Entries Tagged as 'energy'

Newt, Your Ad With Pelosi Wasn’t Dumb

December 5th, 2011 at 11:59 pm 31 Comments

Newt Gingrich recently described his 2008 appearance in a 30-second ad with then-Speaker Nancy Pelosi as “the dumbest single thing I’ve done.” Many conservatives share a negative view of it. Ron Paul, order for instance, search cites the ad as an example of Newt’s “serial hypocrisy.”

Curious, I took a look at the ad, eager to assess its dumbness. Here’s the full transcript:

Pelosi: Hi, I’m Nancy Pelosi, lifelong Democrat and speaker of the House.

Gingrich: And I’m Newt Gingrich, lifelong Republican and I used to be speaker.

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About that Perry Jobs Plan

David Frum October 17th, 2011 at 11:03 am 54 Comments

The governor’s jobs plan is to open more of the US to energy exploration and production.

He promises that such a policy will create 1.2 million new jobs. When I heard this, it seemed to me utterly implausible: the US oil and gas industry employs 2.1 million today, coal under 100,000 – and these at a time of high prices and active production. 50% more jobs on top of that? In a capital-intense industry?

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Want Fewer Wildfires? Burn More Wood.

September 30th, 2011 at 12:47 am 19 Comments

The recent wildfires in Texas have returned forest management to the headlines. In Texas and elsewhere, wildfires have destroyed property, endangered firefighters and polluted the local environment.

While fires are a natural phenomenon, humans can increase their severity or frequency through their own actions. Counterintuitively, one way humans could manage this risk would be to increase the role of wood in our energy supply.

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Christie’s Climate Change Straight Talk

May 27th, 2011 at 5:41 am 31 Comments

Chris Christie has pulled New Jersey out of the Regional Greenhouse Gas Initiative, or “Reggie,” the power plant cap-and-trade program that covers NJ and nine other Northeastern states.

Left-leaning environmental groups are framing Christie’s pullout as a bag of pander candy to delight ideologues for whom climate denialism is a litmus test for any potential GOP presidential candidate.

That’s not what Christie is doing. Christie is not a climate denier. He did not put on a tinfoil hat and rant about scientists plotting world domination. He is not polishing apples for the Koch Brothers and Big Coal. He did not buy a ticket to fly Air Inhofe.

Much of what Christie said about climate change at today’s news conference was only mentioned in passing by the press. His remarks deserve a wider airing.

Such as: “Climate change is real and it’s impacting our state. There’s undeniable data that CO2 levels and other greenhouse gases in our atmosphere are increasing.”

And this: “When you have over 90 percent of the world’s scientists who study this stating that climate change is occurring and humans play a contributing role, it’s time to defer to the experts.”

And this: “We have an obligation to reduce our greenhouse gas emissions.”

Christie concluded that Reggie is not effective for getting the job done. He didn’t conclude that the job is not worth doing.

In fact, given that Pennsylvania is not part of Reggie, Christie fears that clean power plants in New Jersey could be aced out in the regional power market by “dirty Pennsylvania coal plants,” three of which Christie’s administration has sued in federal court for wafting pollution into the Garden State.

The pugnacious governor put emphasis on the word “dirty,” as if pushing back at PA for all the Jersey jokes they tell on the west side of the Delaware River.

There’s more than one way to kill the climate change snake.

An alternative that Christie prefers is to scale up cleaner energy. Last year, he signed bipartisan legislation to support development of 1,000 megawatts of offshore wind energy, including financial assistance for component manufacturers.

The state has sent the Interior Department a list of areas in federal waters off New Jersey that ought to be considered for deepwater wind energy leases. In the Northeast, offshore is where the richest wind energy resources are found.

Christie also has pushed back against the “drill, baby, drill” dogma that is touted as a magical answer for energy security and high fuel prices. He doesn’t want to see any drilling rigs off New Jersey or off the coasts of nearby states, such as Virginia, where a blowout could smear the Jersey Shore with tourist-repelling brown goo.

