Welcome to Tomorrow

Adding greatly to our foundation-shaking, angst-ridden and white-knuckled concerns in daily life is how to afford enough gas to do what’s necessary to keep the ball rolling, day by day — kids to school … us to work … groceries [fewer bags for larger cost] secured at the one-stop shopping event that’s being combined with other essential trips so no gas frittering occurs.

I would like to take a moment to say that although a prophet is never honored in his own country, JIMMY CARTER told us this day would come, and tried to make us pay attention to the eventualities. But noooooooo – we did our little Scarlett O’Hara “fiddle-de-dee,” flipped our dress up behind us as we moved along and continued to guzzle; like the spoiled Miss S, we decided to worry about it “tomorrow.”

So, tomorrow is here — how do you like it so far?

I’m always perplexed [but in sorrowful agreement] when Bill Maher discusses gas prices — as someone whines about them, Bill invariably adds, “Good. Maybe now we’ll begin to take this seriously.” Elective surgery is what you put off when you can — when it’s no longer elective, it’s a bona fide emergency. Alternative power sources are no longer elective — and when Bill reminds us of that, I always think about Poppy Bush and his declaration that the American life-style would NOT be thwarted.

Except by reality, perhaps.

Our Boy Wonder thinks that ANWR holds the answer and is pounding on “tree huggers” for holding up his drilling project — the fact that the oil wouldn’t be available in this decade or even until well into the next doesn’t deflate his bubble — a bright, sparkly and profitable one he shares with Exxon Mobil who is ‘disappointed’ in their $10.9 billion profit this quarter.

Oh, fiddle-de-dee!

A boycott of Exxon [as Boss Hog of the oil profiteers] was proposed awhile back and I think that’s an excellent idea — although in the final analysis, most of us will end up purchasing fuel for the lowest price wherever we can find it. All those energy-saving plans Jimmy said would be expedient for our future were scrapped long ago and under the Dubby’s tenure, given the heave-ho … so we’re locked in to this moment in time, and forced to think longingly about alternatives at long last … I just hope we get over the ethanol propaganda quickly enough to divert money away from it and get corn back onto the table where it belongs [Obama needs to come up to speed on this, I don’t know about Clinton.]

McCain and Clinton like the psychological benefits of a summer decrease in this election season; Obama is playing Carter on this one, poking the illusions with a stick, and supported by most of the analyst’s. I think we need to get on the same page and realize our guzzling days are pretty much done — the dinosaurs are dead, and their last dregs are being fought over by another species in deep trouble; time to get on with the inevitable.

Sales of trucks and SUV’s are down by over 10% and likely to continue to drop — and commuters are selecting trains and buses now more than ever, although there are concerns with that long-ignored infrastructure as well. While we moan and sigh, it is well to remember that gas is over $8 in the UK and other places; we’ve been Scarlett for a long long time — it’s time to stop fiddling and pay the piper. The last article will make you gasp.

By the way, as regards news of the day — it’s the 5th anniversary of “Mission Accomplished” … we’re shooting missile’s at Somalia … 80,000 more jobs went down the drain in April … and the recently convicted DC Madam has evidently committed suicide in Florida.

Jude

Obama TV ad on gas prices: You need a president who tells you the truth
snipped from USA Today

[Obama ad running in Illinois and North Carolina — open link for video]

I’m here to tell you the truth. We could suspend the gas tax for 6 months, but that’s not going to bring down gas prices long-term. You’re gonna save about 25, 30 dollars…or half a tank of gas. That’s typical of how Washington works. There’s a problem, everybody’s upset about gas prices – let’s find some short-term, quick-fix, that we can say we did something even though, even though we’re not really doing anything.

We cannot deliver on a better energy policy unless we change how business is done in Washington We’ve got to to the oil companies and look at their price-gouging. We’ve got to start using less oil and that means raising fuel efficiency standards on cars and developing alternative fuels.

That’s the real honest answer to how we’re going to solve this problem. That’s what you need from a president, someone who’s going to tell you the truth.

I’m Barack Obama and I approve this message. ++

Clinton Gas-Tax Proposal Criticized
Economists Share Obama’s View
Alec MacGillis and Steven Mufson, Washington Post
Thursday, May 1, 2008

A growing chorus — including a top congressional Democrat — labeled Sen. Hillary Rodham Clinton’s proposal for suspending the federal gasoline tax ineffective and shortsighted yesterday, even as she continued to paint Sen. Barack Obama as insensitive to drivers’ woes for not endorsing the plan.

