Saturday, February 26, 2011

The solution to high gas prices? Let's put in a 62 mpg mandate !!!

Derrick Z. Jackson is a typist for the Boston Globe.  He is deeply and profoundly wrong so often that I've "liked" him on Facebook just to keep in touch. 

Here's an excerpt from his latest, called "United States Must Break The Addiction To Foreign Oil". 
Unrest continues to spread, from the Middle East to the Middle West to . . . the gas pump.


The democracy uprisings against repressive regimes, many of which America propped up, has also fanned fears for the flow of oil. In response, Big Oil has jacked up its prices and gasoline is back up to $3.20 a gallon for unleaded in Massachusetts and is reportedly headed to $3.50 nationally. As the Obama administration tiptoes between popular protests and potentates who turn on our oil spigot, Americans are concerned about prices at the gas pump.
As well they should be.  What should we do?  OMG, what can we do

If only we had oil of our own, oil of our very own somewhere off the coasts of California, Oregon, Washington, Florida, Georgia, South Carolina, North Carolina, Virginia, D.C., Maryland, Maine, New Hampshire, New Jersey, and all those other little Yankee states in the middle where my geography is fuzzy? 
If only, if only.  

Seriously.  That part of Jackson's rant is so profoundly screwed up that it doesn't even rise to the level of being wrong.  The Middle East is in the middle of a huge upheaval, and that's going to jack with fuel prices for a while.  Everyone, and I mean everyone, has huge reserves.  Gasoline costs what it does at any given moment because that's what people are willing to pay at that moment, all other factors taken into account.
 
Competitors, especially small ones, have huge barriers to entry, all put in place by the people who stand in front of each other once a year for the SOTU speech, and rant about our addiction to foreign oil   Otherwise people would be out there drilling near the states listed above. 

One other thing....trade is a funny thing.  Both sides need each other.  Whose economy do you think can last longer without the other?  U.S. Consumers or Evil Foreign People?  That's the question our politicians never ask.  Citizens of other countries now rely on American Dollars.  They can't eat, build houses, or educate their children without them.  Have you ever had a 25% drop in sales?  It's tough, isn't it? 

And when we give our dollars to those foreigners with funny names who worship funny gods, do you know what they have to do with them?  There's only one place where they accept green pieces of paper with pictures of dead presidents on 'em. 

Back to Derrick Z. 

....Instead of whining about gas prices, Americans should be demanding that the Democrats and the Republicans make oil independence a top priority. Less than a year after the BP oil spill, energy has disappeared as a top issue of the day in current polling of Americans. This is even though energy affects everything from jobs to the environment to what wars we wage to how many blind eyes we offer to dictators who sit on fossil-fuel resources.
Like almost all other Statists, Derrick Z. can throw down an eloquent rant about how many billions of dollars we idiotically pay dictators, all in the name of "stability".  Derrick slams The Teleprompter Jesus for his response to the BP spill.  And after griping about our government's ineffectiveness, what does he want? 
What does he want? 
Derrick Z. wants more government involvement. 
Last month, the new Republican House majority, which has declared war on the Environmental Protection Agency, inspired infantile behavior from the Alliance of Automobile Manufacturers. The organization wrote Darrell Issa, the new House oversight chairman, to protest the potential cost of fuel-efficiency standards as high as 62 miles per gallon being considered by the Obama administration.
Yeah, 62 miles per gallon.  Declare it, make it so, get pro-active. That's all it takes.  Ask King Canute.   

Derrick, mandates and Congressional Performance Art won't get us anywhere. 
Building a "Fortress America", taking us back to a trading system like Feudal China's, won't get us anywhere.   We need the Evil Foreigners and they need us. 
We need for our government to leave everyone the hell alone.  Build some roads.  Referee in some disputes.  Defend the borders.  That's all. 

7 comments:

Stephen M. Smith said...

Why so stingy with only a 62 mpg standard? Why doesn't Congress just mandate zero-emission perpetual motion machines for everyone? Wouldn't that solve all the problems in one fell swoop?

Nick Rowe said...

If Congress mandated that water run uphill, it would DOUBLE the electricity generation of our hydroelectric dams.

If they make a simple modification to Daylight Savings Time, it would always be light and they would double or triple the output of solar panels.

If they simply talked in the general direction of wind farms, they'd recapture their CO2 emissions just like the regenerative brakes on hybrid cars.

To hell with oil, go nuclear!

The Whited Sepulchre said...

Both of you are correct. I was setting my sights too low.
We should declare that all industries extract infinite amounts of something from nothing.

Dr Ralph said...

Why not a market based solution that doesn't require drilling offshore?

Let the price of gas go where it will.