Reasonable people can debate the right mix of incentives and standards for spurring replacement of dirty energy with cleaner alternatives.

That’s the sort of debate that Republicans and Democrats should have. Christie deserves credit for taking part.

Don’t Pick on Big Oil For Having Big Profits

May 18th, 2011 at 12:07 am 33 Comments

Repeal the so-called subsidies to oil and gas? Ostensibly this is a punitive measure that targets oil companies for the rise in the price of gasoline at the pump, doctor even though most gas stations are independently owned, unhealthy and need to make a profit in their businesses.

First of all, these are not subsidies per se.  Rather they are tax breaks aimed at the entire manufacturing industry — a category that includes oil & gas – and which can be broken down into four components, only one of which is specifically targeted to the industry.  (It also is the least significant.)

  • Domestic manufacturing tax deduction– $1.7 billion.  This is a tax deduction given to every manufacturer in the US as an incentive to keep manufacturing facilities in the United States.
  • Percentage depletion allowance — $1 billion.  Any business can write down the cost of its capital equipment.  Oil in the ground is treated as capital equipment.  Again, all companies get it, not just oil companies.
  • Foreign tax credit– $850 million.  All companies get credit for taxes they pay to other countries, not just oil companies.
  • Intangible drilling costs — $780 million.  As opposed to over the life of an investment, the oil industry is allowed to write-down drilling credits in year one.  This is the only “subsidy” that treats oil companies differently than the rest of the manufacturing world.

So what are we talking about here?  A total annual savings to the federal government of $4.3 billion?  (And this assumes no negative economic impact which is hardly a guarantee.)  This is enough money to run the government for less than ten hours.

If you want to have a debate about all subsidies (tax breaks) then by all means let’s.  But to single out one industry because its product happens to be in demand and as such it had the temerity to make a profit, is ludicrous and irresponsible.  It is targeting people who are in the wrong business as far as politics is concerned because they happen to be in the right business as far as demand for their product goes.  “Big oil” is more than just CEOs in a corner office.  A company like Exxon-Mobile employs 82,000 people worldwide in all capacities from rig workers, to truckers, to geologists, surveyors, mechanics, pilots, schedulers, traders, cooks, pipeline workers, marketers, mid-level managers, etc. These are honest, hardworking people who are providing for their families while supplying world’s energy needs.  Is it a crime that they get paid for their services?  Apparently on Capitol Hill it is.

And yet, those same evil oil companies pay enormous taxes that far outweigh any tax breaks.  Exxon alone paid $8 billion in taxes in just the first quarter.  This is twice as much as the entire industry receives in annual subsidies.  Yes, say our politicians, but look at Exxon’s profits.  No company should be allowed to make $10.5 billion in profits while American drivers are getting squeezed at the pump. Oh? Who exactly decides what is enough?  Chuck Schumer?  Obama’s energy czar? Exxon provides a product that the world needs. One we cannot live without in fact.  And for every dollar they make in gross profits, they pay forty-three cents in taxes.  In fact, the oil & gas industry averages roughly a 9.5% profit margin, placing it down at number 23 in the list of profitable businesses.

In case you’re curious, breweries are number one at 26% profit margin.  Yet I have never seen Pete Coors raising his right hand before a bloviating committee and Lord knows I need beer as much as gasoline!  If big oil is “gouging” us, then other industries are positively robbing us blind.  Industries that average higher profit margins than oil & gas include: applications software (22.7%), cigarettes (17.4%), railroads (12.9%) and wireless communications (11.1%).

A company like Exxon puts up big numbers because it is a very big company valued at roughly $396 billion.  $18 billion is well within expectations of a successful enterprise of such scope and size.  And they do not sit on this cash.  Almost three-fourths of their after-tax profits are poured back into exploration and drilling.  They must constantly be seeking out and delivering more energy for the consumer whose insatiable appetite continues to grow globally.

