Where do we find oil?

People criticized the last Republican Congress as a do nothing congress. The current Democrat Congress has done even less.

Article Dump

Here are a few articles I liked:

This is just good satire.

Here are two articles from Thomas Sowell, one of my favorite writers. The first relates to a police shooting trial from New York. Several officers had killed an unarmed man driving a car. All I heard in the news about the case was Al Sharpton was angry that the officers were found not guilty of murder. Only after reading this Sowell piece did I learn that the dude was trying to run down a cop.

The second Sowell piece is about the symbolism behind racial quotas. Administrations like having different color skins because it makes them feel good. Nevermind the fact that many students are ill-served by being admitted to schools they are not otherwise qualified for. I am a fairly smart guy, but I would probably not have that great an experience at Harvard.

This last article is from the Czech president, Vaclav Klaus, who would like to debate Al Gore on global warming. Klaus is an economist. Gore so far has been unwilling to look at the merits of any argument that discredits his Nobel Prize or Academy Award (I'm not sure what meaningless award Gore actually got for Inconvenient Truth). Klaus compares climate alarmists the the Communists who had run Czechoslovakia. Let's face it, calling someone a Communist is my favorite insult.

I Laughed At This

More details here. I know this is a little late, but happy tax freedom day.

(H/t NRO)

World Upside Down.. Again

Let me get this straight. Obama wants to talk with Chavez, Castro, Il, and Ahmadinejad, but doesn't want to trade with Colombia and South Korea. Right. We talk to the bad guys but don't trade with the good guys.

Today's politicians always get things upside down. They protect free speech around a stripper pole (forgive the tawdry example, but it fits), but stifle political free speech near election season with their campaign finance laws. What kind of speech deserves protecting!? What was the First amendment written to protect?

Bring Back King Dollar

Another friend has entered the blogosphere. I had a long and thorough answer to this post and it never showed up. Instead I will try to recreate my thoughts here.

He is absolutely right that the weakness of the dollar is related to the increase in the price of oil. Whichever came first, the weak dollar and high commodity prices (don't forget the more critical prices of wheat, corn, and rice) are related. All these other commodities are priced in dollars, so as the dollar weakens, all the prices increase.

I will have to disagree about the cause of the fall of the dollar. Iraq has nothing to do with it. Congress has been spending like drunken idiots, but the largest growth of spending is entitlement spending. There is no excuse for that, especially under a Republican Congress. There is no home for conservatives in either party right now. (As a side note, several Democrats have won special House elections by running CONSERVATIVE candidates. Guess what? Conservatism wins.) The Republicans probably deserve the trouncing they will receive in November for diluting their brand of fiscal responsibility.

Another cause of the fall of the dollar is the household debt. (Surprise, the prophets are right about something else. We should live within our means.) The household debt is mirrored by the trade deficit. If we want to improve the trade deficit, we should encourage more savings and investment. Sorry to break it to the liberal-left, but that means lower capital gains taxes. Improving the trade deficit will strengthen the dollar. Otherwise, the dollar will continue to weaken to approach a trade equilibrium.

Here's how that works: dollar decreases, American goods become cheaper internationally. Cheaper American goods sell more. Exports increase. Weak dollar buys less imports. Imports decrease. Trade deficit balances. I like the other solution more. We need high investment to increase US productivity so we increase output for higher salaries. Thus, household income increases and so do exports.

The key to all of this is an economy that is not too hot and not too cold. When the economy is just right, it is called Goldilocks. Too much growth will result in inflation. Too little growth, on the other hand, yields unemployment. Other than after Gulf War I and the dot-com bust and 9/11, the US economy has been growing at the perfect rate. Those two recessions lasted about 9 months each. The recent slow down has resulted in media stories of soup-line-America.

Much to their chagrin, the recent quarter showed positive growth. It was about 0.6%, but it was still growth. Shouldn't the economy actually shrink in a recession? All the economic indicators seem to say that the economy is about to get back to Goldilocks status. Of course Congress could wreck this by hiking taxes. (Especially if they double the price of fuel. The "solutions" to global warming are the same as tax increases; they just hit the poor most. Global warming nuts love high fuel prices.)

