Kerry's Advisers Mock His Energy Plan (So I Don't Have To)

On Thursday, Sen. Kerry unveiled his plan for energy independence (apparently a crowd-pleasing concept which we are sure polls well).

On Saturday, the NY Times presented the Kerry rebuttal:

Kerry's Goal of Independence From Middle East Oil Divides Advisers

The idea of a United States independent of Middle East oil is a touchstone of Senator John Kerry's campaign and a huge crowd pleaser, but has divided and exasperated many of his most experienced energy advisers.

Some advisers say they worry that Mr. Kerry's focus on freeing the United States from reliance on oil from the Persian Gulf, the linchpin of the energy plan he released on Thursday, is unrealistic and misleading and that hammering away at it would erode Mr. Kerry's credibility with business, the news media and other countries.

Hmm, that contrasts splendidly with the Washington Post description: His promises to stop the outsourcing of jobs and end dependence on Middle East oil are not grounded in reality.

Well. My (uncharacteristically non-rhetorical) questions:

The Saudis are the global low-cost producer of oil. However much the US can reduce its own demand, many higher-cost producers, such as Russia, will find their production to be uneconomic before the Saudis do. In fact, one might expect the Saudi share of the (shrinking) export market to go up. Does Kerry care? And should he?

Secondly, you don't need to believe in Michael Moore to believe that the Saudis would prefer to see Bush back in the White House. So, do they have enough available production capacity to engineer an October surprise, and push the oil price back to $35-$40 per barrel?

How would the politics of that play out? We can hear it now, Bush saying, "I reached out to allies", and Kerry screaming "But not those allies - mon dieu, he's in thrall to the Saudis". Troubling.

And a real puzzler - is there enough of a lag between production and official reporting that the Saudis could boost production in, e.g., October, but not have the world see that they are backing Bush until the reports come out in mid-November? Obviously, there would be rumors, but still, I wonder. And with all Kerry's Saudi-bashing, some Dem stategists ought to be wondering as well.

Comments

[Yehudit]

Another reason Kerry's plan is unrealistic, which you didn't mention, is the fact that this is a global economy, and whether or not the US is independent of Saudi oil, we still have a tightly integrated economy with many other countries which are not independent of Saudi oil. If they go down, we go down, even if we never spend another cent on Saudi oil.

The Saudis can engineer a global recession if they want. It is not in their interest to do so, but if Al Queda et al get control of the Saudi oil fields, they may very well decide to take the entire planet back to the 7th c. with them. Therefore whoever is in the WH has to play nice to the Saudis to some extent, at least to prop up the princes who are modern enough to keep the oil flowing. This is the best argument against Moore's 'Bush in bed with the Saudis" meme - I can't see what any other president is going to do differently, until other oil producers can make up a shortfall from SA, or the entire globe converts to a different energy source.

[ed]

Hmmm.

What makes you think the Saudis want Bush to remain in office?

Kerry wants to quit Iraq, stop making waves and stop hunting terrorists. Isn't that what the Saudis want?

[ed]

Hmmmm.

"The Saudis can engineer a global recession if they want."

Unless Iraq can deal effectively with the insurgents/terrorists and gear up their production to match the Saudis.

Which is an interesting thing isn't it?

[Brian]

It's a real hoot to copy-and-paste, isn't it? These paragraphs should have been mentioned:

1. "Any energy plan in a campaign reads more like notes from a brainstorming session than a detailed blueprint for economic and social change. The ideas are diverse and often vague, in an effort to have as many people as possible sign on. The chances of an actual policy being passed by Congress are slim, said energy industry experts, some of whom contended that the country had not had a comprehensive energy policy since President Jimmy Carter."

2. "Among Mr. Kerry's advisers and independent energy analysts, the reviews of the details of the plan were mixed, though most praised its focus on reducing energy demand.

"At least it's going in the right direction," said Roger Diwan, a managing director at PFC Energy, a Washington consulting firm. "The only thing that matters is increasing fuel efficiency because if you can't control demand, you will never have an energy policy.'"

3. "Some advisers who squirm over the language maintain that the Saudis nevertheless understand that such categorical statements are campaign-year rallying cries. The Saudis point out that every president since Richard M. Nixon has called for the same thing, though one Saudi official who spoke on the condition of anonymity said the call was "more loud now.'"

Of course part of it is politics. We are in an election; that's what's going to happen.

If I had to guess, I'd say that nobody in the campaign honestly believes that we are going to be entirely independent of ME oil. It's more of a matter of working towards getting greater independence, through things like increased efficiency, but not complete independence.

