Conservative Colloquium

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Posts Tagged ‘oil’

“Obscene” Profits and Salaries

Posted by Tony Listi on June 14, 2008

Well, well, looks like liberals actually do believe in the existence of something called obscenity. No, it’s not pornography. It’s not government financial support for disgusting and sacrilegious art. It’s not any of the vulgarities that characterize modern culture.

Profits and salaries are obscene! Of course! Money is obscene! How could we conservatives be so blind? Sure, one can know obscenity when one sees it.

The fact of the matter is that it is not any of government’s business how much profit any business makes, regardless of size and productive capacity. If workers at a certain company feel that they are not compensated enough or that their superiors are excessively compensated at their expense, then they are free to quit and seek another job where their talents are more justly compensated.

You see, the market works. It rewards companies that allocate their profits where such funds are most needed and deserved. A company headed by a CEO who takes a larger salary than is necessary or just is only hurting himself and his company. He is taking away funds that could be reinvested in the company to increase future earnings and maintain a competitive advantage over other firms. He is also driving good and talented people, human capital, away to other companies who will more justly compensate such people. Or at the very least (or worst?), the CEO is creating justified bitterness and complaining among employees who feel they are not receiving their fair share. This corporate cultural disruption can only hinder productivity and competitiveness.

The capitalist system works. We don’t need government stepping in and creating unintended problems.

But what unintended problems?  asks the naive liberal and statolatrist.

Glad you asked. Wealth creation (before it can even be distributed) is really a product of reinvestment of profits. The most successful and wealthy corporations reinvest their profits in human, technological, and various other kinds of capital. Thus the corporation uses its money to make even more money for all its stakeholders! Wealth grows at a rapid rate with such freedom to make wise investment choices.

Now what do you think happens when the government comes along and confiscates “obscene” or “windfall” profits from corporations? It stifles this wealth-creating reinvestment! It puts these corporations at a competitive disadvantage nationally and globally. Ultimately, it hurts the working man who depends upon the success of his employers and their ability to reinvest in him and his productivity.

What makes you think the government can more effectively reinvest the profits of companies within a particular industry or generally throughout the economy?!

You think that politician in D.C. knows anything about creating, marketing, and distributing a product or service? Hate to break it to you, but most of those politicians graduated from law school, not business school or the school of hard knocks. They are mostly lawyers who are talented in using the law to coerce others and steal the fruits of their labor. They are skilled in marketing of a certain kind (read: demagoguery), but they have no know-how in producing any great physical product. I’d like to see Barack Obama, Hillary Clinton, Harry Reid, Nancy Pelosi, John Kerry, and other liberals get oil out of the ground, refine it, and then distribute it worldwide! Last time I checked, they weren’t petrochemical engineers of the caliber that Texas A&M produces.

Posted in Budget, Spending, and Taxes, Economics, Energy, Government and Politics, Liberalism, Politicians, Socialism, Texas A&M, Written by Me | Tagged: , , , , , , , , , , , , , , , , , , , , , | Leave a Comment »

Democratic Party=Communist Party

Posted by Tony Listi on May 28, 2008

Sometimes Democrats actually say what they really would like to do in plain English:

Hmmm, socializing? Government taking over? Government running all our oil companies?

Yeah, we’ve seen this before: besides Chavez, it’s called Vladimir Putin! It’s called the Soviet Union! It’s called communism (and fascism for that matter)!

The Democrats restrict supply by preventing our oil companies from drilling. Economics 101: restricting supply has the effect of increasing prices (assuming demand stays the same or grows). And then the Democrats blame the oil companies for high gas prices which they themselves created! The nerve! They want to use the high gas prices that they caused as a justification for a government take over?! The government interferes with the market, causes a rise in prices, and then claims to be helping out the common man by taking over the industry. Then the industry falls apart, fosters corruption, requires higher taxes, and/or bankrupts the government. Don’t fall for the ruse.

