While most of us knew that Ike would have an impact on the price of fuel at the pump, I believe most of us know there is a delay in that correlation. A delay of about 7 hours is a little short, but that is the time it took.
Hurricane Ike hit the Texas coast at 2:10 AM local time on Saturday the 13th. Ike hit the Keyser Walmart 7 hours later. I pulled in to fuel up my truck and when I tried to turn on the pump it would not come on. There were a fair amount of people standing at the pumps and none would come on. As us customers began to talk with each other, and the information was the power was off and they were resetting it.
When the pumps came back on it was apparent that Hurricane Ike had struck Walmart, because when the pumps came back on fuel was $0.30 higher that when I had pulled in the station. No delivery truck had delivered any knew fuel. Even if the fuel had been piped from the Gulf Coast it takes about 4 days to arrive to eastcoast terminals (yes there is a gasoline pipleline that runs from the Gulf Coast to New Jeresy).
That Walmart gas station probably has 8000 gallon tanks in the ground and 3 grades of gasoline. Assuming they were half full at the time that means they raised the price on 12,000 gallons of fuel by $0.30. That makes an extra $3,600 profit for Walmart off a Hurricane that never hit the Keyser Walmart. That is wrong it is price gouging.
Some people would blame unchecked capitalism, but they would be wrong. We are Walmart customers and I doubt any of us like what they did. We are fully aware they were taking advantage of the situation and their customers. Capitalism has the answer, we simply take our business elsewhere. There are plenty of other service stations in the area and we should reward those that have the lowest price on fuel.
If you use the gas price checker on this page you will find by not shopping for fuel at Walmart you will usually save money. Dale's Pit Stop north of McCoole is usually the low cost leader and that is how you use capitalism to your fuel advantage.
Showing posts with label Fuel Prices. Show all posts
Showing posts with label Fuel Prices. Show all posts
Tuesday, September 16, 2008
Saturday, August 30, 2008
Friday, August 8, 2008
Politicians win when they put the American People First
In the 1990's the Republican Party took control of the US Senate and House when they promised to put the needs of the American people first. Unfortunately once in power they forgot that there primary job was to take care of the nation first and not the special interest groups and the American voter took away their majority in the 2006 election.
The Democrats have not learned from the mistakes of the Republican Congress and are now putting the needs of the special interest ahead of the American people and the people are not happy. Some in the Democratic party are starting to realize that. Surprisingly extreme left wing group, MoveOn.org, is warning members they are loosing the energy argument. In an e@mail to supporters they wrote, "Here's the truth:Right now, progressives are losing this argument." They don't realize they are wrong, just that they are loosing the argument. I can tell them the reason they are loosing the argument is because they are WRONG!
Last week when Congress walked out on the American people without doing anything to help with the current energy crisis. Many in congress had had enough. Republicans have been staying in Washington protesting speaker of the House Nancy Pelosi's choice to ignore the plight of the average American. American Solutions held a press conference at the capital on Wednesday.
Unlike the anti-energy elites that have a stranglehold on the Democratic Party, the American people clearly understand that laws of economics still apply. If you increase the supply of any product that price will drop. Drilling for more oil is only part of the answer, but it will bring oil prices down. Ironically Paris Hilton is right on energy policy, we need to move forward on all fronts. We need to drill now, but we also need to explore alternatives such as bio-fuels, wind and solar.
The Republican Party is on the side of the American people on energy policy and for any political party being on the American peoples side is the right place to be. The Republican party should not do what is right for the party, it should do what is right for the American people. If you do what is right for the American people, then it will automatically be what is correct for the party.
The Republican party has been the party of common sense. We used common sense solutions that helped the average American. We got away from the in the 1990's drunk with power. Now we have an opportunity to return to the core values of the American people and the party. Standing firm on drilling for our own oil to bring down fuel prices and help the American people is the right side of the issue.
The Democrats have not learned from the mistakes of the Republican Congress and are now putting the needs of the special interest ahead of the American people and the people are not happy. Some in the Democratic party are starting to realize that. Surprisingly extreme left wing group, MoveOn.org, is warning members they are loosing the energy argument. In an e@mail to supporters they wrote, "Here's the truth:Right now, progressives are losing this argument." They don't realize they are wrong, just that they are loosing the argument. I can tell them the reason they are loosing the argument is because they are WRONG!
