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Oil Nonsense and Congressional Ignorance

I interviewed Sen. Maria Cantwell (D-Wa.) several months ago, right after Katrina. She and a bunch of other Dems, like Wyden and Durbin were standing outside the Congressional Exxon, near the Senate office buildings, taking advantage of the high prices as a back drop.

They were hawking some bill that would allow the FCC (Correction: Silly me. It was the FTC. Wrong acronym!) to investigate instances of price-gounging and prosecute or something crazy like that. I caught her afterward and asked:

ME: Do you recognize at all that high prices might simply be caused by the fact that Gulf Coast refineries have been wiped out, thereby depleting production, thereby depleting supply while demand stays the same or increases, which inevitably means that prices have to rise?


Cantwell: But you see, we're going after price-gougers.

ME: I understand that. What I'm suggesting is that it could be that none of the gas prices are price-gouging; they're just a natural market reaction to the depleted supply of gas brought on by Hurricane Katrina, which wiped out oil refineries in the Gulf Coast. And, if the prices are lowered by the FCC or Congress, we'll end up with gas shortages because the higher prices are an incentive for oil companies to produce and deliver a sufficient amount of gas even under conditions that are not ideal. If the profit incentive is taken away, they won't produce the gas and no one will have gas.

Cantwell: (Furrowed brow) Could you say that one more time?

ME: See, here's the deal. The supply of gas went down and demand stayed the same or increased. Therefore, prices went up. I'm suggesting that the rise in prices is NOT evil oil companies gouging anyone, but a natural market adjustment, which allows us to have plenty of gas even in rough times. Now, if gas prices get lower....

Cantwell: Who did you say you work for?

Cantwell's Assistant: (pulling her by the elbow) Senator, we've got to move on. You've got a meeting.

She was totally and utterly confused by what I said, and seemed genuinely interested in trying to puzzle it out, as if she had NEVER, EVER heard it before. Totally true story, even though it sounds too sad to be true. And, this is a woman who is fairly active in the energy policy arena. How can we possibly expect any solutions out of these people when they don't understand the problems they're dealing with? We will end up with no energy if people like Cantwell are in charge.

I can just imagine that, every year or so, when this gas-price crisis starts, Thomas Sowell sighs, rolls his eyes, and sits dutifully down at the keyboard once again to plonk out his crystal-clear Econ 101 lessons for the politicians and civilians of America.

It is a great service. He's done it again this year in Oily Politicians :

Are the oil companies charging all that the traffic will bear? No doubt. But they were probably charging all that the traffic would bear when the price of gasoline was half of what it is today.

Even businesses that are losing money are charging all that the traffic will bear. Otherwise they could raise their prices and stop losing money.

Most of the people who are making this claim are charging all that the traffic will bear for their own labor or the use of their own products. Dressing up the plain fact that we all usually prefer more to less in political rhetoric about "gouging" explains nothing. Something that is true all the time cannot explain drastic changes.

Is it rocket science that, when oil prices hit new highs, gasoline prices also hit new highs? Do you think the price of wheat could double without the price of bread going up? Would we have politicians running around spouting off about "gouging" by Big Wheat?

And, Oily Politicians: Part II:

Price movements up or down provide incentives for people to consume less or to consume more -- and to produce more or produce less. From the standpoint of the economy as a whole, the history of any particular batch of oil is irrelevant.

Prices need to ration all oil according to existing supply and demand. At the same time, prices need to provide incentives to produce more oil or less oil, according to the same supply and demand conditions.

"Windfall" profits and windfall losses are all part of the same adjustment process. If politicians seize the windfall profits and leave windfall losses alone, what that means over a cycle of years is that the average rate of return on oil production falls below what is needed to attract the investments that greater oil exploration and production require.

God bless him. Maybe I'll send copies over to Cantwell's office.


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Comments (47)

As an economist I'm uncomfo... (Below threshold)
merc:

As an economist I'm uncomfortable with the fact that so many politicians either honestly don't understand basic micro- and macroeconomic principles or just don't care about them because demagoguery gains votes, honest economic positions don't.

We've got a huge building full of lawyers, executives and medical doctors setting this nation's economic policies.

I sure wish some economists would get elected.