Another threat to the current economy is high tariffs. Despite what Lou Dobbs says, outsourcing is good for the economy. No one talks much about the amount of insourcing that happens. Ever noticed how many Toyota plants are in North America? The purpose of the free market is to put the factors of production (land, labor, capital, and entrepreneurial skill) where they are most economical. One of the reasons for the strength of the Euro is that those factors of production move across Europe more efficiently that when they all had separate currencies.

Before someone gets in a tizzy about my "outsourcing is good" statement, let me elaborate. I want the high skill, high paying jobs to stay here. If we raise all these artificial trade barriers, that won't happen. It is good when simple jobs are sent overseas. That frees us up to do the more lucrative stuff. But it also has the benefit of increasing the standard of living overseas.

We need the innovation and capital to stay here. That increases productivity. Increased productivity makes foreign investors want to invest here. That increases demand for the dollar, increases its value, and solves the international price inflation of oil and food. Again, that requires low taxes.

Ethanol Kills People

This is a papar I wrote for my Washington Campus class. It draws on some things I have posted previously. The resources I used are below:

“Guns don’t kill people, ethanol kills people.” That is my slogan for a broad campaign to change the way the government of the United States approaches energy demands in the 21st century. It is an intentionally bold statement to raise awareness of how the US energy policy has had impact around the globe. Rapid economic growth in Brazil, Russia, India, and China (the BRIC countries) has combined with only slowly energy increasing supply, environmental concerns, and instability in the Middle East to make energy important to the security of the world. My purpose is to lay out a plan which will address the energy crisis as well as the emerging food crisis which has its roots in energy policy.

The most difficult part of the path forward is that no single solution or combination thereof will solve the problem immediately. It may take 20 years to fully address the energy and food problems the world faces right now. Without doubt, measures can be taken to help, but they are more likely to address the symptoms than the disease. Maintaining a political movement over a generation will prove extremely difficult. In the mean time, political parties will change power several times, a new cause célèbre will emerge annually – demanding “emergency” action, and new and real dangers will emerge to threaten the free world.

The Problem

Two obvious solutions to the high cost of energy exist: to increase the supply or decrease demand. The first is difficult but possible, and the second is unlikely without changing much of the way the modern world operates. There is more than one way to increase the energy supply, but current efforts, subsidized by the Federal Government, have had disastrous effects internationally. Corn based ethanol – and $8 billion in federal subsidies – has directly increased the demand for corn while decreasing the supply of other food crops as farmers rush to plant corn over their usual crops. The World Bank reports: “Almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for bio-fuels production in the U.S., while existing stocks were depleted by an increase in global consumption for other uses” (The World Bank, 2008).

Table 1. Index of projected real food crop prices, 2004=100
Real Prices. 2007 . 2008 . 2009 . 2010 . 2015
Maize ........ 141 ... 179 ... 186 ... 176 ... 155
Wheat ........ 157 ... 219 ... 211 ... 204 ... 157
Rice ........... 132 ... 201 ... 207 ... 213 ... 192
Soybeans ..... 121 ... 156 ... 150 ... 144 ... 127
Soybean oil .. 138 ... 170 ... 162 ... 153 ... 119
Sugar .......... 135 ... 169 ... 180 ... 190 ... 185
Source: DECPG. (The World Bank, 2008)

Table 1 shows the massive price increases that have hit the worldwide food market since 2004. These price increases have lead to rioting and protests in Haiti (Murdock, 2008), Egypt, and Pakistan, among other places (Hassett, 2008). For example, the price of wheat has increased over 100% since 2004. This has been compounded by a poor wheat harvest in Australia. Fear of shortages has led to one third of wheat exports being sealed behind the borders of the largest exporting countries (Blas, Gorst, & Whipp, 2008).

Admittedly, not all evidence points to corn ethanol as the source of increased commodity food prices. A study recently released by the Agriculture and Food Policy Center at Texas A&M University shows that most of the inflation of food prices has been caused by the increase in the price of oil (Anderson & Outlaw, 2008). This is why a comprehensive energy policy to address all facets of the problem is necessary.

