Mover Mike

How do you answer the question my friends asked, "What's wrong with Socialism?" I don't have a canned elevator spiel on the problems, but I was reminded of the question today. I received am email from NewsMax.com with the headline of a story: Ethanol Boom Could Boost US Natural Gas Prices. I have posted about ethanol before, here, and I was interested in the subject.

You will recall that the meddling began as the government "offered farmers millions of dollars in incentives to produce the fuel in an attempt to cut imports of foreign oil." Interfering in the market is where the problems began. Besides the inefficiencies of ethanol in our cars, using corn began to have an effect on corn prices as we consumed food for fuel. Higher prices for corn are great for farmers, but already Mexican peasents are feeling the price impact on corn prices for corn-based foods.The article states that "farmers this year are planning to plant a bumper crop of corn, possibly the most since World War II. Corn fields consume large amounts of fertilizer, the ammonia of which comes from natural gas." In addition, 78 ethanol plants are under construction and seven undergoing expansion. "If all the new plants and expansions come on line, total capacity will be above 12 billion gallons per year, according to the Renewable Fuels Association.

Up to 95 percent of U.S. ethanol plants use natural gas boilers"

So now the government's meddling has created two new demands for natural gas and demand causes the price to go up if supply is limited. Which it is. Here's a chart of Natural Gas (see chart). You can see that the price has been contained under $8.00 for most of 2006 and 2007. It appears to me that it is getting ready to move back to the $10.00-$12.00 area. Here are some of the uses for Natural Gas:

Furnaces
Pool and Spa Heaters
Clothes Dryers
Outdoor Lights
Barbecues
Water Heaters
Stoves/Ranges
Fireplace Logs
Patio Heaters and Fire Pits

When winter comes and the poor can't pay for the higher prices of natural gas, who do you suppose is going to pick up the tab?

Here's another problem, production of natural gas peaked in 1970, despite higher prices and increased drilling:

The six largest countries in order of Proved reserves (trillion cu ft)of Natural Gas are

1. Russia 1,680
   Iran 971
   Qatar 911
   Saudi Arabia 241
   United Arab Emirates 214
   United States 193

Seems to me the end result is heavier demand and greater reliance on the very countries that we swore we would cut imports of foreign oil.

Socialists turn to government to solve short term problems and don't bother to think of the long term consequences. What happens if corn-based products go up in price? Socialists want to step in and subsidize or tax or resort to price controls.

Ethanol is a boondoggle. It is bad for the environment, bad for our cars and bad for our pocketbooks. If the government would stay the hell out, we would see higher prices for oil and gas which in turn would inspire creative solutions, like Zero Point Energy applications. More on that later.

Socialism Natural Gas Ethanol Corn fertilizer Mover Mike

James Turk writes that the Dollar is in freefall and uses this chart as evidence:

I don't know if you can have a head-and-shoulders formation that spans 14 or 15 years, but breaking 80 would sure be ominous. Meanwhile gold and silver in terms of the USD look like "up" is a long ways away.

USD James Turk Mover Mike

Driving around North and Northeast Portland, I'm seeing gasoline at $3.41. Today on The Oregonian's front page we have the story of the misery caused by high gas prices in For some, gas tank is half empty. In it we get stories of people making choices between food and gasoline or pills and gasoline. And once again we read about the effect of high gasoline prices on contractors and mowers of lawns.

I checked in on the chart of gasoline prices over the last two years and I wasn't surprised to see prices hit their peak in April of last year and stayed high through July before faling 50% to a bottom this past January. If history repeats expect high prices for the next three months, the driving vacation months.

The real point of The Oregonian article, it seems to me, is to generate sympathy for the poor inviting some form of government subsidy. Politicians will see the problems and want to resort to windfall profit taxes, wage and price controls and/or subsidies (robbing Peter to pay Paul). Higher prices should force changes in behavior. In the article

Shawn McLendon earns about $1,300 a month as a YWCA case manager who helps battered women find transitional housing. She drives all over Portland in a gas-guzzling 1977 Cadillac Concours, but she managed to stretch her money enough to cover expenses and a few extras when gas hovered around $2.50 a gallon.

Woiuldn't it be cheaper for McLendon sell her car and buy a car or Vespa and get twice the gas milage and have fewer operating expenses, not to mention EPA problems?

Erik and Peder Elder are contractors who say they would lose credibility if they drove to a jobsite in a fuel conserving pickup, but they don't lose face bumming $6 for gas from a client. Shouldn't higher prices force them to make changes so they can do their jobs in a more efficient manner. Why should we have to subsidize their choices?

If those predicting an oil supply tightening are correct, we will see higher prices for all things involving oil. We as a society need to talk about ways to lessen the effects on our poor and elderly, but not at the expense of allowing the market to work.

Gasoline Mover Mike

Speaking of the technology revolution, Stratfor points out that,

At a Brazilian ethanol conference June 4-5, Brazilian government-funded researchers said they have perfected a method of producing cellulosic ethanol that drastically reduces the cost of processing.

Cellulosic Ethanol comes from the part of the plant, corn for example, that is the part thrown away. You know I'm not a fan of ethanol, but consider

Cellulosic ethanol production has to first break up the cellulose. (Cellulose is polymerized sugar.) Though the price of doing that has dropped by a factor of 10 in the past decade, it is still around $2.25 a gallon.

Now the Brazilian process brings the price down to $.35 to $.50 a gallon. That could have a big impact on agrarian countries and could lessen the overall demand for oil for gasoline.

Ethanol cellulosic ethanol Mover Mike