US: Only Country to Limit Its Own Energy Supplies

This last week the nation of Brazil discovered enough oil sitting only 130 miles off their coast to give them the equivalent of nineteen years worth of oil by their current usage standards. That's nineteen years that they don't have to purchase oil from anywhere else.

Presently in territories under US control we have oil reserves that could eclipse that number by possibly 20 to 30 times. We have the technology to go get it with almost zero impact to the surrounding environment.

And in some places where we could go harvest it from - like the Alaskan wilderness, we would need less than 2% of the total territory to give us domestic oil production that would rival the output of what we purchase abroad and thus cause those suppliers to drop their prices. Off the shores of California, Florida, and other oceanside states further exploration could be had with no cost to the taxpayer and any reserves we would find would belong to the U.S. and thus allow us to control our own energy future.

Read more here.

Oil Companies Paid More Taxes Than Bottom 75%

Investor's Business Daily -- In 2006 alone, according to the American Petroleum Institute, U.S. oil companies paid some $138 billion in taxes to the IRS — and that doesn't include special oil severance, sales and use taxes companies also had to pay.

Internal Revenue Service (Table 6, p. 41) -- In 2005 (the most recent year for which data are available), the bottom 75% of all individual taxpayers (about 100 million taxpayers out of 132 million total) paid about $130.9 billion in income taxes. Adjusting by the recent average of about $5 billion in annual increases in tax revenue from individuals, it is estimated that the bottom 75% of individual taxpayers (more than 100 million individuals) paid about $136 billion in 2006.

Bottom Line: In 2006, U.S. oil companies paid more in corporate income taxes to the IRS ($138 billion) than the individual taxes paid by the more than 100 million individual taxpayers in the bottom 75% of all individual taxpayers (estimated to be $136 billion, see chart above).

Big Oil Is Not the Problem, It's Big Government

Congressional ignorance of basic laws of supply and demand is at once bizarre, breathtaking and frightening. For example, in a speech delivered by New York Democratic Sen. Chuck Schumer on May 13, he urged the U.S. to force Saudi Arabia to pump a million barrels a day more of oil — which Schumer claimed would slash the price of crude by $25 a barrel.

What Schumer didn't say was that 1 million barrels is exactly the amount of extra oil the U.S. would today be pumping if President Clinton hadn't vetoed drilling in the Arctic National Wildlife Refuge in 1995. Despite this, Schumer still opposes drilling in ANWR.

One of the oil business's dirty secrets is that only 6% of all reserves are controlled by investor-owned oil companies such as those demonized by Congress. The rest are controlled by governments, one way or another. And 11 of the 15 largest oil companies are government-owned. Government is the problem, not "Big Oil."

~IBD Editorial

Cartoon of the Day: Alternative Energy

Housing Market Correction: It's Far From Over

WASHINGTON -- Existing-home sales fell a second month in a row during April, while inventories surged and prices dropped sharply from a year earlier.

Home resales fell to a 4.89 million annual rate, a 1.0% decrease from March's revised 4.94 million annual pace, the National Association of Realtors said Friday. Originally, the NAR estimated sales fell 2.0% to 4.93 million in March.

The median home price was $202,300 in April, down 8.0% from $219,900 in April 2007. The median price in March this year was $200,100. High inventories have exerted downward pressure on prices. The decline has kept would-be buyers from signing off on property as they wait for still-lower price tags.

Inventories of homes increased 10.5% at the end of April to 4.55 million available for sale, which represented an 11.2-month supply at the current sales pace (the highest level since 1982 (updated), see chart above, data available here). There was a 10.0-month supply at the end of March, revised from a previously estimated 9.9 months.

ANWR = MA+NJ+RI+CT+DE; Footprint = 1/6 Dulles

ANWR's frozen desolation looks like:
ANWR's 10.4 billion barrels of oil have become hostage to the planet's saviors (e.g., John McCain, Hillary Clinton, Barack Obama), who block drilling in even a tiny patch of ANWR. You could fit Massachusetts, New Jersey, Rhode Island, Connecticut and Delaware into ANWR's frozen desolation (see bottom picture); the "footprint" of the drilling operation would be one sixth the size of Washington's Dulles airport (see top picture above, click to enlarge).

