24 June 2008

More Superficial Drivel

[ed. note: we originally titled this "Answers To Your Questions." That was before we wrote the post. Once finished, we decided on this, more appropriate title.]

First off (though we don't know why we even have to clarify this), we have never pretended to be a moderate/centrist/non-partisan/post-partisan/bi-partisan blog. We're conservative first. This often leads us to support Republican candidates. How is this a surprise to anyone? We try to be fair and reasonable, but we know enough about bias to understand that objectivity is a pipe dream. Plus, this is an opinion blog, not a reporting blog. We've got no reason to even make a failing attempt at 'just the facts, please ma'am' reporting a la The New York Times. So, please, quit faulting us for not being something we never claimed to be in the first place.

When we bash what seems to our readers to be a far-left opinion. Don't take it personally. We very rarely pick on those precious few of you who choose to read and respond to our posts. We get that none of you advocate the ridiculous things we pan here at OL&L. Most of our readers are conservatives. Most of you who reply are moderate to liberal. To our knowledge, none of you fall into the extreme left camp we frequently lampoon. So, when we go after whacked out leftist/environmentalist ideas or whatever, don't take it personally. We're usually responding to something we read over at the Seattle PI or maybe our bi-weekly scan of the Daily Kos or Huffington Post--not your comments.

We like the idea of drilling independent of its political ramifications. The fact that it could be used politically to help get people we like elected is simply a happy coincidence. Our support of drilling is not so myopic or narrow as some of you seem to believe. We have repeated here (every time we talk about energy issues. check our archive.) that we support drilling along with a carbon tax, nuclear power, and increased R&D funding. What more do you want? We are wary of the economic cost to Americans and American businesses if we attempt large scale transition from fossil fuels to renewable energy. It will hinder us competitively in relation to other countries and is an environmental burden we should not bear alone.

When it comes to policy recommendations, we are political realists. We like the idea of a carbon tax, but the likelihood of enacting one by itself is very slim. Coupling it with a reduction in income and corporate taxes improves its chances, but still makes it tough politically. This is why we half-heartedly endorsed McCain's $300 million initiative to award individuals or corporations who developed better battery technology. It's not the broad, market based solution we hoped for and RD mocked, but if McCain is elected President, it has a far better chance of passing Congress than his and our preferred carbon tax.

And all of these things have a better chance of passing if they are lumped together with increased drilling--a policy supported by a significant majority of Americans.

Part of the reason we disagree with some of you about drilling is that we do not entirely agree with the assumptions on which you base your conclusions.

We get the idea of "peak oil." We understand the price distorting effect of a cartel like OPEC. But we think some of these things are overblown. OPEC's influence has been overstated since the trade embargoes of 1979. Since then, their influence has diminished and with the increased supply coming from Canada's oil sands (our largest single supplier), they have been diminished even further. This isn't to say they have no or little effect, simply that their influence is less than you think because it's easy to demonize and hate the terrorist/oil producing countries.

Regarding peak oil and how that plays into this conversation, RD and some of the rest of you don't like the idea of drilling because it prolongs the influence and control OPEC has on the price of oil and therefore the American economy, national security, and our international interest. We don't like the idea of funding Saudi Wahabbists anymore than the rest of you. However, we believe that between the outer continental shelf, ANWR, and non-traditional supplies of oil found in shale-oil and Canada's oil sands, the increased supply will both decrease the price of oil in the long run and the price influence (what is the technical term? control of marginal supply?) of the OPEC cartel. Some estimate that shale-oil and other non-traditional oil reserves are actually several times greater than the oil reserves of OPEC nations. Again, accessing these resources would significantly diminish OPEC's cartel influence.

We are optimistic about oil because we believe that higher prices will drive the market to find more sources of oil like thermal depolymerization which could potentially manufacture oil indefinitely from things like garbage, sewage, and agricultural waste. We also believe that improvements in technology will make more oil more accessible. Higher prices and technology led to large oil field finds in the Gulf of Mexico, off the coast of Brazil and of course drove the development of Canada's oil sands. We do not foresee a peak oil collapse in the near or even mid-term because of these factors. Heck, our faith in the markets is such that we think prices will eventually drive a near-seamless transition from fossil fuel to some other, perhaps yet-to-be discovered energy source. This is what our study of history has shown us.

Within the general framework we outlined the other day, we are of course open to new and different ideas. Hopefully our drilling fetish makes sense to you when considered in light of our assumptions about supply, demand, OPEC, peak oil and the other things we've written about in this post. Or, you could do as Krauthammer suggested Congress was doing (h/t: S. Lybbert) with some of their recent legislative posturing--repealing first the law of supply and then the law of demand because, of course, they're laws so they must have been put in place by some other idiot Congress--probably a Republican one.

The truth is, we blame most of the rising cost of gasoline on the weak dollar. Greenspan, the guy who seems like he wishes we was still in the game, is largely responsible for cutting rates to far and leaving them their too long. If Bernanke follows through on his commitment to raise interest rates and strengthen the dollar, we expect gas prices to fall accordingly.
/superficialdrivel

[cue Raisin's predictable mocking impersonation]

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5 comments:

RD said...

