Saturday, July 26, 2008

ANWR, OCS, And “Supply and Demand”

In the last post about drug addictions relation to oil demand I briefly covered some of the basics of why Oil is different then most other product. But here is a better description for those who are interested in a better understanding.

Supply and demand are a relationship by which market prices are set in a successful business. It is the most basic, day one, concept of economics. Just knowing that increased supply and demand decreased can lower prices for a product is not going to get you your masters in economics. As a matter of fact it is about as close to it as a guy who masturbates is to getting a doctorate MD. There is so much more to it then that. I will try to explain its relationship to oil.

Like I said, supply and demand are a relationship. One must respect the other when trying to determine affects on the market. Demand is a factor that reduces in quantity as price is increased. A key element of demand is the phrase “willing and able”. Bata VCRs are not flooding the shelves of you local Wal-Mart because nobody is willing to buy them at any price. Any supplies of Betas are dead inventory. By the same token there are only about 50 Koenigsegg CCRs produced per year. It turns out that there are very few people “able” to pay 3/4 of a million dollars for a car. (It doesn’t have the greatest fuel economy either.) Many are willing but not able.

The demand for oil is increasing. China is estimated to put 25,000 cars on the road per year. It is also estimated that they will have more cars on the road then the US in the next 10 years. India is another emerging economy. It is not sure what pressure they will put on the auto market, but the energy market in general will feel the upward push in demand. So, Why not just throw supply at it?

Let us take a look at supply. Supply is the amount that the producer has decided the market will buy at the maximum price. That point where the market is satisfied and doesn’t need anymore is “one too many”. It is also called it equilibrium point. If 20 people want your product and you produce 10, then the price you can ask will be more. The 10 that get it will be the 10 most “willing and able.” The other 10 will do without.

Anything produced falls into two categories. Some fall into both. Every product is at least either a Luxury or a necessity. You need a home. Anything above a warm dug out hole in the ground is considered a luxury. Almost all products have “substitute goods”. Butter has margarine, corn has peas, and beer has wine. Gasoline has substitute products, however, they are very undesirable to most transportation energy consumers. Its substitutes are E85, natural gas, walking, biking, and renewably generated electrical energy are most notable. Many of these options are not even feasible for most consumers. To further complicate the situation, the American culture is designed in such a way that using gasoline is required as a way to continue prosperity. If you are not able to pay for gasoline, you are not going to work, and you are not going to be able to for necessities, let alone luxuries for very long.

In contrast, the Saudi Arabian culture is not as tied to the use of gasoline. They actually produce way more oil then consume. Oil in the ground is like money in the bank for them. Their economy is positively affected by oil price increases. Drilling in ANWR will not change the economic equilibrium price. That point where maximum price is charged for the least quantity produced. That just means that if one supplier increases supply, a second producer can actually maintain its bottom line by simply reducing supply. This is especially true if your are predominantly a supplier and not a consumer of the product. Saudi Arabia’s economy is positively effected by increases in prices on crude oil. The US economy is not.

This is why supply and demand argument doesn’t hold weight in our economy. Getting off the stuff does.

Sunday, July 20, 2008

Economic Stimulus That Also Reduces Energy Consumption

The legislators really missed the boat on the economic stimulus. Of course the executive branch never had a boat to begin with. We all understand that the economic stimulus money went to pay off existing debts or straight overseas in exchange for cheap Chinese goods. It didn’t work. But could a policy be enacted with more merit? Yes.

Instead of just giving $1500 away to the average family, a policy could have encouraged a solution to something else also pressing the U.S. economy. They could have encouraged energy conservation. Instead of just giving the money away, they should have made people turn in receipts for up to $1500 for improvements to their car or home that reduced their energy use. For an automobile tax incentives could have been given to anybody who got a tune-up, fuel efficient car, or approved system enhancements. Houses could use the incentive to install tankless hot water heater, solar or wind generators, or more fuel efficient windows. $700 per person could have been given to those who bought prepaid public transportation vouchers. This would help the economy in a few different obvious ways.

First it would direct more of the money to sources that would return to the local and national economy. Auto mechanics, bus drivers, and plumbers labor can not easily be bought from China. Many of the parts they use are made by American companies too. The money won’t be deposited straight back into savings either. The only way you get it is if you spend it.

Secondly, it would help to drive down the cost of oil by reducing demand. (Sorry all of you ignorant, greedy, self serving conservatives, there is two sides to the “supply/ demand” equations.) We can’t easily force the increase of supply; however we can reduce the demand pretty readily. Many of us might not like it, but we can do it. I can’t find a quotable source but I had heard once that increasing the national fuel economy average just 1 MPG would be equivalent to opening up an oil source that produces 650,000 barrels of oil a day. Considering how many cars are out there, it seems believable. Encouraging better upkeep is going to be way easier then inspiring the Saudis to produce more.

