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Solving the Gas Crisis

Obama and McCain have weighed in on spiraling gas prices. But is either proposal workable? If not, what can we do? Is the situation hopeless, or is a real solution possible? Let’s examine Obama’s and McCain’s proposals, see where they’re right, and where they’re wrong. Finally, we’ll consider a bipartisan solution everyone can get behind.

Obama and the left

The main proposal coming from the left is “windfall profits” taxes on the oil companies. How will this have any impact on prices? Do they not know price = cost + profit? If you increase costs (by taxes), you increase prices. How will raising taxes lower prices? Nobody asks, as Obama’s disciples blindly follow their messiah into the twilight zone (or for you Buzz Lightyear fans “to infinity and beyond”).

For example (we don’t have an exact number, so if you do, leave a comment), if the oil companies make about $.10/gallon (we’ve heard numbers in the range of 6-8 cents), if you eliminate profit (not just “windfall” profit), you’ve only impacted prices by about a dime. Whoope. The reality would be quite different as companies consider taxes additional cost — and who pays for rising costs?

In contrast (and a proposal Obama belittled as a cheap political stunt), how much in tax per gallon do you pay? How much of a reduction if taxes were suspended? That would be a real reduction, as taxes are just artificial additions; Federal tax alone is 50% higher than oil company profit:

Fuel taxes in the United States vary by state. For the first quarter of 2008, the average state gasoline tax is 28.6 cents per gallon, plus 18.4 cents per gallon federal tax making the total 47 cents per gallon (12.4 cents/L). For diesel, the average state tax is 29.2 cents per gallon plus an additional 24.4 cents per gallon federal tax making the total 53.6 cents per gallon (14.2 cents/L).

So the average tax is about five times the oil company profit, yet the left displays righteous indignation over the dime, and blissfully ignore the $.47/gallon in taxes. Of course (as Obama recently hinted), many on the left actually want higher gas prices, so the fact their proposals do nothing should not be surprising — they don’t have citizen’s best interests at heart. But they’re stuck in a tough situation, they want higher gas prices, but can’t come out and directly say it or citizens won’t vote for them.

Hmmm. Let’s see, a $.10 reduction is real progress, and $.47 reduction is a cheap political stunt. Yes sir, we need change. With great ideas (and logic) like this, how could anyone not be behind such vision? It’s change!

The other proposal floating around the left is nationalizing the oil industry. Absurd on its face, and of course does nothing to either increase supply or decrease demand. Completely useless. But it does serve the left’s socialist interests (and maybe that’s the point).

The basic economic laws are supply and demand. If demand is up and supply is down, prices go up. Conversely, if demand is down, and supply is up, prices go down. If you want to impact prices, you affect either supply or demand (or costs, like being more efficient, reducing taxes and red tape, etc). Cost + Profit = Price.

But if you propose to increase costs, while refusing to increase supply, you’ve got the perfect storm for spiraling prices. Nobody is that crazy to believe you can increase costs, decrease supply and actually have the result of lower prices. Nobody. The only conclusion we can draw is those that propose such laughable solutions are trying to pull a fast one on citizens. Cynical? Perhaps. But the alternative is to believe these people have an IQ in single digits and shouldn’t be driving a car, much less running the country.

But Obama’s big strength is the ability to influence his followers. If he actually abandons his laughable ideas, and works with real ideas to bring down prices (by decreasing costs and demand and increasing supply), his influence could be huge, and could be a key factor to implement real solutions. But first, he’s got to jettison the far-left group-think (next idea, wage and price controls, and wearing sweaters!), and fundamentally change his idea that he likes higher gas prices (as his current ideas neither increase supply, or decrease demand — at best, the far-left ideas do nothing, and at worst make the problem worse).

Obama and the far-left are simply clueless — increasing costs (via taxes or otherwise) doesn’t reduce prices (a problem compounded when you additionally refuse to increase supply). Nationalizing the oil industry won’t affect supply and demand either. Both ideas simply pander to the far-left who actually want higher gas prices, and socialized anything. But they’re beyond worthless to help the little guy on main street.

As usual, the little guy gets gored (pun intended).

McCain

McCain is better on the increase supply side (calling for more drilling), but still won’t call for an all-out, environmentally reasonable increase in drilling. He’s still wrong.

And he’s wrong on failing to call for a massive shift to alternative energy. Oil won’t last forever, and moving off to alternative energy should be a priority. Why isn’t it?

