29 April 2008

Congress Needs To Show Us They Care


By congress' own actions, I would say that they agree with the findings of the Economic Policy Institute, in their assessment is that "Higher gas prices .. incentivize conserving". In other words, they seem to believe that higher Gas prices are "good" for the country, because the force people to conserve and use less gas. The sad part is that by my conversations with people in Coffee shops and people I meet in stores, many American's, or at least Rich American's (I live in one of the wealthiest areas in the country), feel the same way. The biggest problem with this line of thinking is that, as the Economic Policy Institute so astutely observed, it affects the bottom half of income earners the hardest; not to mention the devastating effects these policies have on the world's poor. Gas and corn prices have gone up at least 50% and 100% respectively, since Congress was taken over by the Democrats almost 2 years ago. In other words, we're building this brave new "Green World", on the backs of the ones who can afford it the least. Everyone talks about about oil as if it's passe technology, like we don't need it anymore. We should just move on. NewsFlash! The world still runs on oil, and we still don't have any alternative that is as economically viable as oil.
This morning President Bush expounded on Congress to do something to increase domestic drilling to help the economy. His comments were dismissed mostly because Congress, despite the high prices, seems to feel that we need to focus more on Green Fuels. Unfortunately, they know that Green Fuels can't compete with cheap gas and so they are reluctant to act, even if it's what the American People want. Popular Mechanics did a great story last year, where they show that Green Fuels have a long way to go be competitive with Gas, this is still true even with the recent run up in prices, especially corn based ethanol, which is about 50% higher than last year, due to increases in oil and corn.
On January 28th 1981, Reagan, faced with gas at 3X what it was when Carter stepped into office, decided that the government tried and failed in their attempts at regulating the Oil and Gas business. He decided to let the free markets dictate the price. In the book Envy of the World: A History of the US Economy and Big Business by Timothy, J. Botti, on page 392, the author talks about how, "Reagan dropped all price controls on the industry for the first time since 1971. In addition, he cut Carter's windfall profits tax of 30% on new oil exploration in half". Later, in 1988, after the ensuing Oil Glut, Reagan was able to eliminate the tax entirely, since the Oil industry was just barely making a profit. The U.S. consumer benefited with lower gas prices for the next 20 years! This my friends is what is called Leadership, something sorely needed by our so called leaders today. The reason it worked was simple, unshackled by excessive taxation and regulation, the industry found so much oil, that our reserves during the 80's increased by over 29%. To top it off, in order to compete with the U.S. massive oil output, OPEC, ended up cutting prices to the point to where Oil was as low as $8.00 a barrel!
Instead of following the example of what worked, set by Reagan, here's what congress is doing:
  1. Subsidizing millionaire farmers.
  2. Restricting Oil Exploration and production.
  3. Ignoring Maryland's call to restart the 'Synthetic Fuels Corporation'.
  4. Focusing on Corn based Ethanol, which only benefits Agribusiness.
How did we get here? After the Oil collapse of 1985, Oil companies started to consolidate the industry through mergers and acquisitions to become more profitable, and in many cases to stem huge losses. At the same time, OPEC seeing a threat from a more energy independent U.S. Started cutting prices to the point to where it costs less for us to buy our oil, than to go out, try to find it, extract it and so forth. The U.S. not only had excess capacity of Oil, we had a HUGE excess gas capacity as well. If gas prices had stayed high, they could still make money, but by the end of 1985, gas prices bottomed out at about .89 cents a gallon, too low for them to make any money. Through merger's acquisitions (and explosions) we cut the number of gas refineries down do about half today of what we had during the Reagan years, but unfortunately, congress used the Exxon Valdez spill as an excuse to once again, shower the industry with regulations, most of which had nothing to do with Shipping, and environmental spills, and more to do with protecting the industry from newcomers getting into the business. This had the effect of allowing the industry to continue to consolidate, and cut costs, while at the same time preventing any newcomers installing new refineries or oil drilling to compete with the existing business. In other industries, such as Airlines, smaller carriers like Spirit or Jet Blue enter the market to provide low cost choices, where Mergers caused those low cost choices to disappear, not so in the Oil industry. The past few years has seen the merger of Exxon and Mobile, Chevron and Texaco, British Petroleum and Amoco. Where are the new startups to challenge these guys?

Of course, the other White Elephant in the room is Global Warming. Too many of congress' decisions are based upon the whole "Carbon Footprint" theory, that somehow we are causing Global Warming. Before you dismiss me outright, let's keep in mind that the Southern Hemisphere has been cooling about as much as the northern hemisphere has been warming over the last decade or so. Also, 3 of the 5 or 6 hottest days on record since 1890, happened over 70 years ago. There's absolutely no proof that we are outside of normal variations. In addition, the tales of the oceans rising, it turns out were falsified. Even a British judge has said that Gore's movie, needed to be shown with Guidance notes to point out the "Political Indoctrination" and "Factual Errors".

But here we are betting our entire future that this is all correct, when in reality it's nothing more than the latest political fad du jour. A hundred years from now, when the next Glaciation Cycle starts, historians will be saying, "What the hell were those people thinking? Didn't they have the technology to study history back then?" I'll get into that in another post.
Back to the subject at hand, if congress really cares about us, here's what they need to do to lower prices on Gas.
  1. Realizing the Industry is cleaner than it's ever been, streamline the EPA process required to get a new site up and running.
  2. Reform the EPA to actually allow more Gasoline Refineries to be built in the U.S. (without it costing Billions to do)
  3. Restart the Synthetic Fuels Corporation.
  4. Offer tax breaks to companies to switch Power Generation from Oil to Coal.
  5. Mandate higher fuel efficiency for vehicles.
  6. Mandate all new homes be built with Solar Hot Water Heaters at the bare minimum.
  7. Mandate higher energy efficiency in Homes and appliances.
  8. Mandate to all electric utilities that they MUST buy any available electricity at the same cost, that it costs them to generate that electricity (this way if someone builds a Garbage powered generator, he can sell the electricity back to the utility.
If these policies are announced on the SAME DAY that they announce a stop in Emergency Reserve purchases until the end of the summer driving season, AND a stop to interest rate cuts, believe it would be enough to burst the current Oil bubble that is powering oil up even higher every day.

So there you have it congress, now show us you care!

Recap of references used in this Story on Diigo.

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