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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Group not interested in Bush refinery plan
David Ivanovich
Houston Chronicle
May. 1, 2005 12:00 AM
WASHINGTON - President Bush hopes to encourage construction of new oil refineries by offering up closed military bases as possible sites.
But refining experts are skeptical the president’s plan could overcome the huge costs and vociferous local opposition that have stymied construction of new refineries for nearly three decades.
Bush said last week he would order federal agencies, working with the states, to try to prod construction of new refineries on old military facilities and “simplify the permitting process for such construction.”
Speaking at a Small Business Administration conference, Bush argued that by “easing the regulatory burden we can refine more gasoline for our citizens here at home. That will help assure supply and reduce dependence on foreign sources of energy.”
There is a proposal to build a refinery near Yuma, the first that would be built in the United States since the 1970s. The company behind the plan, Arizona Clean Fuels, is seeking help from federal lawmakers to hasten the permitting process. They also have said they are not interested in building on an old military base.
Arizona Clean Fuels hopes to build a $2.5 billion refinery that could handle 150,000 barrels per day. Arizona environmental regulators granted the company an air permit in April. Last week the company visited Wall Street to seek investors.
funky chicken on May 8, 2008 at 1:59 PM
upinak, most recent article was in my comment on the last page
funky chicken on May 8, 2008 at 1:56 PM
it was April 28 or something gotta go
funky chicken on May 8, 2008 at 2:01 PM
Regarding Senator McCain, I received a request for a contribution today and sent it back with a note that I will contribute when he reverses his positions on the carbon tax, drilling in ANWR, and drilling offshore.
It may be a small gesture, but it gives me the audacity of hope and change.
Buy Danish on May 8, 2008 at 2:02 PM
You forgot to mention it is also imported now and we pay tarrifs on it.
Funky, oil comapnies actually don’t like ethanol. It screws up more then you realize. It junks up the refineries who merge and mix it with the gasoline before shipping to your local gas station.
An oil comp can only do so much. They have to deal with the enviromental BS more so then anyone realizes. If they do not have ethanol in the gasoline.. they can be fined … heavily. To the companies, which is also the refineries… they would rather do that then have to pay millions in fines.
Enviromentalist have everyone by the balls.. and I don’t understand why it got this far, other then ninnies are the people we elected.
upinak on May 8, 2008 at 2:04 PM
Arithmetic. +-*/
That’s less than 5% of our consumption, though. The USA produces, if I recall correctly, a little less than half of our 20 million bpd consumption rate domestically. Even if ANWR were to start producing the 1.5 million bpd that TexasJew stated above (which will probably only last 8 years or so anyway), we’re still going to be buying half of our oil from overseas. The argument that some propose, that we can become energy independent off of ANWR, is ridiculous. Furthermore, what’s the price per barrel for oil produced in Alaska? Is substituting an extra couple percent of our consumption of OPEC oil for Alaskan oil really going to influence the price? I don’t think so. It could alter the supply/demand balance, but then again, OPEC could simply lower their output to match our increase in production…
The issue of price is not dependent on small changes in our domestic production, but a major increase in demand for oil in the rest of the world.
Big S on May 8, 2008 at 2:07 PM
I’ve spent quite a long time in the chemical industry. I know very well how much oil is in my life.
Big S on May 8, 2008 at 2:08 PM
What about Hillary? She’s gotta just be brimming with Fossil Fuels.
- The Cat
MirCat on May 8, 2008 at 2:12 PM
for someone who has been in the chemical industry… oh please tell us more of the oil oh wise one!
They said that Prudhoe was only suppose to last 10 yrs…. over 30 yrs later it is still going. I think you lost the arguement there.
I am calling you a defeatist.
upinak on May 8, 2008 at 2:14 PM
It’s silly to assume that a different oil field will behave the same way. You can’t apply such precedent in cases like that.
You’re hoping to make do with smallish oil reserves, and I’m gunning for an increase in nuclear and clean(er) coal energy production to last for centuries or more. Who’s the defeatist?
Big S on May 8, 2008 at 2:18 PM
Sorry to disappoint you, but I don’t own a car. I ride a bike or take the bus. I’m also a vegetarian and refuse to air condition my house in summer. Yet, I am inexplicably right-wing. Think big tent!
By the way, I have enough faith in capitalism to think it will survive some environmental regulation. If capitalism survived the FDR taxes, it’s pretty darn tough system. On the other hand, as I am strongly right-wing on economics, I do hold that there are good arguments to regulate as little as possible. I’m not that far from Ron Paul on economics.
thuja on May 8, 2008 at 2:18 PM
Yes, your story is a common one. Oil wells believed tapped-out, are never really tapped-out. The oil is replenished by some natural earth process and obviously it wasn’t because some dinosaurs happened by over the last forty years and died there. The late Dr. Thomas Gold developed a theory on where oil REALLY comes from and wrote a book about it. Very interesting stuff.
