How Terrible: Oil May Get Cheaper

The headline in USA Today shouted: "Iran deal boosts fears of global oil glut."

Of course, I had to read the story to see who was afraid and how serious this whole glut business could be. Surprise! The fearful are those who devote their lives to gambling on Wall Street, and apparently their concern relates only to the possibility the mega-oil companies of the world may see their profits, and thus their stock values, fall a bit.

Let it flow, let it flow, let it flow

Michael Cohen, an energy analyst at Barclays, was among the  fearful. According to Barron's, he said, "Iran's efforts to raise oil exports could not have come at a worse time, given the market's lingering oversupply."  He promptly was contradicted by other experts who pointed out that Iran is not in a position to immediately dump a billion gallons of oil on the world market.  It will take six months or more to gear up production, although some reserves have accumulated and could be released sooner.

Hey guys. Do any of you care about the effects on the folks who use oil products? I can't think of anything those of us who are forced to fill the gas tanks of our vehicles to survive in this modern world have to fear from stable or lower  prices.  I can think of several reasons for us to celebrate.

1. Lower oil prices may hurt economies of producers such as Russia, Venezuela, Nigeria, and Saudi Arabia, but they help net oil importers, including the U.S.  Lower oil prices make our companies more competitive. More important, they put extra dollars in the hands of consumers, and consumer spending drives most of our economy.

2. U.S. oil producers have been on a drilling and pumping spree since fracking technology made increased production possible. If world prices drop, some of that activity will stop or decline as it becomes too expensive. Problem? Heck no. Fracking can have very serious environmental effects.  If we need less of it, that is all to the good.

3. Unless our politicians are willing to accept continued deterioration of our roads and bridges, they must raise taxes, and the most convenient way is to increase existing per gallon taxes at the pump. Here in Michigan, even with a decidedly anti-tax legislature, our pols are flirting with a deal that would increase our tax by 34 cents per gallon by 1217.

The federal government so far has shown little interest in a tax increase, but it cannot support that position forever. The highway trust fund is unsustainable.

Of course, tax increases will reduce or eliminate the positive effect of lower oil prices on consumers, but at least they will not cut into our present spending power much, if at all. And we'll have a better and safer transportation infrastructure.

If benefits such as these promote fear, I would like to be terrified.

Taxing the Good Guys

That master of irony, Oscar Wilde, got off many good lines during his creative writing career. Perhaps best known is “No good deed goes unpunished.”

We are about to see good deeds by many Michiganders punished for no good reason if a bill now before the state legislature becomes law. The bill would raise registration fees for owners of hybrid and electric vehicles.

How crazy can our local law makers get? Apparently, some would ignore 40 years of national policy intended to replace gas-guzzling vehicles with more efficient models. The original idea was to reduce or eliminate our dependence on imported oil. A more important reason that has come into sharper focus

Less Woulld Be Better

recently is to reduce excessive consumption of fuels whose use contributes to air pollution and climate change.

Going to hybrid or electric vehicles has a big impact. Our family car gets relatively good gas mileage. However, we could do much better. I've done the math. If we replaced our aging sedan with a comparable Toyota Prius or Ford C-Max, we would double our gas mileage. 

Making that significant contribution to environmental quality would cost us about $5,000, the difference between the hybrid price and a gasoline-only auto with comparable features. People who own hybrids were willing to back their beliefs about environmental quality with cash, although they probably could recoup the investment with savings at the pump over the life of the vehicle.

I know several Prius owners (the C-Max wasn't sold in the U.S. until this year.) None bought their cars to save money. Every one of them made the purchase to help enhance the environment. Punishing them with higher taxes would be idiotic. 

A much better idea is to simply raise the tax on gasoline to get the increased road maintenance money we need. That would create a bigger incentive for millions of us to reduce our carbon footprints by “trading up” to one of the growing number of fuel-efficient vehicles on the market today. It also would reduce at least some unnecessary driving, and that would help, too.

Pothole Paranoia

This time of year we seem obsessed with potholes, often for good reason. I just returned from a short shopping trip, and spent most of the journey dodging about a dozen large cracks and crevasses in access roads and the state highway that covered most of the route.

Yes, we can fear them. I couldn't avoid one giant, deep pothole in a side street—cars were on either side of me as I turned onto the highway. Even at 20 m.p.h., the impact made me think both front wheels had separated from the car. Luckily, that didn't happen. However, a couple more jolts like that and the old family sedan will face a trip to a service station for an alignment, or worse, to straighten everything out. We had to do that last year following pothole season.

Local media are featuring potholes. Cartoonists are making fun of them in their creations. Potholes are very close (following comments about continuing bad “spring” weather) to being the No. 1 conversation starter when strangers meet.

The Governor of Michigan has proposed bold action. He wants to increase gasoline taxes and vehicle registration fees to raise more than a billion dollars earmarked for road and bridge reconstruction and repairs. At the rate the public is bitching about the condition of our highways and byways, one would think the Gov’s plan would carry the day with room to spare.  Not so.

Led by conservative legislators in Gov. Snyder’s own Republican Party, opponents of the proposal so far have succeeded in blocking it.  Some version may yet pass, but anything that smells like a tax increase is going to face a rough road (pun intended).

Recent opinion polls show a big majority of voters wants the roads fixed, but many don’t want to pay one cent in increased taxes to do the job. A number of trite sayings might apply here. “There’s no such thing as a free lunch,” seems to fit as well as any.