Great letter to the WSJ. I love the comment on our "fourth branch" of government.

"The Lawnmower Men" (Review & Outlook, July 19) proves the point that we no longer have only three branches of government. To the executive, legislative and judicial branches we have added bureaucracy. There are now a myriad of government agencies which have a say in how we may live our lives, and none of the people who run or staff these red-tape factories can be held accountable to the people of the nation through any electoral process.

So the Environmental Protection Agency wants to regulate my lawnmower and measure "grams per kilogram of cuttings"? This is the U.S. and here we measure in ounces and pounds; granted illegal drug dealers might not have a problem with this metric nonsense. Is the EPA going to say I can't cut my grass until it reaches a certain height in order to achieve the desired measurements? Will there be an extra tax on foods that tend to create more "emissions"? How about a tax credit for Bean-o? How about they just leave us alone.

We could solve the global energy crisis by hooking up generators to the founding fathers' graves. They should be spinning fast enough to produce enough electricity to fuel the whole country. If they were alive, however, I think I know what they would say about this proposal and all of the other rules dumped upon us: "No regulation without representation!" Though if this bureaucratic trend continues, we might go back to: "Give me liberty or give me death!"

Beth Halgren
Eudora, Kan.

Labels: climate, energy, environment as religion, global warming, taxes

Great editorial by Bret Stephens concerning Al Gore's "Kennedyesque" challenge that the United States be "100% zero-carbon electricity in 10 years." The simple fact is it was far more feasible to put a man on the moon than attain Gore's goal, especially when Gore himself opposes both nuclear and hydroelectric power.

In 1995, the U.S. got about 2.2% of its net electricity generation from "renewable" sources, according to the Energy Information Administration. By 2000, the last full year of the Clinton administration, that percentage had dropped to 2.1%. By contrast, the combined share of coal, petroleum and natural gas rose to 70% from 68% during the same time frame.

Now the share of renewables is up slightly, to about 2.3% as of 2006 (the latest year for which the EIA provides figures). The EIA thinks the use of renewables (minus hydropower) could rise to 201 billion kilowatt hours per year in 2018 from the current 65 billion. But the EIA also projects total net generation in 2018 to be 4.4 trillion kilowatt hours per year. That would put the total share of renewables at just over four percent of our electricity needs.

Mr. Gore's argument would be helped if he were also willing to propose huge investments in nuclear power, which emits no carbon dioxide and currently supplies about one-fifth of U.S. electricity needs, and about three-quarters of France's. Britain has just approved eight new nuclear plants, and the German government of Angela Merkel is working to do away with a plan by the previous government to go nuclear-free.

But Mr. Gore makes no mention of nuclear power in his speech, nor of the equally carbon-free hydroelectric power. These are proven technologies -- and useful reminders of what happens when environmentalists get what they wished for.

Mr. Gore's case would also be helped if our experience of renewable sources were a positive one. It isn't. In his useful book "Gusher of Lies," Robert Bryce notes that "in July 2006, wind turbines in California produced power at only about 10% of their capacity; in Texas, one of the most promising states for wind energy, the windmills produced electricity at about 17% of their rated capacity." Like wind power, solar power also suffers from the problem of intermittency, which means that it has to be backed up by conventional sources in order to avoid disruptions. This is especially true of hot summers when the wind doesn't blow and cold winters when the sun doesn't shine.

And then there are biofuels, whose recent vogue, the World Bank believes, may have been responsible for up to 75% of the recent rise in world food prices. Save the planet; starve the poor.

None of this seems to trouble Mr. Gore. He thinks that simply by declaring an emergency he can help achieve Stakhanovite results. He might recall what the Stakhanovite myth (about the man who mined 14 times his quota of coal in six hours) actually did to the Soviet economy.

Labels: climate, energy, global warming, Gore

Here's Jonah Goldberg on the anti-speculation frenzy driving the populist crowd:

Never mind that there’s no evidence “speculators” — i.e. commodity traders — are doing anything to increase the price of oil. They aren’t hoarding it. No one’s cornering the market. The speculators make money when the price goes down, and they make money when it goes up. In short, they don’t care if oil prices are high or low as long as they guessed correctly.

And that may be the most infuriating part of all this. The speculators don’t want high oil prices, but Washington does.
Read the rest.

Labels: Economics, energy, Oil

Labels: Economics, energy, Oil

This is a great op-ed from Investors Business Daily. The McCain camp needs to memorize the whole thing and rattle it off at every opportunity.

• "We can't drill our way out of our energy crisis."

Actually, we can. As we've noted before, conservative estimates put the total amount of recoverable oil in conventional deposits at about 39 billion barrels. Offshore, we have another 89 billion barrels or so. In ANWR, 10 billion barrels.

In oil shale deposits, we have more than 1 trillion barrels of oil. In perspective, that's about four times the total reserves of Saudi Arabia. And if estimates of shale reserves as high as 2 trillion barrels prove true, we'll have about a 300-year supply of oil just from shale. This compares with current estimated total U.S. oil reserves of about 21 billion barrels.

ANWR alone is expected to yield 1 million barrels of oil a day. Now make the highly conservative assumption that we're able to get a like amount of oil from the other sources — for a total increase of 3 million to 4 million barrels of oil a day.

That's an enormous rise in oil output. Today, we produce just under 8 million barrels of oil a day from domestic sources. So we could, in effect, boost our energy output 50%, and thus our energy independence, by bringing an additional 4 million barrels of oil to thirsty world markets each and every day.

By the way, those calculations don't include the trillions and trillions of cubic feet of natural gas found in the same locations, which, along with nuclear power, could be used to fire our power plants.

By 2030, according to the U.S. Energy Information Administration, we will need at least 30% more energy to fuel our economy. Nearly 85% of that increase will come from oil and gas, even with expected gains for alternative energy. Can't drill our way out? In fact, it's the only way out of our energy crisis.

• "Oil companies are sitting on 68 million acres of oil leases and refuse to drill."

