High Gas Prices Don't Play in Peoria.
April 6, 2004 10:16 AM   Subscribe

 
Heh. I agree with Dick Cheney of 1986, although it's obvious that he was protecting his own domestic oil interests, and not trying to lower our dependence on foreign oil.

Refocusing our attention upon domestic sources of energy was a good idea 18 years ago, and it's a good idea today. (Which is why W Bush levied tariffs on foreign steel way way when) Unfortunately, it goes against so-called Republican values of free trade and economic liberalism.

Yeah for Cheney '86, self-interested bastard that he was/is.
posted by BlueTrain at 10:30 AM on April 6, 2004


Follow up:
"In 1986, then- Congressman Dick Cheney proposed a tax on oil that would have raised gasoline prices and laid 400,000 workers off. Despite this bill, the Bush-Cheney campaign claims that they are interested in lower gas prices and opposed to higher taxes. Senator Kerry helped stop Cheney's proposed gas price hike, co-sponsoring for a resolution in opposition to the plan. Even Cheney's fellow Republican lawmakers opposed his gas price hike - - 15 Senators joined Kerry to sponsor a resolution in 1987 to stop Cheney's bill."

How come this wasn't brought up during the barrage of "Kerry wants to raise your gas prices" commercials from the GOP in recent weeks?
posted by EmoChild at 10:32 AM on April 6, 2004


What I'm trying to figure out is why I'm hearing these things from Air America and Eschaton, instead of from the Kerry campaign.

On Preview: What Emo said
posted by John Kenneth Fisher at 10:33 AM on April 6, 2004


metatalk (not trying to be a jerk, really)
posted by Ignatius J. Reilly at 10:39 AM on April 6, 2004


we have always been at war with EastAsia.
posted by badstone at 10:41 AM on April 6, 2004


I already lost.

What I'm trying to figure out is why I'm hearing these things from Air America and Eschaton, instead of from the Kerry campaign.

One theory.


posted by Ignatius J. Reilly at 10:46 AM on April 6, 2004


Here's a registration-free link via Google News.

So Kerry's responses are not as fast on the draw as he promised he would be... OR... he was deliberately holding off, waiting for the "Liberal Media" to break this story to make it look less like a "campaign ploy", and giving a chance for other "news chatter" to die down before the "Gasoline Prices" grenade fell clearly in Bush/Cheney's court... Still, when you're thinking about gaining advantages before the November election, please remember IT'S STILL SEVEN MONTHS AWAY!!! If you're going to make a PolitiFilter post, why not get into the speculation over Kerry's running mate? That sounds much more fun.

(why am I using so many "quotation marks"?)
posted by wendell at 10:57 AM on April 6, 2004


Is there something like Godwin for Orwell? It seems to me that, if the probability that an on-line discussion will invoke a comparison to Hitler / Nazis approaches 1, then something more or less the same could be said for some invocation of Nineteen Eighty-Four.
posted by palancik at 11:21 AM on April 6, 2004


the article points out that cheney was just playing politics by introducing a bill that would favor (my home state of) Wyoming despite contradicting his conservative values related to free trade, by taxing imported oil.

i think the price of gasoline in the US is too low, especially as compared to the rest of the world, but, as the article also points out, tax plans like this one would probably cause more harm than good.

"Under Mr. Cheney's proposal, any foreign oil bought for less than $24 per barrel would have been taxed with a fee equal to the difference between the cost of imported oil and the $24 base price. According to the federal Energy Information Administration, the cost of imported oil in the late 1980's and most of the 1990's stayed well below $24, except for a brief period following Iraq's invasion of Kuwait. In fact, oil imports cost less than $18 per barrel over much of that time, so when that was the case the Cheney plan could have led to oil taxes of $6 or more per barrel, driving up demand for domestic oil.

But the plan also included a complicated formula tying the taxes to gains in inflation and the gross national product. Senator Richard J. Durbin, Democrat of Illinois, who criticized the plan in a speech last week, said if it had been enacted when Mr. Cheney introduced it, in the years that followed it would have cost consumers $1.2 trillion.