The Democrats’ clash on the issue has emerged as a flash point in the week before the presidential primaries in Indiana and North Carolina and is emblematic of the broader contrast that the candidates have presented: Clinton says she would make immediate bread-and-butter fixes for struggling Americans, while Obama portrays himself as a truth-teller who would bring a new kind of politics to Washington and produce more lasting change.

Backing up Obama’s position against Clinton’s proposal to suspend the 18.4-cent-per-gallon tax for the summer is a slew of economists who argue that the proposal, first offered by Sen. John McCain, the presumptive GOP nominee, would be counterproductive. They argue that cutting the tax would drive up demand for gas at a time when the supply is tight, which would mean that the price at the pump would drop by much less than 18 cents per gallon.

The tax suspension would, as a result, cut into the highway trust fund that the tax supports, a loss of about $9 billion over the summer, but also result in fatter profit margins for oil companies. Clinton says she would replace the lost revenue by raising taxes on the oil industry.

Harvard professor N. Gregory Mankiw, who has written a best-selling textbook on economics, said what he teaches is different from what Clinton and McCain are saying about gas taxes. “What you learn in Economics 101 is that if producers can’t produce much more, when you cut the tax on that good the tax is kept . . . by the suppliers and is not passed on to consumers,” he said.

Clinton has an ad running in North Carolina and Indiana that attacks Obama for his opposition to lifting the tax. Yesterday, she added visuals to her pitch by joining a sheet-metal worker on his ride to work, stopping with him at a gas station to fill up the pickup truck he was driving as her motorcade’s SUVs idled nearby.

“I’m willing to give you a little more relief on a short-term basis,” Clinton said. In Apex, N.C., her husband chimed in by telling voters, according to ABC News:

“There’s a difference between the two candidates here. Her opponent says, ‘Well, she’s just pandering to voters.’ That’s not true. Look, folks, there are people out here who are choosing every week now between driving to work and having enough food for their kids, between driving to work and paying their medicine bills.”

Obama, who as a state senator supported temporarily suspending the Illinois gas tax in 2000, cast Clinton’s proposal as a ploy that would, according to an estimate by the Congressional Budget Office, save the average family about $30 for the summer — or, he said yesterday, “30 cents a day, which is less than you can buy a cup of coffee for at 7-Eleven.” He began running a 60-second ad showing a clip of him responding to what he calls the “Clinton-McCain proposal” at a rally.

“That’s typical of how Washington works. There’s a problem, everybody’s upset about gas prices — let’s find some short-term quick fix, that we can say we did something even though we’re not really doing anything,” he says in the ad. “We cannot deliver on a better energy policy unless we change how business is done in Washington. . . . That’s what you need from a president — someone who’s going to tell you the truth.”

Obama is proposing to reduce the cost of driving by suspending purchases for the country’s Strategic Petroleum Reserve. Over the long term he would also tax windfall oil profits and cap carbon emissions to provide rebates for low-income Americans and money to invest in renewable-energy research.

He supports ethanol, which is a boon to his state’s corn growers but has driven up food prices.

Leonard Burman, director of the Tax Policy Center of the Urban Institute and the Brookings Institution, said the laws of the market argue against a tax suspension. “Every summer, the refiners are running full out. If the price fell, people would want to drive more and there would be shortages,” he said. “It’s a basic economic principle that if the supply is fixed, the price is going to be determined by demand.”

Joining in the criticism was House Majority Leader Steny H. Hoyer (D-Md.), who said that the Democratic leadership of Congress has no intention of pursuing the summer tax suspension that Clinton touted. The move “would not be positive,” he said. “The oil companies would just raise their prices.”

Clinton stresses that she, unlike McCain, would push for a windfall-profits tax on oil companies to offset any benefit to them and replace the revenue loss to the highway trust fund. Burman called this “utterly incoherent,” saying that a windfall-profits tax would over the long term only exacerbate the supply problems caused by lifting the gas tax, because it would discourage the exploration for and development of new sources of petroleum. “So a policy intended to lower prices, but which won’t do that, will be offset with a policy that’s likely to raise prices over the long term,” he said.

