices.

We have seen this happen twice already and I am afraid we will get a third dose of it within a couple of years. We foolishly welcome the cheap fuel and end up paying more in the long run. How does this work?

Somewhere around $60-70 a barrel (adjusted for inflation) alternatives become competitive with oil and the higher the price goes, the more investment flows into alternatives. We saw that happen in the early 1980s and we are see it happening now to an even greater extent. The problem with most alternatives is that there is a significant up front investment. This includes research and development costs as well as capital investment in things like solar panels that might take several years to pay off.

When energy prices are high, investments in solar, wind or hybrid vehicles pays off quickly. When energy prices are low, such investments pay off slowly or maybe not at all.

High energy prices provide a de-facto subsidy to alternative energy. Unstable energy prices make all energy investment uncertain.

Last year I attended a forestry convention where the theme was alternative energy from forestry residue (wood chips etc). The speakers were visionaries, talking about the great potential for alternative energies. Some of the guys around me looked skeptical. When I talked to them, it turned out that several had tried such things in the 1980s but lost their investments in the 1990s when the price of oil dropped through the floor. They recalled a similar, although smaller, such fluctuation in the middle of the 1970s. They were not going to jump on this bandwagon this time.

It is true that market forces cause the price of oil to fluctuate. As prices rise, there is more exploration and development which naturally brings the prices down. But manipulation by governments greatly exacerbates market cycles and makes them pernicious. People like Hugo Chavez, Ahmadinejad or Vladimir Putin are not friends of free market democracy and are not enthusiastic alternative energy sources that will cut into their profits and political power. They exercise their power to destabilize the energy market and make it a hostile environment for alternatives.

We are not helpless but our choices are limited. We cannot decree cheaper energy in the short run, but we can use market power against those who would keep us dependent on oil. The ironic way to lower energy prices and develop alternatives to oil in the long run is to make sure energy prices stay high in every short run.

We cannot allow brief episodes of low prices to periodically destroy progress in alternatives and conservation. This happened in the 1990s. We foolishly welcomed these low prices and thought that the good times would roll forever.

Let's scr*w the despots and declare independence from oil addiction. (Those who want to include American oil companies in this crowd, feel free to do so.) What we need to do is tax carbon and keep the price of oil up when it is coming down. It could be enacted in a simple fashion. Today the price of oil is high and we don’t think it will ever come down. Experience indicates this is mistaken. As oil prices come down, we should impose countervailing taxes to keep the drop from destroying our efforts to develop alternatives and invest in conservation strategies.

Twice the oil pushers have fooled us. Actually, I am sure there are more examples, but there are two big ones I can recall. Let’s not give the SOBs a third shot.

Posted by Jack at May 15, 2008 10:40 PM
Comments
Comment #252944

Jack, oil has a true supply and demand price which is calculable. The current price of gas and oil in the U.S. is significantly higher than that supply and demand ratio warrants. That difference should be addressed, especially when it is forcing more and more Americans into financial crisis. Independent truckers to mention just one group.

Otherwise, I agree, any conspiracy to lower the price of oil or gas below the supply and demand ratio price, should be broken. A far superior alternative is to devise conspiracies to raise real wages at least commensurately with cost of living increases.

But that would require both Republicans and Democrats to secure our borders, curtail immigration for wage depression purposes, and vastly invest in American schools and education as if our nation’s future depended upon it, which it does.

Posted by: David R. Remer at May 16, 2008 2:20 AM
Comment #252946

David

You know why we disagree so often on the details, even though we often agree on the broad brush? You just have a lot more confidence in the ability to rationally plan in complex systems. I think that oil today is higher than clean supply and demand would dictate, but I have no confidence that the “true” demand can be calculated.

It is not only unknown, it is unknowable, sort of like the Heisenberg uncertainty principle, since if ever you actually calculate it, the very fact that you have done a calculation changes expectations and demand. And since all prices are forward looking we cannot know the “true” price.

When I studied for my MBA, I had to take microeconomics. My professor was an academic with a PhD from Brown, who made us do all sort of price equations using calculus that I have completely forgotten. Later I had a follow up course taught by a retired executive. We asked about pricing and he said something like, “You see what you can get and adjust from there. The theoretical price is meaningless”

That second piece of advice served me well. In my quarter century since grad school, I have never - ever - had any reason to do a complicated cost equation, nor even seen one done.

