Wednesday, April 30, 2008

The President Speaks

I watched the president's press conference yesterday. I must say the whole of it made me about as angry as I would have expected it to. His main thrust was that everything that's wrong today is the fault of Congress. He asserted in various ways that he's been unable to get several handy dandy bills through for about the last eighteen months or so. Now, by my math that means that he couldn't even get his own republican congress to help him out from November of 2006 to January of 2007, but I don't think he and I do math the same way.

Watching him, I was struck by how small his thinking is. Alternative energy is only nu-cu-lar and ethanol. Drilling in ANWR will solve our dependency on foreign oil and so on. Had John Kerry been elected we'd be nearly three and a half years into our "Apollo Program" for alternative fuel sources. One would hope these would be more than just those choices that benefit Monsanto, ADM and Cargill as well as GE and ConEd.

So in the midst of all his blather, I didn't pay much attention to the one sentence that became the news shows' soundbite. The President of the United States of America said to us "I firmly believe that, you know, if there was a magic wand to wave, I'd be waving it, of course.I've repeatedly submitted proposals to help address these problems, yet time after time Congress chose to block them."

Here's the funny thing. He has been president for over seven years. He could have done something. But let's recall that what was done in 2005 was to give massive tax breaks to the oil companies and other energy firms. We stopped charging royalties to oil companies who take crude from public land. Essentially, we are allowing oil companies to take from the commons for free. And each quarter these companies are setting record profits.

And, what did George W. Bush say in 2005 when he wanted to pass that wonderful energy bill that would bring down the price of gas, which then had soared to a shocking $2.28 a gallon? He said:

"I wish I could simply wave a magic wand and lower gas prices tomorrow," Bush told the U.S. Hispanic Chamber of Commerce. "But we must act now to address the fundamental problem. Our supply of energy is not growing fast enough to meet the demands of our growing economy."

Three years ago he could have waved that magic wand to improve our mass transit infrastructure (my city is trying to add light rail-a forward looking idea that cons hate), could have extended tax credits to buyers of hybrids rather than Hummers, could have encouraged our auto companies to improve fleet efficiency. Rather, the news this morning in Wisconsin is that GM is laying off 750 people at the Janesville SUV plant. Yeah, who could have seen that coming?

And now, McCain and Clinton and others say that we should have a tax holiday for the summer to reduce the price of our gas by eighteen cents a gallon. Think about that: we give the raw product away, we've given billions in tax incentives to the oil companies and now as an answer, some would like us to forgo our own revenue - money that goes to US citizens for roads and infrastructure improvements, because oil companies are overcharging us? Insane.

Is now a good time to remind everyone that had we kept Jimmy Carter's CAFE standards in place we wouldn't need foreign oil?

34 comments:

dguzman said...

Great post, Jess. Just wish that people in the media had such long memories, but I guess they're too busy drooling over pics of Hannah Montana in a sheet and then pretending they're appalled at the photos. That takes a lot of fucking energy, you know?

God, when I think of how different things would be if we'd kept a lot of those policies from the "energy crisis" in the 70s (remember rationing to use LESS gas?), if Al Gore hadn't been robbed of the presidency in 2000... it's enough to make me want to just bury my head under my pillow.

CDP said...

Great post. At least Clinton is suggesting that we offset the revenue loss with additional taxes on oil companies.

If I had a magic wand, it would be right up George Bush's ass. (I'm trying to get your cuss-o-meter up to 70%).

Spirula said...

I watched the president's press conference yesterday

I either hit the mute, or turn the sound off, or hum loudly if I can't do the other two whenever I hear his voice. Seriously.

So I consider you a brave soul.

ANWAR again. Shit. These assholes couldn't find their way out of a paper bag. Frankly, I'm in favor of composting politicians as an energy producing solution.

Oh, as for those other two babbling ganglia who want to suspend the federal gas tax for the summer: "OMFG, think of all the shit I'll be able to buy with the $1.80 I save on every tank! Take THAT mortgage crisis!"

FranIAm said...

Deep sigh.

You watched? Oh wow, you are one strong woman.

It is all such horseshit and I worry about where our collective outrage is? Where is the revolution? And I know as upset as I am, I have yet to start one.

Zoey & Me said...

You hit the nail on the head. Great post!

Dr. Zaius said...

Great post! It is all too true. And Carter has been proven correct - just in time to be blamed for talking to Hamas. **sigh**

mr energy said...

jess, your comments raise some questions.

If, as you said,

"We stopped charging royalties to oil companies who take crude from public land. Essentially, we are allowing oil companies to take from the commons for free."

If the price of gasoline is high AND the federal government is NOT collecting royalties from oil extracted from federal land, do you believe the price of gasoline would DROP if oil companies were to resume royalty payments?

Second, you also said...

"And each quarter these companies are setting record profits."

Exxon and a few others are huge multi-national companies that earn their profits from global operations. The industry is populated by companies ranging from huge operations like Exxon, to small mom & pop businesses. But not one of them controls the price of gasoline. That's all in the hands of consumers, who consume 85 million barrels of oil each day around the world. The US takes 25 million barrels a day.

China now produces almost as much oil as the US. World oil prices would decline if China increased its own oil production. But the US can't control the Chinese oil industry.

On the other hand, Congress can open up all US territory to oil drillers.