~George Will

HT: SBVOR Blog (for the images)

Oil's Perfect Storm May Finally Blow Over

UK Daily Telegraph --The perfect storm that has swept oil prices to $132 a barrel may subside over the coming months as rising crude supply from unexpected corners of the world finally comes on stream, just as the global economic downturn begins to bite.

The forces behind the meteoric price rise this spring are slowly receding. Nigeria has boosted output by 200,000 barrels a day (BPD) this month, making up most of the shortfall caused by rebel attacks on pipelines in April.

The Geneva consultancy PetroLogistics says Iraq has added 300,000 BPD to a total of 2.57m as security is beefed up in the northern Kirkuk region. "There is a strong rebound in supply," said the group's president Conrad Gerber.

Saudi Arabia is adding 300,000 BPD to the market in response to a personal plea from President George Bush, and to placate angry Democrats on Capitol Hill - even though Riyadh insists that there are abundant supplies for sale.

Trade Policy: Always Looking Out for the Consumer

NPR -- If you think your dry cleaning bills are high now, hang on. Wire hangers are getting more expensive due to import tariffs on cheaper hangers from China. So dry cleaning operators are asking customers to return their hangers to help keep costs down.

A flood of cheap Chinese hanger imports in recent years has forced all but one major U.S. hanger manufacturer out of business. M&B Hangers in Leeds, Ala., hung on.

In 2006, U.S. shipments of wire hangers were valued at $40.39 per 1,000, compared with $31.69 per 1,000 for shipments from China, according to the U.S. International Trade Commission. Last year, the United States imported 2.7 billion wire hangers from China — up 52% from 2006.

Since the tariff was imposed, nearly every dry cleaner in the U.S. has had to pay more for hangers, on average about $4,000 a year.

US: Only Country to Limit Its Own Energy Supplies

We have failed to increase our country's crude oil production. Domestic oil production has declined, to 1.9 billion in 2007 from 3.1 billion barrels in 1980, while imports increased to 3.7 billion barrels from 1.9 billion. We now importing about 60% of the oil we use.

One reason for the imports is that our public policy has forbidden offshore oil drilling for much of the estimated 85 billion barrels of recoverable oil and 420 trillion cubic feet of natural gas (an 18-year supply) that are on the Outer Continental Shelf, and another 10 billion barrels of oil in Alaska. Together they could replace America's imported oil for about 25 years, but the first President Bush issued a directive forbidding access to a significant portion of the Outer Continental Shelf. President Clinton extended the restriction through 2012 and vetoed legislation that would have allowed drilling in Alaska.

So America has large amounts of oil and gas, but our efforts to extract it have been significantly reduced by the federal moratorium on drilling. America remains the only nation in the world that has curtailed access to its own energy supplies. Meanwhile China will soon begin drilling for oil off Cuba and in Venezuela.

From today's WSJ editorial by Pete DuPont

Want Lower Gas Prices? OK, Let's Increase Supply

World oil prices might decline if there were more spare oil production capacity. But the control of world oil prices is not in the hands of investor-owned oil companies in the United States, which control just 6% of worldwide oil reserves (national oil companies of foreign governments own 80% of the world's oil reserves).

Even if the control of oil prices were in American hands, which it is not, Congress refuses to allow access to plentiful oil and natural gas deposits beneath federal lands and U.S. coastal waters. It's hard for our government to ask the main oil-producing foreign countries to increase their production when 85 percent of the U.S. Outer Continental Shelf and the Arctic National Wildlife Refuge are closed to domestic energy production. All too forgotten is that these areas hold billions of barrels of oil, enough to strengthen U.S. energy security and support our economic growth for many years.

Opening oil exploration in areas that are off-limits would be an encouraging sign that our elected lawmakers are acting in the best long-run interests of our national security and our continued economic prosperity.

From my editorial in today's Detroit News

Cartoon of the Day

Pigs At The Public Trough: So Much Pork Even The Dept. of Agriculture is Against The $300B Farm Bill

Imagine if Michigan's struggling Big Three automakers suddenly struck this deal with Congress: The U.S. government would buy the Motor City's cars for roughly twice the world market price, then resell them at about an 80% loss.

This boondoggle of a deal would spur worldwide protest, and rightfully so. But the five-year, $307 billion farm bill is equally ludicrous. President George W. Bush is expected to veto it within days, but no matter. Congress appears to have the votes lined up to override.