This is yet another slander of "Big Oil" by House Speaker Nancy Pelosi — one that has become a major talking point for Democrats in Congress. It's completely dishonest.

Oil companies have spent billions of dollars for those leases. Drilling has increased by more than 66% since 2000. They are searching for oil even as you read this. Some parts of those 68 million acres will have oil, some won't. But at $145 a barrel, you can bet oil companies have plenty of incentive to find it.

That said, 68 million acres is in fact a minuscule amount. Some 94% of federal lands — 658 million acres — remains off-limits to exploration. Another 97% — or 1.7 billion acres — of federal offshore properties likewise remains off-limits. These lands contain tens of billions of barrels of recoverable oil. It's there for the taking, now.

How much energy is there? Federal lands, according to the American Petroleum Institute, hold 651 trillion cubic feet of natural gas, enough to fuel 60 million households for 160 years. They hold at least 116 billion barrels of oil, maybe more. That's enough to fuel 65 million cars and provide fuel oil for 3.2 million homes for 60 years.

As such, it's the height of irresponsibility for Congress to leave these lands off the table. It ensures we remain vulnerable to pariah petrostates like Venezuela, Saudi Arabia, Libya, Iran and others who wish us ill.

• "Even if drilling works, it'll take a decade or more for the oil to flow."

This is quite an argument coming from the Democratic Party, which has made keeping oil off the market a linchpin of its energy policy for decades.

If President Clinton hadn't vetoed the idea of drilling in ANWR back in 1995, we'd have that oil on the market today. Ditto if Congress had approved ANWR drilling in 2002, when President Bush requested it.

Even so, the larger point is false anyway. New oil will be flowing in some cases within three to four years, according to industry estimates. But the impact on prices will be immediate. Why? Because markets would suddenly have to discount future oil prices for the expected gain in oil supply. That would cause oil prices, especially in futures markets, to drop.

By the way, this isn't just conjecture. President Reagan, within a week of his inaugural in 1981, removed domestic controls on oil. Energy prices began tumbling almost immediately, with oil falling from $34 a barrel in early 1981 to just $11 by 1986.

It worked before, and it'll work again.

• "Record profits by big oil companies are the reason for soaring prices."

It's true that oil company profits have never been higher. But put into perspective, oil company profits are high because the price is high. As a share of revenue, profits aren't so high.

The average profit, as we've noted before, is around 8 to 9 cents to the dollar. That compares with about 7 cents to the dollar for manufacturers and more than 15 cents to the dollar for computer makers.

In short, oil profits aren't out of whack with the rest of industry.

What doesn't get said is that while oil companies have profit margins of about 8%, about 12% of the price of a gallon of gas goes to the government in the form of taxes. When indirect taxes are included, the share is even higher.

So who are the real price-gougers?

From 1981 to 2006, the oil industry made $867 billion in profits. Yes, that's a lot. But over that same time, they paid total taxes of $1.2 trillion, Energy Department data show. And that doesn't include taxes of $519 billion paid to foreign countries.

Please remember that the next time a politician vows to hit "Big Oil" with a windfall profits tax or some other idea. The tax won't be paid by the oil company; it will be paid by you, the consumer.

In coming weeks, we'll try to look at some of the other myths surrounding America's energy. The problem is, there are so many that dispelling the falsehoods about energy can become a full-time occupation for a newspaper.

In the meantime, let us suggest that if you think more oil will help, you should tell your local members of Congress. They're easy to find at the government Web site thomas.loc.gov. The only problem is, on this topic, many won't want to be found.
Here's a quick additional point for bullet #1, whereby the opponents claim we can't drill our way out of the problem. Let's suppose that the crew at IBD isn't right (they are), that still leaves the fact that this isn't an all or nothing proposition. We can't drill our way out of the problem? Well, okay, how about drilling most of the way out of the problem? How about half the way out of it? How about even a quarter of the way?

I'll tell you this, doing nothing, which is what we've been doing -- not drilling our own proven oil reserves, not building a refinery in 30 years, not building nuclear power plants as even France, Japan and Sweden do (which amazingly puts our energy policy to the left of those countries), heck even liberals in the northeast blocked, yes blocked, a proposed windmill farm in Cape Cod -- has proven to be absurd and deeply expensive. Moreover, it's essentially a tax on the poor. Those who couldn't afford gas prices last year are doubly screwed this year.

Remember that fact the next time you hear one of these self-proclaimed champion of the working man claim that high gas prices are ultimately a good thing.

No, it's not.

Labels: 2008, democrats, energy, mccain, Oil

[WSJ] "I want you to think about this," Barack Obama said in Las Vegas last week. "The oil companies have already been given 68 million acres of federal land, both onshore and offshore, to drill. They're allowed to drill it, and yet they haven't touched it – 68 million acres that have the potential to nearly double America's total oil production."

Wow, how come the oil companies didn't think of that?

Perhaps because the notion is obviously false – at least to anyone who knows how oil and gas exploration actually works. Predictably, however, Mr. Obama's claim is also the mantra of Nancy Pelosi, Barbara Boxer, John Kerry, Nick Rahall and others writing Congressional energy policy. As a public service, here's a remedial education.

Democrats are in a vise this summer, pinned on one side by voter anger over $4 gas and on the other by their ideological opposition to carbon-based energy – so, as always, the political first resort is to blame Big Oil. The allegation is that oil companies are "stockpiling" leases on federal lands to drive up gas prices. At least liberals are finally acknowledging the significance of supply and demand.

To deflect the GOP effort to relax the offshore-drilling ban – and thus boost supply while demand will remain strong – Democrats also say that most of the current leases are "nonproducing." The idea comes from a "special report" prepared by the Democratic staff of the House Resources Committee, chaired by Mr. Rahall. "If we extrapolate from today's production rates on federal lands and waters," the authors write, the oil companies could "nearly double total U.S. oil production" (their emphasis).

In other words, these whiz kids assume that every acre of every lease holds the same amount of oil and gas. Yet the existence of a lease does not guarantee that the geology holds recoverable resources. Brian Kennedy of the Institute for Energy Research quips that, using the same extrapolation, the 9.4 billion acres of the currently nonproducing moon should yield 654 million barrels of oil per day.