Politicians become, through... (Below threshold)

Politicians become, through trial and error, experts at getting elected. They become, through design, experts at STAYING elected.

All else - the subcommittees, chairmanships and so on - are designed to give credentials so they can STAY elected.

In all honesty, I'm not surprised she didn't seem to have a clue.

This dumb bunny is my Senat... (Below threshold)

This dumb bunny is my Senator.

I expect her to win re-election with at least 53% of the vote.

My other Senator got 55% in 2004, and she's even dumber.

MKH:I apologize (a... (Below threshold)
Peter F.:

MKH:

I apologize (actually, I'm more embarassed than anything) for my hapless state senator, Maria Cant(DoAnything)Well.

Hopefully and with any luck, she'll be replaced by former Safeco CEO, Mike McGavick, this Novermber. In fact, if he fails to use this weak grandstanding moment by Cantwell to thrust himself into the limelight, it'll be a missed political opportunity.

Unfortunately her ignorance... (Below threshold)

Unfortunately her ignorance comes as no surprise...also, and more unfortunately, she doesn't stand out in the crowd...Boxer, Schumer, Feinstein, Wyden...the list is long, all pretty much ignorant about all matters unrelated to, as JL above points out, getting re-elected. Additionally, merc is dead on, economists need to reside everywhere in our government, not just behind the curtain in OZ. We have come to understand how many independent factors impact our economy...no just the Fed.

The writings of Drs. Sowell... (Below threshold)
Steve L.:

The writings of Drs. Sowell and Williams should be required reading of all politicians before they begin running their mouths. Imagine how our lives would be with informed elected officials.

I know, I know. I can dream, though.

I keep trying to explain th... (Below threshold)

I keep trying to explain this sort of thing to people, but Econ 101 doesn't seem to be high on the "took it in junior college" list.

On the other hand, I got to hear Steven Levitt speak about Freakonomics this morning (after seeing Ben Stein yesterday).

No joke. I'm always trying ... (Below threshold)

No joke. I'm always trying to teach my college-grad friends economics. You can easily get through with no idea what supply and demand are.

Cantwell=Durbin yep lump th... (Below threshold)
Drew E.:

Cantwell=Durbin yep lump them together..note progressives say Lady Cant is a sell-out but If ya wanna go lumping Dukester/Ney/whats-his-name-fromTexas=all Republicans in the House...As for Eco 101 I know one thing if you are going to spend more than you earn you gotta serve somebody ...and our somebody is Communist China and the Saudis...see most folks don't respond until they are directly effected/affected ...well gas prices do that..I love the Republicans thinking we can be bought for $100 ...I love the skyrocketing electric bills this summer kinda like the Enron manipulation in CA...see most citizens do not get capital gains realized by companies laying off or outsourcing because,; we are out of a job..most citizens, pick a poll any any poll, do not believe in this economy..most citizens are learning that deregulation does not make things cheaper..anybody running for office whose platform is how our great economy is making things better will be defeated. But hey..keep on spinning..those of us with children have seen how they love to spin..until they lose balance and fall down..

Drew, learn to punctuate, c... (Below threshold)

Drew, learn to punctuate, capitalize, and divide your writing into paragraphs.

It's simple courtesy, for God's sake. I don't expect good writing; I'm talking about basic stuff like ending a sentence with a period (one period, Drew, not two or three according to choice) and starting the next sentence with a capital letter. This is stuff which any reasonably intelligent nine-year-old already has a good handle on.

I'm sorry if this sounds like I'm The Man tryin' to harsh your buzz with all my fascist rules, duuuuuuuude, but expecting people to wade through drivel like the above is just plain rude.

Supply and demand? Is that ... (Below threshold)
Drew E.:

Supply and demand? Is that like the tinkle down theory? Yep! Anyone remember Beanie Babies? People were actually paying more than $50 for a small stuffed toy because of the demand. Is that supply and and demand? ...Standard Oil created supply and demand..until the last Republican with balls TR said enough..I am waiting for someone to post here supporting supply and demand who owns no stocks..I really dislike communisim...it pisses me off that our supply and demand is controlled by them...I am also not a big fan of the Saudis who had their citizens crashing our planes on 9/11 and Iraq did not..We have had a Republican President/Senate/Congress ...hmmm where is the good life? At what point in time will you point at Republicans, at any level, who are responsible?