The details of our market system are not knowable, but if you follow the general swing you don’t need to know them.

It is sort of like in the old Star Trek when Mr. Spock said, “impact in 5.4 seconds” What a useless piece of information. Spock seemed smart, but he could never make in the world of business.

Posted by: Jack at May 16, 2008 5:13 AM
Comment #252947

Jack-
Points off for the use of the Heisenberg uncertainty principle. The reality of that is something like the reality of pricing, but only metaphorically.

Heisenberg deals in the quantum world. The gist of it is that in order to detect a particle, you have to hit it with another particle. If we’re looking at an electron, and throwing a photon at it to determine where it is, and how fast it’s going, Heisenberg tells us we’ve got a bit of a problem.

If our interest is determining the position of a particle, then we need to use as small a wavelength as we can. But according to Quantum Mechanics, to get that small wavelength, you have to raise the energy of the radiation you’re using. By doing that, of course, you get the precise position at that moment, but the energy absorbed from that photon deflects the course of that particle, the way that a course of a billiard ball would be deflected by another fast moving ball.

If your interest is momentum, then, you can’t use higher wavelength light to measure things. However, your understanding of the position gets fuzzier and fuzzier. Look at the way light deflects around an edge, and you’ll see how this fuzziness can come about.

It’s a physical fact, and it’s not a variable relationship.

Price is different. However, there are certain ways of setting up a market where people are kept in ignorance of the real reason for the highness or lowness of the price, or where the level of those prices doesn’t reflect anything in the real world besides what kind of money some people want. I think during the course of this decade, prices in the energy markets have not been reflecting true supply and demand. I also think that some elements of the high prices can be traced to consolidation of different oil companies.

I think we’ve gotten substantial warning from the past few years as to the danger of our energy policy, as it is. I think selling high gas mileage cars becomes even easier when people realize how little the fuel costs over time when gas is cheaper, and if the government steps in and raises mileage requirements, I’m sure few will complain.

I’m not sure the price will fall too far, or that supply and demand will return things to how they once were, but current prices are probably exaggerated in a draconian way.

Posted by: Stephen Daugherty at May 16, 2008 9:19 AM
Comment #252948

Jack -

Certainly, there is a conspiracy to lower oil prices - George Bush is hobnobbing with the Saudi royal clan as we speak. But there is also a conspiracy to raise oil prices. Without OPEC, countries in the Persian Gulf and elsewhere would pump competitively and provide oil at lower prices. Or what if the oil producing companies let various companies compete, instead of nationalizing their petroleum sectors? That would introduce even more competition.

In the absence of externalities, competition is the most efficient arrangement possible. This is the First Fundamental Theorem of Welfare Economics.

However, the global oil market is anything but externality-free. There are myriad externalities of massive scale, including climate change, oil wars, and the depletion of world petroleum. We could debate forever what the ‘best’ level of output is.

That debate is not productive. Instead, we should take a clear-eyed view of the world, which I think you do, and emphasize pursuing stability and growth in a world of cartels, pollution, corruption, etc. Just because we can’t find the best possible allocation does not mean we cannot identify efficiency improvements.

Posted by: Chops at May 16, 2008 9:31 AM
Comment #252953

Stephen

I understand that Heisenberg analogy is just that … an analogy. It is however true that market prices reflect future expectations so any accepted estimate of future price will affect expectations and so change the prices. In that way the analogy is sound

You are exactly right about prices, but the only people “kept in ignorance” are those who refuse to understand. I don’t know why it comes as a surprise to anybody that prices are to a large extent arbitrary. As I said above, princes are always based on future expectations and so they are always guesses of what will be rather than what is or was. The final price of anything is the result of an explicit or implicit negotiation.

People not actually involved in business have developed various theories of price. Probably the most enduring was a labor theory of value, which held that the price of anything reflected the labor that went into it. People still misunderstand prices when they implicitly apply this rule. The past doesn’t matter to the price except to the extent that it anticipates the future. The price of anything is simply what one person will take for the product and what another will pay. And the person setting the price looks to the next transaction, not the past one. In other words, if you bought something for $1 and you anticipate the next unit will cost $10, that is what you charge.

Price contains a lot of information about expectations and predicts about the future. That is why it is such a powerful tool for allocation of resources. I am advocating that we (in this case the USG) influence those expectations in a consistent and constructive way.