Nonetheless, the House still went through with a gesture called the "use it or lose it" bill, which passed on Thursday 223-195. It would be pointless even if it had a chance of becoming law. Oil companies acquire leases in the expectation that some of them contain sufficient oil and gas to cover the total costs. Yet it takes years to move through federal permitting, exploration and development. The U.S. Minerals Management Service notes that only one of three wells results in a discovery of oil that can be recovered economically. In deeper water, it's one of five. All this involves huge risks, capital investment – and time.

If anything, the Democrats ought to be dancing in the streets about "idle" leases. It means fewer rigs. The days of hit-or-miss wildcatting have been relegated to the past by new, more efficient technologies, such as seismic imaging, directional drilling (wells that are "steered" underground) and multilateral drilling (multiple underground offshoots from a single wellbore).

At the same time, finding new reservoirs has become far more complex. Except for a few very large fields discovered decades ago like Prudhoe Bay, most recent discoveries have been smaller, deeper and less concentrated. The U.S. needs a continuous supply of discoveries to replace declining wells.

Yet companies are not allowed to explore where the biggest prospects for oil and gas may exist – especially on the Outer Continental Shelf. Seven of the top 20 U.S. oil fields are now located in analogous deepwater areas (greater than 1,000 feet) in the Gulf of Mexico. In 2006, Chevron discovered what is likely to be the largest American oil find since Prudhoe, drilled in 7,000 feet of water and more than 20,000 feet under the sea floor. The Wilcox formation may have an upper end of 15 billion barrels of recoverable oil and should begin producing by 2014 – perhaps ushering in a new ultradeepwater frontier.

Likewise, in April, the U.S. Geological Survey revised its estimate for the Bakken Shale, underneath the badlands of North Dakota and Montana. The new assessment – as much as 4.3 billion barrels of oil – is a 25-fold increase over what the Survey believed in 1995. Such breakthroughs confirm that very large reserves exist, if only Congress would let business get at them.

All of which has Democrats sweating bullets. The leadership is desperate to avoid debating a Department of Interior spending bill, because they know Republicans will offer amendments lifting the drilling moratorium that may peel off some Democrats. Last week, Chairman David Obey shut down the Appropriations Committee rather than countenance more domestic energy production. Given Democratic energy illiteracy, this is a fight the GOP can win if it keeps up the pressure.

Labels: 2008, democrats, energy, Obama, Oil

Forget Oil, Tax Lawyers' Windfalls
June 25, 2008; Page A14

Recent investigations of some plaintiffs tort law firms have resulted in criminal pleas or massive settlements in the hundreds of millions of dollars, as you've documented in several editorials including "The Firm" (June 18). More investigations are to follow, according to the news. My point is that these cases have finally disclosed an inconvenient truth: The plaintiffs tort bar makes obscene profits at incredible profit margins.

Meanwhile, the Democrat-controlled Congress wants to tax oil companies on their "windfall profits." Why are they not targeting the plaintiffs tort bar for their outrageous profits? The profit margins they make would likely be found to be obscene to most Americans, especially when people are made to realize that the oil companies' profit margins are not only below most other industries, but far, far less than that of the plaintiffs bar.

The reason we hear nothing about these law firms is simple: The tort lawyers are among the biggest contributors to the Democratic Party. Not only does Congress ignore the obscene profits of the tort bar, but new laws are being proposed or passed that protect or enhance those profits. An example is the recent bill to allow tort lawyers to deduct "loans" made to clients to finance their litigation.

If taxing "windfall" profits is truly the goal, then the tort bar is certainly an appropriate target. Personally, I have no problem with anyone making as much profit as they can in a free market, but then I am not the one grandstanding and demanding new taxes on "windfall profits." For me, I bet on Congress's hypocrisy to win out over its alleged principle on this one.

John Watson
Marietta, Ga.

Labels: Economics, energy, Oil, tax cuts, taxes

[AFP] Saudi Arabia said Thursday it planned to increase daily oil output by 200,000 barrels per day, according to a statement posted on the country's London embassy website.
The Saudis are increasing output because they're worried that the United States will increase -- long term -- the amount of domestic oil we drill and refine. This puts Democrats on the same side of the political fence as Saudi Arabia -- they both oppose more US domestic oil production.

Brilliant job, Democrats! We'll see how that works out for you come November...

Meanwhile, I'm sure you've heard it by now -- US oil companies, say the opponents of more drilling for domestic oil, already have access to the vast majority of federal lands, but are choosing not to drill for oil.

Here's the rest of the story:

[WSJ]...it is true that only 0.46% of the Outer Continental Shelf is producing oil (though only 2.3% is under lease). But because of the exploration ban, oil companies go in more or less blind, not knowing the extent of the available resources. Millions of acres lack oil or gas, which is why it's called "exploration." Federal law stipulates that an oil company must sink a producing well within 10 years or lose the lease; it often takes nearly a decade to navigate the geography, not to mention the long process of environmental and regulatory review. Or coping with multiple lawsuits from the green lobby.
So, Democrats would have the US oil companies invest billions of dollars of their capital to explore areas that have no *proven* oil reserves, while blocking access to those lands that *have* proven oil reserves.

Labels: 2008, democrats, energy, Obama, Oil

... and sell it to us at a far higher price.

Labels: energy, Oil

Economist Larry Kudlow notes that one never knows what John McCain one is going to get.

A few days ago McCain delivered a Reaganesque speech on economic policy, which included tributes to growth through low taxes, supply-side philosophy and credit to private business as the backbone of the country.

But this morning on NBC's Today Show , McCain talks of evil oil, cartels, finite oil (huh!?), and "obscene profits.

[Kudlow] When asked about gas prices at the pump, and whether they could go any lower, Sen. McCain said he didn't think so because "You've got a finite supply, basically, and a cartel controlling it."

