R-Squared Energy Blog

Pure Energy

Is This Piling On?

Palin for President in 2012? I think not. Per Fox News, Sarah Palin didn’t know that Africa was a continent, nor did she know that NAFTA was comprised of the U.S., Mexico, and her neighbor Canada. Fox sat on the story until the day after the election:

This came from the McCain campaign, so it could be sour grapes. But if true, it also speaks to McCain’s vetting process and his judgment.

November 6, 2008 Posted by | John McCain, Sarah Palin | 15 Comments

Is This Piling On?

Palin for President in 2012? I think not. Per Fox News, Sarah Palin didn’t know that Africa was a continent, nor did she know that NAFTA was comprised of the U.S., Mexico, and her neighbor Canada. Fox sat on the story until the day after the election:

This came from the McCain campaign, so it could be sour grapes. But if true, it also speaks to McCain’s vetting process and his judgment.

November 6, 2008 Posted by | John McCain, Sarah Palin | 90 Comments

The Debate Over Energy Policy

From last night’s presidential debate transcript, both of the candidates sound off on energy policy. Comments from me are inserted into the text as [RR: comment].

Schieffer: Let’s go to — let’s go to a new topic. We’re running a little behind.

Let’s talk about energy and climate control. Every president since Nixon has said what both of you…

McCain: Climate change.

Schieffer: Climate change, yes — has said what both of you have said, and, that is, we must reduce our dependence on foreign oil.

When Nixon said it, we imported from 17 to 34 percent of our foreign oil. Now, we’re importing more than 60 percent. [RR: I predict over the next 4 years that this dependence will increase, unless we are in an extended recession/depression.]

Would each of you give us a number, a specific number of how much you believe we can reduce our foreign oil imports during your first term?

And I believe the first question goes to you, Sen. McCain.

McCain: I think we can, for all intents and purposes, eliminate our dependence on Middle Eastern oil and Venezuelan oil. Canadian oil is fine. [RR: In 2007, the U.S. imported 2.2 million barrels per day from the Middle East and 1.4 million barrels per day from Venezuela. That is greater than Canada’s total oil production, and Canada uses 2/3rds of the oil they produce internally. Sources: U.S. Imports by Country of Origin and Canadian Oil Production]

By the way, when Sen. Obama said he would unilaterally renegotiate the North American Free Trade Agreement, the Canadians said, “Yes, and we’ll sell our oil to China.”

You don’t tell countries you’re going to unilaterally renegotiate agreements with them.

We can eliminate our dependence on foreign oil by building 45 new nuclear plants, power plants, right away. We can store and we can reprocess. [RR: While I agree with the need to build more nuclear plants, this will do little to reduce dependence on foreign oil. The vast majority of electricity in the U.S. is produced from coal, and only about 1% is generated from petroleum. New nuclear plants will probably end up satisfying new demand, and displacing old coal-fired plants. Source: Electric Power Monthly]

Sen. Obama will tell you, in the — as the extreme environmentalists do, it has to be safe.

Look, we’ve sailed Navy ships around the world for 60 years with nuclear power plants on them. We can store and reprocess spent nuclear fuel, Sen. Obama, no problem.

So the point is with nuclear power, with wind, tide, solar, natural gas, with development of flex fuel, hybrid, clean coal technology, clean coal technology is key in the heartland of America that’s hurting rather badly.

So I think we can easily, within seven, eight, ten years, if we put our minds to it, we can eliminate our dependence on the places in the world that harm our national security if we don’t achieve our independence. [RR: It could be done, but only by taking a big bite out of demand. If we reduced our per capita energy usage to European levels, we could cut our oil imports by about 70%. To become completely independent (assuming current supplies) would require a cut in our consumption of 75%.]

Schieffer: All right. Can we reduce our dependence on foreign oil and by how much in the first term, in four years?

Obama: I think that in ten years, we can reduce our dependence so that we no longer have to import oil from the Middle East or Venezuela. I think that’s about a realistic timeframe.

And this is the most important issue that our future economy is going to face. Obviously, we’ve got an immediate crisis right now. But nothing is more important than us no longer borrowing $700 billion or more from China and sending it to Saudi Arabia. It’s mortgaging our children’s future. [RR: Agree with that. We are enriching other countries and weakening the U.S. with our high level of dependence on foreign oil.]

