KOL to the Rescue

Can the Kings of Leon solve our dependence on foreign oil? Overthinkingit.com notes that rock music quality (as judged by songs on Rolling Stone magazine's 500 Greatest Songs of All Time) is directly correlated with US Oil Production (although they had to take out Alaska to make the numbers work). We need more rock, people!

While this analysis is a great example of the old maxim that correlation doesn't prove causation (take note, Al Gore), I find the list of the greatest rock songs ridiculous. According to rock music snobs, the vast majority of great rock songs were written in the 60's and 70's. Granted, the 80's was a weak decade for rock, but the last two decades have produced rock that has rocked as much as the rock from the golden age of rock. Nirvana, Rage Against the Machine, Radiohead, the White Stripes? To quote Norm McDonald: "Ridiculous. Completely ridiculous. Can you believe these characters? Way out of line. Way out of line... You know what hurts the most is the lack of respect."

Hat tip Freakonomics.

Obama's New Energy Plan

Obama has unveiled his new energy plan - telling you to properly inflate your tires. He claimed that this would save more gas than off shore drilling would produce. When asked for the data to back up this claim, the Obama camp had to admit that Obama basically made it up. The Republicans continue to press Speaker Pelosi for a vote on off shore drilling, an actual plan (also favored by McCain) that would increase domestic supply, cutting the price you pay at the pump and allowing for our economy to grow. The Democrats continue to stand in the way.

Obama counters these calls for increased drilling by saying that this action won't generate new oil for 7 years (as if alternative energy solutions are any closer). By this logic, if you're going into your sophomore year in high school, you should probably drop out now, because a college degree won't benefit you for 7 years. Obama must have forgotten about the evil oil speculators - doesn't it stand to reason that if they believe the supply of oil will increase in the long run it will affect prices in the here and now? This is what is meant by a "psychological" benefit. Notice that the oil speculators are no longer enemy number one, now that they're losing money because of the falling price of oil.

Obama blasts the US for importing $700 billion in oil a year. This is not a wealth transfer to foreign countries. It is a voluntary exchange of money for $700 billion worth of oil! Oil that gets me where I want to go. Also, most of that money goes to Mexico and Canada who then spend an awful lot of it on our products. Yes, it would be better if we had more of our own oil, but the Democrats are standing in the way.

Obama's energy plan is to tell you to use less oil and to punish the oil companies that bring you oil. Drive less. Fly less. Obama and his party are beholden to the environmental wackos and will always favor higher energy prices. Energy policy is going to be a huge advantage for the Republicans this November.

Drill Already

US crude oil supplies increased by 3 million barrels this week and what do you know - the price of a barrel of oil dropped from $147 to $135. It didn't hurt that President Bush lifted an executive order imposing a moratorium on off shore drilling. Unfortunately, Obama and the Dems continue to stand in the way, arguing that taking action to increase domestic supply is a stupid idea because "we can't drill our way out of this."

The US Minerals Management Service estimates that there are 85.9 billion barrels of oil (enough to supply the US for 11 years) and 420 trillion cubic feet of natural gas (enough for 18 years) waiting for us on the Outer Continental Shelf. Yes, it will take some time to get to some of it, but certainly not as long as it will take to develop competitive alternative energy sources. The only thing standing in the way is the Democrat controlled Congress and a certain presidential nominee.

Energy policy is shaping up to be a tough issue for the Democrats, as they are beholden to the powerful environmental lobby which absolutely opposes cheap energy. Many Democrats would like to see higher prices on gas because it causes people to use less energy. Most favor the Kyoto treaty, which would probably require the government to increase taxes so that gas prices reach $7-8 a gallon. Obama opposes drilling in the OCS and doesn't have a problem with the price of gas. He did tell MSNBC that, “I think that I would have preferred a more gradual adjustment.” I would prefer that we make every effort to secure our own oil so we can fuel our economy and lower our payments to oil rich countries supporting terrorism.

Gas Prices Update

"Does it trouble any of you when you see what you're doing to us?"

This was Dick Durbin's (D-IL) question for oil companies executives dragged to Capitol Hill. CBS suggests that the question might be turned back on Senator Durbin. Chicago has some of the highest gas prices in the nation thanks to the highest taxes in the nation. On a $4 gallon of gas, Chicagoans are paying 79.2 cents in taxes. Yet Senator Durbin insists oil company are stealing from us by keeping a dime or two per gallon. We could also ask Durbin why his party is standing in the way of drilling for more of our own oil and building new refineries. All this doesn't seem to trouble Durbin.