Last week when Congress walked out on the American people without doing anything to help with the current energy crisis. Many in congress had had enough. Republicans have been staying in Washington protesting speaker of the House Nancy Pelosi's choice to ignore the plight of the average American. American Solutions held a press conference at the capital on Wednesday.
Unlike the anti-energy elites that have a stranglehold on the Democratic Party, the American people clearly understand that laws of economics still apply. If you increase the supply of any product that price will drop. Drilling for more oil is only part of the answer, but it will bring oil prices down. Ironically Paris Hilton is right on energy policy, we need to move forward on all fronts. We need to drill now, but we also need to explore alternatives such as bio-fuels, wind and solar.
The Republican Party is on the side of the American people on energy policy and for any political party being on the American peoples side is the right place to be. The Republican party should not do what is right for the party, it should do what is right for the American people. If you do what is right for the American people, then it will automatically be what is correct for the party.
The Republican party has been the party of common sense. We used common sense solutions that helped the average American. We got away from the in the 1990's drunk with power. Now we have an opportunity to return to the core values of the American people and the party. Standing firm on drilling for our own oil to bring down fuel prices and help the American people is the right side of the issue.
Monday, August 4, 2008
2 West Virginia Congressman vote to keep fuel prices at record levels
While many across the country have canceled vacations due to high fuel cost, Congress decided to take a 5-week vacation of its own. The reason was to avoid solving the high fuel cost problem. The answer is simple; drill for more oil domestically. 71% of the nation now agrees that drilling for our own oil is a good idea.
Many in Congress claim that drilling will not lower the cost of oil. Consider that oil prices in countries that drill for their own oil are the lowest in the world and those that do not are the highest in the world. The laws of Economics are simple. If you increase supply and demand remains the same the price will drop.
Obama made the comment that we all need to inflate our tires to save more fuel. It is true that properly inflated tires will increase fuel mileage, but that is about the equivalent of trying to irrigate the desert with a garden hose. We are dealing with a Congress that doesn’t live like you and I. They do not understand that families are having to make choices on whether or not to go on vacation or buy back to school supplies.
House Vote #566; to leave Washington for a vacation without taking any action to lower fuel prices breaks down like this for the West Virginia delegation.
Aye WV-1 Mollohan, Alan [D]
Nay WV-2 Capito, Shelley [R]
Aye WV-3 Rahall, Nick [D]
Only Representative Capito wanted to stay to vote on a package to lower fuel cost to West Virginians and she had this to say, ““With high energy costs placing such a heavy burden on the lives of West Virginians, it is incredibly frustrating that this Congress has been unwilling to even have open debate on a comprehensive solution.” We must remember when we go to the polls who is with us and who is against us.
Wednesday, July 23, 2008
Vacationers and the $4 gallon of gas
I had heard the stories of how people are skipping vacations because of the high price of gas, even talked to people who were not vacationing because they tallied up the price of gas and it would cost too much. I expected less traffic this weekend when I drove to Va. Beach area, but that wasn't the case. Since I have family living in Richmond, Va and Newport News, Va, my wife and I have been regular travelers of that route for the last two years. Traffic was at least as bad if not worse for our trip than in prior years. I don't know the statistics of visitors to the beaches this year, but if my extra 2 hours of traffic delays yesterday are any indication, beach vacations are as popular as ever. My hotel had not reduced it's cost to attract customers in a dwindling vacation market, on the contrary, they were booked to capacity as were all the other hotels in the area. When I thought about this long and hard I realized that even though gas prices doubled in the last year or so, compared to the cost of the trip, it wasn't a big increase. Not big enough to cancel plans or to skip driving to Newport News for a family members wedding. My minivan holds about 20 gallons of gas. So a complete fill-up adds about $40 compared to $2 per gallon gas prices. That tank of gas could get me there and almost back home. So my gas price may be $40-$50 higher than in previous years. My hotel was $250 for two nights, and I spent over $150 on meals and the customary round of pre-wedding golf. That was a 48 hour trip. Had we gone for an entire week, our budget would have been around $2500 and the extra $50 in gas wouldn't even be noticed.
We rarely think of it in total cost terms. My wife shops for the lowest price on gas. But even a 10 cent savings per gallon only saves us about $2 or the cost of my cup of coffee on a fill up.