Posted by: Jack at May 16, 2008 11:39 AM
Comment #252958


Jack: When claiming a conspiracy, you need to name the main characters, not just the supporting cast.

People like Dick Cheney (top secret energy policy), the Saudi royal family, the CEO of ExxonMobile and the speculators on Wall Street are neither friends of the consumer nor alternative energy sources.

Why did Bush go to the Saudi’s to ask for more supply? Why did he not go to his buddy Putin or one of the other evil empirists? Why are the Saudi’s demanding that we build more refining capacity?

Posted by: jlw at May 16, 2008 12:53 PM
Comment #252964

“Why did Bush go to the Saudi’s to ask for more supply? Why did he not go to his buddy Putin or one of the other evil empirists? Why are the Saudi’s demanding that we build more refining capacity?”
Posted by: jlw at May 16, 2008 12:53 PM

OK jlw, I’ll bite, what is your answer?

Posted by: Jim M at May 16, 2008 2:22 PM
Comment #252965

Jack, it is the managerial economics that permits one to detect and prosecute unfair trade practicers.

Thankfully, Republicans like you, who have no use for such microeconomics, are leaving the government’s positions of power. And with them goes the belief that as long as a few are making profit, all is well with the economy.

The true supply and demand price may never be precisely knowable, but, the difference between its estimate and the extant price in the market, can justify investigation, oversight, and if need be, regulation which puts people in prison for monopolistic and oligopolistic behavior.

That is why Republicans must leave government operations to someone else. They don’t believe in oversight, investigation, and regulation - it exposes too much of their behavior and impedes their achieving their ends, wealth and power deceptively and secretly acquired and maintained.

Abramoff is but one of a very large number of examples in the last 7 years. Getting from a lower level of wealth to a much higher level of wealth by circumventing the laws and order required for just means and ends to get employed, landed him in prison. And Tom DeLay out of office, thrown out by his own Republican constituents who, being good Americans believe in just law and transparent order in the actions of those presumably acting on our behalf.

Same principle applies to corporations spending millions to convince their potential customers that they are acting in the best interests of their consumers. The educated consumer will demand justice if they learn the corporation lied and cheated the customer to part the customer from their money - a measure of their work and effort in the service of others.

The difference between the supply/demand ratio price and the actual price is often the unjust and even criminal actions of the players involved. What Adam Smith would call actions driven without moral sentiments to guide their path.

A concept your comments apparently fail to appreciate. OPEC is anti-American and antithetical to fair and just enterprise principles. It is our duty and responsibility as just people to end OPEC’s oligopoly through the investment and creation of less costly, alternatives. Thankfully, Republicans are leaving power, to make room for those willing to make those investments.

Bush’s and Republican’s answer to high oil prices is to acquire more oil as jlw and others above indicate. ANWR and coastal shelf drilling efforts and Bush’s imploring the Saudis to open their spigots wider blatantly reveal these Republican’s vested interest in preserving their investment enriching crude as a basis for industry out to the very last marginal penny of profit, regardless of how many people are impoverished by the effort.

It is unjust. The Republican leadership in government today is unjust. Many, without even being aware of their injustice toward consumers and American workers. But, nonetheless, the reason they are losing elections even in their own Republican stronghold districts. The difference between intelligent Republican voters and current Republican leadership in government is sufficient cause for Republican leadership removal from control of government.

That’s another kind of economics, the economics of democratic elections.

Posted by: David R. Remer at May 16, 2008 2:56 PM
Comment #252986

“Bush’s imploring the Saudis to open their spigots”

In case anybody cares, the Saudis told Bush to go pound sand.

Having an economy that is entirely based on a resource controlled by folks that don’t like us now, and haven’t ever really liked us, is suicidal.
Add to this the ability of “day traders” to cause the price to vary wildly and we have a recipe for disaster.
Drilling for oil here in America isn’t an answer. The money spent on the exploration for oil alone could get us far down the road to development of a resource that isn’t limited by long term availability.
Sooner or later we are going to have to bite the bullet. Putting it off isn’t going to make the solution any less expensive, and short term solutions will not solve our long term problems.

Posted by: Rocky at May 16, 2008 7:51 PM
Comment #252988

Rocky says, “Having an economy that is entirely based on a resource controlled by folks that don’t like us now, and haven’t ever really liked us, is suicidal.” But, he also says using our own natural resources to prevent suicide is impractical.

