Energy: Supply and Demand Ignored
June 16th, 2008 at 06:38pm KMorrison
With gas prices rising there is a growing frustration with Congress because of their lack of action. What would help reduce energy prices? Production - basic supply and demand dictates that if supply increases then prices drop. There is debate about where drilling is appropriate, but cutting off all sources of new drilling makes the U.S. more dependent on foreign oil. The Democratic Congress has essentially blocked new drilling or delivery on new sources of oil. Even if Anwar and the Everglades are taken off the table due to environmental concerns, blocking all new drilling clearly restricts supply and increases prices.
Energy production could also be assisted with the use of alternate energy sources. Ethanol has promise, and Brazil has a large supply available for export at reasonable prices. However, ethanol subsidies take this form of alternative energy off the table. The rules stating that ethanol must be corn based limits ethanol’s potential. From grasses to sugar, ethanol can be developed from numerous natural sources. It has even been argued that deforestation could be reduced if tree based ethanol was a viable product. However, ethanol subsidies create a myopic focus on corn, ignoring the potential for alternatives, and manipulating the market in a way that ensures ethanol’s failure. Secondly, the high tax on Brazil’s ethanol prevents a less expensive energy source from entering this country cutting off another valuable energy supply.
Finally, nuclear has potential as a clean fuel source. Several environmental groups are starting to view nuclear as the energy of the future. While some have safety concerns, it is clean and nuclear plants have made advancements over the years and can be run safely.
So why the frustration with Congress? Because they are ignoring these sources of energy. The Democrats are against drilling and against nuclear energy, and they support corn based ethanol subsidies and the ethanol import taxes. The trouble in the economy has been caused mainly by high energy costs, and the Democrats are more interested in a windfall profits tax, which has not been proven effective, and ignore the need for supply. The increased enery costs hurt the middle and working class the most, as it acts essentially as a tax increase. The Democrats say these are the people they are most interested in looking out for, but that is not reflected in their energy policy.
*Clarification - Ethanol subsidies do not disallow use of other forms of ethanol. It’s an import tarriff that makes Brazilian ethanol economically unfeasible.
Energy: Supply and Demand Ignored
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19 Comments Add your own
1. Rave Dave | June 17th, 2008 at 4:55 am
The price of oil has nothing to do with supply and demand. See link below to see why oil prices are so high.
http://globalresearch.ca/index.php?context=va&aid=8878
2. Ken | June 17th, 2008 at 7:47 am
The major problem I think is in place is I’m not sure that the democrats want the price of gas to go down. If there is a drop in the price of gas, then the taxes for gas will go down and any excuse to add more taxes to the oil companies will go away. The current high price of gas is a windfall for the democrats in office. They have someone to blame, a scapegoat to beat up on and a rally point to focus their hatred of the free market on. There is too much money to be stolen from ‘those evil oil barons’ to allow a drop in the cost of gas.
Granted, if a democRAT is elected as President, then and only then I’m thinking they will quietly open up some of the untouched reserves for drilling.
3. Joe | June 17th, 2008 at 10:58 am
First off, regarding drilling… a couple of things.
1) Dems are against drilling in ANWAR. Some Repubs and some Dems are against drilling just because it would be an ugly eyesore (see Mel Martinez and drilling off the Florida coast. Martinez: ”Further, we need to allow exploration in areas that support drilling. Finally, I strongly oppose drilling off the coast of Florida.“
Other GOP Senators opposed ANWAR drilling in 2003:
By all means, drill for more oil, but why not use the land that is already leased? You can see it here all the places that are leased for drilling, but aren’t being used. Use those that are already leased, then think about ANWAR.
2) Drilling in ANWAR wouldn’t produce a drop for a minimum of 5 years. Even then, the amount of oil produced compared to our annual usage is minimal. It wouldn’t even make a pinpoint into the price of oil. For the money and time that it will take to set up operations and begin to generate the first drop of oil, use that money and time to develop alternative fuels. You can do that in places where people already live!
Next, Ethanol. An excellent alternative and I agree, they need to stop restricting it to only corn. Using only corn for that is doing nothing but increasing the price of all food that uses corn (which is most everything).
Nuclear. Two things about Nuclear. First, the safety concerns can not be marginalized. This is a significant issue. Who wants to have a nuclear facility in their home town, raise your hand. Second, that minor thing of the waste that is produced. Something has to be done with it. It has to be stored somewhere and that is the biggest safety concern. Until someone comes up with ways to handle this, nuclear sounds great but is awfully scary.
