Redstate

creation of alternate energy sources would be to just tax the crap out of imported oil. It would still probably be cheaper than the government handouts and assorted stupid policies we are following now.

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

Tax Offshore Oil, Open up ANWR and the OFffshore areas but make it expensive, use the revenue streams to fund research on Oil shale, cellulosic ethanol, biodiesel and advanced nuclear.

Heck you could even apply an offset to the import taxes for oil companies that invest in research on the above alternatives (all are domestic)

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Great idea. I'm sure that's an idea even Hillary can get behind. How about we leave the tax hikes and government planning of the economy to the Democrats and we leave energy decisions to the marketplace? That seems to be a novel idea on the Republican side nowadays.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

.

and the tax breaks as well. Its the same thing.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

I'm always hearing about these massive subsidies given to oil companies, but then when it comes down to specifics they usually mean things like "we think we should have charged them a royalty of $x per barrel they pull out of American oil fields, but now we are thinking we should have charged them $x*2 per barrel. Therefore they are being subsidized by $x per barrel."

If you want to talk about subsidies, oil doesn't hold a candle to other industries. The incentives that are there are usually there to offset the unsatisfactory regulatory and legal environment we've created in the US and get them to do something here (like maybe build a refinery) in spite of all that.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

And please don't attribute positions to me I haven't taken. I have no problem with de-regulating oil, I haven't giant problems with "Windfall profits taxes" and what has been done concerning refineries is kafkaesque. I would be damn happy with getting rid of all subsidies to all industries. I really would like to see agriculture get streamlined.

But you are arguing from a very naive position on this. Even William Buckley on the blood for oil issue came back with what would you have us fight for ? Right now we are in the middle east to stop terrorists and keep the oil supply stable. If we didn't need the oil there very well might not have been the terrorists in the first place.

If you like you can view this as a defense program. The fleet ballistic missile program has cost us over a trillion dollars. How much would this be worth ?
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

I haven't giant problems with "Windfall profits taxes"

Is there a typo there or do you seriously not have problems with windfall profits taxes?

I would be damn happy with getting rid of all subsidies to all industries.

And then we will still be using oil. The massive cash subsidies, usage mandates (which amount to subsidies) and tariffs (which amount to subsidies) are the only things keeping us in the ethanol biz.

Right now we are in the middle east to stop terrorists and keep the oil supply stable. If we didn't need the oil there very well might not have been the terrorists in the first place.

The whole oil -> terrorism link is utter BS. As I've said (many times) before, terrorism doesn't require a whole lot of money. And there are plenty of like minded people with the will and the means to fund it. If we stopped consuming oil tomorrow, do you think we would fall off the terrorist's target list? That radical Islam would disappear? That they wouldn't be able to get 100 bucks together required to blow people up in the tube on their way to work? Do you think that the Middle East would be a better place? Do you think all of the poor and out of work people who used to have jobs in the oil industry would go out and buy American flags (to fly, not to burn) with the money they don't have? That is what is naive.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

And yes that was a typo. I have giant problems with the very idea of windfall profits taxes, in any industry.

On your questions about oil->terrorism.
No but they wouldn't enjoy governmental support.
No, it would alter beyond recognition.
What was Osama's personal fortune ?
Middle East a better place ? It would hinder elements that are preventing it from being better.
I don't know seeing as any plan to phase out oil will probably eliminate their job after they have retired from it.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

IIRC didn't his money come from his family's construction business?

I'm not a South Park Republican, I'm a King of the Hill libertarian.

Of course the construction business was built on the house of Saud. The problem seems to be the found wealth effect that oil generates coupled with the generation of second and third sons with little opportunity that the region produces. I mean to blog on this later when I have the facts more thoroughly nailed down.

No matter how you slice it though you will be able to achieve greater influence in the region if you can hide their cheese.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Osama has since had most of his money stolen by Sudan and he is not a particularly wealthy guy any more. A lot of upper middle class guys living in the US are worth what Osama is.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

Re: The whole oil -> terrorism link is utter BS. As I've said (many times) before, terrorism doesn't require a whole lot of money.

Small scale doesn't: you're right there. But small scale terrorism isn't much worse than everyday street crime.
What we need to worry about is large-scale terrorism(more 9-11's, Al Qaida with nukes, etc), above all state-sponsored terrorism. And beyond that we need to worry about hostile, illiberal governments like Iran and Venezuela, who are big, big problem quite apart from the issue of terrorism. Anything we can do to pull the financial rug out from under these oil-fueled thugcoracies is money well spent in my opinion.
And since I'm in an ornery mood tonight (Florida traffic is beastly now-- spring break you know) I will note that I find it quite odd that people who scream about patriotism and who are so willing to shed the blood of America's sons (and daughters) are so fiercely adverse to paying one thin dime out of tehri own pockets to defeat our enemies.

