It's Not The Oil Companies

The idea is that the energy companies have been fixing prices at artificially high levels...The only problem with this idea is that it's based on a totally false premise. The energy companies don't set the price of oil or of gasoline. The prices you pay for heating oil or gasoline aren't set in boardrooms in Texas but in trading rooms at commodities markets all over the world. - Ben Stein

I really don't like to pay $3 per gallon of gasoline, but blaming the oil companies is not going to solve the problem. In fact, oil companies have little to do with the actual price paid at the pump. Imposing draconian “wind-fall taxes” on these companies will not lower the price. The proof of this is that no such tax measure has ever resulted directly in price decreases. Congress likes to enact them for the simple reason that the oil companies are an easy target that makes it look like they are doing some work come election time in November.

It is not just a “false premise” as Ben Stein called it, it is completely misguided. Consider the fact that last quarter, Exxon's “record” profits were equal to 9% of revenue. This is actually a very paltry amount, given that numerous companies routinely turn in profits of 20% or more, and last quarter, the average was 11%. By once again using “fuzzy math” (i.e. focusing on the absolute dollar value rather than the percent), the mainstream media is able to confuse John Q. Voter enough that Congress can once again do nothing while appearing to do something.

Oil companies' profits amount to 9 cents per gallon. The Federal Government imposes an 18.4 cent per gallon tax, two times what the oil company costs me. California tacks on another 32 cents on top of that, nearly four times the oil companies' profit. That means that this very day, if government were truly interested in taking positive steps to lower the price of gas, I could be paying “only” $2.50 per gallon. But of course that means that government would have to fore go tax revenue, rather than get more through the wind-fall taxes. And without that gas tax revenue, how would they fund the Bridge to Nowhere.

Congress' misguided “actions” frequently cite as the goal to reduce the dependency on foreign oil. They incessantly bicker over drilling in ANWR, investing in alternative energies, and their latest idea to send every taxpayer a check for $100. Thanks, that will help. Once. For various reasons, none of these approaches will solve the problem of foreign oil. And even if it did, as explained above, the cost of oil has little to do with the cost of gas at the local station.

Republicans want to open ANWR for additional drilling: more oil! lower prices! This is bunk. American companies are currently pumping oil out of the Alaskan North Slope. What they don't tell you is that because the oil has a high sulfur content, no refinery on the West Coast (which is the only part of America connected to the Alaskan pipeline) will take it. As a result, virtually every single drop of oil from the North Slope goes to Japan. The oil in ANWR is the same and will have the same fate. Unless the environmental freaks in state governments on the West Coast relax the restrictions, ANWR oil will not reduce the price of gas in America. But the Republicans can blame the Democrats for “their failure to seek oil independence,” just so long as you don't find out where the oil goes.

Democrats want to increase gas taxes to pay for research into alternative energy. In fact, they have tried since 1993 to impose additional Federal taxes ranging from 25-50 cents per gallon (they only succeeded once with a 4.3 cent increase). They have also managed to pass punitive environmental regulations that have prevented any new nuclear power plants or new oil refineries from being built since 1979. Either of those would have a measurable impact on the amount of foreign oil imported into America.

In the meantime, they have touted so-called “green” research to be paid for with their wished-for gasoline tax increases. The two current favorites among the alternative energy Democrats are wind power and hydrogen. Of course, you would be hard-pressed to find a single Democrat who has actually voted in favor of any wind farms. In fact, Democrats have actively campaigned against wind farms in coastal regions (remember that both the right and left coasts are “blue” - wouldn't want to spoil the view).

It has been estimated that enough wind energy could be farmed from the Great Plains to power the entire United States. Why aren't the Democrats proposing development there? If you guessed “because those are red states and they don't want the Republicans to get the credit,” that would only be part of the answer. Most Democrats oppose wind farms on the Great Plains because the windmills are a danger to migratory birds. So much for one source of alternate energy.

So what about hydrogen? The dirty little secret of hydrogen is that there is very little free hydrogen on Earth. The vast majority is tied up in the water that surrounds us. The lion's share of what is left is locked away in methane ice on the bottom of the world's oceans (although for the most part, it is tantalizingly close) or in natural gas deposits. To extract it and then to convert it to the form needed to power cars, you need to use energy. And since no process is perfectly efficient, you must use more energy than the hydrogen will ultimately be able to provide in useful work. And because of the Dems' irrational fear of nuclear power and Ted Kennedy's “no windmills in my backyard” antics, that energy must come from burning more fossil fuels.