Now, from the start of this campaign, I’ve identified this as one of my top priorities and here is what I think we have to do.

Number one, we do need to expand domestic production and that means, for example, telling the oil companies the 68 million acres that they currently have leased that they’re not drilling, use them or lose them. [RR: Pandering. There is already such a provision. Oil companies aren’t out leasing land just to sit on it.]

And I think that we should look at offshore drilling and implement it in a way that allows us to get some additional oil. But understand, we only have three to four percent of the world’s oil reserves and we use 25 percent of the world’s oil, which means that we can’t drill our way out of the problem. [RR: True, we can’t drill our way out. But it is extremely naive to think we can ramp up enough biofuel production in the next 10 years to displace very much petroleum – and we certainly couldn’t do that without the risk of unintended consequences.]

That’s why I’ve focused on putting resources into solar, wind, biodiesel, geothermal. These have been priorities of mine since I got to the Senate, and it is absolutely critical that we develop a high fuel efficient car that’s built not in Japan and not in South Korea, but built here in the United States of America. [RR: As I have said before, the problem is not one of supply. There are plenty of fuel efficient cars to choose from now. The problem is getting people to demand them. We saw demand pick up sharply when gas prices rose set new records earlier this year, which is why I think a gas tax would go a long way toward addressing the issue of the fuel efficient car. If the demand is there, the cars will be built. If gas is expensive, demand will be there.]

We invented the auto industry and the fact that we have fallen so far behind is something that we have to work on.

Now I just want to make one last point because Sen. McCain mentioned NAFTA and the issue of trade and that actually bears on this issue. I believe in free trade. But I also believe that for far too long, certainly during the course of the Bush administration with the support of Sen. McCain, the attitude has been that any trade agreement is a good trade agreement. And NAFTA doesn’t have — did not have enforceable labor agreements and environmental agreements.

And what I said was we should include those and make them enforceable. In the same way that we should enforce rules against China manipulating its currency to make our exports more expensive and their exports to us cheaper.

And when it comes to South Korea, we’ve got a trade agreement up right now, they are sending hundreds of thousands of South Korean cars into the United States. That’s all good. We can only get 4,000 to 5,000 into South Korea. That is not free trade. We’ve got to have a president who is going to be advocating on behalf of American businesses and American workers and I make no apology for that.

Schieffer: Senator?

McCain: Well, you know, I admire so much Sen. Obama’s eloquence. And you really have to pay attention to words. He said, we will look at offshore drilling. Did you get that? Look at. We can offshore drill now. We’ve got to do it now. We will reduce the cost of a barrel of oil because we show the world that we have a supply of our own. It’s doable. The technology is there and we have to drill now.

Senator Obama didn’t reiterate his call for a windfall profits tax as part of his energy policy plan. But you can see that provision on the web page describing his energy plan: Barack Obama’s New Energy Plan. You know, I think I could support that if he has a provision to cut tax rates if oil prices fall. But I don’t see that happening.

For balance, here is Senator McCain’s energy plan: John McCain’s Lexington Project. And while McCain doesn’t support a windfall profits tax, the irony is that as Alaska’s governor his running mate pushed one through. (You can read a pretty balanced account of that story here).

October 16, 2008 Posted by | Barack Obama, energy policy, John McCain, politics | 757 Comments

McCain Losing It

I have held my tongue this week, but the McCain/Palin tactics are starting to really disgust me. I have been scratching my head and asking myself what has happened to this man. I once admired him. I wanted to see him beat Bush in 2000. Now I wonder if it’s just that my views have changed so much, or whether he was ever the person I thought he was. (For a real hatchet-job that says he was never the man I thought he was, see the new Rolling Stone article: John McCain, Make-Believe Maverick ).

Christopher Buckley, the son of the late William F. Buckley, says McCain has changed:

A Buckley endorses Obama

Buckley, who praised McCain in a New York Times Op-Ed earlier this year and defended the Arizona senator’s conservative credentials against wary talk-radio hosts, said McCain is no longer the “real” and “unconventional” man he once admired.