Guess what the most popular vehicle on the road was...not just an SUV, but Chevy Suburban and Ford Expedition sized SUVs. The super-SUVs. And reasonably so, the space makes your drive more comfortable, and the extra large gas tanks makes it so you don't have to stop to fill up en route. My sister-in-law drives a Hyundai Tiburon and had to stop 2x in her trip from Western PA to Va Beach to fill up. When you have kids in the car, stopping is a 20-30 minute ordeal, not to mention the possibility of sturring up a fight or interrupting a movie. So the large SUV may add $100+ to your gas bill, but having space (with kids that translates into peace and quiet) and saving 4-5 stops and 2 hours of travel time is worth a 4% increase to the vacation budget. With the extra space, one can bring your own beach equipment, bikes, etc. which will save money and time over renting this equipment upon arrival. The benefits seem to outweigh the extra cost of gas and neither the low gas mileage nor the $4/gallon price tag seem to have slowed down vacationer traffic.
Friday, June 20, 2008
Is a Hybrid Car really the best choice to save fuel?
The Toyota Prius gets about 45 mpg a Volkswagen Golf Diesel gets about 52 mpg. The Golf will run circles around the Prius while saving fuel. Just watch the video.
Wednesday, June 11, 2008
West Virginia Congressional Delegation on Wrong Side of Issue
Some of those Representatives that West Virginia sends to Washington are not listening to the people back home. These are starting to pop on the internet and around the state trying to send a message Rockefeller, Rahall, and Mollohan.
The United States is currently worlds number 1 user of oil and only the worlds 3rd largest producer of oil. Each day the US sends $2 billion overseas to purchase oil while over 600 billion barrels of oil are accessible in the US with current technology. The only thing stopping the drilling in the US is our own US Congress.
The United States is currently worlds number 1 user of oil and only the worlds 3rd largest producer of oil. Each day the US sends $2 billion overseas to purchase oil while over 600 billion barrels of oil are accessible in the US with current technology. The only thing stopping the drilling in the US is our own US Congress.
Friday, June 6, 2008
West Virginia’s High Fuel Tax is Reducing Fuel Tax Revenue
West Virginia has one of the highest fuel taxes in the nation. That tax adds 31.5¢ to each gallon of fuel we purchase within the state and that bad tax policy, like so many others Charleston has given us, is reducing our tax revenue.
Free market forces are doing exactly what they will always do. The price-conscious consumer searches for the lowest price, and they are increasingly finding that price across state lines. With much of West Virginia’s population located along the border in cities like Weirton, Parkersburg, Huntington, Bluefield, and others, it is easy for consumers to avoid the higher priced West Virginia fuel. Sometimes the choice for consumers is extremely easy with gas stations sitting on both sides of the border within sight of each other having up to an 18¢ difference in price on the same grade of fuel — the West Virginia station being the more expensive of the two. The state’s fuel tax is the biggest cause of the price difference.
These price-conscious West Virginians are voting to fill their tanks in other states, decreasing the amount of tax the state receives. At the same time they are giving a tax boost to the states of Maryland, Ohio, Pennsylvania, Virginia and Kentucky when they pay that state’s fuel tax.
West Virginia funds its entire portion of highway construction and maintenance with taxes from fuel. A major component in highway maintenance is the petroleum based product; asphalt. The state’s equipment runs on diesel fuel and gasoline. All of these items are rising in price significantly right when the state’s poor tax policy is reducing the amount of funding the Department of Highways receives.
An opportunity for West Virginia lies in these high fuel prices, and we need to seize it. We must cut our fuel taxes now and get two great benefits. The first will be to West Virginia taxpayers who will see an immediate reduction in fuel cost providing much-needed relief. That lower fuel cost will free up consumers’ money to spend in other parts of our economy, causing long overdue growth in West Virginia.
The second benefit will come when the free market brings those price-conscious West Virginia consumers back to purchase the cheaper fuel. They will now begin to pay the West Virginia fuel tax instead of the fuel tax in the other states, but something else will happen as well. Price-conscious consumers living in the bordering states will begin to shop in West Virginia for fuel. Those from Ashland, KY, Marietta, OH, Cumberland, MD and other bordering communities will cross over the border, buy fuel here and pay West Virginia taxes instead of their home states, providing greater tax revenue for West Virginia.
