Obama's Energy policy

[Gaspar]

Ok, lets play FOTD's advocate.  What could possibly happen if the windfall profit tax went into place  (or back into place, we already tried it in the 70s, but since we don't know we are doomed to repeat, bla, bla, bla)?

I am an oil company, I am squeezed by taxes, I make less than a 4% profit on my goods.  I rely on volume sales, but that volume  is shrinking because of price.  I cannot acquire my product domestically and when I acquire from foreign sources I am squeezed again, and whipped by speculative trading.  

Now my government is going to punish me, not for my profit margin, but for my bare ability to make a profit.  The only thing that keeps me in this country is my distribution is reliant on the US economy.  My government is going to take away the money that I earn for my stockholders and redistribute it back to my stockholders in a lesser manner under the guise of punishing me.  All to acquire votes from people who don't understand my business.

I THINK I WILL MOVE TO ANOTHER COUNTRY.  SHOULD I TAKE THE 10,000 PEOPLE I EMPLOY WITH ME?  NAH I'LL JUST HIRE CHEAPER LABOR WHEN I GET THERE.

I think this is a good exercise.  Now could some "Przyjaciel diab#322;a" provide a different scenario?

[Hometown]

Oil is due another bust.  Cesar Chavez says that 10 percent of the cost of oil is a result of Bush scare tactics.  Industry experts say that supply doesn't justify the current run up.  When it goes bust Tulsa and Oklahoma will feel it but because oil is cyclical it shouldn't surprise us.  When it goes bust it's time to lay groundwork for the next upwards spike in prices so that Tulsa can clean up as we continue to move into peak oil.

Anne Richards was the model Democrat in regards to oil.  Oil butters are bread here in Oklahoma.

[Conan71]

quote:Originally posted by cannon_fodder

Wevus,

Given all the negatives I illustrated, where do the positives come in?  Exxon would still be in the black, yes.  But given all those negatives the Federal government gains less than one tenth of one percent of its needed revenue.  

The solution is primarily "deal with it" as you pointed out.  High energy prices are here to stay.  The windfall profit tax, even if we seized 100% of their profits, will do NOTHING to reduce energy prices.

We have spent 60 years now gearing our transportation system to cheap oil (moving to suburbs, buying big cars, building more lanes, killing trains and mass transit), 30 of those years knowing DAMN WELL that it was a mistake (1970's anyone?).  Now we pay the piper.

The long-term solution is to let the market dictate new and better technologies (GM shutting down truck plants, people actually driving the speed limit, distance to work a primary factor for realtors now).  Government can help by encouraging those technologies in research grants, inducement prizes (the government has the ability to guarantee HUGE orders), tax incentives, and policy (streamline nuclear regulation YESTERDAY).  I have outlined this in detail previously and would be happy to do so again.

BUT, given the choice between more drilling and taxing oil companies more, which realistically would have a positive impact on prices?   Clearly more drilling is not the long term solution and would not have a ground-breaking impact, but those are the two main proposals on the table of our two party system.  

/don't construe this as arguing against revocation of the tax breaks for oil companies.  I am not too familiar with them, but unless they are encouraging these companies to increase domestic supply or other items that make national sense... they don't need it.  Yet another fine example of abusing our current tax system it appears.

Of course, nevermind that confiscation of profit from oil companies would limit expansion and repair of oil exploration, transportation, and refining infrastructure which is helping many segments of our economy right now.

If I'm understanding correctly, this would basically add more subsidy to alternative fuels whilst hobbling big oil and making US oil companies less competitive on a global scale.  Total BS idea.

Are we getting ****ed by big oil?  You bet.  Some of the blame for that falls on questionable energy policies in the US for the last half century.

[joiei]

Okay, say we do start drilling in the Anwar,  how long will it take to get the operation up to a full run?  how long will it take for that oil to start flowing into our pipelines?  Are the refineries that we currently have able to handle the increased production flow?  Will that help us in this situation in the next 6 to 12 months?  How will that reduce the price at the pump in the next 6 weeks?  12 weeks?  6 months?

[we vs us]

quote:Originally posted by joiei

Okay, say we do start drilling in the Anwar,  how long will it take to get the operation up to a full run?  how long will it take for that oil to start flowing into our pipelines?  Are the refineries that we currently have able to handle the increased production flow?  Will that help us in this situation in the next 6 to 12 months?  How will that reduce the price at the pump in the next 6 weeks?  12 weeks?  6 months?

6 years?

[Conan71]

And if we'd have started drilling in 1995, we would have been pumping oil from there for a few years already.  Just because it might be 6 to 8 years for production to hit full-stride, it's no excuse not to get started on it.