And quite wrong. His position is a free market free trade maximization one. He also seems to have a sincere belief that being able to play games with our use of oil would not help.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Would certainly not help the terrorism problem at this point. It's too late for that. Oil use is rising around the world and even if America were to completely stop using oil tomorrow, the export loss would be filled by selling to China and India and Vietnam and Africa and, and, and...
And to Aleks, "Every little bit helps" only when either the problem has ot spiralled out of control (too late) or when accompanied by Massive use of governmental force beating over the head the people that are the problem.
So, yes, let's reduce our use of foreign oil. I am all for that. It's one of those "little bits" you mentioned. But let's do that by doing things that are Good for our economy and our nation.
Let's drill our own oil. Let's switch power generation over to nuclear.
Ethanol of any kind is expensive and costs more energy to produce than it provides. It's a losing gambit no matter how you work it. Let's move on to proven winning moves.

Only two defining forces have ever offered to die for you:
Jesus Christ and the American G. I.
One died for your soul; the other for your freedom.

Ethanols negative energy is disputed. Especially when you are talking about sources other than Corn.

But yes any energy strategy has to include us using our own reserves. Its idiocy not to.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

even corn is not a net loss anymore...the problem is do we really want to put in 100btu's to get 105. In my opinion ethanol will never be *the* solution. ha-ha I made a pun.

A Constitution of Government once changed from Freedom, can never be restored. Liberty, once lost, is lost forever. -John Adams

If it comes from nuke ? and winds up being cheaper than foreign oil ?
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

If it comes from nuclear power were probably better off developing better batteries and running electric cars.

Stop off at your local fuel station and trade batteries (short cut transmission lines).

A Constitution of Government once changed from Freedom, can never be restored. Liberty, once lost, is lost forever. -John Adams

Couldn't say without doing the math. There is also the fact that much of what is considered waste heat from a power plant could be used for this process. Also we would need to beef up the transmission system (Ours is near capacity at the moment witness the northeast blackout of 03)

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

And yes about world demand. The question is not use but price.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

But small scale terrorism isn't much worse than everyday street crime.

I would certainly beg to differ on that. It's not about numbers. And even if it were, the potential for a huge score by the terrorists is still out there (where it is non-existent in deaths from falling off ladders or anything else). All it takes is one event to throw this equation out of wack.

What we need to worry about is large-scale terrorism(more 9-11's, Al Qaida with nukes, etc)

You mean like the OKC bombing? Was that a high budget operation? Or the embassy bombings? Or the attack on the Kole? Or the attacks on Bali? Or the attacks on London? Or the attacks on Spain? Or the first WTC attack? Even 9/11 (probably their biggest and most expensive single operation to date) cost maybe 100 grand to pull off, total. Big deal. A guy who owns a couple bodegas in NYC could easily finance that all by himself.

As far as state sponsors of terrorism goes, do you think NK could sponsor terrorism if they were so inclined? They certainly didn't seem to have much problem pulling off more sophisticated and expensive feats such as building their first nukes and building new missile systems. I think they could manage to afford to buy some fertilizer and diesel fuel for their operatives in the US. Now maybe I missed all that massive oil revenue NK has coming in, but I don't think I did.

And beyond that we need to worry about hostile, illiberal governments like Iran and Venezuela, who are big, big problem quite apart from the issue of terrorism.

And conveniently ignore the countries like NK who don't have oil and are also big problems. I'll take Venezuela any day over North Korea.

Anything we can do to pull the financial rug out from under these oil-fueled thugcoracies is money well spent in my opinion.

Then maybe we can turn the Middle East into Africa. Is that the model we are going after? No thugocracies to be found there, I guess.

I will note that I find it quite odd that people who scream about patriotism and who are so willing to shed the blood of America's sons (and daughters) are so fiercely adverse to paying one thin dime out of tehri own pockets to defeat our enemies.

Well, ignoring the offensiveness of this remark for a moment, some people really don't think that spending money subsidizing ethanol is going to "defeat our enemies" any more than NCLB or CFR will "defeat our enemies." Doesn't seem so odd, then, does it?
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

Saudi Arabia uses its huge cash reserves to fund Wahhabist Madrasses all around the world.

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

And I'm sure they'd find money for this stuff anyway. They have to if they want to avoid an Islamic revolution which will result in the loss of their fortunes and many of their heads being cut off. This stuff is simply red meat for the bad guys... an attempt to keep them somewhat satisfied.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

all I was saying is that it made more sense than what we are doing now. I don't like any government intrusion in the marketplace. But if we decide as a people that it makes sense to meddle in this one area for various reasons, the most efficient thing would be to cut out all subsidies, and central planning, and just go with a tax.

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

Pretending the government isn't interfering doesn't move us closer to stopping it.

Even the way we implement taxes has an effect.

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

another upside will be that all those starving third world people will be too weak or dead to commit mass exterminations of each other, so we won't be drawn into some sort of police action.