I'm actually glad that there is disagreement among the policy advisors. It shows that they are taking their jobs seriously, which is a nice contrast to the blindly ideological, politically-driven stuff we get from the current team.
------------------------

As for The Washington Post, this is all it said: "His promises to stop the outsourcing of jobs and end dependence on Middle East oil are not grounded in reality." Why some people accept that as definitive proof that his policies won't work is beyond me.

On another note, I'm glad outsourcing was mentioned. I'd like to clarify his position. I hate to use all capital letters, but KERRY IS NOT A PROTECTIONIST; HE'S FOR FREE TRADE. His rhetoric has been politicized and includes some inklings of protectionism, but similar things can be said about the Bush administration. He doesn't want to stop outsourcing entirely (nor does he think he could do it even if wanted to, I'd bet). He merely wants to stop the tax incentive to outsource. And that's a good thing. It restores the market imperatives.

[Brian]

"Kerry wants to quit Iraq, stop making waves and stop hunting terrorists. Isn't that what the Saudis want?"

Where in the world are you getting that?

[Jim Glass]

Well, at least Krugman can't complain that media isn't getting Kerry's policy proposal out there to the public.

Maybe this time he'll complain that it is.

" 'The chances of an actual policy being passed by Congress are slim, said energy industry experts, some of whom contended that the country had not had a comprehensive energy policy since President Jimmy Carter.' "

He cured us of the idea. So his rule was good for something!

[The Kid]

Brian –

Bad news – most of Kerry’s backers and the Democrat party are not for free trade, but for selective quotas and tariffs to protect union workers’ jobs and the heck with Africa, the Caribbean, and other developing areas; they call this “fair trade.” Bush has erred here too (steel tariffs), but is not bashing outsourcing the way that Kedwards are.

Bush’s energy policy is clear – free up federal land for oil and natural gas exploration and extraction by private industry. The cost to the taxpayer is minimal.

We’re screaming about oil prices now, but natural gas prices have more than doubled since 2000. Thanks to emissions regulations, virtually all new electric utility plants are gas-fired, increasing the demand for and price of natural gas. As a result we’re importing more liquefied natural gas in tankers that are attractive targets for terrorists. But I digress.

The Bush energy plan (see below) could still be implemented but requires stable tax policy (i.e., current rate on capital gains taxes) to reduce prices. Current tax rates will also stimulate the development of alternative fuels (please, let’s not talk about the ethanol boondoggle) by facilitating investment in new technologies.

Let’s get really real for a moment and note that the energy medium of the future as we see it today is hydrogen. There are no scientific or technical obstacles to a hydrogen economy, it’s quite straightforward. But it takes energy to produce hydrogen

Bush and crew recognize the elements necessary to move in that direction: capital for infrastructure and new nuclear power plants, a repository for spent fuels (Yucca), and regulatory changes – that’s the plan: free markets, private development, government support where essential. Wind power and solar power will remain limited for a host of reasons mostly having to do with efficiency (ROI) and aesthetics – the technologies are understood.

Iraq cannot develop the capacity to replace Saudi oil for a number of reasons. Besides the size of known reserves, the two big problem are diversion for internal economic development and transport – shipping and pipelines. You might note that Iraq’s oil terminals are in easy reach of Iran’s weapons systems, and that pipelines take time to negotiate and money to build and protect. Which reminds me that the biggest threat to a reliable supply of oil is not the Saudis – they need the income to support the princelings and keep the country somewhat stable – but the Iranians who can get by on a lot less income.

Which also reminds me that the Saudis don’t like the price of oil above about $33 per barrel. Prices above that level stimulate even exploration and attracts capital to develop expensive deep-sea technologies and extraction.

Finally, Kerry’s policies will damage US automakers, or should I say auto manufacturers. GM is fighting to stay ahead of Toyota in the world market and Ford is having trouble making a buck. Force them to produce a fleet with 35 MGP average consumption and they’ll raise prices, put out fuel-efficient crap quickly, and reduce their market share as the Asians provide better products at cheaper prices. Increased capital gains taxes will make capital more expensive for domestic producers, accelerating their spin to oblivion.

[Brian]

"Bush has erred here too (steel tariffs), but is not bashing outsourcing the way that Kedwards are."

If you are talking about unions, you are probably right. They have a narrowminded, protectionist view of the world.

But his advisors don't feel that way.

"The cost to the taxpayer is minimal."

At bare minimum, various externalities won't be included.

