Bread, circuses, and gas-tax holidays
posted at 10:00 am on May 8, 2008 by Ed Morrissey
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Shouldn’t the gas-tax holiday idea have died with Hillary Clinton’s campaign hopes last Tuesday? Not according to economist Bryan Caplan, who explains in the New York Times that it might have limited value in keeping Congress from doing something even more stupid in response to rising gas prices. The problem that Caplan’s explanation creates is that stupid policies are not necessarily exclusive to one another:
The main causes of high gas prices are probably factors beyond our control, like rapid growth in China and India and low real interest rates. But voters don’t want to hear this; they want politicians to “do something!”
During our last big energy crisis, in the 1970s, “something” turned out to be a salad of populist nonsense: price controls, rationing, windfall profits taxes, arcane loopholes and lots of lawsuits. That political response turned an inconvenience into a disaster.
We can do better this time. Since in an election year Congress will feel compelled to show the voters that it feels their pain, let’s do something that at least keeps energy markets in good working order. The tax holiday fits the bill. Markets will adjust to it, no problem. And it won’t cost much — the estimated $9 billion in lost revenue is about $30 per person. That’s not a bad price to pay for a little insurance against a rerun of misguided ’70s measures.
Second, even a “giveaway” to the oil industry sets a positive course for the future. During the last crisis, the industry was a scapegoat for scarcity. Politicians scrambled to stop oil companies from profiting from the crisis, even though temporarily high profits end shortages by giving businesses an incentive to figure out how to increase output.
It’s naïve to think that the oil companies have forgotten the ’70s. They know there’s a decent chance that economic populism will return. In fact, it already has: Senator Clinton’s full proposal is to combine her tax holiday with a ’70s-style windfall profits tax.
Which is why Caplan’s advice makes no sense. The gas-tax holiday doesn’t preclude more foolish policy; if anything, it invites ideas like windfall-profits taxes. The government will seek to recoup the lost revenue in some manner, rather than doing something useful like cost-cutting. That’s why Hillary Clinton wedded the two together. George Bush would veto such a tax scheme this year, and a President McCain would veto it next year, but either a President Obama or President Hillary Clinton would not just sign a windfall-profits tax but actively encourage Congress to pass one.
It’s long past time for a little straight talk, my friends, on the uselessness of the gas-tax holiday. Gas prices did not skyrocket because of federal taxes on gasoline, and their removal will shave about $2.50 off a fill-up. The holiday solves nothing and in fact makes the problem worse, because an initially lower price will increase demand, which will drive prices higher again, which the reapplication of the tax will exacerbate. It delays consideration of a responsible energy policy that could actually address the price of gasoline as well as the rest of the energy policy that Congress has muffed for the last six years after 9/11.
In that sense, Barack Obama is right: the holiday is nothing more than an election-year pander.
After the 9/11 attack made clear that war would create pressures on oil supply, as well as the rapid increase in demand from India and China, the US needed to start planning for the long term on energy. We needed to start drilling and producing our own oil in much higher quantities, and we needed to build refineries to produce our own gasoline; we’re importing 20% of the latter now, and that number will rise significantly without more refinery capacity in our own nation. Expanding both would lower prices and create American jobs, both beneficial to our economy.
We also needed less pandering on renewable energy sources. Instead of focusing on nuclear energy and clean coal, we offered billions in subsidies and mandates for ethanol, which not only makes the energy we use less efficient but has begun to seriously distort food markets around the world. Congress should have eliminated regional mixture mandates as Bush did after Katrina and Rita disrupted a major portion of our narrow refining capacity in favor of one national mixture to allow for maximum efficiency, and therefore cost reductions, in our supply.
None of these measures got serious consideration because of the same kind of short-term thinking exemplified by the gas-tax holiday. It would take years, Congress said in 2002, to bring all of these assets on line in sufficient force to make an impact on energy prices. Well, here we are, years later, paying for that short-term thinking. Where will we be years from now, after listening to that excuse again?
John McCain, Hillary Clinton, and Barack Obama had better start offering real solutions to the energy crisis now if we expect to ever solve it at all. It will require long-term restructuring of our energy production and necessarily require us to produce more of our own resources domestically while speculative solutions continue to develop. Otherwise, the only holiday any of us will see is when we spend all weekend at the pumps waiting for our weekly ration of fuel.
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Drill. In. Anwar.
HotJavaJack on May 8, 2008 at 10:04 AM
I just can’t grasp why it’s conservative to oppose a reduction in taxes, even if it is only temporary. Most people don’t realize that 20 cents of every gallon goes directly to the federal government. And now several states are saying they will follow suit and have a gas tax holiday of their own.
Imagine the instructive value of suddenly having everybody in those states pay 50 cents a gallon less for gasoline for 3 months…..and then when the holiday expires, watching the price skyrocket again in one day.
funky chicken on May 8, 2008 at 10:06 AM
Symbolism sucks.
a capella on May 8, 2008 at 10:07 AM
But liberals like Obama instinctively say that every tax cut is “pandering”.
jgapinoy on May 8, 2008 at 10:10 AM
To what end? It accomplishes nothing and those revenues will be found elsewhere. How about attacking the energy problem head on for once? More refineries, nuclear plants, ANWAR drilling, less regulation by the greenies. Those issues require political courage. PR political moves don’t get it done.
a capella on May 8, 2008 at 10:14 AM
Why ethanol is a bad idea from the Federal Government’s own Fuel Economy Webpage.
BohicaTwentyTwo on May 8, 2008 at 10:15 AM
I think people are missing one key to this whole debate.
