The Politics and Reality of Energy in 2008
The cost of energy is a big concern on people's minds and naturally figures heavily in the electoral rhetoric heading into November and it will only get heavier. But, of course, that's about all it will do. The blunt reality of it all is that nothing either McCain or Obama have in mind will lower energy costs in the short term....and pretty much for the longer term. This is of course is not really a shocking revelation to many but it does put on damper on the hopeful and uplifting feeling many will get when listening to their preferred candidate speak on the matter.
Via The Economist and earlier via Mark Thoma, we have an interview with MIT professor Robert Pindyck assessing the energy policies of the candidates and energy realities binding them to real life.
To those with some memories, this territory has been covered in some previous diaries. An optimistic look at emerging solutions vs. empty chatter. A more glum assessment. See also here.
Pindyck with the unsexy truth:
Neither of the candidate's plans would have any impact [on short term energy costs]. The one exception would be McCain's proposal to eliminate tariffs on the importation of Brazilian ethanol. It would immediately reduce the cost of ethanol...Most of the proposals are political and they involve subsidies to alternative energy sources. A lot of those subsidies are just ways of providing pork for different groups...
Look, what are going to be needed ultimately is a tax on carbon and a tax on gasoline -- a large one. Another way to have a tax on carbon is to have a cap-and-trade system so you only allow a certain amount of carbon dioxide to be emitted. That will raise the cost of carbon. A gasoline tax would greatly reduce gasoline use. It would create the incentives we need for other energy sources, including conservation.
No candidate is willing to get up and say, "We need a to have a high tax on gasoline." In fact, McCain wants to suspend the federal tax on gasoline for the summer and Obama didn't. Nobody is going to say, "We want to make sure we have a tax in place so gasoline prices are always going to be high." That encourages people to drive smaller cars and to conserve and that brings about investments in new technology. When people know that gas prices and fuel prices will stay high because of taxes, it means they have incentive to develop alternative energy supplies.
IOW, they cannot show the way. All they can do is block or obstruct one way knowing people will need to find another. Who's ready to do that? Well, neither in my opinion.
Yet another reason to just think about foreign policy and keep low to no expectations on most of the rest.
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References -
Oil prices have dropped off their highs but there has been no big buildup in inventories despite a large drop in US consumption.
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)Or is OPEC cutting back accordingly? I thought many of those countries were living paycheck-to-paycheck, to the point where significant drops in oil income could quickly hurt their economies.
--In the land of the blind, the one-eyed man is king.
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| parent )but OPEC claims to have been increasing production not cutting back. I know that some other producers have been having production problems which may be big enough to offset any OPEC increases. China's consumption has been rising rapidly as well so maybe they are sucking up any reduction in usa from the US.
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| parent )when oil was $50 a barrel. At $115, not so much.
--I blame it all on the Internet
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| parent )- Login or register to post comments
)Enron is no more, so there goes the motivation (even Wendy Gramm's) to keep the Enron loophole. Olbermann's one-sided "analysis" doesn't reflect that, and he gives short shrift to the fact that McCain opposed the farm bill because it maintains ethanol subsidies and the Brazilian ethanol tariff, and because of its bloated spending.
Since John saw fit to cite The Economist, here's one on oil futures.
--"I want America to know that I'm, like, totally ready to lead." -- Paris Hilton
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| parent )Well said, John.
More info, FYI:
Analysis by the Energy Information Administration (of Dept. of Energy) on “Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf”
http://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html
(OCS = Outer Continental Shelf)
Excerpt, with bolding mine:
And by the way, if McCain continues to base his appeal on exploitation of ignorance on this issue (and on tax cuts), he may convince me to stay home in November rather than vote for him. Not only might I be simply too embarrassed to vote for him, but I don't like politicians and Americans generally to learn the lesson that phoniness and deception pay off big time (that's why I said early on in the primary campaign that I wouldn't even consider the ultimate phony, Flip Romney).
In fairness to McCain, though, he is the one being honest and responsible and putting country before politics regarding the sugar ethanol tariff (and corn ethanol subsidies), while Obama has done the opposite. Great Tom Friedman column on this topic http://select.nytimes.com/2006/09/20/opinion/20friedman.html
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)cause you to stay home in November?
Just curious...
--Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
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| parent )Sorry Brendan, missed your question this morning. I've been asked that before by folks who, like you, know how much I can't stand Romney and wouldn't want politicians and other Americans (and kids) to learn the lesson that unlimited, shamelss phoniness is the key to success.