How about wind? I’m from Boston and I do not like that Kennedy was one of those blocking the Nantucket wind farm. Everyone blames him… but of course then-Gov Mitt Romney also strongly opposed it. Wind is something that really needs to be taken into consideration.
How about solar? Every skyscraper in every big city should have solar panels on them as a matter of law.
The windfall profits tax is foolish. The additional taxes will simply be passed along to the consumer. Other things should be done as in… somehow getting the oil companies to develop alternative energy.
The summer-time “gas-tax holiday” is completely stupid. That very well may be the most asinine thing I have heard proposed.
Anyway… we agree on a lot of things about energy. However, you last paragraph blaming everything on the Democrats is a bit much.
4. Eric T | June 17th, 2008 at 12:18 pm
The royalties from drilling leases that the U.S government will bring in, would be huge at today’s prices. National Debts would quickly disappear, who knows maybe income taxes could even be reduced. Oil royalties could fund Social Security and other services. Maybe royalty checks could even be distributed to the people.
Joe-
The gas tax relief is still a great idea, there is no reason to be defending that tax hiker Obama or his democrat pals in congress, if they had their way we’d be paying $9- $10 a gallon like the do in Europe. Windfall profit taxes would drive prices thru the roof, anyone with half a brain can figure that out. The democrats simply think the American People are just not paying enough for gasoline, they just proved it to everyone.
5. Joe | June 17th, 2008 at 12:42 pm
Eric,
Please point to anywhere that any Democrat says they want $9-$10 a gallon prices. Please find that for me.
I told you windfall profit taxes are stupid.
How exactly did Democrats “prove” that they think Americans aren’t paying enough? Explain that comment.
And a gas tax holiday would be a wonderful way for you to save 32 bucks over the summer while you drive over those crumbling bridges. Oh by the way… those 32 bucks that you save will quickly go away when there is a larger demand for gas causing the prices to rise.
Eric… you need to think things thru. The gas tax holiday is a gimmik. Nothing more. Nothing less.
6. KMorrison | June 17th, 2008 at 1:07 pm
Joe, I agree we have pretty similar positions on this. I’m okay with the restrictions on drilling in environmentally sensitive areas. The Republican’s strongest argument for drilling in Anwar may be that the Alaskan people want drilling there, yet I’m a fence sitter on this and am okay with keeping that area protected. Yet there could be more drilling, and as of yet it is not happening. I think the gas tax holiday is similar to the windfall profits tax, both are unproven and gimmicky.
I also understand the reservations about nuclear, but I don’t think it can be ignored. It is a clean source of energy and it’s potential output is much higher than wind and solar, which should also be taken advantage of. I’m encouraged that environmental groups are seeing nuclear as holding significant potential.
My criticism isn’t intended for all Democrats, just the Congressional Democrats that we find sitting on their hands right now. The areas that oil companies have been given rights to drill don’t all have needed permits to tranport the oil, so I find the Dems recent protest that these areas aren’t being utilized rather weak.
If we go back over the last 35 years there is plenty of blame to spread around for the government being incredibly short sighted in its energy policy. However, right now the Dems are in control of Congress and they need to act to keep these increasing prices from doing even more damage to the economy.
—I’m a New Englander too and the Cape Cod wind farm is such hypocrisy. Such ‘Not in My Backyard’ thinking, it’s unfortunate.
7. Eric T | June 17th, 2008 at 1:45 pm
Joe-
The Federal government takes a huge part of my paycheck, if I work alot of overtime, they take even more. The state and local government tax everything from my home, utilities, phone, internet, every time I buy something, the government is there making sure they get some money too.
Joe do you really think the government is going to go belly up and bridges will be falling down because they give us a little break on the price of gasoline. Come on man, $4.00 a gallon doesn’t hurt the high rollers, but is killing the folks trying to feed a family on $8-$10 an hour.
During The whole process people and companies are paying taxes. Is the government really going to go out of business to cut us a deal on gas prices?
The companies exploring, drilling, the pipeline companies, the refiners, the carriers, and at the end, the distributors, are all paying income taxes, taxes on earnings, taxes on taxes.
Joe, do you feel your just not paying enough in taxes, or what????
It is simple, if you are against the gas tax relief, you are for higher priced gas!
8. Eric T | June 17th, 2008 at 1:54 pm
Kmorrison-
I agree, Ted Kennedy has no credibility. He could steer that yacht around the windmills, Wind Power is great because it doesn’t need fuel. Nuclear Power requires uranium to run, and generates very hazardous radioactive waste, that is a problem to dispose of.