Now is the time for West Virginia to make a significant cut in the fuel tax to help West Virginia taxpayers and consumers increase revenue to the WVDOH and boost our state’s economy. We need to put an end to the bad tax policies in West Virginia that are destroying our economy.
Free market forces are doing exactly what they will always do. The price-conscious consumer searches for the lowest price, and they are increasingly finding that price across state lines. With much of West Virginia’s population located along the border in cities like Weirton, Parkersburg, Huntington, Bluefield, and others, it is easy for consumers to avoid the higher priced West Virginia fuel. Sometimes the choice for consumers is extremely easy with gas stations sitting on both sides of the border within sight of each other having up to an 18¢ difference in price on the same grade of fuel — the West Virginia station being the more expensive of the two. The state’s fuel tax is the biggest cause of the price difference.
These price-conscious West Virginians are voting to fill their tanks in other states, decreasing the amount of tax the state receives. At the same time they are giving a tax boost to the states of Maryland, Ohio, Pennsylvania, Virginia and Kentucky when they pay that state’s fuel tax.
West Virginia funds its entire portion of highway construction and maintenance with taxes from fuel. A major component in highway maintenance is the petroleum based product; asphalt. The state’s equipment runs on diesel fuel and gasoline. All of these items are rising in price significantly right when the state’s poor tax policy is reducing the amount of funding the Department of Highways receives.
An opportunity for West Virginia lies in these high fuel prices, and we need to seize it. We must cut our fuel taxes now and get two great benefits. The first will be to West Virginia taxpayers who will see an immediate reduction in fuel cost providing much-needed relief. That lower fuel cost will free up consumers’ money to spend in other parts of our economy, causing long overdue growth in West Virginia.
The second benefit will come when the free market brings those price-conscious West Virginia consumers back to purchase the cheaper fuel. They will now begin to pay the West Virginia fuel tax instead of the fuel tax in the other states, but something else will happen as well. Price-conscious consumers living in the bordering states will begin to shop in West Virginia for fuel. Those from Ashland, KY, Marietta, OH, Cumberland, MD and other bordering communities will cross over the border, buy fuel here and pay West Virginia taxes instead of their home states, providing greater tax revenue for West Virginia.
Now is the time for West Virginia to make a significant cut in the fuel tax to help West Virginia taxpayers and consumers increase revenue to the WVDOH and boost our state’s economy. We need to put an end to the bad tax policies in West Virginia that are destroying our economy.
Thursday, May 29, 2008
Shelley Moore Capito Working on Your Fuel Costs
Shelley Moore Capito announced that Congress will halt shipments of oil into the Strategic Petroleum Reserve for the time being. President Bush had opposed such a measure because the reserve currently is short of full capacity by 3%. However Capito cited statistics that claimed gas prices could drop by as much as a quarter a gallon in some areas.
Capito had called upon the president to not oppose this move and it looks like he will not veto it. From his perspective it certainly makes sense to fear a severe supply crisis, but people and the economy need relief now. However, Capito realizes long term solutions must continue to be worked upon.
Will fuel costs go down as much as anticipated? Definitely in the short term the impact will be felt. The question is whether or not the drop will be enough to restimulate demand. After all, driven miles actually dropped in the last several months for the first time in years. Stimulated demand could drive the price back up again.
More concerning is the attitude of the oil producers who rebuffed Bush's request to increase production. The US market is no longer the only major player and our leverage as consumers has decreased. If the Congress would act, we could once again command leverage as producers as we did before World War II.
In any event, Capito's work will be much appreciated by those of us scraping to put gas in our tanks this summer.
Wednesday, May 28, 2008
Shortages and Price Rises
The Moorefield Examiner ran a poll yesterday asking how the US government should stabilize gas prices. 30% responded that the answer lay in increasing supply by drilling into known reserves including public lands. 11% suggested that current market forces ought to be left alone. However 53% suggested that the oil companies be overwhelmingly taxed to seize their profits.
The price of oil and gas rises because of shortages in supply. Gas companies (and this is true for food as well) must raise prices substantially in times of short supply. Price rises actually represent the lesser evil when compared to a complete cut off of product to the market. Seizing profits won't help because these companies do not stick their money into a sock and hide it. Most of them reinvest profits into production and research, looking for new sources of energy or making production more efficient. Putting legal caps on gas or food prices will not reduce demand and we would run low on or run out of gas and perhaps some kinds of food as well. President Bush's recent veto of a bill that would put caps on food prices showed real leadership.