When talking GAS, Price does NOT affect demand. People HAVE to drive.. to work, kids, grocerys, we have created a society where mobility is a need.
Some trips are optional, and price will affect those, but the vast majority of my driving I HAVE to do.
The Gas tax holiday will not affect how people drive, but will affect one of the good things this government actualy does, which is fix roads.
However this:
Just plain pisses me off. America today only produces 57% of the oil we produced at peak in 1970. We DECREASE oil production every year, while increasing consumption due to increaseing population (those 20 million illegals gotta drive to work you know).
Hmmm… interesting… I HAVE THE SOLUTION!!! 20 million is about 7% of America…. DEPORT THEM and we’d have a 7% decrease in consumption!!!
Romeo13 on May 8, 2008 at 10:16 AM
I wouldn’t mind if they started drilling off New Jersey or in Alaska. Why do the libs mind? They aren’t in a tizzy about drilling in the middle east. They don’t seem to care about the environment or the wildlife in the middle east, just in their own back yards. Such hippocrytes.
bloggless on May 8, 2008 at 10:21 AM
Can’t drill in new offshore fields.
Can’t drill in ANWR.
Can’t build more refineries.
Got the have dozens of custom boutique blends.
Government won’t step up to the plate.
Government keeps trying to fool us by slapping band aids onto slashed arteries.
Here’s a solution for government, grow a set! If there’s a gas crisis get a handle on it now. There should be two options for Government.
Ration it.
Shut up about it if you’re not going to do anything.
Oldnuke on May 8, 2008 at 10:27 AM
Why do you all assume the 3 month “teachable moment” on taxes and doing something long term about domestic energy supply are mutually exclusive?
Most people have no idea how much they pay in taxes. Federal income rate cuts are hard to sell because most folks don’t write checks on April 15; they just have taxes withheld from their paychecks and don’t pay much attention.
If that practice stopped for 3 months, and everybody had to line up to write a check for their monthly withholding, tax cuts would become much more interesting to people with jobs. The summer gas tax holiday is the same thing. It will open the eyes of millions of Americans to how high our taxes truly are. How can that be a bad thing?
funky chicken on May 8, 2008 at 10:28 AM
As a taxpayer I would love it if someone would pander to me once in a while :)
jcarl4283 on May 8, 2008 at 10:29 AM
sad thing is, on my last job site, 60 carpenters and laborers show up in 50 rides, few carpool, for various reasons, many unavoidable.
the “immigrant” work force( at one time was about 40 folks) on the e.i.f.i.s. and pools show up, literally, by the van load.
palefaced on May 8, 2008 at 10:29 AM
Because the rank and file still won’t see it. All they’ll see is a slight drop in price at fill up time. The only real winner would be some politician crowing about what a great job he/she had done to control gas prices.
Oldnuke on May 8, 2008 at 10:31 AM
if our government had to actually pay for their own fuel consumption they would come up with realistic solutions to the “crisis”
palefaced on May 8, 2008 at 10:32 AM
Well said, Cap’n. You hit all of the major points. Drill now! Off of Hyannisport, right in front of the Kennedy compound. Who cares if there isn’t any oil there. It’d be worth it anyway.
pistolero on May 8, 2008 at 10:34 AM
China and India are bidding up the price of oil. If we stopped doing business with them they might not have the money to bid against us.
Owing to the fact that it is almost impossible to avoid buying goods from the Chi-coms, would somebody please start a business called “China Free’ where there were no goods from China available in that store?
Global warming is of course caused by feminism.
If we went back to the days of ‘Father Knows Best’ where families had only one job, mothers stayed home, etc. There would be half the cars on the road and half the office and factory space to heat and cool. Traffic would be far less and cars would actually move. Auto emissions would be cut by 60%+ as a result.
Demand for fuel would be cut in half and prices would fall. We might even be energy self sufficient.
I blame liberals (and liberal groups) for all problems (real or immagined) because I can!
Cheers
The Rock on May 8, 2008 at 10:37 AM
The problem for politicians is, the Big, Screeching Mouths of the Enviro-whackos and Tree-Huggers.
And, until the voice of the anti-Enviro-whackos drowns them out, nothing constructive will ever be done.
Opposition to real solutions, needs a good swift kick in the groin.
franksalterego on May 8, 2008 at 10:42 AM
Except that won’t happen. A gas tax holiday won’t lower the price of gas at the pump. Anticipating the windfall profits tax, the companies would simply keep the revenue — i.e., effectively raise their prices — to pay the tax.
paul006 on May 8, 2008 at 10:49 AM
There’s not going to be an increase in drilling in the ANWR, or offshore, in the near future. It’s not really feasible politically, and even if Congress were to approve it today, the operation would not be up and running for at least five years. Even then, the reserves are only projected to hold us off for a few years anyway (even as low as 1.5 years), so there is very limited benefit to drilling there. The long-term solution is to move to nuclear power, making use of plug-in automobiles as a general means of transportation, along with increased federal assistance to emissions sequestration from coal-fired power plants.
The temporary “gas tax holiday” really has very little to do with the importation/consumption of oil domestically, and a whole lot to do with lowering the drag on our anemic economy that is caused by the current high oil prices. In the short term, avoiding a deep recession when faced with increased competition overseas is far more important than trying to tap into a few extra barrels of oil. I understand the impulse to prioritize energy independence, but that priority order is wrong given the current economic circumstances. I though republicans were supposed to understand this stuff. Jeez.
