Energy

By mb50

Written by Ralph R. Reiland

Here's how the economic and political system of a nation is destroyed.  Every price increase of just a dime per gallon of gasoline at the pump extracts approximately $5 billion from the pockets of U.S. consumers over the course of a year.

On top of killing family budgets, with a dollar per gallon jump at the pumps picking our pockets of $50 billion per year, there is on the macro level an inverse relationship between the price of oil and the overall health of the economy - oil price hikes deliver less job growth, less demand for labor, more unemployment, more poverty, more inequality, more inflation, lower real income increases, and smaller advances in the standard of living.

Additionally, higher oil prices directly cause greater amounts of U.S. capital to be exported, both to pay the higher prices and to pay for the growing levels of imported oil.

In 1985, the U.S. imported 25 percent of its oil usage.  Today, it's 61 percent.  And still we are placing restrictions on increases in domestic production, both for oil and other sources of energy.

A few days back, President Obama, rather than sticking around a couple hours to explain to the American people or to the U.S. Congress why we were going to war in Libya, flew off to Brazil to hand out a permit to allow deep sea oil drilling in the Gulf of Mexico to Brazil's state-run oil company, Petrobras.  Capitalist companies in America need not apply.

This particular foreign deal was an especially snug and nostalgic fit for Obama.  Brazilian president Dilma Rousseff is somewhat of a Latin form of Obama's old Weather Underground chum Bernardine Dohrn.

In earlier days, Rousseff, a former Marxist guerrilla, was charged with running with a gang of redistributionists who accumulated revolutionary capital by way of kidnapping foreign diplomats for ransom.

A top priority for Rousseff today mirrors the "spread the wealth around" objective that Obama stated to Joe the plumber.

Dohrn, just home from a trip to Cuba in 1969 where she hoped to pick up some pointers on how to impose a "classless" society on the United States, displayed her true psychopathic colors in a speech she made to the Weathermen's "War Council."  Speaking elatedly of the murders by the Charlie Manson gang of actress Sharon Tate, coffee heiress Abigail Folger, and three other people, Dohrn proclaimed, "First they killed those pigs, then they ate dinner int eh same room with them, then they even shoved a fork in the victims' stomachs!  Wild!"

That's the fully hateful Bernardine on public display, seeing herself as a new George Washington, a revolutionary fighter for a new nation.  It's the same role, except this founding mother was in serious need of a super-sized bottle of antipsychotic drugs and a super-tight straight-jacket.

Of all the places for candidate Obama to kick off his political career in 1995 in his first run for the Illinois State Senate, he picked the living room of Bernardine Dohrn and husband Bill Ayers, co-founder of the Weather Underground and, more recently, the national vice president for curriculum studies at the American Educational Research Association.  I'd have kept my guard when Bernardine sashayed out of the kitchen and began circulating around with the hor dourves and metal forks.

In any case, it's no surprise that things are coming apart, especially on energy.  "If somebody wants to build a coal-fired plant, they can," pronounced Obama during the presidential campaign.  "It's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted.

What's the end game?  "Suicide Mission Accomplished"?

Ralph R. Reiland is an associate professor of economics at Robert Morris University in Pittsburgh.

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IBD Editorials

Why Can't We Learn From Others' Failures?

Posted 05/03/2011

Alternative Energy:  Like a man living out a fantasy, President Obama is still pressing his green energy agenda.  But a glance at other experiences tells him it won't work.  Why does he think he can do what can't be done?

"Instead of subsidizing yesterday's energy sources, we need to invest in tomorrow's," Obama said in his weekly radio address of April 23.  "We need to invest in clean, renewable energy."

It was only one of several opportunities the president has taken lately to play green huckster.  He seems dead serious about coercing the country into a renewable energy regime int he same way he rammed through his health care overhaul.  And just as ObamaCare will prove to be ruinous, so too will the green energy scheme.

Consider Germany.  It began a renewable energy program that has neither paid off nor lived up to its green promise.  This unsurprising conclusion is found in "Economic impacts from the promotion of renewable energies:  The German experience" published by RWI, a German research center.

