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Author Topic: Addressing the Rise of Energy Prices
Daruma28
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Bush admin has got a few proposals now to address the rising gas prices...

Bush seeks refineries at former defense bases, help for nuclear industry

* We haven't had an oil refinery built anywhere in this country in almost 30 years. Even if Saudi Arabia gave us oil at $.10 a barrell, the price would still be pretty high because we don't have the refinery capacity for supply to meet demand.

* People opposed to building Nuclear Facilities point to 3-mile Island and Chernobyl as reasons why we should not even try to go down this road. Two answers to this argument - 1) We can build them in barren, unpopulated areas of the country, like Death Valley. 2) The technology and safeguards have been significantly improved since both of those accidents...and just look at France: 77% of France's electricity comes from the country's 58 nuclear reactors. Haven't heard about any incidents over there...

* We could use some serious standardization in the blends of petroleum currently mandated by environmental regulations in various regions throughout the country. Right now there is 55 different blends, many of them required for a specific locale...so when demand for one blend increases (like auto gas in during the summer driving season), the regulations prohibit the refineries from cutting back on blends not as in high demand to produce the blend that are. Any attempts to change this are instantly met with the political hyperbole of "de-regulation = wanting to pollute the environment."

The green environmental movement is opposed to building any new refineries, any new nuclear power plants, or de-regulating the refinery industry, as well as drilling in ANWR - and the Democrat party is lockstep with the environmentalist agenda, and any one that wants to address the rising price by addressing any of these particular issues is immediately labelled as being "for pollution and for big oil profits at the expense of the environment."

If you consistently vote Democrat at all levels and support the environmnetal movements platform wholeheartedly, please don't whine about the price of gas at the pump or our relieance on imported oil. All those things are ineveitable result of the environmental movements policies. And automobile gas only accounts for less than half of all petroleum consumption. Home heating during the winter consumes more gas than all of the world's SUV's combined.

So the next time you pull up to the pump and blanch at the $2.25 a gallon for 87 octane, SMILE. You should be enthusiastic...afterall, you are paying for your environmental policies you want to have enacted. [Smile]

[ April 29, 2005, 04:47 PM: Message edited by: Daruma28 ]

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Mike_W
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What if I support expansion of nuclear energy, AND have strong feelings about environmental protection?

As for your final paragraph, get real. While the things you mention do contribute to energy prices, they are incremental (for the record, seasonal swings of refineries are primarily done to adjust for the demand of home heating oil, rather than grade mix). Global supply is falling behind global demand (with some trading and speculation also adding to the mix). It really is that simple. Gasoline at $55/bbl is going to cost a whole lot more than it would at $25/bbl.

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Sancselfieme
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I think nuclear is also the way to go. Accidents were few and far in between, and non-existant now.
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Daruma28
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quote:
Originally posted by Mike_W:
What if I support expansion of nuclear energy, AND have strong feelings about environmental protection?

Ah. But you mistake me for somebody that is against environmental protection. I just don't see how drilling in the godforsaken frozen desert in a small section of ANWR hardly amounts to environmental holocaust....or building more refineries either.

Why have the environmental movement consistently opposed the contruction of refineries for the past few decades? A refinery in a desert area of Texas is not like we are clearcutting Muir Woods for oil profits......

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The Drake
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Those folks won't be happy till we're paying European prices. Frowning, and saying, "What? Only $2.25? We need to top $5 before we're as ecofriendly as our Europals.

http://www.aaireland.ie/petrolprices/default.asp

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Mike_W
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Well, that would unleash the power of the market to drive efficiency and alternatives, now wouldn't it.

Daruma, no, I don't mistake you for anything. I just take exception for your attempt to blame current energy prices on those with environmentalist leanings.

Refineries are a nasty, nasty thing. Perhaps they are necessary, but I can't find fault with those that would oppose them.

ANWR is no holocaust, but it sets a horrible precident.

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javelin
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I think that those people who have opposed nuclear energy and building new refineries DO have some blame to shoulder here, Mike.
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Mike_W
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If you really want to be constructive, how about this;

Invest now in nuclear energy as a stopgap measure

Stop subsidizing, directly or indirectly, the petroleum business

Consider some additional taxes on petroleum based fuels in order to a) reduce (or slow the increase of) consumption, and to funnel some of the dollars into basic energy research.

If you want a couple more refineries, I have no objection, but not in my back yard :-). I also question the business case for new refinery construction if, in fact, oil consumption will level off or start to fall.

