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Fossil Fool Part III
The lies and deception from abusers such as Newsom and Biden are unacceptable.
November has been a crazy month! Elections in the USA, EV/Rocket Man taking over Bird App, Elizabeth Holmes 2.0 crashing crypto even more, you name it! Plus a roughly two week off the grid hiatus on my end - more on that later. Spoiler alert: it involved a trucker’s strike against high fuel prices which snarled up an international border crossing. Didn’t hear about it? Yeah no surprise.
The hysteria from politicians and their corporate press cheerleaders on energy prices, particularly gas prices seems to have died down a bit although as a dose of good measure, California Governor Gavin Newsom’s so-called “senior climate advisor to @CAGov” tweeted this, apparently signaling her lack of understanding of basic economics or let alone a basic understanding of her own state’s roadblocks. This is both typical of grotesque narcissists and abusers - they will blame everything and everyone else except for themselves when they are precisely the problem.
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It turns out this same illustrious thief of our taxpayer money masquerading as a noble public servant was simply foreshadowing the upcoming dog and pony show.
Gaslighting is a term grotesquely overused and in this context also comes off as incredibly punny. It was also in the title of a piecepublished back in October entitled, "Gaslighting On Gas Prices: How do politicians get away with blaming others for the consequences of their policies?" Michael’s piece is behind a paywall (worth the cost, IMO, far better analysis of energy and civilization than 99.9% of the corporate press) but I’ll quickly summarize some of the high points.
In early October a U.S. District Court Judge Jinsook Ohta published a decision on a class-action lawsuit alleging price collusion among the traders at Big Oil companies. The plaintiff in the case was of all things, a gasoline retailer. That’s an interesting catch given that both Newsom and Biden have repeatedly attacked these “little guys” in the oil and gas supply chain while presumably “thinking” they were simultaneously attacking Big Oil. The closest “gotcha” moment they arrived at in the case was an admittance that sometimes the handful of refineries in the state coordinated with each other during shutdowns on logistics. Such activities do smell of monopolistic and cartel-like activity (and ironically Newsom and the CA government presumably don’t like the competition). What seems to be missing from the plaintiff’s accusations are the alleged incentives - why would companies competing with each other band together all the sudden, in one state only to conduct such activities? Especially when knowing their business operations are in a state whose bureaucracy is notoriously not just anti energy but anti-business? The logic doesn’t add up, even with a well-fitting (recycled) tin toil hat.
The defense stated, “After years of costly discovery, plaintiffs have zero evidence of this claimed agreement” between oil companies, they argued in briefs filed in advance of the hearing last spring. Their attempts to infer a conspiracy … fall short of satisfying the governing legal standard the conduct they identify is entirely consistent with non-conspiratorial, independent decision-making by individual defendants.”
And Judge Jinsook Ohta wasn’t having it either. She wrote, “While these types of agreements can be misused as part of an unlawful conspiracy, without more (evidence) this court cannot conclude that exchange agreements, in and of themselves, raise a reasonable inference of conspiracy.”
Next he cited a 2006 report from the Congressional Research Service who dug into the 1980s
windfall excise profits tax mentioned in Fossil Fool Part II. The clowns running the show in Sacramento and Washington have so far not specified exactly how and what to tax. The 2006 report is quite long but a good tldr of why the 1980s tax didn’t work can be distilled into the following from the introduction of the report. Emphasis and formatting for clarity, mine.
Dependence on imported oil grew from between 3% and 13%. The tax was repealed in 1988 because:
(1) it was an administrative burden to the Internal Revenue Service (IRS),
(2) it was a compliance burden to the oil industry,
(3) due to low oil prices, the tax was generating little or no revenues in 1987 and 1988, and
(4) it made the United States more dependent on foreign oil.
The depressed state of the U.S. oil industry after 1986 also contributed to the repeal decision.
Such a tax that would recoup any recent windfalls with less adverse economic effects; imports would not increase because domestic production would remain unchanged. In the long run, such a tax is a tax on capital; it reduces the rate of return, thus reducing the supply of capital to the oil industry.
