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April 13, 2009

I Think They're Called, "Prices"

The Wall Street Journal reports that the government is lagging in instituting an "electricity efficiency" program that would reward companies for saving electricity.

In an efficiency market, states or the federal government would require utilities to buy a certain amount of energy-efficiency certificates.

The certificates would be established when electricity use is permanently eliminated through a project, from changing lighting to replacing air-conditioner chillers. The credits could then be traded on a secondary market, making a growing number of efficiency projects profitable.

Challenges exist in forming such efficiency markets, which already are in place in some European countries. Precisely measuring reductions in electricity consumption can be tricky. In addition, efficiency programs have for decades almost solely been run by utilities, whose profits conversely rely on a steady growth in electricity demand.
Now, one might think that actually saving money on electricity would be enough to induce people to, you know, save money on electricity.  Apparently, these federal regulators have never heard of things like, "Internal Rate of Return" and, "Net Present Value.'

For the uninitiated, a company calculates how much a project will cost, and then calculates how much they'll save or earn on it over its lifetime.  Much like deciding exactly how many shoes much electricity the economy needs, this can be a detailed and careful calculation.

The cost of electricity is factored into these things.  Of course, raising the cost of electricity also raises the cost of the project, since it raises the cost of producing the bulbs.  (No doubt, the government will tell the bulb manufacturers what a fair profit margin is.)

So instead of letting price signals work the way they have for the last couple of hundred years, the government will establish a secondary market, including the oversight mechanisms for it, a taxation system for the electric companies, including its oversight bureaucracy, a means of measuring how much electricity would have been used otherwise, not counting for the fact that cheaper electricity could mean more production, God forbid.

In effect, instead of just letting their customers save money by buying less of their product, the government is going to mandate that utilities sell back the ability to save money to their customers.

You know, if they put this much effort into dynamic scoring of the tax system...

January 29, 2009

Blog Talk Radio

Tuesday night we chatted with Jan Tyler, who blogs on election integrity at her own site, and at examiner.com. Jan had something to say not only about her own work, but also about the trend towards paper ballots and the risks inherent therein. We also touched on the Democrats' blocking of registration and voter reform here in Colorado.

Our second guest was State Senator Greg Brophy, Assistant Minority Leader and scourge of coyotes everywhere. We talked about his efforts to forestall the hammer coming down on Colorado's energy industries, and proposed protections against eminent domain abuse. We also asked him, as we ask all Republicans who come on the show, what three core principles should the Republican party place front-and -center?

Listen here, or subscribe on iTunes.

Join us next week as we talk to Daveed Gartenstein-Ross of the Foundation for the Defense of Democracies about the upcoming elections in Iraq, and where we stand in the fight against Islamist Supremacy.

In the second half, we talk with reporter Mike Saccone of the Grand Junction Sentinel about the Western Slope, the state legislature, and the state of newspapers not named "Rocky."


Listen live at Blog Talk Radio

November 25, 2008

What Was That About the Oil Industry

Governor Ritter and too many legislators have been counting on the oil and gas industry to protect us against a recession. Note that these are the same people who argue against shale oil on the basis of Black Sunday a few decades ago.

Here comes the bad news your mother warned you about:

Energy companies are slashing operating budgets as Colorado's once-booming oil and gas industry struggles with plummeting commodity prices, a tight credit market and an uncertain regulatory environment.

Hiring freezes have been implemented in an industry that just six months ago struggled to fill open positions. The effects of the cutbacks are trickling to other companies, such as law firms that provide service to oil and gas operators.

News flash: it ain't just the law firms. It's trucking companies, hotels, housing, construction, pipeline companies, metalworking, logging, and everything else upstream from the hole in the ground. It's not just severance taxes, guys.

They'll base the budget on a cyclical industry, but won't allow it to grow to take advantage of the upturns.

March 29, 2008

Light Up The Night

I would have posted earlier, but I was busy turning on all the lights for Earth Hour. In fact, this latest attempt to turn the US into a rolling version of North Korea, came right around the end of the Jewish sabbath, so I couldn't turn anything on until about halfway through.

Still, I thought it was a perfect time to replace the bulbs on the front porch. After all, the dog's getting older, and can only do so much...

March 12, 2008

Mark Udall, Natural Gas, Iran, and You

Mark Udall - a good, patriotic American - is a threat to national security.

OK, not all by himself, and not any one of his positions, but as part of a Democratic Senate majority, and as a combination of his policy views.

