How bad is the energy situation in America? We all are aware of the increases in the price of oil in the past couple of years. In fact there has been a massive amount of attention to every rise and fall of the price per barrel. That attention has of course translated into greater speculation fueling great price fluctuations, happier members of OPEC, richer brokers, and tighter margins for virtually every type of business in America.

But how bad is it? Does this compare to say the 1970’s and that oil disaster? Actually very well. In fact there is virtually no comparison. From 1970 to 1980 the price of oil went up 1566%. Again that was an increase of 15x in 10 years or 1.5x every year for that decade. In the past 10 years oil has increased a mere 300% or 3x counting today’s high.

So what other factors have been involved in the run up between then and now? Considering the fact that oil consumption in America has increased 21% since 1980 alone (I couldn’t find data since 1970). Of course that is 28 years or .75% a year. So that does not explain the price increase, especially when you consider that the price of oil only increased 33% from 1980 to 1990. So there must be another reason.

Perhaps it’s the fact that there is a limited supply of oil in the world. Knowing this, and the fact that the Middle East has no other major exportable good, it makes sense that as demand continues to be steady or increase the price will rise. But that still does not explain the recent dramatic (moreso due to media influence) increase.

Until you look at speculation. In the 1970’s perhaps 15%, maybe 20%, of the nation was involved actively with the stock market. In the 1980’s there was a huge increase in trading of everything, backed up with a healthy helping of movies from Hollywood fueling interest (recall Trading Places, Wall Street, Other People’s Money). As a result the investing populace doubled. Then with the tech bubble we saw the numbers swell to around 60-70%.

As these numbers swelled, more and more people became aware of alternative investment vehicles. Commodity trading along with spot trading became the new penny stocks. With an upfront cap of only 5% of the total investment oil was primed to run as the housing market had its bubble burst. And here we are today.

The only other major factor has been the fact that since the 1970’s neither Republicans or Democrats have done anything about America’s energy needs beyond polispeak. Every administration has talked about alternative energy sources, and funded no research. Each decade has passed without increases in domestic drilling while OPEC made more money. As the years passed the number of oil refineries has dropped to roughly half as many in operation today as in 1970. And speculators made money.

Why is America in an oil shock, and complaining about gasoline prices (which have had a fractional increase in price as compared to oil) – not to mention soon to be reeling from home heating oil prices? Because we have politicians that have been more concerned with fueling special interest groups (eco fanatics and oil companies alike) rather than the average American.

So what is our answer? What are we the people going to do? We can either sit back and accept yet more polispeak about creating advances while ethanol kills the Gulf of Mexico and sits unused in the 5 states that actually have it available to the public or we can get real change. We can either leave domestic oil sources untapped and penalize our economy or use oil and fund research for other sources. We can either do something or suffer the consequences of inaction and polispeak promises.

That is the choice in front of us. Every other option is just a stopgap answer that will placate anyone with a short memory and nothing else. Because the energy situation in America is hardly bad…yet. But soon it will be a real crisis, and one that will give this generation and the next an understanding of the 1970’s that will make them pray for alternative day fuel lines.

Labels: commodity markets, Crude oil prices, ethanol production, Hollywood, Middle East, OPEC, penny stocks, Polispeak, stock market

So in the 4th day of the start of the unofficial race between Senator McCain and Senator Obama the barbs are continuing to hit their marks. Of course the start of the race lies with President Bush.

It must be said that President Bush was wrong as he spoke overseas. A U.S. President should NEVER discuss the internal political matters in a foreign state. It weakens any potential President in terms of foreign policy and is little different than when House Speaker Nancy Pelosi tried to affect policy when she visited the Middle East.

Going beyond that, I do have to wonder about what Senator McCain first stated

‘What does Senator Obama expect to gain…’

Seriously, what does he expect? If an American President speaks to any nation that promotes terror, they elevate that nation. Without a clear ability to gain something of equal importance, direct talks hurt America.

I gave a friend this example,

“No one is concerned about the threat of Papua New Guinea today. But if the President of the free world went there and spoke to their leader about their military and goals, it would instantly be news. New Guinea would instantly have more political power than other nations in their region and be more involved with every world power. Now imagine if you just change the country to Iran.

Imagine Iran saying that America was so afraid they had to talk, tail between their legs, to the powerful Iran. And so on.”

The fact is that Senator Obama is wrong on this. He is wrong to make the comparison about President Kennedy. While it is true that there were talks to remove all future nuclear weapons from Cuba, and to discuss the cold war, it wasn’t because President Kennedy was a talkative guy. President Kennedy threatened and near took America to war, over the missiles and Cuba. It was the Cuban Missile Crisis that created the talks. So it was the threat of force, and only that imminent threat that got talks going.

When you compare President Kennedy’s motivation to talk to the USSR to the plans of today’s Presidential candidates, he doesn’t match up to Senator Obama. Maybe those to young to recall the incident will not realize this, maybe those older have romanticized the event, but President Kennedy did not just start talking, and the threat of the post-nuclear USSR was far more tangible than Iran at this moment.

So think about it. How does elevating Iran, a nation that denies the Holocaust and desires the death of Israel and advocate the overthrow of the American political system, make America safer? What argument could Senator Obama provide that would suddenly convince Amenajad (President of Iran) top change his mind or tactics? Especially since he claims these beliefs are part of how he views his faith?