Does it make anyone happy to pay $4 a gallon for gas? Nope. The key for the United States whether it comes to food or fuel is to assume leadership and increase supply. We can do both since we have vast untapped reserves of oil and we pay farmers to not farm. Flooding the market with US oil and food will drop prices substantially, but it will take congressional action to make this happen. We must remember this in the coming election.
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Kudos to Lisa Peana and the West Virginia Republican Club's blog for predicting the primary day massacre of incumbent Democrats. My question is this, were these Democrats all very publicly associated with Joe Manchin? I wonder how many Democratic candidates and incumbents will be eager to get their pictures with the Gov in this go-round?
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Prayers for Senator Edward Kennedy and his family. No one except the most evil should have to suffer from the ravages of brain cancer. We may disagree with the Senator a lot, but we hope that God sees fit to enable him to make a full recovery.
Thursday, April 3, 2008
Questions That I Cannot Answer
The specter of $4 a gallon gas is nearly upon us and there is no reason to believe that the climb will stop there. The obstacles placed in the path of getting inexpensive gasoline from the ground into your gas tank push us towards a tipping point. OPEC, the international association designed to regulate oil production, is only one aspect of the problem. Regulated supply combined with ever escalating demand has made the price of oil skyrocket. That is combined with the domestic obstacles of not tapping our own vital supplies, while relying ever increasingly upon foreign refining since we have regulated new refineries out of any possibility in this country.
In other words market pressures on oil are making it more difficult to rationalize our dependence upon this particular product. Meanwhile all energy prices rise along with oil. This produces pressures that can hurt, but also provide opportunities. This leads to my questions.
Why haven't we seen more private interest in coal liquefaction? Governor Manchin is interested and pushing for federal help. One would think that the coal companies would be interested enough to help make it happen. Are they heavily involved? If not, why?
Why are liberals so dead set against wind energy? We can put wind farms on the ridges over towns like Keyser and not ruin any natural, pristine views. If the county commission does not like it, the city ought to annex the land and reap the economic and tax benefits. The city needs money and it lacks industry. This could be a big part of a revitalized Keyser or Petersburg, or any other economically distressed town in the region near a high wind area.
Why have we as a state not looked into hydroelectric power? Tennessee gets most of their electricity from dams on small to moderate sized rivers. How many dams do we have on the Kanawha and Ohio Rivers (which we own!) Why can't we adapt Summersville and Sutton Dam for hydroelectric capabilities? Union Carbide constructed a hydroelectric plant decades ago off of the New River, which is a fairly small stream.
Why hasn't West Virginia tapped into its massive gas reserves more effectively?
At what point will market pressures eliminate the internal combustion engine? To me, we should start seeing these pressures hit a tipping point soon. The beauty of capitalism is that it rewards the forward thinking, the least expensive, and the most efficient. I'd say in ten years or maybe less we'll either see the market pressures subside drastically, or we will (more likely) witness technological revolutions that the oil companies will either be a big part of, or be destroyed by. Same with auto makers.
The best way to see development is to let the market work without excessive intervention. Push and prod, don't tax and regulate. That is how we'll see our energy questions solved most effectively.
Monday, March 24, 2008
Gas Price Protesting
I got an e mail from a family member yesterday. It was a forward that was trying to organize a gas price protest. I usually get these about once a month. They are usually pretty similar in that they target oil companies as the culprit if pricing and seek to diminish their profits by boycotting gas for a day. This one was different in that it targeted corporations instead of the whole industry.
Either way, the resentment is misplaced. Any action ought to be directed at incumbents and candidates for Congress. I sent a response to the e mail that read:
The problem is not the oil companies. The reason they jack prices up is because of supply constraints. They do profit a lot off of it, but the high prices keep demand low enough to prevent a shortage. Only one problem would be worse than high prices and that is complete supply cut off. The oil companies set prices as a response to the very complex situation that the US legal system has created. There are four things that Congress can do to get gas prices down.
First, drill in the Alaska National Wildlife Refuge and reduce our dependence on foreign supplies. Jimmy Carter shut that down because they thought a few oil wells would endanger reindeer and bear populations. Coal mining has not done that here and oil wells are less intrusive.
