More on the Gas Run

Gas prices surge as Ike moves in | ajc.com.

States warn gas stations against price gouging

These stories is just full of juicy quotes about indignant consumers (read: voters) about this gas run.  I’ll present some quotes:

Larry Ruiz of Duluth said it cost him $45 Tuesday to fill up his small pickup. Friday, it cost him $60. “It really is just too expensive,” he said. “The government has lost control of the gas.”

Larry, the government doesn’t have control over gas prices.  At all.  It controls one thing, the location and siting of oil refineries.  You know who has control over gas prices?  You.  But I bet you’re not willing to take responsiblity for your actions.  It’s alot easier to set blame on the government than yourself.

The wholesale price for a gallon of gasoline rose about $1, to $4.25, Thursday morning, topping the high price five years ago when hurricanes Katrina and Rita raked the Gulf Coast, said Tom Kloza, publisher of the Oil Price Information Service in Wall, N.J. It was uncertain whether that price spike will filter down to the retail level.

“It’s pure panic,” Kloza said. “It’s related to the fact that there are worries about whether there’s going to be enough (gasoline) in the distribution system to satisfy some of the September pumping needs on the Gulf Coast.”

More proof that this is a run.  People don’t know if there’s going to be supplies, so they hoard.  This will become a self-fulfilling prophecy.

“Every time there’s a hurricane this happens. They’re just doing this to rip people off,” said 19-year-old Megan Cohen, a South Carolina college student who settled for paying $4.11 a gallon after going to three stations.

Uh, this wasn’t the case in any other hurricane season except following Katrina, Megan.  It hadn’t happened with any of the hurricanes this year, including Gustav, which hit another large section of the oil and gas producing area of the country.  But Megan, you’re not helping by going to three gas stations and “settling” for $4.11 a gallon.  This means that you didn’t need gasoline (then why go to three stations unless they were out, and there’s an easy way to figure out if the station is empty: noone’s getting gas).  But Megan probably has never taken an economics class at her South Carolina college, otherwise she would know about SUPPLY AND DEMAND.  It’s not that hard people.  Less supply means prices go up.  Demand going up sharply because of panic buying means prices go up even futher.  Or, if they don’t go up quickly enough, there’s a shortage.

S.C. Gov. Mark Sanford asked residents to avoid filling up unless necessary. “Instead, this is a time to think of ways in which each of us can make a difference on what may come our way if refineries in Texas are significantly damaged,” Sanford said in statement. “It might mean riding to the football games with a neighbor or on Sunday riding to church with a friend. It might mean watching a video at home rather than going to the movies or riding to work with a co-worker.”

I know there’s not alot that can be done legally, but as the leader of a state, can’t Mark do something with a little more leadership?  Making a difference?  Throwing out silly suggestions?  This is wimpy politico talk here.  Man up, Mark!  Tell people to stop being so stupid and panicking, if this isn’t a problem.  If it is… be more forceful in telling them that this might be the case for a while.  But if this is his idea of leadership, then this state’s got problems.  This was also true of the Hanna situation, which was equally feeble in the public response.

In South Carolina – where gas prices increased about 20 cents a gallon on average Friday – Attorney General Henry McMaster said gas stations that price gouge would face criminal prosecution. He did not set a threshold, saying each case must be investigated separately to see whether prices were raised to an “unconscionable” level.

But putting the gouging laws into effect?  Now THAT’S going to make things better!  Making the suppliers walk on egg shells in pricing so that if some 19-year old tart with no clue of how things work gets pissed off and files a complaint, then you’ll have to deal with investigations for the next year.  Or you could price it so low that you’ll be out in 5 minutes, but you don’t have to deal with the state lawyers.  Or you could just go on vacation for the next 15 days until this expires.  Then you’re fine and it’s only the customers who get screwed.  But we already knew that about these types of laws.

North Carolina Republican Congressman Robin Hayes called for a federal investigation into some prices rising more than $1 per gallon in a day.

“I understand there is a substantial hurricane in a sensitive area of the country, but this dramatic spike in gas prices is breathtaking,” he said.

I just wanted to point out the party of the pandering politician here.  What’s a federal investigation going to do that the myriad of state investigations won’t?  Oh, that’s right.  Make it seem like you’re doing something about it.

John McCain Uses the Pickens Lie

From John McCain’s acceptance speech last night:

My fellow Americans, when I’m President, we’re going to embark on the most ambitious national project in decades. We are going to stop sending $700 billion a year to countries that don’t like us very much. We will attack the problem on every front. We will produce more energy at home. We will drill new wells offshore, and we’ll drill them now. We will build more nuclear power plants. We will develop clean coal technology. We will increase the use of wind, tide, solar and natural gas. We will encourage the development and use of flex fuel, hybrid and electric automobiles. (Emphasis added)

I’ve documented the fact that $700 billion is a bald-faced, economically illiterate number that was conjured up by T. Boone that has no basis on the realities of the oil market or just plain facts. Add to the fact that McCain just lumped natural gas in with solar and wind (“one of these things is not like the other, one of these things is just not the same”), and T. Boone must have been jumping for joy with the speech last night. I’m sure one of the first things McCain will reach across the aisle to Nancy Pelosi is to force private fleet vehicles to run on natural gas.

So if you oppose the Pickens Plan, or don’t like the fact that it’s based on sketchy numbers, has a significant chance of screwing up our electricity market and backed by someone who has a huge financial stake in it, then you don’t have a choice in the election. Well you do, but you won’t hear about it in the media.

I would call on John McCain’s campaign to fully disclose their relationship with T. Boone and fess up to the fact that he cited a horribly incorrect number during a nationally televised speech. It’s the least that he can do “for the country.” But I doubt that will happen.

McCain Invents New Constitutional Power

Again, from John McCain’s acceptance speech:

We need to change the way government does almost everything: from the way we protect our security to the way we compete in the world economy; from the way we respond to disasters to the way we fuel our transportation network; from the way we train our workers to the way we educate our children. All these functions of government were designed before the rise of the global economy, the information technology revolution and the end of the Cold War. We have to catch up to history, and we have to change the way we do business in Washington.

I must’ve missed that part of the Constitution where it says that the government sets the standards for transportation fuel. Yes, yes, I know I’m in a minority opinion, where the Supreme Court has given the federal government carte blanche to do whatever it wants with the economy. Of course, no one has opposed the ethanol mandates, or the EPA gasoline/diesel requirements yet either, at least not successfully. Of course, as a nation, we have long accepted federal limits on economic freedom. Perhaps when you’re required to trade in your gasoline powered car for a T. Boone special, you might make a peep, or not.

Regardless, this is just another way that McCain is letting everyone know that he’s going to be fulfilling the Pickens Plan when he gets into office. He just doesn’t want to say it so directly. So much for that openness and accountability that he’s running on.

Politics as Usual with Palin and the Media

So we’ve gone through a weekend of hearing about Sarah Palin as the new Republican VP nominee. And, to no one’s surprise, it was all about personal characteristics and almost nothing on policy.

There were thousands of stories on Palin’s children, both newborn and almost adult. But that’s the essence of the game as the liberal media and the blogosphere tried to find something against Palin that would stick in terms of criticism. I know it’s hard to find some actual information on three day’s notice, but I was somehow able to find information on her in five hours on Friday afternoon. You’d think the media could do that, since they’re getting paid for it after all. But instead, we get innuendo and slander, going after her personality, but not her policies. And it’s not like she’s a blank slate, as she’s got two years as governor and a couple of years as mayor to find information on. So, as usual, the ancien media fails at their job of investigation and reporting.

Meanwhile, the GOP side of the media is just ecstatic about the pick, as if this is all the people needed to warm up to McCain. To his credit, he did reinforce his social conservatism at the Rick Warren forum, and it appears that this is another pick along those lines. Which is why the anciens wanted to go after her personal life as to make the hypocrite tag stick. But there’s nothing to those attacks, which is why the GOP side is going after them on this issue. So instead of introducing their candidate and filling in the gaping holes on her policy ideas and where she stands on the issues, they’re, once again, playing on the other team’s field. But as this weekend has shown, there’s nothing to this issue, which is why the GOPers are attacking this hard.

But it doesn’t help us in the minority who actually, you know, still care about the issues and policies that government puts in place. And more to the point, both sides have been strangely silent on Palin’s energy policy while in Alaska. It’s supposed to be her strong point, and she even mentioned it in her introductory speech. But as I outlined in my Palin on Energy post, it’s at best a political pander, and at worst, a contradiction of the national Republican policy on taxation and a gold mine for the Democrats, if they’re going to take the bait.

In case you don’t know, Palin instituted a new severance tax on oil pumped from state-leased lands. And contrary to usual Republican policy, this tax was higher than the previous level. In fact, it became a windfall profits tax, as the structure of the tax was that it increased as the price of oil increased, the very definition of a windfall profits tax.

But people aren’t interested in the fact that it’s a tax increase out of the Obama handbook, they’re more interested in covering it up as “giving a tax rebate back to the people”, as epitomized by the Rush Limbaugh show this afternoon:

CALLER: And you asked him a specific question, and what he picked out was so mundane, I mean it was on everyone’s mind. You asked him what were Sarah’s accomplishments here, and he had an ability to tell you a whole litany of things. And he picked out oh, you know, “She’s going to send us some money.” Well, yeah. It’s a small part of a much larger plan by the state —

RUSH: Well, but wait a minute.

CALLER: — to help us out.

RUSH: No, I knew what he was talking about at the time. Alaskans — she gave them a rebate on rising gasoline prices added to whatever it is you guys already get for allowing the Alaska pipeline and other things up there, but she was simply saying, she made it a point in her announcement to say that she didn’t keep the money as a governor and put it in government coffers; she sent it back to the people who were experiencing this rapid increase in gasoline prices. Remember, Obama at the time the gasoline prices were skyrocketing up, said, (paraphrasing) “I’m not really worried about the price but I am concerned about how rapidly it went up.”

CALLER: Yeah, it was disgusting.

RUSH: She turned it back to the people, that’s all. No different than a tax rebate.

CALLER: Right, which was the original idea of the original permanent fund in the first place, because the oil revenue of the state, according to Hammond, our governor at the time, belonged to the people. And so the people get a tiny little portion of the interest, and that’s what that dividend is about, but I wouldn’t have chosen that as her most important accomplishment. Frank Murkowski was expected to be a really good governor, and he was just a bust. She beat him in the primary, and she filed his deal that he had made with the gas companies — or the oil companies, she filed that right in the trash. (Emphasis added)

First of all, it’s not a tax rebate, as the $1200 doled out by each citizen was never collected from the citizenry. It was collected from the oil companies and redistributed to taxpayers. That’s NOT a tax rebate. It’s the same problem that the Bush tax rebates/stimulus payments have, the rebates are uncorrelated with tax payments. So it can’t be a rebate if you don’t pay the tax in the first place.

But the bigger problem is that there is this entitlement to the oil company revenue because the oil came out of state-owned land. The fact that the state owns any land is something entirely different, but that’s different from a federally owned parcel (which was in most circumstances expropriated and definitely unconstitutional). Under the Alaska Constitution, the state can own land, and lease mineral rights, but it doesn’t own the oil. Well, they can own the oil, but they allow private entities to explore and produce the oil, at least until politicians decide to take over the production as a whole (or just go ahead and tax it 100%).

In the grander scheme of things, this should sound at least some concern for conservatives, but I haven’t heard a peep from either side of the aisle, but it’s actually pretty obvious once you think about it.

Republicans don’t want to dirty up the image of Palin, especially when she says that it’s not a tax increase, but it’s getting a fair valuation on the resources. If a Democrat tried doing that on a tax on… anything, Republicans would skin that Democrat alive.

Democrats are either waiting for a “gotcha” moment, possibly during the debate or closer to the election. The question will be obvious: “During your time as governor of Alaska, you passed a tax increase on oil companies that were then sent taxpayers as an energy rebate. Barack Obama has proposed the same thing, but John McCain and the Republicans have attacked this proposal. Do you support Obama’s plan that is very similar to your policy in Alaska?” And then she’s going to have to square the circle, saying that it’s ok to do it on the state level, but not on the national level, or backtrack on her record in Alaska. Either way, the Republicans are going to have to figure that one out quickly, because either she’s going to piss off fiscal conservatives or be attacked (rightly so) as a flip-flopper.

Right now, there’s no sign of what she’ll do, even if she highlighted the policy (in a limited way) in her speech in Dayton. But unlike the pregnancy/child issues, this is a serious issue that could very well put her in a bad position.

(UPDATE: The Cato Institute has done some research into her tax policies: Gov. Sarah Palin’s Record on Taxes and Spending and Palin: Uninspiring Tax Policy Record. Leave it to the libertarians to do the political work of the partisans. There’s a thesis to be had there, do non-mainstream party outlets cover the issues that the Big Two parties do not want to have discussed? I’m also thinking Obama/climate change and environmental parties.)

Sarah Palin on Larry Kudlow

Yes, I know it’s Larry Kudlow, so I apologize for that. But just skip to the 3:35 mark, which is where Palin’s populism comes out in droves. “The oil and gas resources that the Alaskan people own?” “We have to make sure that an appropriate value is placed on these resources and that the people who own these resources are able to benefit from them.” I’m sorry, but why does “the people own these resources?” That sounds pretty Venezuelan to me, which is NOT very conservative. She also avoids the deregulation question, but that’s because the blowhard Kudlow asked a 30 second question about three different things.

Sarah Palin on Energy

As most people know, Sarah Palin is now the VP nominee for the Republican Party. Everyone knows the obvious stuff: she’s a woman with 5 kids, current governor of Alaska, former mayor, elected on an anti-corruption kick.

But there’s not so much that people know about her policies and her accomplishments. So I’m going to try and fill in the blanks, especially on energy (It’ll be tougher to get her policy ideas on transportation, but they’re there in the land of the Bridge to Nowhere). I first had my antennae up when both McCain and Palin in this afternoon’s rally mentioned that she had fought against “Big Oil.” It might just be cover to make sure that she doesn’t get politically attacked for being cozy to oil interests or attacking her as “continuing Bush’s presidency.” Referring to the oil industry as “Big Oil” is not something the Bush presidency was known for.

So I found this website, run by a lawyer named Beldar, who jumped on the Palin bandwagon early and often, as shown in the link. As for what she’s done in office:

• She’s spoken out against putting polar bears on the endangered species list. While only tangentially related to energy, putting the polar bear on the list would enable federal regulation of pretty much the entire economy, as the specious reasoning for putting the polar bear on the list as “threatened” is due to global warming climate change. If anything makes climate change worse for the polar bears, it can be regulated by the feds, according to the Endangered Species Act. This is a no-brainer, but it’s a politically risky action to take, for fear of being labeled a “Big Oil” supporter, or anti-green. But she makes up for it with…
• She signed onto the punitive damages case that was eventually brought to the Supreme Court. This case, stemming from the Exxon Valdez oil spill, was about the $5 billion in punitive damages that were sought against Exxon (now ExxonMobil). Exxon thought that this was excessive and fought all the way to the Supreme Court to have them lowered. Exxon won in a 5-3 verdict to lower the damages, though the 4-4 split meant that there could actually be punitive damages under maritime law. The actual Court decision can be found here (warning, lots and lots of legalese). Funny thing, Palin found herself on the side of Breyer, Ginsberg and Stevens, and against Thomas, Scalia, Roberts, Kennedy and Souter. But as you can see in the video below, this is mostly a populist action, since there were 33,000 people, businesses, and associations impacted by this. It’d be political suicide to not support this, but the populism still remains:
  
• In another populist move, she signed onto a tax increase. On oil companies (scroll to see discussion on “serverance” tax vs. “income” tax vs. “windfall” profits tax.) Here are the details of the actual tax. Key points:
  1. Increases base rate on all oil from 22.5% to 25%.
  2. Adds surtax on value of oil between $30 to $92.50 of .04%
  3. Adds surtax of .1% on all value above $92.50

  Whether you want to call it a windfall profits or a severance tax, she raised taxes on oil output, and made them progressive instead of flat. That’s pretty counter intuitive to pretty much all conservative tax thought, as we would like taxes lower and flatter.

  (As a side note, it CAN be argued that this is a windfall profits tax as this tax is increased as the value of the oil increases. The value of the oil increases NOT on the production capabilities of the oil company but on factors outside their concern, making additional profits prohibitively “windfall”. A flat tax would not be a windfall tax, as the tax would not increase as prices increase, but because of the progressive nature of the tax, it becomes a windfall profits tax. This makes any progressive tax a windfall profits tax, though it’s worse for income, because presumably, the increased income is through increased work, which is not a windfall to the user. Arguments against the windfall profits tax should be the same as arguments against progressive income taxes. It also increases the incentives for oil companies to increase their production costs (or more accurately, persuade the government to increase the production costs allowance) to avoid paying higher taxes, a perverse economic incentive.)

• And with these new tax revenues, she gave them back to the state already flush with government handouts. From the Seattle Times:
  Alaska’s oil windfall by the numbers
  $6 billion – Estimated revenue collected by state of Alaska from new tax on oil profits this fiscal year.
  $10 billion – Estimated total oil revenue collected by state this year (old plus new oil taxes).
  $1,200 – Special payment to each Alaskan resident this year from new oil tax.
  $2,000 – Estimated annual dividend each Alaskan will receive this year from oil-wealth savings account, not counting the new oil tax.

  So Gov. Palin raised taxes by more than 100%. Though to say this is on profits is somewhat disingenous, as it’s just on oil price above production and transport costs, which means that this isn’t even a tax on profits, as it ignores other costs (R&D, maintenance, marketing, etc.). So it’s even worse than a profits tax.

  But the revenues at least went straight back to the populace instead of funneled through all sorts of government programs. That would be even more wasteful and economically illiterate. First she wanted to create a debit card system for energy payments but instead settled on a straight check to “help with rising gas prices” although the money will probably be spent on things other than energy (like the stimulus checks). The straight check at least is good that it doesn’t increase government any more than it already does (the creation of a government check card bureaucracy), since they already have a system in place for doling out the money that they had already received.

  So this tax was in essence a populist ploy to get more oil money redistributed to the citizens of the state. It smacks me of being a little on the road to nationalizing the oil fields there (state-izing?). What happens when the citizenry wants more of it’s $1,200 dollars. The tax goes up. No surprise there.

• Lest I seem too negative on Palin, there are some points that I do like about her. She supports drilling in ANWR and completed the natural gas pipeline to the US through Canada. The natural gas pipeline will be an immense help to the US natural gas market, even if you have to travel through Canada to get there. I don’t know enough about the pipeline as to whether the gas will be intermingled with Canadian gas or not, which would be an interesting trade issue, at least statistically.

So overall, I would peg Palin as a conservative populist on energy. This seems to fit with her overall philosophy, as so far as it can be determined by ontheissues.org:

But we’ll get a closer idea of what she brings to the table as the campaign unfolds.