Maxx on May 8, 2008 at 2:27 PM
Hey.. why not investigate my claim. The geologist who found the “field” was a noted and very highly respected USGS geologist. Who said it would not last more then 10 yrs.
There is also NPRA (National Pertoleum Reserve Alaska, formerly know as NPRA Naval Petroleum Reserve Alaska). Which is taken care of by BLM Bureau of Land Management. They have quite a few oil “reserves” there as well, but no where to send the oil or the gas.
There are Satalite pools ALL over the place, not just Alaska. Yet, people such as you halt everything for what reason?
There is no such thing as clean coal… as a “chemical” person you should know what the plants release via chemicals in the air. The sulfer content can be extremely hazardous depending on the type of coal used. Yet people freak out if there is a natural gas leak… either via a oil pad or if it is natural, because it is polluting the air. If they only knew the real percentage, which is still a guessimate.
I have no problems with Nuclear, wind, solar…. but it only works on a small scale. What are we going to do… Solar plate and windmill the planet? German people use solar for many thing but it makes their house unstable due to the panels on their roofs and depending on how the house was built, can collapes it. But doesn’t it take hard plastic to make the solar panels and windmills you so want?
**Sighs**
upinak on May 8, 2008 at 2:27 PM
Yes I know who Thomas Gold is. I think many of his theories are probably correct… but not all. And that is what they are.. theories.
What I never understood is how does that much bacteria gets to the depth he proclaims before becoming sweet crude stew. And when the pressures build… depending on the heat.. how Natural Gas is formed. Is it baked, flash cooked out of oil? Is Shale actually what happens after sweet crude it cooked to the point of no return.
Ahh the thoughts and question running thru my wittle head.
upinak on May 8, 2008 at 2:32 PM
Yeah right, I’ve been reading your comments for some time thuja and you are about as right-wing as Ted Kennedy.
Maxx on May 8, 2008 at 2:35 PM
In case it escaped you, I’m NOT against drilling in ANWR. I’m against acting (as you and others do) as if it’s going to make a big difference. It’s not. It won’t make us independent of foreign oil, it won’t make gas much cheaper (the topic of this thread), and any effect it might have is a few years away, at least. As I stated above, we’re going to have to switch to something else sooner or later.
As for clean coal, there are many scientists working on sequestration now, in order to limit the emissions from coal-fired plants. There are plenty of good ideas, but they’re expensive and in the early stages of development.
Nuclear power is by no means a small-scale operation, and would provide cleaner power more effciciently than all of the fossil-fuel dependent mechanisms we have now.
Big S on May 8, 2008 at 2:45 PM
Ah! so that explains the replies I get on non-environmental threads from people saying that they agree with me. I’d been wondering that.
thuja on May 8, 2008 at 2:57 PM
I found a posted copy of his papers on the subject here.
Maxx on May 8, 2008 at 2:59 PM
The federal budget is north of $2 trillion. American’s are so undertaxed that Washington needs 18.4 cents per gallon on top of that? Please. Abolish the gas tax period.
Spitfire9 on May 8, 2008 at 3:02 PM
thuja on May 8, 2008 at 2:57 PM
You didn’t get many to agree with you on this thread, where you basically said you loved abortion. Remember this?
I can’t think of a single issue where you are on the right, can you name one?
Maxx on May 8, 2008 at 3:16 PM
Yes, it is true that on the environment, I don’t agree with the right and that includes abortion. I consider abortion to be an important environmental and I’m more extreme on abortion than is my sister-in-law who is on the board of her city’s Planned Parenthood. Also, I’m gay and I do support gay marriage.
On the other hand, besides environmental threats, I see Islam as also quite threatening. I think we need to be realistic about Islam and appeasement in general. I don’t agree with anything Obama says about foreign policy. I want a very low tax rate and very little government. Get rid of the Department of Education, Department of Energy, Housing and Urban Development, the Federal Reserve, Department of Agriculture, the Human Services part of Health and Human Services, and so forth. I also strongly support the death penalty and even agree with the religious right about opposing gambling and casinos, which I suppose is a lost cause. I’m extremely skeptical about the entire dialog on race in this country. We look for evidence of racism, like a bunch of peasants in medieval Europe looking for a witch–consider just this website and Ron Paul. Finally, I’m a big fan of an old book called “The Closing of the American Mind” by Allan Bloom and Diana West’s newer book “The Death of the Grown-up: How America’s Arrested Development Is Bringing Down Western Civilization”.
thuja on May 8, 2008 at 3:39 PM
thuja on May 8, 2008 at 3:39 PM
That was a thoughtful reply and I respect that. You are of course welcome in the Big Tent and you don’t need me to tell you that. And of course you can regard yourself anyway you like, but from my perspective you are still a long way from being right-wing. Being pro-life is core to being conservative in my opinion. And environmentalism is just socialism in a green wrapper, as well as the global warming fraud.
