G.U.N. Oil Report

PORTLAND, OR

by Mike Bryson
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The oil industry and market has been destroyed by State regulations, control, war-mongering and subsidies. The more the State has become involved in energy regulation, the higher prices have gone and the lower supplies have dropped. Often times we see those in the State or aligned with the State seeing a crisis looming ahead, but we also have seen the State try to stop a crisis with price caps, which has caused a bigger crisis. The gas crisis during the reign of Nixon was shown to be false, just as every crisis will likely be in the future. The free market of prices tagged to real supply and demand is all we need to overcome a crisis; when real supplies dwindle and real demand goes up, other energy sources will be found. It happened with Kerosene and Coal turning into Gasoline and Nuclear energy; if it wasn’t for the State limiting the supply of Gasoline and Nuclear generation, we’d have much lower prices and much higher supplies of both.

It seems like everyone in Macomb county, MI want more government regulations and subsidies in order to try to prevent a crisis.¹ This is in a state that has been destroyed by government control of nearly all their markets including the labor market. Instead of pointing the finger of blame at the previous regulations and subsidies, the sheeple of that region just want more nannyism and care rather than opening their markets to true competition. While wages might drop, jobs will grow and the new lower prices means lower wages won’t be a problem for those that now have jobs. Don’t wean people off of government care; end government care and let people find out that everyone can produce something for someone else.

New York is possibly leading the boom in corn-based ethanol as the governor announces a fourth ethanol production facility.² While this nearly US$100 million facility will be built with mostly private funds from farmers, agribusiness and individual investors, it will open to receiving millions in state aid and tax credits. Again the State is there to give preferential treatment to the select few at the cost of millions of consumers and taxpayers. We also have to see that the heavy sugar regulations in the U.S. have removed one of the best alcohol-fuel products from the market: sugar-based fuel which is more efficient and cheaper to produce than corn-based ethanol.

In a debate between a few candidates for the Governor of Minnesota, the incumbent said he wants to go after oil companies’ contracts that prevent more gas stations from installing E85 ethanol pumps.³ Many oil companies have contracts that prevent gas stations from selling fuel that the company itself does not market. While it may sound like a good idea to go after these contracts, it could have huge effects on the viability of the major gas brands itself. What politicians should be going after is laws that prevent gas stations from selling what they want (unless a contract prevents them). In many markets throughout the U.S., State and local laws limit what business owners can do.

Another vehicle is announced that will support E85 / Flex Fuel fuel, this time it is the 2006 Chevrolet Avalache SUV.⁴ The Avalache has a 5.3 liter V8 engine pushing over 300 horsepower.

While we see huge gas prices partially blamed on no new refineries opened in decades, that isn’t the case with the heavily-subsidized E85 ethanol blends. In Ohio another ethanol production plant is popping up, with hopes that the additional supply (and competition of refineries in various states) pushing the price of ethanol down further.⁵ If subsidization could be removed, even more companies would enter the market; competition is what drives prices down, subisization keeps competition from entering a market.

We see how subsidization and regulation of ethanol leads to less competitors and huge profits (which happen mostly in a regulated market of State-made monopolization) in ADM’s recent report that their ethanol market has jumped nearly 600%.⁶ ADM is one of the heaviest subsidy-lobbying groups and one that has a strangehold on many corn markets.

Wal*Mart might be one of the biggest pushes for more ethanol availability as it announced it wants to provide the fuel at its gas stations.⁷ Currently only 800 out of 160,000 gas stations provide E85, with Wal*mart able to add another 50% to the small number. The more, the merrier, but it seems that local and state regulations against gas competition within the same station might be one of the factors keeping the alternative fuel down. The added cost of subsidization in reducing competition is also a problem.

A small group of young 20-somethings took a roadtrip across the U.S. using only E85.⁸ They were able to find the most E85 in the corn-belt where prices ranged from US$2 to US$2.40 per gallon. The hardest part of the trip was in the Rockies where they had to rely on 22 gallons of ethanol stored in red tanks (not a safe procedure). The 10-day journey started in D.C. and ended in Santa Monica, CA.

A hilarious article that reiterates why the State is the great evil in energy distribution is in the Green-Bay Press-Gazette: Gov. Doyle announced that the state of Wisconsin’s minimum mark-up law doesn’t cover ethanol, which can sell for up to US$1 less than gasoline since stations are allowed to compete freely.⁹ Minimum mark-up law? What does that mean, in a market with heavy regulations and zoning restrictions? It means higher prices, of course.

Discuss this article at the oil report forum.

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Mike Bryson is the news editor of the Global Unanimocracy Network. He lives in the Portland, OR region where he works as an IT business developer and point of sale consultant. E-mail Mike with news links or comments on this report.

by Mike Bryson

Portland, OR
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The a short article from last Thursday, TheState covered an interview with oil lobby economist John Felmy.¹ The quick interview shows that Felmy lays the blame on higher oil prices in decreased supply from U.S., Nigeria, Venezuela and Iraq oil wells, as well as the fact that no refineries have opened in the US in ten years due to bureaucracy. He doesn’t cover the fact that the dollar may have lost half its value in that ten year time frame; fiat inflation caused by the Federal Reserve’s doubling of the amount of dollars in circulation over the decade.

In New York, Governor George Pataki signed into law yesterday a bill to make it easier for New York gas stations to sell E85 and ethanol-blend alternative fuels.² New York has some harsh overregulation that prevents gas stations from selling fuels that their brand doesn’t market. This reduces the supply of fuels that a particular gas station can purchase. New York is not the only state with such harsh restrictions on what a company can provide to the consumers. The New York Association of Service Stations and Repair Shops executive director said with only 200,000 alternative fuel vehicles on the road, there’s little market for E85. Are we seeing preferential treatment for a few companies that do offer the E85 blend?

Republican Governor candidate Dick DeVos is offering a campaign promise to cut farm property taxes and develop Michigan into an alternative fuel center.³ DeVos said that he believes the governor’s role must be to provide leadership that promotes an environment of sensible regulation, low taxes, a favorable business climate and a skilled work force for producers, processors and marketers of Michigan’s agricultural products. Considering that previous Michigan politicians are mostly to blame for the state’s destruction through excessive taxation, regulation and bureaucracy, don’t put much faith in DeVos’ promises. Michigan has a very unique opportunity to attract hundreds of businesses if they removed all barriers to competition; their high number of available laborers would bring many corporations back if not for the state’s outrageous preferential treatment. Current Democratic Gov. Jennifer Granholm just signed into law bills that lower the state tax on each gallon of ethanol-blended fuel to 12 cents, down from the 19 cents figured into a gallon of regular gas, and that lower the tax on biodiesel fuel from 15 cents per gallon to 12 cents. Another new law offers grants to gas station owners who want to sell E85 and biodiesel fuel. Here we see some good things (lowered taxes) and some terrible things (state grants) that will likely not just wipe each other out but make things worse for new businesses who will have to pay for the grants through higher prices to the consumers.

Twelve new FlexFuel vehicles have been announced for 2007 by DaimlerChrysler, Ford, General Motors, Mercedes Benz and Nissan.⁴ FlexFuel capability allows the car to accept regular gasoline, E85 or usually a combination of the two. The FlexFuel vehicle makes the most sense as it doesn’t force owners to use ethanol, but it might increase the demand for local stations to carry the alternative fuel.

Discuss this report at the oil report forum.
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Mike Bryson is the news editor of the Global Unanimocracy Network. He lives in the Portland, OR region where he works as an IT business developer and point of sale consultant. E-mail Mike with news links or comments on this report.