New piece in Philadelphia Inquirer: Speculators smooth out the rough spots

My new piece with Grover Norquist in the Philadelphia Inquirer starts this way:

With regular gas prices topping $3.70 last weekend, angry politicians are blaming the higher prices on speculators and greedy oil companies. On Monday, The Hill newspaper reported that 23 senators and 45 congressmen, all Democrats except for one independent, called for urgent action against the "speculators" they hold responsible. Sen. Bob Casey of Pennsylvania demanded, "Consumers shouldn't be forced to pay higher prices at the pump because of speculative bets on Wall Street."

These politicians want the Commodity Futures Trading Commission to use its new regulatory powers under a law signed by President Obama two years ago to limit the amount of oil that speculators can buy.

This isn't a new concern. Last April, when regular gas prices hit $4 a gallon, the president launched a Department of Justice investigation into what he called "manipulation in the oil markets that might affect gas prices."

Unfortunately, neither the Democrats in Congress nor Obama appear to have a clue how markets work. The policy reminds one of Richard Nixon's attacks on speculators during the 1970s. . . .

The inefficiency of Electric cars

Buying these cars is the same thing as throwing out almost $20,000 dollars (the price of a Chevrolet Malibu starts at $21,800). Note that these costs don't include the cost of replacing the car batteries after four or five years. From the Washington Post:

The long-anticipated Chevrolet Volt, General Motors' electric car, will cost $41,000, the company announced Tuesday, leaving consumers to decide whether its environmental appeal is worth a price far above that of similarly sized conventional autos.

Electric-car technology has been around for years, but the high cost to make the vehicles has prevented automakers from producing them for the mass market. The price announcements for the Volt and its electric rival, the Nissan Leaf, have been highly anticipated as a result. Nissan, the only other major manufacturer expected to bring such a vehicle to market this year, said the Leaf will cost $32,780.

GM and Nissan are relying on a $7,500 federal tax credit for buyers of electric vehicles to offset some of the added cost, and they're hoping that the allure of their novel power source will make up the rest. . . .

UPDATE: This does not look very promising.

For the price of the Volt, you could buy almost two hybrids from competitors. But in these early days of electric vehicles, a cold economic analysis doesn't really apply. . . .

GM figures that if you drive within the Volt's 40-mile battery range, it will cost $1.50 a day to drive, compared to about $3.50 per day for a 30 mpg sedan. . . .

So let's take those numbers, that I assume are picked by GM to make the car look at its best. At $2 for a whole year that comes to $730. Even assuming a zero interest rate, over ten years that comes to $7,300. That doesn't come close to make up the cost difference.

Possibly the monopoly power of oil companies just declined thsi week?

Energy futures fell Monday after a tropical depression that moved the Gulf of Mexico late last week turned out to be a dud. . . . .

Congressional Energy Bill Farce

The Energy Bill adopted by the Congress has many problems and provisions that will make the US poorer. For example, requiring that we use more expensive, less efficient sources of energy. This discussion in the NY Times caught my attention:

The utilities provision, or the so-called renewable electricity standard amendment, was among the most contested measures in the energy bill. Sponsored by Representative Tom Udall, Democrat of New Mexico, and several others, it will force utilities to make a significant share of their electricity from solar, wind, geothermal, water and other nonfossil fuel sources, although they can meet part of the requirement through conservation measures.

The standard applies only to investor-owned utilities and exempts rural electric cooperatives, municipal utilities, the Tennessee Valley Authority and the state of Hawaii from the mandate. . . . .

If cutting back on carbon dioxide is so important, why do these rules only apply to "investor-owned utilities"? Surely municipal utilities should also count? What about Hawaii? Carbon dioxide is being added to the atmosphere every place. Why does the administration only threaten to veto based upon the lack of oil production in the bill?

Congressional Energy Bill Problems

The Energy Bill adopted by the Congress has many problems and provisions that will make the US poorer. For example, requiring that we use more expensive, less efficient sources of energy. This discussion in the NY Times caught my attention:

The utilities provision, or the so-called renewable electricity standard amendment, was among the most contested measures in the energy bill. Sponsored by Representative Tom Udall, Democrat of New Mexico, and several others, it will force utilities to make a significant share of their electricity from solar, wind, geothermal, water and other nonfossil fuel sources, although they can meet part of the requirement through conservation measures.

The standard applies only to investor-owned utilities and exempts rural electric cooperatives, municipal utilities, the Tennessee Valley Authority and the state of Hawaii from the mandate. . . . .

If cutting back on carbon dioxide is so important, why do these rules only apply to "investor-owned utilities"? Surely municipal utilities should also count? What about Hawaii? Carbon dioxide is being added to the atmosphere every place. Why does the administration only threaten to veto based upon the lack of oil production in the bill?