That last sentence is interesting to say the least. At the California-level, Newsom and his Malthusian goons have openly declared they wish to get rid of the state’s oil industry which is among the most regulated and cleanest in the world, providing thousands of high paying useful jobs, and billions in tax revenue which ironically funds many of the useless bureaucrats who regularly make life hell for everyday Californians. Goes to show the abuse cycle to which they’re locked.
The abuser-in-chief pulled the best rhetorical trick in the book too, by invoking children (aka Pedophrasty) in his plea to ignorantly deprive the as they love to brag - the
5th 4th largest economy of an energy backbone by stating, “As we move to swiftly decarbonize our transportation sector and create a healthier future for our children, I’ve made it clear I don’t see a role for fracking in that future and, similarly, believe that California needs to move beyond oil.”
Shellenberger points out several in fiat academia who even point out the flaws in the lawsuit - UC Berkeley’s, Severin Borenstein, and energy economist, and Shon Hiatt, am Associate Professor of Business at USC came to similar conclusions. Shellenberger even dug up a 22 year old report published by the State’s Attorney General at the time trying to get down to the bottom of the mystery of the state’s unusually higher gasoline prices which needless to say indicates a lot of CA’s woes precede Newsom’s regime.
Shellenberger provides receipt after receipt of attempts both at the state level and national level from politicians restricting in-state or domestic oil and gas production along with construction or expansion of refineries. Here we have Biden’s EPA blocking the retrofitting and expansion of a refinery in the US Virgin Islands. Or his administration slowing leases on Federal land. What about Candidate Biden guaranteeing us he was going to end fossil fuels? How about Biden openly attacking refineries, who were running at full capacity, at near breaking points? And we can’t forget Biden’s administration canceling leases in Alaska in the midst of him demanding the industry work overtime to produce more in order to lower prices.
The California Energy Commission’s so-called attempt to “seek answers about this Fall's unprecedented spike in gasoline prices as the oil industry reported record profits,” resulted in something interesting - they demanded representatives from the major oil companies come to Sacramento to explain themselves.
Except much to their disappointment, their chairs were empty.
Abusers, and Newsom with no doubt is one, make both unreasonable and unhinged demands of their victims. It’s no surprise these folks, having been demonized both by Newsom, his thugs in the State Government, and plenty of “journalists,” and having their livelihoods threatened aren’t going to want to show up. The verdict has already been delivered, there is no due process. Newsom and his goons used Franz Kafka’s “The Trial” as an instruction manual, not a lesson.
Presumably people who actually produce things for a living didn’t have time to entertain a handful of useless bureaucrats interested in cos-playing a Maoist Struggle Session either. Someone has to get that food to French Laundry anyways.
Now back onto Biden. As if he didn’t engage in a grotesque level of deceit in the past, yesterday he really went overboard.
Biden is leaving out several key details on top of what was previously mentioned in the Shellenberger piece but also important to discuss is what he’s done over the past year with the nation’s Strategic Petroleum Reserve (SPR) which has been a key part in his supposed lowering of gas prices for Americans.
The SPR was established in the mid 70s (see Fossil Fuel Part II) as reserve intended to dampen supply shocks of oil - such as what happened in 1973. It consists of several large salt caverns in South Texas and Louisiana. Water is pumped out of these salt caverns and replaced with oil. When oil needs to be removed, water is pumped back into the caverns displacing the oil. The US Department of Energy owns and manages the reserves buying oil on the market to fill it and selling the oil on the market when emptying it.
The massive size of the SPR results in what’s effectively a subsidy on the global oil market. To add to the punch, most of the refineries in the US are not tooled to refine the oil stored in the SPR much of which is a heavier grade, so it is sold abroad. And because this oil is sold on the global market just like most other oil is, the buyers are not necessarily in the US either. It was revealed last summer, that as Americans were still paying record gasoline prices, much of the oil Biden ordered to be released from the SPR went abroad. Attempts have been made in the past to bring lighter grade crude to the US, such as from the Canadian tar sands but the Biden Administration infamously killed the mostly complete Keystone XL pipeline.explained in their piece, Pass The Salt, that over the years, the SPR has been converted from an emergency oil stash to a slush fund of sorts meant to pad and manipulate budgets in Congress too. They write:
In 2015, Congress began using it to game the Congressional Budget Office’s (CBO) score of major funding bills, mandating sales in the future to make present-day spending appear “deficit neutral.” For example, The Fixing America’s Surface Transportation Act of 2015 calls for SPR sales totaling 66 million barrels from US fiscal years 2023-2025, while the Tax Cuts and Jobs Act of 2017 calls for the sale of 7 million barrels over US fiscal years 2026 and 2027. The Bipartisan Budget Act of 2018 calls for the sale of 100 million barrels between 2022 and 2027.