McCain’s ideas would be a short-term reduction in prices, but a long-term loser in overall strategy. It’s time to find, develop and implement other energy. Even Larry the Cable Guy knows — git ‘er done.

In the end (as usual), the little guy gets hosed (another pun intended) under McCain’s plan as well, it just takes a little longer than Obama’s non-plan.

The Solution

Politicians look out for themselves instead of citizens (shock! horror!) — all they’re concerned about is elections, not citizens. The far-left use increasing prices to move toward socialism and increase government power, and the far-right seek to grab all the money they can while plundering citizens. Neither looks out for the little guy on main street.

Both are wrong, and both lead to the little guy paying the bill for entirely avoidable mistakes, while self-serving politicians cater to their own needs by throwing the common citizen off the cliff — while having the chutzpah to ask for campaign contributions before they hit the rocky shore below.

Supply and demand — you need to work on both. In the short term, you can’t fix demand quickly as increasing MPG on cars and such takes a looooong time. So in the short term (1-5 years), increasing production is the best way to go. But long term, oil well eventually run out (when, of course, is quite debatable and irrelevant to the point anyway), so working to reduce long-term demand by developing other resources is mandatory. And the final wildcard is costs — increasing efficiency, reducing red tape and taxes can also affect real change (oops, used the magic word, that makes everything better! It’s chicken soup for politics … oh nevermind).

Supply, demand, costs. Come on, guys, it’s not rocket science (more on that later).

So what to do? Here’s a four-point plan (many ideas which come from somewhere else) to actually do something to solve the situation. It’s a bipartisan solution everyone should agree on — nobody gets everything they want, but the situation won’t improve by inaction either.

  1. Drill Here. Drill Now. Pay Less. We can do it safely, so the time is now to start developing what resources we have. Objections over hurting the environment are absurd — even Hurricane Katrina didn’t cause an ecological disaster to the Gulf oil platforms.

    Yes we can! … increase production, while protecting the environment.

  2. Formulate a real energy policy (no rhetoric allowed) — including biofuel, nuclear, coal, hydrogen, wind, and solar — all are on the table and workable in at least some situations. We must shift to non-gasoline powered cars, for example the Chevy Volt (due in 2010). Oil won’t last forever, stop acting like it will — the time to move is now, will inaction improve the situation in five years?

    Yes we can! … develop alternative energy.

  3. A Kennedy-esqe commitment to getting the job done. No excuses. Young people under 30 don’t remember that kind of national commitment, but if you recall Kennedy’s speech calling for a moon landing before 1970 you know how it rallied the cause, and produced results beyond what we thought technologically capable (in 1962 our space program was, well, nonexistent).

    We have the technology, what holds us back is red tape, and frankly, a lack of real desire to solve the situation for citizens (as groups exploit the crisis for their own end political goals, ignoring the plight of hard-working citizens). The President should (must) demand an end to bizarre regulations holding back both expanding exploration and new alternative technology, and do it now.

    Yes we can! … get the job done (after all economics isn’t rocket science).

  4. Accept no excuses — demand action.
    • When Obama says drilling won’t help, immediately ask follow-up questions — what will supply be like if we don’t act now to increase production? Do you think doing nothing will increase supply? And how will keeping supply low lower prices? Does economic theory no longer hold?
    • Ask McCain why he’s not calling for the government to lead in alternative energy usage and move away from oil. Even if what government develops has no commercial use at all, just getting the government off oil will increase supply and help lower prices and lengthen time we can use reserves. The Federal Government should immediately launch a Kennedy-esqe commitment to wean government off oil within 10 years.
    • Ask Obama how increasing costs (new taxes) can lower prices. Ask him to cite cases where increased costs and taxes have lowered prices. Don’t fall for empty rhetoric or fancy slogans, demand real answers.
    • This is a non-partisan issue. The left gets what they want (alternative energy, higher MPG standards, biofuel, etc), while the right gets increased drilling and production. Neither partisan side “wins” — the citizen does. Isn’t that what government is for?

It’s time to get it done. If you remember Kennedy and the state of our space program at the time he said it, you’re reminded what a dedicated group of people working toward a common goal can achieve — it can be done (we succeeded in rocket science, surely economics isn’t beyond grasp). But it takes more than empty partisian rhetoric and selfish self-serving politicians with catchy slogans saying one thing, but secretly working towards other goals.

This is a breathtaking pace, and such a pace cannot help but create new ills as it dispels old, new ignorance, new problems, new dangers. Surely the opening vistas of space promise high costs and hardships, as well as high reward.

