jeffreymark

MCCAIN'S ENERGY VISION

OH MY WHAT TO DO WHAT TO DO ABOUT ENERGY

This Economics 101 challenged pundit knows little if nothing at all about the energy crunch. But, the internet seems chock full of those who do. And I must admit, in the midst of McCain's pandering to liberals with their global warming junk science he has offered one solution in the spirit of conservatism:

"If I am elected president, I will set this nation on a course to building 45 new reactors by the year 2030, with the ultimate goal of 100 new plants to power the homes and factories and cities of America," McCain told a campaign event in Missouri, an electoral battleground state.

"If we're looking for a vast supply of reliable and low-cost electricity -- with zero carbon emissions and long-term price stability -- that's the working definition of nuclear energy."

Meanwhile, an W$J op.ed. piece criticized Bush's political game with Congress of cat and mouse.

Mr. Bush argued that leaving most of America's immense offshore oil-and-gas resources off-limits was "outdated and counterproductive," and he called on Congress to end its quarter-century ban. Fair enough. But the ban actually has two components, one of which is a 1990 executive order; like launching a warhead, both keys must be turned. Mr. Bush said he would only turn his after Congress did.

The Administration has botched a prime political opportunity. Lifting the Presidential ban would have been symbolic for now, because Congress's ban would still apply. But it would have put the spotlight on Congress as the last political obstacle to exploiting domestic reserves, just as public support for more drilling is rising.

In addition, former Deputy Chief of Staff to President Bush, Karl Rove, offers the most commonsensical analysis of both Obama's and McCain's proposed energy solutions. He accuses both candidates of inflaming populist hostilities toward oil companies. First of all, concerning Obama, Rove suggests that comparatively oil company profits are not out of line:

...ask this: Why should we stop with oil companies? They make about 8.3 cents in gross profit per dollar of sales. Why doesn't Mr. Obama slap a windfall profits tax on sectors of the economy that have fatter margins? Electronics make 14.5 cents per dollar and computer equipment makers take in 13.7 cents per dollar, according to the Census Bureau. Microsoft's margin is 27.5 cents per dollar of sales. Call out Mr. Obama's Windfall Profits Police!

It's not the profit margin, but the total number of dollars earned that is the problem, Mr. Obama might say. But if that were the case, why isn't he targeting other industries? Oil and gas companies made $86.5 billion in profits last year. At the same time, the financial services industry took in $498.5 billion in profits, the retail industry walked away with $137.5 billion, and information technology companies made off with $103.4 billion. What kind of special outrage does Mr. Obama have for these companies?

Secondly, in relation to McCain Rove offers generic evidence contrary to McCain's accusations that oil companies refuse to invest their profits in alternate energy. He proceeds to, in light of the historical context, ask why we should expect oil companies to take the lead in creativity. Rove then gives the bottom line indicative of both candidate's proposed policies and that is an "animus toward free markets and success." Indeed both apparently want to follow a New Deal socialism narrative of the 1930s.

But oil and gas companies report that they have invested heavily in alternative energy. Out of the $46 billion spent researching alternative energy in North America from 2000 to 2005, $12 billion came from oil and gas companies, making the industry one of the nation's largest backers of wind and solar power, biofuels, lithium-ion batteries and fuel-cell technology.

Such investments, however, are not as important as money spent on technologies that help find and extract more oil. Because oil companies invested in innovation and technology, they are now tapping reserves that were formerly thought to be unrecoverable. Maybe we are all better off when oil companies invest in what they know, not what they don't.

And do we really want the government deciding how profits should be invested? If so, should Microsoft be forced to invest in Linux-based software or McDonald's in weight-loss research?

Mr. McCain's angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a "perennial gale of creative destruction" is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is "the pivot on which everything turns," Schumpeter argued, and "proceeds by competitively destroying old businesses."

Most dramatic change comes from new businesses, not old ones. Buggy whip makers did not create the auto industry. Railroads didn't create the airplane. Even when established industries help create new ones, old-line firms are often not as nimble as new ones. IBM helped give rise to personal computers, but didn't see the importance of software and ceded that part of the business to young upstarts who founded Microsoft.

ENERGY QUANDARY BITES DEMS

Democrats may have created a Frankenstein with their own past energy policies. House Whip Roy Blunt's website explains:

House Republican Whip Roy Blunt (Mo.) issued the following statement today referencing a recent Rasmussen poll showing that two-thirds of Americans support responsible deep-sea energy exploration, and applauding U.S. Sen. John McCain (R-Ariz.) for announcing his intention to lift current bans on producing that American energy when he becomes president:

“For millions of Americans, $4 gasoline, $5 diesel, and $13 natural gas aren’t just a passing inconvenience – they’re a major factor in deciding how they get to work, feed their families, and live their lives. Sen. McCain understands these energy challenges and has seen their consequences firsthand – and his call today to lift America’s unilateral ban on deep-sea energy exploration contrasts sharply with his opponent’s ‘Audacity of Nope’ stance when it comes to producing our own energy.

“The problem for Democrats in the House, on the other hand, is this: What two-thirds of the American people support, a staggering 83 percent of their caucus has consistently voted against. The result is the continuation of a 27-year-old policy that has locked away 420 trillion cubic feet of American natural gas, and kept off-limits enough American oil to end our reliance on OPEC for the next 40 years.

