I'll cut U.S. dependence on oil, pledges Bush

Dragoon you said and your subsequent posts until I nailed you on subsidies then you watered down your post with clintoneque words like you usually do:

"No, the "oil companies" aren't "stealing" from the American people! That's a lie! Stealing would mean they're taking your money and giving you nothing or less for it's value. That's not at all the case! Prices are set by supply and demand. That economic system is capitalism. Gasoline - the best known product made from crude oil - is still a bargain in this country even at its highest prices. It's price has gone up but, relatively to cost of living, it's still a good deal.

The profit margin for many parts of the oil business is not that great and there's a whole lot of risk involved in the business. Yes, some people have become very rich in the business but others have lost a lot. Refining, for example, is a business that operates on variable margins and when the margin is small it can quickly kill an enterprise no matter how well they run the business. They have to honor their contracts and keep supplying the demand. Few businesses - especially small ones - can afford to be in the industry especially with the intense amount of capital required even for environmental controls alone. Without the opportunity - not guarantee - to make lots of money few would bother with the risks. That's what drives capitalism. Let's try more socialism or even communism as an alternative and see how unproductive business and government can become.

A large part of the price of gasoline is tax - presumably for highways - that your government keeps spending on new, improved, and maintained roads so you can drive your car wherever you want whenever you want. The citizens want those roads and they want their cars. They want bigger and faster freeways with no delays. Do you want to lower the price of gasoline? Cut the demand! Cut the cost of roads! Stop building so many roads and build alternatives instead. Give up some flexibility to go wherever you want when you want.

A whole lot of Americans make a very reasonable living off the "oil" business when you consider all the petrochemical processes related to it and all the many products made by them. Do you remember the "oil" industry bust of the 1980's? Do you remember all the people who had to walk away from their homes because they lost their good jobs in the industry? The "oil business" has in fact put a lot of money in the average worker's pockets, bread on their tables, roofs over their heads, and clothes on their backs. The "oil" industry includes the exploration, production, transportation, and distribution of natural gas. Do you want to turn off your heat for a while so the price will go down? We use disposable plastic materials in an ever increasing number of products and they're made from crude oil and natural gas. Do you want to stop using those conveniences to help cut the demand for the raw materials?

In any industry - entertainment included - a few people make a disproportionate amount of money. It doesn't seem fair to those making much less but if it's not illegal it's not a problem for the government to solve but rather the marketplace. What those making less don't often see is what it actually takes to make more money. It's work - not necessarily back breaking work - but real hard high risk work with a very high level of responsibility. Most people can't do it but they like complaining about the benefits those that can get from it. The business of government is not to make rich men poor or poor men rich. We do have antitrust laws to prevent monopolistic practices that would override supply and demand by controlling both sides of the equation. If that happens, then it's time for the government to step in and protect its citizens. But, it's not happening because there's plenty of competition in the business. "

Nothing, Nada!, Zilch!, Zero! about a major Libertarian tenet against subsidies it is only when you were called on the carpet Dragoon that
you weasled it in...perhaps you messed up ..again!

You are only a major brown nose for big oil ..the same big oil that is taking from the taxpayer when they have mega billions to finance
their operations..

Me thinks you are a fraud and above is reason why
no mention of subsidies and taxpayer money going to big oil...which pure Libertarians are against.


Now Draggoon bust out your clinton style weasle words...you know you have been caught.

 

Fraud is a strong word, and should be elaborated or withdrawn, IMO.

 

No subsidies should be given to any industry - including farming. The free market should decide which businesses thrive.

 

I would also include art, architecture, NPR, public radio, CSPAN, telecommunications, social security, medicare, etc. The whole framework built since the days of FDR have completely distorted our economy, and is a house of cards ready to collapse.

 

C-SPAN is funded by the cable industry, not the federal government.

 

Voluntarily, or by legislative/regulatory design (like the "Gore tax?")

 

The government has absolutely nothing to do with the funding of C-SPAN. The cable industry voluntarily funds it and voluntarily carries it.

 

My mistake. The point is, subsideis permeate all of our society. Every homeowner who writes off his mortgage interest is subsidized. Are we willing to give that up, as well? If we eliminate one subsidy, they ALL should be removed.

 

I disagree that a tax deduction is a subsidy. I consider a subsidy to be giving a taxpayer's money to someone else, not reducing someone's taxes to keep for himself.