I find it fascinating that many who rail against “greedy big oil” probably do so on their iPads.  Apple’s market cap is now an astounding $305 billion.  And its profit margin is a whopping 21%: double Exxon’s. Steve Jobs is far more wealthy than Exxon CEO Rex Tillerson.   How come?  Well, one reason is that an Apple iPad 2 currently sells for $729.  Yet its actual cost to make with Chinese workers [who take home a mere $185 per month] is $293, which means a gross margin of 54%.

So who is really the “gouger”?  Exxon or Apple?   Why is multi-billionaire Steven Jobs not in front of Congress explaining himself?  Because, like his oil counterparts, he shouldn’t have to.  He makes a product that people are willing to pay an exorbitant sum relative to its manufacturing cost to possess.  And one can argue that we need iPads a lot less than we need energy.

I notice that coffee futures have come off in the past few weeks yet Starbucks hasn’t reduced the price of a venti skim latte mocha chi-chi foo-foo cinnamon two pump steamer.  Should we have the boys in the van abduct Howard Schulze and drag him before the committee to explain his 9.7% profit margins that partly resulted from hiking prices 25 cents on some drinks when the coffee futures went up, but not giving us back that quarter when the market sold off?  Of course not…

Clearly what is happening in Congress is a shameful attempt at laying the blame for their own inability to cope with the rise of prices across the board, and energy in particular, even though Washington’s policies from a decade of loose money, to sitting idle while we grew ever more dependent on overseas fossil fuels, to cordoning off huge deposits of domestic crude in our own waters and backyards are far more to blame than any CEOs.  It may be politically expedient to finger-point at “big oil” for committing the cardinal sin of doing their jobs well and showing a profit (while ignoring the true ‘gougers’ in the higher profit sectors). But it makes for poor policy, and an astounding waste of taxpayer resources.

Clearly what is happening in Congress is a shameful attempt at laying the blame for their own inability to cope with the rise of prices across the board.

Obama’s Cynical Drilling Drive

May 16th, 2011 at 4:45 pm 20 Comments

What President Obama’s Saturday radio address should have said:

“My fellow Americans. Today, I am directing the Department of the Interior to conduct annual lease sales in the National Petroleum Reserve-Alaska.

“This is a transparently political move. My order will not reduce gasoline prices this year or next year. However, if you believe that my action today will help lower gasoline prices, your misplaced belief might improve my chances for re-election next year. That’s important.

“Just so you know, gasoline prices are a function of crude oil prices, which are set in a worldwide market. Even if additional oil from northern Alaska came on the market this year – which it won’t – it wouldn’t add enough supply to the global market to drive prices down significantly.

“You should also know that oil companies producing new oil from Alaska will not give Americans a discount because I was kind enough to order up more production in America. They will sell that oil at the world price. That world price will largely determine the price of gasoline that you pay. If rising Chinese demand causes the world oil price to rise, gasoline prices will rise also. That’s just tough cookies, folks.

“My Republican friends in Congress will probably dismiss my transparently political move as too little, too late. That’s OK, but I would ask them to acknowledge that they too are trying to hoodwink the voters with glib statements that more domestic drilling is an easy answer to high gasoline prices.

“Oil dependence is a strategic liability. As long as we’re heavily dependent on oil, our economy will be vulnerable to price spikes and our security will be at risk. However, Congress and I are not likely to do much about this until after the next election, or after the  following election. Hey, that’s just politics.

“Meanwhile, I hope you have great vacation plans for summer. Better budget more money to keep your gas tank filled. There is nothing that I or Congress can do this year to help you. Thanks for listening.”

FroshUpdate: West for the West Wing?

May 16th, 2011 at 7:38 am Comments Off

Freshmen have been pushing the energy bills in the American Energy Initiative, but conservative economists tell FrumForum it will have little effect on gas prices in the next year. Meanwhile, freshman Rep. Martha Roby calls rising gas prices “the greatest threat to our economy”.

Rick Berg is expected to announce for Senate this evening, and Rep. Chuck Fleishmann announces a new award in his district for businesspeople. This is FroshUpdate for May 16, 2011.