There are 80 BILLION barrels of proved reserves on US territory now off-limits to oil companies. That land includes ANWR and reserves off both coasts. If we were to drill these reserves the US would increase domestic employment, reduce world oil prices and pump US dollars into the US economy instead of sending it elsewhere to import oil from other countries.

Regarding cars and mileage standards -- you cannot force people to buy new cars. Meanwhile, we will never see an electric airplane. Or electric trucks or electric freight trains.

The willingness of Congress to stand in the way of lower oil prices by restricting access to domestic oil reserves will contribute to the financial hardship of the airline, trucking and railroading industries.

This is utter brainlessness.

CDP said...

PS--I tagged you.

Jess Wundrun said...

Mr. Energy, thinking in old ways is what is brainless.

Let's run through, shall we? While I rarely do a sentence by sentence examination of someone's response, I am going to do it here, particularly since you've used small thinking to describe me as brainless. Interesting.

If the price of gasoline is high AND the federal government is NOT collecting royalties from oil extracted from federal land, do you believe the price of gasoline would DROP if oil companies were to resume royalty payments?

There are several responses to this statement.

1. My concern is not the drop in price but rather how we could have been investing the money from the sale of our resources. This means we don't have money for our failing infrastructure or for alternatives or for mass transit.

2. The US has NO money from the give away of our resources to pay for any calamity that might occur from drilling. Privatize profit, publicize the risk.

3. We got rid of the royalty payments and the price still skyrocketed. This was a move that was supposed to keep prices low. It vacates the argument that these companies NEED incentives and tax breaks, because they'll take those right along with the profits. In other words, those incentives have failed to keep prices low, so in our own interest why keep them?

China now produces almost as much oil as the US. World oil prices would decline if China increased its own oil production. But the US can't control the Chinese oil industry.

On the other hand, Congress can open up all US territory to oil drillers


China and Russia's interest in the Caspian Sea reserves is the true reason for our interest in getting our own stake there. If you add the US subsidy of a trillion dollars (more, really) for our wars in the region, you know we've already paid far too much for our oil. And as China's middle class grows and demand grows things will only get worse. Tapping ANWR is an intermediate solution at best, in the words of the president himself. Incredibly naive to believe that such a stop gap measure is going to solve any problems at all.


There are 80 BILLION barrels of proved reserves on US territory now off-limits to oil companies. That land includes ANWR and reserves off both coasts. If we were to drill these reserves the US would increase domestic employment, reduce world oil prices and pump US dollars into the US economy instead of sending it elsewhere to import oil from other countries.


Could you cite your "proven reserves" information from a credible source? ANWR oil won't reduce the cost of our gasoline at all, won't be online until at least 2013, and no one knows for sure what is there. The truth is that drilling in ANWR has always been more about expanding the rights of corporations to take from the commons than about actual results.

Regarding cars and mileage standards -- you cannot force people to buy new cars. Meanwhile, we will never see an electric airplane. Or electric trucks or electric freight trains.

How many Americans are driving cars that were built before 1986? Are you? The hope in the seventies was that by now we'd have fleet standards of 45 mph or more. We don't. And the "free market" found no incentive to do so for us. Do you find it ironic that Bush has finally reintroduced CAFE standards? So we were right about them, we just had to give up thirty years of lost time to get there.

As far as the 'electric' argument, that, son, is called a straw man argument, one I did not make. However, to answer in kind, we also don't have electric rocket ships now do we?

So it seems that you and the president have staked all on ANWR. And I am not removed my original thesis that that is small thinking indeed.

Dean Wormer said...

Nice post, Jess.

This part made me a little sad because it was so damned true-

Had John Kerry been elected we'd be nearly three and a half years into our "Apollo Program" for alternative fuel sources.

One of the saddest things about the Bush administration isn't just the horrible decisions they've made such as the war in Iraq or pulling out of Kyoto, but the lost opportunities they've frittered away. From the worldwide compassion towards the United States following the 9/11 attacks to the opportunity to really do something about global warming they just seem to take a dark sort of glee in doing the wrong thing.

When I think about all the good that would've come from a President Kerry or a President Gore for that matter it just breaks my heart. The changes that have to come with regards to energy aren't optional. All Bush/ Cheney have done by denying reality is put us further behind everyone else in coming to terms.

Distributorcap said...

ANWR -- at BEST we would see oil in 10 years -- at BEST -- so lets keep ripping the planet apart to get that oil ----- by the time the oil runs out, there will be nothing left to live on.

and believe it or not -- there is a silver lining to these high gas prices --- conservation, get GM and Ford and Chrysler to build cars that get 60 mpg and more hybrids, alternative energy, mass transit --- no clinton and mccain want people to top their tanks off every day to save 30 cents a gallon

if i had a magic wand i would make it a time warp and have it so George H W Bush shot blanks.

Jess Wundrun said...

dean in so many ways it makes me sad. I don't know how we will find the ways to undo what has been done. On the other hand, the pendulum needs to swing pretty far for and equal and opposite reaction. Still, time is of the essence and it's obvious we still don't know how to be truly civilized. In the actual definition of the word.

dcap I do believe it. There are those of us on the environmental side who are not upset by the high cost of gas because we know that until consumers have an incentive they won't look for alternatives.

I agree about your magic wand though. I think that all it would've taken was for GHWB to have quit before that last bourbon for us to have lived a GW-free life. Who knows?

fairlane said...

They're handing out Magic Wands?

Chimpy better pray I never get hold of one.

