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yup. exactly.  I agree that they should stop subsidizing corn production for ethanol..  but I also think should be subsidizing other promising alt energy sources. 

 

Subsidizing corn for ethanol never looked smart... I believe it was just designed to win votes from the mid-west.

 

 

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Amen Beer Barron. Lets hope free markets have some life ahead of them. Comsumption leads to efficiency. We continue to get better at finding fossil fuels as demand increases. The best thing governemnt could do to get to alternative forms of energy would be get out of the way, reduce regulation, reduce taxes, reduce subsidies and let the best source win. By the way ethanol, biodiesel etc. consume far more energy in their refining process than they save.

 

I think this is a plan which will lead to disaster.

 

I don't know what this free market you guys speak of is? What's free about the energy markets?

 

You have massive government regulation. (much of it needed).

Huge areas off limits to producers. (many of these should be off limits).

Many areas of production controlled by other Governments which dont believe in your beloved free markets (Nigeria, Brazil, the Middle East).

A cartel which has massive pricing powers. (OPEC)

Subsidized consumers around the world. (World Governments tend to subsidize fuel)

 

And massive externalities. The first thing that has too happen for any discussion on energy to be successful, is dropping the free market mantra.

 

The markets are a tool to be used when useful.

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BP had a powerful lobby as well and they were lobbying for additional regulation that they thought would benefit them in the form of Cap and Trade. Why should any area be off limitsto exploration and production? The offshore drilling business was highly regulated, did that prevent the accident from happening? And if they allowed inshore drilling in shallow water this thing might be over already.  The Communist USSR was highly regulated, did that prevent Chernobyl? It did allow for using nukes on out of control wells which is pretty interesting.

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Sometimes its beneficial for areas to be used for other purposes. Cali and Florida may lose if drilling is allowed depending on the numbers, relating to tourism and what not. Also 20% of the demand, 2% of reserves, you cant drill your way out. The numbers dont add up.

 

Are you seriously arguing for no / De regulations? Seriously? So because regulation fail, no regulation is the solution. Show me an example of successful no regulation. Regulation minimizes - you cant prevent things from happening in my opinion. Seems like a false choice / faulty logic. What you saw is what self regulation / bad regulation / and bad incentives tend to deliver. Regulation should be reduced, improved, and incentives reshaped.

 

I think we need smart efficient regulation - tough to get when some want no regulation and industry wants profitable regulation. If everyone agreed, we needed an efficient watchdog then we would get that. But a good bit of the populations thinks anything associated with Government / Regulation = Bad. I think we also need criminal prosecution, to drive better decisions.

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Or maybe greater personal accountability. If there were no regulations telling Mr. Watsa how much he had to reserve to cover expected/unexpected losses, how different do you think his reserving would look from its current levels?

 

I think some people would do a good job, and some would not (kinda like now). I think alot would fail and someone else would pickup the tab. Similar to what happened before insurance / banking regulation. AIG obviously failed to properly reserve for CDS which were unregulated, it obviously didnt work out that well.

 

I think it works well in theory / fairy tale land but its been tried and doesn't work well for society. With things such as Oil Spills Offshore and Nuclear Energy who cares about personal responsibility. The goal is prevention.

 

Some people are long term greedy, you are assuming that everyone else. I know quite a bit of short term greedy people though, who don't work for the benefit of society. They cut corners and gamble. When it doesn't work Government has to step in, so great for them but bad for everyone else who picks up the tab. BP cut corners, the markets are punishing them, but that doesn't help make people whole.

 

-----

 

Im surprised BPs stock is holding up so well with the cut. Interesting.

 

http://www.streetinsider.com/Corporate+News/BP+%28BP%29+Establishes+$20+Billion+Fund,+Suspends+Dividend/5736244.html

 

While the fund is building, BP's commitments will be assured by the setting aside of U.S. assets with a value of $20bn. The intention is that this level of assets will decline as cash contributions are made to the fund.

 

Looks like Sharper was right, concerning assets. I bet when this is said and done, BP loses leases / right to drill in US waters.

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The offshore drilling business was highly regulated, did that prevent the accident from happening?

 

Prior to the spill, BP had over 750 safety violations, compared to 20 for Sunoco, ConocoPhillips, Citgo, and Exxon, COMBINED, for the same time period.  Yet BP was allowed to drill, and obviously without sufficient safeguards or contingency plans.

 

The MMS (Minerals Management Service) which oversees the industry also collects revenues from it, an inherent conflict of interest.  They did not even require BP to provide a blowout plan.  Which is obvious, considering the terrible job that BP did at reacting to the spill.

 

These are not signs of an industry that is "highly" or "adequately" regulated, quite the opposite.  Regulation is lax and allows the oil companies to take enormous risks with the environment and industries that depend on it (i.e. fishing, tourism, etc).

 

I am all for capitalism and free markets, however frameworks and regulations have to be in place, because free markets that are completely unfettered mean that greed and corruption will eventually dominate all other interests.  The Enron debacle was the result of a period of very lax regulation over what certainly has to be a regulated industry.