Big S on May 8, 2008 at 10:49 AM
John McCain, Hillary Clinton, and Barack Obama had better start offering real solutions to the energy crisis now if we expect to ever solve it at all
Let’s see … hmmm … hold my breath waiting for the above or get myself some gas tax holiday right now … hmmm …. which will it be? Hold my breath or get me some immediate relief …. hmmmm.
I just can’t seem to make up my mind.
pabarge on May 8, 2008 at 10:50 AM
I have the answer – DRILL on US soil!!
And kick the eco-Marxists to the curb.
DerKrieger on May 8, 2008 at 10:52 AM
Call me a radical, but a tax is a tax. It’s my money being confiscated, and even if I get one penny of relief via baldfaced pandering, it’s still a victory.
It sickens me when conservatives ignore a cornerstone of our philisophy—tax relief—because they deem it “too small.” Weak.
And again, if you buy into the “gas tax pays for highways” shellgame — hey how’s that other “trust fund” scheme working out?
Cuffy Meigs on May 8, 2008 at 10:55 AM
Why? Isn’t Newt Gingrich advocating this same thing? McCain can support this and claim it’s a concession to those pesky conservatives.
As for the people who can’t understand why on earth we aren’t salivating with gratitude over this “brilliant” scheme; It’s sort of like when Jack Kemp proposed that America establish Chinese-style Free Enterprise Zones. Accepting the notion that limited and occasional freedom is a benevolence from the government isn’t an improvement; it’s another step down the road to serfdom.
As for the gas tax itself, they can triple it as far as I care. I’m willing to listen to any new tax scheme that starts out with, “First, we eliminate the income tax…” But I haven’t heard those words yet.
I thought Bush’s “rebates” were a cute gimmick at first – a jab at all the moronic accounting tricks the government uses to make us think it’s something besides a giant parasite. But if that was originally intend as a joke, it’s not funny anymore. If some people want to jump up like a trained seal whenever someone dangles a “tax treat” in front of you, more power to them. But some of us are holding out for red meat. And, mark my words, we are eventually going to get it – one way or another.
logis on May 8, 2008 at 10:56 AM
Big S – you’re a big dummy as Mark Levin would say. Electric cars? Do you know how long the transition period would be to non-petroleum based alternatives would be? Decades. The ROI on more drilling on US territory is much shorter than any alternative. And we don’t need to use our own resources just to bring down prices but also to deprive terrorists (Saudis) and whackos (Chavez) of dollars with which to harm us.
Switching away from fossil fuels for the production of electricity is magnitudes of order easier than switching for use in transportation. If the eco-Marxists had not gotten in the way we could very well have ~50% nuclear by now. Our current gas crisis is primarily the fault of government and not any market shortcomings. Politicians need to get teh Hell out of the way.
And take a minute to Google “Bakken Oil Formation”
DerKrieger on May 8, 2008 at 10:58 AM
Funny you should mention that. Given the curreent structure of our economy and its energy usage, the higher fuel prices (and taxes!) go, the less revenue the federal government will get from the income tax. I guarantee it.
Big S on May 8, 2008 at 10:59 AM
I agree with you in general, but I do dispute the highlighted assertion.
I would argue that the removal of the fed tax would do very little to change the price of gas, in fact I would expect it to remain the same. The 18.5c would simply go to its rightful owner, the gas company.
Oh, perhaps for PR reasons the gas companies might shave a bit off the price, but they would be nuts to do so.
LimeyGeek on May 8, 2008 at 11:00 AM
Take the money. It belongs to you anyway. Just don’t expect the holiday to fix the problem,..or the roads. It’s a head fake.
Big S put his finger on it.
a capella on May 8, 2008 at 11:01 AM
ANWR…
This is what grinds my hump:
The BULL-SH!T…The REALITY
franksalterego on May 8, 2008 at 11:04 AM
Well that will never happen Ed.
The choices for congress are clear. Either develop a long term strategy that will involve endless hours of time and research, institute a plan that is fair to the oil comapnies and consumers alike, and is so meticulously prepared that a successful outcome is inevitable, or …… take a vote, pass a bill and give everyone a stack of nickels to spend on lottery tickets.
Do the math. Nothing will change. Wave to the Russians and the Chinese as they pass us by.
fogw on May 8, 2008 at 11:04 AM
Brilliantly persuasive strategy for achieving long-term, structural tax relief: deride short-term, incremental (yet pandering) tax relief as “gimmicky” and “bread & circuses.” If you won’t accept small victories, good luck with your IRS-destroying dreams…
To be clear, even if the gas tax cut only lines the pockets of oil companies — that’s still a good thing. It’s not in the gubmint’s pocket.
Cuffy Meigs on May 8, 2008 at 11:08 AM
I would like congress to simply remove themselves entirely from the equation. No plan. No solution. Just quit fucking things up.
Pardon my french
LimeyGeek on May 8, 2008 at 11:11 AM
Not that long. The technology for electric vehicles (for personal transit; I’m not talking about heavy shipping – yet, anyway) is available and in use. Hybrids are already catching on (due to hig gas prices, I concede), and fully electric vehicles with excellent performace specs are being produced right now. If we want to push ahead with these, the federal government should offer extra tax incentives (aside from the lower fossil fuel usage) for the manufacture and purchase of new electric vehicles.
If you think our domestic oil reserves are large enough to fuel our economy (as it is now) for very long, you’re the one who is deluded. We will have to move to electric power for transportation (with nuclear sources) sooner or later; if the technology exists now, we should try to do it sooner.
My point about the gas tax holiday is that the response time for increasing drilling and/or increasing electric power are too long to help us with the current bad economic situation. A “gas tax holiday”, properly administered, could help a great deal. In the meantime, when we look ahead to future energy sources, we should probably try to aim for the one that will work for a long time (nuclear), and avoid the temptation of the one that will largely be a dud (ANWR drilling).