Dean Wormer said...

Jess-

Exactly. It is a pendulum. The challenge is that the other side recognizes this as well. That's why they try and use the media and the political establishment to keep it from swinging back. So far they've been pretty successful but the question remains as to as whether the forces pushing against them are greater than they are.

Can they hold the pendulum permanently in place? I don't think so.

Dr. Monkey Von Monkerstein said...

Stop making so much sense. You're making my head hurt.

Mr Energy said...

Jess, you offer a lot of chatter that had nothing to do with energy use.

You say...

"1. My concern is not the drop in price but rather how we could have been investing the money from the sale of our resources."

The preceding is all about the past. The past is past. Things did not go the way YOU wanted in the past. But there's no doubt that things went the way MILLIONS of others wanted. Hence, you were out-voted by real life.

You claim...

"This means we don't have money for our failing infrastructure or for alternatives or for mass transit."

The "infrastructure" is not failing. One collpasing bridge is meaningless, especially when it investigators determined the Minnesota bridge collapsed because hundreds of tons of equipment and materials were placed on the bridge while workers were resurfacing the roadway AND commuters were driving across it.

Roads and bridges all experience wear and tear. Everywhere I go there are resurfacing and rebuilding projects underway. I suppose we could build many more roads and bridges, which would have the effect of getting more and more people to drive more and more places while burning more and more gas. That's okay with me, but I think it goes against your totalitarian desire to control other people's lives.

You said...

"2. The US has NO money from the give away of our resources to pay for any calamity that might occur from drilling. Privatize profit, publicize the risk."

This statement is utterly silly. If a domestic oil company were to pay ZERO royalties to the federal government, its profits would reflect the absence of that cost. The difference would appear as increased profits.

Oil company profits are taxed at about 40% by the federal government. In addition there are various other state and local taxes oil companies pay. In other words, even if oil companies are free from royalty payments, they get heavily taxed.

There is another issue which you do not understand because you have no real experience with the oil industry. That is this: When an oil company takes oil from federal property it does not deplete its own corporate resources. That means the oil company cannot use certain favorable accounting strategies to lower taxes. Thus, the lack of a royalty payment means little in the big picture.

Then there is the fact that oil company employees get paid -- and they pay taxes to federal, state and local treasuries. And consumers pay both FEDERAL and STATE excise taxes. About 20% of the pump price is tax.

You said...

"3. We got rid of the royalty payments and the price still skyrocketed. This was a move that was supposed to keep prices low."

First, the price of oil is determined in GLOBAL AUCTION MARKETS. Not US markets. The price reflects SUPPLY and DEMAND. Not taxes or royalties. Take note that gasoline in Europe and other regions is more than twice the price in the US. Yet oil is still $110 a barrel. Moreover, even though France generates almost all its electricity with nuclear power, the French pay $110 for a barrel of oil, just like we do.

Oil is a global commodity. Its price reflects GLOBAL DEMAND -- which is rising.

You said...

"It vacates the argument that these companies NEED incentives and tax breaks, because they'll take those right along with the profits. In other words, those incentives have failed to keep prices low, so in our own interest why keep them?"

YOu seem to be part of a crowd that believes the oil industry gets a free pass. Exxon may have earned profits of $40 billion last year. But it also paid $40 billion in taxes.

In short, it appears you want to raise taxes on oil companies and extract as much money as possible from them. Okay. But if you want to extract the maximum possible revenue, then open the door to full-steam-ahead operations. Let oil companies drill wherever oil can be found. That's the way to maximize revenue.

Based on your angry sensibilities, you want to shrink the oil companies by government force, through taxation and through the restraint of their operations. That is a guarantee for higher and higher prices. But you should understand that higher prices are the confirmation of inadequate supplies.

If global reserves were actually nearing depletion, that would be one thing. But we are at least a century away from getting to the bottom of the oil barrel. There's plenty left.

You said...

"China and Russia's interest in the Caspian Sea reserves is the true reason for our interest in getting our own stake there."

Oil is a GLOBAL COMMODITY. The more oil pumped, the lower the price. We are the best in the world at getting oil out of the ground. The Russians and Chinese are lousy operators. Meanwhile, with respect to the price of oil, it does not matter who runs the drilling and production operations. It is the quantity of oil flowing to market that matters. However, for those who believe in efficiency and conservation, American companies are best.

All your arguments lead to your desire of artificially restricting oil supplies, which will very definitely drive prices higher. You make no sense.


You said...

"If you add the US subsidy of a trillion dollars (more, really) for our wars in the region, you know we've already paid far too much for our oil."

If -- hypothetically -- OPEC were to cut way back on oil production, what would happen to oil prices? Saddam Hussein was a terrible oil manager. The Iraqi oil industry was a mess and getting worse. Production was falling and would have continued to fall if he were still around. Iraq now has the chance to become a major producer while enjoying rising prosperity. That's good news to me.


You said...

"And as China's middle class grows and demand grows things will only get worse."

China's middle class is growing and becomeing more prosperous. That's a fact and it's going to continue. In other words, oil consumption in the world's largest country will continue to surge. NOTHING we do in the US will slow the rising demand for oil in China. The same is true for India. NOTHING we do here will offset the increases in oil use there. Why pretend otherwise?

You said...

"Tapping ANWR is an intermediate solution at best, in the words of the president himself."