The only strategic end-game I can see to holding off on drilling our own reserves (congrats, the Chinese and Cubans will now be drilling off Florida, since we ruled that possibility out) is if we are the last country left with vast reserves which means we would control the market 30 years from now.  Unfortunately, that does nothing to help now.

The Gov't needs to back up, allow more drilling domestically, allow some refinery expansion, thereby putting extra profits to work by oil companies as they should be.

[Gaspar]

quote:Originally posted by joiei

Okay, say we do start drilling in the Anwar,  how long will it take to get the operation up to a full run?  how long will it take for that oil to start flowing into our pipelines?  Are the refineries that we currently have able to handle the increased production flow?  Will that help us in this situation in the next 6 to 12 months?  How will that reduce the price at the pump in the next 6 weeks?  12 weeks?  6 months?

The prices are set through speculation of supply that is forecast over long periods of time.  Every-time we even hint that we are going to start digging, the price shoots down.  If we actually start to drill, it may be 10 years (more realistic) until the supply is ready, but the moment we make the announcement the price will plummet.  

The biggest fear among Arab countries is that we start drilling.  Their entire economy and way of life is built on our daily purchases of oil.  They have trillions of dollars of american money spread around just a handful of very wealthy sheiks.  Most of their people still starve and we fund that philosophy.

[we vs us]

quote:Originally posted by Gaspar

The biggest fear among Arab countries is that we start drilling.  

I don't think that's true.  The largest possible amount in the ground in ANWR is still small compared to proven Mid East reserves.  There's no practical way that allowing more drilling in the US will somehow liberate us from Mid East oil.  The only way to do that is to cultivate alternative sources of energy.

[cannon_fodder]

When talking about the market impact of arctic drilling remember several things:

1) The volume needed to drastically reduce prices is small. All we need to do is push the supply 1 barrel above demand.

2) Speculation is driving oil prices.  CW says we are running out, so we are.  Access to a huge new reserve in the future would drive prices down on the futures market today (and the spot usually follows) even though supply is years out.

3) ANWR is not an insignificant amount of oil.  It is not a savior, but the security in supply that it provides will quell market concerns (see above).

4) Your arguments are not really arguments AGAINST drilling, simply reasons why the effects of drilling won't be the savior.  Which few argue that it will be, but it will help.  If given the choice of tapping $1 Trillion of domestic oil or letting it just sit there;  which decision will have the most positive economic impact (including the effects on oil prices?).
- - -

These are two separate mutually exclusive decisions.  Drill or not.  New tax on oil companies or not.  And as of yet, no one has made a coherent argument that failing to utilize domestic resources or taxing oil profits will have a positive impact on the issues at hand.

[iplaw]

quote:Originally posted by we vs us

quote:Originally posted by Gaspar

The biggest fear among Arab countries is that we start drilling.  

I don't think that's true.  The largest possible amount in the ground in ANWR is still small compared to proven Mid East reserves.  There's no practical way that allowing more drilling in the US will somehow liberate us from Mid East oil.  The only way to do that is to cultivate alternative sources of energy.

Check out shale oil in the Rockies and Utah.  ANWAR is only drop in the bucket, not to mention the right, left and gulf coasts.

We have more oil than we could use for the next 60-75 years, but environmental regs make drilling an almost impossible feat.

[Chicken Little]

quote:Originally posted by cannon_fodder

Given all the negatives I illustrated, where do the positives come in?

I'm not so sure I agree with Gaspar's statment that "'Big Oil' is you and me".  Sure, most of us own stock, but the richest 10% of us own 90% of the stock, with a median holding of $110,000 in stock per household.  Now, the richest 10% are by no means all filthy rich, many would probably still be considered upper middle-class.  I'd simply like to point out that with stock as with all wealth, there is inequality, not that there's anything inherently wrong with that.  So, the wage worker filling his tank every week may indeed be "Big Oil", but not so much when compared to others.

The richest 1 percent, households with an average annual income of $326,720 now get about 15% of the nation's annual income, which is very close the the 18% in 1913, i.e., the Gilded Age, robber barons, etc.  Again, not that there's anything inherently wrong with wealth, even ostentatious wealth.  Just wanted to provide some history and perspective.

I don't know if the rich deserve a soaking, that's a moral judgement.  But I do know that if the need is great, taxing the pants off the rich is a workable option.

FDR started taxing the very wealthy in 1935.  By 1942, some of their tax rates reached 93%.  FDR (and Truman, and IKE for that matter) emptied out mansions across the US, by 1963, income of that top slice shrunk from 18% to 8% of the Nation's income.  Now, it's back at 15%.

So, did all that socialism and income redistribution ruin America?  I don't think so.  The wealth of the rich helped pull us out of the Great Depression, finance a global war for Democracy, and pay for the GI bill among other things.  It led directly to the longest and strongest burst of economic expansion in US history and to a strong middle-class that has stagnated a bit, but is still strong today.