The answer is "no". I'll already have to hold my nose to vote (as I always have), but if I had another nose, I'd hold that, too if Romney were on the ticket. Romney does bring a lot of strengths (which I pointed out in the past, even while trashing the guy), and winning the vice presidency won't send quite as strong a message re: the phoniness payoff as would his winning the presidency.
As a side-note, McCain is working pretty hard on his own to convince me to stay home in November. On top of his stupid and harmful tax cut plans and pandering to the Christian right on social issues, he is basing his campaign largely on exploitation voter ignorance (e.g., off-shore drilling; tax cuts), and I have to consider what lessons would be learned from a McCain victory on that basis (as well as selfishly consider my own embarrassment). Here's my dilemma http://theforvm.org/diary/kierkegaard/the-best-man#comment-110095
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| parent )geologist,yes
economist, well it wouldn't have been my first pick, although Pindyck has written extensively on the subject.
I wonder what Pindyck's opinion of nuclear energy is?
I believe he has written an article on it (nukes) as well as article(s) on the energy shortages in the late 70s. If I remember correctly, he also co-wrote an article on systematic risk, I wasn't impressed.
Next time, can we get someone from Texas A&M or the Colorado School of Mines to keep some balance.
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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)At least Obama isn't prepared to lie to the public in order to get elected, unlike the McCain camp and the GOP. That's a good start and at least there's some prospect that if he's elected without having resorted to lying, an Obama administration won't feel the need to lie in order to stay in office. Such a paradigm shift is absolutely essential if we are to establish the relationship of trust between voters and their elected politicians that any government led shift in energy policy toward alternate sources and away from fossil fuels will require.
--GW Bush, leading contender for worst President ever.
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)Obama didn't lie about that either. McMaverick lied like a rug about it.
--But she's a queen, and such are queens
that your laughter is sucked in their brains. -D. Bowie
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| parent )nt
--"I want America to know that I'm, like, totally ready to lead." -- Paris Hilton
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| parent )nt
--But she's a queen, and such are queens
that your laughter is sucked in their brains. -D. Bowie
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| parent )would have any significant impact on gasoline prices. To tell you the truth I'm not sure that McCain was lying about this. He may just be stupid enough to believe it so he wasn't lying even though he was incorrect. When Hillary was pushing the idea I think she was definitely lying though.
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| parent )I agree with all of the above (except I don't think McCain is stupid; he may just be ignorant on the matter. Having said that, he's got advisors who know better, so I think it's more likely that he was lying).
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| parent )The real problems are the speculative market driving up prices combined with a lack of refineries. If the ordinary American realized how narrowly we are skirting disaster via our lack of refinery capability, they'd be completely shocked.
McCain is just plain crazy talking about more drilling. It's idiotic: what he's not saying is that we need more refineries, but a goddamn refinery doesn't make as nice a photo-op as a helicopter ride to a drill rig.
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| parent )wouldn't we see cheap crude and expensive refined products?
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| parent )More gasoline and fuel oil is in private reserves than the strategic reserves. The speculation part dictates the bench price per barrel, NYMEX operates crack spreads against AP options, gasoline futures, heating oil futures, there are loads of ways to trade that market. Very few of those contracts are for delivery, the ones that are traded on separate spot markets, Morgan Stanley, Goldman Sachs and until it went bust, Bear Stearns ran huge spot markets. ICE and Dubai operate the same way on several different contracts, Brent and West Texas.
So essentially what we have is an couple of Enrons here. There's a fair bit of markup on refining, but that's mostly because refining uses so much energy, all by itself. But we haven't built a new refinery in decades. It's essentially the same gasoline products in every station, it's all made its way up in the pipelines. Oh, they do reformulate it a bit, at the terminus, but it's same-same. See, Enron used to be a two-bit utility, ran a few peaker plants, then it started running a market. Several markets in fact.
Well, Enron went kaput. Oh the horror of it all. Much palaver, Bush couldn't run away from Kenny Boy fast enough, it's a miracle Bush and Phil Gramm and his weasel wife weren't tarred and feathered, but America is a forgiving nation, if not terribly bright. And most of America wouldn't know a put from a call, much less how to circumvent US insider trading regulations by trading on foreign markets. See, if they traded NYMEX, they'd have to do disclosure paperwork. On ICE they don't. So ICE is a really dirty game where only the big boys play, and if ICE and Dubai were playing a square game, Brent and WTI would be trading at half their current bench price.