No one has ever said anything else. Every oil reserve is nothing more than a pool of oil that will eventually run dry. Is this news?

No one has ever said ANWR is large enough to supply our oil needs forever. It is a large oil reserve that will contribute to our total oil production for many years. Just like the North Slope of Alaska, which has been pumping oil for 30 years.

You said...

"Incredibly naive to believe that such a stop gap measure is going to solve any problems at all."

I repeat, every oil reserve will run dry. That's why we keep looking for new ones. Every oil well gives us a temporary supply of oil. Why is this news? The naive people are those who have zero knowledge of the oil industry but make stunning pronouncements anyway.

I said...

"There are 80 BILLION barrels of proved reserves on US territory now off-limits to oil companies. That land includes ANWR and reserves off both coasts."

You asked:

"Could you cite your "proven reserves" information from a credible source?"

Start with Congress. But you might not consider Congress a credible source. Check the Energy Information Agency. And check with companies in the Oil Industry.

Just as oil companies found oil and gas in the Gulf of Mexico, they also found oil and gas off the east and west coasts of the US. There was drilling off the west coast until legislation stopped it. Drilling is limited by law all across the US mainland. Nature is not the cause of the limitations.

Of course your request for credible sources regarding oil reserves is amusing in itself. There is NO reason oil companies would claim there are available oil reserves if that claim were false. It costs over $50,000 a day to rent an off-shore drilling rig. Some rent for $200,000 a day. No oil company would pay to drill dry holes.

In any case, seismic companies like Schlumberger have mapped much of the US. Geologists have been climbing over potential oil terrain for a hundred years. That's why Congress knew a ban on drilling meant something. There was plenty of data to back up the claims of the anti-oil-drilling people.

You said...

"ANWR oil won't reduce the cost of our gasoline at all, won't be online until at least 2013, and no one knows for sure what is there."

The oil industry depends on Exploration & Production, Gathering & Transmission, and Refining & Marketing. It takes the steady discovery of new oil reserves to maintain the flow of refined oil products to the whole world.

But you seem to be making the argument that supply has no effect on demand or price. Then there is the silly claim of what ANWR contains. The reserves are considerable and they are large enough for the oil companies to risk the capital to build the infrastructure to bring that oil to market. It took three years to build the Alaska Pipeline. That's a fair guide for the ANWR project. It is irrelevant that the oil from that project is a few years away from coming to market. It takes at least 12 years to take a nuclear reactor plan from start to finish. Is that a reason to forget nuclear power?

You said...

"The truth is that drilling in ANWR has always been more about expanding the rights of corporations to take from the commons than about actual results."

The oil from ANWR will flow to consumers. What other results are you addressing? What corporation rights? What does that mean?

You sound like someone determined to cut off her nose to spite her face.

You said...

"How many Americans are driving cars that were built before 1986?"

Not many. But so what. Consumers can buy new cars that go far on a gallon of gas, and they can buy cars to go very short distances on a gallon. You are debating the micro aspects of an aggregate issue. The US consumes 25 million barrels of oil per day. Raising mileage standards on cars will not lower our daily consumption. Higher mileage standards MIGHT cause a small shift in the patterns of use, but not a DECLINE, as a hundred years of history have shown.

You said...

"The hope in the seventies was that by now we'd have fleet standards of 45 mph or more."

Says you. A few people felt that way. But obviously most people did not. Consumers speak with their wallets. There have been high mileage cars available since the auto market began to mature. After WWII the VW Beetle came to the US. That car got 40 miles per gallon. My father had one. He also had a Ford that got about 15 miles per gallon. Consumers chose vehicles for reasons that include mileage, but there are other more compelling factors for many.

You said...

"And the "free market" found no incentive to do so for us."

The free market gives car buyers exactly what they want. As demands change, so change the cars. Demand for high-mileage cars is up. So too are sales and so too is the manufacture of these vehicles. Few Hummers are sold these days. This all adds up to a sound consumer-driven car market to me.

You said...

"Do you find it ironic that Bush has finally reintroduced CAFE standards? So we were right about them, we just had to give up thirty years of lost time to get there."

Bush is giving sound-bite material to the press. CAFE standards are in the hands of Congress. There is, of course, the reality that GM, Ford and Chrysler are all in deep trouble. You can point the finger of blame anywhere you want, but the fact remains, all three US car companies are in deep trouble. Toyota has surpassed GM as the world's largest motor vehicle manufacturer.

What does this mean? It means that US CAFE standards will put additional strains on US car companies. Higher mpg standards demand more engineering AND to raise the fleet's average mileage, it probably means making fewer big cars and more small cars.

However, if ALL three US carmakers are forced to reduce the production of low-mileage cars and increase production of high-mileage cars, they will each sell fewer cars. Why? Because US buyers will have fewer choices among US cars. It's already happening. Big Three car sales were down a huge percentage in the first quarter of this year.

That means layoffs and possible factory closings. Chrysler has already announced temporary closings scheduled for the summer.

Of course there are a lot of attractive imports getting good mileage and offered at attractive prices. Amazing considering the weakness of the dollar. When the dollar strengthens, imports will look even better. Bad news for domestic Big Three auto-workers.

You said...

"As far as the 'electric' argument, that, son, is called a straw man argument, one I did not make. However, to answer in kind, we also don't have electric rocket ships now do we?"

There's nothing "straw" about the impact of oil prices on airlines. Maybe you think the airline industry is one we can live without, but you're alone if you think so.