Grammer? Yep... I can do... (Below threshold)
Drew E.:

Grammer? Yep... I can do that. I can indent paragraphs. I appreciate your comments. At the very least it is a positive. However,; I must go back and check out other diatribes. I do not doubt for a monment that you have addressed them in a like manner.
You know I respect a back to basics approach. I believe the downfall of grammer came when commie teachers did away with diagramming sentences. However,; that brings us to the crux of the matter. What is more important, what a person says or how they say it?
How do you convince someone not to write irregardless? Say what you will about English only, our language and structure is difficult because of the hodgepodge gathering of languages.
I will, however, attempt to pursue a more generally accepted structure. I realize that perhaps there are those that don't bother to read the message because they deem the message poorly written and not worthy of further exploration. i(written in the spirit of e.e. cummings) will take that into account in future postings.

A US senator without a clue... (Below threshold)
docjim505:

A US senator without a clue???

SAY IT AIN'T SO!

Drew E.,Actaully, ... (Below threshold)

Drew E.,

Actaully, Beanie Babies (and other extreme fads and panics of that sort) are economics as practiced by fools who don't understand how supply and demand works. They can't judge supply, they don't really understand the demand, and they're hoping that they can find other folks who have even less knowledge then they do before the market collapses. It's closer to a pyramid scheme than true market forces.

The Standard Oil example is a bad one for you, since it was (mostly) not a coercive monopoly, but one based on competition (indeed, oil prices dropped by about 50% during the time of the Standard Oil "trust"). The Roosevelt moves versus Standard Oil came well after real competition reduced Standard's market share from the 90% level. In other words, due to competition and innovation, the "invisible hand" worked.

By the way: "our supply and demand" aren't controlled by "them," because we control the demand, and "them" consists of many countries (the largest supplier of oil to the US is Canada).

I tried to indent but whate... (Below threshold)
Drew E.:

I tried to indent but whatever you are using would not let me... no, I really tried..for example I just pressed the tab..if you notice nothing is indented although i am sure the poster do indent...(hey try it yourself)

And that's the beauty of su... (Below threshold)
John S:

And that's the beauty of supply and demand. Demand for gasoline dropped 1.3% in March when gas was still relatively cheap. Wait until April numbers come in. I'm guessing a 3 or 4% drop in demand. And assuming Congress doesn't do something stupid to cause an artificial shortage, gasoline prices will plummet 80 cents in June.

"What is more important, wh... (Below threshold)

"What is more important, what a person says or how they say it? "

In this case, due to your incredibly bad way of saying what you thought you said, you didn't really say much of anything.

Drew, the accepted way of s... (Below threshold)

Drew, the accepted way of separating paragraphs on the Internet is with a blank line. When you reach the end of a paragraph, hit your ENTER key twice.

No indenting necessary.

Next lesson: The proper use of the period (.) and the ellipsis (...).

Drew, the accepted way of s... (Below threshold)

Drew, the accepted way of separating paragraphs on the Internet is with a blank line. When you reach the end of a paragraph, hit your ENTER key twice.

No indenting necessary.

Next lesson: The proper use of the period (.) and the ellipsis (...).

Canada? I am sorry you are ... (Below threshold)
Drew E.:

Canada? I am sorry you are going to have to give me a link that supports your contention.

Hey, I got it. I just have to space between paragraphs. Canada? If I were you I would contact a major media like FOX. This is a break through story.

As of 2004:<a href... (Below threshold)
Drew:Try Googling ... (Below threshold)

Drew:

Try Googling "united states oil supply canada" (without the quotes, of course). Many cites.

Canada is the single largest supplier, at about 15%.

That's another bit of info that should clue you into why one single supplier or group of suppliers can't really "control" the international oil market.

It's not a breakthrough story for anyone except people who don't understand how markets work.

Oh, Drew. You're delightful... (Below threshold)
Mary Katharine:

Oh, Drew. You're delightful. Grammar is spelled with an "a" and "irregardless" is not a word.

...Standard Oil created sup... (Below threshold)
woof:

...Standard Oil created supply and demand..


Drew, you are ignorant.