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| parent )If you think that oil speculation is a big factor in gasoline prices and that the low dollar and that true global market supply & demand driving up crude oil prices are not, you just don't know what you're talking about.
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| parent )and written whole trading systems, including parts of this bad boy, but I don't know what I'm talking about. M-hm. All that artificial intelligence work I do, all that games theory and math I took, just can't stand up to your assertions about True Global Market Supply. Listen here, nobody knows how much oil and gas is out there. Iraq just quadrupled its existing reserves since the invasion: we've found huge gas deposits under Anbar Province. Oddly, just about that time, the Sunnis decided they didn't want to fight us any more, and stopped their quarreling over oil revenues. Now everybody has oil and gas, Sunni, Shiites and Kurds.
Here's a clue. Markets can be cornered, wise guy: when you've got them by the short and curlies, their hearts and minds are sure to follow. With an ICE terminal, you can trade Dubai and London and nobody's the wiser in the good old US of A.
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| parent )Hunt Brothers and silver, and how did that work out?
But you are certainly correct about energy, no one knows how much is out there which makes cornering a "major" mkt very difficult.
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )and paid something like 370 million dollars in fines to settle propane price fixing charges among other things.
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| parent )and propane is a "major" commodity, well who knew!
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )the US uses about $10 billion a year of propane. That compares to about $11 billion a year for aluminum and $26 billion a year for copper. So yeah, that would make it a major commodity.
--I blame it all on the Internet
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| parent )nt
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )That's why we have antitrust and laws against price fixing. Who knew such things were possible? Apparently you didn't. Bunkie Hunt got cornered by the CFTC, yeah, that little organization Wendy and Phil Gramm got to release Enron's mega-grifters on the world.
But in those days, it still had teeth. I guess you're one of those libertarians who wouldn't call the fire department if his house caught fire.
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| parent )who has cornered a global mkt, De Beers Diamond Jewellers Ltd
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )Just a bit of recommended reading that I grabbed quickly:
http://www.economist.com/opinion/displayStory.cfm?source=hptextfeature&s...
http://www.nytimes.com/2008/07/23/business/23commodities.html
http://www.newyorker.com/talk/financial/2008/07/07/080707ta_talk_surowie...
http://gregmankiw.blogspot.com/2008/06/department-of-strange-bedfellows....
http://www.nytimes.com/2008/05/12/opinion/12krugman.html?ex=1368331200&e...
http://krugman.blogs.nytimes.com/2008/06/23/speculative-nonsense-once-ag...
http://www.nypost.com/seven/06202008/postopinion/opedcolumnists/scapegoa...
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| parent )the subject from cornering a "major mkt", unless of course I've made my point and now you want to change the subject.
Of note, I'm not sure why you brought antitrust into the conversation.
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )Yup, that's right. You don't have a clue what you're talking about. But you'll have to forgive me for placing more credibility in the expert consensus than in whatever you claim you've done and whatever insights you claim that gives you into this question.
Do your homework, for goodness sake. Don't talk out yer butt.
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| parent )2. No insults or personal attacks on other users
Most here take that to mean no openly insulting comments of which there can be no doubt what was intended. Not clever.
--GW Bush, leading contender for worst President ever.
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| parent )And stop fixating on Blaise's butt.
--To think is not enough; you must think of something -- Jules Renard
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| parent )LOL, What a shocker that the usual suspects react with such alarm and protestations at my saying that one of theirs does not know what he's talking about (OMG!! Apologize!!), while saying nothing about that same individual repeatedly calling me an "armchair general" (not to mention doing so based on a total straw man rather than anything I actually said), among many other occasions in which someone from their side made comments as bad or worse than what I've said here.
Keep up the good work guys.
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| parent )two sets of rules.
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )Many different interpretations.
I merely offered my own interpretation meant as helpful advice to a new member.
--GW Bush, leading contender for worst President ever.
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| parent )and run for moderator if you want things run differently. The mods are volunteers - in fact I believe two of them are conservatives in the current term - so unless you start paying them quit complaining.
--I blame it all on the Internet
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| parent )First, who is complaining about the moderators? Are Harley and Spartacvs moderators? Maybe you should know what you're talking about before YOU start whining.