Second, cut the red tape necessary to refine oil. We have not built a new refinery since the 1970s in the US and we have lost a few. Much of our oil is now refined in Venezuela, a country led by an anti-American madman.
Also we have a bewildering set of laws that vary from state to state on the cleanliness of gasoline. Refineries have to create a wide variety of blends to match state and local laws. They have to determine the supply and demand necessities for all those localities and that is impossible to do. Why not take the best environmental standard and make that the national standard?
Last, phase out oil fired power plants. We have resources at home that can run our power plants; we certainly do not need to keep importing oil for that purpose. West Virginia itself, between coal, natural gas, and wind, can produce a lot more power than it can possibly consume. All we have to do is construct the plants. If we are smart, we will allow them to be built here in West Virginia near the sources and export the power out.
First, drill in the Alaska National Wildlife Refuge and reduce our dependence on foreign supplies. Jimmy Carter shut that down because they thought a few oil wells would endanger reindeer and bear populations. Coal mining has not done that here and oil wells are less intrusive.
Second, cut the red tape necessary to refine oil. We have not built a new refinery since the 1970s in the US and we have lost a few. Much of our oil is now refined in Venezuela, a country led by an anti-American madman.
Also we have a bewildering set of laws that vary from state to state on the cleanliness of gasoline. Refineries have to create a wide variety of blends to match state and local laws. They have to determine the supply and demand necessities for all those localities and that is impossible to do. Why not take the best environmental standard and make that the national standard?
Last, phase out oil fired power plants. We have resources at home that can run our power plants; we certainly do not need to keep importing oil for that purpose. West Virginia itself, between coal, natural gas, and wind, can produce a lot more power than it can possibly consume. All we have to do is construct the plants. If we are smart, we will allow them to be built here in West Virginia near the sources and export the power out.
The first two points came directly from John Raese's campaign for US Senate and they make sense both in terms of our economy and security. Combatting high gas prices while maintaining a strong economy means looking at the complex relationships between supply and demand as well as the obstacles placed in the way of oil companies who desire to meet that demand.
Friday, March 21, 2008
The Energy Answer is Under Our Feet
Of all the states, West Virginia’s economy ranks at the bottom while we sit on mountains filled with energy in the middle of an energy crunch. Our economy should be booming, yet it is not. One reason is that we have a tendency to look to government for solutions and not to ourselves. Ronald Reagan once said, “Government is not the solution to our problem. Government is the problem.” His words hold true today. Everyday as we fuel up our vehicles paying close to $4 or more per gallon we are reminded government has not solved the problem, nor will it.
Government officials hold meetings and conferences, form committees and coalitions, but then all that happens is they talk about the problem and get their pictures in the media. One conference referred to the “New Technology of Coal Liquefaction.” For the record Friedrich Bergius developed one of the first processes for turning coal into gasoline almost 100 years ago.
Government doesn’t even know how old the processes are; are we sure we want it in charge?
One of the ideas being floated is a Private-Public Partnership, where government becomes a partner in the construction and operation of a coal liquefaction plant. The problem is government becomes the dominating partner in these ventures; the project becomes bloated, inefficient, and politically influenced to the detriment of the private business partner, the taxpayer and the consumer. History also reveals that the term “corporatism” was coined by Benito Mussolini to describe Private-Public Partnerships, which were used as a way to maintain government control. This is not a road we want to go down.
So what should be government’s role? Government’s first and most important goal should be to make as level and competitive playing field as possible. We must give West Virginia’s businesses a competitive advantage through business friendly tax and legal reforms. Half measures like eliminating the franchise tax by 2015 is not going to give us a competitive advantage anytime soon. It is like getting in a swimming pool one toe at a time instead of jumping in all at one time, getting wet and starting to swim. We must enact the needed tax and legal reforms wholly and fully now — get the initial shock out of the way and then begin to swim in increased jobs and tax revenue as our economy expands because West Virginia will be economically competitive.
So if government’s job should be to provide a level playing field for the competitors, then how do we move forward? The free market will always seek the lowest price and if fuel made from coal is cheaper, then the market will purchase fuel made from coal instead of oil. While we know we can currently make fuel cheaper from coal than oil, the problem is in regard to the cost and time of building the coal liquefaction plant. That cost is estimated at around $2 billion with about 2 years of construction. Some company has to be willing to risk the investment in the plant and take the chance that oil prices will remain high long enough for the plant to pay them back with interest.