So what is left? Solar? Geothermal? Natural gas? Everywhere you turn, environmental regulations set up by the Democrats 30 plus years ago prevent building the infrastructure necessary for any alternative energy, while other regulations prevent building additional refineries to increase the supply of distillates. The Democrats can then sit around blaming the Republicans for “serving their oil company masters by refusing to pass the gas tax.” It's a great sound bite come election time, but the truth is, they do not want any of these alternative sources to be developed.

Consider this: over the last 2 weeks, the average price of gasoline has risen 25 cents per gallon. In fact, every couple of days as the price of oil went up, the price of gasoline at the corner stations also increased. Since Monday, the price of oil has gone down nearly 5%, but the price of gas at the corner stations has actually continued to go up (by my unscientific survey of an average of 3 cents per gallon since Sunday). Moreover, stocks of raw crude are at a seven year high, while distillate inventories are only 4.5% lower than this time last year (despite the fact the refinery capacity has been hovering around 85% for the last 6 months). In a market where the laws of supply and demand held sway, gasoline prices today should be at most 4.5% higher than this time last year.

***UPDATE*** I wrote this article too soon. Between 7:30AM and 6:30PM yesterday, the price of gas at my local discount station rose 10 cents!!! This despite the fact that crude oil prices went down by about 70 cents per barrel and gasoline dropped nearly 7 cents per gallon over the course of the day. ******

But of course, the petrochemical market does not live in the world of supply in demand. Instead, speculators “bet” on what they think the price of crude and distillates will do over the next 90 days. Once a speculator picks a price target, he looks for an oil company to service the contract at the proposed price. Sometimes their bets are based on geopolitical issues, sometimes on forces of nature, but the result can never be more than a guess. No science, no math, no economics can ever account for irrational fear.

Suppose for a moment that you are selling a car for $1000. I walk up and say “I'll give you $5000 for that car.” What would you do? It is no different for the oil companies. Even though in all likelihood they could profitably deliver oil in the $28-40 per barrel range, if someone offers to buy it at $75, are they going to turn it down? This is not greed – it is capitalism at its finest. The oil companies are unintended beneficiaries of the speculators.

Nothing, nothing in the known world can effect the price of the gas that is already sitting in the tank at the corner station. No market influence, no price fluctuation in the cost of oil or distillates. Nothing. It has already been delivered at a price set at least 90 days earlier. The price is fixed. Any gas deliveries over the next 90 days are delivered against a contract that also has a fixed price set when the contract was serviced. Nothing can change the amount the gas station owner is going to pay.

It should take a minimum of 90 days for any price change in oil or distillates (up or down) to show up at the pump. But of course, any increase in the amount you pay goes directly into the bottom line, not of the oil company, but of the owner of that gas station. This is why the price goes up immediately when oil does, but it takes a long time for the price to go down. This is flat out greed, not capitalism.

It's not rocket science. If Congress wants to enact real gas-price relief, they can declare a moratorium on the Federal gas tax. That will immediately lower the price of gas. They can target the speculators and assess the “wind-fall tax” on them instead of the oil company. They could offer a tax incentive to the oil companies on any revenue invested in exploration. They could encourage States to lower or declare moratoriums on state gas taxes. They could encourage States to prosecute local gas station owners for price gouging. But of course, that would be too much like actual work. It is far easier to do nothing that looks like something.

It's Time For A Change

When in doubt, kick 'em out. - Coach Birdy, CMU

Every school has at least one athletic coach who is also an unheralded philosopher of life. The wisdom of these sophists is often unrecognized until years after their pontifications. At Carnegie Mellon, that man was the swim team coach, Mr. Birdy. Like all of his breed, his first name was lost to history and was know simply as “Coach.”

Coach Birdy also happened to be the resident Lifeguard Instructor, and in that capacity was I exposed to his wisdom (thanks to the benevolent intercession of the EE Department Secretary - “Take PE. It counts as a humanities class!”). One of the lecture classes was dedicated to safety issues, and one of the sub-topics was weather. It was during this discussion that the sage of the swimming pool enlightened us with his unique solution to weather safety - “When in doubt, kick 'em out!”

Over the intervening years, I have found that advice applicable to so many other areas beyond weather related safety. The reprehensible behavior of Congress of late has led me to the conclusion that it is time for them all to go. When in doubt, kick 'em out!

According to official records, the 109^th Congress has the oldest Senate (at 60 years) and likely the oldest House (at 55 years – record keeping in the House did not begin until 1907). Fifty-six members are over the age of 70 and 214 are over the age of 60. Certainly, in and of itself, age is not a bad thing. However, as we dig deeper into the details, it is clear that age is only one factor in a Congress increasingly distancing itself from John Q. Voter.