Part of the point is that no matter how much power we generate with alternative sources, oil is irreplaceable in some circumstances -- such as flight and shipping.

About 60% of the oil consumed in America is used for transportation. Cars, trucks, buses, planes, trains and ships, etc. No amount of conservation through higher-mileage vehicles will stop the climb of oil use for the simple reason that our growing population will demand more and more on an aggregate basis.

You said...

"So it seems that you and the president have staked all on ANWR."

Those uninformed about the facts of oil in the US revert to this silly debate about ANWR. It is one large pool of oil that will contribute to the overall flow of oil used in the US. People who know something about the oil industry all understand the facts about oil wells and their longevity.

Jess Wundrun said...

mr. energy, I hope you spent a good four or five hours of your time writing that diatribe. I could only get about 1/4 of the way in and then I quit.

Is there a class for angry right wing trolls? You seem to have taken it. You continue to argue against/for positions I have not taken.

You even argue against yourself claiming that oil companies have no control over the price of oil, yet if government were to intrude that would raise the price of oil.

So, if you can't even agree with yourself, I'm not wasting my time wading into your drivel and pointing out the myriad of ways my arguments have simply escaped you.

You do seem to like to pat yourself on the back, though. Arm hurt?

mr energy said...

jess, when supply of a commodity is constricted -- which is the outcome of government intervention in markets -- the the price of a commodity rises.

But oil companies are not in the business of constricting supplies. There are too many competitors for collusion to occur. Each company attempts to pump its oily heart out because that's the only way for the employees to earn a pay check.

Government doesn't have that problem.

Perhaps the lesson of the illegal drug market would make things a little clearer for you. Cocaine is expensive because government attempts to limit access to it.

If cocaine traded for its true cost plus a shipping fee, it would be cheap. Instead, consumers pay a highly inflated prices.

Jess Wundrun said...

bullshit.

Water is a commodity whose price always rises when the supply is privatized.

The price of legal drugs are 5000 times the price of production. Including R & D which is outsourced to smaller pharma and to universities.

There are two examples that negate your thesis.

mr energy said...

Jess,

There are water fountains in every town in the US. The price of that water is ZERO.

You really get into deep water when you write about water. For starters, water is not H2O from the nearest stream. Money is invested in water resources, as well as water purification and wastewater treatment. These activities are vital.

Africa lacks clean water. That's why over a MILLION children DIE each year from the diseases they catch from the water they have.

The price of bottled water bought in supermarkets and convenience stores plays no role in the price and distribution of water to the general population.

Most Americans receive water for a direct cost of ZERO. The cost of providing water is included in a homeowner's tax bill.

In NY City we pay a water bill. NY State operates a huge reservoir system in the Catskill Mountains. No one working for the Water Works is a volunteer. Hence, providing water creates financial obligations for taxpayers.

As for drugs and drug companies, well, from you comment I can see that you do not know how to read financial statements.

In short, the most profitable drug companies have net profit margins between 15% and 20%.

More important to the discussion is the fact that some drugs are commodities -- like aspirin -- and some are complex compounds protected by patents.

Meanwhile, consumer behavior plays a huge role. People will buy Bayer aspirin for 8 cebts a tablet rather than buying the generic aspirin for less than a penny a tablet. Why? Aspirin is aspirin like gasoline is gasoline.

But the supply of new drugs is limited by patents. If a new drug is prescribed, a patient might say it's too expensive and ask the doctor for an alternative.

But the new drug will remain expensive as long as it outperforms the competition.

Then there is the issue of insurance. Drugs keep many people alive and functioning. That fact has to be included in an estimate of a drug's true value. Many people have to answer the question of how much they will pay to stay alive.

Thus, it is absurd to compare the price of many expensive drugs with commodities for which there are substitutes.

As for outsourcing R&D, you really need an education in the drug business before making such conclusive statements.

Ideas for new drugs emerge from many places. Sometimes universities. Often times, the minds of scientists employed in the pharmaceutical industry.

If early research shows a hint of promise, some early-stage capital will become available. If the early-stage capital leads to testing that shows more promise, the company may well reach the point where it can sell stock to the general public.

These companies can raise $100 million from risk-tolerant investors with little trouble.

Over the past two years I have had an interest in Biodel (stock symbol BIOD). Check it out if you care.

The company has NO revenue and a lot of losses, which is all you get when running clinical trials. Will the company succeed? I don't know.

But if it does, it will form a licensing arrangement with a large pharmaceutical company and collect royalties from sales. Royalties are commonly set around 15% of the sales revenue.

You can't compare prices of common, readily available commodities with prices of complex manufactured products. But if you want to kill the goose that lays the golden drugs, you can eliminate patent protection. There are groups attempting to do that. They believe pharmaceutical companies profit unfairly from patent protection.

There is a genetic condition known as Goucher Disease. Only a handful of people in the world have it. They depend on special drugs to survive. Last I checked, the annual cost was $150,000.

Guess what? Even for $150,000 a year, the pharmaceutical company that held the patent for the treatment of Goucher Disease didn't want the business, and it took steps to abandon the drug.

Why? Because $150,000 a year did not cover the costs of making the drug. Thus, another company took on the task. I haven't checked for a while, so I don't know how that switch has worked. But there is no doubt that pharmaceutical companies have to make a lot of money on some drugs to carry all the others that put little or nothing on the bottom line.