Big S on May 8, 2008 at 11:12 AM
The US still has oil-fueled power stations producing ELECTRICITY!!!
How about lifing the moratorium on new Nuclear Power Plants?
It would be several years before the oil-fueled plants could shut down; but at least it’s a step in a better direction.
Oh and – drill for domestic oil
kooly on May 8, 2008 at 11:13 AM
Yes, but what about the gas we’d waste tracking them down, chasing them, driving them across the border and coming back? ;)
MadisonConservative on May 8, 2008 at 11:15 AM
Ed,
Why can’t we have all of it?
Frankly, I only drive when I must. Otherwise I stay home. No trips to the country, no extra trips to Grandma’s house, no NOTHING except Home -> Work -> Home, with the occasional trip to Home Depot or Lowe’s to pick up something for the house.
I own a Jeep Liberty, so my gas mileage isn’t all that hot. But I NEED the cargo capacity for those trips to Home Depot (Just bought the house last spring, still doing fix-up jobs) and I NEED 4 wheel drive because I live in the Buffalo NY area and the roads are bad several days out of the year, but I still have to be at work. I can’t afford the payments on the more fuel-efficient but WAY over-priced “crossover” 4×4’s, so I can’t get anything more efficient (I am having to LEASE the Liberty as it is) and my old car, a 1998 Pontiac Bonneville clunker was even LESS efficient than my Liberty.
So here I am, with a FIXED amount of fuel that I need, and you are saying I shouldn’t get a price break, no matter how small, because Congress might also do something stupid like they did in the 70’s?
WHAT THE F–K?
I WANT the Gas Tax holiday. Frankly, I want Gas Tax Freedom. NO MORE gas taxes AT ALL. I ALSO want all the other good stuff mentioned here. More drilling at home. More refineries at home. More nuclear and clean coal power. Improvements to the power grid. NO subsidies for Ethanol.
But it can start with the gas tax holiday. It’s not going to cause me to drive more, but it will help my wallet out a bit. Even if it’s only enough to buy an extra coffee each fill up, I’ll take my money back, thank you very much.
wearyman on May 8, 2008 at 11:17 AM
Gas prices do affect gas consumption.
Many trips are optional, but even those trips can be driven in a more efficient manner.
High prices gives individual incentive to keep their cars in top shape.
Over the longer turn, high prices encourage people to buy more fuel efficient cars.
Both affects can be seen now, if you are willing to look.
MarkTheGreat on May 8, 2008 at 11:20 AM
So much paranoia in such a little package.
If the gas companies could control their prices this easily, why haven’t we been paying $5/gallon for decades?
If you answer competition, collect your gold star on the way out the door.
MarkTheGreat on May 8, 2008 at 11:23 AM
Big S, I don’t know where you have been getting your propaganda from, but the ANWR reserves are enough to satisfy all of the US’s consumption for more than a couple of years.
At a more realistic rate of production, they can increase our supply by several percent for decades. If you don’t think that this enough to matter, then you have never studied the issue.
As to the claim that it will take 5 years to get production going. I point out that we have been trying to drill ANWR for close to 20 years now.
MarkTheGreat on May 8, 2008 at 11:26 AM
Announce to drill in Anwr, fast trac the building of new refineries, drill offshore, and you will see the price of oil drop in half in one day, and continue to drop.
Meanwhile, a few speculators will be jumping out of windows, which will be entertaining.
right2bright on May 8, 2008 at 11:26 AM
I would bet that illegal immigrants use much less energy than does the average American.
MarkTheGreat on May 8, 2008 at 11:27 AM
No no no…they would be raising their profit margin. The price remains the same.
LimeyGeek on May 8, 2008 at 11:28 AM
You are correct, but even the “optional” trips have an effect on the health of the economy.
The reason for the disagreement here is that there are two groups of people with two very different sets of priorities. Some are more concerned with the long-term energy inependence of the USA, while others are more concerned with the short-term economic health of the country.
Big S on May 8, 2008 at 11:28 AM
A few shirts will be lost, for sure. C’est la vie.
LimeyGeek on May 8, 2008 at 11:29 AM
Wearyman,
What about two cars? Buy a used compact for trips to work, and everywere else that you need the hauling capacity of the 4×4. The odds are that your savings in gas will go a long way towards covering loan payments.
MarkTheGreat on May 8, 2008 at 11:30 AM
BigS,
Are you seriously claiming that these “optional” trips support the economy?????
What supports the ecomony is buying things. Whether this is done in one trip or 10 doesn’t amount to a hill of beans as far as the economy is concerned.
Do you also feel that car pooling is a drag on the economy?
MarkTheGreat on May 8, 2008 at 11:32 AM
I’m don’t know where you see paranoia in that comment, and I don’t disagree that competition regulates prices. Do you disagree that companies pass on the cost of their overhead, including taxes? If so, how do imagine they make a profit if they don’t pass the cost of business to the consumer?
paul006 on May 8, 2008 at 11:35 AM
Source, please?
IIRC, the estimates range from 4 billion to 12 billion barrels in ANWR. Given an average daily consumption of 20 million barrels, that’s between 200 days and 600 days if we get all of our oil from there. Since we will probably continue to buy oil from overseas, you can adjust those times apropriately. Most of the estimates you hear assume 5% of the daily consumption will come from ANWR, extending the estimated lifetime of the reserves beyond 10-20 years. However, that’s not really a state of energy “independence” if you ask me.
Big S on May 8, 2008 at 11:36 AM
Like buying the gas to fuel the extra trips?