Robert M. Simon, Democratic staff director of the Senate Energy Committee, said he used an analysis by the Congressional Research Service to calculate that the $24 price base, after adjusting for inflation, would have grown steadily to $48.24 by this year. In comparison, the price of West Texas crude oil recently peaked at $38 but has settled around $34, well above the recent lows of $11 in 1998 and $18 in 2001.
"

so higher taxes on oil (foreign or domestic) would likely only result in some other economic screw up.

what i'd like to see is for the govt to reduce subsidies to big oil companies in order to drive up prices and maybe provide some incentive for us to move to more alternative sources, but hopefully also increase productivity as per competition, the free market, etc. but the politics wouldn't play very play with cheney's main constituency these days...big oil companies, so that's pretty unlikely to happen.
posted by jacobsee at 11:28 AM on April 6, 2004


The price of oil is different than the price of gasoline. Granted, exorbidant prices of oil will necessarily lead to exorbidant prices of gasoline. But that does not mean that by saying "Cheap oil is not a good thing" one is necessarily saying "Cheap gasoline is not a good thing." Much has been written about the costs of petroleum (oil) and how it effects our economy. When I took Oil and Gas Contracts in law school, the professor constantly sounded this note. If oil companies are making enough to cover their costs, then oil will fall to an equilibrium point. Competitive markets will drive down the cost of gasoline at the pump to a level that should be palatable to the consumer. Remember, the oil producers, that is, the ones that rely on the cost of oil, are seperate and distinct from oil suppliers, that is, the ones that set the cost of gasoline.

If oil were to drop to 2 dollars a barrel, our economy would be ruined. The oil industry's production, refinement, transportation and research contributes to the economy in terms of jobs and money. If that price dropped to nothing, then the net social welfare loss would be enormous. The key to it all is figuring out the price wherein the social loss from people paying more than they would like is offset by the net social gain from the benefits of the oil industry. One should be reminded that the price off oil is not particularly high right now. I would argue that it is a tad too high to be economically efficient. But the price of oil and the resulting price of gasoline are no where near the highs of the past, adjusted for inflation.

Another spillover benefit of high pricing of oil is that it might drive production of Alternative fuels. One of the key problems of alternative fuel sources is creating enough of a demand to justify R&D. If oil prices are high, then alternative fuels will benefit. Due to this enormous benefit, I have always sided with the position that cheap oil is a bad thing. I have never bought the argument that dirt cheap oil will mean that companies won't pursue it and will turn attention elsewhere. Indeed, due to the economies of scale, oil will be produced at extremely low levels of profit. The economies of scale may crowd out some smaller companies, but that will only hurt supply which will shift the equilibrium price point higher.

So I think Cheney's suggestion is very interesting and probably correct.
posted by Seth at 11:31 AM on April 6, 2004


jacobsee,
Good to see someone making a substantive point.

so higher taxes on oil (foreign or domestic) would likely only result in some other economic screw up.

I am not sure that is the only possible consequence. As noted in my comment below yours, there could be all sorts of spillover benefits from keeping a strong price for domestic oil.

what i'd like to see is for the govt to reduce subsidies to big oil companies in order to drive up prices and maybe provide some incentive for us to move to more alternative sources, but hopefully also increase productivity as per competition, the free market, etc.

I agree with you. I would like to see this too. This is consistent with what I previously mentioned about the spillover benefits. And I wonder why you follow this line of thinking, but you conclude in your prior comment that Cheney's plan will lead to an economic disaster?
posted by Seth at 11:42 AM on April 6, 2004


Interesting : let's scrap away Cheney and Cliton and Bush and whoever for a while.

And let's have a look at this nice site looking at the incidence of taxation in 2001 on gasoline price in a few countries (basically how much tax you pay per gallon or liter). Indeed the data is old, but significative as taxation in U.S. was the lowest.

Now let's come back to the past year : as far as I know the unit of measure of value of petroleum is dollar (that is to say, companies buy petroleum and pay with U.S. dollars for petroleum). Euro money was exchanged more or less 1 euro per 1,15 dollar (which means you pay 1 euro to get 1,15 dollars , nice deal eh ? ) ..therefore european petroleum companies buying petroleum at market prices
enjoyed more or less a 15% reduction of price (all other things equal).

In Italy consumer associations complained that none of the savings coming from a better xchange rate was transfered to the consumer (in other words, while the companies enjoyed a cost cut, the price at which you buy the gasoline remained equal).

Curiously enough, the consumer associations complained, anytime there is a increase in gasoline price the companies are quick to justify it by saying that "market price rised" ; but when xchange rate fluctuates giving cost cut to petrol companies, the price remains the same or the variation is abysmal. How fuckin comes ?

The justification was that petroleum is not bought daily, but it is bought in advance (makes sense) according to the predicted demand and prices, therefore the savings could not be passed to consumer because they were still selling petroleum they bought ; it was a kind of an unspoken promise from petroleum companies .."in the future you'll get better prices, trust us ! " Mhh yeeeeah sure !

Curiously enough the market price of oil later raised (and is now peaking as far as I know) so now the companies tell us "the market price increased, sorry" ...but the savings you didn't promise , but that we expected ? Oppppps they very quickly forgot them.