“After decades of taking easy votes to lock away $10 oil and sub-$2 natural gas, Democrats now face a very different landscape on energy – partly, in fact, of their own doing. Thankfully, for Democrats on the Appropriations Committee, tomorrow’s markup will provide them a chance to cast a pro-energy vote by backing the Peterson offshore energy amendment. For the rest, they’d do well to take a close look at the energy poll released today – and do even better to vote with their constituents in the future.”

NOTE: An analysis compiled by the House Republican Whip tracking voting patterns on energy issues going back to 1994 found that 91 percent of House Republicans have voted in favor of legislation to increase access to American energy, while 86 percent of House Democrats have consistently voted against such bills. On the specific issue of deep-sea energy development, 83 percent of Democrats have opposed it, while 81 percent of Republicans have voted in support.

Hat's off to Blunt for his relentless pursuit over the last few weeks of an answer to the energy crunch.

HIGHER GAS PRICES OK?

It might make sense if you're a socialist like Obama at times appears to be. Ed Morrissey wonders about the matter:

According to Barack Obama, high gas prices don’t really constitute a problem for Americans. He stated yesterday that the reason for our anger is the rapid increase in prices, not the prices themselves. Obama claimed that Americans would have accepted a “gradual adjustment” to the current cost:

Morrissey continues:

Obama wants higher gas prices? Do the rest of the Democrats feel the same way? It certainly would explain why they continue to block domestic energy production in oil. It would also explain the bloated Lieberman-Warner bill, which would have imposed a heavy regulatory bureaucracy on the energy industry, along with rationing that would have both driven up prices and held down supply.

Democrats like targeting the demon possessed "big oil" companies as a catalyst for creating the world's problems. So why all the fuss at their prospect of wanting prices to rise?

MYTH BUSTING BIG OIL PROFITS

This economics 101 challenged pundit believes in capitalism with its laissez-faire philosophy. Yet I must admit, rising oil prices along with record breaking profits leaves me scratching my head too. Perhaps the folks over at Fortune may clear up the fog a bit:

The theory: Big oil companies are pushing prices up to boost their profits, which have soared to record levels in recent years. Top industry executives recently got hauled before Congress, where legislators pressed them for an explanation for rising gasoline prices - and outsize executive pay at companies like Exxon, which earlier this year posted a $40 billion profit for 2007.

Reality check: Executives acknowledge that company profits are high, but argue that their share of the global oil market is small. Exxon, the biggest U.S. oil company, ranks 14th in the world in terms of oil reserves. The companies also note that refining margins - reflecting the business of turning crude into gasoline - have dropped sharply over the past year. Exxon said that even with the price of gas hovering around $4 recently, the tight margins mean the company's refining profit is only a dime a gallon. Perhaps that's why Exxon shares, after doubling between 2005 and 2007, have actually lost ground this year.

Continue reading Fortune here.

THE PRICE OF PROFESSIONAL SPORTS

Analyst have long questioned the benefits of subsidizing opulent sport facilities. Tom Kirkendall takes a serious look at the issue. Others tackle the issue here and here. This last link refers to a study done by the Heartland institute in 1987. If you're the type who majors in the details you will find the HI's study exhaustive and compelling.

WHY ARE OIL PRICES RISING?

Since I'm Economics 101 challenged I do not know why prices continue to skyrocket. But a few pundits like Gateway Pundit put forth a few reasonable questions today concerning the matter:

Over the past 30 years:

Which party blocked the development of new sources of petroleum?-- Democrat
Which party blocked drilling in ANWR?-- Democrat
Which party blocked drilling off the coast of Florida?-- Democrat
Which party blocked drilling off of the east coast?-- Democrat
Which party blocked drilling off of the west coast?-- Democrat
Which party blocked drilling off the Alaskan coast?-- Democrat
Which party blocked building oil refineries?-- Democrat
Which party blocked clean nuclear energy production?-- Democrat
Which party blocked clean coal production?-- Democrat

Read the rest of the analysis here.

GAS PRICES MAY BENEFIT POLITICAL CANDIDATES

Because I am an economics 101 challenged person I will leave the analysis of rising gas prices to the more knowledgeable pundits. Since I spend much time on the road, however, I must take a serious look at downsizing my vehicle-something I hate to do. While I fidget and cringe over high prices Robert Schroeder of the W$J informs me that a few unlikely folks are profiting from the gas price spike:

But the closeness to the election is as much of a potential peril as it is an opportunity to energize voters. Just ask Hillary Clinton, whose proposal to suspend the 18.4-cent-a-gallon gasoline tax this summer apparently didn't gain her enough traction with voters after economists almost universally panned the idea. McCain is floating a similar idea. Obama has rejected it. It's difficult to influence energy prices from Washington in the short term. But that hasn't stopped Clinton or McCain from talking about it. "It makes for really good headlines," says Matt Klink, vice president at Los Angeles-based Democratic strategist Cerrell Associates. Voters should take heart, though, since there's no shortage of proposals to bring down prices in the long term, and boost U.S. energy independence at the same time. Now the question is -- in an election year -- can the candidates agree on anything? "Whenever you get a critical mass of Democrats and Republicans working together on an issue, you get a solution," says Klink -- who adds that he hasn't seen any real bipartisan effort yet.

HOW LOW WILL PEOPLE STOOP TO GET A PIECE OF THE TAX REBATE PIE?

Mike Lester

THE SAD STATE OF OUR SAVINGS ACCOUNTS

The decline of our personal savings accounts seems to be in direct proportion to the rise in our disposable income.