1. We all know yours is an opinion blog (this is evident from the glaring lack of evidence to support your claims). But it is also true that every time we put an opinion in the public sphere, we are inviting it to be criticized. We can either (1) ignore this criticism, no matter how valid, and stick to our opinion, (2) cry about it, (3) respond to an extreme or inaccurate version of the criticism (like calling it communist), or (4) actually consider the merits of the criticism and its evidence and reevaluate our views. Usually you choose #1, or 3, which is your prerogative. But it makes some people think you're more interested in polemics than truth and solutions. Some of us consider that a bad thing; others don't. If you don't, you might consider admitting it: "I am more interested in partisan polemics than quality analysis and real solutions." Then I would get off your case.

2. Again: you say you support drilling with a carbon tax; but you have never addressed my central point: drilling now is what will prevent a carbon tax. The reason a carbon tax is not politically feasible now is that people like you continue to pretend that drilling is an answer. What you're failing to recognize is that the number of informed observers that support a carbon tax is growing quickly; its political feasibility is lacking only because politicians ignore it. It is getting more mainstream, and we should do what we can to promote it.

3. You provide no evidence for your supply arguments about oil. You cite the large reserves as evidence that drilling will affect prices and impact dependence. Jake, it's not reserves that matter; it's marginal supplies. The US consumers 20+ million barrels per day. More than 12 of those are imported. No matter how massive your reserves are, you cannot have your desired effect unless you can produce more oil per day. ANWR promises to reach full capacity at 1 million per day sometime around 2018 by Conservative estimates. Continental shelf and shale oil promise even less right now. So your use of reserves as a defense is not very useful. Further, your arguments about OPEC are pure speculation, and they go against a massive wall of economic research. Basically, you choose to believe this because you need it for your position; shouldn't you instead choose you position based on the evidence? Once again: drilling doesn't affect prices, it doesn't affect dependence; but it does make the real solution farther away.

4. Your discussion of economic costs is inaccurate. The long-term economic costs of letting the market fix this completely on its own are massive - in addition to the national security costs. Further, you pretend that we would be bearing this on our own; but Europe has been implementing ideas similar to the Pigovian for years, and China is clearly making moves to get on board. Who else do you want? And now, Europe is in a position where high energy prices don't affect it nearly as much as they do us, because Europe has moderated the cost through smart policies. You prefer to bear the costs for the long haul, in the form of terrorist attacks and a market correction that would certainly be more costly than a planned approach. You are living in a fantasy world if you think that these kinds of transitions are naturally "near-seamless."

5. Blame the weak dollar? Give me a break. Of course it is a factor. However, real oil prices passed their all-time record back at around $100/barrel. I thought only the Ron Paul fetishists still believed that you could blame the dollar for everything. Oil prices, in the long run, are a result of supply and demand, which you joke about but seem to ignore when it comes to oil. Basic economic principles, which this blog often ignores, tell us that the price trend can be explained by (1) Rising demand in emerging markets and (2) expectations of further rising demand, due to both emerging markets and American refusal to develop a real solution. Blame it on the weak dollar? Give me a break.

You say that I'm wrong because my assumptions are wrong, but you are unable to demonstrate the falsity of the assumptions. Meanwhile, you based your arguments on assumptions that, as I've just discussed, ignore basic economics. This is a result of the traditional American partisan way of approaching problems: choose your position first, based on what your party and the talk shows tell you, then start making up assumptions to support it. You would make a great congressman.

I certainly don't entertain any delusions that you would change your mind; you'll stick to your opinion as long as the Conservative talking heads do. However, it's important that your readers don't fall for your baseless arguments. Your blog of late has represented exactly what is wrong with American political dialog: rather than examining evidence, we have our opinions spoon-fed to us by partisan power brokers. Then, we use any inaccurate method we can to defend it, ignoring the contrary evidence and reason itself. We seek partisan interests over national interests. Frankly, I think its disgusting that intelligent people in the greatest country on earth intentionally choose to remain ignorant. We have nobody to blame but ourselves as we continue to lose power and influence in the world.

Matt said...
This comment has been removed by a blog administrator.
jody said...

While I don't take this blog personally I would still like to comment on this post. As someone who falls into the moderate/conservative catagory a great deal of the time, I have my own reasons for supporting certain initiatives--usually based on certain performance expectations. I assume that you might advocate policy decisions with certain results or implications in mind. With your whole embrace of drilling in your Drill Drill Drill post I was interested in your expectations of drilling; which were wildly absent. Laying aside any environmental complications, any inflated assessments of oil quantities, any political candidates futures; and assuming that your wildest policy dreams come true and a carbon tax is in place, alternative fuels are in place, and research and development is happening; what do you expect drilling for oil on American soil to do for or allow for America 5, 10, or 20 years from now?

RD said...

I've just posted a more thorough discussion of this issue, including excerpts from Dan Yergin's upcoming hearings. Of course you know that Yergin is probably the world's foremost expert on the political economy of oil, and he agrees that while the dollar is one of many small factors, the real cause of high prices is supply and demand.

Energy Straight Talk

RD said...

...And for more refutation of your claim that gas prices are due to the weak dollar: The president of the ECB, which by most accounts is more responsible regarding inflation than the Fed, discussed oil prices in the Financial Times today.

What do you think he blamed for the high price of oil? Lack of trivial drilling in the US? The weak US dollar? "The major issues are associated with supply and demand," says Jean-Claude Trichet.

This is much bigger than a weak currency and ineffective drilling ideas. We can't fix the problem until we admit that.

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