How is all that stuff related to article ? In this way: somebody may suggest to get rid of taxation on gas or to very much reduce it so that everybody will get a break and economy will enjoy as a whole. Politicians either support more or less taxation, but interestingly enough not 0 tax on gas. Why so ?

What is likely is that if we got rid of taxation on gas entirely the "market" would initially show a dramatic increase in demand (as cost of gas decreases, it makes more sense to use it because it costs less then other options) ..which leads to an increase of price of petroleum because petroleum companies has no interest at selling more for less money, rather they like to sell less for more money (if petroleum is scarce, why sell a lot for little, sell a little for a lot of money, or as much as possible without starving the customer)

So at the end I suspect that the price would match or nearly match the current price with taxation ; but the money would go to corporate coffers, further cutting money that can be spent by government on public stuff because the taxation on additional revenues wouldn't match the decrease of incomes coming from lack of taxation on gas.

So the taxation on gasoline is a powerful instrument to influence the market price , as if the govt (for instace) raised the tax , people and expecially companies would start seeking for alternatives to petroleum or to find more efficient way to use it ...and eventually really reduce demand.

Meanwhile the petroleum companies would try to maneuver against the effects of taxation by reducing gas price , so that they can still meet their profit target for the year ; as they can't fire all their workers to compensate for the damages. At the same time they would blame the evil OPEC because they didn't want to increase production (which lowers price) ..curiously enough free market economy is only good and sane when they can dictate the market.
posted by elpapacito at 11:47 AM on April 6, 2004


Is there something like Godwin for Orwell? It seems to me that, if the probability that an on-line discussion will invoke a comparison to Hitler / Nazis approaches 1, then something more or less the same could be said for some invocation of Nineteen Eighty-Four.

Hell, mathematically, the longer a thread goes the probability gets closer to 1 that there will be a mention of Roddy McDowell.

As for this thread, The problem is that anyone's record can be skewed to make them look bad, no matter the party. I'm sure Cheney has a good rationale for his proposal, just as Kerry has a good rationale for his moves.

That's the problem with the majority of the American public choosing their leader on who has the loudest soundbite.
posted by John Kenneth Fisher at 11:57 AM on April 6, 2004


seth: if the price of oil drops to $2 a barrel, which I assume is below the cost of production, doesn't that mean there's too many companies producing oil? why not just let the market do its work and put the least efficient companies out of business? At that point, presumably the price would stabilize at marginal cost. Why protect inefficiency?
posted by boltman at 11:59 AM on April 6, 2004


And I wonder why you follow this line of thinking, but you conclude in your prior comment that Cheney's plan will lead to an economic disaster?

I think it's consistent to point out that govt interference in the market (gas taxes) may be as ineffective as govt interference in terms of subsidies. I didn't mean to imply economic disaster, just inefficiency. Cheney's tax plan was really more like protectionism for domestic oil than a tax to try to limit consumption.

Having just tried to understand elpapacito's argument however has just made my head hurt. One more try...
posted by jacobsee at 12:00 PM on April 6, 2004


Good New Republic link, Ignatius, thanks.
posted by John Kenneth Fisher at 12:02 PM on April 6, 2004


Why protect inefficiency?

This precisely sums up what I was trying to say.

I'm sure Cheney has a good rationale for his proposal, just as Kerry has a good rationale for his moves.

Politus goes into more detail about Cheney's purely political rationale for this move. He doesn't give any sources, but it sounds plausible:

"The main plank of the young candidate’s campaign was a federal Oil Import Tax, and he hammered Cheney with the issue at every opportunity. An Oil Import Tax would stabilize the price of oil, greatly benefiting the states that produce the strategically vital commodity. Cheney resisted, and the young Dem nominee bashed him over and over for not supporting jobs in Wyoming.

At a press event at a television station in the state capital about two weeks before the election, a reporter told the young candidate that Cheney had just introduced a bill in the U.S. House to impose an Oil Import Tax. The reporter said to him, “You know, if that bill actually becomes law, you will be the father of all that.” The candidate agreed.

The candidate and the reporter discussed how craven Cheney had been by introducing the bill just days before the session ended, ensuring it would never get acted upon and would die. But Cheney reaped the political capital of blunting the young candidates attacks in a totally disingenuous and cynical way."

posted by jacobsee at 12:03 PM on April 6, 2004


boltman,
My point is that the US can't fairly compete. OPEC could push oil to $2 a barrel and destroy American companies.