When the Tulip Bubble Burst
TULIPOMANIA
The Story of the World's Most Coveted Flower

http://www.businessweek.com/2000/00_17/b3678084.htm

Tulip mania differed in one crucial aspect from the dot-com craze that grips our attention today: Even at its height, the Amsterdam Stock Exchange, well-established in 1630, wouldn't touch tulips. ''The speculation in tulip bulbs always existed at the margins of Dutch economic life,'' Dash writes. After the market crashed, a compromise was brokered that let most traders settle their debts for a fraction of their liability. The overall fallout on the Dutch economy was negligible. Will we say the same when Wall Street's current obsession finally runs its course?

....not that there's anything wrong with that.

Drew E: "I am waiting for s... (Below threshold)
jdavenport:

Drew E: "I am waiting for someone to post here supporting supply and demand who owns no stocks."

Count me in. If you don't believe in it, you will have plenty of what you don't want, and none of what you do.

I made squat last year, and own no stock. Good thing the market now delivers, nearly for free, what in the past would be luxuries of kings.

Go educate yourself.

Compare the price of a gall... (Below threshold)
Wovoka:

Compare the price of a gallon of milk to a gallon of gas and the associated capital investment into the end product and gas seems like a bargin.

Here is the letter I receiv... (Below threshold)
Joseph:

Here is the letter I received from Pennsylvania Sen. Arlen Specter on the gas problems today. We should vote the bums out NOW!

Date: Fri, 28 Apr 2006 16:27:49 -0400
From: [email protected]
Subject: Re: Gasoline/Natural Gas Prices
X-Originating-IP: [156.33.203.25]

Thread-topic: Gasoline/Natural Gas Prices
Thread-index: AcZrAjeZgMbmToBDQPamaGr3W3MC8A==
X-OriginalArrivalTime: 28 Apr 2006 20:27:49.0555 (UTC)
FILETIME=[37B80030:01C66B02]


Dear Reverend:


Thank you for contacting my office regarding gasoline prices. I appreciate hearing from you on this matter.

Rising energy costs and increasing gasoline price volatility have had significant effects on our economy and are a major concern to America 's businesses, consumers, and Congress. Analyses show that the components that make up the price of gasoline are the market cost of crude oil (46%), federal and state taxes (24%), refinery costs (19%) and marketing and distribution costs (11%). Among the numerous factors that affect gasoline prices, only federal taxes and regulations for clean air standards and reformulated gasoline are within the direct control of the federal government. It is important to note that federal gas taxes are deposited into the federal highway trust fund, which is the federal government's main source of highway construction funding.

However, in light of the continuation of high gas prices and reporting of record profits by oil and gas companies, I believe the time has come for the Federal government to look past its limited controls on the energy market. Therefore, as Chairman of the Senate Judiciary Committee, I held two hearings in February and March of 2006 to consider the effects of consolidation in the energy industry and whether concentration had resulted in increased prices for gasoline, other petroleum-based fuels and natural gas. As a result of those hearings, I recently introduced S. 2557, the Oil and Gas Industry Antitrust Act of 2006. The purpose of this legislation is to require the appropriate antitrust agencies to further consider whether mergers within the oil and gas industry have violated antitrust laws and whether such mergers and information sharing among companies should receive closer scrutiny. Additionally, this legislation would address record industry profits and high gasoline prices by prohibiting oil and gas companies from diverting, exporting or refusing to sell existing supplies with the specific intention of raising prices or creating a shortage. S. 2557 also incorporates provisions similar to those of S. 555, the No Oil Producing and Exporting Cartels (NOPEC) Act, of which I am cosponsor, which would enable OPEC members to be sued for violating United States antitrust laws by conspiring to fix the price of crude oil.

Furthermore, I have consistently been a supporter of increasing the domestic oil supply and energy efficiency to balance market discrepancies between supply and demand. I have been the lead Republican sponsor of an amendment to the energy bills of the 106 th and 107 th Congresses that would require the federal government to enact policies to reduce United States consumption of oil by one million barrels per day from projections by 2015 and supported a similar amendment to the Energy Policy Act of 2005, which was signed into law on August 8, 2005, that would have required a reduction of domestic oil consumption by 1 million barrels per day from projections by 2013. This modest goal was not included in the final bill, but I believe it could help to focus the federal government's attention on reducing oil imports in support of national security and lower trade deficits and I will continue to support such measures.