INCYMI: FrumForum – Conservative economists pan the American Energy Initiative – H.R. 1229, 1230 and 1231 – saying that the three bills will not reduce gas prices in the foreseeable future, and not at least for the next year. “In general it is very difficult to have policies to significantly increase oil production within one year,” concurred Dr. David Kreutzer, a Research Fellow in Energy Economics at the Heritage Foundation. There’s more hope in the longer term, however, says Cato’s Peter Van Doren. http://bit.ly/kFpD5A

WEST FOR THE WEST WING? An increasing number of Tea Partiers and conservative Republicans want Rep. Allen West to run for president. The Internet is already filled with a number of sites like “Allen West For President 2012″, an “Allen West for President” Facebook page and “West for the West Wing 2012,” etc. http://bit.ly/iNU0qT

FLEISCHMANN LAUNCHES AWARD: Rep. Chuck Fleischmann will announce the kickoff of a new award for local businessmen, the Economic Excellence Award. The announcement will take place on Tuesday. “The free-enterprise system has helped make this country the greatest nation the world has ever known. It is those people who risk everything to start their own businesses and pursue their dreams that drive our economy. I want to recognize those people, and spotlight the great business environment we have in the 3rd District of Tennessee,” Fleischmann said. http://bit.ly/jVhDOk

BERG ANNOUNCES TONIGHT: Rep. Rick Berg is expected to announce his run for Senate on Monday night via Facebook and an e-mail to supporters. Following his announcement will be a state-wide tour.  http://politi.co/lgGy4L

FroshUpdate is a regular look at how the freshman class is making news. Add us on twitter @freshmenFF, or tell others to join our mailing list by emailing frosh@frumforum.com with ’subscribe’ in the subject line.

VIDEO: Rep. Marthy Roby conducted the GOP address on Saturday, emphasizing that it’s time for Washington to get serious about the challenges facing the country and to expand domestic energy production.”To do nothing [is] the greatest threat to our economy,” she said. http://wapo.st/mvzEbo

IN CASE YOU WEREN’T SURE: VIDEO: Allen West about Obama: “I can’t stand the guy.” http://bit.ly/jzo52X

GINGRICH AGAINST RYAN PLAN: On Meet the Press, Gingrich calls the plan “right-wing social engineering,” which he says is “no more desirable than left-wing social engineering”.  http://wapo.st/kRoJJQ

GOP Energy Bills Won’t Save You at the Pump

May 13th, 2011 at 2:07 pm 29 Comments

Even as Republican Congressmen applauded the passage of three energy bills they said would address skyrocketing gas prices, conservative economists told FrumForum that the legislation – even if it was signed into law – would not have much impact on gas prices within the next year.

Over the last two weeks the House has passed three pieces of legislation (known as the ‘American Energy Initiative’) that attempt to address energy policy and rising gas prices:

  • H.R. 1229, the ‘Putting the Gulf of Mexico Back to Work Act’, expedites the process of the Dept. of Interior being required to issue Gulf drilling permits.
  • H.R. 1230, the ‘Restarting American Offshore Leasing Now Act’, would require the administration to conduct offshore lease sales in the Gulf and near Virginia.
  • H.R. 1231, the ‘Reversing President Obama’s Offshore Moratorium Act’, would lift Obama’s ban on offshore drilling and require the administration to establish a five-year offshore lease plan in productive areas with the goal of producing three million barrels of oil a day by 2027.

Freshmen members of Congress greeted the passage of these bills as job creators that would also reduce the price of gasoline. The Putting the Gulf of Mexico Back to Work Act “not only would put thousands of Americans back to work, it would increase our production of oil here at home and lower the cost of gas,” noted Rep. Paul Gosar (AZ-01) in support of the bill.

“By speeding up the drilling permitting process and increasing domestic energy production, we will… help address the concerns of rising gas prices,” said Rep. Alan Nunnelee (MS-01) after the bill’s passage.