So it is not surprising that some would have us stay where we are a little longer to rest, to wait. But this city of Houston, this state of Texas, this country of the United States was not built by those who waited and rested and wished to look behind them. This country was conquered by those who moved forward — and so will space.

We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win … [John F. Kennedy, 1962]

Yes we can.

Continue with Part IIMoving to the world that works.

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12 Comments

  1. Colin says:

    I think this article gets it right about what is wrong with both McCain and Obama’s plans, especially on the most basic economic fallacy that both seem to be embracing. However, points #2 and #4 of the solution are based on these same fallacies, and would perpetuate them.

    Formulate a real energy policy (no rhetoric allowed) — including biofuel, nuclear, coal, hydrogen, wind, and solar

    This blog got it right about biodiesel a few posts ago – it’s a terrible idea. The government intervening in the market, causing the fuel prices to ripple into food prices would be both ignorant and immoral. As for the rest, no “policy” is needed – except the policy of get out of the way. Nuclear energy, for example, is not being ignored because of a lack of government initiative, but because of an abundance of government restrictions and interventions. Government needs to stop subsidizing farmers and oil companies, and also stop giving loads of wasted R&D money to other “alternative energy” corporations. This is not a new idea – they have been doing this for years and it has, not surprisingly, produced nothing but a few meaningless inventions and a large bill to the taxpayers.

    …calling for the government to lead in alternative energy usage and move away from oil. Even if what government develops has no commercial use at all, just getting the government off oil will increase supply and help lower prices and lengthen time we can use reserves. The Federal Government should immediately launch a Kennedy-esqe commitment to wean government off oil within 10 years.

    We are in this boat because the government has “led” on energy since the 70’s. Government doesn’t lead us anywhere but into energy shortages, distortions, conflicts, malinvestments and boondoggles. Dumping a bunch of tax dollars into the coffers of corporation’s R&D budgets with little accountability and only vague “inspiration goals” to meet, is a colossal waste. Subsidies to special interests are not going to bring a solution, but perpetuate the problem (and create additional, unintended ones).

    MY SOLUTIONS:
    Stop Inflating the CurrencyThis article accurately states the causes for high prices in non-distorted markets (costs + profit = price). In a free market, this is compensated for by lower prices for substitute goods and services. However, the opposite is happening – it isn’t just oil going up, but everything. And as any (older) dictionary will tell you, inflation is not prices going up, but the value of the currency dropping.

    High prices are a symptom of inflation – not the disease itself. For example, by looking at oil compared to gold, there is nothing like the drama with the dollar. So the long-term solution is for the government to stop inflating the money supply at the very least. This is the root cause of aggregate higher prices, including oil.

    Trade Not WarOil specifically, has gone up over four fold since the US invasion of Iraq. Perhaps the US should also cease supporting elements of medieval mercantilism, and consider that we can obtain resources without having to invade and occupy other sovereign nations. This was the advice of our founders, who rebelled against England primarily for its mercantilist policies. Not going to fix the short-term problems, obviously.

    The Free MarketWe need to stop looking to big government to save us and instead look to the market. The marketplace makes skyrocketing prices the oil industry’s own worst enemy – at high prices alternatives become cost-effective and worth of investment. Moving the inefficient and corrupt bloat of government further into the energy industry by not only keeping them in oil (and it’s dependent infrastructure), but expanding it into alternative energy is a looming disaster. Profit creates incentive, and that is what enables the invisible hand to operate in the public interest – not more power and money in the friends of government.

    The high prices (and profits) signals the market to increase supplies in the short run, and enables ideas, innovations and substitutes that were formally unprofitable, into viable alternatives – costing taxpayers nothing and increasing the size of government by nothing. Americans (and especially conservatives) once believed in free enterprise , capitalism and entrepreneurship – these ideas have not failed. Has government now become so attractive?

  2. This blog got it right about biodiesel a few posts ago – it’s a terrible idea.

    The previous post on ethanol centered around the state of Oregon *mandating* it without any options (creating in effect a hidden tax) — and what it does for old engines/boats, etc because of that mandate.

    We have no problem with the use of ethanol in *some* situations. Let people decide — some will use it, others not. It certainly can be part of the solution.

    Ironically, our idea of rejecting mandates, but allowing people to choose for themselves is much closer to the “free market” you espouse the virtues of, then yours of unequivocally stating “it’s a terrible idea”. It’s a terrible idea for some uses — why not let people choose themselves? Some will, some won’t. You’re not advocating government control of energy, are you? (tongue-in-cheek)

    We are in this boat because the government has “led” on energy since the 70’s. Government doesn’t lead us anywhere but into energy shortages, distortions, conflicts, malinvestments and boondoggles.