Given what you’ve told me, I would say you are a moderate, at least from my perspective.
Maxx on May 8, 2008 at 4:13 PM
I’ve asked this question before and have yet to get a decent answer. Given that very little of our electricity is produced from oil just how will increasing our nuclear electrical production reduce our oil consumption? Please don’t come back with that cockamamie BS about using nuclear power plants to make hydrogen and then using the hydrogen to power cars.
Oldnuke on May 8, 2008 at 4:18 PM
That is the most ‘immoderate’ argument for abortion I’ve ever heard.
Buy Danish on May 8, 2008 at 4:20 PM
No, actually fossil plants are more efficient than nuclear plants. Cleaner is a matter of perspective. Nuke plants emit fewer contaminants but what they do put out is about a toxic as you can get, and it stays that way for a long time.
Oldnuke on May 8, 2008 at 4:24 PM
I know it wasn’t directed at me, so you can just ignore me if you like. But tell me sincerely, why is that so “cockamamie.”?
Really…. what am I missing…. why not hydrogen to run cars derived from nukes?
Maxx on May 8, 2008 at 4:28 PM
I can accept that. My greatest fear in American politics is 60 Senators of the same party–which is a militantly moderate view. I usually describe myself as center-right.
Let me tell one benefit of the big tent. I’m fairly good at explaining to the thoughtless left what is wrong with their ideas and even getting them to the idea that voting Republican is not a crime. Someone further to the right than me may not be able to communicate successfully to them.
thuja on May 8, 2008 at 4:30 PM
The technology to do this doesn’t exist today, at least not in a commercial package. No electric utility is going to sink the needed money into R&D for something they don’t have a market for. Electric utilities produce electricity and provide it to customers. Now if some company could get backing and provide collateral to front a contract for the power output from a nuclear plant guaranteed for 30 years some utility would almost certainly build the plant to provide the power. At present no one is jumping up and trying to get a contract for 1500 megawatts on a 24/7 basis for 30 years just to make hydrogen. Thus cockamamie.
Oldnuke on May 8, 2008 at 4:39 PM
No hydrogen cars, thus no market for hydrogen. That makes sense and I agree.
I agree with that too. But you misunderstand me when you think I argue for nuclear power just to make hydrogen. Make electricity, we need electricity and there certainly is a huge market for it.
But have enough capacity with the plants that eventually if they hydrogen cars come to market, they can use that spare capacity to make hydrogen. If not than they can just make more electricity as the population grows and demand increases.
Of course the distribution system would need to be put in place for hydrogen. I wouldn’t think the technology for that wouldn’t be much different than the way we distribute natural gas today.
You seem to be thinking I’m advocating a short term solution when I’m actually advocating a long term solution.
But I’m sure you know a lot more about the regulatory situation than I do. And if your saying that the plants would not be authorized without the market in place… then we need to restructure the regulations as well.
Maxx on May 8, 2008 at 4:57 PM
Actually didn’t think you were advocating anything. You asked a question. I just answered it. I didn’t see it as you advocating for hydrogen production. I agree that we need to increase our nuclear capacity but I’m a little biased. I just don’t see it reducing our dependence on oil.
This has nothing to do with regulations, at least on a national level it’s just economics. IF the load isn’t there or projected to be there the utility won’t build the plant. A power plant is a huge investment and the utility has to have assurance that the plant will have buyers for it’s power. Unlike gas and oil companies electrical utilities cannot store their product. If the plant isn’t running it’s just a money pit.
The utility probably wouldn’t have anything to do with the hydrogen manufacturing or distribution system. They would just be a customer. Don’t get me wrong an electric utility would love to get a contract like that. They would have to have assurances though that the customer could accept the output and the contract would spell it out. Utilities build plants to supply electricity to specific customers but those customers guarantee the utilities investment.
Oldnuke on May 8, 2008 at 5:23 PM
Skip hydrogen altogether for now. Lithium battery arrays are probably more accessible, and probably a heck of a lot safer than fuel cells. While a battery charge may only give good performance over a range of a few hundred miles, most people don’t go that far without the opportunity to plug in again.
Are you talking about thermodynamic efficiency or economic efficiency? Many modern designs for fossil-fuel powered generators have higher thermodynamic efficiencies (> 40%) than older nuclear plants (30-40%). However, the price per unit power for nuclear plants is lower than for others (excluding startup capital, which is largely dependent on regulation), so the economic efficiency could be said to be higher. Cost per unit energy is the subject of this thread, and that is what I was referring to.
Big S on May 8, 2008 at 5:39 PM
Oldnuke on May 8, 2008 at 5:23 PM
Then we have no disagreement. You are arguing that at step 3 when we get the nuke sites built and up and running that we have accomplished nothing to reduce our dependence on oil. And I agree.