"We’re screaming about oil prices now, but natural gas prices have more than doubled since 2000. Thanks to emissions regulations, virtually all new electric utility plants are gas-fired, increasing the demand for and price of natural gas. As a result we’re importing more liquefied natural gas in tankers that are attractive targets for terrorists. But I digress."

Hmm, interesting. Links?

"The Bush energy plan (see below) could still be implemented but requires stable tax policy (i.e., current rate on capital gains taxes) to reduce prices. Current tax rates will also stimulate the development of alternative fuels (please, let’s not talk about the ethanol boondoggle) by facilitating investment in new technologies."

"Bush and crew recognize the elements necessary to move in that direction: capital for infrastructure and new nuclear power plants, a repository for spent fuels (Yucca), and regulatory changes"

The problem is that nuclear power isn't the magical solution some on the right want it to be. If it were, nobody would oppose it. Among other things, it's not very efficient and the waste cannot be easily managed. If Yucca Mountain isn't going to hold the stuff, I'd like to know where is it going to go. And how do you plan to protect these sites against terrorists?

See above.

"Finally, Kerry’s policies will damage US automakers, or should I say auto manufacturers. GM is fighting to stay ahead of Toyota in the world market and Ford is having trouble making a buck. Force them to produce a fleet with 35 MGP average consumption and they’ll raise prices, put out fuel-efficient crap quickly, and reduce their market share as the Asians provide better products at cheaper prices. Increased capital gains taxes will make capital more expensive for domestic producers, accelerating their spin to oblivion."

How much will the price be raised? If it's going to double the cost of a car, I don't think anybody would support this, except for the hardcore environmentalists. If it's something manageable, I'd say it's a good thing. I'm not sure how elastic car sales are, but upon first glance, the costs don't seem to be so large as to cause a serious downturn in auto sales. (And wouldn't you know? Kerry-Edwards plans to work on the plight of US automanufacturers in Chinese markets, but that's another issue.)

Doing a quick Google search, I came across this: http://www.aiada.org/article.asp?id=19560. It says that the costs would increase by $1,000. I don't imagine that someone who intends to buy a $38,200 Ford Explorer is going to run out the door because the price increased to $39,200.

Besides all of that, new technologies cost a lot at first. But prices go down. We may have to pay a lot for energy efficient lightbulbs now, but they will become cheaper over time.

[The Kid]

Since natural gas prices started rising in 2000, the chemical industry, which uses gas as a fuel and a raw material, has lost 76,00 jobs according to the 2

My source for the price increase of natural gas doubling in price since 2000 is the 2/17/04 Wall Street Journal. The article also reported that Dupont and Dow have been relocating manufacturing operations overseas where gas is cheaper – natural gas is a key ingredient for the chemical industry; Dow’s moved 76,000 jobs overseas during the past three years just because of increased natural gas costs.

As for the price of cars – the feds dictate fleet MPG through CAFE (corporate average fuel economy) standards. To achieve a fleet average of 35 MPG, automakers must sell more smaller vehicles than larger ones. With demand usually greater for the below 35-MPG vehicles, manufacturers raise the price on those and drop the price on the smaller ones; whether that produces overall profit is subject to the vagaries of the market. To assure profitability, however, the manufactures will plan on doing everything they can to reduce costs on the smaller vehicles, making them less desirable, and increasing the probability that they will lose money overall. Auto demand is elastic – that’s why we see rebates and financing deals advertised; folks who want comfort will turn to the used car market to meet their needs and drive up the price of used cars. Demand will push the price of the Explorer beyond the $1,000 you cite. The CAFE truck loophole proved this, but that loophole too will be closed.

As for Kedwards helping GM in Europe – GM already has the plants there and believe it or not the Buick brand is a status symbol.

As for the practicality of nuclear power, go here and you'll find that France get 77% of its electricity from nuclear power. (They maintain forces in Africa to assure a steady supply of fuel for their reactors.) The US gets 20% from fission.

You and I may be reasonable, but the envirowackos are not. They will fight nuke power, fight Yucca, etc. They love Kyoto because it would cut back domestic energy production. They really do want the primary means of transportation in the US to be bicycles made of hemp.

[Brian]

"Since natural gas prices started rising in 2000, the chemical industry, which uses gas as a fuel and a raw material, has lost 76,00 jobs according to the 2

My source for the price increase of natural gas doubling in price since 2000 is the 2/17/04 Wall Street Journal. The article also reported that Dupont and Dow have been relocating manufacturing operations overseas where gas is cheaper – natural gas is a key ingredient for the chemical industry; Dow’s moved 76,000 jobs overseas during the past three years just because of increased natural gas costs."