Currently, the average tenure of a Representative is just over 9 years. The average tenure in the Senate is just over 12 years. The “official” publication, The Biographical Directory of the US Congress, disingenuously reports this data as 4.5 terms (true, but misleading) and 2 terms (an out-right lie) respectively. In actuality, it means that the average Representative is currently in his 5^th term and the average Senator is currently in his 3^rd term. It also means that the average Senator was first elected when he was 48 and the average Representative when he was 44 .

Over half of the current Senate (53 members) have served longer than 10 years, and nearly 1/4^th (23) have served over 20 years. In the House, the numbers are 202 (46%) and 58 (13%) respectively. There are 7 Senators have served for more than 30 years, and 3 for more than 40 years (the numbers in the House are 13 and 2). There are also numerous instances of family members running for another family member's seat when one retires or dies (a hard number is difficult to determine due to the choice of criteria, but it is clearly a non-trivial number).

For their occupations, 218 are lawyers and another 195 self-identify as career politicians. This means that a staggering 77% are careerists in occupations which are not trusted by the average American. Only 139 current members have ever served in the military, yet Congress considers themselves to be experts on what is best for the Armed Forces.

In 1995, Congress (briefly) considered a term-limits bill, which was of course defeated (fox in the hen-house, anyone?). During the debates, Congress applied some poor logic to defeat a bill with the obvious side effect of (ultimately) forcing then-current Congress Critters to find alternative employment. Henry Hyde, who at the time was Chairman of the House Judiciary Committee, said “If somebody came up to me and said you have to vote for this person, I would be offended. I would say you don't understand democracy. Now, I fail to see the difference between someone coming up and saying you cannot vote for this person. I would say you don't understand democracy, either.”

Well, Representative Hyde, let me explain democracy to you, since you don't seem to understand either. When Washington stepped down after his second term, one of his stated reasons for doing so was that he believed he would die in office which could potentially be interpreted as the President being a de facto ruler-for-life. This un-legislated two-term limit was precedent for nearly 150 years until FDR decided he was better than everyone else and sought a third and then fourth term.

Appalled at his hubris, Congress responded by passing the 22^nd Amendment prohibiting anyone from being elected President for more than 2 terms (a person could serve at most 2 years unelected as the result of death or permanent incapacitation of the elected President in addition to the 2 elected terms). Of important note is that the two term limit was codified for the express purpose of not wanting the Presidency to appear imperial, exactly the problem Washington had foreseen.

Thanks to the 22^nd Amendment, every President is barred from seeking a 3^rd term, and by direct result, I am told every eight years or so who I can and can't vote for. No one – no Congressman, no ex-President, no voter – ever claims that this is not democratic (unfortunate, maybe, but not undemocratic). So if limiting the term of the President is not a violation of democracy, how is it that Congressman Hyde can assert that attempting to limit his term means that I don't understand democracy.

But Congressman Hyde is not done. He goes on to claim that the job of Congressman is so difficult that experience is necessary. “Every other area of professionalism in this nation values experience, tenure, and the wisdom which can come with terms of service. Term limits would destroy this opportunity and make Congress an institution where inexperience is more valued than professionalism and experience...This is not an easy job, and it can't be done overnight. It takes years...You demean the importance of this job by saying anybody can do it.”

Since the job requires experience, and since only Congress Critters have the experience, only current Congress Critters can be elected. Ah, the veil is lifted! Enlightenment of the masses is at hand! Congressman Hyde (and all who voted against term limits) have revealed their true colors. It is indeed I who understands democracy and it is he who understands aristocracy! But then who shall replace a retiring Member since no one has the requisite experience? Shouldn't we value experience of having been President in our President? By Hyde's logic, we should be demanding that the President serve for life (or until he deigns to retire, as Hyde acknowledged that is the primary means by which Members lose office).

But let us examine Hyde's logic more fully. “Term limits would remove critical leadership and institutional abilities of Members,” claims Hyde. Perversely, at the time he made this observation (1995), he noted that 52% of all House members had been elected after 1990. This means that more than half of the House lacked the experience Hyde claimed was so important, nay indispensable, to the job. That would certainly imply that a person can learn the job while doing it, the exact opposite of his conclusion.