The people should just tell Ted to shove it, and put up the wind mills, Ted is just standing in the way of Progress.
9. Joe | June 17th, 2008 at 2:05 pm
Eric,
The gas tax supports the Federal Highway Trust Fund. That Fund already has a $3.5 billion shortfall.
I’m not saying the U.S. Government is going to “go belly up”. I am saying that they will have even LESS in the fund to work on roads and bridges. So you save $40. The Highway Trust Fund loses out on BILLIONS. So how do the roads and bridges get fixed?
You bitch and moan about Democrats taxing everything. You support the Republicans borrowing and spending. Guess what… eventually someone has to pay for that borrowing.
Eric, if you are worried about how much the federal govt is taking from your paycheck, and you don’t make over $250k, then it would be in your financial best interest to vote Obama.
You’ll get your biggest break from him.
Check this out
Here is a quick summary. I don’t know what you make, so I’ll assume it is somewhere between $19k and $112k.
$19k-$38k
McCain — you save $113
Obama — you save $892
$38k-$66k
McCain — you save $319
Obama — you save $1042
$66k-112k
McCain — you save $1009
Obama — you save $1290
So get over the gun issue and vote your economic best interest. Vote Obama if you truly are pissed off at the Federal Govt taking too much of your paycheck.
Finally… saying that I am against gas tax relief means I am for high prices is flat out stupid. I mean REALLY stupid. I am for lower gas prices. $4 a gal is killing me. I drive almnost 100 miles a day. I am saying that saving $40 over 3 months is not going to do squat.
10. Joe | June 17th, 2008 at 2:07 pm
Eric,
Regarding Kennedy and the wind farm…….
If I remember correctly, you like Mitt Romney in the primaries, didn’t you? Mitt was every bit AGAINST the wind farm as Kennedy was.
Trust me… I live in Boston.
I personally think they were BOTH wrong on that and that wind farm should have happened.
11. KMorrison | June 17th, 2008 at 2:23 pm
This is an excellent article about why those of us in the middle class shouldn’t be cheering on a tax hike on the rich.
Tax hikes are particularly harmful to the economy when the economy is already struggling. Increasing taxes on the rich in attempts to achieve a mythical idea of fairness ends up hurting those people that it claims it’s protecting.
12. Joe | June 17th, 2008 at 2:35 pm
I’ve seen that before KM. That is trying to prove that the high income bracket will pay a larger percentage than the lower.
I hate to shoot the source, but my source came from CNN Money. Yours came from a blog.
Anyway…
Here is something else to think about when considering the tax plans:
Tax studies have shown that when tax cuts are deficit funded and they’re paid for by raising taxes in the future, “the economy is worse off than if you didn’t cut at all,”
–Len Burman, the Tax Policy Center’s director.
So……….. from the CNN Money article I linked above. BOTH will be increasing the deficit which is awful…
Also, regarding McCain’s tax plan….
The net result: compared with their tax bill today, taxpayers on average would see their tax bill cut by nearly $1,200. That means their after-tax income would rise by 2%.
But those in the lowest income groups would only see their after-tax income rise by less than 1% (or between $19 and $319). By contrast, the highest-income households - those with incomes of at least $603,000 - would see a boost in after-tax income of 3.4%, or more than $40,000.
So that kind of offsets that example you provided from the blog.
It is time for us to finally see that trickle down does nothing of the sort.
13. KMorrison | June 17th, 2008 at 3:00 pm
Wasn’t trying to challenge your source. I don’t doubt the breakdown. My source was providing a metaphor to help make sense of the data.
This is one issue I get to happily argue as and Independent. Republicans dropped the ball on spending over the last eight years, and they dropped it again recently in not challenging the pork-laiden farm bill.
However, Senator McCain has been a champion of cutting government spending for years. He’s routinely criticized for having been against the Bush Tax Cuts, and now supporting their extention. Yet his oposition came from his desire to see spending cuts accompany those tax cuts (as he offered his own set of tax cuts at that time), but recognizes that rolling them back now would only act as a tax increase. I’m in agreement that cutting spending is a huge issue, and it’s an issue that clearly favors Senator McCain.
On the issue of tax increases, it has been well proven that tax increases in slow economy is damaging the economy. The ‘fairness’ debate goes a lot further in a strong economy versus a weak one, but taxes put the brakes on economic development, and that’s the last thing anyone wants to do right now.
