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Saturday, September 6, 2008
New News Since June!
It feels like almost forever since my last post but the summer required me to handle a couple of issues. Now I am back and not a moment too soon. Since I last posted we were exploring gas prices and which candidate was really making the better proposal. Now its time to shift gears and I think the best way to do that is to first discuss the Vice Presidental selection of both men.
Monday, June 30, 2008
Gas Prices, A Major Campaign Issue? Any Possible Solutions? continued...
Part 2
Now we can focus on some offered solutions by our politicians. First we will start with the Republican presumptive nominee John McCain. His original solution was to lift the federally imposed gas tax for the summer. Great Idea right? Well before we crown McCain as the solver of this huge global problem of oil price, lets fully examine what is being offered.
As mentioned in my previous piece, the federal government tax accounts for only about 10% of the price we pay per gallon of gasoline. This would mean that if we average the nations per gallon gasoline cost at $4.00, each of us would be saving a whopping $0.04 on every gallon! That's right a whole 4 CENTS. If we were to add that up for about 17 gallons of gas (an average of what fills a gas tank in a sedan) we would be saving a whopping $2.72 when we fill up (total cost would be about $68.00) and about $0.68 per gallon of gas we purchase! Is this really an answer to our oil problems. Some make the argument that "A little relief can go along way." Apparently not. You would be lucky to get about 5 miles with the serious savings with this tax free idea ($0.68 would by about 0.17 gallon of gas and sedans get about 32 highway miles per gallon so that amounts to a little more than 5 miles).
Now Senator McCain, and many other Republican elected officials support off shore oil drilling. To tell you the truth I was almost doped by this idea. There is currently a ban on new off shore drilling in areas of our country such as Florida and Alaska for preservation of the wildlife and environment. Republicans have been pushing to remove this ban so that we can drill and have our own oil. In other words if we increase the supply of oil available we will force the prices of gas to decline somewhat. This sounds like a great idea and for a minute I was on board. That is until I did my research. It turns out that the oil companies in this country ALREADY HAVE PERMISSION TO DRILL IN AREAS OF THE COUNTRY and guess what THEY DON'T! There are many areas of the country that are open for drilling. Acres and acres of land are available to start the processing and refining of oil. Oil companies own leases to this land and they do absolutely nothing with it and from a business side why would they. If oil became over abundant in this country then the price of oil would plummet and the multi-billion dollar industry would become a multi-million dollar industry. Huge losses for the oil companies! So why are they pushing for the life of the federal ban on offshore drilling? It turns out that they can own acres of land, produce no oil until they decide to, in order to keep the prices nice and high, bleeding the American middle class and maintaining the lavish lifestyle of oil company execs.
There is a bill currently being voted on in Congress that, if made into law, would force oil companies to pay fines for not developing and drilling their already leased land. Please visit the website of your U.S. Senators and Congressmen to voice your support for the bill that will force oil companies to use the land they already have leases for drilling.
Now we can focus on some offered solutions by our politicians. First we will start with the Republican presumptive nominee John McCain. His original solution was to lift the federally imposed gas tax for the summer. Great Idea right? Well before we crown McCain as the solver of this huge global problem of oil price, lets fully examine what is being offered.
As mentioned in my previous piece, the federal government tax accounts for only about 10% of the price we pay per gallon of gasoline. This would mean that if we average the nations per gallon gasoline cost at $4.00, each of us would be saving a whopping $0.04 on every gallon! That's right a whole 4 CENTS. If we were to add that up for about 17 gallons of gas (an average of what fills a gas tank in a sedan) we would be saving a whopping $2.72 when we fill up (total cost would be about $68.00) and about $0.68 per gallon of gas we purchase! Is this really an answer to our oil problems. Some make the argument that "A little relief can go along way." Apparently not. You would be lucky to get about 5 miles with the serious savings with this tax free idea ($0.68 would by about 0.17 gallon of gas and sedans get about 32 highway miles per gallon so that amounts to a little more than 5 miles).
Now Senator McCain, and many other Republican elected officials support off shore oil drilling. To tell you the truth I was almost doped by this idea. There is currently a ban on new off shore drilling in areas of our country such as Florida and Alaska for preservation of the wildlife and environment. Republicans have been pushing to remove this ban so that we can drill and have our own oil. In other words if we increase the supply of oil available we will force the prices of gas to decline somewhat. This sounds like a great idea and for a minute I was on board. That is until I did my research. It turns out that the oil companies in this country ALREADY HAVE PERMISSION TO DRILL IN AREAS OF THE COUNTRY and guess what THEY DON'T! There are many areas of the country that are open for drilling. Acres and acres of land are available to start the processing and refining of oil. Oil companies own leases to this land and they do absolutely nothing with it and from a business side why would they. If oil became over abundant in this country then the price of oil would plummet and the multi-billion dollar industry would become a multi-million dollar industry. Huge losses for the oil companies! So why are they pushing for the life of the federal ban on offshore drilling? It turns out that they can own acres of land, produce no oil until they decide to, in order to keep the prices nice and high, bleeding the American middle class and maintaining the lavish lifestyle of oil company execs.