“This campaign has changed John McCain,” Buckley wrote. “It has made him inauthentic. A once-first class temperament has become irascible and snarly; his positions change, and lack coherence; he makes unrealistic promises, such as balancing the federal budget ‘by the end of my first term.’ Who, really, believes that?

“Then there was the self-dramatizing and feckless suspension of his campaign over the financial crisis,” Buckley added. “His ninth-inning attack ads are mean-spirited and pointless. And finally, not to belabor it, there was the Palin nomination. What on earth can he have been thinking?”

I would add to that the crazy mortgage scheme he proposed at the most recent debate, which has some conservatives up in arms:

McCain faces conservative backlash over mortgage plan

(CNN) – John McCain is facing a fresh round of anger from members of his own party deeply opposed to the Arizona senator’s proposal for the federal government to purchase troubled mortgage loans.

In a sharply worded editorial on its Web site Thursday, the editors of The National Review — an influential bastion of conservative thought — derided the plan as “creating a level of moral hazard that is unacceptable” and called it a “gift to lenders who abandoned any sense of prudence during the boom years.”

But he lost my vote the day he put Palin on the ticket. Any thought I had of voting for the man went out the window as soon as I heard that. As I said at the time, I don’t think she is qualified (and subsequent events have only reiterated my original opinion). I think his choice of her put politics ahead of country.

On the other hand, I don’t think Obama has a solid energy plan. Someone told me recently that his energy advisors are primarily environmentalists, but not energy experts. If true, that means his energy policy will contain a lot of unrealistic ‘solutions.’ I have a hard time embracing an energy policy that consists of “Fund X, mandate Y, and tax the devil out of the oil companies.” I just haven’t figured out how that last bit is going to help secure additional energy supplies.

I have held steady in my prediction that Obama will win the presidency (although that doesn’t mean I am voting for him). I predicted it to my father-in-law following the Iowa caucus, and have repeated that prediction several times here. But I have to give credit to my wife on this one, who predicted it following his speech at the Democratic National Convention four years ago.

However, I think there is a good chance that the winner of the election will only serve one term. They are going to govern through a very difficult four years, and two years in they will be catching a lot of the blame for not fixing a set of very vexing problems. I think they will preside over escalating energy prices, which will cause the economy to continue to struggle. And if Obama is elected as I expect, I think he is likely to make some serious missteps when oil prices spiral higher, exacerbating the problem.

October 12, 2008 Posted by | Barack Obama, John McCain, politics, Sarah Palin | 328 Comments

McCain Losing It

I have held my tongue this week, but the McCain/Palin tactics are starting to really disgust me. I have been scratching my head and asking myself what has happened to this man. I once admired him. I wanted to see him beat Bush in 2000. Now I wonder if it’s just that my views have changed so much, or whether he was ever the person I thought he was. (For a real hatchet-job that says he was never the man I thought he was, see the new Rolling Stone article: John McCain, Make-Believe Maverick ).

Christopher Buckley, the son of the late William F. Buckley, says McCain has changed:

A Buckley endorses Obama

Buckley, who praised McCain in a New York Times Op-Ed earlier this year and defended the Arizona senator’s conservative credentials against wary talk-radio hosts, said McCain is no longer the “real” and “unconventional” man he once admired.

“This campaign has changed John McCain,” Buckley wrote. “It has made him inauthentic. A once-first class temperament has become irascible and snarly; his positions change, and lack coherence; he makes unrealistic promises, such as balancing the federal budget ‘by the end of my first term.’ Who, really, believes that?

“Then there was the self-dramatizing and feckless suspension of his campaign over the financial crisis,” Buckley added. “His ninth-inning attack ads are mean-spirited and pointless. And finally, not to belabor it, there was the Palin nomination. What on earth can he have been thinking?”

I would add to that the crazy mortgage scheme he proposed at the most recent debate, which has some conservatives up in arms:

McCain faces conservative backlash over mortgage plan

(CNN) – John McCain is facing a fresh round of anger from members of his own party deeply opposed to the Arizona senator’s proposal for the federal government to purchase troubled mortgage loans.