I would concur that a pure free market would likely drive most American oil producers out of business, but would that be a good thing for America? I doubt it; it would be Great Depression level of devestating. Unfortunately, because we have OPEC, we can't even have a free market. So we are left to protect ourselves, or be at the mercy of OPEC. By taxing OPEC companies, or requiring their oil to be sold at whatever our domestic companies can compete at, then you eleminate the power of OPEC to destroy the domestic oil industry.

So the conception of the market that seems most effective overall, is to have domestic companies behave in a free market, and require foreign oil to comply with the equilibrium prices established by the domestic market. This might mean cheaper oil than we can get from OPEC, but it would keep the American oil industry strong (and would permit the other spillover benefits I have mentioned).
posted by Seth at 12:10 PM on April 6, 2004


I would concur that a pure free market would likely drive most American oil producers out of business, but would that be a good thing for America?

ah, good point
posted by jacobsee at 12:19 PM on April 6, 2004


Sometimes a little protectionism can be a good thing, especially when you're talking about the commanding heights of the economy: energy, steel, play-doh, etc.
posted by jacobsee at 12:22 PM on April 6, 2004




Why have a tax on gasoline?

Well, because users of gasoline provide us with absolutely massive public costs. I seem to recall that about 40,000 people died in 2001 from car-created air pollution. There's also reason to believe that gasoline pollution contributes to higher rates of asthma and other espitory diseases. This drives up health costs, which are often, oone way or another, passed along to the government. And then there's the problem of road upkeeps and dealing with car accidents. I support gas tax to pay for these things, because it puts the cost of the car squarely on the shoulders of those who use them. It's a responsibility thing. Though, seemingly, responsibility doesn't have much to do with politics anymore.
posted by kaibutsu at 12:59 PM on April 6, 2004


Seth: OPEC could push oil to $2 a barrel and destroy American companies.

Half-serious comment: What if they did? When OPEC runs out of oil in a few decades, US companies can sell their oil for a significantly higher price.
posted by Triplanetary at 1:21 PM on April 6, 2004


seth: thanks for the response. I know next to nothing about the oil market, but I think your view is persuasive, given the problem of OPEC.

What we really ought to do is figure out a way to dismantle OPEC. I wonder how they are so effective in maintaining disipline among all the member counties, given that many could probably make a fortune by defecting.
posted by boltman at 1:37 PM on April 6, 2004


Seth: If oil were to drop to 2 dollars a barrel, our economy would be ruined.

They don't teach the Broken Window Fallacy in law school, apparently.
posted by Kwantsar at 1:37 PM on April 6, 2004


This isn't meant snarkily at all but have people been reading Doonesbury lately? Its an interview with a Republican trying to say that, in order to stop spending so much money, they need to spend more. Up is down, in is out, light is dark, etc.

I've taken to pretty well inverting whatever ShrubCo says. If they say there are WMDs then there are none. If they say no new taxes then I need to brace myself for some heavy taxation. If they say something is bad then I'm definitely going to think its a good idea.

Welcome to Orwell's 1984, only 20 years late.
posted by fenriq at 1:38 PM on April 6, 2004


It's funny. When I traveled to India, and in my many years of working with native Indians, I was always surprised by how blatant the corruption was and how real it was to its citizens.

After checking my bags at the airport, I wanted to run back outside to say goodbye to my coworker and friend. The police security initially stopped me, but soon made it clear that I could buy my way outside. (This was pre-9/11, btw). I was informed on many other occasions that it was just the way it was -- everyone wanted bribes, the politicians were corrupt, and you'd hear a lie before you'd hear anything near the truth in political matters.

At that time, it struck me as so alien -- not the corruption. We've always known there was widespread corruption in the US. What struck me was how accepted and out in the open it was -- how blatant and unapologetic it seemed, and how people didn't run out into the streets and bring the country to a standstill lest deal with their country crawling.

I never thought it was possible, but it doesn't feel so alien anymore. This administration has somehow devolved the playing field into some developing country free-for-all -- I wonder how long it will be until we are tipping the police to let us travel and ignoring politics in despair because of election fixing.
posted by VulcanMike at 1:54 PM on April 6, 2004


I've taken to pretty well inverting whatever ShrubCo says.
I've long thought that whenever a rightwinger speaks of the dreaded liberal, that what in essence they're doing is just projecting their real values/intentions onto the dreaded liberal. Thus when a winger says the dreaded liberal will do anything for power what they're actually saying is they themselves will do anything for power. When a winger speaks of the dreaded liberal and their intentions, almost without exception they're actually discussing themselves and their intentions. It's all unconscious by the winger. This theory has really helped me sort things out.
posted by Buck Eschaton at 2:33 PM on April 6, 2004


Seth: If oil were to drop to 2 dollars a barrel, our economy would be ruined.