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Daruma28
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quote:
Originally posted by Mike_W:
Daruma, no, I don't mistake you for anything. I just take exception for your attempt to blame current energy prices on those with environmentalist leanings.

There is quite a difference between environmentalist leanings, of which I have quite a few of my own, and environmentalist fanatics.

Like I said, an oil refinery in the Nevade or Texas desert is a reasonable trade off in my mind...but to much of the activist environmental movement, there is no compromise. It is largely due to their efforts that we find our selves with inadequate production capacity to meet demand.

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Mike_W
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Yes.." those people". Perhaps a narrower brush is in order.

Then again, I reject the idea that refinery capacity is a significant driver of the upswing in prices. And, truthfully, the business case for nuclear did not make sense until recently.

Call me crazy, but I'm sensing some winds of pragmatic change in the environmental movement. The days of tiresome radicals may be coming to an end. The greenhouse gas issue is tailor made to drive many environmentalists towards the nuclear option.

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javelin
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quote:
The greenhouse gas issue is tailor made to drive many environmentalists towards the nuclear option.
No more filibusters? [Wink]
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Daruma28
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lol, jav [Big Grin]
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jefferson101
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quote:
Originally posted by The Drake:
Those folks won't be happy till we're paying European prices. Frowning, and saying, "What? Only $2.25? We need to top $5 before we're as ecofriendly as our Europals.

http://www.aaireland.ie/petrolprices/default.asp

The question could be asked. Are the highways in Europe any less congested because of the high fuel prices?

I think not.

The only reason I hear anyone in Britan giving for using public transportation is because the roads are so packed that the trains are quicker.

What that tells me is that fuel prices, in and of themselves, are not going to decrease motor vehicle usage. People just get a more fuel efficient vehicle and keep on keeping on.

What it's going to take is cheap and efficient public transportation. And most of what anyone has right now is neither cheap or efficient.

Alternate fuels would be nice, too.

But regardless, I'm predicting a substantial drop in oil prices by September. We have a bubble right now, because there is a lot of speculation going on. When demand doesn't keep up with supply, which it hasn't for the last couple of months, the bloom will come off the rose and the price will come down.

For a while.

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Mike_W
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"People just get a more fuel efficient vehicle and keep on keeping on."

Which is kind of the point.

Truth is, North Americans will never give up their cars for public transit. At best, we can reduce the per capita consumption through efficiency and, eventually, substitution of a different source of energy.

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JohnLocke
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Oh Gawd, maybe we can guilt the Democrats into Republicans if we get them to see that environmentalism is the CAUSE of high fuel prices.

Get real indeed.

We aren't building more refineries because the oil companies know they won't be needed.

Your boss gave the reason for our situation just last night, Daruma: our nation's lack of an energy policy coupled with the corresponding rate of demand growth which has outpaced growth in production capacity by a magnitude of 40 times.

News flash: Oil prices are determined by how much oil we decide to consume.

Not even Bush blamed the enviornmentalists.

What's astonishing to me is that no one sees the obvious reasons for building Oil Refineries on military property.

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Daruma28
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That's right. The moratorium on building refineries, nuclear power plants and exploring and developing our own domestic oil sources has nothing to do with the environmental movement, and the environmental movement has not had significant influence in the Democrat party..... [Roll Eyes]
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WarrsawPact
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Considering that the price of gas has skyrocketed SO much, it won't be long before TDP is more cost-effective. If crude gets up to $80/barrel, drilled oil will be a thing of the past.

21% of the price of regular gasoline is directly from federal and state taxes. Compare that with 51% of the cost being drawn from the actual cost of crude oil and 19% for refining (more in environmentally-friendly states like CA).
[The rest comes from distribution and marketing and non-crude profits].

Minus taxes, the cost of your gas would drop from $2.08 to $1.64 a gallon. Do the math on your monthly gas costs.
So yeah, the excise tax on gasoline, largely pushed by environmentalists, IS in great part to blame for high oil prices -- though obviously the supply and demand on crude oil has a part to play now that the OPEC cartel has lost its grip on prices.
Same blame goes for a number of regulations imposed by the environmenalist lobbyists so that gas would be a little cleaner during peak use periods of the year.

Don't get me wrong -- I love clean air. But we need to be realistic about where the price of gas comes from.