Environmentalists noted that suspending the gas tax also would undermine efforts to curb global warming because it would increase the use of gasoline, a fossil fuel that contributes to climate change. It would also reduce incentives for buying fuel-efficient vehicles and developing alternative fuels. Relying on a windfall-profits tax to replenish the highway fund would leave less to invest in renewable energy, which is what Clinton had previously said a windfall tax would go toward.

More generally, they said, stoking ire about the cost of gas undermines efforts to build a case for limiting carbon emissions, which could raise prices at the pump. “It sends a confusing message,” said Kevin Knoblauch, president of the Union of Concerned Scientists. “What’s more helpful is if [politicians] help consumers understand that this isn’t about near-term gas prices, it’s about a comprehensive and smart approach to energy policies.”

That leaves the question, though, of whether the proposal will score points on the campaign trail. In Kokomo, Ind., last week, Kathy Spier said the rising cost of gas is to blame for the 50 percent drop-off in sales at her three exotic lingerie stores. “They don’t have extra money to spend on frivolous things,” she said.

Political consultant Carter Eskew, a former Al Gore adviser, said that if he were advising Obama, he would have said: “If you want to oppose this . . . you’re going to have to spend a lot of time and energy explaining.

“I don’t think it’s brilliant economics; unfortunately, it may be good politics. The smart people say ‘It’s stupid,’ and the people who aren’t as schooled say ‘At least it will do something for me,’ ” he said. “I don’t know that anyone connects the dots: that there have been a series of politically expedient decisions . . . that have added up to an economic picture that is not at all rosy and in fact fairly disastrous.” ++

Staff writers Perry Bacon Jr. in North Carolina, Peter Slevin in Indiana and Jonathan Weisman in Washington contributed to this report.

The Escape Artist
Dana Milbank, WaPo
Wednesday, April 30, 2008

The incredible shrinking presidency of George Walker Bush hit a new milestone yesterday: The commander in chief turned to sorcery.

“You know, if there was a magic wand to wave, I’d be waving it,” Bush informed Sheryl Gay Stolberg of the New York Times in a Rose Garden news conference.

She had asked him about the recession, which everybody seems to be acknowledging but Bush.

Further, the wizard of the West Wing said he would use his supernatural powers, if he had them, to conjure up lower gas prices. “I think that if there was a magic wand and say, ‘Okay, drop price,’ I’d do that,” said the illusionist.

Abracadabra! Watch the president pull a rabbit out of a hat! See his low ratings vanish before your very eyes!

Well, not this time. “There is no magic wand to wave right now,” Bush finally confessed to Stolberg.

But the president had something else up his sleeve. He used his appearance before the White House press corps to perform one of the oldest tricks in the book: blaming Congress. He faulted lawmakers 16 times in his opening statement alone.

“Americans are understandably anxious about issues affecting their pocketbook,” he began, and “they’re looking to their elected leaders in Congress for action.”

Implicit in his formulation was that Americans no longer look to him for action.

“Congress has repeatedly blocked efforts,” he protested. “Congress continues to block provisions. . . . Congress needs to clear away obstacles. . . . Congress is considering a massive, bloated farm bill. . . . Congress needs to do more. . . . I ask Congress to do its part.”

The reporters in the audience didn’t fall for the blame-Congress sleight-of-hand.

“Gas prices have gone up, foreclosures have gone up, there have been layoffs, news just this morning that consumer confidence is down yet again,” recited the Associated Press’s Jennifer Loven. “Isn’t it time to think about doing more?”

“Were you premature in saying that the U.S. economy is not in a recession?” needled Jeremy Pelofsky of Reuters.

“Americans believe we are in a recession,” pointed out American Urban Radio’s April Ryan. “What will it take for you to say those words, that we are in a recession?”

The illusionist swirled his cape and turned that into a question about Congress. “I mean, you know, the words on how to define the economy don’t reflect the anxiety the American people feel,” he ventured. Rubbing his nose, he continued: “The average person doesn’t really care what we call it. . . . These are difficult times. And the American people know it, and they want to know whether or not Congress knows it.”

