Friday, 19 February 2010

The Myth Of The Hidden Tax

While getting my news from NPR this morning, I heard a discussion about getting rid of tax breaks for "fossil fuel" companies. First of all I have to disclaim that an outsized percentage of the family's retirement account is invested in "fossil fuel" and other energy companies. There are many reasons for this. I also feel that it is slightly hypocritical of me, as I rant against them and call them evil, but they've got the whole world over a barrel (get it? I'm on fire in the early AM) and they'll get their pound of flesh. I'm over it. At least we hold no Goldman. In fact we don't hold any financials. Probably should. Don't.

Anyhoo, Jay Rockefeller, he of the greatest piece of real estate in DC and king of the coal state, was somewhat sanguine about the loss of this break. A Rep from some other "old energy" state was less so, saying that "we" (yes, he actually used the word "we") will just have to pass that added cost onto the consumer, so that it would act as a hidden tax. Breaking news: removal of ill-performing subsidies does not equal hidden taxes. It equals an opportunity for the market to work. If oil, or coal, or wind or any other thing loses subsidies and reverts to its real cost, then it will be at its natural competitive position and the market will adjust. Yes, in the short term our in-built reliance on fossil fuels (created through some really quirky series of events - the whole mechanism by which we came to be in the state we are in, and the American empire was created by no force more prominent than oil. It would take a book to explain. That book is "The Prize," which you should read) will cause consumer and producer prices to rise. Then (hopefully) we will adapt. And the money that isn't spent on oil subsidies on our behalf will be directed to some area of greater universal benefit. We are just absolutely killing ourselves with our dependence on fossil fuels.

Here is my stupid question of the day. If oil is indeed produced by fossils, just how many freaking fossils were there? I mean we pull a billion barrels of the stuff out of the ground every thirty minutes or so and have done for the better part of a century (this is a literary technique called "hyperbole") - just what kind of a Casanova was old Dino? There must be more oil underneath the ocean than there is water IN the ocean.

Topic change #1:
From today's NYT:
Mr. Obama will announce the so-called ‘’innovation fund’’ at a town hall style meeting here, the officials said. The money will be redirected from the Troubled Asset Relief Program, known as TARP, and made available to state housing agencies, who will be expected to design programs to help homeowners having difficulty meeting their mortgage payments, either because they are unemployed, are burdened by second mortgages or owe more than their homes are worth.
So I guess capital gains on home sales are going to go up then, right? Right? Every single one of these homeowners would have felt great about pocketing the gains if they suddenly owed a hell of a lot less than they their homes were worth. Probably would have taken out home equity loans because, hey, free money. Hence the "burdensome" second mortgages. Do that enough times and you all of a sudden implode the economy. Hence the "unemployed." GOD DAMN IT we are stupid. Idiot proofing the world is creating better idiots.

Topic change #2. Team Sky kind of took a beating the other day. File under "inevitable." The freaking hubris on those guys is just astounding. Holy schize. They'll be good, they have far too much talent on their team not to be, but it was comforting to see the peloton (and Cervelo in particular, who have to be my favorite team even though Gerrans is now on Sky) teach them a bit of a lesson in manners. Too bad my boy Boss Hog was the ultimate recipient of the smackdown, but hey it had to happen.

Speaking of smackdown and throwdowns, get ready for round 2. News later.

Speaking of throwdowns and Sky and new teams and hubris, we are rapidly approaching the debut of my new team, an event which I hope is not popularly anticipated with the same thoughts I had viz Sky. The team has been accused of stealing riders from other teams, which is patently laughable, but on balance I think we've paid it forward acceptably and will continue to do so. We arranged the first competitive event which many people will do this year, and will do more of these. The third or fourth race on the calendar is ours, as is a season long series which many will be aiming for. And before the season is over you'll have a chance to do more races that we're hosting. So without being smug or holier than thou or anything even remotely flavored with those spices, I feel pretty good about our citizenship to date. Hopefully I can feel as good about my legs in the coming months.