Additionally, I have supported the improvement of automobile fuel economy and reduction of vehicle emissions, which would also alleviate domestic oil consumption. The conference report of the Energy Policy Act of 2005 authorizes $3.5 million per year for fiscal years 2006 through 2010 for the National Highway Traffic Safety Administration to carry out fuel economy rulemakings. I also supported the incentives included for innovative clean coal technologies which hold the promise of replacing foreign imports of oil. For example, I have worked to secure a U.S. Department of Energy loan guarantee for a Pennsylvania plant, the first in the nation, which utilizes coal and coal waste to produce clean-burning diesel fuel.

Thank you for taking the time to bring your concerns about rising gasoline prices to my attention. This is an important issue deserving Congress' consideration to best serve the interests of consumers and our nation. If you have any further thoughts on this or any other matter, please do not hesitate to contact me or visit my website at: http://specter.senate.gov.

Sincerely,

Arlen Specter

My #2 son is on full schola... (Below threshold)

My #2 son is on full scholarship to the University of Chicago thanks to John D. Rockefeller and other rich folks.

Trickle down works.

Any lefty can understands s... (Below threshold)

Any lefty can understands supply and demand and government interference in the market.

Just look at the market for illegal drugs.

You can't beat economics. No matter how many enforcers you put on the job.

BTW Republicans who underst... (Below threshold)

BTW Republicans who understood economics would not support drug prohibition. A socialist price support system for criminals.

It is not just lefty's who are economically ignorant.

Now only if Specter et.al. ... (Below threshold)
Wanderlust:

Now only if Specter et.al. would undo the byzantine legislation regarding ethanol and MBTE, and allow for refineries in differing regions to support each other where shortages exist (by relaxing oxygenation standards on a temporary basis), perhaps the industry might invest in new infrastructure as required to support demand.

Oh, demand...something legislators think is eeeeeeeevvvvvvvvillllllllllllllll...LOL

I share a last name with Ma... (Below threshold)
Glenn Cantwell:

I share a last name with Maria; After reading these postings, I'm considering changing my name to "Cirby" or "Ham".

I really feel the need to b... (Below threshold)
snowballs:

I really feel the need to bitch about this - but first I need to take a drink of my $1.60 beer, look forward to my $3.50 + coffee tomorrow as I sit under ~$200 + dollars per month of pure interest payments on revolving credit card debt and watch Tivo of crap of my $89 cable bill.

/meaningless bitching

What's in a name?... Peter... (Below threshold)
Glenn Cantwell:

What's in a name?... Peter F. correctly suggests that Maria has brought a black mark
(an apostrophe) upon the Cantwell Coat of Arms.

Nathaniel Hawthorne changed the spelling of his name by adding an "e" so as not to be associated with a relative, Hawthorn, the Salem Witch judge...In like fashion,maybe I could go back to an original spelling of Kentwell... Or drop an "L" as a symbolic gesture.

Better yet, the "Snowballs" moniker sounds kinda good.

Joseph, thanks for p... (Below threshold)
docjim505:

Joseph, thanks for posting that letter from Specter. I found this part... interesting:

...only federal taxes and regulations for clean air standards and reformulated gasoline are within the direct control of the federal government. It is important to note that federal gas taxes are deposited into the federal highway trust fund, which is the federal government's main source of highway construction funding.

Can you say, "We ain't gonna cut the taxes?"

I think you can. The gov has no problem taxing the hell out of a vital commodity and slapping all kinds of regulations on it because they're doing it for Our Good(TM). Natch, the politicians NEVER dip into the Highway Trust Fund (or any other government till) for the purposes of pork barrel spending, do they?

It's time to be worried, folks. Not because the price of gas is going up, but because the politicians are going to FIX THE PROBLEM.

Be afraid. Be VERY afraid.

Heard a comment on a radio ... (Below threshold)
wave_man:

Heard a comment on a radio show that I think put the current complaints in perspecive. The caller wanted the oil companines to be disbanded and oil to be supplied by a public utility, like water.

This will work great. Just like all those other wonderful governmental agencies. Think TSA, think FEMA, think...