Bush, sporting a bright-green tie and a new haircut, employed many pyrotechnics during his Rose Garden performance. He shook his head and made a sad shrug as he spoke of Congress’s many failures. He chopped at the lectern with his hand and slammed his palm for emphasis as he told ABC News’s Martha Raddatz about the “thugs and killers” in Afghanistan. He teased Stolberg about the Times’s boycott of Saturday night’s White House Correspondents’ Association dinner. And he chitchatted with Ryan, telling her she’s “lookin’ good in yellow” and asking about her baby.

But diversions would get Bush only so far. After the White House called the news conference, but half an hour before Bush stepped from the Oval Office, the Conference Board announced that consumer confidence fell in April to its lowest point since the Iraq invasion in 2003. That started a new sell-off on Wall Street, where investors await today’s report on economic growth in the first quarter. “Are you concerned that they will show us to officially be in a recession?” Stolberg asked Bush.

“I think they’ll show that we’re — it’s a very slow economy,” he replied.

The Washington Post’s Dan Eggen tried to put Bush in one of his least favorite places — the psychoanalyst’s couch. “You’ve expressed frustration with Congress,” he pointed out. “Are you frustrated? Are you angry? And do you have any real hope of being able to work with this Congress this year?”

Bush looked around, as if puzzled. “I believe that they’re letting the American people down, is what I believe,” he answered.

A chief way in which Congress is letting the American people down, the president said, is by refusing to approve oil drilling in the Arctic National Wildlife Refuge.

“They’ve repeatedly blocked environmentally safe exploration in ANWR,” he said, depriving the nation of “27 million gallons of gasoline and diesel every day.” This was one of the oldest tricks under Bush’s cloak — he has been making the ANWR case, unsuccessfully, for eight years — and his delivery was a bit rusty.

“Repeatedly” came out as “repleatedly,” and “27 million gallons” became “27 millions of gallons.”

Reporters quickly pointed out that, whatever the merits of oil exploration in ANWR, it is a long-term proposal that won’t help this summer’s gas prices. “Opening up ANWR is not long-term,” Bush objected. “It’s intermediate-term.”

So now the president is reduced to arguing the difference between long-term and intermediate-term. His is a slow and torturous disappearing act. ++

Gasoline-tax reprieve: an idea running on empty
Minimal cost savings, increased dependence on foreign oil, and high administrative costs are among reasons why this idea ran out of gas.
David R. Francis, Christian Science Monitor
May 5, 2008

The small cartoon on the Tax Policy Center’s website shows a man’s head with a gaping hole through it and the words “Stupid Tax Trick.” The words refer to the proposal by Republican Sen. John McCain to suspend the 18.4 cents per gallon federal excise tax on gasoline between Memorial Day and Labor Day.

The presumptive Republican presidential nominee’s suggestion was quickly picked up by Sen. Hillary Rodham Clinton, campaigning for the Democratic nomination. The idea, however, died a quick death in the Senate last week at the hands of a Democratic caucus drafting a bill aimed at giving relief from soaring gas prices. To many economists and others, the short tax holiday didn’t make much sense.

“It’s a terrible idea,” says economist Eric Toter, coauthor of the article that accompanied the cartoon and was headlined, “What Were They Thinking???”

Undoubtedly, they were thinking politics. A new survey by the Kaiser Family Foundation found that paying for gasoline easily tops the list of economic woes seen by American families. Some 44 percent of those surveyed saw their gas bills as a “serious problem.”

“It’s out of the political pandering playbook,” says Robert Bixby, executive director of the Concord Coalition, a nonpartisan organization pushing for elimination of the federal budget deficit.

Sen. Barack Obama, Senator Clinton’s rival for the Democratic nomination, did reject the idea. On this issue, he’s “the only one that looks like a grown-up,” comments Mr. Bixby.

President Bush also disapproved. Of course, he’s not running for office.

Here’s why critics say the gasoline-tax holiday plan is a bad idea:

•It wouldn’t save the average consumer much money. If a driver uses 10 gallons a week, he or she would save about $26 during the three months – enough to buy seven or eight milkshakes. A driver with a long commute to work would, potentially, save more. So would the truck drivers who were circling the Capitol in a horn-blaring caravan last week, angered by the 24.4 cents per gallon tax on diesel fuel.

The problem, says Mr. Toter, is that the cheaper fuel would encourage Americans to drive more – say an extra trip to the beach. The end result – after increased summer demand stretches American refining capacity to the limit – would be even higher prices.