Whether we are desperate enough to need to turn to such drastic measures is surely a subject for debate.  But, if the question is whether or not all of this pinko stuff can work, then I think the answer is that it HAS worked before and it DID NOT ruin us.  Quite the opposite.

[Gaspar]

quote:Originally posted by iplaw

quote:Originally posted by we vs us

quote:Originally posted by Gaspar

The biggest fear among Arab countries is that we start drilling.  

I don't think that's true.  The largest possible amount in the ground in ANWR is still small compared to proven Mid East reserves.  There's no practical way that allowing more drilling in the US will somehow liberate us from Mid East oil.  The only way to do that is to cultivate alternative sources of energy.

Check out shale oil in the Rockies and Utah.  ANWAR is only drop in the bucket, not to mention the right, left and gulf coasts.

We have more oil than we could use for the next 60-75 years, but environmental regs make drilling an almost impossible feat.

You forgot Montana, where they are now estimating around 40 billion barrels in the Bakken fields.

We still have quite a load here in Ok too.

BTW Last week China started drilling off the coast of Florida and California.  Just far enough out to be in international waters.  They want to position themselves as our new overlords energy suppliers. I bet they snicker as they drill and watch our tankers steam by on their way to the persian gulf.

Great!

[Gaspar]

Two bits of related news to offer.

Abu Dabi is buying the Chrysler building.

http://www.nypost.com/seven/06112008/business/chrysler_bldg__on_the_block_115016.htm

And yesterday:

The Democratic energy package failed. would have imposed a 25 percent tax on any profits of the five largest U.S. oil companies, which together made $36 billion during the first three months of the year. (Again they site "Gross Profit" rather than "Net")

All this bill would have done is hike gas prices by um, uh, oh ABOUT 25%.  They are idiots!  But then again they knew it would fail, it was just campaign season acrobatics.  

Someday, the Republicans need to just surprise them and vote yes on one of these.  Then watch how they backpedal to kill the bill.  [}:)]

[we vs us]

quote:Originally posted by Conan71

And if we'd have started drilling in 1995, we would have been pumping oil from there for a few years already.  Just because it might be 6 to 8 years for production to hit full-stride, it's no excuse not to get started on it.

The only strategic end-game I can see to holding off on drilling our own reserves (congrats, the Chinese and Cubans will now be drilling off Florida, since we ruled that possibility out) is if we are the last country left with vast reserves which means we would control the market 30 years from now.  Unfortunately, that does nothing to help now.

The Gov't needs to back up, allow more drilling domestically, allow some refinery expansion, thereby putting extra profits to work by oil companies as they should be.

I agree that there's plenty of blame to go around for this crisis.  Keeping ANWR off the table has been, IMO, a mistake, but then so has been an energy plan that doesn't rescind tax breaks for the oil giants, doesn't touch CAFE standards, and doesn't make a serious effort to fund and develop alternatives (nuclear, wind, hydro, solar, etc).  

Problem is, placing blame for the past doesn't fix the current predicament.  It's dragging our economy into the s***ter now, not in ten years.  I'm not enthused about the "ride it out, take yer medicine" theory, especially if this recession measures up to predictions (worst since the Great Depression is what I've heard).  If that's even near true, the dislocations and uproar that need addressing now will be pretty significant.

The market is a great thing, but it doesn't care about people.  It will fix itself in its own sweet time, but that doesn't address the problems it leaves in its wake.

PS. I'm not arguing for the windfall tax, BTW.  Like I said, I don't think it's fair policy, or particularly effective.

[Gaspar]

quote:Originally posted by we vs us

I agree that there's plenty of blame to go around for this crisis.  Keeping ANWR off the table has been, IMO, a mistake, but then so has been an energy plan that doesn't rescind tax breaks for the oil giants, doesn't touch CAFE standards, and doesn't make a serious effort to fund and develop alternatives (nuclear, wind, hydro, solar, etc).  

I agree on the development of alternatives!  I invest in quite a few stocks such as Evergreen Solar and other companies that are researching methods of producing energy, cleaner and cheaper.  However the amount of surface area necessary for solar to be effective is too great.  

Wind power is an option but it's now getting scrutiny from the same environmental groups that block oil exploration.  Apparently you need a lot of mills to produce adequate amounts of power for a community, and the mills interfere with the migration of avian species.

Nuclear however is cheep, plentiful, and safe.  But the minute it is put on the table again, the Pelosi's of the world will rally against it, and the "Denim Clad" will show up in gas masks to protest.

You see, for some, energy is the enemy!  


Allow me to amend that. . . humans are the enemy!