Second, why is it not "whining" when some folks (folks who happen to be on your side of the partisan divide, not that I consider myself on either side) complain incessantly about supposed rules violations, many questionable as is the case here, applying a blatant double standard, yet it IS "whining" when I point out the double standard. Could it be because you are applying...well, a double standard?
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| parent )because you don't see me whining about rules violations. If something bothers you that much email the mods. My reply was specifically because Timmy stated that there are two sets of rules.
--I blame it all on the Internet
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| parent )there are, just look who was complaining and not a mod in sight
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )commiserate.
I certainly didn't infer that the mods have two sets of rules.
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )I blame it all on the Internet
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| parent )there wasn't a mod in sight
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )There are only two big electricity pipes into California. Enron would book those lines, then squeeze expensive power through them. Same thing with our diminished refinery capacity and booking the gasoline / fuel oil pipelines.
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| parent )Given the annual timing, the EPA plays a bigger role than the pipelines.
--"Making sure your tires are properly inflated, simple thing, but we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much." Ob
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| parent )shhhhh, he already told us, in an authoritative "the real problem" tone, what the REAL problem was. Consider yourself educated now, the beneficiary of all his research.
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| parent )The real problems are the speculative market driving up prices combined with a lack of refineries.
Really? So the price of crude and the dollar are NOT big factors, and speculation IS a big factor? Good thing you're telling folks what the "the real problems" are. You've obviously done your homework....not.
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| parent )About inventories and consumption. As for refineries I think that the real problem is the large capital cost required to build a new one. In order to recoup that cost you need to have crude to feed the refinery for a fair number of years. Whatever they say in public the oil companies know that peak oil is not far away and they don't think that they will be able to utilize any big increase in capacity long enough to repay the capital investment.
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| parent )Sounds like something we could order at Mickey D's...
..."you want fries with that?"
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )....and they are cooked in canola oil.
--But she's a queen, and such are queens
that your laughter is sucked in their brains. -D. Bowie
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| parent )Hot & Sour
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )Brown gravy & cheese curds are way more appetizing than they sound. They also add back all the fat you saved from cooking the fries in canola oil instead of trans fat.
--But she's a queen, and such are queens
that your laughter is sucked in their brains. -D. Bowie
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| parent )The sauce they serve with a McMaverick... Hot & Sour
Is this thing on?
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )I laughed.
But before you pump your fist about it?
You were up against poutine, fercryinoutloud.
--Excess on occasion is exhilarating. It prevents moderation from acquiring the deadening effect of a habit. - W. Somerset Maugham
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| parent )It is all have been thinking about since I wrote that comment. The only place I have had it is in Montreal. The Google says there aren't many places in and around Boston to get it, but I would guess they suck compared to Montreal.
--But she's a queen, and such are queens
that your laughter is sucked in their brains. -D. Bowie
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| parent )It's not hard to do.
I fry the fries in a wok, fresh and hot...add the cheese curd and gravy....well, there goes MY diet.
If you ever make to Vancouver, B.C., there's a place called Fritz' that serves fantastic poutine...that's all they sell...incredible vareties of it.
I've thought about opening a poutine stand here in my drizzly, chilly little town.
People in the U.S. look askance at it..till they've tried it.
I spend a fair amount of time in Canada. One of the funniest arguments I've seen was two Albertans in disagreement, vehemently so, about whether beef or chicken gravy was the proper gravy for poutine.
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| parent )"At least Obama isn't prepared to lie to the public in order to get elected"
[sniff]
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )That the ends appear to justify the means, even if that involves perpetuating a hoax on the voters.
--GW Bush, leading contender for worst President ever.
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| parent )There's nothing in that comment about ends justifying means. Is it make-up-stuff day and nobody told me?
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )or are you fine with it?
--GW Bush, leading contender for worst President ever.
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| parent )...that Sen. Obama doesn't lie to the electorate?
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent ):)
--GW Bush, leading contender for worst President ever.
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| parent )I wish I'd known, I would have worn my hat.
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )To think is not enough; you must think of something -- Jules Renard
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| parent )“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )that providing an example of Sen. Obama lying to the electorate would involve you having to make stuff up.
--GW Bush, leading contender for worst President ever.
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| parent )Really it's touching, and kind of cute.
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )I guess you turned tail again?
--GW Bush, leading contender for worst President ever.
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| parent )Enjoying the naïve charm of it all.
--“I serve as a blank screen on which people of vastly different political stripes project their own views.”
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| parent )- Login or register to post comments
| parent )