Five bucks a gallon? I say let it hit ten bucks a gallon!

Hear me out.

I make a round trip commute of 50 miles a day plus general running around which works out to about 15,000 miles a year. My 13 year old Saturn wagon gets around 30 mpg (I track it religiously), which at $3 a gallon, the current going rate for regular, means my annual fuel cost is roughly $1,500. Joe Bob in his 12 mpg pickup or Hummer has an annual fuel cost of around $3,750 for the same number of miles.

Bump gas up to $10 a gallon and I'm spending $5,000 on gas. Painful but I'll manage.

Joe Bob is going to be spending $12,500. My guess is he's going to be highly motivated to trade that pickup up for something with a little better mileage. Plus I don't have to put up with his freaking monster pick-up tailgating me at 70 mph on the freeway.

Side benefit: Detroit (if management pulls heads from hindquarters enough to see daylight and stopped hawking behemoths) can sell a bunch of new energy efficient cars.

Side benefit #2: drivers of the new generation of small cars now produce fewer emissions.

Side benefit #3: with the cost of shipping now a much larger factor, locally produced goods can better compete in the marketplace. Globalization only really works if transportation is cheap.

Side benefit #4: the concept of being a locavore makes more sense if shipping your California-grown tomatoes is prohibitively expensive.

Side benefit #5: alternative energy sources will make sense economically and perhaps no longer be ridiculed by those who see them as a scam perpetrated by the politically well-connected.

I'll leave the downsides to you - you do that so much better than me.

Nick Rowe said...

Side cost 1: The production of Joe Bob's pickup released CO2 which is already in the atmosphere: a sunk cost. The CO2 emitted to produce his new hybrid is NOT a sunk cost. His new car will have to make up the difference in energy and emissions AND it's own production emissions.

Side Cost 2: Joe Bob might actually need that large vehicle to carry things related to his income.

Side Cost 3: Hybrid vehicles use rare earth metals and nickel, the mining from which causes massive environmental devastation. 95% of rare earth metals come from China.

Side Cost 4: taxes have an excess burden - the loss in consumer and producer surplus that evaporates. This will cost hundreds of billions of dollars of GDP. The excess burden grows proportional to the SQUARE of the tax rate.

Side cost 5: We have pretty good public transportation where I live, and some people still can't afford the $60 per month for a bus pass. How many people who do not have public options will lose their ability to get to work?

Side cost 6: there is no benefit to being a locavore. The per unit transportation cost for mass quantities of tomatoes shipped to Texas is lower than the per unit cost of shipping them across town.

Side cost 7: if you need a tax or a subsidy to make an alternative cost-effective, it's not cost effective. The taxes and subsidies have their own costs.

Side cost 8: smaller, fuel efficient cars are, all else equal, less crashworthy. This leads to more deaths. In an accident, they cost more to repair and are more often "totaled."

Side cost 9: greater fuel economy reduces the per mile cost of driving, so people will drive MORE. So the cost and emissions savings will not be as large as advertised.

Side cost 10: lighter, fuel efficient vehicles require more maintenance. For example, the brake rotors leave the factory at the legal minimum. So the first time you step on the brakes, you're below minimum. When you change your pads, you're also going to need four new rotors at $100 a pop plus labor.

Side cost 11: Let's say Joe Bob's old pickup is worth $4000. When gas rises to $10 per gallon, that pickup's resale value will drop to nearly zero. So he gives it away. But that just subsidizes somebody else for the first 400 gallons of gas.

Side cost 12: at $10 per gallon, a huge black market for gasoline would develop, providing gas for much lower than $10. But the costs to society for producing that gas would be huge from the enforcement and evasion costs. Congratulations, you've just created a new form of organized crime! Watch Mad Max again - that's the world you'll be living in.

Side cost 13: faced with severe oil shortages, the Nazis developed a synthetic fuel during WWII. With $10 per gallon gasoline, that fuel (or some other carbon-based fuel) would become cost effective. We'd have all sorts of toxic liquids being burned in different engines.

Don't underestimate the ability and willingness of people to get around any "solution" you come up with. Government is perpetually trying to fit a queen size sheet on a king size waterbed. Every time they try to get the fourth corner tucked in, one of the other three pops out.

If Joe Bob owns a $70,000 Hummer, he doesn't give a damn about paying $12,500 per year for gas.

It we built a nuclear reactor near every city, plug-in electric vehicles MIGHT actually make sense.

Dr Ralph said...

Nick - one thing I respect about you is your willingness to do your homework.

SC1, 2: granted, but sooner or later that vehicle's going to get replaced regardless.

SC3: That's today; if there's a bigger market shouldn't the free market come up with improved technology? Besides, hybrids alone aren't the answer: a hybrid Suburban still gets crappy mileage.

