Artificial costs

Mark Perry has some interesting graphs comparing average gas price with taxation levels:

It’s important to recognize what this is not.  It’s not to say that gas taxes should be lower, nor does is it an argument in favor of McCain’s asinine gas tax holiday proposal. 

But it is an important reminder that there are regulatory components.

Hat tip: Coyote Blog.

An energy earthquake

Great piece in the LA Times about the changes that may be in store as energy prices continue to rise:

Besides the obvious effect $7-a-gallon gasoline would have on commuters, automakers, airlines, truckers and shipping firms, $200 oil would drive up the price of a broad spectrum of products: Insecticides and hand lotions, cosmetics and food preservatives, shaving cream and rubber cement, plastic bottles and crayons — all have ingredients derived from oil.

The pain would probably be particularly intense in Southern California, which is known for its long commutes and high cost of living.

“Throughout our history, we have grown on the assumption that energy costs would be low,” said Michael Woo, a former Los Angeles city councilman and a current member of the city Planning Commission. “Now that those assumptions are shifting, it changes assumptions about housing, cars and how cities grow.”

Push prices up fast enough, he said, and “it would be the urban-planning equivalent of an earthquake.”

The thing is, painful and overdue as it is, life will probably be better when it’s all done.

Our kingdom for a coherent energy policy

Via Autoblog:

With stock markets and unemployment numbers taking their lumps, civilian unrest at oil and food prices, and politicians weighing in with all manner of cures and pronouncements, the Group of Eight nations got together to try and figure something out. The result: they want oil producing companies to produce more oil while they work on creating oil-independent fuel sources.

It’s the equivalent of Wimpy saying to Popeye, “For a hamburger today I will gladly pay you on Tuesday.”

Meanwhile, in a related development, gearheads are faking orgasms over the new Cadillac with 556 horsepower.

The reality of eating local

A new study at Carnagie Mellon raises questions about the “energy” impact of eating locally: Ezra Klein summarizes:

The line, then, is that the prudent environmentalist will eat local in order to cut down on greenhouse gas emissions. Intuitively, that makes a lot of sense. Bananas shipped from Brazil can’t be good for the environment. But two Carnegie Mellon researchers recently broke down the carbon footprint of foods, and their findings were a bit surprising. 83 percent of emissions came from the growth and production of the food itself. Only 11 percent came from transportation, and even then, only 4 percent came from the transportation between grower and seller (which is the part that eating local helps cut). Additionally, food shipped from far off may be better for the environment than food shipped within the country — ocean travel is much more efficient than trucking.

As Brad Plumer writes, the striking takeaway is that “on average, replacing just 21 percent of the red meat in the ‘typical’ diet with fish or chicken does as much, emissions-wise, as buying everything in that same diet locally.” That’s not, of course, an argument against eating locally. Taste, farming practices, sustainability, and much else point towards local consumption. But buying locally raised meats doesn’t get you off the environmental hook. If you’re worried about global warming, changing what you eat is far more important than monitoring where it’s produced.

Consequences? What consequences?

Great bit at TMV:

SUV for Sale

By Tom Purcell

“Ah, the summer season has arrived and the wife and I hope to hit the road. That means one thing. I must dump my SUV.”

“Dump your SUV?”

“With gas prices soaring, who can afford to drive such a gas guzzler anymore? What’s worse: My giant hunk of steel is worth several thousand less than I owe on it.”

“Those are the breaks. But isn’t that the risk you took when you bought it?”

“Risk?”

“Surely you know that a third of the world’s crude oil comes from the Middle East, one of the most volatile regions in the world. That volatility has led to erratic gasoline prices before.”

“It has?”

Twelve dollars a gallon?

Not yet, but certainly possible.

“The world’s premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand.” Previously the International Energy Agency had forecast an ever increasing supply to match ever increasing demand, but times they are a changing. Not one to be outdone by an international agency, “the U.S. Energy Department’s own forecasting shop, the Energy Information Administration, has long stuck to the same demand-driven methodology as the IEA, assuming that supply will keep up with the world’s growing hunger for oil.” After all, for decades that’s how things worked, so why do the hard job of analyzing both supply and demand when only doing half your homework is so much easier? But, since 2004 demand has continued to rise while supply has plateaued. Now, both agencies have been caught with their analytical pants down and are scrambling to cover themselves. While some blame oil speculators for rapidly rising fuel costs, most economists and oil analysts point to increasing world-wide demand combined with the difficulties of finding new oil and the lack of willingness of oil suppliers to spend the money needed to find more of the stuff.

Only getting half of it

Michael at Balloon Juice talks about ANWR and why it won’t help reduce gas prices.

He’s right, it won’t make a large dent in the worldwide oil prices, but the larger issue is domestic production and reduced reliance on Middle Eastern sources, particularly in a strategic sense.