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

why hasn't he bothered to hold the Republican Senators and CongressCritters feet to an open gas flame on the issue. Sorry, he's been a wimp. He's had some good positions, but he won't exercise his bully pulpit stick upside Congressional heads to get important things done.
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Congressmen who willfully take actions during wartime that damage morale and undermine the military are saboteurs and should be arrested, exiled, or hanged. — J. Michael Waller

To defend his wife from a physical attack.

What makes you think he'll use it on anythig else. In this most important of political arenas, he is incredibly incompetent.

Only two defining forces have ever offered to die for you:
Jesus Christ and the American G. I.
One died for your soul; the other for your freedom.

I think Bush has been strong on promoting energy independence, its the Democrats and RINOs that have killed many of his proposals.

He hasn't been that good. There are areas under an executive moratorium that he hasn't opened up to drilling. He has nobody to blame for that but himself since he doesn't need Congress's approval.

Let's be honest here, oil funds jihad against the West and also allows many unsavory nations (Russia, Iran, Venezuela, etc.) to wield incredible influence around the world.

We could stop buying oil tomorrow and it wouldn't do a thing about radical Islam, except to make it worse as the more reasonable regimes collapse and turn into less reasonable regimes and as we have less to do with them.

Terrorism is a low budget enterprise. The bad guys can raise enough money in the west to finance the jihad. They can raise enough money on illegal activity to finance the jihad. They aren't trying to build nuclear submarines and aircraft carriers. This is simply a tired meme that doesn't reflect reality.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

You are talking about the complete elimination of Oil. If the Aliens with the combination sciencebook/cookbook came down and gave us a replacement for oil that was cheaper and better it would still take us 50 years to get away from it. by way of illustration, we are still using tubes for electronics.

Shifting to alternatives lets us exert influence on the less reasonable regimes. The Irans and Venezuelas of the world. Lets face it they are considerably easier to disrupt economically anyway.

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

You are talking about the complete elimination of Oil. If the Aliens with the combination sciencebook/cookbook came down and gave us a replacement for oil that was cheaper and better it would still take us 50 years to get away from it. by way of illustration, we are still using tubes for electronics.

I was giving you the ideal scenario: we stop using it entirely tomorrow. If you are talking about cutting the demand by 5% over 20 years it would have even less of an effect on terrorism, if it were possible to have less than no effect, anyway.

Shifting to alternatives lets us exert influence on the less reasonable regimes.

Nope. That is 180 degrees wrong. Trade and interdependence is how we get to exert influence. If we give that up (see Iran, Cuba, NK, Iraq) we are left with no cards to play except the military action card. They don't need us so they won't listen to a thing we say unless they think we are really going to invade. Your suggestion boils down to this: we need to repeat what we've done with Iran and NK (where we have no interdependence) with Saudi Arabia and Kuwait. Then maybe we can hold as much sway with Saudi Arabia and Kuwait as we do with Iran and NK. I see some problems with this plan.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

It would be like cutting off our heads to eliminate acne.

I believe the Russia vs China experience once and all resolved the argument about applying shock treatment to an economy.

Please stop using nonsensical scenarios that I did not raise. I don't have a flamethrower for torching the strawmen. We are talking about twenty percent in ten years. Not five in 20. And yes I do feel that will buy us considerable leverage.

Venezuella is a prime example. We are one of the few countries that can refine their fuel if we could rapidly shift our consumption from their supplies to another country or just from internal sources we can give them an oil shock like you would not believe.

We are not ending our trade interdependence just gaining some more wiggle room.

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Please stop using nonsensical scenarios that I did not raise. I don't have a flamethrower for torching the strawmen. We are talking about twenty percent in ten years. Not five in 20. And yes I do feel that will buy us considerable leverage.

Put whatever number on it over whatever time frame and it makes not a bit of freakin' difference in the world. We already have plenty of leverage if we wanted to use it. We don't because we don't want to. We want to be friends with SA, not enemies. You start using the lever on them (as you clearly want to do) and they aren't going to be friends for very long. If we wanted to use the lever on them tomorrow we are fully capable of doing so as our past actions have shown (seeking worldwide sanctions against Iran and achieving worldwide sanctions against Iraq). The reason we aren't getting on Saudi Arabia's case is the same reason we aren't getting on Pakistan's case. We need them to be our friends, not our enemies.

Venezuella is a prime example. We are one of the few countries that can refine their fuel if we could rapidly shift our consumption from their supplies to another country or just from internal sources we can give them an oil shock like you would not believe.

Big deal. And this is going to make them a friend, how, exactly? You think Chavez couldn't deal with sanctions? You don't think they could simply find other buyers for their oil? Places like Iran and North Korea are in a world of economic hurt, but somehow they manage to be big, looming threats at the same time. That really isn't that hard to pull off.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

Of all the dumb things our government spends money on, I'm willing to throw some money at Ethanol to lessen our dependence on foreign oil.