 

Much of the "subsidies" that the energy industry receives are tax deductions. The effects are the same. mortgage interest deductions artificially inflate real estate values, thereby distorting the market. Farming subsidies artificially inflate farmland value, thereby distorting the market. I have no problem eliminating subsidies, but they ALL should be removed.

 

I would remove the subsidies, as I define them, and keep the tax deduction for home interest, charitable contributions, etc., unless we go to a truly, totally flat income tax system.

 

You greatly over estimate your success on "nailing" me, ASLANSPAL. You merely reveal your inability to comprehend what I wrote as well as a gross lack of understanding of the whole subject matter.

I have acknowledged that the oil industry, like many others, receives some benefits - various incentives - in the interest of furthering our nation's energy policies. It is also encumbered with a lot of regulations. These are things the people want and which are implemented through their elected representatives. The people can request that the Congress stop those programs any time they want. The oil industry doesn't have a vote in that. Yes, lobbying plays a part - too much of a part in our government - but, in the end, the people are still in charge.

These kinds of things have been done in the agricultural and transportation - even the airline industry, ASLANSPAL - industries for years. They're the result of people looking to the government for answers. Some have had positive results. Government involvement in building the first transcontinental railroad, for example, or in granting homesteads to people who'd farm the land for a few years. However, overall I believe the best interests of the people are ultimately served by a free market regulated by supply and demand with minimal government oversight on behalf of the people to prevent monopolist practices that might control both sides of the supply and demand equation.

An acknowledgment that such subsidy programs exist, even in the oil industry, does not mean, even in the slightest, that all the profits made by the oil companies are the result of these incentive programs. Let's keep in mind that the people pay taxes for these programs but they also receive benefits for them assuming the implementation is according to the plans. Some people believe the price of gasoline - an important but not singular product of the oil industry - would be much more expensive if the various incentives were removed. Maybe and maybe not but, regardless, private enterprises would still want to rightly make the best return on their investments that the market could bear. That's exactly the way it should be in a free economy like ours.

The oil industry makes a lot a money because it's a high volume business with good profit margins most of the time. The relatively minor amount of subsidies don't alter the fundamentals of that process. The industry makes products that people want, need, and are willing to pay to have. It does it efficiently because of the intelligent hard working people that own and are employed in the industry. It provides jobs for a whole lot of people and it uses the skills of a lot of people. The profits get turned around into additional investments and spending that benefit the economy.

Is there some inequity in this? Sure, there certainly is. Some people make a disproportionate amount of the money. Some people misuse their business power. There is some greed involved - at both ends of spectrum and every point in between. People are evil at the top and the bottom in every segment of our society. Capitalism is not perfect! Regardless, the oil industry, does more for the betterment of America's economy than government could ever do. Private industry always does!

There are issues of great concern regarding the supply of crude oil and the trade practices of our suppliers in the Middle East. They have the oil supply. We have the oil demand. We have to give them money for their oil. That has made many of them very rich. Governments are involved in this process but it's still largely a supply verses demand market and, fortunately, the Middle East, as others have pointed out, isn't the only source. The best we can do is to maximize alternative sources of crude oil. They can cut production and hoard supply. At some point that could become a matter of national security and that might merit government intervention. Our suppliers know that.

Further, it's my opinion, that the solution to our energy concerns aren't going to come from government. In fact, I think government will likely meddle in it to the detriment of a solution. The solutions will come from people with ideas, others with capital to invest for a return, others with the skills to organize a business, more with the skills needed to design, build, and operate the industries needed, and then workers to run the businesses. The incentive for all that will be making a profit - either dividends, interest, wages, or salaries.

Kindly stop calling me a "fraud" or "Libertarian" or "Clintonese" or "brown nose", whatever other silly terms you like to come up with, and start writing like an intelligent person. Your labels don't even remotely fit me and don't bring any good credit to your thoughts.