“We need to be doing everything in our power to keep energy prices low, especially during these difficult economic times,” added Rep. Scott Desjarlais (TN-04) after the Restarting American Offshore Leasing Now Act passed.

Indeed, in their statements, first supporting the bills and then later touting its passage, many congressmen cited the rising cost of gasoline and the pressures high summer prices would have on families.

But conservative economists were not optimistic about a short run impact on gasoline prices. When asked by FrumForum whether the passage of these three bills would have any discernible impact on the price of gas in the next year, we received a resounding ‘no’ in reply.

“There’s very little that the President and Congress can do to substantially lower the price of gas over the short term, because the price of gas is largely contingent on the price of oil, which is traded on a world market. Even if we increase domestic production, we do not have the ability to seriously shift the world price, and our own oil will sell at that same price,” explained Dr. Kenneth Green, a resident scholar at the American Enterprise Institute.

“In general it is very difficult to have policies to significantly increase oil production within one year,” concurred Dr. David Kreutzer, a Research Fellow in Energy Economics at the Heritage Foundation.

This does not make the ‘American Energy Initiative’ a bad series of legislation, he argued.

“If the one-year impact on price is the only measure of policy success, there will never be a policy to significantly increase oil production.  Unfortunately, this short-run focus has been a dominant factor in energy policy for the past decade and is one of the reasons we do not currently have more production from Alaskan lands and waters as well as from the Lower 48 and the outer continental shelf,” said Kreutzer.

Cato Senior Fellow Peter Van Doren had a technical analysis for the longer-term impact of the legislation. “In the long run if these actions increased total supply by 2 million barrels a day…this implies a 3.9% reduction in global crude oil prices,” said van Doren, citing estimates from academic articles. “But a price decline is going to increase demand somewhat – these are dynamic markets, remember – and once we take that into account… the price decline drops to 2.4%.  So if oil would otherwise have sold for $100 per barrel, it would now sell for $97.60 per barrel.”

The American Enterprise Institute’s Kenneth Green did have at least one suggestion that would immediately decrease the price of gasoline: cut the gasoline tax. “One thing they could do would be to declare a gas tax holiday,” said Green, which would promptly reduce the cost of gas.

However, even this has caveats. “They’d have to make up the shortfall from somewhere else to maintain transportation infrastructure. They could do that by switching to something like tolling, or VMT-fees (fees based on miles-traveled), but the money would have to come from somewhere,” said Green.

Therefore, if Congress were serious about immediate relief at the pumps, it seems as if the solution lies in calling for a gasoline tax holiday.

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The Dems’ Big Oil Tax Break Trap

May 11th, 2011 at 3:22 am 26 Comments

Senate Democrats are circulating a bill to cinch up oil company tax loopholes and use the resulting revenue to pay down the deficit.

The bill would take aim at the “Big 5″ – BP, Chevron, Shell, Exxon, and ConocoPhillips – by tinkering with foreign tax credits, dumping manufacturing and intangible drilling expense deductions, terminating the percentage depletion allowance, ending deepwater royalty relief, and requiring the Big 5 to capitalize costs for injectants used to squeeze more oil out of wells.

Several observations are in order.

First, reducing the deficit is not the goal of this bill. Gotcha politics is. Harry Reid et. al. have brewed up a cow splat for dogmatically anti-tax Republicans to step into, so they can be portrayed in next year’s fun-filled TV ads as coddling Big Oil and voting against deficit reduction.

Second, some Republicans seem willing to oblige, as they dutifully repeat shopworn talking points that putting the arm on oil companies for more tax revenues inevitably would discourage drilling and drive up gas prices.

In the world outside talk show sound bites, however, the impact of ending oil industry tax preferences likely would be small potatoes. Price, not tax, is the dominant consideration guiding exploration and production decisions.

In 2009 Senate testimony, a Resources for the Future research fellow estimated that eliminating oil industry tax preferences would raise fuel costs for the average American by $1.40 per year – approximately equivalent to one cup of really bad coffee – and cause domestic oil production to crash by a whopping 0.36 percent.