I’m sorry for Senator Obama’s fans, but such a plan or even the idea is idealistic and based in a fantasy world that has nothing to do with the here and now. It may sound nice, and is preferable to the current status or violence, but it’s about as attainable as buying a gallon of Ethanol in New York City or a snowstorm at the equator.

I’ll compare Senator Obama and Senator McCain in depth shortly.

Labels: Cuban Missile Crisisis, foreign policy, Iran, Israel, Middle East, President Bush, President John F. Kennedy, Presidential election race 2008, Senator Barack Obama, Senator John McCain, USSR

I was speaking with a young former military man today, and the subject of the 2008 election came up. This man is 22, a former Navy Seal, and interested in what will happen to America in the near term. He also has no idea who to vote for.

Sometimes I forget that many people, of all ages, have not been following the Presidential race since 2006 like I and other bloggers have. That’s not because of a lack of interest, or intelligence. It’s because there is so little information out, and so little to get behind. There are plenty of YouTube video clips, charts on the net to chart where each candidate stands, and 30 second soundbites galore. But there is little substance and platforms for the average American to sink their teeth into.

To an extent I hope that my lists of Pros and Cons of Republican and Democratic candidates are helpful. I hope that my letters to several of the candidates (of both political parties) helps to give further insight to what each offers the nation. But even if all that I have written over the past year and almost a half on this has been read by every undecided voter in America I don’t think it is enough. That is because all the candidates are failing America.

They are failing us because they are playing partisan games, one-upmanship and preening like celebrities (with issues) more than attempting to be political leaders. And that benefits none of us.

One example of this failure is in the question given to me by this young man. The question was

“This war has gone too far. Especially since it was started over oil. I’m concerned about that.” – paraphrased but the essential elements of the question.

My answer is simple, and not one politician has ever said this that I am aware of.

Let’s say that the war was done only for oil, which is easily debated and proven incorrect. Why is that bad? Right now, estimates state that there may only be another 40 years or so of oil left in the Middle East. At this time there is not another alternative energy source that works. Not one. Lot’s of theoreticals but they are all only effective on paper.

Given that fact, and there is no debate it is fact, then oil is the only reliable energy source in the near future. America has reserves and access to several major oilfields that have never been tapped. The reason is that we are using all the oil in the Middle East while developing alternatives for the future. If OPEC were to run out of oil, most every nation would be unable to continue to provide for the safety and quality of life of their people virtually overnight. Except for America and a few other nations. That’s because of our use of foreign oil.

Taking a long term view, it is strategically important that we use oil from everyone else as much as possible, to guarantee that when the reserves start to dry up we will still be able to defend our nation, and continue to seek and create improved energy sources.
So, having an ally in the Middle East that provides America cheap oil in large quantities is vital to our long-term survival. It makes sense for us to want to have control over a major oil producer.

In addition, there is the question of money. Many want to point at President Bush and say it’s about him making money. The theory is that only oil companies will make money from Iraq. Those claiming this fail to recall that those same oil companies help fuel the American economy. They are part of the stock market, where tens of millions have invested their retirement funds, based on the thought they will bring in a profit. These companies employ thousands of people. They are paid to find, refine, and transport this fuel. This oil is used by hundreds of businesses that create cars, plastic, tires, perfumes and other products.

Oil companies making more money, means that America makes more money. And for those that might want to “take the profits away from the oil companies and give it to the people,” they are both liars and ill-advised. If the profits are taken from the oil companies, you will not receive a check for your share of that money. In addition, your mutual funds, and the stock market will drop. Jobs will be lost, in dozens of industries. America will be hurt.

It’s true, and all you need to do to see it is to look at the big picture and the long term view.

But politicians won’t say that.

How about tax reform that so many want to have. Several presidential candidates claim they will “remove the IRS” and completely convert the tax code. I feel they are misguided in the worst manner.

Not that I think the IRS is a good thing, or that the tax code is working. But if it were to be removed it would impede the entire nation. Of the roughly 40% of the nation that is employed by the Government let’s say that the IRS, or any department, makes up 5% of all the people employed. Without the IRS they are all out of work.

In addition you lose all the people that do oversight on the IRS, all those that do research on the effects of the tax codes, those investigating the loopholes of taxes, and those that prepare taxes for the average American.

Say good bye to H&R Block and other similar corporations. And with their loss goes the benefit and impact they provide to the stock market. Unemployment skyrockets, and the stocks, mutual funds and retirements of millions plummet.

The big picture, long-term view really takes all the wind out of the sails of a cute popular soundbite. But it’s far more honest. Because the fact is that any department of the Government is incapable of being removed or revised substantially. There are just too many lives, and economic implications tied to it to happen.

What does that mean when evaluating Presidential candidates? That when you look at all the information and comments made you have to take a moment to review what they are really saying. You have to look at the long term effects. And you have to throw out all the feel good fluff soundbites they all make. Because there isn’t a human being alive, ever, that can discuss all the implications of say nuclear weapons in Iran or illegal aliens in 30 seconds.

Labels: American economy, Democratic Party, election 2008, H and R Block, Iraq War, IRS, Middle East, President Bush, Presidential candidates, Republican Party, tax code