Unfortunately fattening the wallets of Iowa presidential caucus attendees and Archer Daniels Midland is a pretty expensive way to get marginal reductions in our oil consumption. Even the exagerated estimates from the advocates of ethanol subsidies admit that it takes a lot of energy to produce the corn and convert it to ethanol. (Google ethanol net energy) Some other estimates conclude that producing ethanol actually consumes more energy than it generates; I'm skeptical of that and suspect we get slightly more energy from ethanol than we waste, but with a big waste of money.

If you really believe that it's worth imposing costs on the American consumer to reduce foreign oil consumption, the far cheaper and more effective way is to tax imported oil. You could reduce foreign oil consumption by a greater amount and at less cost to consumers than with the current subsidies and mandates for ethanol use. The oil tax would increase oil's effective price, making alternative energy sources and conservation more economically attractive. Then you could count on the market to find far cheaper alternatives than the politicians doling out ethanol favors.

Ethanol, crucifying America on a cross of corn.

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

President Bush traveled to North Carolina today to promote his plan for cellulosic ethanol, which is produced from wood chips, grasses or other materials instead of corn. Bush has made this a significant component of his "Twenty in Ten" goal to reduce America's addiction to oil.

Emphasis Mine.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

And you still believe the Ministry of Choosing Winners will come up with a better/cheaper five-year plan for replacing oil consumption, doling out tax dollars to the guys who write the best grant proposals or have the right political connections? Better than private companies risking their own money?

I am really beginning to resent having position that I don't personally hold attributed to me.

I believe I said something to the effect up there that a tax on foreign oil imports should be implemented with a corresponding offset for research and or development of domestic fuel sources. I also gave a list of more possible sources.

I did not say pick one and go all in on it. I also pointed out the amounts that should be spent needed to be contextualized in terms of the costs of future Middle Eastern adventures we may be able to avoid.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

I believe I said something to the effect up there that a tax on foreign oil imports should be implemented with a corresponding offset for research and or development of domestic fuel sources. I also gave a list of more possible sources.

Somebody is going to have to decide how this money for research and development are spent, whether this is financed through grants, tax credits (most likely) or any other scheme. That somebody wouldn't be the market, it would be political types in DC who are more than happy to help their friends rake in the taxpayer-funded jack.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

I am really beginning to resent having position that I don't personally hold attributed to me.

Please quote me attributing a view to you that you "don't personally hold" if you're going to accuse me of doing that. You know, as in attributing to me attributions I never personally made.

The only position I've attributed to you is your desire to spend taxpayer money on ethanol subsidies, and quoted your own words in my first reply:
Of all the dumb things our government spends money on, I'm willing to throw some money at Ethanol to lessen our dependence on foreign oil.

I disagreed with your faith in the Ministry of Choosing Winners' ability to find the cheapest alternatives to oil, and suggested leaving it to the market. I said if the government was to interfere in the market, the most efficient mechanism was just increasing the price of oil with a tax, and leave it to the market price incentives for private companies to find the cheapest alternatives to oil.

Your subsequent reply seemed to think that a different list of nominees for the Ministry of Choosing Winners to pick from was relevant to the point, despite the fact you're still clearly talking about a government program to find oil substitutes:
President Bush ... his plan for cellulosic ethanol, which is produced from wood chips, grasses or other materials instead of corn.

It's still the same issue whether you're talking about switch grass, corn or bird droppings - you trust the political allocation of grants more than you trust people risking their own investments to choose the best alternatives to oil. If ethanol is so smart, whether from bird droppings or wood chips, a greedy capitalist will invest in it.

I also gave a list of more possible sources. I did not say pick one and go all in on it.

Great, like singular vs. plural is relevant to the distinction between government grants allocated politically vs. private investment allocated on price and expected return. In fact my reply never implied "pick one", and I'll copy/paste it again with with the plurals highlighted to make that clear:

And you still believe the Ministry of Choosing Winners will come up with a better/cheaper five-year plan for replacing oil consumption, doling out tax dollars to the guys who write the best grant proposals or have the right political connections? Better than private companies risking their own money?

Exxon could research harnessing the power of mexican jumping beans with the credit. They would be foolish to do so but as long as the money was spent on research thats fine.
I imagine they and if not they, their shareholders would want some return on that money.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

I'm skeptical of research tax credits not getting politicized, and would rather just expense research for tax purposes. With a tax credit for oil-substitute research, companies would have to buy tickets for campaign fund raisers, so they could lobby the Chairman over what qualifies as "research" for the tax credit.

That said, I think a generalized research tax credit would by far more efficient than earmarking government money for ethanol or any other particular proposals.

as the qualification. It puts the gamble in the oil companies hands.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Using "results as the qualification" for the tax credit still requires legislative language, where the placement of a few prepositional phrases could be worth millions of dollars to an oil company. I think it's still managed economy snake oil.