I'm not sure how this all relates to what you originally discussed.

"To achieve a fleet average of 35 MPG, automakers must sell more smaller vehicles than larger ones. With demand usually greater for the below 35-MPG vehicles, manufacturers raise the price on those and drop the price on the smaller ones; whether that produces overall profit is subject to the vagaries of the market. To assure profitability, however, the manufactures will plan on doing everything they can to reduce costs on the smaller vehicles, making them less desirable, and increasing the probability that they will lose money overall."

I'm not sure that I buy that. Would you care to elaborate?

In a very basic sense, if you create a problem, someone will find a way to solve it. In this case, if we force fuel efficiency on automakers, they will eventually find a way to manufacture their products in a cheaper way.

Besides, the amount of savings over the long term would surely make up for the initial higher costs, although whether this will be a big factor, if any, in the mindset of consumers.

"The CAFE truck loophole proved this, but that loophole too will be closed."

Assuming you are right, by how much?

"As for the practicality of nuclear power, go here and you'll find that France get 77% of its electricity from nuclear power. (They maintain forces in Africa to assure a steady supply of fuel for their reactors.) The US gets 20% from fission."

And?

"You and I may be reasonable, but the envirowackos are not. They will fight nuke power, fight Yucca, etc. They love Kyoto because it would cut back domestic energy production. They really do want the primary means of transportation in the US to be bicycles made of hemp."

I'm not even going to bother responding to this.

[Brian]

Come to think of it, if the situation gets dire enough, I'm not opposed to a tax increase directly on the purchase of the so-called gas guzzlers. At least I don't think that I am.

[ed]

Hmmm.

Ok. I have to say it. I can't resist it. It's just too amusing. Sorry if I offend.

"Among Mr. Kerry's advisers and independent energy analysts, the reviews of the details of the plan were mixed, though most praised its focus on reducing energy demand."

Who are these "advisors"?? What?? He's holding secret meetings with unnamed people formulating an energy policy?

I DEMAND to know who was at those meetings and what the particulars are of what they discussed!

lol.

[Brian]

"I DEMAND to know who was at those meetings and what the particulars are of what they discussed!

lol."

Oh, you wit, you.

Tell me, does Kerry have a huge connection to an energy company, a la Halliburton? (And don't even try to bring up a non-issue like THK once making a profit off of that company's stock.)

[The Kid]

Bush’s policy is market-based and not only will do less harm, but will provide greater benefits in terms of job creation and increasing personal choices than Kedwards’ bureaucracy-based solution will. Moreover, Bush looks toward growth, Kedwards does not.

The point of the natural gas discussion is that prices are way up because of increased demand and decreasing supply. Demand is up for several reasons:

- Current pollution rules and environmental activists make investment in coal-fired or nuclear power plants risky; the latter requires especially patient capital.
- Gas turbine generators can be built relatively quickly and put on line, allowing a faster (and surer) return to investors.
- Idiot attorneys-general have finally stopped talking and started suing utilities with coal-fired plants that comply with federal emissions regulations. Note that the suits are not about sulfur or NOX or particulate matter, but about CO2 emissions (a la Kyoto).

Supply is down because some existing natural gas wells are nearing the end of production. In the past new fields replaced those depleted, but modern restrictions on exploration on federal lands has put this to a halt. (The Bush plan would have scaled back the restrictions and increased supply at no cost to the taxpayer.) A side-effect of the higher natural gas prices is the loss of jobs in the chemical industry. High oil prices will do the same. Kedward’s plan would aggravate job losses and keep prices high because restrictions on exploration and extraction on federal lands will remain in place. Moreover, John Jr. will probably lend his influence and expertise to the AGs’ suits against utilities.

You must not understand the impact of CAFE limits on the auto market and how that led to the SUV craze. I will try again, but read this first. Legislation implementing CAFE in 1975 recognized three distinct classes of vehicles – passenger, light trucks, and commercial – and imposed the highest mileage requirements on the passenger fleet. Detroit responded with a load of crap – this came a few years after emissions laws and at about the same time crashworthiness standards were introduced, so engineers had their hands full trying to make lighter cars for CAFÉ yet safer (heavier) cares for crashes. I don’t know how old you are, but the 1970s and 80s were not the glamour years for the US auto industry. Full-sized cars were down-sized, station wagons disappeared, and smaller cramped cars flooded dealer showrooms so that manufacturers could avoid the per-vehicle fines that would result from missing the 27.5 MPG fleet standard for passenger cars. Put it another way: an entire year’s output of passenger cars had to average 27.5 MPG.

