Thursday, September 29, 2005

Death by Chocolate

Mom always warned me of having too much of a good thing. I wonder if Bush's Mom offered her son the same words of advice. If so, he clearly was not listening. The Republican Party, I fear, is about to come apart at the seams, fattened by too much of a good thing: electoral success.

People who study chaos theory understand what happens when a system grows larger and more complex. At some point complexity overwhelms that system and it tends to collapse into simpler, more sustainable parts. This natural law applies to political parties just as well as to the Cosmos.

The greatest success of the Republican Party in the past century has been its ascension to majority in both houses of Congress, as well as control of the White House. This sea change was largely due to the enormously successful efforts of Newt Gingrich and the inspirational leadership of Ronald Reagan. Not the wimpy leadership of George H. W. Bush (Bush 41), nor the watered-down Republican establishment senatorial "club" types, such as Trent Lott, Bill Frist, John McCain and Arlen Specter. Of course, Democrats will always label these senators "radical", but to the Republican Party, they are all very much moderates.

In Republican parlance, "moderate" means "weak".

These guys, along with our current President Bush, all inherited a strong party built from the efforts of others, not themselves. Newt Gingrich put together the Contract With America and gave us the first Republican House of Representatives majority in generations. He is a hero, and fully deserves credit for the Clinton-blocking prosperity of the 1990s.

Gingrich's strategy was to isolate the Democrats and paint a clear picture for voters: us versus them. It worked marvelously, and traditionally Democratic voters elected Republicans to Congress in record numbers.

The Democrats would love to do the same thing now, but they already have all the Leftist voters they are going to get. Everyone who could possibly vote Republican has already shifted to the Democrats. As a result, the Republican Party contains a breadth of political philosophy while the Democrats are a concentration of Leftists.

There are a great many pro-choice Republicans, but essentially no pro-life Democrats. The same can be said for many other issues: affirmative action, taxation, national defense, etc. Republicans are now the inclusive party, while Democrats are increasingly socialist and Marxist exclusionary. Ironic, but true.

So, why should Republicans worry? Because when your political spectrum runs from hard Right to center-Left, it becomes increasingly difficult to find a central core. It's tough to keep such a panoply of conflicted interests together.

And when your leader seems convinced he has to pander to the Left, he no longer effectively leads either the Right or the center. In other words, this man is no Reagan.

Bush has yet to veto a spending bill, in nearly five years of office. While he did cut taxes, a bit, he increased discretionary spending without corresponding political gain. Prescription drugs for the elderly created a new entitlement, but did not cement voter loyalty among senior citizens.

The President declared the War on Terror-- a good thing altogether, but he fails to remind us why we are in Iraq. He had an opportunity to force an important issue with permanent lower taxes and genuine tax reform, but he failed to act until Hurricane Katrina seduced him into opening the spending floodgates even wider. And this President loves spending.

When it comes to policy and philosophy, he refuses to sell, so it is increasingly difficult for us to buy.

I'll not elaborate further on Bush's failings. For more, check out Ann Coulter or Peggy Noonan. But I will make a prediction: the Republican Party, with its current leadership, will fall apart. It will collapse from the center and the Democrats will pick up the pieces. We will end up with one more Democrat president-- and I choke as I imagine who that might be-- and more Americans than ever will learn to hate Democrats.

At some point, two new parties will form from the broken Republicans and ever more disaffected-- and conservative-- traditional Democrats. The remaining core of the Democrats will become increasingly hard-Left and will become politically irrelevant. Americans simply don't want socialism.

Whatever replaces the Republicans and (conservative) Democrats will not contain a socialist platform. It will have a cohesive, market and growth-oriented economic philosophy. It will promote education policies that actually produce educated Americans from all groups and geographies. It will understand that the best protection minorities have is the United States Constitution, as it is actually written. And judges are to interpret existing law, not to make new law.

There will be plenty to debate, but failed socialist and anarchist experiments of the past 200 years will be declared dead for all time.

And American political life will go on, but in a different, genuinely progressive form.