This is exactly wrong. There is no finite supply, or if there is we are 100 years away from it. I don't know who has put this thought into the senator's mind, but it is a bad thought in terms of energy and a bad thought in terms of the politics of this campaign.

Look, we have the Bakken fields, the outer continental shelf and all the offshore drilling opportunities, ANWR, and so forth. There's probably over a trillion barrels worth of reserves out there. And Republicans in the Senate are trying to move a deregulated drilling bill through the process. McCain should be backing this and talking about it.

Democrats are out there pushing cap-and-trade, which would jack up gasoline and oil energy prices, damage the economy, and create a massive central-planning exercise. The Democratic Congress has done nothing to alleviate the oil shortage. They're captured by the greenies. They should be blamed.

This is a real turnaround issue for the Republicans and Mr. McCain. But McCain's not going there.
This is what angers me so much about Republicans today. With the exception of a few, most Republicans (1) don't recognize opportunity when it bites them on the rear, and (2) are absolutely terrible at communicating conservative ideals [perhaps because (3) so many of them are not conservatives but just average ideologically expedient politicians].

As Kudlow says, more domestic drilling, and creating refineries to turn the oil into fuel (and plastics for that matter) should be a slam-dunk issue for McCain and Republicans.

The WSJ summarizes the heart of the problem -- obstructionism.

Anyone wondering why U.S. energy policy is so dysfunctional need only review Congress's recent antics. Members have debated ideas ranging from suing OPEC to the Senate's carbon tax-and-regulation monstrosity, to a windfall profits tax on oil companies, to new punishments for "price gouging" – everything except expanding domestic energy supplies.

Amid $135 oil, it ought to be an easy, bipartisan victory to lift the political restrictions on energy exploration and production. Record-high fuel costs are hitting consumers and business like a huge tax increase. Yet the U.S. remains one of the only countries in the world that chooses as a matter of policy to lock up its natural resources. The Chinese think we're insane and self-destructive, while the Saudis laugh all the way to the bank.

There are two separate moratoria on offshore drilling: One is a ban that Congress has attached to every budget since 1982, and the other is a 1990 executive order that President Bush has waived in only a few cases. Republicans made failing attempts to overcome both when they ran Congress, but current Democratic leaders and their green masters remain adamantly opposed. The new political opportunity amid record prices is to convince enough rank-and-file Democrats that they'll suffer at the polls if they don't break with this antiexploration ideology.

While energy "independence" is an impossible dream, there's no doubt the U.S. has vast undeveloped fossil-fuel deposits. A tiny corner of the Arctic National Wildlife Refuge contains an estimated 10.4 billion barrels of oil and would be the largest producing oil field in the Northern Hemisphere. Yet the Senate blocked that development as recently as last month. The Outer Continental Shelf is estimated to contain some 86 billion barrels of oil, plus 420 trillion cubic feet of natural gas. Yet of the shelf's 1.76 billion acres, 85% is off-limits and 97% is undeveloped.

Engineers recently perfected refining solid shale rock into diesel or gas, which may amount to the largest oil supply in the world – perhaps as much as 1.8 trillion barrels in the American West. That's enough to meet current U.S. oil demand for more than two centuries. Yet as late as 2007, Democrats attached a rider to the energy bill that prohibits leasing the federal interior lands that contain at least 80% of America's oil shale. The key vote was cast by liberal Senator Ken Salazar from Colorado, of all places.

These supply guesses are probably conservative, because the only way to know for sure is to drill exploratory wells. Yet most of Alaska and offshore are cut off even from modern seismic testing. Many areas haven't been examined since the 1960s, when exploration technology was far more primitive. This has led to the believe-it-or-not situation in which the Chinese are prepping to drill in Cuban waters less than 60 miles off the Florida coast. American companies are banned from drilling in American waters nearby.

Yes, we know, increased drilling is no energy cure-all; new projects take about a decade to come on line. Then again, more than a few experts say that new production could affect price as the market perceives a new U.S. seriousness to increase supplies. Part of today's futures speculation is based on the assumption that supplies will remain tight for years to come, even as Chinese and Indian demand surges.

Nor would merely repealing the exploration bans be enough. Between 2000 and 2007, the drilling of exploratory oil wells climbed 138%, but over the same period domestic crude oil production decreased 12.4% and fell to the lowest levels since 1947. Refineries for gasoline are stretched to the limit, but multiple regulatory barriers impede new construction or even expansions at existing facilities. Then there is the inevitable lawsuit downpour from the environmental lobby.

Democrats are going to have to grow up. The oil-rich areas they want to leave untouched are accessible with minimal environmental disturbance, thanks to modern technology. Hurricanes Katrina and Rita flattened terminals across the Gulf of Mexico but didn't cause a single oil spill. As for anticarbon theology, oil will be indispensable over the next half-century and probably longer, like it or not. Airplanes will never fly on woodchips, and you won't be able to charge your car with a windmill for some time, if ever.

Public anger over fuel prices could hardly come at a worse time for the GOP, since voters tend to blame a flagging economy on the party that occupies the White House. But the opportunity is to offer a reform alternative to Barack Obama and the high-price energy status quo he embraces. It looks like the public is increasingly ready for . . . change. In a May Gallup poll, 57% favored "allowing drilling in U.S. coastal and wilderness areas now off limits." Just 20% blamed the increase in gas prices on Big Oil, like Mr. Obama does.

Recent weeks have seen some GOP stirrings on Capitol Hill, but John McCain has so far refused to jettison his green posturings, such as his belief in carbon caps and his animus against offshore development. A good reason for a rethink would be $4 gas. At present, it is charitable to call Mr. McCain's energy ideas incoherent, and it may cost him the election.

Labels: climate, democrats, Economics, energy, global warming, mccain, Oil, taxes

Great editorial by Dan Henninger:

One thing Brazil and the U.S. have in common is the price of oil: It is priced in dollars, and everyone in the world now knows what the price is. Another commonality is that each country has vast oil reserves in waters off their coastlines.

Here we may draw a line in the waves between the serious and the unserious.