    I think you missed the point. Imagine if you will, government running like a business (pretty hard, but try). You’d search for the best deal to solve rising gas prices, correct? Now imagine a company larger than GM, Ford, IBM, Microsoft — with staggering resources in every corner of the country. That’s the federal government.

    With those resources, by themselves, they can move to alternative energy. Although you quoted it, maybe you missed this “Even if what government develops has no commercial use at all, just getting the government off oil will increase supply and help lower prices and lengthen time we can use reserves” — that’s the point.

    It’s not about government *mandating* the use of *anything*, but with the resources the feds have, they can by themselves move to alternative energy, even if nobody else does. That by itself increases supply for everyone else. And of course, just like the space program, the technology will likely spin off to the private sector. It doesn’t *have* to to be worthwhile, but in reality it likely will, just as the space program brought many new technologies to people, even though it wasn’t the primary goal of the space program.

    That’s leading by example, not mandate. Whatever they develop may have other uses, maybe not, but it’s not the point. With the resources the Federal government has, they can get off oil by themselves, and free up what they use for everyone else.

    So, what does “lead” mean (people use it differently)? If you mean government mandates to use specific solution xyz, I’d agree (as already noted in the ethanol debacle in Oregon) — it’s a bad idea.

    If you mean lead by example, or lead as in be the first (as we do), it’s a great idea — even if whatever they use has no other application. If the government stops using oil, that increases supply for everyone else *and* can save the government money (which comes from the taxpayer after all) — it’s just good business practice.

    lead != mandates

    What do you propose, the government just wait around until something drops in their lap? Would you run your business that way? If not, why advocate the government does?

    Dumping a bunch of tax dollars into the coffers of corporation’s R&D budgets with little accountability and only vague “inspiration goals” to meet, is a colossal waste. Subsidies to special interests are not going to bring a solution, but perpetuate the problem (and create additional, unintended ones).

    We never said anything like that (tax dollars to corporations, vague goals, little accountability) — you’re projecting something we didn’t say. And if the “inspiration goals … colossal waste … not going to bring a solution” you’re referring to is Kennedy and the space program, remember we did it — you may think space was a colossal waste (many do), but the program did what it was supposed to. It succeeded.

    What we said was “wean government off oil within 10 years”. It’s a concrete goal. We did it to go to the moon (I remember it), we can do it with energy.

    Trade Not War – Oil specifically, has gone up over four fold since the US invasion of Iraq. Perhaps the US should also cease supporting elements of medieval mercantilism, and consider that we can obtain resources without having to invade and occupy other sovereign nations.

    A textbook example of post hoc, ergo propter hoc fallacy.

    My dog woke up, and then the sun came up — hey, my dog caused the sun to come up!

    It’s possible the run-up in oil has nothing to do with Iraq at all (then again, some of it might be related), but too many people make the error in logic to assume just because something came after an event, it caused it.

    We need to stop looking to big government to save us and instead look to the market.

    You’ve missed the government is *part* of the market. Not government is THE market, but government is A market and a part of THE market. With the amount of energy, cars, paperclips, computers and so on the government uses, they will impact the overall economy.

    All we’re saying is run it like a business — by themselves they should investigate and deploy alternative energy — if we ran a business with the resources the Feds have, we’d do it to — it’s just sound business practice.

    As to the rest of free market, foreign policy, changing the fractional reserve system and so on, those are all large topics by themselves. Suffice it to say there’s quite a difference between textbook theory and reality. None of those ideas are practical in the foreseeable future in any event, *even* if they’re all correct. In that sense, they’re not worth discussing for the current situation save in an academic setting (good luck getting the country back on the gold standard, for example).

    The textbook says when gas hits $10/gallon (or whatever) the system will self-correct. Is that the way you want it to work out?

  3. Colin says:

    I think you missed the point. Imagine if you will, government running like a business (pretty hard, but try).

    I can imagine government running like a business – and so can the US government, which began doing just that a little over a century ago, and it was led by a new (at the time) alliance of the progressives, leftist and right-wing imperialists. Economic historians have made quite a strong argument that running the government like a business (which obtains monopoly power, for “efficiency” of course) led to and propagated many of the economic crises we are still paying for. Moreover, it is on the road to a country developing into a corporatist-government (I’ll refrain from using the “f” word since it has negative connotations associated with specific regimes).

