Election Odds

[Nym90]

As well they should be. As you say, high gas prices hurt almost everyone, and they'll hurt the economy too if they stay this high. Obviously it's something tangible that people can relate to...unemployment is too, but really only if you or someone you know is unemployed.

Personally I think that we need a lot more investment in road building and widening and in public transportation so that people don't have to drive as much if they don't want to, and so that they spend a lot less time stuck in traffic congestion. More congestion means more wasted fuel, which means people have less money. Plus, people have less time...think of how much better the economy would be if we didn't have all of that lost potential productivity. Not to mention the damage to the environment from the extra wasted fuel...it just plain hurts the economy and the well-being of everyone, to waste time stuck in traffic jams. Making public transportation (buses, trains, subways, etc) more efficient, effective, faster, and easier and more convenient to use would also help save fuel and save people money in the long run. Also, not to mention that using less fuel obviously reduces our dependence on Middle East dictatorships, always a good thing.

Helping to curtail suburban sprawl wouldn't hurt, either.

Sorry for the off-topic rant, just had to get that off my chest. Now back to your regularly scheduled thread....

[Swing low, sweet chariot. Comin' for to carry me home.]

As well they should be. As you say, high gas prices hurt almost everyone

Agreed.  So what do you think Bush's plan is?  One of the main reasons I stayed home in 1992 was because every time I filled up with gas, I was reminded that Bush41 raised the gas tax by 5 cents.

Bush is vastly underestimating the risk of $2 gas to his reelection chances.  And I don't think he can wait for the prices to go down in September.  He needs a 30 cent reduction within the month of June....and that is very much within his power to do.

[Mort from NewYawk]

I think Bush is currently (5/28/04) five percentage points from victory.  He needs to be polling around 48-49 percent in the current polls, but he is only polling 43-44 percent.

Look at the economic news out today: Chicago PMI (manufacturing) is booming at a 16 year high with strong job growth, personal income increase by .6% of a percent last month- the best in over three years.  Yet consumer confidence is dropping and Bush's approval rating on handling the economy continues to drop.

Why?  Answer: GAS PRICES.  Not only are consumers being gouged at the pump, but each time they drive past a gas station (probably 10 times a day), they're remined that they are being gouged.

The anger over high fuel prices has trumped any credit Bush would have gotten for the rebound in employment.  And instead of just the unemployed being angry, everyone is angry over gas prices.

Barring the capture of bin Laden, the election is not winnable for Bush if gas prices stay around $2 throughout the summer.

...If Iraq stays out of a civil war and the economy stays clear of oil-price-induced inflation, the Republicans should be able to persuade the dwindling middle to stick with them, in spite of the highly polarized environment...

It's been a concern for some time. I'm no economist, the concern has been mentioned in the business press for at least six months. There's no question that it's the only economic concern that could threaten Bush's re-election. And since the economy is one area that America feels the Democrats are stronger in....

I agree with you, Nym90, about our traffic-clogged, gas guzzling society. (I'm lucky enough to live in a pleasant city neighborhood, where I can walk or take public transportation anywhere).

On another thread, I posted excerpts from Kerry's foreign policy speech yesterday. One of his four "imperatives": reduce dependence on foreign oil.

[Nym90]

Well, since the gas tax is what largely funds transportation and roads, decreasing it, while perhaps providing some short term economic relief, would be far more costly in the long run, unless you think we should make up for the loss by increasing revenue in some other area and then shifting that money to transportation.

Improving the efficiency of our infrastructure is the only effective long term solution to the problem of high gas prices.

We need to encourage less use of gas, not more. Reduce our dependency on foreign oil by increasing efficiency of our roads, our vehicles, and our transportation infrastructure. Then when OPEC tries to gouge us, we can tell them to go shove it.

[Swing low, sweet chariot. Comin' for to carry me home.]

On another thread, I posted excerpts from Kerry's foreign policy speech yesterday. One of his four "imperatives": reduce dependence on foreign oil.