The Solution

To attack energy and food price problems will take a multi-front assault. In the short term, the United States must increase the availability of oil. There are several sources that remain untapped. The Alaska National Wildlife Refuge (ANWR) has the potential to match Prudhoe Bay as the largest domestic oil find. Offshore drilling has become more technically feasible, but Florida and California (among others) have blocked new platforms. These local solutions can yield results over the next 5 to 10 years, but other steps must be taken to look more long term.

The United States has some of the largest coal reserves in the world. As much as 50% of US electricity supply comes from coal. The coal industry claims to have enough reserves to supply the US with energy for 200 years (America's Power). To make coal power more acceptable to environmentalists, technology needs to be further developed to eliminate the pollution from coal powered generation plants. This technology could greatly benefit the world because China has become a large user of coal, completing a new power plant every week to ten days. Any advances in US clean burning coal technology should be given to China to improve their pollution problems while still allowing them to expand their energy supply for a rapidly growing economy.

For electricity generation, the US should build more nuclear power plants. French electricity is 75% nuclear, while the US is only 20% nuclear. Problems exist here, though, because, as MIT news reports there has been a 20 year underinvestment in the nuclear fuel supply (MIT News Office, 2008). Renewable energy such as wind and hydroelectric power generation are attractive where possible, but not every region has the natural resources necessary for these power sources.

Every summer, the news reports that seasonal and regional gasoline blends cause prices to increase. To provide over 20 different boutique fuels each summer is hard on the supply chain. Instead of 20 mixtures, the federal and state regulatory agencies should come together and consolidate into 5 summer fuels. If refineries could phase these fuels in over a month it would lessen some pressure on the supply chain. As reported on Slate.com, these summer blends are necessary to limit evaporation in hot weather, but cause trouble in the winter because of the difficulty of starting engines (Schechner, 2004).

The refining of oil into gasoline has become a problem as well. It is widely reported that a new oil refinery has not been built in 30 years. The only growth in refining capacity has come from expanding existing refineries. Hurricane Katrina damaged several refineries and the remaining facilities were running at 100% of capacity to make up for the damaged refineries in the Gulf Coast. The EPA should approve the construction of new, technically advanced refineries to assist in protecting against natural disasters crippling the refining capacity of the country.

Ethanol mandates should be ended immediately. As discussed above, they have played a role in disrupting the world supply of food. Ending ethanol subsidies and mandates could cut corn prices by 20 % (Borenstein, 2008). The energy required to distill corn into fuel offsets the energy created by ethanol. The World Bank reports: “The grain required to fill the tank of a Sports utility vehicle with ethanol (240 kg of maize for 100 liter ethanol) could feed one person for a year, so competition between food and fuel is real” (The World Bank, 2007). If technology improves such that biofuel production no longer consumes large amounts of energy, it could become more feasible, but no one should starve for the sake of fuel production.
This is a broad solution and will have broad opposition. To implement any or all of these proposals will require addressing the concerns of a wide assortment of interest groups.

Opposition

Environmentalists will be the first group to oppose most of these measures because of the fear of global warming. The only way to resolve their concerns will be to show that the above proposals are actually better for the environment than the current policies. Unbiased research will be vital to obtain persuasive results.
One argument for biofuels is that they will reduce the usage of fossil fuels and lower greenhouse gasses and the threat of global warming. The problem is that rainforests are being cleared to supply acreage for fuel crops. Researchers from Princeton and Iowa State found that instead of lowering CO2 emissions, the actual result is a carbon debt that will take 167 years to repay. Tim Searchinger, the Princeton researcher said, “We can't get to a result, no matter how heroically we make assumptions on behalf of corn ethanol, where it will actually generate greenhouse-gas benefits” (Eilperin, 2008). Farm lobbyists will also provide serious opposition to ending corn ethanol subsidies because they benefit from higher commodity food prices.

Other solutions – like nuclear energy, cleaner coal plants, and wind generation – face the opposition of localized groups. It is the NIMBY phenomenon – people like the idea of cleaner energy sources, but “not in my back yard.” High energy and food prices may be the only thing able to persuade these people to accept local power plants and wind farms.