Then the Detroit/Dearborn marketing folks noticed that consumers were buying more “light trucks” at an increasing rate; light trucks had a CAFE requirement of 20.7 and had less stringent crash requirements. A suburbanite walking into a Ford dealer looking for a set of wheels for his daily commute could take one look at a cramped compact, a down-sized mid-size, or a light truck and not have a hard time choosing the truck which offered more room for ample drivers and a little less fuel economy than the mid-size for the price of the compact. Consumers were even buying fully options versions of the construction foreman’s old faithful, the Suburban. That’s what got the SUV boom underway – manufacturers meeting consumers’ needs. Ever since then the elites and envirowhackos have been trying to stamp out the SUV one way or another. Kedwards’ is aimed at SUVs too.

As for higher taxes on gas guzzlers, they have been in place for years. See ">http://www.irs.gov/publications/p510/ar02.html#d0e5419"> this. Please read up a little on energy policy. It’s difficult, I know. Start with CATO – it’s not a Bush supporter, but an outfit that researches free-market solutions that are more efficient than bureaucratic morasses.

As for nuke power, you questioned is practicality. France’s experience demonstrates that it is practical – they’ve got small scale nuke plants throughout the country generating electricity and providing hot water. What I did not point out is that nuke plants don’t produce CO2, one of the so-called global-warming gases, and should therefore be welcomed by the envirowhackos. But it’s not welcome because their agenda focuses on reducing energy production and consumption. I liken then to religious fanatics simply because their approach is neither realistic nor science-based. They are among the opponents to Yucca because they do not want nuke power to succeed. They do want us to have fewer choices, and they will select the choices for us, thank you very much.

For nuke power to succeed in the US, the plaintiff’s bar will have to be restrained and the public will have to engage in the fight against the envirowhackos message of fear. Kedwards is not about to do that, Bush is. Look at the energy plan stalled in Congress and Bush’s call for restrictions on lawsuits.

[Brian]

"Bush’s policy is market-based and not only will do less harm, but will provide greater benefits in terms of job creation and increasing personal choices than Kedwards’ bureaucracy-based solution will. Moreover, Bush looks toward growth, Kedwards does not."

That sounds like a GOP talking point.

"Kedward’s plan would aggravate job losses and keep prices high because restrictions on exploration and extraction on federal lands will remain in place. Moreover, John Jr. will probably lend his influence and expertise to the AGs’ suits against utilities."

Ah, throwing out the trial lawyer insult. You can do better, can't you?

Well anyway, is there a lot of natural gas in ANWAR?

As for the CAFE standards, I must be missing something. First, let me try to understand your point. Are you saying that there is virtually no way SUVs could become more fuel efficient, and that making certain requirements would make them cease to exist?

"Please read up a little on energy policy. It’s difficult, I know."

Go Cheney yourself.

Now to gas taxes. I did a very basic search at the CATO site. The first piece that I clicked goes with the point of view that raising CAFE standards is bad, while implementing a gas tax is good.

What are you trying to say about gas taxes?

"As for nuke power, you questioned is practicality."

I think I questioned its efficiency, which is one part of its practicality.

"What I did not point out is that nuke plants don’t produce CO2, one of the so-called global-warming gases, and should therefore be welcomed by the envirowhackos."

That is sort of like saying that AIDS patients or those with Diabetes should be glad they don't have cancer so they don't have to deal with the loss of hair resulting from chemotherapy.

"But it’s not welcome because their agenda focuses on reducing energy production and consumption. I liken then to religious fanatics simply because their approach is neither realistic nor science-based. They are among the opponents to Yucca because they do not want nuke power to succeed. They do want us to have fewer choices, and they will select the choices for us, thank you very much."

There's a minor grain of truth to what you are saying, but you go off course by resorting to inflammatory charges.

"Kedwards is not about to do that"

Maybe that's because they don't want to rely mostly on nuclear power.

[The Kid]

Oops! Ex-squeeze me. You’re in this for tolling. Sorry, I thought you were serious.

[Brian]

I'm not in this for trolling. Why would you think that?

[J_Crater]

What happened to a multilateral energy approach. Surely the Kerry plan for energy independence will isolate us from other countries that are dependent on Middle Eastern oil, further pushing away from our allies and plunging us down the hole of unilateralism.

[Brian]

"Surely the Kerry plan for energy independence will isolate us from other countries that are dependent on Middle Eastern oil, further pushing away from our allies and plunging us down the hole of unilateralism."

Why do you think that?

[Betsy Markum]

I can't believe it, my co-worker just bought a car for $87607. Isn't that crazy!