I specifically said that was not my position.

And please show where I said spend money on ethanol subsidies. The person you are referring to is Jacob Coulter.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

You're right, I did quote Jacob Coulter from the original comment and mistakenly attributed it to you. I apologize.

And please show where I said spend money on ethanol subsidies

Maybe I misinterpreted what you meant, and you can clarify. You responded to my comment by citing President Bush's ethanol subsidies proposal and you emphasized the part about alternatives to corn as a source of ethanol, which I thought you meant in support of Bush's plan:

President Bush traveled to North Carolina today to promote his plan for cellulosic ethanol, which is produced from wood chips, grasses or other materials instead of corn

Do you oppose President Bush's plan that you cited above, which spends billions of tax dollars specifically for ethanol? If so, I'm sorry I misunderstood your point.

Corn is what I am not particularly for. Unless the plan was done as a substitute to AG subsidies. Its a tough call I would like to see AG subs done away with, but thats just not going to happen. So if we can change them into something useful it would be a plus.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

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Congressmen who willfully take actions during wartime that damage morale and undermine the military are saboteurs and should be arrested, exiled, or hanged. — J. Michael Waller

geothermal. And cold fusion!

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

That was a '70's thing. The earth was getting colder. Now it's getting warmer so it's prolly warm fusion.
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Congressmen who willfully take actions during wartime that damage morale and undermine the military are saboteurs and should be arrested, exiled, or hanged. — J. Michael Waller

We need to distinguish actual sanctions and the threat of sanctions. Imposing a sacntion regime is no good for either side. Being able to threaten a sanction that the other side believes you can implement is another matter.

We have been able to use the threat of trade sanctions very effectively in international negotiations. The following link provides an analysis

http://www.ima.org.uk/conflict/papers/Hovi.pdf

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

But it's a dangerous game of chicken at which we almost always lose. If we threaten and they say no, we have to follow through. Then we end up stuck with 50+ years of sanctions and no way out without losing face unless they back down, which they probably aren't going to be interested in doing.

We can certainly do that now, regardless of how much oil we use. We have done it in the past. We did it with Iraq. And we have been trying to get UN sanctions against Iran, which would take oil off the world market. We can threaten all we want, but we can't deliver on worldwide sanctions, it wouldn't make a difference if we did, and we already aren't buying anything from the bad guys like Iran.

It's a game we can't help but lose.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

that paper showed when threat of sanction was credible it had an up to 90% effective rate. Our problem isn't that sanctions or the threat of them doesn't work.

Its that currently we are completely unable to impose them on the oil states. The commodity is a sellers market.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

that paper showed when threat of sanction was credible it had an up to 90% effective rate.

I don't think that some kind of macro analysis is particularly useful because of the differences in our relationships going in, the kind of trade we had going in, the kind of demands we are making, etc. With the specific region we are talking about, I don't see what good the threat does. I also don't agree with some of their "sanction" wins like Libya that could not have been achieved without the threat of preemptive military action.

Its that currently we are completely unable to impose them on the oil states.

You mean like Iraq and Iran?
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

We imposed them on Iraq and were as successful as we could ever hope to be in getting the rest of the world to go along with us, which is not very.

We imposed them on Iran and tried to get the rest of the world to go along with us. We haven't bought oil from Iran for almost 30 years now. I'm sure Iran is going to break any day now, give up their nuclear weapons and missile development, terrorism financing, help us out on the GWOT, and come sit around the camp fire and sing Kumbaya with us.

We don't want to impose them on our allies like Saudi Arabia, UAE and Kuwait. These guys do help us out. They have no interest in developing WMDs. We don't want to push them to the Iran side of the table, which is exactly what sanctions or the threat of sanctions would do.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

Was preventing the modernization of our communication system ? The prizes are of similar size, and in the telco case the solutions are here and proven
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

But the dime finally dropped. I think you're saying that the energy business needs to have the cobwebs and the deracinations of government's involvement swept away from it before it can do all the right things. Correct?

I'm all for that. But our national politics is going in exactly the other direction, and picking up speed. If Hillary becomes President, that will be the end of the game.

Now that you mention it, it would be interesting to compare the dynamics of government's interaction with the energy and the comms businesses. It's a big topic. Feel free to go first ;-).

My bottom line is that the government acts as a provider of goods to its target market, and enterprise does the same in its own markets. As long as we the people create a market for government that operates as a moral agent ("there oughta be a law!") rather than sticking to enforcing contracts and fighting the wars we authorize it to fight, we're going to have these problems.

The government will always interfere with the energy business. Here and there it can fix localized problems, but always in the context of "giving the people what they want," and manipulating their perceptions of reality to keep the votes coming. On the whole and over time, government can't possibly create anything good in economic terms. Vladimir's really interesting and informative post gives a lot of detail on how the government can, however, be smart enough to mitigate a lot of the worst outcomes that are caused by its own activity. And even when it does so, it gets accused of favoring the industry, so you see which way the pressure goes.