Brazil discovered only yesterday (November) that billions of barrels of oil sit in difficult water beneath a swath of the Santos Basin, 180 miles offshore from Rio de Janeiro and Sao Paulo. The U.S. has known for decades that at least 8.5 billion proven barrels of oil sit off its Pacific, Atlantic and Gulf coasts, with the Interior Department estimating 86 billion barrels of undiscovered oil resources.

When Brazil made this find last November, did its legislature announce that, for fear of oil spills hitting Rio's beaches or altering the climate, it would forgo exploiting these fields?

Of course it didn't. Guilherme Estrella, director of exploration and production for the Brazilian oil company Petrobras, said, "It's an extraordinary position for Brazil to be in." Indeed it is.
Read the rest.

Labels: climate, energy, global warming, Oil

I read these headlines and I just am dumbfounded.

Obama says he would impose oil windfall profits tax

McCain wants... regulated CEO pay.
Windfall profits tax? Regulated CEO pay? How does one propose we do that, exactly? Or, better yet, we can just cap prices, let we tried back in the 1970s so unsuccessfully. Somewhere Karl Marx is howling with laughter.

Once more, arrogant politicos wish to legislate what is good for us, rather than letting us decide. How does one subjectively judge what is a "windfall profit" or salary versus what is not? (To be fair to McCain, the lesser of two evils on your wallet to be sure, at least he acknowledges that our current corporate tax rate - second highest in the world - is damaging our economy.)

The truth is they're not econ-ignorant. I don't think they really believe this, because anyone who's ever taken Eco 101, or lived through the 70s, understands that when you cap prices, whether CEO pay or a commodity like oil, you create artifical shortages. There's simply no incentive to produce more.

Rather, and I think this is especially true of McCain in part to live up to his "maverick" identity, these guys know that a large segment of the voting population goes along with what sounds good, what is populist. It's far easier to say "hate CEOs!" than to explain economics.

But facts are stubborn things:

"Though the market is surely not flawless, and government interferences often have praiseworthy goals, good intentions are not enough. Any government that sets out to repair what it sees as a defect in the market mechanism runs the risk of causing even more serious damage elsewhere... In case after case where legal price ceilings are imposed, virtually the same series of consequences ensues. . . . A persistent shortage develops because quantity demanded exceeds quantity supplied. . . . An illegal, or 'black,' market often arises to supply the commodity. . . . Investment in the industry generally dries up. Because price ceilings reduce the monetary returns that investors can legally earn, less capital will be invested in industries that are subject to price controls."

-- Alan S. Blinder, former member of the Council of Economic Advisers and Vice Chairman of the Federal Reserve.
Blinder, by the way, was praised by none other than President Bill Clinton as "a brilliant contributor to our efforts to improve the economy."

Do people really believe this populist crap? And why stop there? What about you, reading this blog? Why not have McCain or Obama decide through presidential fiat or Congressional law when you, personally, have made enough money?

John Hinderaker, over at Power Line Blog, wonders, what of a windfall profit for authors:

Barack Obama said yesterday that he wants to impose a "windfall profits tax" on American oil companies. This is a stupid idea, unless you want to reduce the supply of oil and thereby increase prices even further.

But it did cause me to wonder why we don't have a windfall profits tax on authors. Think about it: it takes as much work to write a 300-page book that sells 1,000 copies as to write one that sells 1,000,000. Yet the former author is paid almost nothing, while the author who happens to write a best-seller gets rich. Where is the fairness in that? Besides, the oil companies need their profits to make huge capital investments in oil drilling equipment, ocean platforms, pipelines, and so on. What capital investment does an author need his windfall profits in order to make? A new pencil? An author could easily pay extra taxes on his windfall profits and have plenty of capital left over for his next book.

A windfall profits tax on authors seems like a no-brainer. Coincidentally, Barack Obama's 2007 income of around $4.2 million came almost entirely from book royalties. Now, that's what I call a windfall! If authors' windfall profits are taxed at 90%, Obama can write a check to the Treasury for around $3.2 million. What do you say, Barack? Why not a windfall profits tax on authors?
Pretty audacious. Obama is a guy who just a few weeks ago told a Wesleyan commencement that he hopes those graduating students do not "take your diploma, walk off this stage, and chase only after the big house and the nice suits and all the other things that our money culture says you should buy." No, Obama said, don't do that because "our individual salvation depends on collective salvation."

$4.2 million windfall profit book deal. Do as I say, not as I do, eh Obama?

The only difference between Karl Marx and Barack Obama is that Marx actually practiced what he preached. At least he was an honest communist.

Check out this post, too, by Hinderaker.

What we need, of course, is oil companies with bigger profits, not smaller. Then we need them to invest those profits in drilling for more oil in places like ANWR and the coastal shelf, as well as developing shale oil reserves. The problem with America's oil companies is not that they're big, the problem is that they are tiny, as this chart shows; click to enlarge:



Our oil companies control tiny amounts of petroleum (relative to the world's big players) because they are shackled by Congress, which prohibits them by law from accessing America's abundant petroleum reserves. If you want gasoline prices to come down, write, call and email your Congressman and Senators and tell them to allow the oil companies to do what only they can do: bring us more oil.

Labels: energy, Obama, Oil, taxes

Okay,I have to admit that Charles Krauthammer gets me to rethink my thought that energy wonks who want to raise taxes on gas are nuts. Krauthammer cites some strong economic arguments... Having said that, Krauthammer can't really believe that the government (at least the Democrats) would ever lower regulation of the energy industry or use gas tax proceeds to offset other taxes. I think that's a pipe dream.

On top of that, it's simply against the conservative viewpoint that the government should see fit to tell other people what's "good" for them by artifically legislating what kind of car they should drive or how they should consume.

So now we know: The price point is $4.

At $3 a gallon, Americans just grin and bear it, suck it up and, while complaining profusely, keep driving like crazy. At $4, it is a world transformed. Americans become rational creatures. Mass transit ridership is at a 50-year high. Driving is down 4 percent. (Any U.S. decline is something close to a miracle.) Hybrids and compacts are flying off the lots. SUV sales are in free fall.