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Imagine that... in a casino the expected losses are known...  yet people still play!

 

That is how free markets behave.

 

 

Irrationally?

Im guessing someone will say that people know they will lose, but are paying for the entertainment.

 

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Yes, there are human reasons that guide us to allocate capital in non-efficient ways.  Another would be managed mutual funds -- collectively as a society we waste money on that.  It probably has "entertainment value" to each of us individually as we try to pick the winning fund that will beat the market.  That's another example where free markets don't lead us to the most efficient use of capital -- it's because we are humans, and our human brains interfere with rational decision making.

 

An incident like what BP is facing is one where (as Ken Peaks stated) it would wipe out many operators (perhaps BP too) if they were held accountable.

 

I am willing to wager that in a totally free market if the liability caps were lifted people would still drill in deep water.  They could play the game the way many of us play call options -- collect the upside but possibility of total wipeout.  Total wipeout of course would mean that the corporation would be wiped out, not the business executives.  They could just let that company go bust and start a new company with new capital and drill on nearly the same spot.  They would make (a ton of) money long term because they don't have to clean up the entire mess... they are only on the hook until the assets of the corporation are wiped out.  So even with unlimited liability they don't pay the bulk of the cleanup cost.  They would probably even structure the corporation such that the assets (the oil rights) would be owned by one entity, but that entity wouldn't be the one liable in the event of a spill (the liability would be structured in another corporation that does the drilling). 

 

Right, so I'm getting to a point here... if the cost of extracting the oil isn't fully absorbed by the people producing the oil, then the market price of oil will not be efficient.  It will be too low.  Then it may artificially crowd out more efficient alternative energies.  Thus, it is more than possible for the free market to interfere with our arriving at the most efficient energy solution.

 

I was listening to a program on NPR today where somebody estimated the cost of raising all the docks in the world at a few trillion dollars.  That's what global warming will lead to -- water expands when it warms, and so warming oceans leads to higher sea levels (this isn't even counting the ice melt contributions).  Then you have Holland which will have to put their finger in their dikes, etc...  You have people who will lose their waterfront property.  So when you take your free market... where can you explain to me is the fund that is being set aside out of oil profits to pay for all these costs?  Oh yeah, no wait... the free market promises that you keep the profit and somebody else picks up the tab.  And that's why the government is necessary!

 

 

 

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Government has cause far more devastation by trying to do "good" than any individual or collection of individuals has done trying to make a buck.

 

I don't think destroying the marine life in the gulf and warming the atmosphere&oceans is the kind of "good" that society needs.

 

The government has the power to raise the market price of oil enough to encourage new energy sources to be developed economically... and individuals can do that while making a buck.

 

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Sure government can also give you have empty bullet trains, retirement at 55, and the WORST oil disaster ever, which was caused by the government of Iraq. Followed by the second worst from the gov. controlled PEMEX, in the GOM.

 

Concurrent with this this stream as it relates to BP, what about BPT? Any chance that they have been cutting corners on the North Slope? Doesn't seem as if any of this has been priced into those shares.

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I think raising the gov't raising the price of oil would be a disaster.  To be effective it would cost trillions of dollars we don't have and to what end?  Incentives exist to develop new cheaper alternative energy sources already (the inventor would be a very wealthy man).  Technology development does not work by throwing money at it.  If there was a technology and all we had to do was to engineer a way to use it, thee adding more money to that technology development would be the best way to develop it rather than a subsidy.  Although subsidies are well intentioned, I think they create terrible side effects and if extensively used (as in Spain) can lead to insolvency.  You also have to think of alternative uses for those dollars.  Although energy independence and clean energy are good goals, toady they are expensive and uncertain in terms of payback on each $ invested. 

 

I would much rather either 1) spend it on other more cost effective ways to increase living standards (remove agricultural subsidies with a 1-time payment to farmers, providing wells to developing countries along with malaria nets and inexpensive drugs to give these countries a hand up) or 2) allow folks just to keep the $ to be spent to spend as they wish. 

 

These big comprehensive programs lead to corruption and mis-allocation of resources which in many cases overwhelm the intended benefits.  You are seeing this in "health-care" reform where the solution to a real need is being corrupted by the implementation of the plan and the plan was clearly oversold.  One area not touched by the health-care plan is community rating.  If a firm is under 50 folks they can get community rate but above 50 they are not.  This leads to huge increase in costs once your firm goes above 50 folks.  Clearly the comprehensive plan provided little benefit for these firms - their premiums will go up.  Clearly these guys don't understand the health care market and expect gov't fiat to carry the day.  I am sure this is just the tip of the iceberg in regards to how reform has made the system worse by cost shifting and the shifters taking SOTT (as Whitman states).

 

Packer     

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I think raising the gov't raising the price of oil would be a disaster.  To be effective it would cost trillions of dollars we don't have and to what end?

 

I might have mentioned the word "oil", but suppose instead we're just talking about a gasoline tax.

 

The tax dollars need to be collected anyway (look at our deficit). 