But he has no plan to reduce our dependence on foreign oil.  His ""imperatives" is a big ZERO:  He doesn't want to increase domestic production through new drilling.  He doesn't want new nuke power plants.  The only thing he can point to is technology that doesn't yet exist!!!

[Nym90]

I believe he supports raising CAFE, doesn't he? That would be a huge step in the right direction. We have the technology now to make cars much more fuel efficient, if the automakers had the proper incentive to do so.

I haven't kept up with Kerry's statements on energy policy, but I'm pretty sure he's for that.

Again, increasing domestic production is a short-term solution at best, as the world's supply of fossil fuel is of course limited. The real long term solution here is to switch to the use of renewable energy sources whenever and wherever possible, and encourage the development of new research into this.

Part of the problem in Washington, of course, is that politicians are only there for a short time, so they usually go for the short-term solution, even if it will be worse in the long run.

[Swing low, sweet chariot. Comin' for to carry me home.]

Well, since the gas tax is what largely funds transportation and roads, decreasing it, while perhaps providing some short term economic relief, would be far more costly in the long run...

Im not saying Bush should decrease the gas tax, I simply pointed out the situation in 1992.

Bush43 has in his power to do two things:

1) Remove mixture requirements that add 20 cents a gallon to the price of gas.  Europe was a large oversupply of gas.  But the US can buy all it wants of Euro gas because it isn't formulated to meet the US environmental restrictions.  

If you remove these restrictions currently requiring 20 different mixtures within the US, then gas made on the East Coast (or in Europe) could be burned in cars on the West Coast, thus removing shortages of certain blends of gas in different regions of the country.  That's 20 cents a gallon right there.  

On top of that, you then use more European gasoline since it would then be allowed to be used, having removed the 20 different mixture requirements.  That increase in allowable supply from Europe would shave another 10 cents off the price of gas.

(Bush could also use these EPA restriction as a campaign issue since these fuel mixture requirements costs far more than any benefit they provide)

2)  Now that OPEC has agreed to remove export quotas (will be made official June 3) Bush could announce the sell of 100 million barrels from the strategic reserve over the next 3 months while threatening to sell more.  That drops the price of oil 10 bucks to back down under $30.

Bush could do both of these things with the stroke of a pen and withOUT congressional involvement.

[Nym90]

Interesting ideas.

I don't honestly know a lot about the mixture requirements, and I'd want to see more as to the benefits vs. costs before I'd endorse that, but it's certainly something worth looking into. It seems a little esoteric to use as a campaign issue, but if the price of gas comes down, that would help Bush, for sure.

As for the strategic reserve, I'm not so sure there. Personally I tend to feel that it should be saved for times of true national emergency (I opposed Clinton's attempts to use it to reduce gas prices back in 2000, as well). But again, I admit I don't know enough about the particulars.

[Swing low, sweet chariot. Comin' for to carry me home.]

I believe he supports raising CAFE, doesn't he? That would be a huge step in the right direction. We have the technology now to make cars much more fuel efficient, if the automakers had the proper incentive to do so.

I haven't kept up with Kerry's statements on energy policy, but I'm pretty sure he's for that.

Again, increasing domestic production is a short-term solution at best, as the world's supply of fossil fuel is of course limited. The real long term solution here is to switch to the use of renewable energy sources whenever and wherever possible, and encourage the development of new research into this.

Part of the problem in Washington, of course, is that politicians are only there for a short time, so they usually go for the short-term solution, even if it will be worse in the long run.

First off, Washington doesn't drive ingenuity, business does.

Second, the auto manufactures already have plenty of business incentive to produce cars with better gas mileage, because consumers like you and me ALREADY compare gas mileage when buying a car.

---

Why not do both?  

Production: Why not open up the entire North Slope of Alaska to drilling?  Is anyone living there?  Is anyone vacationing there?  Is Al Gore going to move there when his environmental doom prediction made with his 'D' education in science come true?  Why do we care if drilling rigs are scattered across a place we will never visit in our lifetime?