In a sharply worded editorial on its Web site Thursday, the editors of The National Review — an influential bastion of conservative thought — derided the plan as “creating a level of moral hazard that is unacceptable” and called it a “gift to lenders who abandoned any sense of prudence during the boom years.”

But he lost my vote the day he put Palin on the ticket. Any thought I had of voting for the man went out the window as soon as I heard that. As I said at the time, I don’t think she is qualified (and subsequent events have only reiterated my original opinion). I think his choice of her put politics ahead of country.

On the other hand, I don’t think Obama has a solid energy plan. Someone told me recently that his energy advisors are primarily environmentalists, but not energy experts. If true, that means his energy policy will contain a lot of unrealistic ‘solutions.’ I have a hard time embracing an energy policy that consists of “Fund X, mandate Y, and tax the devil out of the oil companies.” I just haven’t figured out how that last bit is going to help secure additional energy supplies.

I have held steady in my prediction that Obama will win the presidency (although that doesn’t mean I am voting for him). I predicted it to my father-in-law following the Iowa caucus, and have repeated that prediction several times here. But I have to give credit to my wife on this one, who predicted it following his speech at the Democratic National Convention four years ago.

However, I think there is a good chance that the winner of the election will only serve one term. They are going to govern through a very difficult four years, and two years in they will be catching a lot of the blame for not fixing a set of very vexing problems. I think they will preside over escalating energy prices, which will cause the economy to continue to struggle. And if Obama is elected as I expect, I think he is likely to make some serious missteps when oil prices spiral higher, exacerbating the problem.

October 12, 2008 Posted by | Barack Obama, John McCain, politics, Sarah Palin | 224 Comments

Revisiting Palin

On Sarah Palin as McCain’s choice for VP, I came out immediately and said that it was a mistake. I wrote in part:

Count me among those stunned by McCain’s pick for his VP candidate. It neutralizes the strongest argument he had against Obama: Not enough experience. Never again can he utter these words. Further, I can’t comprehend her as president (and with McCain’s age, I think we would have a fair chance of seeing that happen). I think the job is over her head, and I have witnessed the carnage several times when people step into a job over their heads. Imagine letting a first year medical school student do your heart transplant, and you start to get the picture.

After watching a couple of interviews with her, I think she has validated my claims that the job is over her head, and in my opinion the pick has turned into the disaster I anticipated. The spectacle has become a national joke, and I know people who turned away from McCain as a result. (I also know people who initially embraced the move as brilliant). There are even conservative commentators suggesting Palin step down for the good of the party. I certainly questioned his judgement after the pick, and I questioned it again after his bizarre campaign suspension to deal with a crisis that he had downplayed just a couple of weeks earlier.

Our political process makes me nearly ill. I want a candidate who doesn’t pander (like Obama does with his energy policy) or make decisions that are purely political, but not in the best interest of the country (Palin as VP). Both major parties represent parts of who I am, but they also represent parts that are 180 degrees from who I am. That’s why I often find myself ripping into both parties. That’s also why the Democrats often accuse me of being a Republican and the Republicans often accuse me of being a Democrat. Each side tries to define me on the basis of what I oppose. If I am against Obama’s energy pandering, I am a right-wing conservative. If I criticize McCain’s bizarre behavior of late, I am to the left of Ted Kennedy. (I am in fact very centrist in my politics, but I have areas in which I swing right and areas in which I swing left).

The truth is, I think our current political system is broken. It rewards lobbyists and special interests. The candidate who can most convincingly tell the biggest majority what they want to hear is the one who wins. It shouldn’t be like that.

So, do the Republicans here stand by Palin? Do the Democrats think Obama has given sufficient details on how we would accomplish his objectives? (As regular readers here know, I have some big problems with the energy policies of both candidates, but I think McCain’s takes a more realistic view of our energy situation).

September 30, 2008 Posted by | Barack Obama, energy policy, John McCain, politics, Sarah Palin | 464 Comments

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | Comments Off on Hillary’s Stupid Energy Plan

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | 34 Comments

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | Comments Off on Hillary’s Stupid Energy Plan

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | Comments Off on Hillary’s Stupid Energy Plan