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Energy policies - May 29

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Truth or Consequences

Thomas L. Friedman, New York Times
Imagine for a minute, just a minute, that someone running for president was able to actually tell the truth, the real truth, to the American people about what would be the best - I mean really the best - energy policy for the long-term economic health and security of our country. I realize this is a fantasy, but play along with me for a minute. What would this mythical, totally imaginary, truth-telling candidate say?

For starters, he or she would explain that there is no short-term fix for gasoline prices. Prices are what they are as a result of rising global oil demand from India, China and a rapidly growing Middle East on top of our own increasing consumption, a shortage of “sweet” crude that is used for the diesel fuel that Europe is highly dependent upon and our own neglect of effective energy policy for 30 years.

... what our mythical candidate would be proposing, argues the energy economist Philip Verleger Jr., is a “price floor” for gasoline: $4 a gallon for regular unleaded, which is still half the going rate in Europe today. Washington would declare that it would never let the price fall below that level. If it does, it would increase the federal gasoline tax on a monthly basis to make up the difference between the pump price and the market price.

To ease the burden on the less well-off, “anyone earning under $80,000 a year would be compensated with a reduction in the payroll taxes,” said Verleger.

... What a cruel thing for a candidate to say? I disagree. Every decade we look back and say: “If only we had done the right thing then, we would be in a different position today.”
(28 May 2008)


Fuel price debate ignores real issue

Kenneth Davidson, The Age (Australia)
The Government is shirking hard decisions needed to tackle the coming energy crisis.

... As the Australian Association for the Study of Peak Oil and Gas (ASPO) says, "high prices are the market signal that we will reduce our oil dependence. Suggesting that high prices are temporary misleads the public and allows governments to delay difficult decisions."

But wait, it gets worse. Egged on by the road lobbyists, the politicians claim that relief should be given to motorists because the hardest hit are the poor. The cost to revenue of both the excise cut and GST rebate of four or five cents is about $2 billion each. According to Richard Dennis, the new director of the Australia Institute, the household expenditure survey shows that the lowest 20% of families by income would benefit from either proposal by $160 million and the top 20% get $600 million.

Until recently, the Paris-based International Energy Agency was in denial about peak oil. In a recent interview, the IEA chief economist said the forthcoming forecast through to 2015 (to be published in World Energy Outlook for 2008) would show an annual decline in oil production of 3.7% to 4.2%.

According to ASPO, the world is producing one barrel of oil for every three we consume. Production of oil peaked in Australia in 2001. Thanks to falling domestic production and higher import prices, net imports are expected to increase from about $12 billion now to about $30 billion in 2012. If the excise or GST on petrol is reduced, the electorate will demand a similar response every time the price goes up. This nexus must be broken now. It would be obscene if the Rudd Government cut the GST on petrol while continuing to impose the GST on rail, tram and bus fares. We all pay indirectly for higher petrol costs.

A less objectionable second-order response is to cut other taxes to compensate for the higher petrol price.
(29 May 2008)
Contributor Shane Perryman writes:
About as clear a main stream endorsement as you can get. Time now to concentrate on "solutions". (Bold emphasis added.)


China Says `Unwise' to Import More Oil at High Prices

Wang Ying and Ying Lou, Bloomberg
China, the world's biggest energy consumer after the U.S., said it is ``unwise'' to import more oil as international prices climb to historic highs.

``Our dependence on imported oil is already quite high at 47 percent,'' said Mu Hong, vice chairman of the National Development and Reform Commission, the country's economic planning agency.

Crude oil imports fell for the first time in 18 months in April as record crude prices discouraged Chinese refiners from buying oil to turn into fuels for sale at below cost. Oil prices have almost doubled in a year, increasing refining costs for China. ``We will increase our energy efficiency,'' Mu told reporters in Beijing today.
(28 May 2008)


Cabinet meeting: Coal, oil, gas, power, agricultural goods supply must be ensured

Xinhua
Exertions should be made to ensure supplies of coal, oil, gas, electricity and agricultural goods and materials, according to an executive meeting of the State Council, China's Cabinet, held on Wednesday.

... Efforts should be exerted to ensure coal, oil and electricity supplies firstly for the areas ravaged by the May 12 earthquake.

...Meanwhile, according to the meeting, coal and oil production should be increased nationwide to ensure supply in peak season. Enterprises of high energy consumption and high pollution should have their electricity supplies restricted.

Fertilizer supply should be ensured and prices be kept stable. Coal, electricity, gas and raw materials supplies should be guaranteed for major fertilizer production enterprises. Export of fertilizer and its raw materials should be curbed, the meeting said.
(28 May 2008)

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