But I’m talking about step 47, if we have the foresight to plan for step 47, where hydrogen cars could come to market and we had enough spare capacity to make abundant electricity to convert to hydrogen… which is child’s play, no real R&D required.
All I’m saying is that if we ever intend to move to a hydrogen economy we’ve got to plan for how to produce the hydrogen. The hydrogen cars are of no use without the fuel and the hydrogen fuel has no market without the cars.
But you are absolutely correct that nuke plants in the short term do little to nothing to reduce our dependence on oil.
And the ironic part as I’ve stated before is that there is no need to move away from oil, because there is plenty of oil. But to get the wacko environmentalist off our backs, moving to hydrogen would fill the bill, and you can’t ever run out of hydrogen, that is not possible.
Maxx on May 8, 2008 at 5:55 PM
I was speaking of thermodynamic efficiency since I don’t know what economic efficiency is. Your post just said
I assumed you were talking about efficiency. Older nuke newer nuke doesn’t matter fossil plants will still have a higher efficiency than a nuke.
Really? Got any hard numbers to back that up?
What, exactly, is startup capital in relation to a nuclear power plant and why do you think it would be dependent on regulation? When you say regulation are you referring to federal or state regulations or both? The cost for a coal plant these days is not too far from projected costs for a nuke. I say projected because no nukes have been built in this country in a while.
Oldnuke on May 8, 2008 at 6:02 PM
As for clean coal, there are many scientists working on sequestration now, in order to limit the emissions from coal-fired plants. There are plenty of good ideas, but they’re expensive and in the early stages of development.
- So you’re buying into the entire “CO2 is a pollutant” bullcrap.
OK, we get it.
It’s silly to assume that a different oil field will behave the same way. You can’t apply such precedent in cases like that.
- That, like most of what you are espousing, is an ignorant statement. The extent of that basin is as great as Prudhoe.
Oil professionals - geologists, geophysicists and engineers are, thankfully, not as stupid.
Yes, your story is a common one. Oil wells believed tapped-out, are never really tapped-out. The oil is replenished by some natural earth process and obviously it wasn’t because some dinosaurs happened by over the last forty years and died there. The late Dr. Thomas Gold developed a theory on where oil REALLY comes from and wrote a book about it. Very interesting stuff.
Maxx on May 8, 2008 at 2:27 PM
- Nice fiction, but not true, at least in any large-scale way. Oil is almost all biotic in origin.
There’s something about energy policy and oil and gas that makes Americans, even conservatives, ignorant fools.
It’s pathetic to see how deluded a lot of people are, chasing one pie-in-the-sky fantasy after another.
If we are not currently willing to drill in our our oil and gas basins and to develop our massive cost-effective coal reserves , we are simply doomed to be slaves to the rest of the world.
TexasJew on May 8, 2008 at 6:23 PM
TexasJew on May 8, 2008 at 6:23 PM
Succinct, to the point and right on. I don’t understand it either. I just can’t comprehend how so many rational intelligent people can buy into these fantasies that the idiots in Washington keep holding up in order to pander a few votes. I agree it’s pathetic.
Oldnuke on May 8, 2008 at 6:31 PM
I didn’t say “in a large scale way.” But you agree that in many cases… more oil appears in wells previously thought to be tapped-out, do you not?
Maxx on May 8, 2008 at 9:35 PM
Our Transportation Fuel Answer = METANOL
eanax on May 9, 2008 at 10:01 AM
Those wells have also been Capped for years. I am talking in some cases 40 to 50 years. Don’t assume, you look a fool when you do and even though you are learning from those who work oil/gas in here.
As for you saying methanol. Stop and think about why we don’t use methanol. Then think what would it take to make methanol. Then come to the conclussion you made a bad statement. I really don’t want to call you anything I might regret later.
upinak on May 9, 2008 at 11:42 AM
Morning gentlemen,
But you both and I know why they pander. All in the proposed thinking they might get a slice of the pie, or possibly become a shareholder. Incentives for many is like hitting the jackpot, but not scratching the ticket.
upinak on May 9, 2008 at 11:45 AM
I have to drive for my job as a visiting nurse and this tax cut would help me. It would save me a lot more than $30. It would also help truckers. It is interesting to hear conservatives who usually complain about almost any kind of taxes, justifying gas taxes when gas is pushing $4 a gallon.
Terrye on May 9, 2008 at 7:31 PM
Forty or fifty years is an eye-blink in time compared to the millions of years invoked by the biotic theory of oil production. If any substantial amount of oil re-appears, on a frequent basis in wells previously thought tapped out, then one has to question how that happens. If I’m considered foolish for asking that question, so be it.
Maxx on May 10, 2008 at 12:19 PM
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