Rocky, at just want point will we no longer contemplate suicide and are you sure it won’t happen while we wait? Obviously, you’re a risk-taker. 77% versus 19% of Repubs, Dems, and Inds disagree with you as you can find at: www.americansolutions.org

Posted by: Jim M at May 16, 2008 8:06 PM
Comment #252989

Jim,

How many years (and dollars) will it take to ship the parts to, and create the infrastructure to, pull the oil out of ANWAR, vs how many years of oil supply is in the ground there?

We had the opportunity to learn a lesson during the ’70s oil crisis when the price of oil was $15-$20 a barrel and everyone went nuts over gas rationing.
Oil hit $127 a barrel today. Where is the outrage?
Oh, and BTW, I am pretty sure OPEC isn’t charging $127 for a barrel of crude.

That 77% you speak of apparently doesn’t get it. The further the price of oil comes down, the less likely we will develop long term solutions to our energy problems.

We had our first wake up call in the ’70s, your 77% seem content to hit the snooze button again, and again, and again.

Posted by: Rocky at May 16, 2008 8:57 PM
Comment #252993

You know, the truth is, I find this talk of using gas prices as the goad to greater efficiency to be the worst kind of passive approaches to this problem. It doesn’t take a Rhodes Scholar to realize the benefits of greater efficiency when your current car requires fewer fill-ups, and less money to drive.

What we really have is not competition, but its lack, not innovation, but stagnation, not risk taking entrepreneurship, but the serving of old vested interests.

If you really look at the oil policy, if you really look at the automotive companies, there’s all too much support in place for the status quo, which is neither competitive nor forward looking. Business has been getting its way on things, and globalization’s really just an excuse to externalize the problems of continuing in what’s rapidly becoming a dangerously obsolescent technological path.

Posted by: Stephen Daugherty at May 16, 2008 10:39 PM
Comment #252994

Stephen,

Corporate America is too easy a target.

It is we, the American citizens, that are too lazy to demand that changes be made. Change is painful, it doesn’t happen overnight, and we don’t want to face that pain.

The 77% Jim mentions are like junkies that will promise to quit tomorrow, knowing full well that they are destroying themselves, in order to just get that fix to make them feel better today.

We are only the little people singularly.

Posted by: Rocky at May 16, 2008 11:05 PM
Comment #252995

David

There is a fundamental problem for Republicans (or actually free market conservatives) working in government. Liberals believe government intrusion is a good thing. I believe it is sometimes a necessary thing, but rarely an unalloyed good. That means I am less likely to want government action, which will often NOT produce the desired results.

Re the “economics of democratic elections” - Much government “action” is just movement, heat w/o light, and often useless or even pernicious. But it looks good on the evening news. Restraint often the best course, but is very difficult and not rewarded by the electorate. One of my friends was in Central America when a hurricane struck. Then VP wife Tipper Gore came down to do the politics of being seen to care. In one place where she went they had already cleaned up most of the rubble. They had to put down a pile of dirt so that she could get the photo op of throwing a shovel full of dirt for the cameras. The economics of democratic elections dictated that sort of things was good.

Re Abramoff – that was a crime. People were punished during a time of Republican control of congress and the presidency. Let’s also recall the ENRON grew into a problem during a Democratic administration and then was uncovered and punished soon after a Republican took office.

Re prices, supply and demand – how about this simple question? If you could just set the price for your home, what do you think your house worth? Do you think you could get someone to pay you that price? I just bought a tract of forest land. I ended up paying 12% less than seller thought it was worth and less than a similar track would have sold for last year. Was that the “true” price? What about people who paid the other amount last year? If I sell it next year, how much should I charge? All these things are figured out by negotiation. The math is great fun for those who like it, but it at best is only the guide to the first offer.

Re imploring the Saudi to produce more oil – I don’t think it is a good thing to try to lower the prices. But in this case Bush is doing it for exactly those economics of democratic election reasons you are talking about. The economics of democratic elections is one of the biggest reasons we cannot get off the oil addiction. “The people” like to talk about alternatives, but they consistently demand and vote for cheap oil.