It wouldn’t “do anything” for the consumer, Toter concludes. It would just boost the already record profits of refiners and oil companies.

An econometic analysis by Jeff Perloff, an economist at the University of California, Berkeley, is not so harsh. Drivers might save 9 to 12 cents a gallon despite the rising demand, he reckons.

•The gas-tax break would do nothing about United States dependence on imported oil, or, for that matter, on a limited supply of domestic oil. Contrariwise, it would add to consumption and to global-warming emissions.

“We are the laughing stock of Europe because we keep [gasoline] taxes so cheap,” notes Matthew Simmons, chairman of a Houston-based investment bank for the energy industry, Simmons & Co. International.

The state gasoline tax, which ranges as high as 32.1 cents in Wisconsin and as low as 8 cents in Alaska, averages 28.6 cents a gallon. So, add in the federal tax, and the average tax totals 47 cents. Way low by European standards. In Germany, for example, gas is taxed at about $2 per gallon.

Only last January, a bipartisan commission appointed by Congress recommended a 40-cent boost over five years in the federal gas tax with revenues used to improve the nation’s transportation system.

•The tax break would add to the federal deficit. Gas-tax revenues normally go to the Highway Trust Fund, which is used to maintain and improve the highway and public transit systems. One proposal in Congress would have substituted Treasury revenues for the lost HTF money.

•The change would be an administrative nightmare for the nation’s retail sellers of gasoline.

“It would be a logistical challenge,” says Jeff Lenard, spokesman for the convenience stores that sell 80 percent of the nation’s gasoline supply.

At this time, Republicans and Democrats are busily trying to blame each other for the troubling high gas prices. For instance, sometimes more than once a day House Republican Leader John Boehner issues a press release teasing Speaker Nancy Pelosi for not presenting her long-promised “common sense plan” to lower gas prices.

For now, Washington is looking for other ways to hold down gasoline prices. One popular idea is to stop filling the Strategic Petroleum Reserve. At present it contains 701 million barrels, enough with private oil company reserves to substitute for imported oil for 118 days. It is being filled at a rate of 70,000 barrels daily, not a hefty amount compared with imports of 10.1 million barrels a day.

“We are addicted to petroleum, a source of energy which is gradually going to disappear,” warns Michael Klare, who teaches international affairs at Hampshire College in Amherst, Mass. He says the US must really work on “alternative” energy sources.

That’s not a short-term solution. ++

Gas Tax Holiday Is A Bad Idea
Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Ali Frick, Benjamin Armbruster, and Brad Johnson, The Progress Report
May 1, 2008

Rising gas prices are hitting Americans hard, while oil companies rake in record profits. As the economy falters, calls to deal with the price of gasoline have reached the halls of Washington, D.C. “[L]awmakers are considering ideas they might have nixed months ago, including temporarily lifting the federal gas tax and halting deposits of oil into the Strategic Petroleum Reserve.” Sens. John McCain (R-AZ) and Hillary Clinton (D-NY) have called for a summer moratorium on the federal gas tax. McCain has not specified how to make up the $11 billion; Clinton has proposed a tax on windfall profits from oil companies to recoup losses to the federal highway fund. Economic analysts of all stripes have responded with horror, pointing out that “the benefits will flow to oil companies, not consumers.” Even if a suspension of the gas tax led to lower prices, the rich would benefit the most, since “the more a family earns, the more they drive,” notes Sam Davis of the Center for American Progress. Len Burman of the non partisan Urban Institute calls the proposal “a huge windfall for refiners.” New York Times columnist Tom Friedman argues, “This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks.” Newsweek’s Jonathan Alter agrees, stating, “Suspending the federal gas tax is a crass ploy for votes.” The Atlantic Monthly’s James Fallows calls cutting the gas tax “destructive nuttiness” and “embarrassing.” Economist Gilbert Metcalf called it “very short-sighted,” noting, “If we want people to invest in energy-saving cars, we need some assurance that the higher price paid for these cars is going to pay off through fuel savings.”