Consider:



  1. He has repeatedly opposed expanded gas production on the western slope
  2. He has voted against an additional 700 miles of fencing along our border with Mexico

Why is this a threat to national security? Because Iran is almost certainly plotting to disrupt our supply of natural gas from Mexico, And because they may well be trying to insert operatives directly into the United States.

Todd Bensman of the San Antonio Express-News, wrote the series, "Breaching America," and appeared as a guest on Backbone Radio with John Andrews and me. Well, he's back, with a story about Iran establishing a presence in Nicaragua, now run by Venezuela-friendly and decidedly US-unfriendly Danny Ortega.

Make no mistake, this is no humanitarian mission. This is exactly from the Soviet playbook - promise aid to establish a reason for being there. In this case, the aid amounts to a ridiculously ambitious project with little-to-no economic reason for being. Send a high-level delegation, with ministers of electricity, or whatever, providing cover for intelligence operatives. (Note that one of the delegation members is the Iranian Ambassador to Venezuela, also a likely intelligence agent.)

With completely ineffective border security, the Iranians will soon be in terrific position to start slipping agents across borders. And there aren't a whole lot of borders between Managua and El Paso.

More immediately, they may already have tried to blow up the main Mexican pipeline. Or, they may have gotten the idea from that attempt, and want to do it right this time.

If it were an oil pipeline, it might matter less. Oil is easily shipped all over the world, so there's a world market for it. Natural gas is difficult and expensive to ship across oceans, and the US has also resisted building LNG terminals. This means that there is, at best, a continental market for natural gas. And it also means that the best defense against any disruption in supply is...a good, reliable, local supply.

Mark Udall's policies leave us both more vulnerable to an attack, and more vulnerable to the effects of that attack.

June 5, 2006

Feldstein Proposes Gas Rationing - Roundup

Jaw-droppingly, that's what Martin Feldstein proposes in today's Wall Street Journal.

In a system of tradeable gasoline rights, the government would give each adult a TGR debit card. The gasoline pumps at service stations that now read credit cards and debit cards would be modified to read these new TGR debit cards as well. Buying a gallon of gasoline would require using up one tradeable gasoline right as well as paying money.

The government would decide how many gallons of gasoline should be consumed per year and would give out that total number of TGRs. In 2006, Americans will buy about 110 billion gallons of gasoline. To keep that total unchanged in 2007, the government would distribute 110 billion TGRs. To reduce total gasoline consumption by 5%, it would cut the number of TGRs to 104.5 billion.

The government could distribute TGRs to reflect geographic differences in driving patterns. Additional TGRs would be distributed to each debit account at the end of each month to avoid problems of expiring rights. Businesses that use trucks would also get TGRs.

This was a column that just didn't get printed in time for the April 1st edition, right? Or maybe Feldstein was cleaning out his liquor cabinet and found this draft next to the Purim leftovers.

This is WWII rationing, pure and simple.

More likely, Feldstein has spent so long analyzing government policy on Social Security, Health Care, taxes, fiscal and monetary stimulus, that he's forgotten that we have a perfectly good system for encouraging conservation - it's called, "prices."

One wonders why Feldstein stops with gasoline. Surely a government capable of calculating how much gasoline each neighborhood needs to consume is capable of much, much more.

UPDATE: Feldstein's proposal is generating a fair amount of blogospheric comment: I still think the fundamental question is why on earth anyone thinks any government system of allocating credits ahead of time is going to be a more efficient aggregator of need than the market. Given the national balkanization of fuel mixtures and the refining process, this can only lead to more shortages.

Greg Mankiw: I have said many times that I like the idea of higher gasoline taxes, but Marty's scheme leaves me cold. Do we need to create a new administrative bureaucracy because politicians are afraid to use the word tax? I hope not.

lynne Kriesling: But it is so potentially prone to political manipulation, and over such a large number of possible stakeholder organizations, that I think it would distort decision-making enough to generate bad outcomes and entrench special interests.

John Caddell: And Feldstein has a pretty good argument as to why fuel economy standards, while well-intentioned, won't make enough difference to reduce our overall consumption quickly.

Mark Thoma: In addition, while this proposal does provide the correct incentive at the margin, I can envision an endless political fight over the allocation of credits.

Glittering Eye: I have a more basic question. Perhaps I’m being dense but how is this approach better than any other fiat system (it is a fiat system: the government is setting a quota)? Why not just let prices rise? Are they convinced that the demand for oil is infinitely inelastic?