The wholesale flight from gas guzzlers is stunning in its swiftness, but utterly predictable. Everything has a price point. Remember that "love affair" with SUVs? Love, it seems, has its price too.

America's sudden change in car-buying habits makes suitable mockery of that absurd debate Congress put on last December on fuel efficiency standards. At stake was precisely what miles-per-gallon average would every car company's fleet have to meet by precisely what date.

It was one out-of-a-hat number (35 mpg) compounded by another (by 2020). It involved, as always, dozens of regulations, loopholes and throws at a dartboard. And we already knew from past history what the fleet average number does. When oil is cheap and everybody wants a gas guzzler, fuel efficiency standards force manufacturers to make cars that nobody wants to buy. When gas prices go through the roof, this agent of inefficiency becomes an utter redundancy.

At $4 a gallon, the fleet composition is changing spontaneously and overnight, not over the 13 years mandated by Congress. (Even Stalin had the modesty to restrict himself to five-year plans.) Just Tuesday, GM announced that it would shutter four SUV and truck plants, add a third shift to its compact and midsize sedan plants in Ohio and Michigan, and green-light for 2010 the Chevy Volt, an electric hybrid.

Some things, like renal physiology, are difficult. Some things, like Arab-Israeli peace, are impossible. And some things are preternaturally simple. You want more fuel-efficient cars? Don't regulate. Don't mandate. Don't scold. Don't appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

Unfortunately, instead of hiking the price ourselves by means of a gasoline tax that could be instantly refunded to the American people in the form of lower payroll taxes, we let the Saudis, Venezuelans, Russians and Iranians do the taxing for us -- and pocket the money that the tax would have recycled back to the American worker.

This is insanity. For 25 years and with utter futility (starting with "The Oil-Bust Panic," the New Republic, February 1983), I have been advocating the cure: a U.S. energy tax as a way to curtail consumption and keep the money at home. On this page in May 2004 (and again in November 2005), I called for "the government -- through a tax -- to establish a new floor for gasoline," by fully taxing any drop in price below a certain benchmark. The point was to suppress demand and to keep the savings (from any subsequent world price drop) at home in the U.S. Treasury rather than going abroad. At the time, oil was $41 a barrel. It is now $123.

But instead of doing the obvious -- tax the damn thing -- we go through spasms of destructive alternatives, such as efficiency standards, ethanol mandates and now a crazy carbon cap-and-trade system the Senate is debating this week. These are infinitely complex mandates for inefficiency and invitations to corruption. But they have a singular virtue: They hide the cost to the American consumer.

Want to wean us off oil? Be open and honest. The British are paying $8 a gallon for petrol. Goldman Sachs is predicting we will be paying $6 by next year. Why have the extra $2 (above the current $4) go abroad? Have it go to the U.S. Treasury as a gasoline tax and be recycled back into lower payroll taxes.

Announce a schedule of gas tax hikes of 50 cents every six months for the next two years. And put a tax floor under $4 gasoline, so that as high gas prices transform the U.S. auto fleet, change driving habits and thus hugely reduce U.S. demand -- and bring down world crude oil prices -- the American consumer and the American economy reap all of the benefit.

Herewith concludes my annual exercise in futility. By the time I write next year's edition, you'll be paying for gas in bullion.

Labels: CAFE, Economics, energy, Oil, tax cuts, taxes

Call it another case of the folly of environmentally-based central planning. Try as they may, the world's environmental "experts" just can't get around the stubborn laws of economics. Somewhere Adam Smith is smiling.

To create just one gallon of fuel, ethanol slurps up 1,700 gallons of water, according to Cornell's David Pimentel, and 51 cents of tax credits. And it still can't compete against oil without a protective 54-cents-per-gallon tariff on imports and a federal mandate that forces it into our gas tanks. The record 30 million acres the U.S. will devote to ethanol production this year will consume almost a third of America's corn crop while yielding fuel amounting to less than 3% of petroleum consumption.

In December the Congressional Research Service warned that even devoting every last ear of American-grown corn to ethanol would not create enough "renewable fuel" to meet federal mandates. According to a 2007 OECD report, fossil-fuel production is up to 10,000 times as efficient as biofuel, measured by energy produced per unit of land.

Now scientists are showing that ethanol will exacerbate greenhouse gas emissions. A February report in the journal Science found that "corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years . . . Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%." Princeton's Timothy Searchinger and colleagues at Iowa State, of all places, found that markets for biofuel encourage farmers to level forests and convert wilderness into cropland. This is to replace the land diverted from food to fuel.
I love it too when the economic arguments additionally note that the environmental solutions don't even come close to attaining the advertised goal of the environmental movement (i.e., "curing" global warming), but at the same time I don't like it, because it implies that one has accepted the junk science to begin with. Don't fret, environmentalists: I'm sure that one of Al Gore's non-peer reviewed computer models will prove next week that Congressionally-mandated fuel cell cars will nullify the power of the Sun -- that huge bright orb that actually contributes 99.99% of all natural global warming and cooling cycles. Okay, so that's not scientific fact. But neither is Al Gore's claim that the Burmese cyclone was caused by global warming. Who needs facts when one peddles in human misery, eh Al?

Labels: climate, Economics, energy, global warming, Oil

Speaking of energy, we can't help but give more attention to a recent press release from some of the Senate's leading liberals. Charles Schumer, Byron Dorgan, Bernie Sanders, Bob Casey and Mary Landrieu are demanding that President Bush tell OPEC nations to increase their oil supplies or risk losing arms deals with the United States. The Senators say U.S. consumers need the price relief that only increased oil production can bring.

Yes, that Senator Schumer and that Senator Dorgan, both of whom voted against increasing U.S. oil production because they couldn't abide drilling across 1% of Alaska's wilderness. Yes, that Senator Casey, who has called for mandatory reductions in emissions of carbon dioxide. At least Senator Landrieu of Louisiana has fought to allow more offshore drilling in the Gulf of Mexico.