Conservation:  Why not raise the required EPA to 40 MPG by 2015?

Why can't we come at this problem from both ends by increasing production while increasing efficiency?  Or are we going to continue to call "leaders" those who claim that they detect the Spirit of God with rocks, frogs, and slugs?

[Swing low, sweet chariot. Comin' for to carry me home.]

Interesting ideas.

I don't honestly know a lot about the mixture requirements, and I'd want to see more as to the benefits vs. costs before I'd endorse that, but it's certainly something worth looking into.

Here is a list (maybe a tad old) of gas prices across the US.  

http://money.cnn.com/pf/features/lists/gasprices/

Why do you think there is a 40-50 cent difference between regions?  It’s because of the different requirements in the mixture.  It is NOT because of closeness to refineries since gasoline is easily transported through pipelines at very small costs.  

Natural gas also is transported through pipelines (at much higher costs per unit of energy since gas is compressed in a pipeline, thus causing heat.  Kinda like a compressor on a AC uses a lot of energy), but it’s basically the same price throughout the US (unless there is a pipeline disruption).  Why is natural gas roughly the same price throughout the country?  Because there is only ONE standard for the mixture of natural gas, not 20 different standards.

And it is NOT just the West Coast that is paying the price because the differing gas standards are costing all of us by limiting the supply of available gas and raising the costs of all goods through higher transportation costs.

This translates into tens of billions of dollars that is going into the pockets of the companies operating the refineries.

---

As for the strategic reserve, I'm not so sure there. Personally I tend to feel that it should be saved for times of true national emergency (I opposed Clinton's attempts to use it to reduce gas prices back in 2000, as well). But again, I admit I don't know enough about the particulars.

Im not saying the reserve is a bad idea, but why not suck some out when the price is high and replace when the price is lower, thus making the American tax-payers a profit?

[Nym90]

Agreed, but the auto companies aren't voluntarily increasing fuel efficiency enough, so the incentive must not be large enough. The highest profit margin vehicles are the full-sized SUVs. I don't think the manufacturers will increase their own CAFE to 40 MPG by 2015 without government intervention.

Hehe, I just knew you'd try to bring Gore into this at some point...

Personally, I feel that we should preserve nature if there are other perfectly good and reasonable solutions that exist as well. We only have so much wilderness, and they aren't making any more of it. It's always a one way street...rural areas become more urban, but it's pretty rare that an area that was formerly inhabited gets turned back to nature. I realize this is inevitable and don't necessarily oppose it in principle, but I think it makes sense to at least try to preserve what we have for as long as possible. I realize that's a completely seperate issue, suburban sprawl, but it plays into the same idea, that preservation is important.

I'd love to visit the North Shore myself, though I doubt I'll have the time or money to do so in the near future.

I realize others may not share my values in this instance, but I think that if other reasonable solutions exist (which it would seem that they do in this case) then increased oil drilling should only be done as a last resort.

Plus, my points about it only being a short-term fix still stand, as I feel other solutions are not only workable, but better in the long term.

[Mort from NewYawk]

Here is a list (maybe a tad old) of gas prices across the US.  

http://money.cnn.com/pf/features/lists/gasprices/

At least FL, PA, and OH are closer to the lowest rather than the highest per gallon. I know, it could get a lot worse.

Why do you think there is a 40-50 cent difference between regions?  It’s because of the different requirements in the mixture.  It is NOT because of closeness to refineries since gasoline is easily transported through pipelines at very small costs.  

Natural gas also is transported through pipelines (at much higher costs per unit of energy since gas is compressed in a pipeline, thus causing heat.  Kinda like a compressor on a AC uses a lot of energy), but it’s basically the same price throughout the US (unless there is a pipeline disruption).  Why is natural gas roughly the same price throughout the country?  Because there is only ONE standard for the mixture of natural gas, not 20 different standards.