 

I'm not in favor of industry subsidies - tax credits, incentives, etc. - in general. However, there's another side to this that is a reality of business with which I think some of you'll agree with based upon your own observations and experiences. I'll illustrate by two small but typical examples:

One refinery I know of spent about $30 million installing a mandated MTBE additive system to meet new EPA regulations. At the last minute the regulations didn't materialize and thus the expenditure was for nothing. Later another $500 million was spent on new processes to reduce sulfur in gasoline and diesel fuels. The company factored all these costs into the price of their products. They are a market regulated industry so they adjust their price to the wholesale customers who pick up gasoline, diesel, and jet fuel at the refinery or get it via some pipelines. They try to keep their profit margin as high as the market will bear. Some years were very difficult and they, literally, didn't make money. All they did was keep market share and kept their customers supplied. Other years were great because they'd bought crude supplies on long term contracts at good prices while the current market price was higher. They made some smart decisions. There can be some very good years and some very lean years.

One pipeline I know of spent about $300 million installing NOx emission controls on compressor station engines as mandated by EPA and various states. In other cases, they've installed more expensive drivers in lieu of what they'd have installed otherwise just to meet these regulations. They're expecting to have to spend more. The company factored all these costs into the price of their services. They are a regulated business so they have to get government approval for rate increases. They make money by the demand for natural gas transmission. When the winters are warm not as much gets transported. When it's cold they do better. Lots of people depend upon this and similar suppliers for heat and power generation. It's steady but not spectacular return on investment.

These environmental requirements, as an example, imposed by the government in the interest of the public they represent aren't all bad in that they do help safeguard our environment. People in the industry accept that even though they do argue with the regulators over exactly how best to do that and often the government solutions don't make a lot of sense. Likewise neither are the benefits afforded to business in the interest of the public when we consider that they are also heavily regulated and taxed.

My point is that these costs have, are, and always will be passed on to the final consumers of the products or services provided. We know this even though sometimes people kid themselves into believing that some "rich" company should pick up the tab. Companies are entities before the law but they aren't real people except in the sense of those who own them and work for them. If the government provides some tax credits for making certain improvements that benefit the public then, just as if they didn't, the final consumers are going to pay the bill. The difference is that with the government involved there's always a hefty handling charge and the processes are driven by politics verses economics and technology. We could get rid of a lot of lobbyists by getting the government out of the meddling in commerce. The marketplace lobbies with purchases based on real economics, techology, quality, service, etc. It doesn't care which political party the company's owners or workers are affliated with!

It's the same thing as us all paying more for automobiles because of the required environmental and safety improvements mandated by our government for "our own good" as determined by the agencies established by laws made by our representatives. The automobile manufacturers aren't going to pay for these things out of their profits. To do so would make them eventually unprofitable which apparently the American brands may well be anyway.

On a slightly different but related view, it's better, in my opinion, that there be neither benefit for nor taxes upon business entities because, in the end, it is the individual citizens who receive the benefit and who will pay the bills. It is best for them to see, feel, and have control over the true cost of what they demand. I credit some justification for minimal government interference in the supply verses demand market for the purposes of national security and defense, prevention of monopolistic enterprises, conservation of natural resources, and protection of public health and safety. I also credit tremendous justification for no government interference in the normal free enterprise believing that opportunity to make money drives willingness to take risks and motivation to be efficient and productive.

 

My wife looked over at me cause I laughed out loud over this one. Very good Poncho

 

My wife looked over at me cause I laughed out loud over ths one. Good one Poncho

 

Very excellent analysis, Dragoon68!

I would add that oil production peaked in 1970, and natural gas in 1973. It's getting harder and much more expensive to replace every barrel extracted, and the geopolitical uncertainties in Iran and Venezuela further aggravate any long-term investments. Margins are falling fast, and too many people have forgotten the $15/barrel oil just recently in 1998. Current returns won't last long -- probably not even into 2007. Americans have a short memory.

 

Actually we don't know if oil or natural gas has peaked yet. Or if it ever will. Especially if the abiotic theory is correct.

 

I was specifically referring to production, though, not reserves. I've heard of the abiotic theory, but don't know how to judge it. I find the theory intriguing, though.

I should have added Nigeria to the geopolitical uncertainties, too. 240,000 bbl/day, I believe. And there was a disturbing report in the Wall Street Journal this week that suggests that oil output in Mexico may fall as much as 60% by next year, due to encroachment of water and gas. That's like taking Iraq back off the market; coupled with the other uncertainties mentioned, I think we're in for a very rough ride.

I love nature greatly (one reason why I bought a farm in the middle of nowhere), but we need access to those areas put off limits (outer continental shelf and Alaska) fast -- the lead time from exploration to production is too great to wait any longer. Americans aren't going to like their energy costs in another year or three!