Everyone from taxpayer watchdog groups to foreign presidents have rallied to stop its passing. Even the U.S. Department of Agriculture, which is responsible for providing a safety net for American farmers, is denouncing it.

So why are both Democrats and Republicans supporting this absurdity? Plain and simple: they are acting like pigs at the taxpayer trough.

Editorial "Bloated Farm Bill Should Be Plowed Under," from today's Detroit News

What About This Female Pay Gap?

A black woman with a bachelor's degree earns as much as a white woman with a degree. But with a professional degree, black women earn 30% more than white women (see chart above).

Also from The Economist article "Nearer To Overcoming":

• For every dollar that a white man earns, a black man makes only 70 cents. Such figures are sometimes bandied around to imply that nearly all of this gap is caused by discrimination. That is bunk. If a firm could really get the same work done 30% more cheaply simply by hiring blacks, someone would have noticed and made a fortune doing just that.

• A study by Richard Sander of the University of California, Los Angeles, found that when the bar is lowered for black applicants to law school, they are admitted to institutions where they cannot cope. Many who drop out of top-tier colleges might have thrived at slightly less competitive ones. Mr. Sander calculated that the net effect of pro-black preferences was actually to reduce the number of blacks who passed the bar exam. That is, racial preferences for black law students result in fewer black lawyers.

Ethanol Post Office Trucks: More Gas, Fewer Miles

Maybe this is why stamp prices are so high?

Bloomberg -- The U.S. Postal Service purchased more than 30,000 ethanol-capable trucks and minivans from 1999 to 2005, making it the biggest American buyer of alternative-fuel vehicles. Gasoline consumption jumped by more than 1.5 million gallons as a result. A Postal Service study found the new vehicles got as much as 29% fewer miles to the gallon.

The experience shows how the U.S. push for crop-based fuels, already contributing to the highest rate of food inflation in 17 years, may not be achieving its goal of reducing gasoline consumption. Lawmakers are seeking caps on the use of biofuels after last year's 40% jump in world food prices, calling the U.S. policy flawed.

"Using food for fuel has created some unintended consequences: food shortages, the high price of livestock feed,'' said Senator John Cornyn, a Texas Republican. "I think it's leading a lot of people to wonder whether our corn-based ethanol goals need to be adjusted.''

G7 Goldilocks

Economic growth in the G7 countries (U.S., Canada, France, Germany, Italy, Japan, and UK) was 0.48% (1.92% annually) in the first quarter of 2008, just slightly below the average growth of .50% over the last 7 years (see graph above, data from OECD).

Russian Revolution: The World's Hottest Car Market

Detroit News--Fueled by a surge in oil prices, Russia has turned into the hottest of the hot emerging markets -- countries where automakers that can supply the right models earn a lot of money, particularly in the early stages of the boom when demand is outstripping supply.

In the past five years, auto sales have tripled. By 2010, many forecasters see Russia overtaking Germany to become Europe's No. 1 auto market with sales of more than 4 million vehicles.
"There's no sign that this is going to slow down," said Carlos Ghosn, CEO of Renault SA and Nissan. The demand for oil and other raw materials that Russia holds in vast reserves is not likely to subside, he said.

As crude prices have climbed to record levels, Russia's economy has taken off. Its gross domestic product has quadrupled since 2000. The country that once enforced economic equality now counts the second-largest number of billionaires. On the wide boulevards of Moscow and St. Petersburg, glittering Yves Saint Laurent and Gucci boutiques have replaced the drab Soviet stores with their bare shelves.

While China and other emerging economies are evolving fast, the speed of the Russian transformation caught people by surprise. "The unique thing with Russia is that with the boom in commodities, the economy has strengthened very quickly. That's something we didn't foresee when we first started investing in Russia," said Lewis Booth, Ford of Europe chairman.

For automakers like Ford, GM, Toyota and Nissan, which are struggling to boost sales in saturated home markets, emerging economies represent great opportunities at a challenging time.

It's Over

Hillary's odds on Intrade.com: From 70% to 6% in 120 days.

Inconvenient Truth:Tax Rate Hikes Lower Revenue

The data show that the tax yield (revenues divided by GDP) has been independent of marginal tax rates from 1950 to 2007 (see chart above), but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.

"You Can't Soak the Rich" from today's WSJ

U.S. Money Discriminates Against Blind People

WASHINGTON -- The U.S. discriminates against blind people by printing paper money that makes it impossible for them to distinguish among the bills' varying values, a federal appeals court ruled today (Tuesday).