Perhaps. With car-pooling comes a reduction in flexibility. One person can decide freely to go and shop wherever, but with multiple people, your mobility may be limited.
LimeyGeek on May 8, 2008 at 11:37 AM
Which is often “optional.”
Big S on May 8, 2008 at 11:37 AM
They can also internalize such costs, resulting in narrower profit margins.
LimeyGeek on May 8, 2008 at 11:38 AM
Interesting perspective.
Most women I know started working when they were single, kept working when they got married, and wanted to come home to raise their own children once they started having kids. Some moms choose to keep working full time, and that is their choice, but many moms continue to work out of financial necessity. While it’s true that families can downsize their lifestyle in order for mom to come home, it’s also true that for the last 60 years taxes and inflation have been increasing faster than salaries. It’s like the frog in the pot of cold water on the stove…the temperature has been going up slowly but steadily and the frog is getting lulled to sleep as it is being cooked. It is very, very difficult for a family to live on one income these days. Our nation would be better off if moms who wanted to come home could afford to do so.
Red Pill on May 8, 2008 at 11:42 AM
The gas-tax issue is a red herring. An aggressive pro-energy policy will do more for fuels prices than any short-cut tax cut, because the speculators will stop driving the price up (reports say at least 20% of the price of oil is a result of speculation in the futures market).
Forgive me for repeating a post from 25Apr08:
It’s time for Senator McCain to take the initiative, renounce the ‘global warming/climate change’ hysteria, and proffer a program of fast development of cheap, abundant American energy for the 21st century. Americans are tired of doom and gloom and talk of ‘rising prices’ and ’shortages’. It sounds like the ’70s, and if people think the Republicans are responsible, nothing will stop the far-left Democrats from rolling to victory in November. It’s time for Senator McCain to announce: “It’s morning again in America, and it’s going to be a bright day. Not if you elect the naysayers, but if you elect me, because I believe in freedom, liberty, progress, and growth.”
****AMERICAN ENERGY FOR AMERICAN GROWTH!******
****CO2 IS GOOD FOR AMERICA!*****
MrLynn on May 8, 2008 at 11:48 AM
Well, I just drilled a successful oil well down here in West Texas and am in the process of leasing some Bakken acreage in Richland County, Montana and northwest North Dakota.
Since the dumbasses who seem to comprise many of the voters like to elect greenies and anti-development types, then it’s hard for us oilies to be very sympathetic, especially when the REPUBLICAN nominee is as “Global Warmie”, carbon credit-loving and anti-drilling as that lying idiot McCain.
TexasJew on May 8, 2008 at 11:53 AM
I for one, won’t be driving my kids to the circus for bread.
It’s really the enviro-greenies that are harming the economy. Man, imagine how bad it would have been if Kerry was POTUS and had signed Kyoto! YIKES.
kirkill on May 8, 2008 at 11:55 AM
I noticed several people arguing drill in ANWR. Perhaps this would be ok, but people seem unable to negotiate on this. I’m an environmentalists and I would be glad to permit drilling in ANWR for extra protections on the Everglades and some other parks plus elimination of the Mexico City policy. What can’t our politicians cut a deal? Isn’t deal making part of their job description?
thuja on May 8, 2008 at 11:58 AM
Bingo !! Well said.
Here’s where we are. We are currently sitting on the HIGHEST accumulation of Known oil reserves in history, yet we also have the highest price for oil in history. Obviously something has distorted the relationship of supply and demand. If we have more oil than we have ever had before, and we do, then oil prices SHOULD be at an all time low, not at an all time high. So obviously, current oil prices are artificially high for whatever reason. What’s causing it?
We all know that futures trading can and does in some instances distort market pricing. But futures trading is regulated….. right? So that can’t happen ……. right?
But it seems there is a “backdoor” to futures trading that is completely unregulated. I didn’t know this myself until I read the article linked below. The writer, F. William Engdahl just might have the reason why we are awash in oil but still paying through the nose for it.
But to believe Engdahl’s theory, you would have to believe our government watchdogs have failed us again. But how hard is that to believe?
Take a look, it’s worth a read.
The article is long so let me just give you one of it’s most salient points, which is that oil prices began to increase dramatically shortly after the loophole for “futures” trading was opened.
Maxx on May 8, 2008 at 11:59 AM
Most of the estimates you hear assume 5% of the daily consumption will come from ANWR, extending the estimated lifetime of the reserves beyond 10-20 years. However, that’s not really a state of energy “independence” if you ask me.
Big S on May 8, 2008 at 11:36 AM
That’s an incredibly idiotic statement. ANWR will provide around a 25% (OR MORE)additional rise in our total national oil production.
Mr. Genius – what the hell is the point of “Energy Independence” if we can’t increase the amount of energy – especially transportation fuels – that we produce?
TexasJew on May 8, 2008 at 12:00 PM
Why no discussion of the fact that the gas tax holiday as McCain proposed would also suspend the 24.5 cents per gallon on diesel, a tax on truckers which adds up to a hell of a lot more than $30.00, and is inflating costs of everything we buy now?
I realize that this is only a temporary band aid and does not solve the larger problem, but I don’t dismiss it out of hand.
Regarding ANWR capacity:
Is ANWR alone the solution? No. Is it desperately needed now? Yes. While it would take a few years to get it up and running, a commitment to drilling there would affect the price of oil immediately as speculation would decrease.
By the way, how many people realize that the area we want to drill on in ANWR is only 2,000 acres (out of a total of 19.6 million)?