The government regulates things now so that we can't even drill, increase refinery capacity, permit new nuclear facilities, etc. They regulate to the point that inefficies abound. Instead they talk about unproven technologies, etc., as if it will solve our current problems. I have no doubt that many of these solutions will solve problems in the distant future, but what about the current situation? 1995, when ANWR was defeated, was when we should have started drilling there to bring it on line now. Now, we pay the price.

Nothing has ever proven to be more efficient than [gasp] capitalism in solving our problems. Even the ChiComs are figuring that out. Yet the left and the politicos believe that 'guvment' is the answer.

Sad when the government schools fail to even teach basic economics, and instead concentrate on psycobabble. This is a classic example of the result.

Andy MacDonald at SoundPoli... (Below threshold)

Andy MacDonald at SoundPolitics has a likewise interesting article titled, "Cantwell flunks Econ 101".

I tend to agree, and think the "gasoline fever" that has pols on both side pandering for votes is ridiculous!

Senator Cantwell is and has... (Below threshold)
Skeptic:

Senator Cantwell is and has been an embarrassment to Washington state for many years. When serving in the state legislature she had very little grasp on the issues surrounding legislation that she worked on. However, she was very adept at joining the democratic caucus on any issue. She wasn't known for thinking so much as for being a good soldier for the party.

The two embarrassing senators from Washington state are more likely to have benefitted from the hijinx in the Democratically controlled records and elections office in our largest county. The office that "found" enough ballots for the governor's race to handed to the Democrat candidate on the 3rd count.

Hopefully McGavick will not be victim of systemic election fraud in King County and we can replace one of the dim bulbs in the US Senate.

Here is a letter I sent to ... (Below threshold)
Mr. Consumer:

Here is a letter I sent to Les Blumenthal of the Tacoma News Tribune after reading his fluff piece on Maria Cantwell and her crusade to save us all from "Big Oil".

Mr. Blumenthal,
I shudder at your reliance on Tim Hamilton as your "petroleum industry consultant". Mr. Hamilton represents service station dealers who naturally have an ax to grind with their suppliers. Branded dealers have to buy their product from their like branded suppliers - whether that is a jobber or a major oil company. They are contractually locked in to the supplier and have no alternative. Mr. Hamilton is a good shill for your article to prop up Maria Cantwell. Maria Cantwell is as responsible as any of the major oil companies, investment houses, and traders for the rapid rise in the price at the pump.

Maria Cantwell has supported legislation which adds to the cost of petroleum products. Maria Cantwell has shot down attempts at using and developing viable sources of alternative energy, and using currently available sources, which would make this country more secure in the near and long term. In the near term, we need to develop currently available resources - natural gas, ANWR. In the long term we need to switch to non-hydrocarbon based energy resources - nuclear, hydroelectric, wind generation, solar, and wave action to name a few.

As a member of "Big Oil", albeit as a minor employee, I see the biggest contributors to the rapid rise in prices as the speculators - the Morgan-Stanley/Goldman Sachs crowd. However, the table was set by the politicians. If you look at historical inventories of crude, we are at near twenty year highs. The last time inventories were this high, crude oil was at about $20 per barrel. Now, the oil companies do stand to gain on previously discovered reserves based on what goes on in the trading arena. There is no doubt about that; however, the people who add no value to the product whatsoever are the paper traders in the big investment houses. There has been a flow of cash into this particular market over the past 6 years. In 2000 there were about $6 billion in the oil commodities trading arena and as of the end of last year that amount was $126 billion. Most of this is from investment, retirement, and hedge funds. None of these funds discover, refine, transport or add value to the product. Why do prices go up? Because some trader at Morgan-Stanley says he is afraid that the crises in - fill in the blank - is going to cause a shortage in the future. I haven't seen any shortages and I deal with this stuff every day.