[ April 29, 2005, 06:38 PM: Message edited by: WarrsawPact ]

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Dagonee
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Ok, if we could make all our electricity from non-petroleum sources (nuclear, coal, hydro, etc.) and moved everyone to all electric heating, how much would that reduce our oil cosumption if nothing else increased it?

(Yes, I know that's impractical - it's just for my elucidation [Smile] )

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Pelegius
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America, the greedy. There was a survey taken in the 90's about the enviorment and gas prices. The majority of citizens in all but one devaloped country said that they would be willing to pay a little bit extra in gas prices if they knew that it would help to protect the enviorment. The exception: the U.S. I only wish that the current gas prices funded enviormental programs, not the concubine of some Suadi prince. Yes, use nuclear and hydro-elcetric, the later is especialy good. What about geo-thermal, thats how Iceland produces electricity. I know that this isn't practicle everywhere in the U.S., but it could probably power Hawaii and posibly Montana and Wyoming as well.
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Daruma28
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quote:
Originally posted by Pelegius:
America, the greedy.

Yes, America the greedy.

America the greedy that has donated money to malyasia/Indonesia in the wake of the tsunami...

Total of PRIVATE donations as of April 28, 2005: $1,409,925,999

That kind of charity is only possible BECAUSE we are a developed nation whose populace can genearate enough wealth to be able to donate to those in the wake of such a disaster.

The greedy oil consumption that fueled our air craft carriers, helicopters and planes that immediately deployed to rush fresh water, food and medical gear and personnel to assist the survivors.

The greedy oil consumption that makes it possible to produce all the plastics so vital for sterilization of medical supplies, and increasing the storage and delivery of food capacity through plastics.

The greedy oil consumption that....well never mind. It's much easier to just look at raw statistics and jump to conclusions that fit your viewpoint.

Bad America!!!! Curse the evil Big Oil Industry!!!!

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Mike_W
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WP,
"So yeah, the excise tax on gasoline, largely pushed by environmentalists, IS in great part to blame for high oil prices"

No. No. No. No. No. Read the sentence. It's nonsensical. It is fair to say that a significant portion of the price of retail gasoline is tax. This may be good or bad depending on how you feel about sources of funding for road infrastructure, and the cost of externalities of oil consumption. However, taxes on gasoline have NOTHING to do with the recent increase in world oil prices and the direct fallout on gasoline prices.

The taxes haven't changed, the price of oil has.

Which you recognize; "-- though obviously the supply and demand on crude oil has a part to play now that the OPEC cartel has lost its grip on prices"

And, for Daruma, sure, environmentalists have opposed all kinds of things. Some for the greater good, and some more questionable. But, the bottom line is that not a lot of nukes were gonna get built when it was cheaper to make electricity by burning fossil fuels. We capitalists don't invest in things that don't make money. And, no amount of exploration or drilling was going to make the US a "price maker" in world oil markets.

The oil industry's not evil. I've worked in it. Nice guys - provide something we all want. But, the oil industry is in the business of making money, not looking after the environment or looking at long term energy security. For that, our best and only tool is government, like it or not.

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WarrsawPact
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Mike - Taxes are STILL 21% of the price of gasoline on the street. That they represented an even larger percentage of the cost before does NOT negate my sentence.

I said they are in large part (I think 21% is pretty significant, don't you? Gas after taxes is 26.6% higher than gas before taxes) to blame for high oil prices.
I do NOT say that they are responsible for the rise in gas prices. Where did I ever say that? Tell me.

So take your "No. No. No. No. No. Read the sentence. It's nonsensical." and smoke it.

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Mike_W
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I rarely smoke much of anything, and not tonight thank you very much.

Regardless of your protestation, the sentence is still nonsensical. The taxes, on which you blame the high price of oil, apply to gasoline, not oil. And, no-one thought GASOLINE prices high back in the day when oil was less than $30/bbl (and the taxes were the same as today). The change from low to high has been brought about solely by the global market for crude.

So, I apologize if I misread your intent, but perhaps you can see how easy that was given the above, and the nature of the thread (which is about the increase in price of energy, not it's absolute value).


Cheers,

Mike

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WarrsawPact
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I started thinking gas prices were high when 99 cents/gallon looked great.

And I do believe the excise taxes have been raised all over the place since that time.

I mean, look, if taxes represent 21% of the price of gasoline today, did they represent 42% back when gas was half the price? Obviously taxes have been raised.