And it is NOT just the West Coast that is paying the price because the differing gas standards are costing all of us by limiting the supply of available gas and raising the costs of all goods through higher transportation costs.

This translates into tens of billions of dollars that is going into the pockets of the companies operating the refineries.

---

As for the strategic reserve, I'm not so sure there. Personally I tend to feel that it should be saved for times of true national emergency (I opposed Clinton's attempts to use it to reduce gas prices back in 2000, as well). But again, I admit I don't know enough about the particulars.

Im not saying the reserve is a bad idea, but why not suck some out when the price is high and replace when the price is lower, thus making the American tax-payers a profit?

You make a good argument on the mixture standards and the reserve.

[Swing low, sweet chariot. Comin' for to carry me home.]

Hehe, I just knew you'd try to bring Gore into this at some point...

How can I help when he makes a bigger and bigger fool of himself with each speech?  He's like a child literally screaming for attention.

Did Gore express this much emotion after 9/11?  Or is his outrage only directed toward his political opposition?

[Nym90]

I see your point, but I still don't see how he's relevant to the current political debate. I certainly don't put any more stock in what he says than I would for any other former Vice President. I wouldn't listen to Quayle or Mondale really either.

[Errick81]

Personally, I don't like the idea of more and more drilling to meet domestic demand.  Eventually the stuff is gonna run out, so we better have something else to run cars when it's all gone.

As far as the mixture thing goes, I don't think it would do all that much good to change the requirements, as we wouldn't use Euro gas anyways, as it has far higher environmental requirements then the stuff we use here.

As far as mass transit goes, I'm all for it.  But let's face it, we're American.  We want cars (for the most part).  Mass transit isn't greatly effective in surburban environments, but it could help some...the problem is the cost involved.

Living in Detroit, I know the auto companies don't really want to push for high fuel economy cars.  The cost is just too high.  The reason US companies are developing them is simply because the Japanese are threatening to take that section of the market.  

The better solution (in my opinion, for what it's worth), is that the White House (whoever is in it) should give incentives to develop more high fuel economy cars, if they can reduce the cost some, the car companies just might go for it a bit.

Give the companies a tangible (i.e. financial) reason to develop them, that's what will give us the Hydrogen fuel cells and such that will reduce the dependence on foreign oil and all those other goodies.

[classical liberal]

H-fuel cells will never work.  The idea is flawed.  The energy required to produce H from water requires the emmission of more exhaust than the cell would save from being emmitted by the car.

[khirkhib]

H-fuel cells will never work.  The idea is flawed.  The energy required to produce H from water requires the emmission of more exhaust than the cell would save from being emmitted by the car.

Actually it could work though I don't know if it is favourite solution.  What H-fuel cells would do would change emission from non-point to point pollution so at the plants where the Hydrogen is produced the exhaust could be scrubbed.  The question is effeciancy because you would be losing energy as heat and in a 3 step process fuel -> hydrogen -> electricity -> to motion you will be losing to entropy at every step.  However car motors are still so inefficient, century old technology with not to many improvements in efficiancy the total energy lost to entropy even using a longer process may be lower.  My major fear about oil and actually most non-renewable resources is that we won't run out in time if we run out at all by the time the market realizes larger global consiquences the changes affected on the global environment will be irriversable. That will sound strange to most everyone but it really is just economics.  Before I move to the graphs I'll tell you OPEC and the Oil Companies game plan.  They want to to sell all their supply.  That means that they have to set the price high enough so they can make a tidy profit (and they do) but low enough so that people don't have interest in alternative energy or mass transit.  Oil is a drug and when it is cheap and flowing than America will continue to have a strong demand.  What good does it do the oil companies and the OPEC oligarchy to have oil under the ground for the rest of time.  OK the graph.  I'll put that in my next post because it's going to take me about an hour to make it.