All of these Senate Democrats are willing to accept greater carbon emissions, as long as we can also outsource jobs in the petroleum industry to Middle Eastern dictatorships. The Senators do aver that "some of us have concerns in general about arming this region to the teeth," but apparently cheap fossil fuel buys a lot of peace of mind.

A special word of concern about Mr. Sanders: He is the only avowed socialist in Congress, but the Vermonter appears to be losing his religion over $122-a-barrel oil. By signing this letter, not only is he officially recognizing the law of supply and demand; he's also proposing a more crassly commercial trade of guns for oil than anything we've ever heard from the most candid realpolitician.

To top it off, the Senator whose Web site proudly proclaims that the first bill he introduced was to combat global warming now wants more fossil fuels ready for burning. We hope his friends are closely watching Mr. Sanders, in case he blows a gasket over all of this cognitive ideological dissonance.

--Wall Street Journal

Labels: Congress, democrats, Economics, energy, Hypocrisy, Oil

[WND] A study published in Science Magazine today presents new evidence supporting the abiotic theory for the origin of oil, which asserts oil is a natural product the Earth generates constantly rather than a "fossil fuel" derived from decaying ancient forests and dead dinosaurs.

The lead scientist on the study – Giora Proskurowski of the School of Oceanography at the University of Washington in Seattle – says the hydrogen-rich fluids venting at the bottom of the Atlantic Ocean in the Lost City Hydrothermal Field were produced by the abiotic synthesis of hydrocarbons in the mantle of the earth.

The abiotic theory of the origin of oil directly challenges the conventional scientific theory that hydrocarbons are organic in nature, created by the deterioration of biological material deposited millions of years ago in sedimentary rock and converted to hydrocarbons under intense heat and pressure.

While organic theorists have posited that the material required to produce hydrocarbons in sedimentary rock came from dinosaurs and ancient forests, more recent argument have suggested living organisms as small as plankton may have been the origin.

The abiotic theory argues, in contrast, that hydrocarbons are naturally produced on a continual basis throughout the solar system, including within the mantle of the earth. The advocates believe the oil seeps up through bedrock cracks to deposit in sedimentary rock. Traditional petro-geologists, they say, have confused the rock as the originator rather than the depository of the hydrocarbons.

Lost City is a hypothermal field some 2,100 feet below sea level that sits along the Mid-Atlantic Ridge at the center of the Atlantic Ocean, noted for strange 90 to 200 foot white towers on the sea bottom.

In 2003 and again in 2005, Proskurowski and his team descended in a scientific submarine to collect liquid bubbling up from Lost City sea vents.

Proskurowski found hydrocarbons containing carbon-13 isotopes that appeared to be formed from the mantle of the Earth, rather than from biological material settled on the ocean floor.

Carbon 13 is the carbon isotope scientists associate with abiotic origin, compared to Carbon 12 that scientists typically associate with biological origin.

Proskurowski argued that the hydrocarbons found in the natural hydrothermal fluids coming out of the Lost City sea vents is attributable to abiotic production by Fischer-Tropsch, or FTT, reactions.

The Fischer-Tropsch equations were first developed by Nazi scientists who created methodologies for producing synthetic oil from coal.

"Our findings illustrate that the abiotic synthesis of hydrocarbons in nature may occur in the presence of ultramafic rocks, water and moderate amounts of heat," Proskurowski wrote.

The study also confirmed a major argument of Cornell University physicist Thomas Gold, who argued in his book "The Deep Hot Biosphere: The Myth of Fossil Fuels" that micro-organisms found in oil might have come from the mantle of the earth where, absent photosynthesis, the micro-organisms feed on hydrocarbons arising from the earth's mantle in the dark depths of the ocean floors.

Affirming this point, Proskurowski concluded the article by noting, "Hydrocarbon production by FTT could be a common means for producing precursors of life-essential building blocks in ocean-floor environments or wherever warm ultramafic rocks are in contact with water."

Finding abiotic hydrocarbons in the Lost City sea vent fluids is the second discovery in recent years adding weight to the abiotic theory of the origin of oil.

As WND reported in 2005, a NASA probe to Titan, the giant moon of Saturn, discovered abundant Carbon-13 methane that the agency declared to be abiotic in origin.

Labels: climate, energy, global warming, Oil

This continues my thoughts from a few days ago.

Brazil's Not Peaking
By INVESTOR'S BUSINESS DAILY Posted Friday, December 14, 2007 4:20 PM PT

Energy: Global warming doomsayers have a mirror canard of doom in the peak oil theory, suggesting that the world is running out of oil. So is it? Not with countries like Brazil still not even done discovering it yet.

Last week came news that Brazil may be sitting on even bigger oil deposits than the huge Tupi field discovered just last month. According to Bloomberg News, if a geological formation beneath a two-mile layer of salt in Brazil's Santos offshore basin is oil-bearing, it may hold "significantly more" crude, says Gustavo Gattass, an analyst with UBS Pactual in Rio de Janeiro.

That's no small thing — Tupi alone almost doubled Brazil's oil reserves and may raise Brazil to the rank of 10th biggest oil producer from 17th currently. Awed at the good fortune, Brazil's president, Luiz Inacio Lula da Silva sighed: "God must be Brazilian."

Wait a minute. Wasn't oil supposed to be running out? Wasn't all the oil out there already discovered? If this new "Sugar Loaf" field in Brazil pans out, the world oil picture won't be the same.

Brazil will become an even bigger exporter in a decade or so than projected and could put pressure on the club of petrotyrants that now has a monopoly on resources. Best of all, it throws doomsday assumptions about oil "peaking" on its head.

The world produces about 85 million barrels of oil a day, according to the International Energy Agency. Global energy demand is expected to rise 55% from 2005-2030. Peak oil theories abound that new discoveries are not keeping up with oil usage. But it's significant that the new demand also is fostering big new discoveries, largely from the very countries where demand is growing most.

