Wednesday, April 11, 2012

Evil Oil Companies?


I get emails from various politicians.  They have issues.  They have plans.  They want to know your opinion... or maybe just want you to think they want your opinions... hard to say.  This one was just received and elicited a response.  I'll not embarrass the sender by including a name.

April 11, 2012 
Dear Friends,
While oil companies are making record profits – the five biggest took home more than $137 billion in profits last year – the rest of us are paying more at the pump.  
It doesn’t make sense. We’re at an eight-year high in domestic oil production, and domestic demand for oil and oil products is down. That means supply is high, demand is low, but we’re still stuck with high prices at the pump. So what do we do?  
I’ve got some ideas, and I want to hear yours. Like many Ohioans, I’m tired of the stranglehold oil companies have on our national energy policy. And like many Ohioans, I believe we need to take a “do it all” approach to reducing gas prices. 
Please tell me which of these actions you support to reduce gas prices: 

Your Priorities: Gas Prices

Do you feel that these actions are important?


1. Crack Down on Speculation: Prevent Wall Street speculators from driving up the price at the pump. A recent report found that excessive speculation adds $0.56 to every gallon of gas you put in your car.

2. Drill it Here, Keep it Here: If oil companies produce oil on public lands in the U.S., then it should stay here. No longer should oil companies export our own oil overseas, when we need it here at home.

3. Cut Wasteful Subsidies for Big Oil: End wasteful tax giveaways for Big Oil and use the savings to break the stranglehold Big Oil has on consumers by investing in clean energy.

4. Improve Fuel Efficiency of Cars and Trucks: Increase fuel-efficiency standards for vehicles so that consumers get more miles per gallon and spend less on gasoline

5. End Oil Cartels: Give the U.S. the authority to go after oil-producing nations, like the members of OPEC, that band together to drive up the price of oil.

6. Tap America’s Oil Reserve: Open the Strategic Petroleum reserve to increase domestic oil supply and lower prices.

My response:

Dear -----: 
No one likes to see $4 per gallon oil.  Well, almost no one.  But this is an energy policy issue, not an issue about oil companies profits.
Mark J. Perry, University of Michigan - Flint economist asks:
The U.S. has the wherewithal to affect the worldwide price of oil as shown by the mere threat of releasing some of its oil reserves.  But that is and always has been a temporary measure.  A longer term solution is an energy policy, along with supporting legislation, that allows expansion of the supply side.  I'm sure you are well aware of the impact that shale natural gas has had on worldwide supplies and prices... and where is "speculation" regarding natural gas?  Often our laws have just the opposite impact and increase the cost of petroleum products.  Here is something you can actually do to impact the cost of gasoline... and food on our tables:
Sabre rattling at strawmen... or oil companies... is just counter-productive. 
Bruce Hall

I really liked the one about End Oil Cartels.

Okay, do that.

2012 IS HERE


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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)