Furthermore in the comments to that Doomberg piece, M. Ford made a phenomenal analogy to politicians similar pillaging of social security and the debasement of currency.
I remember those tales of yesteryear, here's several:
1. As I understand it, originally the Social Security tax collections were supposed to be put in a "lockbox" (Remember John Kerry's campaign promise (he wasn't the first) to 'secure the Social Security lockbox'). Even then, no such thing existed of course, but those tax receipts were at least initially held in a trust account for many years. Then the politicians figured out they could raid it to meet short term borrowing needs, swapping short term liquid assets in the 'lockbox' for Treasury IOU's, which, in theory, would be redeemable when required to meet future payouts.
2. My grandfather was in the Navy (sailed with Teddy Roosevelt's "Great White Fleet"). When I was a mere whippershapper he would regale me with his adventures around the world. One that I remember was about the money changers in Shanghai. Sailors would change US gold coins for local money to pay for whatever sailors due on shore liberty. The money changers put the coins in a sheepskin bag they carried and when standing on the street corner where money changers hung out, that bag was constantly being shaken. He told me you could hear those coins being shaken for several streets away, that's how you found the money changer. Over the course of a day or two, some gold would be worn off the coins and stick to the inside of the sheepskin bag. Then the bag would be turned inside out and the gold residue scraped from the skin and saved for a rainy day.
3. Many centuries before, the Romans (and every other advanced civilization for that matter, before or since) figured out they could raid public assets by shaving the circulating gold or silver coins or debasing them with lead or copper, while still claiming each coin held the same full value.
Politicians treating the SPR as a short term fungible asset is just another form of raiding the Social Security 'lockbox', shaving or dabasing the coinage. Grifters are gonna grift and the politicians mind is unlimited in its ability to find a creative way to conceal their greed and theft from the public. The SPR is no different. It is, after all, a lockbox filled with Black Gold
Furthermore, Biden’s release of oil from the SPR began in November of last year - before Putin’s invasion of Ukraine but Biden has time and time again lied to the American People by insisting the high energy prices are solely to blame on the invasion. Biden’s releases have also been taking place at an unprecedented record and anybody who is a foe or future foe of the United States is likely taking note. They know exactly how much those reserves hold and how much has been released. Many of them are possess heavy control over the oil markets. Biden has already gone almost literally begging to them to lower their prices and is even on record insisting they do so for the midterm elections.
Refilling the SPR too is likely going to happen when oil is at an unfavorable price. You and I, Dear Taxpayers will be on the hook for this. Last we heard, the plan is to refill the SPR when oil hits around $70.00 a barrel. Back in 2020, when there was far more oil in the SPR and the price was far lower than that, the Trump Administration proposed refilling it then but partisan politics got in the way. The Stage IV TDS exhibited by much of the country prevented them from acknowledging the “broken clock is right twice a day” effect. It also didn’t help that the majority of the opposition are economically and energy illiterate.
Refilling the SPR though, especially if the intent is to get it anywhere close to the levels it was at before Biden’s reckless political stunt (and barring releases used to pad the fiscal irresponsibility in Congress) is also likely to result in a “reverse-subsidy” on the market. How long oil would stay at the target price is unknown but it’s likely it wouldn’t last too long. Oil price bulls have been speculating all along that once China drops their “zero-covid” policy and completely re-opens their economy that oil prices will increase well past the $100.00 range.
Newsom and Biden are by no means unique. Most politicians abuse, lie, deceive, steal, etc. These two though represent a grave threat to the lives of everyday Americans though with their intervention into energy. Neither are professionally, nor intellectually equipped to handle such things either.
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