Brad DeLong: I think Marty's right. I think it's a clever idea--and much better than tightening CAFE. Tom Kalil was talking about higher gasoline taxes with the revenue dedicated to paying the first X thousand of individuals' Social Security taxes. But I think Marty's scheme is more transparent, which gives it powerful political-economy advantages.

Arnold Kling: One gets the feeling that his main concern is to fend off fuel economy regulations, which are indeed exercises in moral vanity--they do little to reduce gasoline consumption but they do help to brand auto companies as villains.

May 26, 2006

If Atlas Shrugged Were About Oil...

...it would look like this.

Clear Peak Colorado, a committee that backs Democratic candidates for the state legislature, plans to launch a series of automated phone calls to voters this weekend.

"As you pay record prices for gas this holiday weekend, remember that some of your hard-earned money is paying for partisan politics," the caller says.

The calls claim that Republicans are using oil-and-gas industry money to pay for attacks on Democrats.

"The Republicans have let big oil off the hook for cleaner air and tougher drilling standards. The high gas prices go from your pocket to the Republicans and back to the pump again," the call says.

Talk about the grease calling the oil black. Someone needs to make calls to parents describing how Democrats are using state funds to attack Republicans over schools. Of course, that would take a Republican leadership with the onions to take on the teachers' unions and the lefty non-profits bellying up to the Ref C trough.

Never mind that it's excessive and poorly-designed clean-air regulation, along with bizarre drilling standards that are at least partly responsible for $2.64 gas to begin with. Federal clean-air regulation mandates that several dozen mixes of fuel be sold, balkanizing the refining and transportation process, preventing plants from substituting for each other when they go offline, and creating semi-annual switchover price spikes. Combine that with decades-old offshore drilling restrictions, and you're doing a masterful job of vertically integrating your supply-chain strangulation.

Not that the Post isn't sympathetic:

Already this year, Owens vetoed House Bill 1309, which would have let the state adopt tougher clean-air standards.

"Already!" The legislature has adjourned, and won't be back until there's a new governor, but the Post wants you to think that Owens is ready to run a drilling rig through the middle of the state capitol, and put a refinery in City Park, providing employment displacing the homeless there.

Thereafter follows a list of Trailhead donors who exhale dangerous carbon dioxide greenhouse gases. Including Pete Coors who has had run-ins in the past with state officials over air pollution. Coors, the Post may not remember, actually ran for Senate as a Republican two years ago, at the, ah, suggestion of Owens and Benson. So naturally he's contributing to a Republican party-building 527 because of air pollution.

Bad politics. Bad journalism. Bad economics. The triple threat.

May 23, 2006

Salazar Gets One Right

No, the other Salazar. John Salazar of the 3rd Congressional district. He voted to lift the decades-old ban on offshore drilling in all but a few places. (Naturally DeGette got it wrong, preferring instead to take my money to pay for someone else's heating.)

Gee, now there's a novel idea. Responding to supply-and-demand issues by increasing supply. Maybe it has something to do with the energy poll results from his Congressional website.

Of course, there's this, from the Democratic Congressional Campaign Committee:

Congressman Salazar remains committed to protecting the environment which is why he opposed the “energy bill” devised by the Bush Administration and oil companies that put profits first and threatens natural preserves and Alaskan wildlife. Rather than promoting oil drilling into our precious lands, Congressman Salazar is a leading proponent for renewable energy sources.

So if Salazar is for drilling elsewhere, but opposes it close to home, what does that say about him? Moreover, if that's what the DCCC chooses to emphasize, what does that say about their energy "policy?"

(Hat Tip: ShopFloor.org, now comforably Blogrolled.)

April 30, 2006

MSM Still Passing Gas

MSNBC's First Read continued its obsession with gas prices to the exclusion of, well, all other economic news this past week. A rough word-count of economic reporting on First Read's blog shows that of 3500 words devoted to economics, 3250 were about gas prices. This does not include a Monday posting ostensibly about the Dahab bombing that spent the second paragraph talking about oil prices.

Ironically, First Read is aware of the problem, even if they don't know that they know. On Friday:

Asked in the April 21-24 NBC/Wall Street Journal poll who is most responsible for high gas prices, 37% of those polled say the oil companies are most responsible. Oil-producing nations rank second at 22%, while only 15% lay the most blame at President Bush's feet and 4% say Congress bears the most responsibility.

