Friday, April 28, 2006

Liberal Oil Solutions Aren't

I find it encouraging that we can get the expected response from socialist journo's repeatedly on any number of issues, today it's oil again. What would you guess the response to be? Not raise taxes? You win a prize! In my inbox is another forwarded Old Grey Hag oped about oil and politics. The current prescription is the same as the old one, raise taxes and force people to buy government mandated cars. I'm for encouraging more efficiency, which would be a natural progression for auto makers if this really was a 'crisis' as in the seventies and eighties when inexpensive, more efficient cars from Asia took the legs off the Detroit dinosaur. But as it isn't a 'crisis', SUV's seem to be selling fine and more government mandated 'alternative' cars will just muck things up and slow the market, not solve the 'crisis'. Henceforth, I will assail the taxation solution, and leave the 'green' cars for another day.

When did a increase in taxes ever result in anything but more government and economic sluggishness? Think hard... Ok, never. The argument for oil goes something like this: alternative sources of energy are expensive, therefor we must increase the cost of gasoline to promote new sources of energy. Sounds great if it wasn't fraught with the same problem any socialist policy is shackled with economically. This ball and chain is insurmountable, yet never addressed by the populist emotionally driven environmentalist. What is this flaw? No free market responds positively to increased taxation or regulation.

Now, I am not a advocate of unlimited growth or wanton pollution, but the current 'climate' of fear and dread concerning the petroleum industry has created a weird state of affairs. This nations largest companies have recorded record profits, yet they are assailed by the socialist left. Shareholders are seeing the fruits of energy stocks that have been pummeled in the past, and this should be applauded. What is extremely grievous in this equation is the government, both national and local. Why you ask? No other mainstream commodity is taxed like oil.

Lets do something really smart. Educate the population concerning simple economics and show the effect of undue taxation. Pass a law that requires gas stations to post the price of gas pre-tax. Yeah, that's right, you would see gas at say $2.40 a gallon, fill up the Prius for twenty-four bucks, but the bill comes to thirty! It gets better when you look at those huge profits recorded recently by oil companies. The profit margin hovers around ten cents per gallon for gas, that's five to one in favor of the government. Then the government wallops a big chunk of change in corporate taxes on the profit, and presumably will get some more in capital gains as the underlying stock increases in value. Recent statements on Exxon's (libs only hate Walmart more) fourth quarter put their profit at eight billion dollars, and the federal government's take on the underlying oil at eighteen billion dollars. They should be jumping for joy instead of jumping for the pseudo-enviro-carrot vote.

Curious in this is the large stake in Exxon by certain government union pension plans. But that is a digression, the real travesty inherent within the debate is how separated the socialist philosophy of the emotionally driven pseudo-environmentalists is from the proverbial core beliefs of traditional American identity. Inevitably, America is demonized in this group, and their identity as American citizens is distorted. It's the 'Global Citizen' syndrome again, which has its roots in pure socialist thought. Again, sounds great, makes one feel good, and is in its application pure folly.

We can pursue alternative sources of energy, and in time we must. Concurrent with that, we can encourage clean use of energy and positively reinforce efficiency. To do such successfully there is a practical aspect we must respect, a fundamental driving dynamic that is part of America's amazing progress that must be built in to and highlighted in any future planning regarding petroleum. But that is not in the playbook for the left and their Grey Sheet propagandists. It is not in the mold of 'alternative' anything, and sells no paper. I wonder if ink prices have risen?

As for the reality of oil, I am not a geologist, or an economist, but have communicated extensively with both professions in an academic context and come away with with the following conclusions. First of all, the price of oil per barrel would need to stay near sixty dollars a barrel for a extended period of time (years) to institute secondary recovery well production. The amount of oil available at that price point is extensive, though not unlimited. When that happens, some of the bio-fuels and shale oil processes become economically viable. At some point in time past that, much more expensive recovery becomes viable, and other alternative energy products will be entering the marketplace. Each of these scenarios will have environmental impacts, and be spurned by nutters. But the time scales are generational, and not out of sink with historical sources of energy and their life cycles.

The global environmental impact of petroleum use is unknowable regardless of what is reported in the news, and will not be 'discovered' in the near future. But the climate has been much warmer than now, and much colder in recent history. It has warmed and cooled rapidly before as well. In fact, it was very warm periods that produced the oil we use today. Arguably, a warmer climate will with the current position of the continents would support more terrestrial regions for farming. But many coastal areas could see dramatic changes. The climate could rapidly cool as well. It is foolish speculation at this point. And to expect all of the world to conform to ideologues expectations regarding petroleum use is asinine, especially based on climatic speculations.

Conversely, encouraging efficiency in the use of petroleum is a very viable pursuit. We should use government resources to research efficiency. Just as we should research alternate sources of energy. However, large scale implementation of these discoveries will occur when they become economically viable, not when they are forced on the market. To forcibly implement is folly as a nation, and impossible globally. Hopefully more sane debate can occur in the media as well, since hype in part is what drives short term market fluctuations. However, those same peaks are fodder for pundits...

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