Assorted Energy Links
1. "Wind ($23.37) v. Gas (25 Cents)," in today's WSJ: There is a reason fossil fuels continue to dominate American energy production: They are extremely cost-effective.
2. "Democrats Windfall Tax—On You," Investor's Business Daily: The last time the U.S. had a windfall profits tax on oil companies, the results were disappointing: 1) Domestic oil production decreased, as oil companies produced less oil, not more, b) The level of imported oil increased due to the huge tax advantage we gave foreign oil companies, and c) Revenues from the windfall tax were far less than expected, because domestic producers pumped less and nontaxed imports flooded our market.
3. "How to Use the Strategic Petroleum Reserve (SPR)," WSJ: Over the last 8 months, the government purchased more than 10 million barrels of oil for the SPR as the price rose $40 to above $120. This is not sensible. It puts upward pressure on oil prices at the worst possible time. It is a waste of taxpayer money. It gives aid and comfort to unfriendly nations. And it is an insurance policy that, for the most part, is no longer needed. In fact, we should be selling oil from the SPR at $120. Doing so could be a powerful tool for U.S. energy policy.
HT: NCPA
12 Comments:
the point about the windfall profits tax is just plain 100% wrong. while the windfall profits tax was in effect domestic oil production rose from 312M b in 1979 to 325 M B in 1984. Of the 8 years that domestic oil production has risen since 1970, 5 of those years were while the windfall profits tax was in effect.
Moreover, oil exploration as measured by the rig count rose and the price of oil fell.
Finally, while the windfall profits tax was in effect real oil imports fell almost 40%
I would like to know the cost of alternative energy compared to fossil fuels. I realize some forms are more suited to transportation and others for generating electricity but it would be interesting to know how high oil has to get before solar, wind, methanol from coal, etc become competitive.
absolutely agree on the SPR.
either:
1. the bush admin is even dumber than we think
or
2. its a blatant decision to increase oil company profits.
oops, one other possible reason bush is still filling the SPR:
3. the White House is preparing for war with Iran
Could filling the SPR be a end in itself? By filing the SPR, while oil prices rise, encourages a shift from petroleum to other technologies. In effect, one way or the other, high oil is kicking the can down the road for electric or hybrid cars or whatever, at a cost, but we'll never go back. Just a thought. Maybe in 20 years, we'll see this as a watershed period when the US became less dependent on foreign oil than any other country. I'm just saying.... could be.
There is a 4th possibility conspiracy theorists might miss in their zeal to blame Bush for something:
4. A logical idea that global demand isn't likely to soften and supply doesnt look pretty, but the importance of an SPR is not diminishing -- therefore, might as well go ahead and fill it as usual, since buying today is probably a bargain compared to waiting and restarting the filling at $150 or $200 / barrel.
I'd think we'd know better than to try to get Uncle Sam to manipulate prices anyway.
Spencer,
I was wondering why your years for the "Windfalls Profit Tax" do not match those given from the NCPA (via the Congressional Research Service). They used 1980 - 1986 as the years of the last windfalls profit tax; you used 1979 - 1984. I read the IBD Editorial, and they gave their sources. Their claims seem legitimate. Where are your numbers coming from, and why did you choose your timeframe? I would like to check it myself.
You can read spencer on the issue here.
Is IBD right-wing nuttery?
"Alternative Energy" is generally a codeword for "Doesn't Work and/or Not In My Back Yard".
Many places which implement wind power find massive resistance in the community surrounding it -- not only in the USA but also in Europe as well.
Further, as many in Texas found out, when it got cold, and power was most needed, guess what wasn't generating power? Hint: It needed more "Alternative Energy" supporters to breath on it.
The Solar Constant at the Earth's surface is right about 1kw/sq.meter. That means that the BEST a perfect solar cell could do is all of 1kw for each SQUARE METER of surface covered with "little blue circuits". In reality, the efficiency is far, far less, so you have to cover many times that area to generate power, esp. since we don't have any particularly good mechanisms for energy storage, so additional inefficiencies come into play for THAT purpose, meaning, in the end, that efficiencies are way less than 10%. So you may have to cover an entire roof with these damned things to generate the needs for a house.
a) They need to be kept clean and leaf-free. Q: What's the #1 cause of accidental death in the USA after cars? A: Falls. Right. Do this and the number of deaths by homeowners cleaning their panels becomes the stuff of legend in the "Unintended Consequences" category.
b) Solar cells are basically computer chips. Manufacture of computer chips is not only ridiculously filthy in terms of exotic wastes, but energy intensive, to the point where Creation-to-Destruction life cycle analyses suggest that solar cells probably don't BREAK EVEN.
In short, there's a reason these things need heavy subsidizing, and it's got nothing to do with them as "new" forms -- it's that no one will put money into them because they DON'T WORK, and have no chance whatsoever of doing so.
Spencer has this on his site: "Yes, the windfall profits tax was still on the books in 1986, but the tax was only paid when the price of oil was above $30/ B and the last time that happened was in September 1983. So by claiming a tax was effective three years after it became ineffective they are able to make that claim"?
No matter what the tax is called or how one tries to rationalize it, its a tax on the creation of wealth, a tax on people's pension plans, and does nothing bring in one more drop of oil whether the source is foreign or domestic...
From the Tax Foundation: Oil Company Profits and Tax Collections: Does the U.S. Need a New Windfall Profits Tax?
(1) Do oil companies currently pay too little in taxes compared to profits?
(2) What was the effect of the last windfall profits tax enacted in 1980?
The answer to the first question is that over the past 25 years, oil companies directly paid or remitted more than $2.2 trillion in taxes, after adjusting for inflation, to federal and state governments—including excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to the latest numbers from the Bureau of Economic Analysis and U.S. Department of Energy.
These figures do not include local property taxes, state sales and severance taxes and on-shore royalty payments.
The answer to the second question, according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil
Where is the economic sense and the common sense in windfall profits tax?
TaxAnalysts has more: Historical Perspective: The Windfall Profit Tax -- Career of a Concept
Filling the SPR has a minimal effect on the price of oil. It doesn't amount to diddly squat.
During the past 12 months, the rate of fill has been 33,000 barrels a day. (Average)
Second, the capacity is 727 million barrels. There are more than 701 million barrels already stored. Hence it is over 96% full. At the average rate of fill over the past year, it will be full in a bit over 2 years.
The daily rate of fill over the past year is less than 0.2% of the average daily oil consumption in the U.S. This is about 0.05% of the total daily consumption of the world.
The announcement to stop filling might have a one day effect on the price of oil. After the traders do math it would be business as usual.
Massive building of nuclear power plants. The Navy makes good, small, hardy ones. Why not go on a binge and build one for every town? We could get that done in 10 years. In the meantime, we could drill our own oil. Problem solved. Duh people. But wait, maybe the left doesn't want to solve the problem? Didn't algore say in his book a couple decades ago that what we really needed was high oil prices to get us off oil? Well, here it is. Let's get off oil then. Nuclear power - the safest, cleanest source of power. Really. Compare it objectively to any other power source and you will learn it is true. Produces less toxic waste than solar power, and is safer (see above regarding falling off roofs - this has killed far more people than nuclear power). Kills fewer birds than wind power, and actually works. A big plus.
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