While on both Tuesday and Wesnesday:

...unstable relations with Iran and political instability in Nigeria seem to be the primary drivers of the price of oil.

Gee. I wonder where people are getting this idea that ExxonMobil is wearing the oil-soaked black hat here?

MSBNC "First Read" Issues Correction

Last week, we noted how MSNBC's First Read blog had reprinted the New York Daily News's misquote of a CNN poll about how oil prices were affecting families. In the poll, 23% said that gas prices were having a "severe effect," 46% said they were having a "moderate effect." The Daily News and First Read both reported 69% under the "severe effect" label.

On Friday, in response to my email, First Read issued the following correction:

On Tuesday, we quoted a New York Daily News article, which cited a CNN poll showing that 69% indicate gas prices are causing them severe hardship. However, the actual poll finds that 69% say these prices are causing them "hardship", not "severe hardship."

To their credit, the correction was given about the same prominence as the original report - at the end of their long, daily commiseration about gas prices.

It's not a perfect correction; they probably should have noted the difference between "severe" and "moderate," for instance. But Ms. Wilner replied promptly and without attempting to make excuses.

April 25, 2006

What Is It With NBC's First Read and Polls?

For a few days, it looked as though maybe MSNBC's First Read - written in part by NBC's political director Elizabeth Wilner - was being more careful with their poll numbers. Then, from today:

The New York Daily News says the same CNN poll showing Bush's approval at 32% also notes that 69% "said gas prices were causing them severe financial hardship."

Well, they quoted the Daily News accurately enough:

Sixty-nine percent of Americans in the CNN poll said gas prices were causing them severe financial hardship.

Take a look, though, at the actual poll. Forty-Six percent say gas prices have caused "moderate hardship," while only 23% say "severe hardship."

In effect, both the Daily News and Ms. Wilner triple the number of people reporting "severe hardship". At least it wasn't their own poll they got wrong this time.

Meanwhile, First Read, now posting throughout the day, fails to mention today's buoyant consumer confidence numbers, which would tend to contradict the claim the gas prices are forcing people to take second jobs.

So why the discrepancy? Probably because gas prices are the one price that everyone knows, because it's posted on every street corner in America. As you drive by the sign, you're literally coming closer to having to pay that price. Gas prices are a lower percentage of total household expense than ever, but gas consumption is something that usually takes some major change to affect. So any change in price gouges into that always-thin margin between the red and the black.

I realize that First Read is primarily political, not economics, but they're clearly letting their political biases get in the way of their economic fact-checking.

A Little Trent's A Lott

Trent Lott was just on Sean Hannity explaining why every time he opens his mouth he gets further away from succeeding Bill Frist and closer and closer to being the ranking minority member on whatever committee assignment he gets.

Look, I know gas prices are high. I pay for gas, too. But to try to argue that there's collusion at the highest levels because when you drive down the street, the prices are all near each other must be to come from a state that can see oil wealth but didn't have enough sense to lure it across state lines. Oil and gasoline are commodities, meaning that they compete on price, that there's no basic difference between the competitors.

Once again, it needs to be said that the oil companies don't set gas prices.

Lott also played the robber-oil-baron class-warfare card. Has he actually bothered to do the arithmetic? Does he really think that if every oil company CEO worked for $1 a year it would save me more than that dollar over the whole year?

Here are two suggestions that Senator Lott might want to try out. First: let the oil companies actually make a profit so they have something to reinvest in exploration and drilling and all those alternative energy sources they'll need to stay in business when the well runs dry. (Corollary: let them actually invest it in those things.)

Second: you, too, can share in the wealth by buying oil company stock. These stocks pay dividends. The Dow Jones US Oil & Gas Index is up something like 35% over the last year. Over the last 3 years, it's up about 100%. If you want to shield yourself against the high price of gas, maybe think about buying oil stocks, and sharing in the wealth.

No, I didn't do that, I'm afraid. But then, I'm not whining about greedy profiteering, colluding oil CEOs, either.

March 3, 2006

Addicted to Natural Gas

It turns out that China, by capping gas prices in an attempt to shift from coal & oil, has driven consumption up to the point where they're pricing themselves out of the natural gas market.

Despite a significant improvement in Tongchuan's air quality, local leaders are planning a new plant and it is going to be powered by coal. They blame sharply rising gas prices. "We have plenty of coal, why don't we use it?" says Zhao Guanlong, the deputy director of the city's development and planning commission.