Like most Americans, the Republican Party is too well-fed to sustain itself. Having too much of a good thing, it cannot discipline itself to turn its political capital into long term muscle, and will collapse under its own weight.

Where is Newt when we need him?

Wednesday, September 28, 2005

"Give us the customers and we will pump more oil"

Recently I posted a mini-rant on demagoguery over the oil industry. In it, I stated the problem we have with gasoline prices is not a shortage of crude oil, but limited refining capacity. Today, the Saudi Arabia oil minister, Ali al-Naimi, announced his country has indeed found more oil, but could not pump more, since customers lack enough refining capacity to use it.

Got that? Plenty of oil, not enough refining capacity to turn it into gasoline. Plenty of demand for gasoline however, so high gas prices. Economics 101, in action.

We keep hearing from environmentalists how oil is a finite energy source. Which is true, but so is the Sun. I just don't lie awake at night wondering if the Sun will rise the next morning. And with oil, our known, proven reserves have grown continuously since we switched from whale oil nearly 200 years ago, when the chubby critters got too expensive. When something cheaper comes along, we will switch from crude oil. Until then, we need more crude oil refining capacity.

The first producing oil fields were in Romania, in the early 1800's. We had a few years supply, it was first thought. Then the very commodity itself became an energy source to power yet more oil exploration, and pretty soon we had 10 or 15 years supply. Not so many decades ago, it was thought the world had only 50 years of oil left, but-- to the consternation of the Left-- we keep finding more oil. Now the "event horizon" is well over 100 years away.

Canada alone has enough oil and gas to cover their needs and ours for the next 100 years, based on projected demand. Add to that the Saudi announcement, which adds some 200 billion barrels to the proven reserve. Billion, with a "b". Also consider Iraq, which has not been surveyed in about 30 years. We may find more oil there, too. Likely we will, considering how geological survey technology has improved in the past 30 years.

The Saudi oil minister said this, at an oil industry conference in South Africa on Tuesday:
Mr. Naimi also said that there were "no takers" for more oil right now, as a result of constrained refining capacity.
"Give us the customers and we will pump more oil," the Saudi oil minister told reporters at the 18th World Petroleum Congress, adding that more refineries needed to be built. He said that enough global output would be added in the next three to four years to restore "some margin of safety" to oil markets.

In the United States, in 1981 we had refinery capacity of 18+ million barrels a day. Today, we have a capacity of about 17 million barrels.

That is more than 1 million barrels less capacity today, than 1981, according to today's Wall Street Journal (link probably requires subscription).

Over the same period, consumption of oil rose 20%. Of course, 24 years ago we were not running those refineries at full capacity, so many were shut down. Today, we have fewer than half the number of refineries of 24 years ago. And all our refineries-- those not shut down by hurricanes-- run at full capacity.

If we build them, the oil will come. And prices will go back down.

Wednesday, September 21, 2005

Blowing Harder Than Rita and Katrina

Bill O'Reilly is nothing without a bogeyman. A few years ago, it was the American Red Cross, which had been reluctant to commit then-current donations directly to 9/11 victims. Under the withering fire of O'Reilly's flaming dragon, the Red Cross relented. Bill saved America from the big, bad wolf, and his ratings are through the roof. Bill, if you had not noticed, is now very rich.

"Looking out for you" is his motto. Indeed.

Now, the target of his demagoguery is Big Oil. The current witch-hunt is to find the imaginary individual who secretly controls gasoline prices. He wants to know who decides what price gas stations charge each day for product. At the same time, he attacks the five major oil companies for making enormous profits.

I guess profits are bad, for some reason. Personally, I prefer to do business with companies that are profitable, especially when continuing supply is important. If you are losing money, or are otherwise financially weak, you may not be around long. But Bill thinks oil companies ought to "give back" some large percentage of their profits, for seemingly altruistic reasons.

Imagine a hurricane victim who lost his house, car, and personal possessions-- maybe even a family member. He is dislocated and out of a job. Suddenly, the oil companies toss out their profits to lower gasoline prices. Oil stocks drop like rocks, maybe taking other Fortune 500 companies with them. So now our hurricane victim is unemployed, and his 401k or pension collapses as well. Terrific outcome. Thanks for looking out for "the little guy", Bill.