There is a bill currently being voted on in Congress that, if made into law, would force oil companies to pay fines for not developing and drilling their already leased land. Please visit the website of your U.S. Senators and Congressmen to voice your support for the bill that will force oil companies to use the land they already have leases for drilling.
Saturday, June 28, 2008
Gas Prices, A Major Campaign Issue? Any Possible Solutions?
Part 1
With gas prices rising at exuberant rates experts say that this may be the sleeper. Sleeper in that this issue may make or break one of these candidates in November. But before we examine the position of both candidates we need to first explore why prices at the pump are so high and what exactly we are paying for. There are many claims that oil is expensive because of the "big oil companies" but what exactly are they doing, or not doing, that is causing the fuel to be this high? Attention to off shore drilling has made its way to the forefront of both campaigns in an effort to prove that we have plenty of oil here in the U.S. If this is the case then why aren't we drilling and using our own resources? And yet there was another policy of relief offered in the past by Senator McCain. That policy would be to repeal the gas taxes for the summer to give the American public some relief. But is this idea going to be all that great? It seems that the answers to these questions are complicated and a simple "yes its big oil's fault" or "yes we should be drilling" is not sufficient to answer these questions.
First lets examine how the price of gas is determined at the pump. According to fueleconomy.gov, the breakdown in May for a gallon of regular was as follows: 75% of the price per gallon is due to the price of crude oil, 10% is due to the process of refining, distribution and marketing costs 5%, and 10% of the price is due to the tax imposed by the government. The breakdown in May for Diesel was: 64% for the price of crude oil, 21% for the refining, 5% for the distribution and marketing, and 10% on taxes.[1]
According to The Quarterly Journal of Economics, price increase of crude oil directly affect the retail gasoline prices (what we pay at the pump), while a hypothetical decrease in crude oil would not have the same effect.[2] This paper was published in 1997 yet this idea holds true to the present. The asymmetry seen here is seen in many different markets and can be used not only for oil. Sam Peltzman at the University of Chicago writes in his article Prices Rise Faster than they Fall, he explains that positive shock to prices in many markets is twice as influential than negative shock.[3] That means that overall the theme seen with markets is such that it takes twice as long to offset positive shock (increases in prices) hence the reason retail gasoline has increased so quickly and inferring that prices would not be reduced anytime soon. So is this the dead end that it sounds like? Part 2 will discuss the possible solutions and see if any are truly realistic.
References
[1] http://tonto.eia.doe.gov/ask/gasoline_faqs.asp#gas_prices
[2] Borenstein, Severin, A. Colin Cameron, and Richard Gilbert. "The Quarterly Journal of Economics." The Quarterly Journal of Economics 112 (1997). Abstract. Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes? (2006): 305-339
[3] Peltzman, Sam. "Journal of Political Economy." Journal of Political Economy 108 (2000). Abstract. Prices Rise Faster Than They Fal
Friday, June 27, 2008
The Dems, Unified!
Today marked the beginning of the Unity tour for Barack Obama and Hillary Clinton. The idea today was to make sure that the hardcore Clinton supporters got on board with Senator Barack Obama. The two had a rally today in Unity, New Hampshire and it seemed to go very well. However, the former President, and in fact the only Democratic president in almost 20 years, has not come on board. Could this be a sign that there is still bitter feelings between both camps? Of course there is bitterness. The two candidates went toe to toe right to the end. A case can be made that had Hillary Clinton dropped out of the race earlier and conceded on the night Barack won the nomination, there would be less bitterness. Nonetheless the two candidates held a united front today. Each praised the other and Obama proclaimed the wonders Clinton has done for women of all ages. It still remains to be seen if Bill will be joining in on the "happy marriage."
True democrats that voted for Clinton, especially women, can not honestly say that McCain is their candidate. It is clear the John McCain is not the candidate for women who are pro-choice, who are in favor of universal health care, and who are in favor of bringing home the troops. To the millions of Clinton supporters remember what is at stake!
Pure Politics '08
True democrats that voted for Clinton, especially women, can not honestly say that McCain is their candidate. It is clear the John McCain is not the candidate for women who are pro-choice, who are in favor of universal health care, and who are in favor of bringing home the troops. To the millions of Clinton supporters remember what is at stake!
Pure Politics '08
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