Sometimes the only nudge the free market needs is the spark of an idea. Consider that CSX Corporation in 2006 purchased $1.2 billion dollars worth of fuel and you know from your own visits to the pump its 2008 numbers are substantially higher. What if the West Virginia coal Industry sits down with CSX Corp and says, since CSX already services 130 active coal mines and purchases billions of dollars worth of fuel, together we can build a profitable coal liquefaction plant. The plant could provide CSX with lower cost fuel, provide West Virginia coal producers with a new market outlet, provide high paying jobs across the board, give the state increased tax revenues and pump billions of dollars into the West Virginia economy.
As a state loaded with natural resources we have an opportunity, but only if we are willing to make the necessary political changes to make it happen. If we are not held back by Charleston’s bad economic policies, then West Virginia has an answer to the nation’s energy challenges. That answer is under our feet.
Government officials hold meetings and conferences, form committees and coalitions, but then all that happens is they talk about the problem and get their pictures in the media. One conference referred to the “New Technology of Coal Liquefaction.” For the record Friedrich Bergius developed one of the first processes for turning coal into gasoline almost 100 years ago.
Government doesn’t even know how old the processes are; are we sure we want it in charge?
One of the ideas being floated is a Private-Public Partnership, where government becomes a partner in the construction and operation of a coal liquefaction plant. The problem is government becomes the dominating partner in these ventures; the project becomes bloated, inefficient, and politically influenced to the detriment of the private business partner, the taxpayer and the consumer. History also reveals that the term “corporatism” was coined by Benito Mussolini to describe Private-Public Partnerships, which were used as a way to maintain government control. This is not a road we want to go down.
So what should be government’s role? Government’s first and most important goal should be to make as level and competitive playing field as possible. We must give West Virginia’s businesses a competitive advantage through business friendly tax and legal reforms. Half measures like eliminating the franchise tax by 2015 is not going to give us a competitive advantage anytime soon. It is like getting in a swimming pool one toe at a time instead of jumping in all at one time, getting wet and starting to swim. We must enact the needed tax and legal reforms wholly and fully now — get the initial shock out of the way and then begin to swim in increased jobs and tax revenue as our economy expands because West Virginia will be economically competitive.
So if government’s job should be to provide a level playing field for the competitors, then how do we move forward? The free market will always seek the lowest price and if fuel made from coal is cheaper, then the market will purchase fuel made from coal instead of oil. While we know we can currently make fuel cheaper from coal than oil, the problem is in regard to the cost and time of building the coal liquefaction plant. That cost is estimated at around $2 billion with about 2 years of construction. Some company has to be willing to risk the investment in the plant and take the chance that oil prices will remain high long enough for the plant to pay them back with interest.
Sometimes the only nudge the free market needs is the spark of an idea. Consider that CSX Corporation in 2006 purchased $1.2 billion dollars worth of fuel and you know from your own visits to the pump its 2008 numbers are substantially higher. What if the West Virginia coal Industry sits down with CSX Corp and says, since CSX already services 130 active coal mines and purchases billions of dollars worth of fuel, together we can build a profitable coal liquefaction plant. The plant could provide CSX with lower cost fuel, provide West Virginia coal producers with a new market outlet, provide high paying jobs across the board, give the state increased tax revenues and pump billions of dollars into the West Virginia economy.
As a state loaded with natural resources we have an opportunity, but only if we are willing to make the necessary political changes to make it happen. If we are not held back by Charleston’s bad economic policies, then West Virginia has an answer to the nation’s energy challenges. That answer is under our feet.
Monday, June 4, 2007
The Price of Government Intervention
In the past few months we have seen gas prices jump to their highest levels since Hurricane Katrina hit. Consumers scramble to find ways to pay the price while others scramble to lay blame. Plenty of explanation exists for this most recent spike.
First is the problem of blends. Different environmental regulations for different parts of the country mean that gasoline refineries must produce a vast array of gasoline formulas, then must figure out the supply and demand for each version sent out over the country. Personally I wonder why they do not simply go with the most environmentally friendly formula for the whole nation.