As noted above, the current average Senator has just begun his 3^rd term, while the current average Representative is in his 5^th. Assuming the numbers were roughly the same in 1995, it necessarily follows that experience is not all that critical. If we assume that the situation was better in 1995, it becomes conclusive proof that long-term experience is not necessary to the job. If we assume the situation was worse, it becomes conclusive proof that decreasing time in office results is no adverse effects on Congress' ability to conduct the business of America. No matter which assumption is true, the inescapable conclusion is that term limits would not harm Congress.

Earlier I wrote that the average Representative was elected when he was 44. Hyde tells us, “I just made a little list of the things you had better be expert in, you had better be knowledgeable about if you are a politician serving in this building: agriculture, environment, weapons systems, international relations, banking, finance, urban affairs, tax policy, budget policy, administration of justice, bankruptcy law, tort, medical malpractice, product liability, immigration policy, criminal law, intellectual property, customs, health care, trade policy, education and labor, and on and on and on and on--a lifetime's work, to know about one of these subjects.” Yes, by the time he was 44, the modest Congressman Hyde had developed a lifetime's worth of expertise in all of these subjects and more.

It ought to be obvious to anyone that if Congressman Hyde's observation were true, the average age of Congress ought to be static. That is, once elected, Congressmen should remain in office until a very advanced age in order to provide the appropriate level of “critical leadership and institutional abilities.” At this point, a large group of them would be replaced by a younger, but presumably “expert,” crowd (the offspring of the current crop no doubt), driving the average age much lower, with a net effect of little change overall. But that is not the case. The average age has been rising steadily, and since it is now higher than at any point in history, his conclusion is insupportable Let's all say it together: term limits would not harm Congress.

It may be perceived that I am unfairly picking on Congressman Hyde (who, by the way, was first elected over 30 years ago). However, in voting down the bill, Congress relied heavily on the Judiciary Committee's report (authored by Hyde) and I can find no credible evidence that Congress has debated the issue since 1995. In an interesting bit of irony, the bill came about as part of the “Republican Contract With America.” A Republican sponsored bill that was part of an agenda that got Republicans elected was not passed in a Republican-majority House (did someone mention the fox and the hen-house earlier?). As long as we elect self-serving Congress Critters who are incapable of fairly debating the merits of a bill that would deprive them of a job for life, we will never have reform.

So how do we go about implementing term limits? The solution was proposed by Coach Birdy – kick 'em out! Vote the current crop of Critters out of office. Replace each of then with a candidate that is willing to sign, not just pay lip service to, a term-limits pledge. Eventually enough members of Congress could be elected such that a Constitutional Amendment could be proposed. And yes, an Amendment is necessary to forestall any recourse to the courts should a disgruntled (former) Congress Critter desire the life time employment he so recently enjoyed.

There is nothing inherently dangerous about term limits. As pointed out above and unwittingly by Hyde, the average Critter has relatively low tenure. For the sake of argument, assume Senators were limited to 2 terms and Representatives to 5. Assume the term limits went into effect today. Also assume that it would apply to those currently in office. That means that in the 2006 elections, roughly half of the Senate and the House would be ineligible for re-election. Any incoming Members would benefit from the wisdom and experience of the remaining half. And again, even though the remaining half would be relatively junior, history proves that this is not problematic for Congress as a whole.

By 2016, all current Members of Congress would be replaced, but the important thing to note is the staggered nature of the replacement. In any Congress, there would be a mix of Members nearing the end of their term limits (i.e., at least as experienced as the average Member today), Members with average tenure (and average experience), and Members freshly entering the ranks. Thus, the “institutional memory” Hyde so jealously guards would always be preserved.

Alexander Hamilton once said, “When a man knows he must quit his station, let his merit be what it may, he will turn his attention chiefly to his own emolument.” Opponents of term limits often invoke this as proof that the Founders were opposed to them. However, this statement is taken out of context. Hamilton was speaking to the idea of forced rotation versus frequent elections. Nearly the identical debate took place over the length of service for the President, and as we saw, the Founders did not place any limits in the final Constitution. This does not mean they were opposed to term limits. It means that they left the matter unsettled.

An important difference between forced rotation and term limits is that until his final term, a Member will not know for sure when “he must quit his station.” Far from using his last term to increase his lot in life, if Presidential history is any guide, he will instead turn his attention to creating his legacy.

It's not rocket science. Term limits will not stop the incessant pork barrel spending, but it should make it possible for worthy citizens who are willing to serve their country instead of themselves to have a chance. And during their final term, at least, maybe they will finally get around to doing their job – provide for the common defense, promote the general welfare, and secure the blessings of liberty.

Got History?