    You’d search for the best deal to solve rising gas prices, correct? Now imagine a company larger than GM, Ford, IBM, Microsoft — with staggering resources in every corner of the country. That’s the federal government.

    With those resources, by themselves, they can move to alternative energy. Although you quoted it, maybe you missed this “Even if what government develops has no commercial use at all, just getting the government off oil will increase supply and help lower prices and lengthen time we can use reserves” — that’s the point.

    You can literally take the above argument, almost word-for-word, and replace the terms regarding energy and gas with healthcare terms, and summarize most speeches from the left calling for universal healthcare. The point is – this never goes like it should – ever. I think conservatives have no problem seeing how this is a bad idea in health markets, why some of them have joined with the left’s same philosophy applied to energy, is beyond me. Governments are monopolies and/or exercise heavy market influence wherever they intervene. We can all see the problems with a business monopoly, but fail to apply the same logic with a government one.

    Government cannot be “run” like a business because it is *not* a business – it is the government. The closest comparison to the government on the market is a monopoly.

    It is a contradiction to say that the government, being such a large consumer of energy, by moving to energy sources less efficient and then on top of that waste, tossing more money into R&D that no company on the market would profit from, is going to use less energy! This is the broken window fallacy – we don’t break something or deliberately increase our resource use (for the same result), and then in all the activity of fixing it, claim that we have created “new” wealth. Reinventing the wheel does not provide a net gain.

    The most efficient (and cost-effective to taxpayers and the rest of the energy consumers) role for government is to use the cheapest energy available – oil. They definitely shouldn’t be using less efficient energy (which has a net increase of oil usage to compensate) and then engage something else they are absolutely horrendous at – innovation (government and innovation hardly belong in the same sentence).

    But this also reveals that government, by it’s massive demand, is causing an upward push on the price. How about instead of switching government over to less-efficient energy, we just start cutting government (do conservatives even support this any more?).

    It’s not about government *mandating* the use of *anything*, but with the resources the feds have, they can by themselves move to alternative energy, even if nobody else does. That by itself increases supply for everyone else.

    That is a fallacy. Ethanol causes prices to go up in markets where it is imposed by government fiat because it takes more gas per net gallon of ethanol than it saves. It is a net loss! Multiplying this by something the size of the federal government will cause a massive increase in resource use and reduce the supply of fossil fuels!

    Oil doesn’t operate on an island by itself. It is in a market with its competition, substitutes, threats of substitutes and the millions of alternative preferences of consumers. Only the market can organize this kind of complexity. A government shoving its way into this dynamic environment is going to have dramatic repercussions all over the place that result in a net loss of production.

    The second thing I think you are missing is this: do you really think that the special interests, lobbies and corruption that plagues every other government project like this is going to suddenly disappear? How are they going to determine who to give the R&D money to? How are they going to be accountable? What about their friends? How do they determine what kind of energy to develop? Who does that analysis? The opportunities for favours, benefits and subsidies grows like a mushroom cloud. That’s the last thing we need affecting the already distorted energy market.

    And of course, just like the space program, the technology will likely spin off to the private sector. It doesn’t *have* to to be worthwhile, but in reality it likely will, just as the space program brought many new technologies to people, even though it wasn’t the primary goal of the space program.

    We can debate the space program another time. But if NASA is your example of government efficiency and “bang for the buck” from tax money…

    What do you propose, the government just wait around until something drops in their lap? Would you run your business that way? If not, why advocate the government does?

    Responsible businesses, individuals and families don’t takes risks that won’t pay off. If they do – they get into trouble. The government should be adopting proven technologies, after the market sifts the wheat from the chaff. This is how successful businesses operate – calculated risk, not shooting from the hip on unproven technologies that may or may not actually do any good.

    A textbook example of post hoc, ergo propter hoc fallacy.

    My dog woke up, and then the sun came up — hey, my dog caused the sun to come up!

    It’s possible the run-up in oil has nothing to do with Iraq at all (then again, some of it might be related), but too many people make the error in logic to assume just because something came after an event, it caused it.

    Not at all – this is establish and confirmed by the output data, interpreted in plain empirical economics. I’m not saying correlation equals causation, I am saying that we have a clear shortage caused by war. War is not good for any economy and it does not improve trade, but restricts it.

    The textbook says when gas hits $10/gallon (or whatever) the system will self-correct. Is that the way you want it to work out?