Posted in Economics, Energy, Government and Politics, Political Philosophy, Politicians, Written by Me | Tagged: , , , , , , , , , , , , , , , , , | Leave a Comment »

Liberal “Innovation”

Posted by Tony Listi on April 24, 2008

Liberal Innovation

Posted in Energy, Government and Politics, Science and Politics | Tagged: , , , , , , , , , , , , , , , | 2 Comments »

New oil refineries needed

Posted by Tony Listi on November 26, 2007

November 26, 2007
H. Sterling Burnett – Holiday travel season is now upon us, and as if just on cue, gas prices spike and hit the headlines. Consumers complain about the prices at the pump, while politicians complain about the increasing U.S. dependence on foreign sources of oil.Obviously, there is a lot of pressure to do something. So what can and will Congress do? Apparently, faced with calls to reduce dependence on foreign oil and cut pump prices, Congress will do the opposite.

A recent report shows the energy bill being negotiated between the House and the Senate would dramatically increase energy (including gasoline) prices. Economic research firm CRA International found that congressional proposals would more than double the cost of petroleum products – if you don’t like oil at $100 per barrel you will really hate it at $200 per barrel.

It should come as no surprise that Congress would make matters worse. After all, they are partly to blame for our current situation. Building new oil refineries or expanding existing ones is among the most affordable, effective and reliable ways to increase supplies and lower prices. Yet emissions controls and mandates for specific gasoline blends have forced many refineries to close and made building new oil refineries very difficult. In fact, no new ones have been built in the U.S. for nearly 30 years.

For example throughout the 1990s, the oil industry spent nearly 25 percent of capital investment – more than $100 billion – to comply with environmental regulations. For some plants, compliance with ever-increasing standards was simply too costly. For instance, oil refiner Premcor shut two Illinois oil refineries because it could not afford required upgrades. Modifications in one refinery alone would have cost $70 million.

Clean air regulations have also discouraged building new facilities. For example, construction of a new refinery in Arizona has been delayed since 1997 over concerns of its impact on air quality and the proposed site, even though the plant received the required air permits. Now, even under the best circumstances, the plant will not be operational until 2011.

Gas prices are also affected by the government’s blender – in order to fulfill various air pollution reduction plans, gasoline sold in the U.S. has been fractionated into about 17 different boutique fuels. With three grades of gasoline, refiners produce more than 50 separate blends. This is expensive, as each blend must be transported separately, which limits pipeline and storage capacity. Moreover, it is difficult to replace supplies when there are disruptions and when refining capacity is taken off-line to clean tanks and pipelines when switching between winter and summer blends. Gas prices spike as a result.

Some argue that industry could increase capacity at existing plants, and that is being done. To help meet growing demand, the industry expanded capacity and improved operating efficiency at the remaining refineries. For example, refineries that operated at 78 percent of maximum capacity in the 1980s produce more than 90 percent of their potential output now. Yet demand still outpaces domestic supply.

To fill the gap, the United States has increased imports of refined gasoline. From 1992 to 2004, the U.S. annual average of weekly gasoline imports more than doubled from 4.7 percent to 9.7 percent of gasoline used.

In an effort to curb demand for gasoline, Congress is also considering mandating annual use of 36 billion gallons of ethanol by 2025. Refiners have responded to existing and proposed ethanol mandates by canceling 40 percent of planned expansions, reducing potential new output from 1.6 million barrels per day to less than 1 million barrels daily.

Yet since ethanol produces less energy per volume than gasoline, the new mandate would replace less than 16 percent of current gasoline demand – much less than the one third-increase in gasoline use estimated over the next 20 years.

The Energy Information Agency estimates energy use will rise 19.2 percent to 24.8 million barrels per day by 2020 while refinery capacity will rise only 9.4 percent. This means refining capacity will only be 100,000 barrels a day more in 2020 than it was in 1981.

The economic impacts of higher energy prices would be profound: a loss of $1 trillion in economic output and up to 5 million workers unemployed. Absent government intervention in the market, refinery capacity would be expected to expand, reducing consumer prices. More economical and secure energy supplies are available if government gets out of the way.

H. Sterling Burnett is a senior fellow and D. Sean Shurtleff is a student fellow with the National Center for Policy Analysis.

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