Pandering

Obama has now accused McCain and Clinton of pandering to the car-driving public by supporting a cut in the federal gas taxes. Ha! This from the politician who blames oil companies for high gas prices, blames free trade agreements for our economic problems, and supports a church that blames whites for all the problems of black America. Cutting taxes is not pandering, Senator Obama. It's our money, not yours. Promising to tax some people more so you can redistribute their money to others in order to get their votes might fit within the definition, though.

In her response, Senator Clinton did a little pandering of her own: "I want the Congress to stand up and vote. Are they for the oil companies, or are they for you?"

Liberals should stop promoting the fallacy that private companies who provide products we want at prices we're willing to pay are oppressing us. Profits are not evil, they are the portion of your voluntary transaction that pays for the investment someone made to bring you a product you want. Taking away profits reduces investment. If you want less of something, tax it more. Using government to interfere (more than absolutely necessary) in the free market and hampering the oil companies' ability to bring us gasoline doesn't just hurt the oil companies, it hurts the consumer as well (this goes for big business of all kinds). Everyone loses, except for the Democrats who get elected.

Obama Flexes His Economic Muscles

In the face of rising gas prices Obama has gone into knee-jerk liberal mode and is calling for a "windfall profits" tax on the oil companies. Obama would dramatically increase the taxes on oil companies when the price of oil exceeds $80 a barrel (oil prices will probably be above $80 a barrel for the foreseeable future). Jimmy Carter tried this and it failed miserably.

Oil is a commodity that is produced around the world (where liberals haven't prevented drilling and the building of refineries) and is sold at market rates. That market rate is determined by the supply of oil and the demand for that oil. World-wide demand for oil (especially from developing countries) has dramatically increased over the last decade and the dollar has declined in value, driving the price sky high. Increasing taxes on the oil companies will reduce their incentive to bring more oil to market, driving prices even higher. Oil companies make a lot of money when the price of oil goes up because their stock pile becomes more valuable. However, they do not set the prices. ExxonMobil, although it is a huge company, is only the 14th largest oil company in the world. They can't set the price for oil any more than a big dairy farmer (that's for you, Polinders) can set the price for milk. OPEC, on the other hand, is a cartel that can and does influence the price of oil by agreeing on how much oil to produce.

Oil company profits cost you about 9 cents a gallon. Taxes (federal, state, local) cost you around 40-50 cents a gallon (who is gouging who?). Obama thinks this isn't nearly enough. He disguises a big tax hike by pretending he's just getting even with the evil oil companies. Who do you think will pay for the tax increase? The oil companies will pass it on the consumer by charging more for gas. McCain is calling for a reduction in the federal gas tax for the summer (it would be nice if he also favored drilling in ANWR). This would actually lower the price you pay at the pump, but Obama opposes it because, well, because it's a tax decrease instead of an increase.

Ah, the classic liberal vs. conservative debate: more government or less?

Hillary on Big Oil
Check out this short clip on YouTube and explain to me how this is not Marxism. On record oil profits, Hillary says, "I want to take those profits and I want to put them into a strategic energy fund that will begin to fund alternative, smart energy." Here's an idea: instead of demonizing oil companies for making about a dime a gallon when we fuel up, let's lower the tax on gasoline. The government takes an average of 45.9 cents on every gallon (18.4 cents federal, an average state and local tax of 27.5 cents). In the last 25 years, domestic oil companies have paid $3.3 trillion (inflation adjusted) in taxes, over three times the amount of their profits for the same period! This is like earning $50,000 a year and having to pay all but $12,500 in taxes. Only a Democrat would think that's not paying their "fair share." Which would more effectively lower gas prices for the consumer - eliminating profits for oil companies (and their incentive to find and produce as much oil as possible) with the maximum price drop of 10 cents, or lowering taxes, with the maximum price drop of 46 cents? A better question - which solution scores points for populist Democrats?

Let's take a stroll down memory lane, to a wonderful time in our nation's history - the presidency of Jimmy Carter. In response to growing energy prices, he signed the Crude Oil Windfall Profits Act into law in 1980. This tax took 70% of the difference in price between a base price the government determined and the market price received by the oil companies. The result? The tax netted only $40 billion extra for the government in the beginning, 1/8 the amount predicted by Carter, and soon dwindled to almost nothing. Domestic production was cut by 3-6%, increasing dependence on foreign oil. In short, it destroyed the oil companies ability to make a profit, period.

The oil business is highly cyclical. There are years when they make tons of money (like this past year). There are also years when they lose billions. Tax and spend politicians know they are lying to you when they blame oil company profits for high gas prices.