    I want the most ethical and workable solution – history has proven that to be the free-market. Central planning of any industry by government or groups and businesses surrogated with government leads down a path to ruin. If gas really is scarce enough to warrant $10 a gallon, than that is what it is. There is nothing in the constitution that says we have a right to gas under $3. Breaking the constitution, and advocating more government largesse, to keep gas prices low is short-sighted and speaks to economic consequentialism.

    No one (almost, anyway) *wants* gas to be $10. But ten dollar gas for a time (if the market is allowed to correct it) is a small price to pay for preservation of liberty. To abuse a famous historical quote: those who would trade freedom for cheaper gas deserve neither.

  4. You can literally take the above argument, almost word-for-word, and replace the terms regarding energy and gas with healthcare terms, and summarize most speeches from the left calling for universal healthcare.

    How you go from the Federal government ITSELF moving to alternative energy to UNIVERSAL healthcare escapes us. One is government-only, the other is national.

    I am saying that we have a clear shortage caused by war

    We can play dueling reports all day, and people will see what they want to see (Watch out for Confirmation bias.) It’s reasonable to accept the possibility *some* of the increase was caused by Iraq, but to make a blanket statement of fact isn’t so possible. Even if the shortage is correct, how much *price* is involved? How much is increased demand from other countries (which would have happened anyway). How much is oil speculators?

    The most efficient (and cost-effective to taxpayers and the rest of the energy consumers) role for government is to use the cheapest energy available – oil.

    Failure to think ahead until the problem hits isn’t very wise. “It’s smooth sailing so far” — until the iceberg hits. Of course, you should have seen the iceberg and taken appropriate measures.

    Ethanol causes prices to go up in markets where it is imposed by government fiat because it takes more gas per net gallon of ethanol than it saves.

    A) you’re stuck on ethanol again. We didn’t say ethanol only.

    B) you’re stuck on government fiats again. We specifically said no mandates.

    You’re arguing against things we didn’t say, so no need to discuss further.

    … this also reveals that government, by it’s massive demand, is causing an upward push on the price.

    Thanks for agreeing with our point, at least we agree if government moves off oil, the likely result is a reduction in price for the rest of us as supply would dramatically increase.

    The second thing I think you are missing is this: do you really think that the special interests, lobbies and corruption that plagues every other government project like this is going to suddenly disappear?

    And that relates to the price of tea in China how? A classic Red Herring.

    Those problems exist (and will have solutions) irregardless of what energy the government uses (they been part of government and business since … well forever). It’s irrelevant to the discussion of alternative energy (although important to government/business functioning in general).

    But if NASA is your example of government efficiency and “bang for the buck” from tax money

    You talked of vague “inspiration goals”, and the space program met it’s objective — nothing more, nothing less. Once again, you’re arguing against what we didn’t say — we never said it’s an example for efficiency and bang for tax buck.

    The most efficient (and cost-effective to taxpayers and the rest of the energy consumers) role for government is to use the cheapest energy available – oil … The government should be adopting proven technologies, after the market sifts the wheat from the chaff.

    After all the discussion, you’ve answered the main question underlying everything and we can boil down our different views to this — you propose to do nothing until the market sorts it out (just as the textbook says) and the iceberg is hit (naturally, there will be a shortage of lifeboats, but too bad). At that point, the system will self-correct (albeit with considerable turmoil).

    We fundamentally disagree with waiting, and believe in altering course *before* the iceberg is struck.

    In short, the extreme positions of blindly following textbook dogma and doing nothing until the market sorts it out (reality never works exactly like the textbook), and the other extreme of nationalizing energy and mandates are both wrong. We take a moderate approach — the iceberg is coming, and prudent people plan for it.

    If you disagree, fine.

    We keep getting farther away from the main point, so there’s not much left to discuss.

  5. Colin says:

    How you go from the Federal government ITSELF moving to alternative energy to UNIVERSAL healthcare escapes us. One is government-only, the other is national.

    It is in the exact way I mentioned. The justifications (and fallacies) are exactly the same. Claims that the government can use its massive size to create efficiency in healthcare are no different than in energy. Government doesn’t (primarily) own it’s own refineries, laboratories and R&D complexes – it farms out contracts to existing private entities. It shifts these resources away from providing market-demanded goods and services and towards providing government mandated ones. Government does not operate in a vacuum.

    We can play dueling reports all day, and people will see what they want to see (Watch out for Confirmation bias.) It’s reasonable to accept the possibility *some* of the increase was caused by Iraq, but to make a blanket statement of fact isn’t so possible. Even if the shortage is correct, how much *price* is involved? How much is increased demand from other countries (which would have happened anyway). How much is oil speculators?