14. Eric T | June 18th, 2008 at 10:02 am
Joe- you say with Obama — you save $1042, now I’m I really suppose to believe that, when Obama, you, and the democrats are making a fuss about parting with $30 or $40 bucks for the gas tax.
Ok, so Obama can’t handle cutting us a little break on the gas price now, but when he gets in he is going to give me over a $1,000. Sounds like B.S.
It very well could be just another empty promise from a politician. If he ain’t gonna part with $40 he surely won’t part with $1000. We’ll get some excuses about how much debt is there, blah, blah, blah.
15. JT Wipple | June 18th, 2008 at 10:24 am
John McCain has stated, in his usual straight talk style, that we must beef up our military in order to win our war with Iraq, and others in the near future (Iran?) The right way forward is to institute a draft that fair and equitable to everyone involved, and the plan is the fully vetted and trusted Rumsfeld Plan. Under the Rumsfeld plan, anyone not involved in a war critical civilian position, or anyone otherwise considered by the federal draft board to be draft exempt due to other “considerations”, and between the ages of 16 and 47 will be draft eligible. John McCain has stated that the need for manpower is so great, that no other criteria will be considered in determining eligibility. Conscription and tour length in war zones will, of course, be for the duration. John McCain, ever fiscally responsible, also has a brilliant plan to make veteran care and benefits pay for themselves as an adjunct to the Rumsfeld plan. John McCain has promised that those conscripted will be offered the option to “bounty out” of military service. For the nominal sum of $10,000 thousand dollars every 18 months, a conscript will be able to postpone military service. For $25,000 a conscript will be permanently exempt from military service. John McCain has affirmed that the funds raised in this way will pay for all veterans’ benefits, plus fund the slimed down, modernized, version of the G.I. Bill of Rights currently under consideration by the responsible party and our President. There will be enough money left over to further reduce that tax burden of deserving Americans (we know that “Trickle Down” works and has always worked!) John McCain also has a plan to empty out our prisons and make valuable use of the human waste that we are paying millions a day to keep in custody. We’ll get into that plan next time! Until then VOTE MCCAIN! We will never surrender to the Iraqis! We will never surrender to the Iranians!
16. Joe | June 18th, 2008 at 11:28 am
Eric,
The point of opposing the gas tax is that it is freaking useless. Giving someone a $40 break over a 3 month period isn’t going to help anyone.
Dropping the gas tax would presumably cause more driving as people think they are getting a break. More driving causes more demand for gas. That demand causes prices to go up.
So the 18 cents a gallon you save will go away as the price of gas rises. So you end up paying the same price as if there was the tax. The only difference is the Highway fund doesn’t get a dime. So you get nothing, the Highway fund gets nothing and the gas companies get more money.
The gas tax is targeted for the Highway Fund only.
As for the $1000 you save from Obama’s cuts, they are offset by tax increases on those making over $2.5 million.
Really… follow the link in my earlier post, it goes thru this. You need to read and make decisions on your own instead of listening to the right-wing machine that tells you Dems do nothing but lie and raise taxes on everyone.
17. Joe | June 18th, 2008 at 11:35 am
KM,
Anyone who gets in needs to cut spending somehow. The tax increase that you talk about (from letting the cuts expire) is only half true.
The tax cuts on the top 1% of Americans would expire. Everyone else would keep the cuts or get additional cuts.
The top 1% can withstand an increase in this economy. The middle class/lower class are the ones that will go out and spend every dime they get extra in their paycheck. That, in turn would stimulate the economy.
When the economy is back on track, then you can talk about more cuts for everyone.
18. JT Wipple | June 18th, 2008 at 9:54 pm
John McCain today got the assurance from the top oil and gas executives in this country, and England, that they’ll do what ever it take to ensure Mr. McCain the White House. To this end, they’ve pledged that one dollar out of every 5 paid at the pump both here and in Europe, will go directly to the Republican Campaign. So next time you buy gas, do it with pride knowing that one dollar out of each 5 you spend is not only going to help John McCain, but the rest of the Republican slate. The other pledge John McCain wrested from Oil Men is that once elected, the price of gas will stabilize at just 7 dollars a gallon for at least until January 2010.
check out more at: McCainCan.blogspot.com
19. The New Conservative | June 22nd, 2008 at 4:27 am
If you think Obama is not going to raise taxes beyond letting the ones Bush gave us expire your dreaming. He’s going to raise them on capital gains, almost doubling them from 15 to 28%. Increase the amount that can be taxed for Social Security. That’s just what he admits he’d raise taxes on. No telling what he’ll do if he makes it to the White House
http://thenewconservatives.blogspot.com/
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