Quote of the Day on Being "Green"

At one time, to call someone "green" was to disparage them as inexperienced or immature. Today, to call someone green is to exalt them as one of the environmentalist saviors of the planet. But it is amazing how many people are green in both senses. Some people who think it is wrong to tell children to believe in Santa Claus nevertheless think it is all right to tell adults to believe that the government can give the whole population things that we cannot afford ourselves. Believing in Santa Claus is apparently bad for children but OK for adults.

~Thomas Sowell

EU-15 Economy Grows 3%, Highest Since 2006

FRANKFURT--The euro zone grew 0.76% during the first quarter of this year, the statistics agency Eurostat reported. The region's numbers, which represent quarter-on-quarter growth, also got a surprising lift from France, where the economy grew 0.64% in the first quarter, and from the German economy, which grew 1.53% in the first quarter of this year.

The figures, which were about double what most economists expected, suggested that the European economy was demonstrating a resilience that seemed unlikely as recently as last autumn.

Note: The 0.76% quarter-to-quarter growth (3.04% annualized) for the EU-15 is the strongest economic growth there since the fourth quarter of 2006, and is significantly above the EU-15's average growth of 0.50%.

Everything You Love You Owe to Capitalism

I'm sure that you have had this experience before, or something similar to it. You are sitting at lunch in a nice restaurant or perhaps a hotel. Waiters are coming and going. The food is fantastic. The conversation about all things is going well. You talk about the weather, music, movies, health, trivialities in the news, kids and so on.

The buffet table, which you and your lunch partners only had to walk into a building to find, has a greater variety of food at a cheaper price than that which was available to any living person — king, lord, duke, plutocrat, or pope — in almost all of the history of the world. Not even fifty years ago would this have been imaginable.

All of history has been defined by the struggle for food. And yet that struggle has been abolished, not just for the rich but for everyone living in developed economies.

We owe this scene to capitalism. To put it differently, we owe this scene to centuries of capital accumulation at the hands of free people who have put capital to work on behalf of economic innovations, at once competing with others for profit and cooperating with millions upon millions of people in an ever-expanding global network of the division of labor. The savings, investments, risks, and work of hundreds of years and uncountable numbers of free people have gone into making this scene possible, thanks to the ever-remarkable capacity for a society developing under conditions of liberty to achieve the highest aspirations of the society's members.

Lew Rockwell, Mises Institute

Japan:Suprisingly Strong Economic Growth of 3.3%

THE ECONOMIST--Japan's economy recorded surprisingly strong growth in the first quarter of 2008, according to preliminary government data released on May 16th. Real GDP growth accelerated to 0.8% quarter on quarter, from 0.6% in the previous quarter (see chart above). This translates into a robust expansion of 3.3% in annualized terms. The key drivers of growth were exports and private consumption, both of which performed unexpectedly well.

Note: Real GDP growth in Japan has increased in each of the last four quarters.

Leading Indicators: First 2-Month Gain Since 2006

The Conference Board announced today that the U.S. Index of Leading Economic Indicators increased in April for the second straight month, the first back-to-back gain since October 2006, signaling that the current slowdown will be short-lived (Bloomberg).

Quote of the Day: Traditional Job A Career Failure?

The most compelling statistic of all? Half of all new college graduates now believe that self-employment is more secure than a full-time job. Today, 80% of the colleges and universities in the U.S. now offer courses on entrepreneurship; 60% of Gen Y business owners consider themselves to be serial entrepreneurs, according to Inc. magazine. Tellingly, 18 to 24-year-olds are starting companies at a faster rate than 35 to 44-year-olds. And 70% of today's high schoolers intend to start their own companies, according to a Gallup poll.

An upcoming wave of new workers in our society will never work for an established company if they can help it. To them, having a traditional job is one of the biggest career failures they can imagine.

~From "The Next American Frontier" in today's WSJ

Texas Jobless Rate in April At Record Low of 4.1%

AUSTIN — The April statewide seasonally adjusted unemployment rate fell to 4.1%, down from 4.3% in March and 4.4% in April 2007, once again matching the record low set in February (see chart above, click to enlarge). The 4.1% April unemployment rate in Texas remains far below the U.S. unemployment rate of 5.0%. Seasonally adjusted nonagricultural employment in Texas grew by 15,400 jobs in April.