Whereas by an intermixture with our people, they, or their descendants, get assimilated to our customs, measures, and laws: in a word, soon become one people. - George Washington

We are not a nation of immigrants. That slogan is leftist, anti-nationalist double-talk which belies the fact that the most recent census data shows that more than 85% of all people living in America today were born here. A good portion of those are descended from the original colonists, meaning that they have no ties to immigration whatsoever. We are a nation of Americans, efforts to separate us into properly hyphenated groups not withstanding.

The pro-illegal immigration rallies last week ought to be an affront to all Americans and legal residents. Using the same tired old rhetoric, the organizers of the rallies brought hundreds of thousands of illegal aliens “out of the shadows” from where they are supposed to be living. Apparently that shadow stops at the parking lot of all Home Depots, fast food joints, and hotels in America.

Invoking great Americans from George Washington to Martin Luther King, Jr. the speakers told the crowds and America at large that any attempt to make illegal presence in America a felony was a racist abrogation of the principles on which America was built. Protests as far east as Wisconsin featured signs saying such things as “Get off our land” (emphasis added). Others claimed that all European descendants are the “true” illegal aliens. And my personal favorite encouraged me to learn the “real” history. Of course, the liberal media and Democratic party panderers were quick to pick up and run with these themes.

Properly chastised by these holier-than-thou illegal aliens, I decided to check a few historical facts.

1. The extent of the Aztec empire never extended into the desert Southwest and Spanish Mexico encompassed only the area from California to Texas. Wisconsin is definitely not “their” land.

2. The illegal aliens in America are speaking Spanish, not Aztec, which means if we are “invaders” then so are they. The Spanish illegally invaded and conquered what is today called Mexico from the Aztec empire in 1519-1520. Spain also invaded and conquered the territory identified above. That means Spain, not Mexico, would have a priority claim on the land the illegal aliens claim is “theirs.” Of course, the American Indians might have something to say about that, and the buffalo and gila monsters would probably dispute them in turn.

3. The Aztecs had previously invaded and conquered all surrounding indigenous tribes by 1473. So even if the illegal aliens were speaking Aztec, they would still be invaders.

4. Spain ruled Mexico ruthlessly, instituting a caste system that put pure-blood Spanish at the top and natives at the bottom. Mexico-born offspring of pure-blood Spaniards were considered second-class citizens. Bi-racial offspring had even fewer rights. In America, laws protect the equal rights of all, and special laws grant “extra” equality to members of properly hyphenated groups. Thus, the illegal aliens would be better served by becoming legal residents.

5. Napoleon conquered Spain in 1808 and placed his brother on the throne. Spanish Mexicans became French subjects and eventually began a rebellion which ultimately led to independence in 1821. Mexico was re-conquered by the French after the civil war of 1858-1861, and was re-re-conquered by Benito Juarez in 1867. Which all leads to the question, who exactly is a “native” Mexican that could (inconceivably) assert some claim on American soil?

6. Today, Mexico is effectively a one-party system (the PRI), in which not a single one of the major leaders is descended from a native tribe. Illegal aliens in America have more voice in the political process of a country whose laws they are breaking than do native Mexicans in their own country. Which one of us is the real bad guy?

If the white presence in America is illegitimate, the Spanish presence in Mexico is also illegitimate. And further, Spanish Mexican illegal aliens have no right to claim any part of the US as “their” land because prior to 1821 there was no such country as Mexico – it was a colony of either Spain or France.

George Washington was not a proponent of open borders. In fact, he specifically cautioned against allowing immigrants to arrive en masse. He believed that if large groups arrived together, they would naturally tend to congregate in the same areas. They would continue to use their own language, their own customs, and their habits from the “old” country. In short, they would not assimilate into America.

He wrote the words above in 1794. How prophetic they seem today, as this is exactly what has happened. Rather than become a nation of Americans, we have become a nation of properly hyphenated groups. Any time someone has the audacity to encourage legal immigrants to assimilate, he is immediately accused of being a racist. Any time a crime is committed against a member of one of the properly hyphenated groups, it is immediately called a hate crime. And any time a large influx of members of these groups wish to come here illegally, the Democrats (and lately even the Republicans to their eternal shame) roll out the red carpet.

What we must not loose sight of is the fact that these people are here illegally. Whether or not they are “vital” to the economy is not the point. How absurd would it be if a bank robber made his defense the fact that he “does the jobs Americans won't?” A crime is a crime irrespective of the (supposed) underlying motive.

It's not rocket science. If someone wants to come to America, they can get in line like every other honest immigrant. Anything less is disrespectful to all.