Tuesday, April 1, 2008

Oil and Gasoline

"Markey challenged the executives to pledge to invest 10 percent of their profits to develop renewable energy and give up $18 billion in tax breaks over 10 years so money could be funneled to support other energy and conservation.

The executives said the companies already are spending billions of dollars - more than $3.5 billion over the last five years - on renewable fuels such as wind energy and biodiesel, but rejected any tax increases."

If you want to understand why Rush Limbaugh reacted so violently to the Democrat/Congressional bashing of Big Oil, to the point of fallacious reasoning (see previous entry), read the above paragraphs from today's AP/AOL story.   Congress is just using Big Oil as a puching bag for political purposes.

In other words, Democrats are not really concerned about eliminating "tax breaks" (as Limbuagh realizes).  What Democrats are interested in is finding money to SPEND, in ways that will likely INCREASE the price of oil, gasoline, and even food.

And look at the ASSUMPTION that Democrats in Congress have a RIGHT to DEMAND how energy companises spend their money.  This is the Hillary Clinton/Barack Obama assumption that it all belongs to the Federal Government in the first place, and that privant companies and civilians are only being allowed to keep some of the money by the grace of the government.  It is hard to imagine a philosophy any more destructive than this one, and Rush Limbaugh fully realizes what is going on.   Public companies are supposed to act in the interest of SHAREHOLDERS.  No one has any right to DEMAND, or even expect, that they act in some central planning concept of the "public interest". 

Where I fault Big Oil is in creating private empires with the same defect of too few decision makers (every big merger reducing decision makers/competitors by one) as represents one of the primary flaws of central planning.  In fact, these huge, private corporate empires also have the other fatal flaw of central planning:  Not really adequately subject to the free market self-correcting virtue, because they are TOO BIG to feel market forces until it is too late.

Note the problem with Democrats.  Do they want to take away "tax breaks" from Big Oil because they should not NEED them, with oil around $100 a barrel--especially when such tax breaks may DISTORT the free market allocation of resources?  Not on your life. 

Democrats want to immediately SPEND the 18 billion in repealed "tax breaks" to DISTORT the free maret in the way that fits the political agenda of Democrats.  This idea that POLITICIANS know the correct way to centrally plan the economy is really the philosophy of Communism (with a big "C").  Central planning has been a consistent failur throughout history because it ALWAYS misallocates resources, without the self-correcting mechanism of the free market.

You doubt this?  Look at BIOFEULS.  The artificial push toward biofuels is RAISING THE PRICE OF FOOD (not to mention beer)--a LOT.  This is taking FOOD out of the mouths of poor people around the world.  And biofuels take more energy to produce than they "save". 

Now I actually have little love for "Big Oil" (see above, and previous entry), mainly because these huge companies have been produced primarily through MERGER--ARTIFICIAL corporate empires no less dangerous to free market theory than interference in markets by the Federal Government.   These huge companies have NOT been produced by great success in the production of oil and energy.

Note, however, that Democrats did NOT oppose the big mergers that produced these oil giants.  That is because leftist Democrats don't believe in the free market in the first place.

What is the BEST incentive for the development of "alternative" energy--with the free market doing what it does best:  properly allocating resources into the RIGHT "alternative energy"?  It is HIGH OIL PRICES.  Eventually, those high oil prices will make "alternative energy" and conservation attractive enough without the distortions of central planning.

In a free market, oil companies are NOT responsible for the "public good".  That comes from the natural operation of the free market.  However, energy companies have done their best to control/limit the free market in their industry (even beyond OPEC).   The solution, however, is NOT to further distort the free market, but to try to encourage a free market in energy.

That said, I do think that there is a SPECULATIVE component in the present price of oil (no real shortage of oil, which also makes it likely that all of these big mergers have adversely affected the free market in oil).  While oil prices were going up, the government CONTINUED to take oil out of the market to put in the emergency reserve.  At some point, that did not make sense  Further, the President SHOULD probably break the PSCYCHOLOGY of the resent market (witht he huge speculative component).  Even a token release from the Strategic Petroleum Reserve--a mere showing of determination to try to let the free market work, free of specualtion and manipulation, MIGHT be enough.  It is worth a try.  Now it may not work, because everyone should realize that we cannot deplete the strategic reserve just because of prices.  However, this is all about PSYCHOLOGY.   I would try it.

I am actually out on my own little limb on this one.  I like big corporate empires, produced by merger, almost as little as I like the central planning disaster that is the Federal Government--BOTH violate free market theory, and experience shows BOTH to be destrcutive to a proper allocation of resources (plus being too resistant to self-correction because of the type of pressures a free market can provide).  The Federal Government--that bloated behemoth of central planning where efficiency and timely correction of wrong choices is IMPOSSIBLE--is WORST, of course.  But the corporate empires have the smae flaws, on a lesser scale.

Yes, I AM out on my own little limb, with few others.  However, I have the advantage of being right.

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