Jess Wundrun said...

Once again, far too long a diatribe for me to waste my time on when you demonstrate a failure to understand the gist of what I am writing from the git-go.

There is a large movement afoot to privatize water delivery in third world countries, some of which are in Africa. There the result is to make the situation more dire than before the privatization efforts. ALWAYS. And the companies that are involved are familiar to you: Enron, Bechtel, CH2M Hill.

I am looking at your last sentence and it only bolsters the point that government could produce the drug for gouchers disease and that private industry operating on a "free market" can't or won't.

Thanks for coming over to my side.

mr energy said...

Jess, water is unclean in Africa because virtually every African nation is run by a thug, dictatorship or junta.

As with Myanmar, these leaders do not care about the people of the country. Clean water is easy to provide. Easy. But the thugs NEVER take the steps to provide it.

Perhaps it's news to you that almost all countries run by dictators lack the scientific knowledge to handle simple public health issues like providing clean water and giving innoculations against prevalent diseases.

As for the companies seeking contracts to provide water in Third-World countries, well, you'd better check again.

The companies you cited -- at least Bechtel -- are in the business of BUILDING waste-water treatment facilities, and I am sure Bechtel can build a water system for any city in the world. But Bechtel is not in the business of operating the facilities it builds. That's not what Bechtel does.

Another entity will operate the facilities built by Bechtel. In the case of water systems, the local government will play a big role.

Meanwhile, you miss the obvious point of wondering why there are countries in the world today that are incapable of providing clean water to citizens. Do you suppose the US has a choke-hold on global water resources?

Your understanding of Goucher Diseases is equally limited.

Governments in capitalistic societies do not manufacture anything. Nothing. Thus, I can't imagine why you would think a govenment with no experience making anything could produce a complex drug.

Second, your response suggests you think all the sufferers of this disease live in the US. They don't. They live in many countries.

Thus, the question becomes which government you think should produce the drugs needed by people with the Goucher problem.

Then there is the problem of whether the government producing the drugs should GIVE the drugs, as you suggest, to people who live in other countries.

You might consider the fact that a number of the victims live in poor countries. Should these poor countries give expensive drugs to people who live in other countries?

You need a course in economics.

Jess Wundrun said...

Once again, you are simply wrong.

As for the first part of your latest screed - these dictators are more often than not holding hands with the World Bank and the IMF who dictate their policies.

Their Freidmanite Chicago School free market policies that call for the privatization of natural resources.

In Bolivia, for example, the World Bank tied its loans to the country to the insistence of the privatization of its water supply. Bechtel ran that water supply. Didn't build the infrastructure - ran the supply, not some other country. In Bolivia's third largest city, Cochabamba, Bechtel's receipts were higher than all of Bolivia's GNP.

That situation led to the infamous Bolivian Water Wars, of which you are no doubt well aquainted.

Bechtel was given a 680 million dollar contract to "fix and RUN" the water supply in Iraq. Water supply is still not up to pre-occupation levels.

See? I don't need to read your lengthy diatribes when you get it wrong in the first sentence or two.

And you need to stop confusing fact with your opinion. And I will never agree with your opinion, so you might as well quit.

mr energy said...

Jess, your overheated assessment of Bechtel's adventure in Bolivia was more or less free of all facts. The following covers the key points.

But before learning the facts, keep in mind that Bechtel owned 27% of the consortium -- Aguas del Tunari -- that was rebuilding and maintaining the water system.

Bechtel, through its minority stake in the Aguas del Tunari consortium, was involved in making the sytem work.

It did not OWN the water system and it did not COLLECT the water bills and it did not SET the RATES. Bechtel handled engineering and project management services for water supply and waste-water treatment. This is exactly what I said without even running through all the details.

The Bolivian government turned to the private sector in the late 1990s to operate the city's water and wastewater system because the local utility had rendered it a shambles. The utility's financial losses had led to mounting debts and declining service.

Service was unavailable to 40 percent of the city's population.

What water came out of the tap wasn't healthy--and typically wasn’t available for much of the day.

Most of those without connections resorted to buying unhealthful water from the operators of tanker-trucks at exorbitant rates--several times higher than what they'd pay if they could hook up to the system.

Residents who had connections suffered an inequitable rate system. Low-volume, poorer users paid more per unit than high-volume, wealthier users. High-volume users had little incentive to conserve scarce water resources.

Aguas del Tunari began operating the city's water and wastewater system November 1, 1999. The consortium did not buy and did not own Cochabamba's water utility or water resources.

The government raised water rates in Cochabamba by an average of 35 percent, effective in January 2000. Half the rate increase was necessary because the government was required to pay down more than $30 million in debt accumulated by the public utility that had previously operated the system so poorly.

Rate increases were also needed to finance proper maintenance and expansion of the water system. Even these rates were comparable to those in other major Bolivian cities.

To minimize the impact on the poor and improve efficiency, the consortium convinced the government to adopt a rate structure that put most of the increase on larger, wealthier users.

Aguas del Tunari only charged for water provided through the network it operated.

It did not charge for water from private or cooperative wells.

It did not lease or own the aquifer.

The contract was for potable water supply and sewage within urban Cochabamba--not for agricultural areas.

Aguas del Tunari managed to increase the availability of water by 30 percent in its short time managing the system. For billings in the month of January (2000), increased water usage amplified for many customers the effect of higher rates.

