DrumBeat: June 29, 2006
Posted by threadbot on June 29, 2006 - 9:25am
Topic: Miscellaneous
U.S. interstate system marks 50 years today
The USA a half-century ago was a place where people seldom ventured far from home. When they did, they drove on narrow, two-lane roads that moved people and goods slowly.With the stroke of a pen 50 years ago today, President Eisenhower began to change all that. He launched the interstate highway system, a giant public works project that would speed travel and the distribution of goods, make driving safer, fuel the growth of suburbs and link far-flung regions of the nation.
The interstate network is getting crowded much faster than it's being expanded, and spending to expand and modernize it must increase dramatically to reduce congestion, according to a report being released today.The high cost of oil is part of the problem:Travel on the 46,572-mile system increased by 51% from 1990 to 2004 while capacity grew 6%, says the report by TRIP (The Road Information Project), a Washington non-profit group that promotes transportation policies that relieve congestion and aid economic productivity. TRIP predicted interstate travel will increase an additional 60% by 2026.
As Asphalt Prices Rise, Roads Crumble
For those who were wondering what happened to Tom Whipple...he's back. The Peak Oil Crisis: Our Government Forecasts the Future
Decline in Venezuelan oil production a ‘concern’ for U.S.:
The U.S. government is concerned about falling crude oil supplies from OPEC member Venezuela, a senior U.S. government official said Wednesday.This is sure going to help the oil industry's tattered public image: BP unit charged with price manipulation.Declining oil output from Venezuela since 2001 “is a concern to world oil markets and has not been helpful to world oil consumers, particularly developing countries in our own hemisphere,” the official told Reuters on condition of anonymity.
Fission Impossible: Nuclear power a no-go due to skyrocketing uranium costs?
Japan fights global warming by making all cars use ethanol by 2030. But the real problem is the U.S.: Half of global car exhaust produced by US vehicles.
America the Dangerous? George Soros on peak oil:
We are facing a global energy crisis which is very complex because it has many ingredients, starting with global warming and the peaking of oil discoveries. And there's the dependence of many of the major industrial countries on sources of energy from politically unstable areas of the world and the behavior of some of the energy rich countries like Iran and Venezuela and Russia exploiting the high price of oil and their control of the supply. So we are in fact in a global energy crisis. That instability has certainly added $20-$30 to the price of oil.
http://news.yahoo.com/s/ap/20060629/ap_on_bi_ge/bp_propane_manipulation_1
Categorically Correct.
The Invisible Hand is legally entitled to pinch pennies from pockets of others when it accidentally puts out scissors instead of paper and gets rocked by reality on a minor bet.
It's all in the US Constitution. Just go back and read it:
Fair is Fair.
Fowl is just a bunch of birds.
Everyone's long-term forecasts of SS payments show them stabilizing at just about 6.2% of GDP (versus today's roughly 4.3%). Figure II.D5 in the trustee's annual report illustrates this nicely. I assert that, as a society that places a high value on personal independence for our elderly, we can afford this, although I acknowledge that others feel that's too much to "give" to retirees. If the retirement age is raised somewhat and/or some very modest means-testing is applied to benefits, the payments stabilize at a lower rate. The SS fiscal "crisis" is due to the 12.4% total tax rate being applied to a steadily shrinking portion of the US national income. If the current 12.4% payroll tax were replaced with a 4.3% tax on all income, increasing gradually over the next 25 years to 6.2%, the system is solvent and a very large majority of those younger American taxpayers would be much better off.
Now Medicare, forecast to take an increasing share of national income forever, eventually costing far more per year than SS, whose trust fund will be exhausted decades before the SS fund, that's a real fraud.
The Social Security Administration has the assets in the Trust Fund, the bonds.
The Treasury Department has the liability, to ultimately pay off the bonds.
These are two branches of the federal government.
Therefore, the asset is offset by the liability.
Therefore, there are no net assets in the SS Trust Fund.
The actual money is spent every year on other government programs, which allows Congress to pretend that we are building up the assets in the "Trust Fund" while actually spending the money on other programs, which constitutes a multi-trillion dollar fraud on American taxpayers.
I guess I mostly object to using SS as the example of "fraud" when the General Fund is currently running a deficit of >$500B per year, and the Medicare program has both long-term benefits which are simply not affordable and the payroll-to-income tax shift occurs much sooner than SS.
Of course, if the Peak Oil pessimists are correct and we're really about to charge over the edge of a production cliff, then SS isn't going to be around for long enough to worry about :^)
One can usually get to age 60 at least with obesity, but the numbers begin falling quickly after that.
http://www.cnn.com/2005/HEALTH/diet.fitness/03/16/obesity.longevity.ap/
I have to hand it to Republican propaganda on this issue. They have been very successful.
Consider the quality of the forecasts. Since 1996, the SSA shifted the first date out by six years, from 2012 to 2018. Since 1996, the SSA shifted the second date out by twelve years, from 2030 to 2042. The CBO, charged with forecasting the most likely outcome (and the SSA is not charged with that), says the second date is 2052 and the percentage is higher. I will cheerfully bet a beer that by the time we reach 2018, payroll tax revenue will still exceed benefits being paid, and that the forecast date for the shortfall to begin will have been pushed out to 2024 or beyond.
I have no issue with people who want to do away with SS on ideological grounds. The position that the government should not be involved in pensions is logically defensible (I happen to disagree with it, and polls suggest that 80% of the US adult population disagrees with it, but it's still a defensible position). Those who attempt to justify that position on the basis that "today's young workers won't get a dime from SS" are, however, saying something that is not even close to the truth according to anyone's forecasts, from the SSA to the CBO to the Cato Institute.