 

Therefore it merely promotes more efficient cars -- and we go through periods of excitement over them (1970s) when gas is expensive, but then fall back into buying enormous cars or little ones with racy engines when prices collapse again (1990s).

 

There is nothing efficient about sending our dollars to Saudi Arabia.  A tax mechanism to promote the purchase of more fuel efficient cars simply means we keep more money within our economy.  It's not a disaster if we buy less oil to fuel gas guzzlers, is it?

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ERICOPOLY and Parker your posts speak to the quality of the board, and the variety of intelligent opinion that can be found here.

 

Sea Island - I think you been reading too much Murray Rothbard and Ron Paul. You seem to have a deep hatred / distrust for government.

 

Eric - I agree with you and may take up business as a wild catter, one could really game the system unless they make serious changes to tackle this issue. I love how free market types simply want to entrust other people's lives and lively hood to the market. I think its ok because they dont live off the gulf or near the nuke plant.

 

Parker - The Government shouldnt set the price (or pick the energy winner as with ethanol), they should put a floor on oil, then let the magic of the markets work (with funding from the floor tax to the major engine of innovation (universities)). There is no free market, with oil. When alternatives become interesting OPEC simply floods the oil or says they will with oil. Saudi pulls oil out at $6 and says they want to keep it around $80 specifically to avoid being expensive and spurring alternatives. Anyone trying to find a solution needs a BTU target to beat. He may be able to beat oil and gas at $100 and $14, but cant compete with $45 and $4 (we have seen all these prices over the last 1.5 years). The Government needs to say oil prices will trade feely, but we are going to tax them under XX dollars.

 

That way there is a floor and people have a target to beat, otherwise you are especially waiting for peak oil to cause dramatic price rises and crisis innovation. Look at the world wide market for oil. Either you spend your life trying to convince every economy / government in the world to try your free market solution or you come to an understanding that its not a text book free market. Its stupid for us to have a free market when our supplier is a cartel.

 

I dont think there is a fuel source that can compete with oil and gas at $40, but there is likely one that is more efficient and renewable at $100. Right now an inventor / oil company would go bankrupt. Better for Big Oil to let the chips fall where they may and buy up whatever is the winner.

 

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My casino analogy actually works very well to explain why gas taxes are needed.

 

People waste a lot of gas on "entertainment".  In the free market, they'll do that -- they'll opt for the cheap entertainment even though it's suboptimal for society.  If you want gasoline efficiency you can raise the tax on gas -- then people will make the switch to fuel efficient cars.

 

The technology for a more fuel efficient fleet already exists today, but people won't switch to it because they get entertainment value out of Mustang 5.0 muscle cars and out of Lexus SUVs, etc...

 

 

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The technology for a more fuel efficient fleet already exists today, but people won't switch to it because they get entertainment value out of Mustang 5.0 muscle cars and out of Lexus SUVs, etc...

 

And because they dont pay the fully burdened cost of energy. The cost of protection (war), clean up / environmental, and climate change aren't included.

 

In a true free market gas would costs $12 and people would switch very quickly.

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"The tax dollars need to be collected anyway (look at our deficit)". You can reduce spending.

 

Obama administration spends $1.2 billion on cycling and walking initiatives

The Obama administration more than doubled spending on cycling and walking initiatives to $1.2 billion (£810 million) last year as it seeks to coax Americans out of their cars.

 

"There is nothing efficient about sending our dollars to Saudi Arabia" There is something effecient in using theirs before ours, certainly it would be more effecient to have this current oil spill in the Persian Gulf than the GOM.

Sea Island - I think you been reading too much Murray Rothbard and Ron Paul. You seem to have a deep hatred / distrust for government. I haven't read the work of these two, I familiar with the U.S. Constitution.

 

 

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I haven't read the work of these two, I familiar with the U.S. Constitution.

 

As am I, it was deeply flawed, an imperfect living document which has gotten better overtime. You can cling to a series of compromises written by men in 1787 all you want. I was actually counted as three-fifths of a whole a person under it, so I am a bit biased, and a bit weary of those who dream of the good old days.

 

Government screws up.

Big / Little Business screws up.

 

Primarily because people screw up, and both of the prior are collections of people. People who hate 1 of those groups, and think the other can do no wrong have missed the boat in my opinion.

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No doubt then you are familiar with the historical irony that it was actually the abolitionists/anit-slavery crowd that didn't want slaves to count at all while slave owners thought they should have full representation.

 

I said it was a flawed compromise by flawed men. Do you really think I care who did what, or which side wanted what? Would it have been better to have still been a slave, but be counted as a full person? Either way both sides agreed for purely selfish reasons that humans were only 3/5th of a person and wrote it down in 1787, so when I hear people acting as if what was written then is the end all be all in political debates / modern current events, my ears start to perk up and I put them in that crazy unable to think clearly about things box.

 

Quoting a 200+ year old document and clinging to it for the sake of just doesn't make sense to me. You aren't responding to what anyone is saying, about actual risks / situations. You are just saying Government sucks, and has made errors in the past, and I love freedom.

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