WHAT’S TO BLAME FOR HIGH GAS PRICES: President Bush said Tuesday that he has no “magic wand” to affect gas prices. But as Steve Hargreaves of CNNMoneywrites, gas price is “all about government policy.” Since the United States has some of the lowest gas taxes in the world, the price at the pump is dominated by the cost of oil. In congressional testimony one month ago, Exxon Mobil senior vice president Stephen Simon said his company believes the price of oil involves four components. The effects of supply and demand accounts for “somewhere around $50-55 a barrel,” or about half the current price. The second factor is the weaker dollar; since 2001, “the dollar has lost 45% of its value” against the euro. The third is “geopolitical risk”; since 2003, the United States has been committed to a three-trillion-dollar war in Iraq, the heart of the turbulent oil-producing world. And the final component is “speculation”; investors have “looked to commodities not only as a hedge against inflation but as a hedge against the tumbling greenback.”

IMMEDIATE ACTION: When asked by Reuters abot the gas tax proposal, conservative economist Greg Mankiw recommended, “If you want to provide households tax relief, a direct rebate…is more effective.” Center for American Progress analysts Sam Davis and Daniel J. Weiss describe how a fast-acting “reliefbate” plan would work. Applied progressively, the “reliefbate” would provide reprieve to 80 percent of American households as well as all independent truckers, at a total cost of $23.2 billion, which “could easily be paid for by closing several oil tax loopholes and recovering lost royalties.” The Washington Post’s Dan Froomkin further recognizes that there are “two hugely significant factors” that Bush could take action on immediately: “the war in Iraq and the value of the dollar.”

LONG-TERM SOLUTIONS: The fundamental solution to gas prices is to reduce dependence on oil. As conservative economist Douglas Holtz-Eakin said, “You have to price oil on a permanent basis to provide incentives to shift away from it. It’s the key issue — and the hardest one to make progress on.” This year, the National Surface Transportation Policy and Revenue Study Commission submitted a comprehensive plan for the future of the transportation infrastructure, which fuel taxes fund. But the federal fuel tax is but one brushstroke in a much broader picture. The Center for American Progress’s Energy Opportunity Agenda states, “The realities of global warming and our growing dependence on oil, much of it imported, will make energy more pivotal than ever to our economic, environmental, and national security fortunes in the 21st century. The challenge we face is nothing short of the conversion of an economy sustained by high-carbon energy — putting both our national security and the health of our planet at serious risk — to one based on low-carbon, sustainable sources of energy. The scale of this undertaking is immense and its potential enormous.” ++

Bush misleads on ANWR
Alex Koppelman, Salon
Tuesday, April 29, 2008

At a White House news conference Tuesday, President Bush sought to place much of the blame for the nation’s economic woes on Congress. Americans are “looking to their elected leaders in Congress for action,” Bush said. “Unfortunately, on many of these issues, all they’re getting is delay … I’ve repeatedly submitted proposals to help address these problems. Yet time after time Congress chose to block them.” But at least one of the solutions Bush offered during his remarks doesn’t hold the promise he suggested, and the statistics he cited to make his case were at best misleading.

“Members of Congress have been vocal about foreign governments increasing their oil production, yet Congress has been just as vocal in opposition to efforts to expand our production here at home,” Bush said, referring to efforts to open the Arctic National Wildlife Refuge, in Alaska, to oil drilling. “The Department of Energy estimates that ANWR could allow America to produce about a million additional barrels of oil every day, which translates to about 27 millions of gallons — gallons of gasoline and diesel every day,” Bush added. “That would be about a 20 percent increase of oil — crude oil production over U.S. levels — and it would likely mean lower gas prices.”

Notice he cited U.S. levels? That’s a much, much lower bar to reach, as — according to the Energy Information Administration — on any given day, the U.S. imports almost twice as much crude oil as it produces. And while he promised “about a million additional barrels of oil every day,” he neglected to mention that, according to Energy Literacy Advocates, the U.S. uses 21 million barrels of oil a day. The additional production would account for less than five percent of our current total oil use.

Moreover, Bush discussed the opening of ANWR as a shorter-term solution than biofuels or hydrogen, and said, “Somehow if you mention ANWR it means you don’t care about the environment. Well, I’m hoping now people, when they say ANWR, it means you don’t care about the gasoline prices that people are paying.”