Speaking of which, a 3rd advantage would be the reduction of foreign oil dependence. It turns out that many of the people in the countries we have to get that oil from don’t like us. Don’t take it too personally they don’t like each other as well. The more we take the lead on this issue the better our chances are to remain standing as the worlds superpower.

Forth, the promoting of these activities might make them a more common and acceptable substitute for the norm. More people may take public transit, tune their car up, or install energy efficient house hold goods.

Last, the savings on the energy cost would supply an economic boost that could last longer then the cash supplied without conditions. The money saved in the reduced energy cost would also be available to buy cheap crap from China. But that is another story.

Thursday, July 17, 2008

The Parallels Of Drilling For Oil And The Crack Epidemic.

Drilling for oil to solve our fuel cost trouble more closely resembles legalizing crack to solve the problems caused by the epidemic. People often spew on about “supply and demand” when talking about drilling in ANWR or offshore. If they truly understood the concept and its factors they would not be so "yappy keen" on the idea. (I heard a Brit use that term.) Oil has characteristics that more closely resemble an addictive drug then big screen TVs. In the case of TVs there is a finite level of demand and its consumers have found a willingness to buy supplementary products. Oil consumers on the other hand have shown an unquenchable thirst and a reluctance to switch to substitutes. Crack heads generally like crack. Increasing the supply of crack or oil generally just increases the number of crack heads.

One problem is that people will sell everything they own and even steal to get money to buy crack. The same can be said of Oil. Look around and you will see increased and new signs on fuel pumps warning about "drive off" offenses. Another parallel is that the producers and sellers of crack and oil are people who do not have the same moral values as our own. 15 Saudi nationals attacked us on 9/11. They were trained, encouraged and commanded by another Saudi national (Osama Bin Laden). The Saudis embody everything that we say is immoral. However, our president saw fit to offer them technology and weapons just to gain their favor and “hopefully” persuade them to produce more oil. A BBC article can be found here that confirms this assertion. South American drug cartels produce the coke that is refined into crack. Middle Eastern Oil cartels produce oil that we refine into gasoline.

If you legalize crack and promote supply, the cost will not be reduced. There will just be more people doing it. People will make crack drinks, crack vitamins, and crack flavored ice cream. Oil was so cheap for Americans they saw fit to produce as everyday transportation unnecessary SUVs and sports cars that get minimal fuel efficiency. Now the big 3 auto producers are scrambling as the market is reacting. Toyota is now number 2 in America and has its sights set on number 1. There are 2 emerging economies that will be adding demand in the future. China will have more cars on the road by 2018 then the U.S. There are plenty of potential addicts to gobble up any increase supply.

Last, just like crack is clearly bad for the users health, so is the increased burning of petroleum products. We have seen as the world has become aware of the effect of humanity on the environment. Many of us deny them. Just like a crack head has a warped sense of his situation and health. Many of us have reached the stage where we know we should quit oil, but we are pleading for just one more high. Then we will figure out how to get off the stuff. “If we drill in ANWR we can get enough to buy time until we can produce a viable alternative solution.” This isn’t the first time we faced an oil supply shortage. We said the same thing last time.

The scary part is that the dealers are very much in control of our leadership when it comes to oil. Could you imagine if a cocaine grower were placed in charge of, say, the FDA? So adding supply will have very little effect on the biggest problem we have. That is that we are currently funding both sides of the “war on terror”. We are also raiding the houses of our neighbors to get the stuff. Really, if the Saudis get weapons and technology from the U.S., don’t you think there is going to be somebody at the other end of those weapons that isn’t happy about it?

Tuesday, July 8, 2008

Cindy McCain And What You Should Know About GOP Hypocrisy

I keep getting this blatantly hypocritical email usually titled something along the lines as “Information about Cindy McCain.” This is a link to the version posted on Snopes.com. http://www.snopes.com/politics/mccain/cindy.asp. This is a prime example of the Conservative hypocrisy.
It's funny how conservatives talk about themselves and how they talk about their fellow Republicans in contrast to the hypocritical way they portray the opposition. Lets break this email down as an example.

She (Ms McCain) graduated from Southern Cal and was a special-needs teacher.” Do you recon that was in the ghetto of LA or NYC? Can you guess why many of those disadvantaged kids have "Special Need"? Often it is Because their parents are addicted to cheep beer and drugs when they were pregnant. FAS is one of the leading causes of birth defects. But we will get back to that.

The author of the email decides to go ahead and skip the part about Cindy meeting John when he was still married. The email fails to mention the fact that she was 24 and john 42 when they met. John and his first wife had 3 kids. The email throws in how this little harlot did not forget to get a prenuptial agreement to protect her assets. Now that is trust. One month after the divorce was final John and Cindy got married in a hotel. Talk about not wanting to wait.