The Hood Robin Subsidy

Twelve cents a gallon?  That's what gasoline costs in Venezuela.

Crude. Black Gold. Texas Tea. Oil, that is.

by Sean from Hiding in the Backwaters:

Rising gas prices are getting more press with elections looming and incumbents fearing some backlash from voters. Much is being made of ExxonMobile’s record $36.1 billion profit in 2005 and their record breaking Q1 in 2006 that is putting them on track to break another profit record for 2006. I found this little breakdown of the numbers interesting.

To put things into perspective, Exxon’s profit in 2005 amounted to six dollars for every single human being on the planet. Put another way, this astronomical profit was enough to buy almost 45 gallons of petrol (at $2.75/gallon) for every man, woman and child in the Evil Empire. This is equal to nearly ten percent of overall consumption for 2004.¹

While I am not happy with gas prices at the pumps—mostly because my income isn’t even keeping pace with inflation, which wanders between 3% and 5%², much less the 20% increase in gas prices this year—I’m not necessarily upset with oil companies making record profits. Conditions favor them right now, so bully for them. Of course, you have those who believe that the two oil men in the White House have engineered this crisis in the Middle East to drive oil prices up. I tend to be highly skeptical of conspiracy theories in general. So we’ll just move on.

My biggest issue with the record profits of oil companies is the fact they receive unbelievable handouts from our federal government. The Energy Policy Act of 2005 included $2.8 billion in tax breaks for fossil fuel production.³ It is incomprehensible to me that when a single player is posting record profits of $36 billion, they are still able to convince the bone-heads on Capitol Hill they need handouts. They don’t need tax breaks. Multinational corporations like ExxonMobile have plenty of tax shelters of their own.

One recent study by Tax Notes found that subsidiaries of U.S. corporations operating in the top four tax havens (the Netherlands, Ireland, Bermuda and Luxembourg) had 46.3 percent of their profits in those countries in 2001, but only 9 percent of their employees and 12.6 percent of their plant and equipment.⁴

What a shock, ExxonMobile has a presence in the Netherlands, Ireland, Bermuda and Luxembourg. But Congress still seems to think (or at least seems to believe we’ll buy it) that we can lure companies back to the U.S. by handing them money.

“This bill spends capital at home to produce our own energy, create jobs and lessen our dependence on foreign sources of oil,” said House Resources Committee Chairman Richard Pombo.⁵

What an idiot. It is always (or at least for the foreseeable future) going to be cheaper to operate abroad no matter how many tax breaks and subsidies we give away. The reason we are dependant on foreign oil is not because there is no oil to be had in the U.S. It’s not because the U.S. extracts exorbitant tax revenues from corporations. It’s cheaper for the same reason we buy toys from China. It’s cheaper for the same reason we buy milk from Mexico. It’s cheaper for the same reason we buy shirts from Indonesia. Cheap labor. No one likes to pay taxes, but I suspect that for companies operating in the U.S. employee salaries and benefits make up a much larger chunk of operating costs than taxes ever have or ever will. That doesn’t mean they aren’t going to turn down free money.

Whether I get nailed at the pump or have it added to my tax burden, I am paying for it either way. Frankly, I’d rather pay at the pump because I believe there are fewer pockets to line paying directly at the pump versus paying for my fuel via payroll deduction.

¹Ashford, Lindsay, “The Fattest of the Fat: ExxonMobil’s Raymond,” April 18, 2006, BlogCritics.org, blogcritics.org.²“Inflation Rate in Percent for Jan 2000-Present,” inflationdata.com.

³“Energy Policy Act of 2005″, Widipedia.org, wikipedia.org.

⁴Rattner, Steven, “Why Companies Pay Less,” The Washington Post, May 18, 2004, washingtonpost.com.

⁵Coile, Zachary, “House OKs energy bill laden with tax breaks: Measure seeks to build up domestic oil production,” San Francisco Chronicle, April 22, 2005, sfgate.com.

Reality bites

Mick has a good piece at UNCoRRELATED on the latest "oil gouging" investigations.  Read it in full.  A sampling:

While its been said that we can't drill ourselves out of this crisis, neither can we, as Democrats insist, "invent our way" out of it. There is a definite need for research and develop of alternative energy sources, but nobody is going to pull a rabbit out of the proverbial hat.

Energetic musings

Justin Gardner has an interesting link at The Moderate Voice.  He in turn is linking to Dennis Sanders at Donkelphant, who waxes poetic about the virtues of his Jetta TDI.

Gardner observes, "Diesels, not so bad any more?  Anymore?  Unless you were emotionally invested in the disasterout diesels Detroit put out in the early eighties, they were never bad in the first place.  Light and heavy trucks in ths US and general motorists the world over have used diesel engines for generations.