If people ever do use Bush’s chosen formulation, I hope they change it a little to conform with reality — I’d suggest something like, “When they say ANWR, it means you don’t care about the gasoline prices that people will be paying 20 years from now.” In 2004, the EIA released a report saying that if Congress were to allow drilling in ANWR that year, the oil would not actually begin flowing until 2013 and peak production would not be reached until 2025. Even then, according to the Associated Press, oil prices would be reduced by less than 50 cents a barrel (assuming oil was at about $27 a barrel — as of this post, even after a decline, light, sweet crude for delivery in June was at $116.44 a barrel). And “even at peak production, the EIA analysis said, the United States would still have to import two-thirds of its oil, as opposed to an expected 70 percent if the refuge’s oil remained off the market.” ++

Gas to Hit $7 a Gallon
Marty Jerome, Wired
April 29, 2008

Both Qatar’s oil minister and the head of OPEC can see oil hitting $200 a barrel before the end of the year and one analyst says gas could reach $7 a gallon within four years. That could mean cataclysm for the global economy.

The world got a little relief today when BP reopened its North Sea pipeline. But the price of gas is averaging $3.60 a gallon and the price of oil is flirting with $120 a barrel with no relief in sight. Market forces don’t seem to be functioning in their normal order. OPEC controls only about half of the world’s oil supply. Ordinarily, when prices spike skyward, the world’s non-cartel spigots open wide. Why isn’t this happening and who’s to blame?

Oil Companies. Admittedly, obscenely compensated oil executives are laying low these days. Big Oil is rolling in profits. The Bush Administration’s tax subsidies to oil companies, which were intended to prod exploration, should infuriate commuters.

And yet the profit margins of oil giants are only slightly higher than the average for the S&P 500. And much of the wealth from these companies is pumped back into the economy in dividends, employment, capital spending and the like. Big Oil shouldn’t get a walk (and windfall profit taxes make more sense than ever). But it’s only a small part of the problem.

China and India. It seems to be a global fact that an automobile signals your arrival into the middle class. Without question, demand for oil in these countries is putting an inexorable upward push on gas prices. This isn’t going to change in your lifetime, and it should sound the alarm for North Americans and Europeans that their middle-class lives will be threatened unless they develop alternative forms of energy — fast. But the increasing demand for oil in China and India is a long-term trajectory. It doesn’t explain recent spikes. And in the short term, it’s self correcting. As oil prices spike, economies slow and the demand for oil eases. So does its price.

Ben Bernanke. Oil is currently priced in U.S. dollars. The Federal Reserve has feverishly tried to calm credit markets in recent months with lower interest rates, which are a kind of Valium for bankers. As interest rates drop, so does the value of the dollar. So it takes more dollars to buy a barrel of oil. Without question, the credit crisis is a more pressing concern than high gas prices. Credit, after all, is the life blood of an economy. It is widely expected that tomorrow the Feds will reduce interest rates again. But many analysts believe this is the last cut we’ll see for a while. Fighting inflation — including rising gasoline prices — is becoming a priority.
When interest rates begin inching up again, it will be bad news if you’re taking out a car loan, good news at the pump. In the meantime, just be glad you don’t have Ben Bernanke’s job.

Speculators. It’s never a good omen when fear swallows reason on the trading floor. But this seems to explain part of what’s happening with the price of oil. Or maybe it’s just greed. Whatever. The good news is that these speculative frenzies tend to end quickly. And ultimately, it’s traders’ fingers that get burned, not consumers.

Suppliers. Here’s the mysterious missing piece in high gas prices: Saudi Arabia, Kuwait, Qatar and other OPEC members try to keep supplies tight and prices high. But England, Norway, Russia and other non-OPEC countries open the spigots to take advantage of high prices. This usually brings prices down. But supply disruptions have become rife — even with OPEC countries, such as Nigeria, thanks to an insurgency that keeps shutting down its pipeline. Norway’s production has dropped by 25 percent since its peak in 2001. Britain’s has dropped by 43 percent. Alaska’s Prudhoe Bay has dropped by 65 percent from its peak. Russia’s is down and so is Mexico’s. It’s enough to make you think speculators are on to something.

When does fear resemble reason? ++

“So keep fightin’ for freedom and justice, beloveds, but don’t you forget to have fun doin’ it. Lord, let your laughter ring forth. Be outrageous, ridicule the fraidy-cats, rejoice in all the oddities that freedom can produce. And when you get through kickin’ ass and celebratin’ the sheer joy of a good fight, be sure to tell those who come after how much fun it was.”
~ Molly Ivins, 1944 - 2007

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

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