Leadership in energy resources - Sarah Palin

The last couple weeks I've been keeping an eye on oil markets, for the most part so I can better understand our options. I am calling for oil to drop to $80 by the end of the year. Glad to have some experts set me straight, but my thoughts:

First, Oil has risen in the

last year from $95.00 to close to $150. Why? IMHO it was demand increases coming from the Pacific Rim and China, as well as overall health of the world economy. Sure there was some irrational exuberance that fueled speculation as well. With monies flowing out of bond markets and housing related securities, hedge funds and investors wanted a place to get some kind of return.

The net effect of this huge upswing in oil prices was the obvious increase in gasoline prices to consumers, with gasoline swelling to $4.00. Finally at about $4.00 American consumers got sick of it and began cutting back on consumption. More and more car buyers went to flex fuel autos that allow ethanol blends (85% ethanol and 15% gasoline) with less expensive blends running almost $1.00 less. As 2008 ensued the gasoline prices started to become a political issue with people asking the question: "Are we adequately protecting ourselves as a nation with our dependency on others' oil?"

Consequences though to all decisions, a big move toward ethanol created a run up in prices on corn and grains, causing food prices to jump in early 2008. This isn't good for our economy, causing inflation, and sure isn't good for overseas nations dependent on our supply of low priced meal.

The Democrats have been quietly gleeful that prices have soared, hoping this will cause consumption cut-backs and investment in alternative fuels. My thought is that investment in alternative fuels will happen anyway, and that government ought to keep their hands as far away as possible, they merely tend to waste money and get in the way.

Republicans on the other hand began talking in the early summer about increasing our own oil drilling domestically, either on ANWR or offshore or both. When Nancy Pelosi and House Democrats decided to shut down Congress and go home for five week vacations, Republicans led by Indiana's Mike Pence decided otherwise and began staging the #dontgo home revolt, literally staying on the House floor in the dark demanding that Speaker Pelosi let Congress come back and vote for more oil production.

Now this week we get to meet Governor Sarah Palin, from Alaska, who will accompany Senator John McCain for the next 60 days in an effort to regain the White House. She, more than all the other leaders running for office, appears to have more experience with this issue. She has negotiated with oil companies, she has forced their hands, and she knows the games they play. She also is a huge proponent of drilling and investing in innovative energy resources.

So, I come full circle, what is best for our long term future?

• An immediate release of ANWR and off-shore drilling properties with large rents or profit sharing agreements to increase supply. Though this will take 2-3 years, even the hint of legitimate supply increases in the future will push oil back to $80.00
• Review all current land leases and make sure that oil companies willing to explore are maximizing these leases. If not, while maintaining the legality of the contracts, look to move these leases to oil companies willing to explore.
• Invest in energy innovation, but don't meddle with government oversight
• Pass a Shovel Ready Nuclear Power Act, that would target 50 sites for nuclear power and fast track the government approvals that currently make it impossible to develop
• Tell OPEC to back off, I'm getting a little sick of their monopolistic games. Let the free market rule. It's time to bust up this little group of anti-freemarket countries.
  
• Eliminate farm subsidies, at least this is a positive part of food price increases from ethanol, let's get rid of one of our blackeyes in international negotitations on free trade.
  

Does anyone have the ability to lead like this? Disagree with me, great enter the discourse.

Two controversial ideas for the economy

Bloggers tend to promote debate and controversy, here are two economic ideas foisted upon the blogosphere this morning for your thoughts:

If Exxon Mobile is paying $4,000 a second in taxes, let's reduce their taxes so they have the time and the inclination to explore and drill more domestically. If you've watched the House Republican revolt and the #dontgo oil drilling vote movement, wherein Republicans are demanding the right to vote up or down on more oil drilling, then you know that roughly 66% of the American electorate wants to let oil companies drill offshore.

Economic and markets blogger Porfolio.com talking about Greenspan's ideas and predictions for the economy, with typical ability to twist everything more negative, did compliment Greenspan on a possible solution for housing which involves allowing more immigrants from Mexico ... I would suggest combining this with re-instituting the down payment assistance program that was killed last month by Congress (using no government money, handled by not for profits and sellers of properties)

But the bit of the interview where Paul Kedrosky laughed out loud actually made perfect sense to me.

He did offer one suggestion: "The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants," he said. The only sustainable way to increase demand for vacant houses is to spur the formation of new households. Admitting more skilled immigrants, who tend to earn enough to buy homes, would accomplish that while paying other dividends to the U.S. economy.

What's wrong with this? Paul's heavy on the sarcasm but light on any substantive criticism:

Awesome. Why wait around for sovereign wealth funds to bail the U.S. out when you can simply invite foreigners in and suggest they buy real estate? Alan's soo-oooo clever.

Greenspan's point is that letting in more skilled foreigners will increase demand for real estate, whether you "suggest" anything to them or not. They'll need somewhere to live, after all, and they'll be perfectly capable of paying their housing costs, whether they rent or buy. Admittedly, this will be more effective for housing prices in LA or Miami than it will for housing prices in Detroit. But it does seem to be a reasonably elegant partial solution to the housing crisis.

There you have it, the two areas where our economy needs the most help ... Gasoline prices need to come back down below $3.00 and housing values need to level off and inventories be reduced. Decrease taxes on Exxon (and allow offshore drilling) and increase the quota of immigrants from Mexico and let us have the Seller Assisted Downpayment Assistance program back.

For more research on offshore drilling proposals

For more research on saving down payment assistance program

Is there an oil conspiracy?

Easy answer no. More complicated is to do the debate with liberals who want to "blame" someone for the high oil and thus gasoline prices. Blame speculators, blame Bush for invading Iraq, blame big businesses for global warming, blame the big business for sending too much industry to China.

Can we stop the blame game? The oil markets are a very efficient market for a commodity.

As Carpe Diem says "If the inventory data are correct, consumers were burning all that $135 oil."

"Why is the price of oil a difficult concept for some on the left? They want to come up with some grand conspiracy theory and rush to command and control legislation claiming that Americans have a “right to lower gas prices.” This is at best silly but at worst dangerous. This mentality hinders future economic growth by giving people a victim mentality and stifles the entrepreneurial spirit by making it seem as though government is the only one who can solve the problem. Congress is now fixated on speculators. If Congress wants to weed out speculators, they should allow more potential supply. Anticipation of increased supply will put downward pressure on future oil prices and hence the prices of these future contracts will decline. If these markets have run amok with speculators, these speculators will immediately see the value of their contract decline. (No one is going to want a speculators contract to buy a barrel of oil at $130 when they expect the price to be $100.) Hence Congress quickly punishes speculators in the most efficient way possible — using the market’s discipline rather than holding committee meetings and investigations and then imposing fines and then collecting fines and then who knows what." From the Foundry

From my perspective, naive as environmentalists may see me, we need more supply of all eneergy sources including oil. We need more speculators, the greater the number the more efficient the market. We need to encourage innovation on alternate fuels, but refrain from manipulating markets while "encouraging"