The recent run outs on the east coast are due to governmental regulations. MTBE is being phased out and there is not enough ethanol to make up the hole in the supply caused by the Congress' lame excuse for an energy bill. Both sides of the aisle have to answer for this one. Maria Cantwell has done her share to make bad policy, but this spans the entire spectrum. We need to be practical and not perfect. If we want to be perfect, we'll have to die and try it again in the next life. No matter what Bob Dineen and his lackeys at the Renewable Fuels Association say, ethanol will not be able to meet our energy needs in an economical fashion anytime in the foreseeable future. The RFA is a mouthpiece for ADM, Cargill and the other players in the ethanol game. If it were a truly viable energy source, it would have come to the marketplace naturally - out of demand and not via mandate. A 2005 study by U.C. Berkeley, Cornell and the University of Wisconsin at Madison found the following about ethanol:

It takes 1.6 gallons of ethanol to create the energy of 1 gallon of gasoline

It takes 30% more energy to create a gallon of ethanol than it produces

It takes 45 kilowatt hours of electricity to produce a gallon of ethanol - 35 to produce a gallon of gasoline

It costs $4.69 to produce a gallon of ethanol - $1.25 to produce a gallon of gasoline

Ethanol just looks like a giant transfer payment from the American Motorist to American Agribusiness. If you think that "Big Oil" has credibility problems, just look at the number of ADM executives that have been convicted of illegal acts. I guarantee you that the number in the oil patch is substantially lower if not zero in the last 25 years. Not that "Big Oil" is not without its problems, but most of these are problems of perception and not problems involving illegal behavior. This is the most investigated industry in the world.

Who pays for the investigations? You and I - twice: once when we pay the tax man and the second time at the pump! This is an overhead cost that is part of the product's price. It is a vicious cycle that you and I get trapped in while politicians spin and executives and their attorneys parry. Lee Raymond (a poster boy for excessive executive pay) and Maria Cantwell (and all her Real Networks money) don't feel the pinch at the pump. Heck, she shows up chauffeured just like Lee Raymond. It is you and I and the millions of regular working stiffs that feel that sharp pinch in our bank account and wince as the pump drains our accounts as rapidly as it fills our tank.

Next time you write an article about this subject, I would appreciate an article with more depth and less of a Rah Rah piece about a politician who is picking the money out of all of our pockets. Maria Cantwell is no different that her counterparts on the right - she is just looking out for herself for the next election. I won't be voting for Mr. McGavick either, since he is cut from the same cloth. Better to deal with the Devil you know!

Mr. ConsumerSome how... (Below threshold)
Tincan Sailor:

Mr. Consumer
Some how I feel we as AMERICAN'S should feel
a little bassakward where we let a 3rd.world
country kick our ass in the production of
Ethanol,not only is their's have more kick 9
times it is and just for a grin we place a .54
a gallon tariff on the importation of this
product, Folks in Brazil drive the same kind
of cars as we do,and those damn Brailians do it for the cost of 10-15.00 per a far cry from your
aprox.250.00 per barrel...Somthing smells very
bad really bad...In IDAHO a group of folks have
plans for a Ethanol plant and will the goverment
offer any help along the way,when pigs fly...You
can say WE ARE PICKING ON BIG OIL,well Chevron
is no different than Enron...Let private money
do this far removed from the oil industry period.What I see here is 60 years ago you
gave some one a back braking job you got A CAN
DO and it was Now, we have a bunch of candy ass
little whiners saying it can't be done Waaaaaa
Waaaaaaaaa.sob the Goverment will have to save us
oh please save us!!!!!! Save yourself SUCKER...

"Some how I feel we as AMER... (Below threshold)

"Some how I feel we as AMERICAN'S should feel
a little bassakward where we let a 3rd.world
country kick our ass in the production of
Ethanol"

Why?

Ethanol is what you use when you don't have anything better. Brazil can make much cheaper ethanol because they have a helluva lot of sugar cane available, and don't pay the people who harvest it very much.

The per capita consumption of auto fuel in Brazil is also much, much lower than in the US, so ramping up production to meet that demand is also a lot easier.

The US could jump into ethanol production in a big way - as long as we completely ignored environmental and labor legislation, erased most of the Everglades, and planted a few thousand square miles of sugar cane.


I love the comment... (Below threshold)
Tincan Sailor:


I love the comment "when you don't have any
thing better' AND BETTER IS??Oil, sure only
the forcast is 50 years left at best. Coal,
shale oil,fuel cell "please" Brazil will
sell us all we need,but not us we tax the
crap out it so no import!!Like I said before
THIS GENERATION is full of reasons why it wont
work,can't be done,I think we have better????
The joy ride is about over folks when will we
fix it... "When pigs fly????"5 years and
we can close out middle east oil with the corn
silege we produce now with out the cane,but
will we...Ford and GM think the time is near
or they wouldn't kicking up the production fo
flex fuel cars and trucks,they go where the
money is and its not with oil.....