Supporters

In a way, environmentalists, energy consumers, and people more concerned with national security issues want the same thing. Environmentalists want fewer fossil fuels, energy consumers want cheap fuel, and national security hawks want to avoid sending money to the Middle East. These desires can be aligned with clean, cheap, local energy supplies that could be developed through nuclear power, clean coal, and renewable energy sources. A technological gap exists between where the United States is and wants to be. It will require a Manhattan Project-type investment to obtain the best mix of new energy sources.

Protecting the worldwide food supply will take a similar focus because of the current tendency of large exporters to seal their borders in the face of shortages in foreign countries.

Improved fuel and energy efficiency will not come quickly. The requisite investments in technology will require time to develop. New industries will need to emerge to clean current coal burning facilities. Nuclear power supplies will need to be increased.

Legislature

Leading the opposition to many of these initiatives will be allies of interest groups within both houses of Congress. It almost seems that both ends of the political spectrum benefit from the high price of energy. Democrats and liberals apparently want to increase prices of fuel so people will drive less and buy more fuel efficient vehicles. John Dingell (D-Mich.) has gone so far as to propose a 50 cent per gallon increase in the gasoline tax (The Hill, 2007). The problem is that people with larger families are harmed because they can’t easily switch to smaller vehicles.

Republicans and conservatives, on the other hand, probably want to use higher prices to push for more drilling, more power generation facilities, and new technological development. Admittedly, this paper falls more on the conservative side of these issues. However, the best way to accomplish these proposals is to address the concerns of the Democrats. Energy independence must be paired with energy efficiency. This will increase the local supply while decreasing the demand. Cheaper fuel must be paired with less pollution. Only with both will the quality of life remain the same for current and future generations.

In the House of Representatives, difficulty will emerge because of Democrat majorities. It is expected that the 2008 elections will tilt the balance of power further to the left. If energy prices and food prices continue to rise, the public outcry may force action that would normally be opposed by the Democrats.
The Senate may be more conservative than the House because of slimmer margins between the left and right. However, this makes progress even more difficult because of the inability of most issues to pass a 60 vote threshold to obtain a floor vote. Even issues that have broad public support face difficulty in the Senate.

The important thing is to frame the debate so stopping corn ethanol is a humanitarian effort, increasing nuclear energy is a national security effort, and clean coal is a way to help rapidly expanding international coal plants to improve their emissions. In reality, there is nothing the United States can do to address CO2 emissions without helping the BRIC countries have cleaner, more efficient power supplies.

The only way to get Congress behind these efforts is to get the American people behind this group of proposals. If elections can be framed around energy and food supply issues, elected officials will listen. Big issues change the political landscape. If the ethanol debate and decisions get out of back rooms and into the public discourse, things may change. Ethanol needs to become a national scandal. Al Gore made global warming his signature issue by dramatizing what he claimed to be the real world effects of climate change. To combat his efforts, the human suffering behind ethanol must be made as widely known as global warming issues. It is a real issue as worldwide food prices increase and fields are diverted to heavily subsidized corn ethanol production.

Regulatory Approval

The regulatory issues to address will be building new nuclear power plants, new oil refineries, and changing the standards on summer gasoline blends. Even if support can be found within Congress for the proposals to address energy supply and demand, there will be a concerted effort to stop them through regulatory agencies that have responsibility for the environment.

Any proposed refinery or nuclear power plant will face legal challenges (Davenport, 2008). The last refinery built within the United States was completed in 1976. Gasoline imports increased by almost 100% from 1995 to 2005 because of a lack in refinery capacity (Hargreaves, 2007). Nuclear plants face the same issues.
Changing the summer blends will also require the coordinating of federal, state, and local regulatory agencies. Having more than 20 summer blends is taxing on refinery operations each June. Even if the boutique fuels were reduced to 5 custom blends, and higher standards were adopted, the refining process would be more reliable and the summer price hike would be alleviated.

The only way to force regulatory progress in these three areas will be to get congressional and presidential pressure on them.

Presidential Backing

For numerous reasons, the implementation of most of these policies will not be possible in the remaining time of George W. Bush’s presidency. Therefore, the changes proposed in this paper are partly dependent on the next presidential election. With John McCain as president, it will be easier because many of these proposals are aligned with conservative, free market principles. He also has enough of a reputation of bucking Republican orthodoxy to implement the needed checks and balances to address environmental concerns.