Of course, I'm more than a little biased, being the proud owner of a Jetta TDI myself.

Sanders observes:

I got this car for two reasons: first, it has great mileage. It’s about the high 30s in the city and in the low to mid 40s on the highway. Since I drive to work (there are no buses that go to my place of work in the ‘bubrs) I only have to fill up about once a week. (When I was taking the bus, I filled up every two weeks.)

Second, it puts less greenhouse gases in the atmosphere. It’s not perfect, since there are still bad particulates, but because of government mandates, it’s getting cleaner.

I made a decision in the free market to get a fuel efficient car. So, the rising fuel prices do take some bite, but not as much in the long run.

This is a really long way of saying that I’m not sad that we have rising prices for fuel. These high prices have made us think about buying more efficient cars. The car companies are even bringing more small cars to the market. People are considering trading in their gas guzzlers and getting more efficient cars like a Honda Civic.

My calculus was similar.  The Jetta rides and handles like a European sport sedan, but so do other cars.  The Jetta ultimately won out because it gets incredible mileage, meaning fewer emissions and fewer trips to the gas station.  As I noted, my first tank saw 41 mpg, and that will increase on trips that are mostly freeway miles.

I don't share the enthusiasm, however, for higher fuel taxes.  As a general principle, wise people do not advocate paying more than necessary for something just because they can.  A lot of people would love to see $10 a gallon gasoline just to "force people from their cars," but what would that do?  Our communities are not built to function without personal transportation.  That's just reality.  Making it impossible for people to get to work and to the grocery store - and have no doubt, it will be the poorest among us who are affected the first and the worst - doesn't accomplish anything.

At the same time, it is correctly argued that metropolitan sprawl is itself a subsidy, and those driving the miles should contribute to the upkeep.  Imagine how many distant subdivisions would be built if the residents were solely responsible for the infrastructure.  Ironically, the regulations and policies of the cities make construction there more expensive, pushing more and more people out to the exurbs.

There has been something of a perfect storm in the media the past few days with stories talking about how the rising fuel costs might affect the economy in future months.  People who fled to the exurbs in search of affordable housing are now finding themselves spending $500 or more a month in extra gasoline costs. 

And discretionary spending in general is threatened by rising fuel costs.  The first and hardest hit will be low income families - and analysts expect WalMart to have problems if the prices continue to rise.  But it's not just low income shoppers who will be hurt as all of us spend less and less of our money on entertainment, dining out, clothing, home improvements, computers and electronic gear, etc., and put it into our gas tanks.  And the basics themselves from groceries to clothing to school supplies will themselves rise with transport costs, driven by fuel costs.

It all begs the question what of what the implications are to our future standard of living.  A lot was made of Kamiita, a town in Japan which shut off its heating system in the interest of saving fuel.  OK…but what's the point of living in a developed country if we don't actually live as if we live in a developed country?   

It's commonly said that in terms of how we live - the things we have, the things we do, the things we take for granted - Americans are pretty well off compared to the rest of the world.  How much of this difference can be attributed to our historically low energy prices?  Do higher energy prices suggest our standard of living falling to that of Europe?

Is that something Americans are going to want to hear?  Somehow I doubt it. 

Scornworthy

It seems right and left have found yet another thing to agree upon - the idiocy behind the notion that a $100 check is going to solve America's problems with rising fuel prices.  From the New York Times:

The Senate Republican plan to mail $100 checks to voters to ease the burden of high gasoline prices is eliciting more scorn than gratitude from the very people it was intended to help.

Aides for several Republican senators reported a surge of calls and e-mail messages from constituents ridiculing the rebate as a paltry and transparent effort to pander to voters before the midterm elections in November.

"The conservatives think it is socialist bunk, and the liberals think it is conservative trickery," said Don Stewart, a spokesman for Senator John Cornyn, Republican of Texas, pointing out that the criticism was coming from across the ideological spectrum.

Angry constituents have asked, "Do you think we are prostitutes? Do you think you can buy us?" said another Republican senator's aide, who was granted anonymity to openly discuss the feedback because the senator had supported the plan. 

Even Rush Limbaugh is getting in on the act, ranting, ""What kind of insult is this? Instead of buying us off and treating us like we're a bunch of whores, just solve the problem." 

But there's the dirty little secret - they average voter is of little more value to the GOP senate leadership than a whore.  Just shut up and vote, and oh, here's a C note for your trouble.  Not put some ice on that.

Joe Gandelman observes:

Conservatives give it a thumbs down. Liberals give it a thumbs down. And the sheer idea of $100 impressing voters has become a laughline. To be sure: $100 is just about enough to fill an SUV once — or pay for a cup of coffee at Starbucks…