The higher rates didn’t last long.

Responding to public criticism, the government rolled back rates in February. Customers who had paid the higher rates were refunded the difference.

Subsequent unrest in Cochabamba was sparked by multiple causes, including unrelated national groundwater legislation that left even citizens outside the service area believing incorrectly that their water resources might be expropriated by a concessionaire. The unrest peaked in April 2000, two months after rates had been rolled back to preconcession levels.

In April 2000, the Bolivian government rescinded its contract with Aguas del Tunari.

Jess Wundrun said...

Once again, you are arguing against yourself.

Protest brought about those changes. The Water Wars. Not the "inherent goodness" of the free market system.

Every point you try to make only bolsters mine.

In April 2000, the Bolivian government rescinded its contract with Aguas del Tunari.

Privatization failed in your own protracted comments.

Do you just want to admit to agreeing with me on every point I've thus far introduced?

Do you even have a point?

mr energy said...

Jess, for any of your comments to make sense, you have to believe that providing water to a large population costs nothing. In other words, you believe in a free lunch. Or at least you believe in the right of others to believe in a free lunch.

The reason citizens were angry about the new arrangement for water boils down to this: they were no longer able to STEAL the water.

If you want to gain some understanding of the Bolivian situation, link to the following site. You will find a six-page statement that spells out the situation.

http://www.bechtel.com/assets/files/PDF/Cochabambafacts0305.pdf

As for my point, I first responded to your misunderstanding of the oil industry and your closed-minded, flawed way of viewing the situation.

Energy prices are rising and they will continue to rise due to fundamental increases in worldwide demand. However, the rise in oil prices is easily slowed by simply drilling for more oil and building a few more refineries.

In fact, it is possible to drive oil prices lower by increasing supplies. When the global reserves begin to run down and recovery becomes truly difficult, consumers should expect price increases. But as long as oil is relatively easy to find and extract, there's no reason to think today's high prices are warranted.

Jess Wundrun said...

Steal water?

That is the most fundamentally flawed world view that I have ever heard of. I don't believe in the free lunch that you accuse me of. But I also don't believe in a foreign corporation suddenly becoming a middle man and making a profit from a resource that should not be commoditified.

You may be interested in a documentary and book called "Thirst" that looks at things slightly differently than Bechtel's own self-interested defense of its attacks on Bolivian citizens with the aid of the Bolivian army.

You have claimed that I have a totalitarian world view, though I have never made a claim as such. You are the one with the very very frightening outlook. Your views are outright fascist.

Worldwide demand for oil could have also been eased by alternative energy, increased fuel efficiency and development of a mass transit infrastructure. All things that cannot happen without government involvement.

So bringing things around to the beginning, you have grasped the problem: demand. Your problem is that you can see only one answer. And you still insist on calling me brainless.

You know that saying about insanity is doing things the same way and expecting different results? Explains you to a tee.

mr energy said...

Jess,

The bottom line of your view on Bolivia is that there were no problems with its water supply.

That would mean that CLEAN drinking water was available to everyone in the country in sufficient quantities and that there was enough water to support Bolivian agriculture.

Was this true in 1999? Did the Bolivian water utility supply enough CLEAN water?

Does Bolivia have enough CLEAN water today? And if you believe the answer is "yes", where did you get your information?

You seem confused about the meaning of "commodity."

Water is a commodity. A commodity is a "good" that is available from many sources but which is essentially the same from each vendor.

Thus, water is water. But CLEAN water is a value-added commodity. Still a commodity, however.

Can a city build and maintain and expand a water system that provides CLEAN water to EVERY citizen in a city without spending a lot of money?

What death and disease toll should a city or country accept from the consumption of dirty water?

If one thing is true, it is that no country can live and prosper beyond its ability to maintain a system providing CLEAN water.

But you and your fellow critics willingly accept the problems of death and disease due to water problems if the solution involves taking money from people who consume water.

Meanwhile, there was not much money involved, even for Bolivia. Like I said, the poorer people were accustomed to stealing water from the richer citizens. But the upgraded water system that Bechtel and its partners provided was harder to steal from. Thus, the poor thieves protested.

Well, as you noted, the Bolivian government is the organization that put down the protests. The Bolivian government is also the organization that acknowleded its need for a better water system.

Anyway, after Bechtel and its colleagues were driven out, a suit was filed for $50 million. The suit was an attempt to recover the profits the company would have earned over the life of the 40-year contract.

In other words, $1.25 million a year. Not much, even for Bolivia. Thus, your claim that the Bechtel consortium was bleeding the country is lame.

Jess Wundrun said...

mr. energy- bechtel helped to write the law that allowed it to charge people for water that it did not even supply.

and the fact that Cochabamba citizens don't have clean water today is a very sad fact indeed, given that they paid more for their water than they did for their food to Bechtel and still wound up with nothing. You seem to gloss entirely over the fact that the problem arose when the World Bank insisted that they privatize their water supply. There were other options.

You do not understand the meaning of "The Commons" and I can not explain it to you.

This line is a complete fabrication on your part "Meanwhile, there was not much money involved, even for Bolivia. Like I said, the poorer people were accustomed to stealing water from the richer citizens. But the upgraded water system that Bechtel and its partners provided was harder to steal from. Thus, the poor thieves protested. Try not to make shit up, 'kay?