    It is possible to make a statement of fact that a dramatic loss of supply and instability in one of the largest oil producers in the world will cause prices to rise. This is both an empirical and theoretical fact.

    Failure to think ahead until the problem hits isn’t very wise. “It’s smooth sailing so far” — until the iceberg hits. Of course, you should have seen the iceberg and taken appropriate measures.

    Which would be exactly what I said – wait for the market to sift out what kind of technologies are actually cost effective before moving the behemoth of the federal government onto unproven technologies. That is the most wise and fiscally responsible solution. It is reckless to just do *something* and start throwing tax money at unworkable alternatives.

    Thanks for agreeing with our point, at least we agree if government moves off oil, the likely result is a reduction in price for the rest of us as supply would dramatically increase.

    This is not what I said. If the government moves off oil to something less efficient then it will increase energy usage and increase prices. If the government stops using oil in favour of nothing (actually saves energy) then of course the price will go down.

    And that relates to the price of tea in China how? A classic Red Herring.

    A red herring is an distraction from the main point. But it is totally relevant to your point that “magically” the government is going to somehow be more efficient at alternative energy usage and bypass the normal stalling points of every government good-will program (the items I listed and then some). It is an important counter-argument and one you refuse to consider. As a conservative – I would think you can see the corruption in the public education system, for example, that results from those things listed. Do you really think people will put their greed and selfishness aside if the government starts heading out money, power and prestige for energy? We are talking about the exact same principles.

    After all the discussion, you’ve answered the main question underlying everything and we can boil down our different views to this — you propose to do nothing until the market sorts it out (just as the textbook says) and the iceberg is hit (naturally, there will be a shortage of lifeboats, but too bad). At that point, the system will self-correct (albeit with considerable turmoil).

    We fundamentally disagree with waiting, and believe in altering course *before* the iceberg is struck.

    This is textbook politician’s fallacy. Things are going bad and we don’t know what to do – we must do something! But what you propose (which you never dealt with in your response) is not going to get the results you expect. I don’t care if you ignore the rest of the discussion – this is what you are burdened with proving:

    – How is it more efficient for the government to switch to less efficient energy (methods that obtain the same result using more resources)?

    – How does throwing tax money at subsidizing unprofitable, unsustainable ideas improve our energy problems?

    – Why would the government be able to innovate better than the private sector and create technologies even the most thrifty of corporations cannot yet master?

    – How is the government going to avoid the corruption that inherently comes with increased power and money concentrated in Washington?

    These are relevant criticisms of points two and four of your solution, which as far as I can see, presume that the government can and should intervene further in the energy market – and will (somehow) be immune from the proven failings of such policies.

  6. As a conservative – I would think you can see the corruption in the public education system, for example, that results from those things listed. Do you really think people will put their greed and selfishness aside if the government starts heading out money, power and prestige for energy?

    That is *textbook* red herring — shifting discussion from alternative energy to waste/greed/selfishness in government.

    What you’re talking about (waste) exists independent of government use of oil, ethanol, water or pixie dust. It can be corrected if the government uses oil, ethanol, water or pixie dust.

    Thus it’s irrelevant *to the point at hand* (even if it’s important for government generally) and contributes nothing to the discussion of the topic, and is not an argument for or against as it will be solved or ignored independent of the choice of energy.

    That is the very definition of a red herring, or as you say a “distraction from the main point.”

    Don’t confuse *importance* with *relevance* — world hunger is important, but not very relevant to the topic at hand.

    … “magically” the government is going to somehow be more efficient at alternative energy usage and bypass the normal stalling points of every government good-will program

    Again irrelevant. If “every government good-will program” has those problems, they can be solved (or ignored) for *every* program independent of the specific program (they’re not specific to any one program). Thus, again irrelevant to the choice of a specific energy.

    That’s a “distraction from the main point” again.

    It is reckless to just do *something* and start throwing tax money at unworkable alternatives.

    None of which we said (please indicate where we said throw money, vague goals, subsidies, mandates and so on). And “unworkable alternatives” are *your* opinion. As we continue to research, the once-impossible becomes ordinary. It won’t happen by magic, but hard work.

    Every engineer knows it takes hard work. It takes concrete goals with specific timetables. And it can be done — we’ve done it before.