SC4: Which taxes? The taxes already included for road maintenance? Seriously - I didn't mention taxes, but being an economist you may see something I missed (wouldn't be the first time).

SC5: God forbid we subsidize the cost of public transportation for low income families.

SC6: I'll give you this one - I was mostly attempting to pull someone's chain.

SC7: Agreed - but if the cost of gas hits $10, I'm not sure you'll need subsidiaries to make alternatives cost effective.

SC8: This is an issue (to me anyway) primarily when you have small vehicles sharing space with large ones. I'm already risking my life - with fewer large vehicles that risk is going to go down.

SC9: This is a purely personal observation, but I don't feel compelled to drive any more or any further because I have a car that gets fairly decent mileage.

SC10: I don't know that you can make that generalization. Again, this is based on personal experience, but maintenance on my Saturn wagon was never all that much. On the other hand, I've got a Jetta that continues to cost me an arm and a leg. Damned German cars.

SC11: It's late and your point is much too subtle. I concede.

SC12: Where is this under $10 gas coming from? I'm not proposing we tax this to $10 - I'm saying let the market charge what it will, and sooner or later it *will* hit $10.

SC13: We're already burning all kinds of toxic liquids. Ever checked what gasoline consists of? It's nasty.

Ultimately this is a situation someone is going to have to deal with, and the solutions are not going to be fun. Pushing it off on our children or grandchildren seems more than a little chicken shit.

Nick Rowe said...

Ralph, you're breaking my scroll wheel!

Yes, the Hummer will eventually have to be replaced. If the hybrid's emission savings cannot offset its emissions of production, then the socially responsible environmental solution is to drive the Hummer until it dies a natural death and then get a fuel-efficient vehicle.

Yes, the market will come up with better technology. But we are limited by the bounds of physical chemistry. Energy storage is the Achilles Heel of alternative energy. There are only a limited number of elements on the Periodic Table to work with.

I apologize for assuming you meant a tax increase. You suggested we "let" prices go to $10 per gallon. Eventually they will get there anyway, so I assumed you wanted to push them along.

The nominal price of gas will certainly reach $10 soon, but the real price might not be any higher than it is now (or might be less).

If the real price of gas hits $10, then alternatives will become more cost-effective. There will be a normal and natural conversion to alternatives.

The burning question is whether improvements in technology or rising oil prices will happen fast enough to prevent Hell on Earth from too much CO2 (if you believe in that AGW garbage).

Given that all previous Malthusian predictions have been defeated by technology, I am optimistic we will avoid Global Warming just in time for the killer asteroid.

God DID forbid subsidizing public transit for low income families. I think it was the Seventh Commandment. Or was it the Eighth?

If you trade in a gas guzzler, the used car is going to get sold. Either someone will drive it, or it will be stripped for parts so another gas guzzler can continue driving. The increase in supply will reduce the price of these vehicles, and thus implicitly subsidize another person's emissions. Now, you could destroy the car (as Cash for Clunkers did), but then you fall into the trap of SC1 - you eliminate a car whose CO2 of production is a sunk cost. It's a waste of resources.

As a driver of a four-banger, I'm quite familiar with Joe Bob driving his monster truck like he's wielding a weapon. I fully support a highway patrolman charging Joe Bob with reckless driving and confiscating his license and truck.

Yes, YOU might not need or want to drive any more miles if you get better mileage, and neither will I, but the laws of economics tell us that in the AGGREGATE, people will drive more. When Congress increased CAFE standards, we actually saw a jump in vehicle miles traveled, holding other things constant.

One of the ways auto manufacturers achieved the CAFE standards was to make vehicles lighter. They removed every ounce of excess metal and used less dense materials. In order to satisfy crash test standards, they used crumple zones, styrofoam, and other compressible designs and components. They even have aluminum foam now! The compression absorbs impact, but the material is destroyed on compression. The net result is a totaled car.

As for maintenance, brake rotors are the best example I have. There's an open question about hybrid batteries which which will be answered in a few years.

Yes, we are burning all kinds of nasty stuff. What I'm saying is that if gasoline gets more expensive, we'll burn even nastier stuff. Gasoline is incredibly efficient - hundreds of times more energy efficient than previous fuel sources.

Here is a truly great article that explains our energy and waste dilemma. As long as we rely on electro-chemical or electro-magnetic reactions, we're confined by the physical properties of matter. By breaking the atom, we learned how to create a quadrillion times more energy than breaking the carbon-hydrogen bond.

Nuclear waste is still a problem, but it's much easier to deal with a truck load of nuclear waste than 330 train cars full of carbon waste to achieve the same energy.