You know as well as I do that the money involved in the lawsuit has no bearing on reality. To claim that those were Bechtel's expected earnings is a farce and if you believe it you are as naive as the day is long. Do you recall that the pro-privatization camp also said that Iraq would pay for itself? Keep kidding yourself.

Besides, aren't we discussing Bechtel because you said that they AREN'T in the water business? You said they only build systems - remember?

Your sudden googling of the issue does not make you an expert.

mr energy said...

Jess, as I said, Bechtel, through its 27% position in the Bolivian water system was there to engineer, build and maintain the system. It was not the OWNER or the controller of the system. You don't seem to understand engineered systems. There is initial construction, expansion, maintenance and repair. That's what companies like Bechtel do. They don't own utilities. They work FOR utilities, among other activities.

Anyway, Bolivia has always been a poor country suffering from huge corruption problems and crime problems. If Bolivia had the engineering capacity to build a functioning water system, it would have done so.

But, like all of the idiocracies in the world, it cannot take care of itself. You obviously support the well established system of failure that guides the hand of the corrupt government in Bolivia.

As I said, there is no free lunch, despite your belief to the contrary. You have your notion of the value of water. But no organization in the world is stepping up to build a Bolivian water system AND then subsidize Bolivians to drink up, which is what your view demands.

CLEAN water is vital, and it is far from free. If the corrupt government of Bolivia converted itself into a functioning capitalist democracy, the lives of Bolivians would improve immensely in less than a generation. But as long as the clowns in charge stay in charge, the country will remain a mess.

As for Iraq, when the idiot muslims in Iraq stop destroying the oil infrastructure, Iraq will produce more oil than ever and the revenue will flow into the Iraqi treasury. Actually, this is already happening, but oil production is far far below theoretical capacity because the idiot muslims are cutting off their noses to spite their faces.

Oil is more than $120 a barrel. Every barrel NOT pumped in Iraq is $120 NOT flowing into the Iraq treasury. The only people opposed to all that money flowing into the Iraqi Treasury are some idiot muslims.

Maybe you can do the math. Iraq is producing around 2 million barrels of oil a day. But its fields are easily capable of producing 6 million barrels a day.

Multiply those numbers by 365 days a year and then by $120 to get an estimate of the penalty inflicted on Iraq by a few idiot muslims.

Jess Wundrun said...

mr. energy aka slappy da ho aka greenspan aka zogby: there is a place for utilities that are run under government auspices. They have served our own country well as they served the Roman empire's own system back in the day.

Try as you might, you cannot argue against the fact that what happened in Bolivia, what is happening in other third world countries, what they are trying to do here in our own country, is to sell existing infrastructure to corporations who then try to make a profit in an area that was formerly unimagineable to people as a profit -making enterprise.

You are the fucking idiot. You don't understand that the World Bank and the IMF can't exist unless they CREATE corrupt governments. You are prepared to blame corruption, or tin-horn diplomats or what have you, but you naively wander about pretending that our own government isn't creating these corrupt governments.

And, like every other argument you make, which I will no longer engage in because you are the most extreme fucktard that has ever been allowed to pass the first grade, god forbid, you argue against yourself.

The way to American security is to decrease demand. The way to decrease demand is not to try to STEAL it from Iraqi territory or from Americans, in our own pristine national territorties. In 200 years American citizens who have NO oil, even according to your beliefs will wonder why people of your limited intelligence, greedy scope and hateful misogynistic credo were listened to at all.

You will be as forgotten as a Tory.

"idiot muslims" I confess, once again I didn't read your crap-filled scree on my own website (where's yours? Oh, that's right, you had one, but nobody cared to read your crap. So sorry your moronic ramblings couldn't even attract your own mother.) but I do see it in the line above this box.

You seem to forget that we invaded their country. That we inflicted 1 million deaths and far more casualties. That we STILL can't provide potable drinking water to the extent that Saddam Hussein could. Yeah, their the idiots.

I only wish you could imagine what your reaction would be if our own country were invaded.

Look, I patiently let you come back here saying that you need to behave yourself. I admit that you've done slightly better than you have in the past.

But you are a colossal waste of my time.
You are an idiot who provides the answer against yourself in any screed. But you're too fucking stupid to see it when you write it.

In my next incarnation, I hope I get better trolls than you.

I will, once again, delete your crap. Had to be done.

no_slappz said...

Jess, as ever, you show a total absence of knowledge when it comes to every issue of economics, finance and business.

When you engineer a power-generating facility that can produce and deliver power at rates acceptable to you, please share your design with every utility company in the US. It would bring you considerable wealth. Everyone -- including the utility companies -- is desparate for power systems that meet your standards.

Jess Wundrun said...

No, what I have is a total disdain for what you believe to be your own understanding of these issues.

You haven't even caught on that "price" has never been a part of my argument.

See what I mean? You still don't grasp what we are talking about.

Further, your idea that new technology will destroy the economy seems to be contradicted by this: "It would bring you considerable wealth."

Absolutely the point, buddy boy. So you agree that the future will belong to those who don't think in the old ways. And fortunately, you've included yourself among them. And we need government assistance to realize those new technologies.

John Kerry called it an "Apollo Project". Fitting I think, given that under two democratic presidents we managed to achieve a space program that put a man on the moon in ten years. Private industry is still struggling to get there.

And, why are you ashamed of yourself to the point that you need to create a new persona for each post? Mental illness?

Just wondering.

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