Kwantsar: They don't teach the Broken Window Fallacy in law school, apparently.


hmmm, i can't make the connection...care to spell it out for me?
posted by jacobsee at 2:43 PM on April 6, 2004


I've taken to pretty well inverting whatever ShrubCo says.
I've long thought that whenever a rightwinger speaks of the dreaded liberal, that what in essence they're doing is just projecting their real values/intentions onto the dreaded liberal. Thus when a winger says the dreaded liberal will do anything for power what they're actually saying is they themselves will do anything for power. When a winger speaks of the dreaded liberal and their intentions, almost without exception they're actually discussing themselves and their intentions. It's all unconscious by the winger. This theory has really helped me sort things out.
posted by Buck Eschaton at 4:33 PM CST on April 6


This isn't on topic, nor is it useful. How could rational discourse be anything other than meaingless jumbles if every critique is merely projection of reality. Discourse would be non-sensical. Here, let me turn it back on to you. You are projecting onto the wingers the idea that they project their ideas on those they disagree with you. So that means those ideas you attributed to "wingers" are really your ideas? This is asinine. And it is sloppy rhetoric that adds nothing to the discussion at hand. To incorporate this belief, then really fenriq is the evil meglomanical corporate figure instead of BushCo as he suggests. After all, we only accuse that we believe ourselves to be.

Or are you suggesting that it is only the other side that is plagued by this problem? That somehow "wingers" are evil people, but your *side* isn't? This is just weak and insipid partisan junk.

Now I know I might sound like I am coming down hard on you, and that is because I am trying to. This thread actually had a topical, balanced, respectful discussion going on, and you came and injected this mindless invective (hey it rhymes). I am guessing you are new, and I hope you don't think MeFi is moveon.org where the point of every discussion is to talk about the evil 'wingers.' We were trying to have a substantive discusion here. Please try to be topical.
posted by Seth at 2:55 PM on April 6, 2004


Seth,
Sorry man, what I wrote was a lame attempt at humor and was definitely unneeded in this forum.

I'm hoping that this whole energy/oil thing will at least be mentioned during the campaign. What do Bush/Kerry actually think our situation is re the peak oil hypothesis and its potential effect on prices and future foreign policy?
posted by Buck Eschaton at 3:42 PM on April 6, 2004


i thought it was funny
posted by jacobsee at 3:44 PM on April 6, 2004


Hitler! Hitler! Hitler!

(misunderstanding and abusing Godwin's Law for fun and profit since 1975)
posted by BigCalm at 3:49 PM on April 6, 2004


Buck: No need to apologize. I was only pointing something out because you are new. I tried to explain in my post why I was rebuking you. It wasn't to shout you down or anything. I have always been an advocate of new members. So please, contribute. I was just trying to suggest contributing something new and unique that you can offer. New blood means new and unique perspectives and makes everything better. But that tired and trite argument about how the Bush Administration is so evil, etc is just nothing new and doesn't add anything new to the conversation. Not to put too fine a point on it, we didn't need new blood to make that point.

So please, comment frequently and share your new in-sights with us all. I look forward to hearing them. Welcome; glad to have you.
posted by Seth at 4:07 PM on April 6, 2004


jacobsee - I think the broken window connection is that while people say higher oil prices are good for the economy they are ignoring the fact that people would spend that extra money on other domestically produced items, if they weren't forced to subsidize the oil companies. So instead of a dollar for gas and a dollar for a couple of apples, it is two dollars for gas. The oil companies do okay, but the apple farmer loses.

I think that this argument also has a flaw in that it ignores the national security value of a domestic energy industry. I don't have sympathy for the oil companies, but I would not like to see the US held hostage by OPEC. I remember sitting in the back of Dad's car while he waited 2 hours to buy gas on alternate days.
posted by bashos_frog at 4:30 PM on April 6, 2004


bashos,

thanks, that sort of clears it up yet makes me even more confused. this increasing confusion is probably the sign of a good, nuanced conversation though.

-Eric
posted by jacobsee at 4:52 PM on April 6, 2004


Can I bring up Roddy McDowell now?
posted by wendell at 7:00 PM on April 6, 2004


I would concur that a pure free market would likely drive most American oil producers out of business, but would that be a good thing for America?

Yay free trade! (when it's good for america)

Roddy McDowell is that chick in that movie with that guy who got a bj in that taxi by that divine hooker, right?
posted by mr.marx at 7:47 PM on April 6, 2004


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