Stephen

It doesn’t take a Rhodes scholar to look at history, both recent and decade old examples, that the price directly and rapidly affects the demand for oil. It quickly raises demand for more efficient cars - happened last year. It increases investment in alternatives. Nothing else has such a great effect or works so rapidly. The reason big government folks are not enthusiastic about it is that it provides few opportunities for graft or for politicians to take credit.

David and Stephen

The theories can tell you lots of things. If you look at the results with your own eyes, you will see something else.

Please explain this ONE things In 2006 the U.S. emitted LESS CO2 than the year before. If you don’t think price had anything to do with this, what Bush policy made this happen. This was during a time of economic growth of nearly 3%. That usually means more CO2. This sort of reduction never happened, not once, during the Clinton times and the EU never achieved it.

Rocky

Yes – we have met the enemy and he is us. The corporations are supplying what the people want and the politicians are pandering to the people’s complaints. The system is working as expected. We need to change the expectation of price and then the system will work in a way that will help get us off the oil addiction.

Posted by: Jack at May 16, 2008 11:34 PM
Comment #252997

So we get this here carbon tax that ya want in order to keep the price of gas in the stratosphear. Do you really trust that bunch of tax and spend politicians up there in DC to lower or do away with the tax when oil prices go back up? If so your a hell of a lot more trusting than I am.
Yeah, yeah, I know. It’ll be written into the tax law that it has to go down when prices go back up. Big deal. That current bunch of clowns up there in DC are ignoring the Constitution and doing as they please. What makes ya think they’ll follow a law they pass?
I’m all for finding alternative fuel sources across the board. But taxes that keep gas prices in the stratosphere sure as the sun rises in the East aint the way to get them.

Posted by: Ron Brown at May 17, 2008 12:04 AM
Comment #253000

The benefits of an infrastructure that is localized and self sustaining is of obvious national and defensive interest. The benefits of cheap oil are short term and unsustainable.

Jack, I actually agree with your post for a change.

I think it is best you stay away from physics analogies, much as you avoid calculus, however. That you don’t understand something, doesn’t make it less valuable or wrong.

Producing a solar/wind/renewable energy system complex that could have most household’s self sustaining, water conserving, and pollution reducing is something of dire national interest. We build planes and tanks because of supporting a national interest in defense. There should be the same kind of focus on independant energy. A self sustaining house is much less vulnerable to attack as well. You can’t easily knock out a power grid that is localized to each house.

Sustaining high oil, coal, and natural gas prices and using tax code to bias toward a national energy idependence policy would make sense.

Posted by: googlumpus at May 17, 2008 12:18 AM
Comment #253003

googlumpus

I used to understand calculus. Actually got “A” in those course. I just never liked it and have since forgotten. What I never got was the usefulness of the cost and pricing equations. This was a practical, not a math problem. There are many things you can do with math that do not really work when applied to a real world situation.

I don’t know if determining exact supply and demand is possible in theory. I do know that nobody has ever figured out how to do it in practice and that makes me believe it is probably unknowable for all practical purposes.

re the physics analogy - I understand that economics & sociology are not sciences and that the analogy with a true science is not perfect. I was just trying to show that even in the sciences, some things are unknowable. Certainly this goes double for the almost-sciences of human endeavour.

Ron Brown

Actually I do NOT trust the taxman to give the money back, but I feel we have to take that risk to avoid a greater risk of oil dependence.

Posted by: Jack at May 17, 2008 1:36 AM
Comment #253007

Jack said: “Liberals believe government intrusion is a good thing.”

Well, that is a very general statement, and as such, very inaccurate. A perfect example was the speech given this week to the nation’s realtors by Rep. Barney Franks, a liberal if there ever was one. But, he is a liberal who has learned much from watching Republicans at the helm, incorporating their practical policy strengths.

Franks, was discussing the current legislation to provide assistance in resolving the housing value and housing credit slump we are in. His first and foremost priorities in crafting the legislation in committee were to:

1) prevent the slump from dragging other sectors of the economy down further, and I think you would agree it is a viable federal role to mitigate recessions and avoid depressions, where possible.

2) Toward the goal of 1 above, provide federal assistance to homeowners facing default as a result of adjustable rate mortgages, who actually own only 1 home and reside in it. In other words, no federal assistance for speculators, two home owners, and professional house flippers.

3) Make the solution self ending by reducing assistance as the foreclosure rate for those discussed in 2) above, drops to Spring 2007 levels. Making the legislation’s direct assistance to homeowners very short term.

and 4) enacting greater oversight over the non-bank lending industry, bringing the transparency and asset to loan ratio requirements of banks to the other non-bank/credit union lending sectors.