Buy Danish on May 8, 2008 at 12:04 PM
I noticed several people arguing drill in ANWR. Perhaps this would be ok, but people seem unable to negotiate on this. I’m an environmentalists and I would be glad to permit drilling in ANWR for extra protections on the Everglades and some other parks plus elimination of the Mexico City policy. What can’t our politicians cut a deal? Isn’t deal making part of their job description?
thuja on May 8, 2008 at 11:58 AM
No.
Nor is destroying our nation’s economy and children’s future for pandering to unemployed treehuggers a part of their “job” description.
Enjoy pushing your Yugo.
TexasJew on May 8, 2008 at 12:05 PM
Ed, you may not have heard this or looking back. But Don Young said yesterday to RAISE the Tax on Gasoline and Diesel to 1.00 a gallon. AND that it is the GENERAL PUBLICS Fault.
That man can rot in Hell… he for sure is NOT getting my freaking vote EVER again!
upinak on May 8, 2008 at 12:08 PM
Hey aren’t you suppose to be drilling that ugly area for oil for us! :)
upinak on May 8, 2008 at 12:09 PM
For how long? Please provide a source. Here’s a source sympathetic to drilling that is in line with my own numbers. Even assuming 16 billion barrels of recoverable oil, the 20 million barrel per day consumption of the USA gives a grand total of 800 days, or 2.19 years if we run exclusively on ANWR oil. If we somehow manage to extract and use all of the oil, and use the high estimate for total reserves of 31.5 billion barrels, that jumps to 1575 days. The 30-50 years estimate that they provide is (surprise) assuming a little less than 10 percent of our consumption will come from there. Now, I don’t discount the potential importance of that, but that’s an incredibly rosy view, especially since our daily consumption figures are likely to rise over that term. In any case, we are still going to be getting almost as much oil from overseas as we do now.
As far as the impact of ANWR drilling on the price of oil goes, even if that oil was free (which it ost certainly would not be), we’d still see a fairly small decrease (percentage-wise) in the price at the pump.
The only place I’ve ever seen the 25% figure you quote is in studies that forecast the total energy production if the 100% of revenues from the “free” oil were put into building solar panels and wind farms. There’s a lot wrong with that proposition, as should be obvious to anyone who looks at it.
Big S on May 8, 2008 at 12:14 PM
Hey aren’t you suppose to be drilling that ugly area for oil for us! :)
upinak on May 8, 2008 at 12:09 PM
But I have been – out in West Texas!
However, if they would let us, we’d be drilling that frozen godforsaken mosquito-ridden tundra right now.
I assume you’re talking about ANWR up in your neck of the woods and not here in Odessa, Texas. Which is also pretty ugly and godforsaken…
TexasJew on May 8, 2008 at 12:17 PM
Reading over the comments, I think you guys are missing the point. There is no shortage of oil. As far as drilling ANWR, I’m all for it. I say … DRILL IT BABY !!
But unless the regulatory problems are fixed that are artificially boosting oil prices to the sky, ANWR won’t help. Indeed we could find an ocean of oil and prices would remain artificially high until we call the government into account and demand they do their regulatory job.
Maxx on May 8, 2008 at 12:19 PM
Well-said.
One thing I can say in McCain’s favor is that he is on board stopping the ethanol madness train, and he did call it as a “scam” from the beginning.
For those who say that drilling in ANWR and offshore or building new refineries is not politically feasible, I respectfully disagree. We can win on this issue if we pick up the phone and dial it. If we could, er, harness our collective energy and press John McCain and our other representatives to do something now, they just might listen this time around.
McCain is not a complete idiot, and he knows that the economy is the number one issue right now, and if things don’t turnaround quickly he can kiss his White House dreams goodbye. The situation was not as dire as this when President Clinton vetoed the ANWR bill the last time around. Different circumstances provide new opportunities.
It requires the American people being as angry about this issue as we were about the immigration bill (and some PAC rolling out an ad campaign to counter the envirowackos with cold, hard facts).
Buy Danish on May 8, 2008 at 12:24 PM
The only place I’ve ever seen the 25% figure you quote is in studies that forecast the total energy production if the 100% of revenues from the “free” oil were put into building solar panels and wind farms. There’s a lot wrong with that proposition, as should be obvious to anyone who looks at it.
Big S on May 8, 2008 at 12:14 PM
Your long-winded argumentation is meaningless, I’m afraid to say.
Solar and wind are jokes, their numbers are crap. It’s all a big scam.
And in the time that it takes to read your post, we are losing the battle a little bit more.
ANWR will put up to 1.5 million per day into the pipeline for the next 25-30 years or so. That’s what we got out of Prudhoe Bay, which was also opposed by the idiot greenies.
A 2.5 million dollar wind turbine, when you take all the fudge factors out that proponents claim, will produce a BTU equivalent of 4 BOPD – about 1/400,000 of that. And it takes a tremendous amount of energy – primarily oil and gas – to produce a huge steel structure like a wind turbine, which is still a huge machine with maintenance and fatigue issues.
And of course, the most elementary way to look at this nonsense is the question: what the hell does a wind turbine or little crappy solar panels have to do with us importing 14+ million barrels of oil per day?
The answer is — nothing!
TexasJew on May 8, 2008 at 12:29 PM
MrLynn on May 8, 2008 at 11:48 AM
Excellent Post MrLynn !
And not only is CO2 good for America.
****CO2 IS GOOD FOR THE WORLD!*****
No food crop grows without the wonderful blessing of CO2, and the world is hungry. And the atmosphere is CO2 deficient, we need MORE CO2, not less.
