Oil, Ethanol, and the Hill's long tradition of Dropping the Ball

Vinod Kholsa writes a though provoking piece on how we don’t need oil or hydrogen, what we need we have plenty of: ethanol. It’s an interesting read and thought provoking [Read it here]… and it triggered some thoughts and here is what we came up with at VFLOAB.

This oil stuff is just so bizarre right now. People complain but I don't see them changing in their ways or the price of oil coming down. It's sort of a shame that Americans got so 'lazy' and began to feel that driving any where and every where was within their rights as red blooded Americans.

It's a total mess that's for sure. It's obvious that the years and years of allowing Big Oil to do what they will, getting around taxes (Kholsa raises a good point when he said that taxing Brazilian ethanol and not taxing imported oil is nuts), and allowing them to write many if not all of the laws on the books right now is absolutely killing us. At some point this has to start hurting the US economy right? But it seems like we've been saying this for years. Yet at the same time, I bet a lot of these rosy numbers we keep seeing are just a few individuals and individual companies creating a bubble and making the economy look unnaturally stronger than it is. The more telling figures are the ones that show the gap between the rich and middle class is growing and has been growing since 2001 or so. That's probably a better 'example' of our current economic situation in this country than anything else. Since if the economy really is doing better, then everyone should be better off.

But I have my doubts… we use oil because it's the most efficient means of getting around. Just look at what Kholsa has to admit: "ethanol offers somewhat lower mileage per gallon hence the need for an "equivalent mileage" price per gallon" Why would I drive a car that gets worse mileage? Sure at 4.00 a gallon I might switch, but when gas was at 1.50, driving an ethanol fueled car made no sense. But even if this is the markets way of creating change, it's still going to need a kick in the arse from the government and I don't see that happening.

Is BigOil evil? Yeah, I'm sure they've pulled every trick in the book to keep prices higher than their actual market value. There's documentation that they limited refinery output to keep prices high (for the record, this was back in the mid 90s). As I said, they've written a bunch of the laws on the books that govern oil and they didn't pay a cent for much of the offshore drilling.

Personally I think the best alternative is much of what they have in Europe: high gas taxes, better public transportation, and encouraging people to walk four blocks for once in their lives. I know that urban America and urban Europe looks very different (we have less public transport and people live in the 'burbs); but if we wanted to we could pull something like this off. Of course that means further subsidizing public transportation so that it covers more areas, but we already have much of the infrastructure to do something like this, especially along the coasts and in the Midwest. There's no reason to believe we couldn't build a 'state of the art' infrastructure in the booming cities of the South and Southwest (though it might be difficult in Atlanta and Phoenix at this point). It's a real shame that it's hard to find a public transportation system south of DC or west of Chicago (San Fran I believe is the notable exception).

Of course this costs money and no one in this country wants to pay taxes. I'm not sure if this is because of greed, a lack of trust in the government, or just what every human 'feels'. But we're going to have to face some 'hard' decisions in this country, decisions that my generation will have to deal with more so than the Boomers. We're at the point where not only are we probably going to see high gas prices for good, but we will also have to deal with healthcare, pensions, and other infrastructure issues. I think these are much more pressing needs than what the market has oil priced at.

But I do find it 'ironic' that many free market conservatives are calling for the government to 'find a solution' to the problem the 'market' and Big Oil has created. And now t
he GOP wants to send every American 100 bucks… lol. This is funny because… the GOP is more in bed with Big Oil than the Dems AND it goes against everything the GOP stands for, or at least claims to stand for. But the moment you ask the government to get involved in healthcare, they're throwing shit fits. But oil? Well in that case ‘we have to do something about it! It’s in the Consititution that gas cannot be more the 2.75 a gallon!’ (meanwhile 40 million Americans don’t have health care… talk about not having your priories in order). I just don't think you can have it both ways. I'd love the government to take the horns on this bull, but they won't until their jobs are at sake. There's too much money on the line. And many of these guys are on either ego or power trips, so they're not going to make hard decisions or do anything constructive because it might cost them their seat. Congress has spent the last thirty years or so slapping band-aids on every issue that comes up instead of getting stitches that we're nearing the point where it's all going to explode and bleed uncontrollably. Expect the same here with the gas stuff: we’ll get a lot of talk and rhetoric about how they need to change things, very little if any action at all, and huge contributions to the Hillers campaign funds from Big Oil. And we’ll do the same song and dance again in five years… I mean who can forget the summer of 2000 when some states suspended their gas taxes?

So I have little hope. Call me cynical, but the actions of the government in my life time have been small and some what insignificant outside of say Welfare Reform, the 2001 tax cuts, the Patriot Act, Iraq, and a few other things I'm forgetting. And let's be honest Iraq and the Patriot Act didn't really 'solve' anything, but there were actions that Congress undertook so I need to give them credit. But they'll wait and wait and wait until it's too late and then slap some band-aid on it. Right now they're all talk, awaiting the next contribution from Big Oil and remembering those guys in Houston or Dallas at the end of the day.

Khosla I don't think realizes that even if ethanol makes sense today and tomorrow, Big Oil is calling the shots. They're the ones that wrote the laws and give money to the politicians. That's a big obstacle to over come. And if you've followed this Jack Abramoff stuff at all, you can sort of get a feeling for how 'tight' these guys become, corruption or no corruption.

And let's not forget the people really getting screwed over by the high gas prices are the working class. That's the real shame.

If people don't like the price of oil, then find another means of transportation and getting around. I guess that's my point in all this. This is the ‘price’ you pay by being a capitalist nation…

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