That country's program " is often cited as a model to be replicated elsewhere," RWI notes, but it's a model "without merit."

It adds:  "Although Germany's promotion of renewable energies is commonly portrayed in the media as setting a 'shining example in providing a harvest for the world' (The Guardian 2007), we would instead regard the country's experience as a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benefits."

To ensure that 12% of the country's electricity is generated by renewable sources - a European Union goal - Germany in 1991 adopted a feed-in law requiring utilities to buy power from independent producers and place it on their grids.  As is always the case with government do-good programs, this mandate forced costs higher.

Solar power, for instance, cost 62 cents per kilowatt-hour while conventional produced electricity cost 3 cents to 10 cents per kilowatt-hour.

Wind power costs were 300% higher than conventional power.  This jacked up average household electricity prices by 7.5%.

While such an increase is unlikely to drive anyone into poverty, it's enough to affect a family's budget.  Imagine, as well, how high the electricity rates would go if the portion of renewables larger than 12% wee required by government.

Spain also has had an unpleasant experience with renewable energy.  The country tried to establish a green economy - and failed.  Gabriel Calzada Alvarez, a professor at Juan Carlos University in Madrid, found that "the Spanish/EU-style 'green jobs' agenda being promoted in the U.S. in fact destroys jobs."

For every green job created by the Spanish government, Alvarez found that 2.2 jobs were destroyed elsewhere in the economy because resources were directed politically and not rationally, as in a market economy.

Researchers from the Italian think tank Istituto Bruno Leoni have published similar findings about their country.  There, "each green job costs 6.9 jobs in the industrial sector and 4.8 jobs across the entire economy."

With this information available, why would anyone continue to push green energy schemes?  It takes an overbearing arrogance for someone to believe that the laws of economics must bend to his will.

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IBD Editorials

Bottom Line:  Left Hates Oil Companies

By LAWRENCE KUDLOW

Posted 04/27/2011

When oil prices blew sky-high in 2008, Exxon Mobil paid $36.5 billion in income taxes, $34.5 billion in sales taxes and $45 billion in other taxes, for a total for $116.2 billion in taxes paid and collected in 2008.  That's according to Mark Perry at the Carpe Diem blog.

Exxon will report earnings later this week. And while oil prices aren't quite as high today as they were three years ago, it's all a bit like 2008.

I read somewhere that either Exxon or the whole oil industry pays more in taxes than the bottom 50% of the whole income-tax system.  So while President Obama is out there ragging on oil companies to remove so-called tax subsidies, it's odd that he doesn't mention how much in taxes the energy firms actually pay to Uncle Sam.

There's a laundry list of tax credits that go to oil, both large and small firms.  Basically, these tax credits allow for the expensing of high -risk investment.  That's what this is all about.

Of course, if you really wanted to stop expensive subsidies, you'd kill the ethanol subsidies that have a big carbon footprint and drive corn and wheat prices sky high.  But, the liberal-left progressives hate oil and gas companies, period.  That's really what all this is about.

Ironically, besides the usual plea for wind, solar and biofuels - which amount to virtually nothing in terms of our energy use - the president does include natural gas.  But natural gas is produced by oil and gas companies.  And you have to drill for it.

Therefore, oil expenses in the whole drilling process - including leases, permits, geology research and dry holes, and then drilling, producing, lifting and ultimately refining for sale - should be 100% expensed.

So it would be great if the president understood that you have to drill for natural gas.  It also would be great if the president and his pals, instead of harping on a measly $4 billion a year in so-called subsidies (compare that with a $1.5 trillion deficit), focused on real pro-growth corporate-tax reform that dropsthe rates and includes permanent 100% expensing.

That's pro-growth.  That's tax reform.  That will create more oil, more natural gas and more gasoline.  That would probably stabilize prices assuming the Fed doesn't totally destroy the dollar.  That would generate millions of new jobs and lower unemployment.  And that would be a good policy.