Maxx on May 8, 2008 at 12:31 PM
Yes but,
All those burritos, contributing to Green-House Gas.
dicotomy
franksalterego on May 8, 2008 at 12:33 PM
Hey BigS. I actually work with Oil and gas companies up here in Alaska. I have actually been to ANWR. Did you know there are actually drilled Wells there. They are exploration with the BLM and the USGS. But why can’t anyone even study the area without having to deal with a lengthy process?
Also the 10 year factor to develope ANWR is a joke. I would give it 3 yrs. Even with ALL the enviromental regualtions.
And as for what and how much oil is actually in the ANWR area, is unknown. They know it is there, they know it has good PSI and can be taken out effectively. What they don’t know is how much, though it is and has been tested to have large quantities, and it also is very sweet…. i.e. nice crude! But they don’t want to open it up because someone said it is a sanctuary and OMG it might hurt a caribou.
I would love for those people to tell me it hurts a Caribou when you see them birthing under the damn pipelines.
Ugh this subject frustrates me sometimes.
upinak on May 8, 2008 at 12:40 PM
Jew Baby, ANWR is about as ugly as it gets. It is brown, clodded tundra all over. When the Foxes (which have rabies) dig on top of the pingo’s for a den and you don’t know it, you might get bit. Also the areas around Kaktovik are flood planes, so you see an occational seal or wolf and fox laying there decomposing.
You sure West Texas is that bad? I hear that the area you drill is fun because there could be a trap on the top soil and you dig 2 ft and there is a oil pool. LOL
upinak on May 8, 2008 at 12:45 PM
Nine out of 10 Caribou support drilling
Maxx on May 8, 2008 at 12:45 PM
Here is a photo gallery of ANWR.
Buy Danish on May 8, 2008 at 12:45 PM
The paranoia is the belief that none of the oil companies will pass along any of the savings from a gas tax cut.
MarkTheGreat on May 8, 2008 at 12:49 PM
Yes,
Rapidly becoming the #1 Tourist Destination.
in a cocked-hat
franksalterego on May 8, 2008 at 12:52 PM
That isn’t ANWR… that is around Deadhorse and Prudhoe Bay/Kuparuk/Alpine/Badami. I am not sure why they put those photos on a ANWR site.
If you see pipeline.. that is NOT ANWR. If you see Kaktovik.. that is only Half of the Village since half of it was burned down 2 yrs ago in a fire in the middle of winter.
upinak on May 8, 2008 at 12:54 PM
you are not allowed to Walk on or near ANWR without a permit.
Also here is some information for anyone intertested.
upinak on May 8, 2008 at 12:57 PM
The perfect is the enemy of the good.
Isn’t this a no-brainer?
funky chicken on May 8, 2008 at 1:05 PM
Thanks. Good read and quite enlightening.
a capella on May 8, 2008 at 1:10 PM
Of course it is, but remember, we’re dealing with Democrats.
Maxx on May 8, 2008 at 1:11 PM
Yes, they can. And no doubt they do, here and there. But companies — especially publicly-traded ones — don’t exist to minimize profit; they exist to maximize it.
paul006 on May 8, 2008 at 1:13 PM
But if he’s in favor of drilling in ANWR, which has been fetishized beyond its value in the overall scheme of things, he’s better than McCain, right? His bridge to (kinda) nowhere was a good deal too, right?
I heard on the news that there is a proposal out there to have the government build refineries on closed military bases…which would be OK except for it should be the job of the oil companies to build refineries, right? Are we headed toward nationalized energy production? Or will the government just take our tax dollars and use them to take all investment risks for the oil industry now?
funky chicken on May 8, 2008 at 1:14 PM
LOL …. That was seriously funny.
Maxx on May 8, 2008 at 1:16 PM
A lack of understanding of the economic function of prices causes people to naively assume that removing a tax will lower the price. This need not be the case. I expect the price to remain the same, or maybe a drop of a few pennies.
LimeyGeek on May 8, 2008 at 1:18 PM
Um, I think Ed would argue that point. Most of the people here who oppose the idea of the gas tax holiday are likely registered GOP.
funky chicken on May 8, 2008 at 1:19 PM
Environmentalism and global warming are basically means by with the elitist hope to rob you of all your money and starve you to death at the same time.
Maxx on May 8, 2008 at 1:21 PM
Um, not me, I’m as republican as Abraham Lincoln and I’m happy to take the tax break, even if only for a day.
Maxx on May 8, 2008 at 1:24 PM
McCain has said he will NEVER drill ANWR. One of the few things I don’t care for him about.
Don Young is just crazy… the man has gone mad.
But the Bridges to nowhere cracks me up. One Bridge is from Anchorage (pop of 300K) to Wasilla/Palmer (pop of almost 80K). The State of Alaska had half the money to pay for that bridge (and is still holding it) and was going to make a toll for it as well. But hey… Alaska is just a joke with oil that you all want so damn much. We want a bridge, you want oil….
upinak on May 8, 2008 at 1:34 PM
Where did you hear that Funky? Got a link or something? I am curious, not that I don’t believe you… but that would be interesting to read.
upinak on May 8, 2008 at 1:36 PM
TexasJew and upinak:
All of that experience drilling oil wells can’t compensate for a little math. The facts are that even the rosiest predictions for the total ANWR reserves and the accessibility therof, won’t make the USA energy independent. It’s not even close. They may not even help very much with the price of crude, either, depending on how much is there and how difficult the extraction turns out to be. This thread is about the price of gas at the pump, and it’s clear from the data (even the cooked data pushed by those with, ahem, personal economic interest in oil exploration) that opening ANWR will make only a small dent in that as well.