My sentence makes plenty of sense. If those taxes were all repealed tomorrow, very few people would still think the price of gas was too high.

Gas here in CA has skyrocketed more than the rise of crude would do alone. As the California Energy Commission notes,
quote:
For every one dollar increase of the cost of a barrel of crude oil, there is an average increase of about 2.5-cents per gallon of gasoline. So, a $10 increase per barrel in crude prices means a 25-cent increase at the pump.
Since two or three years ago, when regular gas was ~$1.50 where I live, has the price of a barrel of gas risen over $40 to make up for the fact that I just paid $2.57/gallon yesterday?

Hmm, nope.

Maybe back in 1998. But not 2002-03.

[ April 29, 2005, 09:03 PM: Message edited by: WarrsawPact ]

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WarrsawPact
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http://www.taxfoundation.org/variousrates.html

Also see links to previous years. You can see how gasoline excise tax rates have changed. They trend up per capita US citizen. And that doesn't count on taxes at other points of transfer, like on refining oil.

[ April 29, 2005, 09:08 PM: Message edited by: WarrsawPact ]

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Mike_W
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Your intent makes sense, but the sentence as written did not.

I have no idea what has happed to US gas taxes in the last three years. But, if you want to blame taxes for that increase from 1.50 to 2.57 (with crude alone driving you to say, 2.25 based on your numbers) best go find a source. A percentage based rather than per gallon tax could be a big part of it, but I don't know the US tax regime.

Remember also that the price of refining goes up with energy costs. You have to burn fuel to make fuel.

Refinery constraints, as Daruma pointed out could make up for the rest of it, as could a little bit of price gouging by retail marketers (officially, never happens, but the big retailers do their best to avoid price wars and keep profitable while keeping on the legal side of anti collusion laws).

Having said all that, one might still argue that US fuel taxes are too low, given the direct and indirect subsidies given the oil industry, and negative environmental externalities related to oil production and consumption.

A little more tax and maybe your beloved TDP would become competitive.

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Digger
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Just to put some numbers into the discussion, 1 bbl (petroleum) = 42 US gal (liquid). So, in terms of raw materials, every $1/bbl increase in crude translates into 2.4 cents per gallon ($1/bbl / 42 bbl/gal). That's where WP's numbers come from.

If gas was about $1.30 per gallon when oil was roughly $30/bbl (as it was here in GA), and taxes being a fixed amount per gallon of gas, you would expect the price increase to roughly correspond to the increase in raw material price.

For the $20 increase/bbl of crude, there should be an increase of about 48 cents/gallon. I just paid $2.13 per gallon yesterday, which is an increase of 83 cents/gallon from the $30/bbl price - almost twice the expected amount. Obviously, there's more at play than just the price of crude.

My first guess would be that two factors are at work:

1. It takes energy to refine gasoline and energy prices have been rising across the board over the last couple of years. Some of the increase in gas price can likely be attributed to higher costs in the refining process.

2. The market is perceiving a limited supply and is responding with a higher price of gasoline. This jives as oil companies have been reporting higher profit margins for the last couple of years. The extra profit can only be realized if revenue increases are outstripping increased raw materials and production costs.

So, some of the increase is 'artificial' in the sense that it is a function of market psychology instead of real increases in the cost of production.

Finally, I don't have a dog in this fight. My comments are intended to be neutral and only address the discrepancies from the expected and real increases in gas prices as relates to the changes in the price of crude.

Please, carry on.

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Mike_W
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Well, according to your source, California excise tax on gasoline was $.18/gallon in 1999 and remained unchanged in 2004. So, I'm not sure you've found your smoking gun.

NOt sure where you get your "per capita" numbers, but those could be affected by both increased tax rates, or increased consumption of the taxable goods.

While many environmentalists do support higher fuel taxes (for the externality reasons I've cited), keep in mind that they are also just a nice, easy to collect way of raising revenue. Politicians have been known to do such things for all kinds of reasons.

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WarrsawPact
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... none of which comforts a neolibertarian.

California is pretty unique in that we don't just have a direct excise tax, but also we tax BOTH our own state motor fuel tax and the federal motor fuel tax.
We have a total of 14 cents of extra taxes on gas per gallon in addition to our direct excise tax.

And that was as of 2002.

We're behind only Hawaii and Nevada in total state taxes on gasoline.

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Mike_W
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I don't know about neolibertarians, but one who believed in the efficiency of the market would want the full cost of fuel to be paid by the consumer, to discourage overconsumption, and so that alternatives would be able to compete fairly.
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WarrsawPact
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Who determines "the full cost"? You? The EPA? Greenpeace?
Alternatives can compete fairly when nobody's giving them a fat subsidy that's coming out of my damned pocketbook anyway.

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KnightEnder
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There is a big difference between an enviromental fanactic and someone that consistently votes democratic. I think we need more nuclear energy and more refineries and we should drill in Alaska. And I think it is well known that I vote democrat. I simply would rather pay more for gas than have Bush in office. Unfortunately it doesn't seem to be an either or.

However, I must say it is very ballsy of Daruma to suggest that the current gas prices are the Democrats fault with Bush and the GOP firmly in power for the last five years.

KE

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WarrsawPact
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Mike - I want to apologize for the "smoke it" comment. Your comment angered me, but what I said was unduly disrespectful. I'm sincerely sorry.

That said, I don't understand -- how exactly does regulation improve the efficiency and natural competition of an otherwise free market? It seems to me that regulation in this context is aimed at artificial behavior modification.

KE - Though I mostly agree, haven't the Dems been on the rise at more local levels of government, including state governments? I know that here in CA, the state taxes on gasoline are even greater than federal taxes.

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KnightEnder
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I don't know, WP. What I do know is that taxes are not the reason for the skyrocketing high oil prices. And even if that is true at the local lever, local politics can hardly be blamed for the nationwide gas price increase. Even if blaming the GOP is unfair, it is definitely not solely the Democrats fault, as Daruma claimed.

KE

[ April 30, 2005, 02:33 AM: Message edited by: KnightEnder ]

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WarrsawPact
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Obviously the rise in crude has a profound effect. Blaming either party for that, especially solely, is shortsighted and hasty.

But let's give credit where credit is due on taxes -- it is certainly not Republicans passing most environmentalist excise taxes, is it?

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No, but that is not the issue, is it?

KE

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No, I suppose the issue is the *rise* of energy prices. Will anyone address the TDP issue?

Drilled oil simply will not be able to compete if it rises another 50% or so.

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If that is true, then I am against it. It is ridiculous to protect our enviroment at the cost of our ability to feed our children. That would be the difference between a democrat and a enviromental fanatic, IMO. Sorry if I can't give you the debate you were looking for, WP. [Smile]

KE

[ April 30, 2005, 03:59 AM: Message edited by: KnightEnder ]

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If we go along with nuclear, will you people lay up on petroleum? Cause I'm like Mike_W - I'm in favor of nuclear power. But the petroleum companies won't let that happen, now will they?
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WP,
Don't worry about the "smoke it" comment. I probably could have used kinder words than "nonsensical".

We've talked about this, but regulation makes a market more efficient when there are imperfections in the functioning of the market - for example, when externalities (costs that are not paid) exist in the production, distribution, and consumption of some good. In these cases, the good is priced below a level that would result in an efficient allocation of resources, and, therefore, below a level that would allow alternatives to be substituted.

Yes, determining and administering that cost is problematic. But, some adjustment is better than none. I'd argue that US fuel prices are WELL below a fair valuation for oil industry externalities.

The oil industry and infrastructure is also quite heavily subsidized. Again, TDP would compete sooner if this were not so.

Finally, I'll make one more argument for fuel taxes (other than the obvious one that they're the most efficient way to pay for transportation infrastructure). Markets are very good at allocating resources in the short term. But, they are notoriously short sighted. High discount factors mean that you almost always invest in what pays RIGHT NOW, and worry about the future then. However, given the span of human lifetimes, and the nature of states and cultures, it may very well be prudent for a state to artificially increase the cost of some could some good that we know will become scares (and therefore expensive) in order to accelerate both modifications in consumer behaviour and the development of substitutes. I wouldn't expect a neolibertarin to go for that, unless you could think of reducing oil dependence as a security issue.

On the republicans not passing taxes thing; well, maybe they should , instead of borrowing massively and laying debt servicing costs at the feet of their children. We’ve been there in Canada, and I don’t recommend it.

Ricky,
I don’t think the oil industry is a big reason we don’t have more nuclear power. Some of the blame can be laid at the feet of the public, and some irrational fears driven by some environmentalists. But, mostly, nuclear power has not been close to competitive cost wise with other sources of electricity. I'm not even sure it is now (but being a believer in technology, I figure we have to get there some time).

Cheers all,

Mike

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