    But it is totally relevant to your point that “magically” the government is going to somehow be more efficient at alternative energy usage and bypass the normal stalling points of every government good-will program (the items I listed and then some). It is an important counter-argument and one you refuse to consider.

    You’re stuck on magic, which we never said either — it takes work. It’s not a counter-argument because those problems with government programs can affect *any* program, and can be solved for *any* program (government or corporate). Thus they’re not relevant to this specific topic — they are a product of government at large (or large corporations), and can be solved (or ignored) for the government at large independent of the choice of energy.

    Things are going bad and we don’t know what to do – we must do something!

    Again, misstating our position. Nobody said it was magic (except you) or we should do something random by throwing money at it and hope for the best. It’s a development effort which will find the best solution — no magic involved, just hard work and research.

    Politicians fallacy:

    1. Something must be done.
    2. This is something.
    3. Therefore, we must do it.

    Nobody is saying to just do *anything*, we need to move to alternative energy, and that takes research. A concrete goal of a specific period of time. Nobody is saying vague goals or anything else. Another misrepresentation.

    How is it more efficient for the government to switch to less efficient energy (methods that obtain the same result using more resources)?

    Nobody said less efficient – you’re assuming again. Do you propose to know everything about *all* alternatives to be developed in the future by research? I didn’t think so.

    The sooner we start developing alternatives, the sooner they become available. It’s that simple. You propose to wait; to use your terms, what’s “magical” about waiting until disaster strikes?

    How does throwing tax money at subsidizing unprofitable, unsustainable ideas improve our energy problems?

    Another misstatement — please indicate where we promoted subsidies. As to profit and unsustainable, you’d have to have *all* knowledge about *all* possible future possibilities to make that statement as fact — research is just beginning.

    These are relevant criticisms of points two and four of your solution

    Since those criticisms apply to government as a whole, irregardless of energy choice (or program), they are not relevant, and are distractions from the main point (They may be important, but not relevant). Those problems may exist currently with oil and are not specific to changing energy choices, so are quite irrelevant.

    which as far as I can see, presume that the government can and should intervene further in the energy market – and will (somehow) be immune from the proven failings of such policies.

    Government should solve their energy problem FOR THEMSELVES, nobody said intervene in the energy market in general, or mandates, or subsidies. You’re seeing what you want to again, but it’s not *our* position you’re arguing against.

    This is no longer a discussion about different views — you don’t understand what our position is as you continually try to ascribe to us subsidies, government mandates and the like. You’re trying to shift discussion (via red herrings), or mischaracterize our position (confirmation bias), and even after repeated corrections and re-statements, you fail to understand what our position is and continue to argue points we don’t even promote.

    We can agree to disagree, but even that’s impossible when you don’t really know what our position is. You’re arguing against someone else’s point of view, and thus, further discussion is not possible and would be a waste of time.

  7. Colin says:

    Are you simply saying we should “research” without intervention, subsidies, mandates etc…? How in the world are you proposing that we do that? The only way that government can do that (which I know of) is a house resolution speaking to the air in the building – good luck getting anything out of that. Please explain how the action of your proposal is supposed to take place. How does government “solve their energy problem FOR THEMSELVES” without affecting the market negatively whatsoever?

    I think until we get to this you are going to continue to call my arguments red herrings (which I think will be shown that they are not) and I am going to continue to call your solution unworkable at best and damaging at worst.

  8. Colin says:

    It’s seems I am not going to get a response… for whatever reason. Since this conversation is closed, I would just like to add for the record that the government is not isolated from the market. The definition of government REQUIRES that it use some form of intervention (mandates, subsidies, taxation, spending, corporate welfare, etc…) even when it is doing something that only directly affects it own resources. Despite the fact that the author never ever calls for these things in name, his suggestion requires them. It is as though the conversation went like this:

    A: “I propose we shoot Murray”
    B: “Have you considered the bullets you will use? If you use 9mm they will go through the walls and hurt others. .45 might not be accurate enough, etc…”
    A: “RED HERRING! I never said anything about bullets! My suggestion has nothing to do with 9mm, .45 or any kind of bullets!”

    A solution that claims to be a “workable” solution, but which cannot define how it works is not realistic.

  9. […] our last article on gas prices, we noted a four-point plan to bring down gas prices — a quick review in case you missed […]

  10. […] background on the gas prices issue, see Solving the Gas Crisis, Part I and Solving the Gas Crisis, Part […]

  11. FutureFacesNYC…

    […]Solving the Gas Crisis « Constitutional Conservatism[…]…

  12. Janeen says:

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