Secondly, refining in the United States is almost an endangered species. Our domestic capacity has not expanded in decades due to the expensive and time consuming permit process combined with legions of environmental groups waiting to sue. Meanwhile current facilities continue to age and occasionally blow up. Increasingly we rely on foreign countries such as Mexico and Venezuela to help provide the fuel we need. The most recent price rises reflect fears that unless a short term reduction in consumption takes place, shortages will occur in some parts of the country. Yes oil companies profit from this and it is hard to work up much sympathy for them, but it is a market tool to ensure a continued supply everywhere.
Right now the supply of crude does not pose a problem. Actually oil prices have dropped recently due to increases in supply primarily from Saudi Arabia. That nation's authorities just foiled a major plot to destroy its oil facilities. We need stable domestic sources of oil and no reason exists to not tap reserves in the Alaska National Wildlife Refuge. In his infinite wisdom, President Carter created this sprawling reserve to prevent oil companies from drilling there, citing the potential danger to polar bear and reindeer habitats. Of course the presence of cities, interstate highways, coal mines, etc. have absolutely driven away the population of black bear and white tail deer from our region. We simply need more domestic supply in case of international turmoil.
Some want to blame the long term energy consumption of the United States, citing familiar statistics that say we use more than any other nation. This represents a typical example of America bashing with no suggested alternative. Environmentalists fail to point out that the US produces more goods and services more efficiently than any other nation. We use more because we produce more, but America also wastes less. The inefficient authoritarian Chinese economy among others wastes more energy due to their much lower productivity level.
As has been pointed out here before, that capability comes from the genius of competitive capitalism. In that philosophy lies the key to solving energy price problems. Governor Manchin called upon the president to declare a state of emergency, a move that would create panic and huge price hikes. He also asked Bush to create a national energy strategy, a policy that the president has attempted repeatedly and received no support. If the governor and others actually want an energy policy they must meet with President Bush, leave politics at the door, and work out a solution. For our economic stability and national security we need to free American industry to produce more in America for Americans.
First is the problem of blends. Different environmental regulations for different parts of the country mean that gasoline refineries must produce a vast array of gasoline formulas, then must figure out the supply and demand for each version sent out over the country. Personally I wonder why they do not simply go with the most environmentally friendly formula for the whole nation.
Secondly, refining in the United States is almost an endangered species. Our domestic capacity has not expanded in decades due to the expensive and time consuming permit process combined with legions of environmental groups waiting to sue. Meanwhile current facilities continue to age and occasionally blow up. Increasingly we rely on foreign countries such as Mexico and Venezuela to help provide the fuel we need. The most recent price rises reflect fears that unless a short term reduction in consumption takes place, shortages will occur in some parts of the country. Yes oil companies profit from this and it is hard to work up much sympathy for them, but it is a market tool to ensure a continued supply everywhere.
Right now the supply of crude does not pose a problem. Actually oil prices have dropped recently due to increases in supply primarily from Saudi Arabia. That nation's authorities just foiled a major plot to destroy its oil facilities. We need stable domestic sources of oil and no reason exists to not tap reserves in the Alaska National Wildlife Refuge. In his infinite wisdom, President Carter created this sprawling reserve to prevent oil companies from drilling there, citing the potential danger to polar bear and reindeer habitats. Of course the presence of cities, interstate highways, coal mines, etc. have absolutely driven away the population of black bear and white tail deer from our region. We simply need more domestic supply in case of international turmoil.
Some want to blame the long term energy consumption of the United States, citing familiar statistics that say we use more than any other nation. This represents a typical example of America bashing with no suggested alternative. Environmentalists fail to point out that the US produces more goods and services more efficiently than any other nation. We use more because we produce more, but America also wastes less. The inefficient authoritarian Chinese economy among others wastes more energy due to their much lower productivity level.
As has been pointed out here before, that capability comes from the genius of competitive capitalism. In that philosophy lies the key to solving energy price problems. Governor Manchin called upon the president to declare a state of emergency, a move that would create panic and huge price hikes. He also asked Bush to create a national energy strategy, a policy that the president has attempted repeatedly and received no support. If the governor and others actually want an energy policy they must meet with President Bush, leave politics at the door, and work out a solution. For our economic stability and national security we need to free American industry to produce more in America for Americans.
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