The election of either Hillary Clinton or Barack Obama poses a different problem. They are much more in tune with the environmentalist viewpoint and will stand in the way of expanded oil drilling or refining. The best way to reach them and their supporters is to show that the US cannot impact the environment as less regulated countries expand coal and other technologies. The humanitarian effort to decrease ethanol production will change some liberal’s opinions, and the promise of energy efficiency should persuade more of them.

Conclusion

It has been said that “great causes are not won in a single generation” (Smith, 1939). It may be easier to address one issue at a time, but that will result in slow progress for problems that have immediate threats to the standard of living of people across the world. People everywhere need access to energy. That energy needs to be clean to keep a clean environment for future generations.

Works Cited

America's Power. (n.d.). Factoids: America's Power. Retrieved may 1, 2008, from America's Power: http://www.americaspower.org/The-Facts/Factoids

Anderson, D. P., & Outlaw, J. L. (2008, april 10). The Effects of Ethanol on Texas Food and Feed. Retrieved april 30, 2008, from Agricultural Food and Policy Center: http://www.afpc.tamu.edu/pubs/2/515/RR-08-01.pdf

Blas, J., Gorst, I., & Whipp, L. (2008, april 15). Biggest Grain Exporters Halt Foreign Sales. Retrieved april 30, 2008, from Financial Times: http://www.ft.com/cms/s/0/38cd4d58-0b15-11dd-8ccf-0000779fd2ac.html?nclick_check=1

Borenstein, S. (2008, april 30). Food scientists say stop biofuels to fight world hunger. Retrieved may 2, 2008, from Associate Press: http://ap.google.com/article/ALeqM5g6hbT75_thXF6CITBPcgoFsLSvlAD90BP6RG0

Davenport, P. (2008, february 4). Arizona oil refinery proponents change location for plant. Retrieved may 2, 2008, from Fox 11 Arizona: http://www.fox11az.com/news/topstories/stories/KMSB-20080204-apbp-refinery.8de370f6.html

Eilperin, J. (2008, february 8). Studies Say Clearing Land for Biofuels Will Aid Warming. Retrieved may 2, 2008, from The Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2008/02/07/AR2008020704230.html

Hargreaves, S. (2007, april 17). Behind high gas prices: The refinery crunch. Retrieved may 2, 2008, from CNN Money: http://money.cnn.com/2007/04/17/news/economy/refineries/index.htm

Hassett, K. (2008, april 21). Bloomberg. Retrieved april 30, 2008, from Bloomberg Commentary: http://www.bloomberg.com/apps/news?pid=20601039&sid=arSRWU0yDL7M&refer=columnist_hassett

MIT News Office. (2008, march 21). Lack of fuel may limit U.S. nuclear power expansion. Retrieved may 2, 2008, from MIT News Office: http://web.mit.edu/newsoffice/2007/fuel-supply.html

Murdock, D. (2008, april 21). Global Food Riots. Retrieved april 30, 2008, from National Review Online: http://article.nationalreview.com/?q=OTBiOTY2ZTAyMWQwYTJkMDIwMmFiZGY4YzAxM2VkNjc=&w=MA

Schechner, S. (2004, april 12). What is Summer-Blend Gas? Retrieved may 2, 2008, from Slate.com: http://www.slate.com/id/2098672/

Smith, J. F. (1939). Gospel Doctrine. Salt Lake City: Deseret Book.

The Hill. (2007, july 7). Dingell to propose 50 cent gasoline tax increase. Retrieved may 2, 2008, from The Hill: http://thehill.com/leading-the-news/dingell-to-propose-50-cent-gasoline-tax-increase-2007-07-07.html

The World Bank. (2007, october 19). Biofuels: The promise and the risks. Retrieved may 2, 2008, from The World Bank: http://siteresources.worldbank.org/INTWDR2008/Resources/2795087-1192112387976/WDR08_05_Focus_B.pdf

The World Bank. (2008, April). Rising food prices: Policy options and World Bank Response. Retrieved April 30, 2008, from The World Bank: http://siteresources.worldbank.org/NEWS/Resources/risingfoodprices_backgroundnote_apr08.pdf

This is Outrageous

Those tolerant and culturally informed liberals are at it again. Check this out. Newly minted Obama superdelegate, Pete Stark, has lovely things to say about the Mormons:

I wonder what they're going to do with the Mormons. I'd like to put polygamy up if they want to fight this battle. Let's go into Utah and have it out. I mean, I don't have any quarrel with polygamy, as long as they leave little kids alone, which is child abuse.