The legislation covers more than these, but, these are the primary pillars of the legislation.

My point is not to laud this particular legislation, but, to point out that there is far less difference between intelligent and experienced Republicans and Democrats in terms of pragmatic solutions, than most folks perceive.

The problem is not that Republicans and Democrats sitting in the legislative Committee rooms are dumb, inexperienced, and undereducated in the matters their particular committee oversees (though some are). The problems arise when they attempt to gain a political edge over their rivals USING legislation crafting as the instrument of that rivalry and political competition.

This is what gives such power to Obama’s and McCain’s bi-partisan rhetoric on the campaign trail. Voter’s have a general awareness that the partisanship is a big part of the culprit in our federal government, failing to produce adequate and effective legislation that does not overreach the problem’s solution, creating more problems (like Republican’s insistence that the tax cuts for the wealthy to stimulate the economy in 2001, 2002 be made permanent).

There is a stark reality as a consequence. Anytime there is a majority party in control of government willing and capable of solving more problems than are created during their tenure, that party will remain the dominant party in federal government, generally speaking, other things being equal.

Republicans had an extraordinary opportunity prior to Nov. 2006 to avail themselves of the benefits of this reality. Regrettably, with GW Bush as their Party’s leader and the incredible number of problems that outnumbered solutions as a result, the GOP, in following Bush lockstep destroyed their opportunity to be seen as an effective governing majority Party. The ‘our way or the highway’ approach toward Democrats and other critics, resulted in their failing to produce legislation and policy that in fact, was the best of both parties. Consequently, Republican measures ended up short of the mark and creating more problems than they solved (removing Saddam Hussein for example).

Democrats have not been asleep these last 13 years. They have in fact, quietly and persistently achieved something quite remarkable that will insure their majority party status for many, many years to come. They brought a considerable number of conservatives into their Party and into Congress as Democrats, insuring that they do not have to rely upon obstructionist minority Party Republicans to craft optimal legislation.

With the likes of Jim Webb, Travis Childers, and Ben Nelson in the current Democratic Party, the Democratic Party of 1992 hell bent on liberal social policy extremes, no longer exists. Which is going to leave Republicans from this point forward charging at liberal windmills.

Republicans fell victim to self-fulfilling prophecy, that they could do whatever they wanted as a majority party, and this long pent up dream of power played out in just such a manner, becoming increasingly obvious to even centrist Republicans.

And the nail in the GOP’s coffin was in believing their own rhetoric about Democrats as out of touch, incompetent, and unable to connect with the electorate which had shifted more conservative in the late ’80s and ‘90’s. Democrats have been refashioning their Big Tent Party giving much greater authority in Committees to Blue Dog Democrats, and quietly promoting the elections of conservatives in House and State races, building a base of credibility for their Party again in a whole host of conservative leaning districts.

The simple fact is, going forward under Democratic Party majority rule, Democrats are going deliver a better product overall than Republicans were able to deliver without a liberal voice within their Party. And GOP predictions of Democrats taxing and spending the middle class out of house and jobs, will be proven wrong and sour grapes partisan based.

Don’t get me wrong, there is nothing approaching perfection about the Democratic Party, and they are going to create problems Republicans might not have (see my newest article in the Center column). But, on balance, and relatively speaking, this new Democratic Party with new respect for proven conservative principles, will command more respect from the electorate than the GOP has these last 4 years. And the Democratic Blue Dogs will give new meaning to “compassionate conservatism” that actually works for the middle class, and reverses the wealth gap that became the bane of GOP rule in the eyes of working non-wealthy Americans.

Posted by: David R. Remer at May 17, 2008 6:14 AM
Comment #253008

Ron Brown said to Jack: “Do you really trust that bunch of tax and spend politicians up there in DC to lower or do away with the tax when oil prices go back up? If so your a hell of a lot more trusting than I am.”

Ron, see my reply to Jack above. There are real world reasons the electorate does trust Democrats more now than Republicans to chart the future course of federal government policies and legislation.

Posted by: David R. Remer at May 17, 2008 6:34 AM
Comment #253016

David

Not all Democrats are liberals and not all liberals are Democrats.

What defines modern liberalism in the U.S. is a desire for government solutions to social and economic problems.