So I guess the telco analogy leads us to this question: in pursuing its own goals, does the government necessarily inhibit real progress in the energy business, as it demonstrably does in the telecom business?

If the answer to that question is yes, Joliphant, then I propose to you that the final outcome will be something like this:

1) a staggering amount of money will be wasted on nothing much (cellulosic ethanol, for example);
2) nothing fundamental will change in our energy usage patterns until something breaks;
3) a long and difficult period will ensue in which the market will arrive at some different modes of energy usage, possibly involving fundamental transformations in American life.

By "something breaks": there are several independent possibilities, including far higher oil and gas prices for any of several different reasons; or the AGW people might come up with a credible "asteroid-impact" scenario.

Perhaps the most benign thing the government could do now is to seriously reform the NRC. This could be done without attracting all that much attention, if we get lucky and find that the environmental lobby really is as divided on nuclear power as it appears to be. It could even be done by a Democratic President.

Currently with the exception our nominal allies in the middle east we have little too no economic leverage and in some cases negative leverage. The reason is they are single product economies and there is no lack of demand for the commodity. We may be the customer but we are the customer the way a crack addict is. Whats worse we re crack addicts in a city with an insufficient supply of crack and a rising addict population.

The only reason we have influence with our mid eastern allies is that we have pledged to defend them. They know they need this and we know they need it. This has at times been costly indeed and the price is not reflected in the cost of oil. Rather its part of the defense budget and supported by federal taxes.

So yes we really do need to clean out the cobwebs in the industry but as you said the trend is not our friend here. Research into alternative fuels is relatively cheap and for the government actions in this sector cheap. I am suspicious on reading the transcript in the original post that only relative numbers were provided. The enzyme manufacturer said they had lowered the cost by 30 fold. No mention of what the original cost was, the current cost is, or its contribution to the price of ethanol. This type of thing always reminds me of when DBL used to tried to sell oil and gas drilling partnerships by touting their tax advantages

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Considering petroleum as a strategic resource with geopolitical impact, you've opened a quite different discussion, which I'd rather not engage in a half-*ssed way. I did want to respond to what I think you said about alternative-fuels research by the government.

I may have misread you, but I don't think government-funded research is going to do anyone any good. And it's not because the government is stupid or incompetent, which is really easy to say but in no way true. Rather, the government is trying to address a different target market, with different dynamics. Their goal is to retain the power to spend the people's money. Given how politics works, you don't actually want to solve real problems if this is your goal. You just want to make it look like the problems are so hard that only you can be trusted to solve them.

Private investors, including some of the sharpest VCs in the business, will do the alternatives research. It's already happening. They'll find the answers.

Google Synfuels. The last government attempt to get us off cheap (at least compared to the alternatives) oil. One of the reasons we aren't seeing huge private sector investments into alternate fuels(at least without massive government subsidy,re. ethanol) is that most Corporate executives have long memories about what lost lots of money. My big problem with the government intrusions into the energy sector is that they are frantic "do something" activities that waste a lot of money in the short term, without generating any long term improvements, while doing a lot of economic damage. All you have to do is look at what the current ethanol binge is doing to other agricultural sectors ( cattle, poultry and pork production) by artificially inflating the cost of their feedstock. All because Bush and Congress had to "do something", and the something was to establish targets and subsidies for ethanol use that encouraged overbuilding of ethanol plant capacity, which now (including capacity under construction) will require more corn feedstock than our agricultural sector can supply. In the end, they'll (Congress and the President) will bail on the project and many people will have lost their shirts on a project that probably shouldn't have been started in the first place. Government should never be allowed to issue production targets and provide subsidies in any industry. All it does is encourage over capacity (compared to either the supply of fuel feedstock or market demand at current prices). If they want to " do anything" they should restrict their funding to tax credits for research and startup costs, which defray costs associated with operating new production methods below optimum levels.

Actually I know a fair bit about the synfuels initiative. We are in fact seeing major private investments in alternative fuels. You have to know where to look. Large public companies can't afford to take any kind of major risk. That's not what they get paid to do, for one thing. For another thing, it's pretty well-known that large enterprises don't embrace any new thing that threatens their incumbent businesses. And ironically, that's true most of all in the best-run businesses.