Big S on May 8, 2008 at 1:37 PM
I’m not talking about the Wasilla/Palmer bridge, I’m talking about the one that was going to connect the little island with its handful of residents to the mainland. Wasilla/Palmer already is connected to Anchorage by a big old bridge, but I could see the need for another one, since the population is growing in that area.
There are less expensive oil fields to develop than ANWR, aren’t there? I mean if we’re gonna drill we should drill where it’s cheapest to extract and transport the oil first.
On the boutique gasoline recipes: are those federal mandates, or state mandates? I thought the problem is that individual states followed California’s example (sigh) and decided that they should all have their own special gas blends too. It would possibly be a federal power grab to completely eliminate the foolishness on that, or no? Bush could do it right after Katrina because of the emergency….
That’s a straight-up question about the fuel mixtures and the federalism implications…does anybody know?
funky chicken on May 8, 2008 at 1:43 PM
Yes,
Fire up the limosine, Jeeves!!
We’re headed for the ANWR Permit Office & Travel Bureau!!
franksalterego on May 8, 2008 at 1:46 PM
I heard it in the car on one of those CNN radio or CBS radio news breaks “at the bottom of every hour” last week while driving around. It caught my ear because I’ve been predicting that the gvmt will step in and build refineries or at least propose it for “national security” reasons.
I just need to figure out a business for myself where I can get the gvmt to build me a billion dollar manufacturing facility for “national security” reasons. I’m just not very creative.
funky chicken on May 8, 2008 at 1:46 PM
Math? You mean Calc? Or Advance Pyshics?
FYI, and just something you don’t know about the American Oil Owner. Did you know that most of you gasoline that is pumped in America is actually from smaller oil comapnies, and individually owned. Just a little fact.
Also Alaska’s Prudhoe and Kuparuk fields, pump to the Lower 48 about 1 million a day. A DAY! Figure that math. If Alaska and the Oil companies STOPPED everything, you all would be in a crisis down there, wouldn’t you! You use more Alaska oil then you all realize. And just think what ANWR could give to the Lower 48. 500 to 1 million barrels a day more. WOW… think of that MATH!
And since you said:
.
Oil exploration has NOTHING to do with the price at the “Pump”. I am not sure where you live, but have you ever looked at the taxes on your gasoline? It isn’t just Federal at 18.6 a gallon. It is State, City, County, and in some cases, it CAN be the Neighborhood! If you don’t believe me call your Dept of Energy in your State and if you have one for your city calle them or look it up online. They have to show number of what they tax.
Also, if you think it is not in the best interest of the World Economy to start drilling… then think again. Have yo not noticed we (as in America) are going back to glass bottles? It is cheaper to produce them now. Or the fact Food is going up, and for a greenie like you, that might be bad. But also fertilizer. Yep… instead of shoveling cow poop for your garden … you will also have to PAY fore poop you shovel and someone always told me “Sh!T is Free!”
Geezdude, you really have no clue how much oil is in your life do you.
upinak on May 8, 2008 at 1:46 PM
Oh I have ideas.. just not the money to start then schmooze some Seantor or Congressman for the rest.
Yes and no. In Alaska no, in the lower 48 yes… CO, UT and a few other States I can think about.
Depends. Some States have there own as others go off the Federal mandate.
upinak on May 8, 2008 at 1:50 PM
Here’s an old story, and if the entire gvmt investment would be to just give closed military base land to refiners, I say that they should get on with it…today. My suspicion is that it will morph into requiring more $$$ of gvmt “investment.”
funky chicken on May 8, 2008 at 1:50 PM
So you think oil is a “fossil fuel,” you think oil is scarce? I recommend you read this book from Jerome Corsi. Here’s a partial review from a top 500 reviewer at Amazon.
Maxx on May 8, 2008 at 1:50 PM
Any state-by-state requirements are imposed by the states themselves, as far as I know. I don’t worry too much about the “federalism” implications of federal action to standardize gasoline formulations, since federalism is, after all, a two-way street. I’m sure this could fall under the commerce clause, and pass constitutional tests.
Big S on May 8, 2008 at 1:51 PM
For those who think Price will impact how people drive???
Please look at the stats. Gas Prices have DOUBLED and yet demand is still the same.
Sorry, but get with reality here. People will NOT drive more, or less, with a 5% decrease in price due to a tax holiday.
Real problems are Ethanol (which makes neither economic, nor ecological sense), and the fact that the increase in fuel costs raise the price of EVERYTHING (transportation costs), and a lack of US production.
This idea will fix none of these problems.
Romeo13 on May 8, 2008 at 1:51 PM
Ethanol has been a disaster in many ways. The oil executives don’t want more refining capacity…why invest for a future that might not be there?
It’s damned shortsighted though. If they put up the refineries and drive fuel costs down, the alternative energy sector will die on the vine again.
penny (or short term profit) wise, pound foolish. The same goes for the Sauds keeping the oil supply tight.
funky chicken on May 8, 2008 at 1:56 PM
Max I asked that question to a few of the geological people I work with… they coouldn’t tell me anything.
Say they cap a dry hole with no oil or very little in it. 40 yrs later they want to run some tests, like resistivity, gamma ray and a few other and also to see it it can be used for something. When they uncap (or unplug/perf) the well… there is oil. Why? No one could explain, even though the geological aspect is the trap holds oil for God only knows how long and once it is dry it will not be there. So where did the Oil come from? Is there another pool or satalite pool somewhere around and the porosity of the rock is that good?
No one can tell me… so the Peak Oil or the fact it is running out makes me laugh.
upinak on May 8, 2008 at 1:56 PM
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