"I love the comment "when y... (Below threshold)

"I love the comment "when you don't have any
thing better' AND BETTER IS??Oil, sure only
the forcast is 50 years left at best."

...except that the same forecast has been made about a hundred times over the last hundred-plus years, and isn't any more true now than it wass back when they started making it.

When the price of oil stays at the current level for long enough to be considered "stable," new supplies will open up, like the oil sands in Canada (currently undergoing major expansion), or the oil shale in the Western US (which is a large enough supply by itself to cover the needs of the US for well over a hundred years).

The whole "peak oil" meme is pretty much dead, outside of the few folks who still don't understand econnomics. Again.

Yeah, I think it's safe to ... (Below threshold)
Ryan:

Yeah, I think it's safe to say that she was caught off-guard, and wasn't able to follow you. My guess is that she was trying to walk down the street as she was ambushed by you, she tried to explain the address you had just heard was about price-gouging, not evil corporate oil. Even GWB has recently made announcements about going after price gougers. Just because Ms. Cantwell refused to agree with or even acknowledge that she understood your application of the theory of supply and demand to the current US Oil Market doesn't mean she doesn't understand economics. It means she wasn't interested in debating with you whether or not she had just made an address about price gouging or the evil oil industry, as you seem to characterize it. Your tirade had nothing to do with what she had just spoken about. She is a highly succesful businesswoman and Senator--I don't believe that basic econ is beyond her, this was a political conversation, not an academic one.

Besides, if it turned out that the supposed price-gouging was actually natural market fluctuations then so what. But if there actually was price gouging going on somewhere, what would be the harm in stopping it? Price gouging only occurs when actual market prices are going up, so it's not like this is an impossibility. Turn off your partisan blinders.

"Yeah, I think it's safe to... (Below threshold)

"Yeah, I think it's safe to say that she was caught off-guard, and wasn't able to follow you."

Don't worry. From her response, it wouldn't matter if she was sitting in a comfortable chair with all of the time in the world.

the concepts referred to are such basic, obvious ones that it takes a member of Congress or a dedicated Socialist to not be able to understand them.

Well Cirby, you are very ar... (Below threshold)
Ryan:

Well Cirby, you are very arrogant. If everyone could just be as smart as you, then the world would be such a better place. It's funny that you think taking an economic theory that is actually quite complex, such as the theory of supply and demand, and applying it to one of the most complex global markets (oil) in the world is so basic and obvious. It's really not, even if you say it is. And if someone randomly approached you on the street and launched into a tirade about the sanctity of market economics you might need a second to get your bearings and respond intelligently. Senator Cantwell chose not to respond at all because she obviously could see that this person was extremely partisan and not interested having an exchange of ideas on the topic. Why would she waste her time talking to this person? She is very busy.

"Well Cirby, you are very a... (Below threshold)

"Well Cirby, you are very arrogant.

Not really, compared to someone who wants the laws of supply and demand to bend to their preconceptions about the world.

"If everyone could just be as smart as you, then the world would be such a better place. "

Quite probably, as compared to being as smart as you or the Senator in question.

"It's funny that you think taking an economic theory that is actually quite complex, such as the theory of supply and demand, and applying it to one of the most complex global markets (oil) in the world is so basic and obvious. It's really not, even if you say it is."

Actually, the idea of supply and demand is quite obvious and basic, it's the idiots who ignore it or try to work around it that screw things up. You know, like the ones who think that a 9% profit margin is "high," that increased demand and lowered supplies don't have any impact on prices, or that the basic concepts of the global oil market are "complex."

"Senator Cantwell chose not to respond at all because she obviously could see that this person was extremely partisan and not interested having an exchange of ideas on the topic. Why would she waste her time talking to this person? She is very busy."

If you read the original comments at the top of the page, you just completely misstated what happened. From the Senator's past record, this isn't just a mattter of her wanting to get to a meeting, it's a matter of her not really understanding much at all about the oil and gas market - and from her comments about "gouging," it's pretty obvious that she has even less of an understanding than most.




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