Watch what the VCs are doing, not the oil companies. (Or the automakers. GM's hydrogen-platform is nothing but a PR stunt.) Ironically, a lot of well-funded work is going on with cellulosic ethanol. I think there are at least two reasons for this: first, because the Brazilians proved it's possible (and please spare me the sugar cane vs. sawgrass debate- I already know all that stuff); and second, because the government seems bound and determined to create a market for the stuff.

investments currently are those areas where the government is providing large subsidies (either direct through production targets (i.e. ethanol) or guaranteed loans (coal - diesel). With regard to the Brazilians; they did not become energy independant through ethanol production (even though it helped). They became energy independant through a large expansion in their oil drilling and exploration program. With regard to corporate executives; wher in my post did I say anything about the major energy players only? Every company has executives. A lot of people outside the major oil producers took a bath from the last synfuels initiative. The bath for the current synfuels initiative is already becoming evident. In the 2005 energy bill, a $100 million loan guarantee was included for a coal - diesel plant in Northeast PA. That loan guarantee has been removed by the President's current energy bill. The Company that had started planning construction is now caught between a rock and a hard place. On top of that, the local environmentalist are getting geared up to oppose the plant because of the CO2 the plant will potentially produce. At least if the government decides to waste money on cellulosic ethanol and jack up our gas prices to subsidize a market for the stuff, they won't put other farmers out of business because the feedstock will involve mostly waste material that isn't used for feed. However, when it's all said and done, more will be said than done with regards to energy independance.

You seem to be focusing on the activities of traditional players in the energy markets. A lot of stuff is going on elsewhere, and it's mostly under the radar. Technology development is not generally undertaken by large companies. They rather tend to stay plugged into what much smaller ones are doing and then acquire the winners. One of the really important aspects of alternative-fuels economics is that nothing will actually come to market until it makes sense. The government can try to force this issue using the artificial market-altering tools at their disposal, but they can't affect reality. None of this means that the important work isn't being done now.

Brazil: what I meant was simply that their experience provides an existence proof for cellulosic ethanol. I know quite well that they undertook the project for some very special reasons, and also that it didn't start paying out until very recently.

fuel needs is:

Heat of Combustion: (Upper Value)(from Wikipedia, since my copy of MArk's Handbook didn't have a value for gasoline)

Gasoline: 20,400 BTU/lb
Ethanol: 12,800 BTU/lb

You would need almost twice as much ethanol to drive the same distance as with gasoline. More credible substitutes ( and already technological feasible)

Natural Gas: ~23,000 BTU/lb
Propane: 21,500 BTU/lb

Future source (requiring a lot of reasearch and infrastructure development)

Hydrogen: 61000 BTU/lb

Anyway, my point all along has been that if we are interested in freeing ourselves from imported oil, ethanol will never be more than a minor contributor and is currently more of a political sideshow than a serious solution. Now, drilling for more natural gas....

Please hydrogen is a sick joke. Its something more suited for undergrads to use in design projects than anything else. Put it next to the hovercar.

You have completely ignored volumetric power densities on those. If hydrogen is the fuel of tomorrow it will be the same way it is today in C-H bond.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

The point is that ethanol is not asuitable fuel sustitute for gasoline, but natural gas is. We have large quantities of natural gas yet untapped and it can be used in current cars with minor modifications.
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With regard to hydrogen, note I said future source with large amounts of research and large capital investment. When would it make a suitable substitute/ I don't know. With regard to your hovercar snark; if you told people 150 years ago that we would be driving gasoline powered vehicles, or just 30 years ago that mainframe computing power would fit in a desk drawer, you would have gotten a lot of strange looks.
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Regarding volumetric power densities, natural gas used as a vehicle fuel is compressed. The only true measure of energy content is BTU/lbm. Since a lb is a lb is a lb.

Regarding the mainframe.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

whenever I think about mainframes. Hours preparing punch card input. Overnight turnaround. Weeks to debug programs. Accidently intrerrupting the printing of pay checks for the city of New York. Thosew are the good old days that I'm glad are gone.

Makes the predictions about the PC revolution. Its not about the mainframe.

But to go back to the original point. We have an infrastructure in place that does a marvelous job using hydrogen as a fuel. We use it joined to carbon atoms. Nothing new needs to be done. Even fuel cell proponents don't have them burning hydrogen but burning hydrocarbons.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

substitute for gasoline as a transportation fuel but natural gas is. the BTU content info was largely for comparison sake. The hydrogen data obviously distracted you from the real point I was making.
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With regard to the PC revolution. Yes there were some visionaries, but the average person on the street would have looked at you like a crazy person. heck I even remember a comment attributed to Bll Gates in the early to mid 1970's that he could not imagine why anyone would need more than 640 k of memory.
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Regarding fuel cells; they may be a viable transportation fuel source someday, but the lots of research and lots of capital infrastucture investments comments still hold.

Mr. Gate's greatest skills are not technological. The quote is a prime example of that. It was not a technological opinion, it was meant to detract from the fact Microsoft did not have an extended memory solution.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

much like the move to unleaded-gas-only in the 1970's, because engines made specifically for burning ethanol work very well.

My other big concern about ethanol is that we look towards the diverse sources available besides corn, such as Brazilian sugar cane and pine debris, both for technical and political reasons. Corn-based ethanol just isn't the best there is, and it's really not good practice to maintain farm subsidies.

lesterblog.blogspot.com

Some transition would be necessary, much like the move to unleaded-gas-only in the 1970's, because engines made specifically for burning ethanol work very well.

