Category Archives: Energy Policy

I have to give the man some credit

I happen to live in Arizonas 5th congressional district; and am currently represented in the house by Harry Mitchell.

Congressman Mitchell and I disagree about a lot of things. Abortion, social security and government health care, school choice and education policy, many economic issues, government intervention and regulations in general, and the overall wisdom of his party leadership and the DNC…

However, I have to give the man some credit. He has generally been good on energy policy, and on guns since he came to congress (as a local politician his record on guns was mixed). He was also against the auto industry bailout, against TARP, and especially against the unconstitutional TARP bonus tax. He’s even reasonable on national security issues, and veterans affairs.

I believe he has ably represented the interests of his district within the congress; and bucked the leadership when he thought it was best for the district (if perhaps not bucking them enough outside of issues of direct interest to the district).

Today, he voted against his leadership; choosing to vote for the greater good of Arizona, and of the nation; against the Waxman cap and trade bill.

Unfortunately, we all lost in that vote; but senate leaders are already saying it’s dead on their floor… so we’ll see.

Last week, and again this morning, I urged congressman Mitchell by telephone to both his offices, and by email, to vote against the bill; as it was against the interest of both the district, and the nation. This evening, having found out how he voted, and reading his statement on the issue, I called to thank him.

We may disagree with our elected representatives, we may have voted for the other guy, we may think they are the wrong person to be in that chair; but once they are there, they are OUR representatives. The peoples representatives.

Letting them know how you feel about something, how important it is to you, what benefit or harm it will do you personally; it works. It may not seem so much of the time, but most congressmen really do care about what the people of their districts think; if for no other reason that it improves their chances for reelection.

So participate. Let them know. After all, it can’t hurt; and it just might make a difference.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Obama: Third Term for Bush

Barack Obama is making the same disastrous mistake that George Bush did, and I am amazed that neither he nor his advisers are aware of it.

Many people have commented that Obama has effectively given Pelosi and Reid free rein to insert as much prok as they wish into their spending bills while pontificating in mock outrage about the need to reduce pork.  The question on many people’s minds is ‘why?’

In the meantime, Obama has been stacking his administration with idelogues who are convinced that the only way to save the human race from extinction in the coming years is to radically reduce the amount of greenhouse gasses that are emitted by human activity by radically reducing standards of living.  In effect, much like George Bush secretly preparing for an invasion of Iraq from the outset of his administration, Obama appears to be preparing for a Great Leap Forward to radically alter the production and consumption of energy.

The early stages of these efforts can be seen in the effective take-over of the U.S. car industry with mandates to produce green cars that consume far less gasoline.  It also can be seen in the early promises to employ people in “green” jobs paid for by the government.  Banks that now have the Federal governemnt as a major shareholder are being encouraged to make loans to ‘sustainable’ projects.

And, in order to get these questionable and expensive bills passed, the government is breathlessly making announcements about the dire economic emergency we find ourselves in, despite the numerous statistics that imply otherwise.  More troublingly, the government has moved to cut off debate, painting people who are either skeptical of their aims, or who question the effectiveness of their measures to meet their stated goals as being reactionary ideologues who are obstructing needed reforms mindlessly or out of greed.

The manifold failures of the George Bush administration did not come as a surprise to many.  Every major policy initiative, every major hiring and firing decision, every piece of legislation was, to a greater or lesser degree, scrutinized by intelligent people who then accurately predicted the outcome, and publicized it nationally.  It was the ability of the Bush administration to marginalize opponents while buying supporters off with pork projects that allowed the Bush administration to veer so far onto dangerous ground before they were forced to rethink their position and alter course.  Had these voices carried greater weight earlier in the administration, the Bush administration would not have been able to engage in inflationary spending, and wreck the U.S. military to the degree that they did.

6000 years or so of written history stand in mute testimony to the danger posed by the hubris of kings. We know that the massive increases in government spending will wreck the economy – not improve it.  We know that the increased taxes and regulatory uncertainty will hinder investments in capital goods – not enhance them.  We know that when workers are diverted from productive tasks to make-work projects, we are all left poorer as a result.  We know that increased regulation and surveillance by the government will not result in greater happiness of the population.

We cannot afford Obama to get the same pass that LBJ did.  The destructive policies, once put in place, will do great long-term harm to the bulk of the citizenry.  We must all do our part to turn the public against the Obama administration’s adoption of Bush’s political strategies.

I call upon all of you reading this, work on the Obama supporters you know.  Point out calmly, non-judgmentally, all the dangerous warning signs surrounding his presidency.  Turn his base against him, and he cannot do anything but fall.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

So, we’re not all going to drown, or be killed by hurricanes?

This is the single best, and clearest, explanation of the Rationalist Position on global warming I’ve Ever Seen

Key line: “So, why don’t we ever talk about the suns contribution to global warming? …Well, because we can’t regulate it, tax it, or make it feel guilty for what it’s doing“.

Got it in one there friend.

There’s no profit, political gain, or power to be grabbed from acknowledging the real causes, and real effects of whatever global warming there actually is. So, the interested parties simply ignore all that, shout down anyone who disagrees with them, and go about seizing as much power as they can, in a disorderly fashion.

From “What You Oughta Know“, a website with videos explaining an assortment of general, and sometimes esoteric knowledge.

Oh and here are the links he mentioned in the video:

Pacific Research Institute:
the documentary, more information

Reid A. Bryson – scroll down for ice cap article

Solar Activity: A dominant factor in climate dynamics – scroll down read sections in blue

BBC’s The Great Global Warming Swindle

Other possible causes for global warming

Oh and just for fun, here’s the same sites take on “Liberals vs. Conservatives“… which is really a pretty solid explanation of the foundations of minarchist positions:

And a great take on the bailout:

“Because there is no disaster that immediate, decisive, wrong action cannot make worse”

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Oil — Where Is It Going? Up, Up And Away!

Last week, I posted about my belief that oil has currently dropped to a price level that is damaging to the long-term stability of the oil market, and that while it seems wonderful right now, it won’t last.

Today we find a bit of evidence that may only support this point:

The $25 low-end estimate [Francisco] Blanch recites is based upon a furthering destruction of Chinese and other emerging-market growth in 2009, and it is astounding if it turns out to be true.

We have witnessed the perfect storm of declining commodity pricing in the last six months — a tsunami of credit tightening, capital withdrawal on a massive scale, dollar strength, weakening emerging-market growth and finally a deflationary spiral that seems to never be ending.

The oil markets, if they represent perfect efficiency as the equity markets normally do, would indicate either that Francisco is very, very wrong with his oil predictions or that we are in for far deeper problems with the rest of our economy. Far-forward contracts of oil are trading at a premium to front months rarely seen before in my history of trading the stuff and in a way that looks unbelievable to other longtime participants.

As I write this piece, January crude is trading for delivery later this month at $43.40 a barrel. Amazingly, January crude for delivery in December of 2009 is trading at $57.50 a barrel, a premium of more than 32%. This premium (contango) nature of the markets has rarely been so great and would allow for a riskless trade. One could buy crude oil for delivery this month, store it and sell next January’s contract for delivery 12 months later. With margin, storage and financing costs, you’d still clear a healthy 11% profit.

Now, I’m a big fan of futures markets. However, futures markets don’t represent truth, they represent an aggregate of belief — and are often trustworthy because it’s belief backed up with money. As such, futures markets tend to be extremely accurate when correct. When wrong, though, they’re often spectacularly wrong, because when groupthink takes over, belief becomes decoupled with reason. This could be easily seen in the housing market, houses representing a similar case to a futures market (i.e. you buy and hold, betting the price in the long-term future will continue to rise, and then even more so recently with house “flippers” speculating on near-term future prices), where the belief that it will simply keep going up only enhances the height it reaches before the inevitable crash.

But I don’t think that is the case here. The pundits are all asking “how low will oil go.” The futures market says it’s headed up. If the futures traders were trading these contracts at $25/bbl, I’d call it groupthink, the belief that things are just going to spiral down worse out of control. But they’re not, they’re exercising a contrarian point with the $57/bbl price. When pundits and futures traders disagree, I know who I’m more likely to trust.

I think what we’re seeing here is a confluence of unintended consequences that many people only purport to understand. Extremely complex are markets making moves that appear contrary to “normal” behavior, and thus everything is becoming very unpredictable. Bailouts here, money-printing there, and debt deflation out of left field have all thrown markets out of whack. It’s going to take time to sort this out, but the oil futures traders are assuming that when it finally happens, we’re more likely to be at $57+/bbl than $25/bbl.

They [and I] may be wrong… When dealing with such complex systems, it’s hard to gauge all the inputs and outputs and every relationship between them. But when you take the prospective theories about what’s going on, I think the plausibility of demand destruction creating a 70% downward move in prices is in question. I think the belief that this is a strong dollar / credit crunch issue is a lot more plausible, and with all the money-printing going on worldwide, I don’t see how anyone can reasonably predict $25/bbl oil.

Oil Is Too Cheap

No, not for the reason these guys think:

Venezuela will back repeated cuts in OPEC oil production until prices stabilize, Oil Minister Rafael Ramirez says, and Russia is proposing closer cooperation with the oil cartel.

Ramirez said Wednesday that his country will back a proposed 1 million barrel per day cut when OPEC meets Saturday in Cairo. If that doesn’t halt the price slide, “We will keep cutting until the market stabilizes,” he said during a visit by Russian President Dmitry Medvedev.

Oil prices fell below $54 a barrel Thursday as dismal U.S. economic data and rising crude inventories outweighed the possibility of production cuts by OPEC and non-member Russia.

Russia, the largest oil producer outside OPEC, produces around 11 percent of the world’s oil and it could be eager to seek new customers to shore up its suffering economy. OPEC output is estimated at about 31.5 million barrels a day — about 40 percent of daily world demand.

Venezuela’s President Hugo Chavez has said OPEC should work to keep global oil prices in a “band between $80 and $100.”

I normally explain price moves using conventional terms of supply and demand. In this case, though, the rules are somewhat different*. There is certainly some demand destruction that has reduced the price of crude oil, but I hardly think it’s a large enough change to move from $147/barrel to $50/barrel oil. At this point, the price of oil seems artificially low, considering the fact that fundamental supply and demand forces haven’t changed.

Yet the response from OPEC, Venezuela, and the big oil companies is the same as if the price decline was natural — they reduce production. This is not only true of the state-owned oil companies, but areas such as Canadian tar sands and some of the more difficult offshore fields have stopped production or shelved new exploration projects. This only makes sense, of course, as the marginal cost of production of many of these projects is well over $50/barrel, and they don’t want to lose money.

This causes a major problem for two reasons, assuming that the fundamentals haven’t changed:

  • It takes supply offline in the short-term, and due to the nature of drilling, shutting down existing fields may reduce the ability to pump oil from those fields in the future. I.e. if a field is pumping 500,000 bbl/day before being shut down, it may only reopen with the capacity to produce 460,000 bbl/day. Thus, taking oil offline in the short term reduces potential oil recovery in the long term.
  • Reduction of exploration projects reduces oil supply in the future. While this may only push out exploration projects 2-3 years, current IEA projections of decline suggest that we should be searching for oil right now — and fast.

What does this mean for future oil prices? They’re going to go up, and they may be going up faster than before. This isn’t a return to the norm, this is the swinging of a seesaw. We’re at a low point right now, but an 800-lb gorilla just got on the other side.

Of course, to hear that oil prices are too cheap is not a common theme these days, as here in California gas has dropped under the $2/gallon mark. From a personal level, of course, I’m enjoying the reprieve. But now may simply be the best time to jump out and buy yourself a gas-saving auto, because these prices will not last.
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