This lovely tidbit comes in a discussion of the recent California Supreme Court ruling that gay marriage is a constitutional right. The truth is so far from Stark's world view. Not only are Mormons going to largely fight the gay marriage ruling, we will also be among the quickest to fight polygamy.

Gay marriage opponents cite polygamy as the next domino after gay marriage is legalized. (After all, Muslim men in Britain get welfare benefits for multiple wives now.) But gay marriage proponents say the "slippery slope" argument is a fallacy. Well, looky here. Now a gay marriage proponent has said polygamy and polyandry are a-okay.

Life, Liberty, and the Pursuit of Happiness

The Declaration of Independence promises the inalienable rights to life, liberty, and the pursuit of happiness. This post from Mark Levin gave me a thought. We have a right to the pursuit of happiness, but no right to happiness.

After arriving in Nauvoo, Heber C. Kimball said, "this is a beautiful place, but not a long resting place for the Saints." Sidney Rigdon, angry, said, "Heber, can't you prophecy anything good?" Heber replied, "I prophecy good for you, if you can get it."

Happiness is out there for each of us, if we will go get it. The problem is when people start acting like it is the government's job to guarantee it.

"Raised the bar for transparency"

This article is very good on the Democrat messiah.

One comment amused me: "the Obama campaign has raised the bar for transparency." This is true if by transparency the person means people can see what they want to see in Obama. (They probably didn't mean that.) I am afraid there is nothing there. And people project him to be the next president. Welcome back to Jimmy Carter.

(H/t NRO)

ACME catalog

Here is a terrific resource. I especially like this item.

Obama Economics

I watched the North Carolina victory speech from Barack Obama tonight and it was rather interesting. Obama is making the move away from primary mode into general election mode. He spent more time going after McCain (admittedly easy to do, but I would go after McCain on different things) than Hillary.

His "bring America together" portions of his speech are very good. He even had a paragraph or two about the nobility of hard work and the vast opportunity that lies within this country. Anyone can lift themselves up if they will put forth the effort. Those are the types of things that need to be said from the political stage.

The problem is that his policies go against the things he claims to promote. He talks about taxing the very people who have lifted themselves out of humble beginnings. He wants to take money from the oil companies and force them to invest in clean energy. He blames destroying the planet on big oil. His health care proposals will cause prices to skyrocket even more. Every item the federal government starts paying for gets more expensive.

It is as if he wants the US to follow the European economies into oblivion. Don't get me wrong, I am all for clean energy. I would love not to send my $3.45 a gallon to the Middle East. The only way to lower energy usage in the near term is to shrink the size of the US economy. That will cost jobs, force more outsourcing, further weaken the dollar, and result in economic disaster.

I don't really want to vote for McCain. He is not all that much better on energy or immigration or health care, but Obama is intent on policies that will make the American economy weak.

Running with the Wind

Here is an amazing story:

This is the kind of creativity that needs to be unleashed in the world. How many lives could be improved if they could implement simple solutions like this!

(h/t NRO)

Elder Ballard in DC

This was interesting. Elder Ballard spoke to the BYU Management Society in Washington DC on April 21. Here are a few highlights:

Overall, I personally think the interest in the Church over the past year and a half was a plus. I’d much rather have people talking about us than ignoring us. The biggest problem we face is apathy.

We need people of goodwill to unite because a tide of filth and immorality is sweeping over the world.

I support the call of the Pope that all who believe in God unite in an effort to stem the tide of evil that is flooding the earth.

As an MBA student at Texas A&M over the last 8 months, I have had an opportunity to work with people who are not Mormon far more closely than at other times in my life. I am convinced of two things; that there are serious problems facing the world that require Latter-day Saint intervention, and that we will need the help of everyone we can get on our side, Mormon or not.

My time as a student has shown me that there are a large number of people who are natural allies. The trick will be mobilizing people on issues we can agree on and having a voice others will listen to.