All you need to burn ethanol is to adjust the air-fuel mixture to compensate for ethanol's low energy content. You can burn it as well in a 1970s carbureted engine as you can in a 2007 flexfuel vehicle. The flexfuel vehicle simply had the advantage of being able to burn various different alcohol/gasoline mixures at any time without any manual adjustments. There's no special engine requirements and no special ethanol specific engine. No matter what you do, you will always have a lot less BTUs in a gallon, so you will need more gallons to get where you want to go. And more money to fill up at the pump.

such as Brazilian sugar cane

That would defeat the purpose of ethanol, which is to function as a huge ag subsidy. There's a reason we use corn sweeteners and beet sugar and it isn't because they are better than cane sugar. We have high tariffs on imported sugar and ethanol. You aren't going to be seeing any proposals to eliminate those tariffs from either Democrats or Republicans.

pine debris

If and when it makes sense from an economic prospective, this will happen. Don't worry, the ethanol gravy train is still in full effect for ethanol derived from feedstocks other than corn. Corn just makes the most sense right now because it is readily available in vast quantities.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

Re-read what I said two posts ago. I said "Ironically" there is research on cellulosic ethanol going on. Investors are rational and markets are markets, whether they are real or government-created. The fact that the government (for its own reasons) is going to mandate the production of cellulosic ethanol means there's money to be made in it, just as surely as there is a government-created market for weapons of war.

I agree that government use targets and subsidies create a market (a very inefficient and wasteful market, since the prices are aritficial). Some people will make a lot of money in the short term. However, the artificial prices will also encourage overbuilding of production capacity. Eventually, as in every government scheme, real markets will set real prices and a lot of investors will take a very large red ink bath, just like happened in the 1970's synfuel projects. No one can rig a commodity market for very long, and our government's synfuels projects are nothing more than rigging a commoditiy market.

becomes a bonanza. You're right about that.

Sorry if regular readers find me repeating myself on this too much; I really favor an approach that lets the marketplace arrive at greater overall energy independence, without subsidies.

lesterblog.blogspot.com

The "marketplace" (which is nothing more or less than the sum total of the normal everyday decisions that ordinary people make) will most definitely arrive at new approaches to energy usage. It doesn't need any help from us.

If what you favor is a diminution of government involvement in this market, then may I suggest, with the greatest respect, that there are more fruitful ways for you to spend your energy.

In any case, your formulation is somewhat interesting, since you embedded in it a policy goal (achieving greater overall energy independence). In the first place, this is not necessarily a market goal. And second, it's a goal which may or may not be achieved, for the crashingly simple reason that people may not be willing to pay for it. However, there is a world of difference between what people think they want, and what they actually do want. The former is responded to by government, and the latter is responded to by private enterprise.

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

the only slight modification I would make is that government responds to what politicians think people want to hear (and will vote for)not necessarily what people think they want. i know that it seems like I am quibbling, but it also explains why government reacts late to every issue, except for the more dire emergencies, and even sometimes there. very often, by the time congress reacts to a problem it is no longer a problem. Witness last year's hearings on high gasoline prices, conducted just as gas prices were declining.

My aim here would be to make certain that the environment remains or improves its friendliness to their efforts. Tax credits accelerated depreciation etc are relatively innocuous ways to do this. As I said back in the 70's and 80's you could put money in a dry hole and come out ahead due to favorable tax treatment.

I completely agree about government not actually solving problems. My favorite example of this is our space program. (Cheap access, permanent presence, etc etc all still in process)

The strategic nature of petroleum and our incredible dependence on it underlies all the argument. If it wasn't the case we wouldn't need to talk about it anymore than we talk about cobalt imports or other similar materials.

I will go out on a limb and say our dependence on petroleum and the same for the rest of the world contributes to the instability of the middle east and net is not a plus for the region. The focus on oil to the exclusion of all else by the majority of states in the region has had a very negative impact (Dubai being an exception).
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

...would still be riding camels, instead of private airliners.

They had a magnificent culture and made great contributions to ours. Something went very very wrong somewhere somewhen.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Note the resemblance to an out of control trust fund baby. I would hazard its not a coincidence.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

The corrupting influence of trade strikes again.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

Can tax credits do a similar trick in helping find an alternative ethanol supply? It's probably worth a try. However, subsidizing corn ethanol seems to me to be a bald, cynical sop to the corn states.

Well the tax credit for ethanol applies no matter how it is generated. If it's cheaper to go the non-corn route, people will do it and make more money in the process. The (very substantial) subsidy isn't specific to corn derived ethanol. The (very substantial) tariff isn't specific to corn derived ethanol. The usage mandates aren't specific to corn derived ethanol. There's nothing really hardwired in there about corn. It is just what is readily available.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman