American Elephants


The Democrat Congress Blew it Again. by The Elephant's Child

Democrats in Congress, and remember that this is a Democrat-controlled Congress, have been desperately searching for a fall-guy to blame for rising gasoline prices. They certainly don’t intend to accept any blame for refusing to allow drilling offshore or onshore, or new refineries, or nuclear plants; no, not their fault. Don’t blame them — it’s the evil speculators who are manipulating the futures markets.  Speculators were everywhere!

Oops! Unfortunately there is no evidence to support the conspiracy theories.  The Commodity Futures Trading Commission, in one of the most authoritative studies ever done, has presented hard statistical data that clearly indicates that financial trading has not been driving price moves.  The federal regulators looked at millions of transactions worth billions of dollars between January and June this year.

Congress held more than 40 hearings on “Speculators” over the summer, if you wondered what they were doing.  Something useful as usual.  The CTFC notes that the expansion of commodities indexing can be partially explained by investors seeking to protect themselves from inflation.  Which has been driven up — at least in part, by Congress’ refusal to allow drilling for oil.



Speaker Pelosi’s Improbable Pronouncements. by The Elephant's Child

Democrat Nancy Pelosi, Speaker of the House, appeared on Meet The Press yesterday. Mr. Brokaw inquired about the Democrat Congress’s very low approval poll numbers. She admitted that the oil companies and the administration all ranked higher than Congress in those polls. “BUT the point is this. People—” she said,”we have to look after the consumer, we have to increase the supply of energy. And the President, even as recently as yesterday, said if you drill offshore, you’re going to bring down the price at the pump. It simply is not true.”

Many economists and professors have pointed out that the President is right, and Ms. Pelosi doesn’t know what she’s talking about. Professor Don M. Chance, a professor of finance at Louisiana State University said:

Thus, the current price of any storable commodity will be affected by expectations of future supply because producers use those expectations to determine when to bring their product to market.

Oil is an excellent example because it has a long storage life. Every drop of oil consumned is on the market for only a small fraction of the millions of years of its life.

If producers expect increased supply in the future, the incentive to bring oil to market later is reduced.

Ms Pelosi went on to say that “Well the fact of the matter is — and the President knows this — if you drill offshore today , you won’t have any impact at the price at (sic) the pump for 10 years, and then it’s 2 cents. We can move much quickly (sic) by releasing oil from the strategic petroleum reserve and having an impact at the pump in 10 days, in 10 days.(sic)”

There are offshore oil rigs that have been sitting off the coast of California, idle since Democrats put a block on drilling decades ago. With restrictions lifted, they could potentially be producing in 3 years, because they know where the oil is.

The significantly explored areas are the central and western parts of the U.S. Gulf of Mexico. Demand all over the world is such that drilling companies are pulling rigs out of the U.S. Gulf. Larry Dickerson, CEO of Diamond Offshore Drilling, says that there are probably 30% fewer rigs working than there were 3 years ago. The rigs that they have are booked up quite a bit in advance, so they would have to build new rigs or relocate rigs here. While that was going on, oil company customers would be doing the seismic exploration, so he estimates four or five years to start producing oil. Not exactly what Ms. Pelosi claims.

Environmental organizations have a mystic belief in “alternative energy”. Wind, solar, and biofuels. Natural. Not “dirty”. Not nuclear. They make a huge assumption that if we just contribute enough money, these sources that contribute only a minuscule bit of energy will suddenly be able to take over the entire job of supplying American energy. That is wishful thinking. And as these organizations are a huge source of Democrat money, Congressional Democrats cannot afford to do other than follow their demands.

The Left always believes in giving taxpayers’ money to their pet causes. They think of it as government money, or their money, to do with whatever seems noble. Trouble is their ‘noble’ causes seldom seem to work. But Democrats are interested in intentions, not results.

They never seem to understand that if the price of gas is so high that people are interested in alternates, the free market will produce all sorts of folks tinkering in their garages to produce new engines, new batteries, new fuels, new cars.

That is what the Capitalism that they so despise does.

Subsidies, on the other hand, entice people hoping to make a quick buck. England has all sorts of problems with wind farms being put in places where the wind supply is doubtful, simply because the subsidies pay for it. In Japan, when subsidies were removed activity in solar power ceased; because there were not investors willing to risk their money in the hope of future profit.

Speaker Pelosi actually had the nerve to claim that big oil, needed to pay “royalties” to the American people, Big oil pays three times as much in taxes as they receive in profits. If they lease land on which to drill, they bid at auction, enormous sums. If they secure the lease, they pay rent every year. If they cannot find oil on the land that they leased, tough luck, rent continues until the lease term is up. At the end of the lease, it reverts to the government.

American corporations are more highly taxed than their counterparts around the world. U.S. corporations pay 39% in taxes. Their counterparts in Ireland pay 11%. There is a clue here to the reason why U.S. corporations move their business offshore.

The late Walter Wriston, former CEO of CitiBank, said in The Twilight of Soverignty:

Capital will go where it is wanted and stay where it is well treated. It will flee from manipulation or onerous regulation of its value or use and no government power can restrain it for long.

Perhaps if we embroidered little samplers with this quotation, and sent them to members of Congress…Nah!



How low can approval ratings of a Democrat Congress go? by The Elephant's Child

Well, gas prices are high, and everybody is struggling mightily to avoid doing anything about it. Nancy Pelosi, having refused to allow any debate whatsoever on gasoline prices, is now demanding that President Bush open the Strategic Petroleum Reserve to release a “small” amount of oil.

“These are the kind of circumstances, in addition to national security, in which utilization of the Strategic Petroleum Reserve is more than justified,” Speaker Pelosi wrote in the letter dated Tuesday. read more

The reserve was opened by Bill Clinton to help Al Gore get elected. Yes, this was undoubtedly important to Democrats, but it was hardly a national emergency. They sold off the Naval Reserve in California to Occidental Petroleum too. George W. Bush opened the Reserve after Katrina when many rigs were damaged and off line, but that was a national emergency.

The definition of “national security” and the understanding of the phrase seem a little wobbly, at best. The Reserve consists of salt caverns that are filled with the largest emergency stockpile in the world, approximately 705 million barrels, about 97 percent of the reserve’s capacity. The reserve would replace foreign supplies for about 58 days, or roughly two months. Can you imagine an emergency that could last more than two months? Me too.

The biggest game is of course, attempting to establish blame. In her letter, Pelosi said that during Bush’s tenure the cost of a barrel of oil has risen five-fold, and the effects have been devastating. I do seem to remember President Bush repeatedly asking Congress to open offshore lands and ANWR to exploration, to authorize new refineries and nuclear plants.

Democrats have extolled Jimmy Carter’s prescience in dealing with a previous oil crisis, which was apparently wearing a sweater, installing a woodstove in the White House and putting solar panels on the roof.

The Shah of Iran fled his country in the wake of protests in 1979, allowing the Ayatollah Khomeni to take control. The revolution shattered the Iranian oil sector and drove up prices. Saudi Arabia and other OPEC nations increased production and the decline in production amounted to only about 4%. Still, a panic resulted, driving the price up further. read more

In the U.S., the Carter administration instituted price controls, which resulted in long lines at gas stations, as had happened six years earlier when President Nixon adopted price controls. Carter called the oil crisis “the moral equivalent of war” and suggested removing price controls. Congress agreed to remove them in phases, and they were finally discarded in 1981 under Ronald Reagan. From all of this we (hopefully) learned that price controls do not work.

Lessons to be learned now should include the idea that you cannot increase supply by hoping that wind and solar will replace gasoline. Not going to happen. Hybrid cars are an expensive luxury. Electric cars are a future possibility, but will require increased generation of electricity. Solar and wind at present make a minuscule contribution to the grid, and require constant back-up of electric power. Environmentalists’ Utopian dreams are just not ready for prime time, however much some want to rely on hope and change.

The other big lesson is that Congressional interference in the market usually has unfortunate results. The likelihood that lesson will be learned is microscopic, for nothing is ever the fault of congress.

The Senate Majority Leader says that oil and coal are making everyone “sick”, that they are “dirty” and that (non-existent) global warming will destroy the earth. This is the caliber of the debate, and the reason that approval of congress has dropped to single digits with only 9% of Americans approving of congress, and only 2% approving a “great deal”. Whew!



The bare facts about the bear business… by The Elephant's Child

Polar Bear

Are you confused by the whole global warming thing? Do your eyes glaze over and do you quickly turn the page at the very mention? You are not alone.

The Interior Department ruled today that the polar bear will be protected as a threatened species”. The polar bear population across the Arctic has doubled from an estimated 12,000 to 25,000 since 1960. But some scientists believe that sea ice, necessary to the bears, may diminish in future years because of global warming. This is an enormous threat to the American economy.

But there has been no global warming for the past 10 years, and there has been actual cooling for the last 5 years. What’s up with that?

“Threatened” is a term with specific meaning. It means their numbers are declining and the species is likely to become “endangered”. But if the numbers of bears are increasing, then why… Because the predictions of computer climate models said that in future years the sea ice may diminish. But…

But the predictive ability of the climate models is increasingly in question. Meteorologists will tell you that they can predict the weather with some degree of accuracy about 5 to 7 days out. Many scientists say that the climate models have no predictive ability whatsoever.

Well then, how effective is the Endangered Species Act? It’s very hard to tell. In some cases, an order to stop shooting the animal in question meant that the species increased. Many have been de-listed because it turned out that they weren’t threatened or endangered in the first place. Counting species accurately is exceedingly tricky. Do they only live here, or could they live just as well there? Is this a lone population or are there 20 more just over the next ridge? Faulty data is frequent.

The Endangered Species Act is, for many environmentalists, not a law to protect plant and animal species, but a back door means of preventing economic development of some chosen area. It is for others a mythical attachment to the idea of “a balance of nature”, which does not exist, for in nature there is only constant change.

The drive to list the polar bear as endangered is more about drilling for oil in the Arctic than it is about the bears. And the propaganda has been intense. We watched “The Golden Compass” recently, a movie made about a children’s book, a fantasy that includes ice-bears — essentially talking polar bears. To watch the movie, we had to endure a commercial from the WWF featuring a little girl pleading for other children to enlist their parents in the campaign to save the polar bear. Unbelievably crass.

So, it is back to the courts, for both sides have said they will sue.

This is a dreadfully dishonest way to deal with national conundrums. No matter how much the naive urban people dream of a world energized by the power of the sun and the wind and hydroelectric power, it’s not going to happen. At least not in the foreseeable future. And if you don’t like the price of gas, write to the Congressional Democrats — they have a lot to answer for.

In the meantime, no wonder your eyes glaze over…




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