[khirkhib]

So going out of the confortable land of national politics and drifting over to resource macro-economics I present to you a modified version of the backstop technology graph in relation to non-renewable resources.  In this case Oil.  And I give credit to Ole Gunnar Austvik out in Norway for having the graph on his web-page  http://www.kaldor.no/energy/hotelling9300.htm



OK so its a busy graph and it is true that sometimes people try to say too much with one visual. I'm one of those people but bare with me.  Basically this model assumes that their is not going to be a magic bullet solution to the energy problem, like cold-fusion, cheap, clean and limitless energy.  This model is I feel a more realistic view of future events that shows a backstop technology, a renewable and hopefully clean though expensive gas alternative.  We already have an idea of what differrent backstop techonolgies might be solar!!, wind, tidal, geo-thermal, ocean current, hydrogen, bio-fuel, ethanol, hot fusion, etc etc and we should include other alternative energy technolgies that we have not yet discovered.

The x-axis is time. The y-axis is consumer price.

The first concept that you have to understand (and the most difficult - I started into it in my last post) is SCARCITY RENT.

Basically with non-rewable (scarse) resources by using my supply today I am using me supply for tomorrow.  Scarcity rent is payment to the owner of the supply for the access of what would in itself become more valuable in the future.  In essence this increases the price of fuel much over the basic costs of extraction, transportation and retail so that the resource owner will be able to make more on interest from selling his supply today than he would have if he had waited to sell a more valuable product tomorrow.  Wow.  I'm a biologist so maybe an economist could explain it better.

Now that the graph basics are established lets dig into what it means.  At the beginning the oil deposits that were used (think Texas, Wyoming, Ohio etc) were relatively big and relatively close to the surface, easy access oil.  It was such a deal for oil speculators that they drilled everywhere in search of oil.  In fact you would have discovered more oil per drilling if you had simply thrown darts at the Texas map to decide where you would drill as opposed to how they drilled everywhere.  As oil become more difficult to extract and transport deeper, smaller deposits, further away from the market the price of the resource increases.  This can be seen in shipping oil in Trans-ocean voyages, building nation spanning pipe-lines, digging for oil in the most hostile and war-torn environments in the world and beneath the seas.  That trend continues.  In fact the world oil reserve has been increasing because expensive technology has given us greater access to more and more oil deposits.  This expensive technology is easiest understood by the oil/sand extraction projects in Canada.  Their are large deposits of oil that, unlike the cheap deposits of the past, are just a slurry of oil and sand.  This oil is being mined not pumped out of the ground, whole mountains are being moved as the tar sands are shipped by the truck load to factories for seperation.  This is not cheap but the Oil companies still make a profit.  The scary thing is that new oil technology and more deposits are being continually discovered and the oil comapanies have the flexibility to lower their scarcity rent so that it is affordable to an increasing global population with more and more energy needs.  But the oil companies know that this can't and won't continue forever at some point the cost of extracting oil will be much higher than the cost of the backstop energy technology be it solar or whatever it ends up being.  The costs of backstop technology is constant because generally they cost the same today as they will tomorrow.  Energy wind mills will pump out electricity but because it is renewable it is fairly constant barring small improvements in the technology.  As the backstop develops and because more utilized the oil price will fluctuate.  Over the backstop price at first because the backstop technology will not have global distribution as then under as the oil market access the last of the deposits with the cheaper technology and in an effort to stay competive with the backstop tech.  The difference will shrink until the whole market is switched on to the backstop tech.  If a backstop tech did not exist theoretically the price could go up indefinately as the oil companies would continue to discover rediculously expensive ways to producing fuel.  This is easiest to understand with a nonrenewable resource like Gold where if the market really demanded it investors could mine asteroids or other planets for gold.  Their has been speculation that some asteroids have large gold deposits.  I don't really know what this would look like with oil but I think plenty of backdrop techs exhist so that part is just theory anyway.  Wait for Part 3 my fears.