Back to the oil industry. In order to be useful in your car, crude oil must be refined into gasoline. In any complex supply chain-- such as the oil business, with crude product, transportation, refinery and more transportation-- that industry will be no more productive than its worst bottleneck. The pinch point, so to speak. When refineries are operating at 100 percent of capacity, look no further for the pinch point. Even if crude oil dropped in half to $30 a barrel, gasoline will get more expensive when refineries continue to sell everything they can possibly make.

O'Reilly tells us the problem is that there are "only" five oil companies, and they are in collusion to control prices. Five is plenty of competition. And, when they are selling 100 percent of what they can make, there is no need to collude on anything. Prices will rise until people stop buying gasoline. Period.

Economics is a study of human nature, and there are two fundamental laws that drive prices: the laws of Supply and Demand. The Law of Supply says that as the price of a commodity rises, supply will tend to increase. With oil at $65 a barrel, you can bet the Arabs are pumping as fast as they can. Conversely, as price declines, so will supply. Human nature.

The Law of Demand is the inverse: as price increases, demand for a commodity tends to decrease, and when price decreases, demand will increase. The combined forces of Supply and Demand determine price. And if demand is high, and supply cannot increase-- we are running refineries at capacity-- prices will certainly go higher. If prices get high enough, people will just as certainly find a way to buy less gasoline. When that happens, prices will stop rising, or will even decline. Human nature.

Pretty simple, eh? You bet, but for a demagogue, rather inconvenient. Much better to invent scandal and get ratings. After all, if viewer "demand" for Bill's show increases, the price he charges Fox News for his show can go up as well. I bet Bill understands that market just fine.

So Bill, why not investigate the real scandal here-- no new refineries built in 30 years. Capacity has increased incrementally over the years, but not one new refinery. And you can bet, if BP Amoco could get a jump on the competition by adding a new refinery or two, they would do so in a heartbeat. No collusion needed, just the desire to seek profits. Human nature.

Who limits refinery construction? The political Left, in the false name of "the environment".

But that's a demagogue of another stripe.

Thursday, September 08, 2005

Swamp Fever

From the bowels of the Mississippi Delta, a howl cuts through the night air. The feverish cry of the bottom-feeding politicus leftus has all the soothing qualities of the beast Nancy Pelosi (remember, "pelosi" is Italian for "hairy") on a media binge.

Indeed, it is the ubiquitous congresswoman, whose voice emanates simultaneously from every television set in the nation. She is calling for an investigation into the handling of Hurricane Katrina, and has already found the culprit: her political nemesis, the evil Republicans. What she has not figured out is, what goes around comes around.

Some people never learn.

Recall some months ago the earnest desire to investigate-- no, immediately jail-- Tom Delay over presumed financial irregularities involving lobbyists, junkets and credit cards? Until someone said, "Good idea, let's investigate the finances of all members of congress". Followed by deafening silence on the Left.

The Left in America cannot seem to get a grip on reality. They honestly think the political center of the United States' electorate is somewhere near their socialist hearts. Yet, Americans keep electing Republicans, despite Democrats having historically higher party membership. Again and again.

Moreover, the only thing the Democrats can think to do is to rally 'round their Marxist core and launch verbal assaults on the Right. No new ideas, constructive action, or reasoned alternatives. Just swampwater and bile. And they have no clue why they keep losing elections.

You see, when you piss off your constituency and offer no useful alternative to the opposition, you have a hard time getting votes. Not that complicated.

So now comes a devastating hurricane, wiping out the homes of thousands. Killing perhaps thousands, it's just too early to say. But not too early to switch the media focus from rescue to recrimination. He said, she said, blah blah. Anything other than actually dealing with the problem at hand.

I will go out on a limb here. When all this shakes out and the facts are known, some Democrats in Louisiana-- in particular the Governor of Louisiana and Mayor of New Orleans-- are going to be looking for new careers.

Just a hunch.

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