It's on tape...
har, har, har
I was struck by the fact that the Saudis felt it necessary to state that they were meeting their contractual obligations to provide oil to customers.
This kind of reminds me of situations where you meet someone and they start assuring you about how honest they are. Every time that happens, I always check to make sure that I still have my wallet.
http://www.menafn.com/qn_news_story_s.asp?StoryId=1093118329
Saudi Arabia Continues to fulfill its commitment to provide oil: Turki Al-Faisal
Saudi Press Agency - 28/06/2006
The Ambassador of the Kingdom of Saudi Arabia to US, Prince Turki Al-Faisal affirmed that Saudi Arabia continues to fulfill its commitment to providing oil since it is the largest dependable oil producer in the world.
While participating in a seminar entitled " Exploring the Future of Arab-American Energy Relations", Prince Turki Al-Faisal said that the rising prices of oil are due to instability in the Middle East and shortage of production of refineries especially in the US and not because of shortage of oil production.
Prince Turki Al-Faisal reiterated the Kingdom's commitment to invest in the field of increasing its production facilities to meet the world's future needs of energy, pointing out that Saudi Arabia is now the leading oil producer.
Directors of the largest American oil companies participated in the seminar, who stressed the importance of Arab-American relations and cooperation in the field of energy. They also affirmed that the bolstering of these relations is crucial to achieve economic and social growth and stability in the whole world.
Recently I interviewed four oil-tanker executives who control a combined 85 percent of the oil coming into the United States. They confirmed market rumors that the amount of oil being stored on large carriers on the high seas is abnormally high. One of the CEOs even predicted the possibility of $40 to $50 oil in the next 6 to 12 months. In another interview, Chevron CEO David O'Reilly suggested that gasoline and energy demands have flattened in the U.S., and may be showing signs of decline.
http://www.nysun.com/article/35124
http://english.people.com.cn/200606/27/eng20060627_277880.html
This reminds me of Yergin's persistent predictons regarding $38 oil.
Digital Rules
Capitalism's Amazing Resilience
Rich Karlgaard, 11.01.04, 12:00 AM ET
Excerpt:
Energy is one of the two leading risks in the global economy. (Terrorism, of course, is the other.) Just take a look at one industry already suffering from oil shock--U.S.-based airlines will lose $5 billion this year. That loss matches the bump in fuel prices. Ouch. Then there's China, which has climbed to the world's number two spot in oil consumption. China uses most of its oil wildly inefficiently to generate electricity. Oil consumption by cars barely registers--now. But during the next four years, China's oil imports will double as the Chinese give up their bicycles. Biting your nails yet? Here's one more sobering oil fact: The world has only a 1% short-term cushion. This makes for a very volatile market.
Given these facts, where will oil prices be a year from now--$75 a barrel? $100?
Wrong numbers, says Daniel Yergin. Wrong direction, too. Try $38. Yergin knows oil. He is a founder and the chairman of Cambridge Energy Research Associates, a consultancy that has 230 employees, with offices worldwide. He is also a recipient of the United States Energy Award and a member of the Secretary of Energy's Advisory Board. A former Harvard professor, Yergin is best known for his Pulitzer Prize-winning book on oil, The Prize: The Epic Quest for Oil, Money and Power.
Yergin's prediction of cheaper oil prices is noteworthy because he doesn't dispute any of the alarming facts cited in my opening paragraph. Not that he would. The facts came straight from Yergin's own mouth at the recent Forbes Global CEO Conference in Hong Kong. I jotted down Yergin's comments while listening to him speak at a dinner. Then he gave a formal speech the next morning and, fueled this time by highly caffeinated tea, I again took notes, just to be sure. Yergin is pretty clear about his predictions. He says oil demand will rise, yet prices will drop. How can this be?
Answer: capitalism's amazing resiliency. Oil prices rise--oilmen become innovative. They work, they invest, they put their heads to the task, they apply technology, and pretty soon they'll discover how to extract oil profitably from oil sand. Or open wells in deeper water. Or scour the planet for new sources using scanners thousands of miles in space. As Yergin reminds us, oil output is 60% higher today than it was in the 1970s. Not many sages from the 1970s would have bet their reputations on this development. The opposite sentiment prevailed back then; experts said the planet was running out of oil. Wrong.
Yergin says he's always asked when oil will run out for good. He shrugs. He's willing to say the world will need 40% more oil in 2025. Hard work and technology probably will find a way to meet the demand.
I too can not believe that the tankers can be carrying anything significant though in terms of the article, i.e. problems with Iran, it would have some minor impact on supply and demand in favor of lower prices. I can see that as a hedge tactic too, but I would think the tanker fleet, except for old small ones in graveyard harbors like off Greece, are fully employed anyway with demand being what it is.
As to O'Reilly of Chevron, not Fox, and his comment. All the oil presidents have been talking for the first few months to a year when oil first started climbing that it would come back down. They were convinced that it would go back to $10-$30. Their collective mistake was in part a function of not including China and the other growing 3rd world economies. They have not left that mindset even now. It shows that it is hard to break old habits.
BUT if there is a major recession, oil will temporarily drop in price, possibly to $30-40. If we play hardball with Iran it goes over $100.
O.K., we can argue the price - and your point is well taken, and my long suit is not economics - the dismal science - but we can agree that in a recession the price of oil will be lower.
But note: oil prices are not just a function of economics but also of politics and that might bring them lower (or higher).
That sounds like a setup for some big spillage..
They sail 'em around empty (apologies to bradshaw, just couldn't resist)