On this blog it is very clear. Whenever there is a problem, the blue side proposes legislation. The red side (mostly me sometimes) is willing just to ride it out with minimum interference.

The Franks thing looks reasonable, except it is dishonest. Interest rates have come down again, so home owners cannot be in trouble only because of interest rates. Unless you are talking about someone who got some kind of teaser rate and then it went to a normal one. I am not particularly in favor of bailing out someone who wants to keep a 3% interest rate for 30 years. Wouldn’t we all?

Returning to big government - when Bill Clinton said the era of big government was over, I was happy. I do not attack him on the economy because he was moderate. Obama has rejected most of the things that made Clinton successful, such as free trade, welfare reform AND smaller government. Where are Obama’s cuts?

I suppose that in the long run, if Dems dominate very long, a conservative Dem faction will come to contend with the more liberal one, maybe dump Pelosi and Reid and get more centrists in power.

Frankly, I don’t care what people call themsleves. If they are in favor of market forces and limited government, that is okay with me. The DLC was a good thing.

Posted by: Jack at May 17, 2008 12:38 PM
Comment #253017

Here is an interesting article directly on topic. It shows that those PR measures like turning off the lights during one hour don’t work well. What counts is structure changes, such as higher prices. It provides a few more good arguments.

Posted by: Jack at May 17, 2008 12:45 PM
Comment #253032

Jack said: “Interest rates have come down again, so home owners cannot be in trouble only because of interest rates.”

Adjustable rate mortgages go up, Jack even when fixed rates are going down. You apparently do not understand the root of the problem and reason 2 million foreclosures are possible this year alone. I think your comments would benefit from a cursory research of the issue.

Posted by: David R. Remer at May 17, 2008 6:45 PM
Comment #253033

Jack erroneously said: “Obama has rejected most of the things that made Clinton successful, such as free trade, welfare reform AND smaller government.”

Obama is for FAIR trade on more level playing fields. “Free trade” was free far more for our trading partners and our international corporations than for American workers and consumers. Its blind spot Republicans just can’t seem to glimpse in their failed Free Trade construction.

You will have to provide evidence of Obama’s intent to reverse welfare reforms of the 1990’s. I have not seen any evidence of this and am certainly not going to take your word for it.

As for smaller government, I don’t see Obama focusing on the size of government at all, either bigger or smaller. He is focusing on far more effective and efficient government toward the purposes which government exists to address.

Size of government is and always was a political ploy issue, and trick played upon the public. It had a nice ring to it with the implication that smaller government would lower taxes. But, we all now know, that contrary to their tricksterism, Republicans were all about growing government in enormous and extremely costly ways.

Democrats at least seek to pay as they go instead of using our children’s futures as credit cards for our own choices and unaffordable choices. I have no doubt government will grow in some areas and shrink in others under Democrats. But, I fail to see how Democrats, with their intent to reform SS and Medicare and lower health care costs at the macro level, their intent to pay as we go for what we spend, and their intent to abandon elective and preemptive war doctrine of Republicans, could possibly grow government at the rate that Republicans achieved.

Posted by: David R. Remer at May 17, 2008 6:57 PM
Comment #253039

Jack,

To quote a guest on Chris Matthews, “stop digging” regarding the Heisenberg principle.

Posted by: googlumpugus at May 17, 2008 9:35 PM
Comment #253040

“What defines modern liberalism in the U.S. is a desire for government solutions to social and economic problems.”

With this kind of logic, one must assume what defines Conservatism is greed, special interest, and racism.

Since you clearly have no idea what liberalism is, I think you should best stick to defining conservatism.

Posted by: googlumpugus at May 17, 2008 9:39 PM
Comment #253045

Jack
We might have to take some risk to avoid further dependence on foreign oil, and oil in general. But I prefer not to trust the politicians with another tax. With their proven record of not ever seeing a tax or tax increase they don’t like or a tax reduction they do like I’m not for the idea of giving them another tax so they can waste more of the tax payers hard earned money.


David
While I agree that there’s no reason to trust the Democrats anymore than the Republicans I was actually referring to both parties in my comments to Jack.
I don’t trust either one as far as I can throw my house. And I sure aint crazy about the idea of trusting them to act responsibly with another tax.

Posted by: Ron Brown at May 17, 2008 11:46 PM
Comment #253047

googlumpus

Of course, consevatism has nothing to do with greed or racism.