 

[khirkhib]

Unfortunately I don't believe that the consumers are paying the true cost  of oil.   Future generations are subsidizing are oil use because they are the ones that will have to pay for oil clean-ups and their own economies will be negatively effected by anysort of global climatic change.  Low lying areas being being flooded by oceans, increase in weather related natural disastors, desertification of healthy lands etc.  The red line comes out of the original price line because the use of part of the oil suppy was probably mostly benign, the problem is we don't and can't know when are use of oil-supplies will start to have a real malignant costs.  It already has in some ways with air pollution negatively affecting the health of urban workers.  When you fill your tank of gas you are paying Shell and OPEC and assides from small taxes, money is not going towards the children that get ashma and the toll booth operators that get cancer.  This is a cost to society above the cost that you pay. Oil companies have an incentive to produce studies that under-estimate the  true cost of fuel because if consumers factor in the true cost - that cost would meet with the backstop prematurely and so they would miss out on a lot of profits that they could have made had the oil sources been depleted at the 'natural' rate. (Where the red line meets the dashed line)

The model could work out in different ways. If the damage is reversable, like it looks like maybe the damage we did to the ozone layer is reversable, than future society will continue to pay towards are abuse of the oil supplies but in time and with the alternatve backstop technology things will eventually even out.  However since we do not understand how powerful an effect we might cause to the global environment the damage we do may not be reversable with-in a matter of centuries.  The earth will survive, animals, plants, bacteria will continue, Darwin's rules apply, no matter how the environment changed cockroaches would still be around.  Even humans, as smart as we are, should be able to continue to survive in a world which has an environment much different on our own but civilization would not.  Cultures change and adapt to survive different environments but cities can not move themselves.  If the damage we do is not easily reversable than the price that we will pay for our oil use will be everything that we have.

So you think I'm an extremist now? These are just economic models and if you sat down and really thought about them I think that you might improve you understanding of what is really going on in the world.  

Anyway please tell me what you think of this? And if you have any questions.

[Swing low, sweet chariot. Comin' for to carry me home.]

As far as the mixture thing goes, I don't think it would do all that much good to change the requirements, as we wouldn't use Euro gas anyways, as it has far higher environmental requirements then the stuff we use here.

Don't talk about things you obviously know nothing about.  We are ALREADY buying gas from Europe, but we can't buy as much as we want because of the different mixtures required in the US.

[angus]

true!  try to get 87-octane in Amsterdam or Hamburg.  You're lucky if you can find even as low as 92.  No wonder they're so damned expensive.

[Swing low, sweet chariot. Comin' for to carry me home.]

As far as the mixture thing goes, I don't think it would do all that much good to change the requirements, as we wouldn't use Euro gas anyways, as it has far higher environmental requirements then the stuff we use here.

there are plenty of news articles documenting the fact the US imports gasoline from Europe and that European plants are having trouble with meeting our EPA standards.

http://the.honoluluadvertiser.com/article/2004/May/23/bz/bz04a.html

http://msnbc.msn.com/id/5068594/

[classical liberal]

khirkhib-

good analysis

I would only comment that the backstop will come about through the demand generated thorugh the increasing cost of extracting oil.  At some point it will present a viable business opportunity and someone will exploit it, resulting in the clean energy technology that Greenies are pushing arriving through the natural workings of the market.

[khirkhib]

khirkhib-

good analysis

I would only comment that the backstop will come about through the demand generated thorugh the increasing cost of extracting oil.  At some point it will present a viable business opportunity and someone will exploit it, resulting in the clean energy technology that Greenies are pushing arriving through the natural workings of the market.

I would agree with you.  Actually that is what the basic model shows.  I only think that the cost that we pay doesn't factor in costs that will be paid in the future which is essentially subsidizing our current use levels.  If the actual costs were factored in then backstop technology would become a viable option sooner than the current market forces would indicate.

[classical liberal]

When has it ever been in the best interest of current financial and executive officers to factor in future costs when the costs will only be truly incurred after they retire?  How can you honestly expect someone to do what they do not perceive to be in their own best interest?