“Texas continues to outpace national trends with its record low unemployment rate,” said Texas Workforce Commission (TWC) Chairman Tom Pauken. “Texas employers now have added 262,000 jobs in the past 12 months.”

Note: Adding 262,000 jobs in Texas over the last 12 months is almost like adding an entire new state the size of Wyoming (total state employment of 283,000) to the Texas economy. Even the construction sector in Texas is booming - 3,000 jobs were added in April, for a gain of 23,200 jobs over the year.

Clothing Deflation: One of Today's Best Bargains

Related to the post below on "The World's Cheapest Clothes," the chart above (click to enlarge) compares the "Consumer Price Index for All Items" to the "Consumer Price Index for Apparel," from 1992 to 2008 (with each index set to equal 100 in January of 1992, data are from the BLS). While consumer prices on average have risen by almost 55% in the last 16 years, the prices for clothing have FALLEN (deflated) by almost 10% over the same period. In fact, clothing for American consumers has never been cheaper, nor more affordable.

The World’s Cheapest Clothes, Cheaper Than Even Wal-Mart. How Does Steve & Barry Do It?

The most basic dresses at J. Crew start at $58. At American Apparel, they start at $26; at Old Navy, $19.50; and at Forever 21, some styles cost $15.80. The least expensive dress on the Wal-Mart Web site is $14.92.

Prices at Steve & Barry’s (a clothing chain where everything costs less than $10) are actually dropping — the $8.98 threshold for dresses (pictured above) was introduced as a holiday promotion last year, but remains with no set expiration. Meanwhile, the company’s sales at locations open at least a year, a crucial indicator of retail health, have increased more than 20% each month since January.

The question on everyone’s lips: How does Steve & Barry's make a decent dress or a jacket, with sleeves, or a pair of functioning shoes for $8.98?

Find the answer here in the NY Times.

HT: Division of Labour

Europe's Economy Rocks, Defies U.S. Slowdown

Surprising even the most optimistic forecasters, the German economy grew 1.535% in the first quarter of this year (about 6% on an annual basis), delivering its best performance in over a decade (see chart above, click to enlarge, data from OECD) despite the global financial crisis and recessionary fears enveloping the United States.

The euro zone, where Germany accounts for a third of economic output among 15 members, grew 0.7% during the period (2.8% annually), the statistics agency Eurostat reported Thursday. The region's numbers, which represent quarter-on-quarter growth, also got a surprising lift from France, where the economy grew 0.6% (2.4% annually) in the first quarter.

The figures, which were about double what most economists expected, suggested that the European economy was demonstrating a resilience that seemed unlikely as recently as last autumn.

Read news reports here, here and here.

Note: First-quarter GDP estimates show that the U.S. economy grew 0.2% (compared to the .60% growth on an annual basis reported in the U.S.) when the official figure is translated into a measure comparable with the estimates published in Europe. In the U.S., quarterly growth rates for GDP are annualized, while in Europe they are reported as quarterly rates without adjusting on an annual basis (see adjustments above in parentheses).

Economic Opportunity Is Close To An All-Time High

How much opportunity do Americans have today compared to 25 years ago (MP: about 60% more, according to the chart above)? How does opportunity compare across gender and racial groups? What will matter most in ensuring opportunity in America in the future?

The Economic Opportunity Index (EOI) is a tool for measuring the extent to which Americans have the opportunities available to them to achieve the American Dream, and identifying those factors which could contribute most to improved opportunity in the future. There are many measures of economic activity, such as unemployment, inflation, GDP1 growth, productivity, or income distribution. However, there is no credible, authoritative measure of economic opportunity – the potential for people to improve their economic well-being based on their individual efforts.

There is a profound and unmet need for a trustworthy set of measures that policymakers, media, or citizens can rely on to assess the degree to which America is indeed the “land of opportunity” for all its people – and whether the amount of opportunity is growing or shrinking over time. The Index will bring hard facts and solid, non-partisan analysis to what is now a confused and ideological debate that falls into the tired paradigm of “grow the pie” versus “redistribute the pie.” In our view, this misses the point because it is focused on the wrong “pie” altogether – we should aim to increase opportunity, and outcomes will follow.

Hope Street Group defines economic opportunity as “Expected lifetime real income, given effort.”