Jim said...

It's not that any tax breaks for fossil fuel companies are going away. It's that we're looking for ways to stick it to them, while subsidizing incredibly expensive .alt energy schemes, and while state operated petro giants take more of our money to fund their projects - French highways, Russian corruption, and middle-eastern funded... well, let your mind run a bit on what our petrodollars fund. The seeds of our own demise, perhaps.

You can say this is a blow for the open markets, but when you take away a competitive advantage from one actor in the market while leaving the same thing in place for other market actors, you in effect create a barrier.

The net effect here, since petroleum is fungible and it's not like demand is dropping simultaneously, will be to disadvantage domestic companies, probably ultimately increasing scarcity and driving up the price on the international spot market - benefitting foreign firms. As long as your goals are driving up prices and hurting American firms, this should be a smashing success. I'm not sure it really helps with .alt energy either, because it doesn't do anything to increase the supply of it or address longstanding problems with it - solar's ever-so-slowly decreasing cost/Kw/hr, and wind's utter unreliability.

Eh, whatever. I'm probably arguing about the mindset of people who think tax policy doesn't change behavior.

Chuck Wagon said...

You sound like the Texas Railway Commission. Although we often agree, we disagree pretty profoundly on energy policy. France has zero domestic production and little more than zero captive foreign production. Russia, with big reserves, has big cards to play. As do may middle eastern states, who share just one fundamental principle - antipathy to the US.

I don't believe that oil has a future past 50 years or so. China is abusing the oil paradigm for all it's worth right now while laying the groundwork for serious ".alt" projects. Will they come to fruition? Maybe. Does oil have a future? No. I like maybe better than no.

God help me I going to quote Zach Delarocha - "it has to start somewhere, it has to start sometime, what better place than here, what better time than now?"

specialrider said...

Who decided that oil is a fossil fuel in the first place and not part of some other geologic process of temp/pressure/etc?

specialrider said...

...I meant to imply that oil may not be so finite a resource as we have been lead to believe...that may be the greatest sham going.

Chuck Wagon said...

special - based on the geology of how oil is found (of which i have a layman's knowledge at best), i have very plausible disbelief that it is a fossil fuel. but just think for a second about the volume of oil that's been brought out of the ground, and how much continues to come out every day. also, hubbert's peak is, to me, far and away the most creditable quantification of what's left in there, and that's not pretty. our mass scale use of oil is fundamentally between 60 and 80 years old, and demand has risen pretty much every day since 1890. some demand spikes, like between 1970 and 1973, really might make you crap your pants.

my word this time is "wrant." brilliant.

specialrider said...

what if I've already crapped in my pants?

Chuck Wagon said...

then you're just like me. just like me.

rematch, coming soon. details tba. I WANT HOLYFIELD!!!!

Jim said...

I'm not so sure about Peak Oil. Exxon just recently announced its 2009 discoveries, and noted that for the 16th straight year its discovery of accessible reserves has outstripped its production. I know that doesn't address aggregate demand but it seems to me like it should be going in the opposite direction, unless Peak Oil is just a millenarian sort of thing, immanentizing the eschaton based on hunches.

And yeah, China is a problem. FWIW, my energy/power chant right now is "Some more nukes! Some more nukes!"

Jim said...

And let me be clear, they have their own issues, but in the long run they are sustainable and clean, particularly if we go with a model of smaller cleaner double vessel models.

Just my 2c. I worked at the wrong end of the energy market to really know the mechanics of production.

Pete said...

I love reading about energy policy, but never take the time to search out any content, so I just wait until you say something through-provoking. Thanks for the post!

TerribleTerry said...

Jim, If you don't believe in Peak Oil?? do you mean you don't think we're at Peak yet? Or that you believe there's no such thing as a finite resource?

What you left out of your equation about Exxon is the entire part where they used to just dig in the dirt and it came spewing out from 1 of every 4 they dig miles and miles under oceans or scoop shale and work the shit out of now only 1 of every 30 wells gives something.