Third, the energy subsidies argument too often devolves into a tiresome ritual of the pot commenting on the kettle’s color choices. Democrats moan about fossil fuel tax dodges, Republicans whine about handouts for renewables, and neither side indulges the voters with an intelligent discussion about what the federal government’s energy policy should be and how taxes and other fiscal tools could best be employed to carry it out.

In truth, all forms of energy are subsidized to some degree. Not one energy resource – oil, gas, coal, nuclear, renewables, or energy efficiency – exists in an Ayn Rand fantasyland, free of federal favors, be they tax preferences, R&D support, loan guarantees, insurance, or other assorted forms of largesse.

That’s not necessarily bad. The trick is to identify the role that tax preferences and other forms of subsidy should play, if any, in a country that needs to tighten its belt, rationalize the tax code, and secure clean, reliable, and affordable energy. That discussion, not gotcha games, should be what we’re seeing from Congress.

GOP Freshmen: Job Numbers Still Too Weak

May 7th, 2011 at 6:50 am 36 Comments

Friday’s unemployment numbers were greeted almost unanimously by discontentment from freshmen Republican Congressmen over the direction of the federal government, buy viagra especially with regard to the Obama administration’s policies on jobs and energy. In turn, the solutions they’ve proposed to boost the economy range from drastic and national to incremental and local.

“We need leadership in Washington, D.C. and President Obama has only provided failed policies that led to these high unemployment numbers, a sluggish recovery, and higher energy costs,” said Congressman Larry Bucshon (IN-08) in a statement Friday.

“It is welcome news that many new jobs were added,” said Rep. Tim Huelskamp (KS-01), taking a slightly different approach. “But, we are still in a situation where too many people remain out of work. And the regulation and budget policies of the Obama administration are only making matters worse.  Employers are working hard just to survive and keep the employees they have now.”

Many members also cited high energy and gasoline prices as causing additional distress for individuals and families in their area. “All across the Eleventh District, Illinois families are sapped with high energy costs that directly impact them at the pump and create consumer uncertainty which translates to less confidence in the markets,” said Rep. Adam Kinzinger (IL-11).

Rep. Ben Quayle (AZ-03) said that Republicans are making real efforts to combat the pressures that high gasoline prices are having on constituents, especially with regards to pushing for increased domestic drilling.

“[R]ising gasoline prices threaten the limited progress we’ve made in the past few months. That’s why the Republican House on Thursday passed H.R. 1230, the Restarting American Offshore Leasing Now Act, which requires the Secretary of the Interior to restart domestic energy projects either delayed or canceled by the Obama Administration,” said Quayle.

“As these prices have continued to rise, I along with my House colleagues have been pleading with President Obama to end the drilling moratorium and allow this home-grown energy to enter the market and drive the price down,” echoed Rep. Renee Ellmers (NC-02).

Republican freshmen have also been promoting several ideas which they hope will boost economic recovery. For example, Jeff Denham (CA-19) hoped to recoup billions of taxpayer dollars by introducing a bill that would expedite the process in which federal property is sold off.

This past week Rep. Tom Marino (PA-10) introduced legislation that would freeze most federal hiring, with only limited exceptions like national security concerns.

Freshman Rep. Dennis Ross (FL-12) told FrumForum that while a federal hiring freeze was “an excellent idea… what is truly needed is a reduction in the federal workforce.” The federal government shed a net 2,000 jobs last month.

Ross suggested more drastic changes to boost the economy, telling FrumForum that growth would be boosted by “reducing the corporate tax rate to below European rates”, repealing Obamacare, eliminating the Capital Gains Tax, abolishing the income tax and the IRS, and eliminating most of the funding for EPA operations and most of the programs in the Departments of Labor and Education.

On the other hand, another freshman, Rep. Frank Guinta (NH-01), is focusing on smaller, localized responses – preferring to help organize two job fairs as part of his ‘Getting Granite Staters Back to Work’ initiative.

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