Peak oil advocates claim that the world is running out of oil unless the West gives up its energy-consuming lifestyle. Like global warming and population-bomb Malthusianism, it's essentially junk science because it operates on a static model. Crucially, it leaves out the politics of whether oil companies are allowed to discover or not.

Might the recent shortage of new oil on the market have something to do with bans on offshore drilling, as in the U.S.?

Might this lack of new oil have something to do with the fact that less-efficient state oil ownership has grown globally to 80% of all reserves, while countries such as Venezuela have begun seizing private oil properties?

Might the fact that big emerging markets need oil badly and don't know where to get it motivate them to find more themselves?

Believing in their potential and determined to get rich, these countries are the ones making some of the most dramatic new energy discoveries this year. Besides Brazil, China has made 10 major new discoveries this year alone. Its Bohai Bay discovery last May, its largest in four decades, added 7.35 billion barrels of reserves. India, once viewed as an energy no-hoper, is also finding energy offshore, and Russia already is a major producer making itself bigger.

Meanwhile, last year Mexico made a huge offshore discovery it has yet to tap. And in the tiny area where U.S. energy companies are permitted to drill offshore in the Gulf of Mexico, Chevron, Statoil and Devon Energy made the biggest discovery since the Alaska Prudhoe find decades ago, called "Jack 2." It's so big it could add 50% to the U.S.' 29 billion barrels of domestic energy reserves.

"The world is not running out of oil," said Daniel Yergin, head of Cambridge Energy Research Associates and one of the world's leading oil experts, in a recent interview with Les Echos in Paris.

Yergin noted that technological breakthroughs also are enabling the production of more energy. Not only can new technologies recover resources from old wells previously thought tapped out, it can create oil from formerly useless resources, like tar sands. It also can recover oil and natural gas from previously impossible geography, like the deep blue sea miles beneath the surface — which will be Brazil's challenge.

Brazil's discovery isn't just wonderful news for Brazil — it's a lesson for the West. Not only is there more oil out there than doomsayers claim, but it takes political will to ignore the naysayers and get out there and discover more.

The best part about Brazil's will to drill is it exposes the peak oil crowd for what it is: a group with a radical agenda that has less to do with science than with expounding "Western guilt" about its economic success, which is built on oil. Emerging Brazil has no such qualms, and shows just how useless such hang-ups are.

Labels: climate, energy, global warming, Oil

Reasonable people can debate whether crude oil supplies are of a peak or abiotic (i.e., petrolium formed from nonorganic means) nature.

On the latter, a few years ago researchers witnessed "the production of methane under the conditions that exist in the Earth's upper mantle for the first time." According to Physics World, "The experiments demonstrate that hydrocarbons could be formed inside the Earth via simple inorganic reactions -- and not just from the decomposition of living organisms as conventionally assumed -- and might therefore be more plentiful than previously thought."

Similarly, NASA's Hasso Niemann found that "abundant methane of a non-biologic nature is found on Saturn's giant moon Titan..." giving rise to the thought that not only might our oil worries be for naught but that there's certainly far more about energy that we don't understand. These discoveries, if fully validated, would undercut political movements that rely on the doomsday theories that oil is finite and we're close to capping its production.

As with all neo-environmental movements, however, some persons practice it to the extreme.

Meet the Wissners.

MIDDLEVILLE, Mich. -- It was around midnight one evening in November when Aaron Wissner shot up in bed, jolted awake by a fear: He wasn't fully ready for the day when the world starts running low on oil.

Yes, he had tripled the size of the garden in front of the tidy white-clapboard house he shares with his wife and infant son. He had stacked bags of rice in his new pantry, stashed gold valued at $8,000 in his safe-deposit box and doubled the size of the propane tank in his yard.

"But I felt panicky, like I needed more insurance," he says. So the 38-year-old middle-school computer teacher put on his jacket and drove to an all-night gas station, where he filled three, five-gallon jugs with gasoline.

"It was a feel-good moment," says his wife, Kimberly Sager. "But he slept better."
Okay, first off, this guy is a moron. The only thing worse than when stupid people make the news is when stupid people make the news on the false implication that they're smart.

There is something to be said for economic laws of scarcity: artificial scarcity (thanks to the dim-witted, panic-sparked actions of "normal" Americans like the Wissner-Sagers) will drive prices up, and the very energy-based corporations, industries, lobbyists and politicans whom one would expect to be hurt by said scarcity would actually profit the most from it.

But, even so, let's entertain this Hollywood B-movie plot line and suppose that the Wissner-Sagers are right -- and oil production will suddenly peak. Exactly how far do the Wissner-Sagers expect 15 gallons (i.e., one gas tank) of fuel and $8,000 to get them before they're stuck with the rest of us? All this schmuck did was lose a night's sleep.

Besides, if things really did go that sour there's only one thing that will be worth a damn -- a gun and a lot of ammunition.

Labels: Economics, energy, folly, Oil

Here's the problem: The U.S. stopped investing in Iran's energy industry in the 1990s thanks to sanctions imposed during Bill Clinton's presidency. Unfortunately, Europe stepped in to fill the void, with state-owned oil firms providing capital and energy technology. Today 80% of the Iranian government's revenue comes from oil exports and sales. Without Europe's support, the theocracy's fiscal lifeline would be a very thin thread.
-- Roger Stern

There's a number of interesting points to what is a pretty complicated issue. After all, it's not every day one reads something in the WSJ critical of sanctions against Iran.

There's a saying that NY Times' Thomas Friedman likes to apply to Middle Eastern oil regimes: the inverse of "no taxation without representation" means that oil regimes don't feel the need for representation since they don't tax their people (because of oil revenues).

One can apply that new adage to all the calls for US energy independence or our relationship with Saudi Arabia (among others). If we absolve ourselves from Middle Eastern oil we can expect to lose the only influence - the almighty buck - we ever had with them, just as we lost it with Iran.

Other countries will fill that market void - indeed, as much as a law as gravity - and attain the influence.

So, maybe we should be careful what we wish for.

Labels: energy, Iran, Oil, Saudi Arabia