“After her Dad died she became involved with his beer distributing firm and is now the chairwoman.” Next Cindy her father dies, this lady that here entire career and background in education steps into a world leading beer brewing and distribution firm, take over and improves upon his success. Isn't that the kind of thing they are talking about when they say "Obama has no experience"? I don’t see what selling a legalized drug has to do with special needs education. But wait there is one connection. It creates more of them.

So she chairs a "beer distribution firm." Now I love beer. But, as a home brewer myself, I think cheep beer is ruining the world. But let us look at this through the political eye for a second. What if she worked for a "tobacco distribution company", "a Marijuana distribution company" (we can compare the ills of that to beer and cigarettes some other day.), or a cocaine distribution company? Let us face it, beer is anti-climatic to a good healthy living. Because of her product people kill children in DUI related accident, loose their jobs, their family, increase their health risks, and their chance at being an outstanding citizen. “Sales have doubled since she has taken over from her father.”

She get to fly around the world helping out children’s organization clearing land minds. Do you think she straps on a vest and goes out there with a metal detector herself? How do you think land minds and unexploded bombs get there? That is right, through wars. That is an activity her husband promotes doing in the Middle East for the next 100 years.

I hear you now wanting to pipe in about people choosing to do drugs. Well don't tell me about it being their choice, because as we move on, we see that anybody can get addicted. The only difference is not everybody has wealthy families to pick them up and get them clean. I love how this email only briefly mentions "her addiction to pain killers after back surgery when she got injured helping children." First the Charity was not to help kids with missing limbs, starving, or even chronic diseases. No she worked with a bunch of plastic surgeons to make the kids more appealing to the eyes. A good cause in some circumstances, but when you only have so much money to invest, shouldn't you put it towards more life threatening causes.

What they don't tell you is that she was working for this charity and she starts stealing the drugs. As when any drug addict gets caught stealing, it is the first time. But I love how conservatives say, "she got addicted to pain killers after surgery." You almost hear the sad soap opera like music start to play when they say it. What about the guy who got addicted to alcohol and marijuana when he was too poor to get back surgery and so he self medicated. The truth is we don't know what she started on and how many times she stole from the child care medical organization she was working for. We do know that the courts convicted her and we could only hope to get as light of a sentence as her highly paid lawyers got her. Hope but never actually realize.

They are willing to run Obama down for being honest and saying he did cocaine a couple of times as a kid. Yet when one of theirs get addicted it is like it was some kind of accident. When one of theirs commits adultery it was “during a rough patch in the marriage.”

So they prop up this ex-teacher who stepped into a role that would be hard for most business graduates. She sells cheep beer, think paper bag and a 40 ounce, to the impoverished neighborhoods of the country and around the world. She seems to have an affixation on the surface characteristics and the way people look. She adopted a child with a "clef lip" oooo. She volunteers for a charity that helps kids that don’t look so pleasing to the eye. She got addicted to drugs. Who knows what she was willing to do to get them. She was willing to steel from a children’s charity. And this is why people would consider voting for John McCain?

Friday, July 4, 2008

Forth Of July And The Issue Of Democracy And Freedom For All.

There are two parts to a governmental structure. The way the laws are assigned (in the US it is via a representative democracy) and the way the wealth is distributed (in the US that is done via free enterprise.) Even those two concepts have various degrees of purity. There is forever the human factor in both. Consider the following question. Would you rather be the resident of a dictator in a communistic country where the dictator is kind, fair, and just? Or would you rather be a resident of a pure democracy such as that found in Rwanda during the genocide where the majority of the people believe the minority of the people had no right to live?

The U.S. Democracy started out as a genocide of the Native Americans. Then it followed with an insurgency against it’s own government. It encompassed the owning of other humans as slaves. A civil war had to be fought to set our practices in line with our constitution. Even that took another half of a century to rectify. In the mean time women were still considered second class citizens.

Today, you have to have access to millions of dollars, a job that lets you take at least a year off, and some political insiders to run for the highest offices in the land. About one quarter of a percent of American actually meet those qualifications. A child starting out in the ghetto doesn’t have the same opportunities as the kid in the posh neighborhoods. More and more we see the voice of the people is not the message delivered by the government.

The only thing that has tripled in the last 40 years is the changes in the definition of democracy. It seems to most Americans that the fact that we don’t get shot or tortured when we say bad things about the government, that we have a democracy. That democracy is representative of “freedom”. Could you take off work for a month? Could you spend time with your kids for a week straight at will? Could you not give a portion of your accumulated wealth to the government if you didn’t want to? Do you own your land free and clear with no other responsibilities? Freedom is a grand illusion in this country. It is closer to that of the world of “The Matrix” movie. In reality we are all locked in cubicles sleeping, but we think we are living fee normal lives of our forefathers. The question is are you content living this dream?

I am about to go participate in the only true democracy. A sailboat, a fishing pole, and a wind.

“’This is the land of the free.’ Whoever told you that is your enemy.” - RATM

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