But tell me please. Give me five characteristics of liberalism in America today. Please do not give the dictionary definition of liberal, which no longer applies.

Maybe let’s not label it. I believe that government is only one part - and not always the key part - of American society. Government is a tool that can be used to set goals and provide the rule of law, but it is not very good at managing the economy or relationships among its citizens (except in making a consistent rule of law). Generally, people do best when they rely on themselves, firms or voluntary organizations to provide the things they want in life.

Is that liberal? If so, why do we disagree?

Re Heisenberg - I would stop digging when you understand. Maybe the fault lies with your understanding of markets and not with mine of physics.


David

Fair trade means what the person using the terms wants it to mean. That is why it is different from free trade. Clinton pushed free trade. Obama doesn’t.

Re welfare reform, Obama’s who rhetoric is that the poor have been mistreated by the system. Do you think he plans to let the status quo continue to operate and what does that mean for the size of government?

Re government size, paygo is a trick. It doesn’t include entitlements, which continue to grow automatically. So it ratchets up the size of government.


Re adjustable mortgages. They are tied to a particular index. I have a home equity line of credit that is adjustable. In 2005, the rate was 4.99%. It went up to 7.2% last year. Now it is back down to around 5%. An adjustable mortage can go up or go down. If you have an adjustable mortgage that only goes up, I suggest you get a new one.

Some people got an especially low introductory rate. They should not have expected it to stay so low. If a person is making a big investment like a house, we need to expect them to have at least a minimal understanding of what they are doing. And I don’t want to reward people for being or pretending to be stupid and greedy.

Posted by: Jack at May 18, 2008 12:35 AM
Comment #255069


Use less fuel. Gasoline prices will rise. Politicans will politic and conspiracy theorist will politic and sin too.

Let our pocket books motivate us. If your feel the pinch now, start changing your driving and home heating habits. The economics are real.

Give the republican conspiracy room to breathe. Then Give the democrats gas tax manipulation the same space. If there is a nickel’s difference, I do not see it.

Posted by: Art Jones at June 9, 2008 10:29 PM
Comment #256396

Dear Sirs,

I worked in R&D in Chemical Engineering in the field of petroleum technology and I am very surprised about the sudden increase in oil prices. The reason for my surprise comes from the fact that tar sands technology for developing heavy crude oil was projected to be cost effective only when the crude oil price exceeded $30/barrel. Now the crude oil prices exceeded $130/barrel and we didn’t see much of an increase in the production of crude oil from tar sands. One would say, oh this is because the tar sands are limited in quantity, and I will say, no there are only 3 trillion barrels of them in Canada and to a lesser extent in the US. Then if the prices of crude oils were really market driven, one would see a dramatic increase in investments to extract tar sands from the sure reserves in Canada and to a lesser extent in Utah. However, surprise, surprise, nothing of this happened. The answer is quite simple. Yes there are people and interests that control the flow of the crude oil and its investment. Most of the research and development of renewable and unconventional crude oil alternatives are and will be controlled by the oil conglomerates. The Department of Energy even gave tax dollars in the form of funds to these very companies to develop new and alternative energy sources and they spent the money and kept the findings for themselves. I was involved in a research project and was able to find a new process by which we can use environmentally benign solvent extraction of tar sands instead of the less effective and environmentally polluting hot water method. My research proved the ability to extract the tar sands and recycle the solvent completely by the use of compressed carbon dioxide which separates the extracted material from the solvent and recovers the solvent completely to be used for further extractions in a continuous process. The carbon dioxide would be recycled and recompressed for the next batch and so on. A complete energy consumption and capital investment study was made (in 2003) and the process proved to be economically feasible even when the barrel of crude was $30 or higher. The process is patented and the University owns the right to the patent, when granted. Now, this is technology that needs investment to be implemented, no petroleum company is willing to take this technology into action because they really do not want to increase the production of crude oil and decrease the prices. The question is who then would do it? I would say, this is the turn for the government to take it’s role and invest in this national security technology. It is a matter of survival and national security to produce oil from these this new and proven technology. If we wait for the oil companies to do it, they have no interest in doing it now, or ever.

If anyone can tell me how can my new technology be promoted for the public interest, I would more than happy to help.

Posted by: Nael Zaki at June 22, 2008 5:42 PM
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