China has backed out of at least one multibillion-dollar deal to buy gas from overseas oil companies and other deals are in jeopardy. Plans to build more than a dozen terminals to receive gas shipments in liquid form are on hold. Chinese officials are discouraging new gas-related investments because they fear the terminals won't be fully utilized.

This indicates the folly of "energy policy."

Of course, it's going to make LNG more appealing to us, and put more pressure on oil prices, which is why this is good news:

As the Bureau of Land Management faces increasing pressure to speed up gas-drilling permits on federal land across the West, it has begun extending deadlines in Colorado because companies can't start drilling fast enough.

BLM officials in Colorado recently changed their rules to stop the clock for drilling companies that can't find rigs to drill gas fields they've leased from the government. Previously, companies that couldn't start drilling before their lease expired lost their lease. M/blockquote>

Since it's smaller companies that are having a hard time finding drilling equipment, this serves as a help to smaller business; and it also suggests that it's time to look into companies that make (not necessarily operate) NG drilling equipment. Note that a large part of the cost of LNG is transportation, so this undercuts that cost.

One other point. The WSJ notes that China has the world's second-largest energy use. But it only just became the world's fourth-largest economy. So it's apparently incredibly inefficient when it comes to energy use, and incredibly dirty when it comes to pollution. Its exclusion from Kyoto is another reason to ignore that treaty.

February 28, 2006

Even More Economic Illiteracy

This is going to have to become a category on its own.

The WSJ is reporting that a number of state legislatures are mulling over the notion that the answer to low supply is...to further depress supply:

With consumers in many parts of the country facing sharp increases in their electricity bills, officials in some states are considering rate caps or other measures that would beat back deregulation.

...

Some state officials are stepping forward to propose rate caps and other measures meant to hold down increases in electricity bills. But the proposed fixes could put utilities in a cost squeeze. Similar proposals backfired five years ago during California's electricity crisis, bankrupting the state's biggest utility. Critics also say the measures do nothing to fix the underlying problem of surging wholesale power costs.

We want more efficient plants. The public would almost certainly settle for more nuclear plants. Heaven forbid the energy companies be able to charge enough to cover the cost of new investment. No, no, much better to let the system crumble, and then, twenty years from now, ask what happened.

February 20, 2006

More Economic Illiteracy

When will we learn that there really is no free lunch? Some Colorado legislators, eager to throw yet more money at the teachers' unions, want to raise taxes on the booming oil and gas industry in the state. And for some reason, they don't think it will actually cost anything:

The proposal would increase by 1 percent the taxes oil and gas producers pay and would divert some federal mineral lease funding largely for school-building and renovations.

"It is our intention in this measure to make sure that we address the immediate health and safety needs in the poorest districts first," said Mary Wickersham, a leading supporter of the proposal and who works for the Donald Kay Foundation.

Because oil and gas prices are set by national and international markets, Wickersham said, the severance tax hike would not increase what Colorado consumers pay for gasoline or natural gas.

Well, if you spread the added cost over the entire worldwide oil & natural gas markets, I suppose that's true as far as it goes. But of course, it's only true as far as any cost doesn't really show up in the price, since prices are set by markets, not by sellers. It also makes Colorado marginally less competitive, since the competition isn't only straight drilling now, but also tar sands and shale oil. Which eventually will mean an equivalent number of jobs lost. Oh, we won't notice it now, only when we need the work.

Then again, what do you expect from someone who thinks that calling a wild pitch a ball means that the umpire is skewing the game?



  booklist

Power, Faith, and Fantasy


Six Days of War


An Army of Davids


Learning to Read Midrash


Size Matters


Deals From Hell


A War Like No Other


Winning


A Civil War


Supreme Command


The (Mis)Behavior of Markets


The Wisdom of Crowds


Inventing Money


When Genius Failed


Blink: The Power of Thinking Without Thinking


Back in Action : An American Soldier's Story of Courage, Faith and Fortitude


How Would You Move Mt. Fuji?


Good to Great


Built to Last


Financial Fine Print


The Day the Universe Changed


Blog


The Multiple Identities of the Middle-East


The Case for Democracy


A Better War: The Unexamined Victories and Final Tragedy of America's Last Years in Vietnam


The Italians


Zakhor: Jewish History and Jewish Memory


Beyond the Verse: Talmudic Readings and Lectures


Reading Levinas/Reading Talmud