In my opinion Prop 87 is good for California and good for the country. We have an energy crisis, a climate crisis, and a terrorism crisis all of them tied to oil. We need to do something and do it now. If you agree with the discussion below (and a series of subsequent and previous posts) please email a link to this blog to ten California voters and ask them to email to ten others.

As Tom Freidman put it in the New York Times: “Here’s the basic story: This Nov. 7, Californians will be asked to vote yes or no on Proposition 87, a ballot initiative that would impose a higher extraction fee on oil pumped in California. (Up to now, oil companies in California have paid a very low extraction fee compared with those in other states – a rip-off they want to keep.) The new funds raised by Prop 87, explained the San Francisco Chronicle, “would be used to finance research and development of alternative fuels in universities; education campaigns; and subsidies to consumers who buy vehicles that use alternative fuels and businesses that produce and distribute alternative fuels. … Oil companies would be taxed between 1.5 percent and 6 percent on oil production depending on the price of oil per barrel. The tax would end by 2017 or when the tax generates $4 billion, whichever occurs first.”

In one state (California) they have raised almost $90 m (the last Presidential election each candidate spent about $125 million in all 50 states!) to spread their mis-information. Money can buy a lot and they are buying it. Part I talked about why gas prices won’t go up. Part II talked about how and why prices for gasoline will decline. I discussed unfair, maybe unethical if not illegal tactics in Part III. What about the costs to society? Health costs, defense costs, foreign policy costs, and other costs? That is Part IV.

There are benefits to be had from freedom from the oilie stranglehold.
Ninety percent of Californians live in areas that fail to meet federal air quality standards. San Joaquin valley is mostly farm and rural areas and yet 1 in 5 children have asthma. The American Lung Association is supporting Prop 87 because the use of gasoline causes asthma and lung diseaseDid you know that volatile organics can constitute as much as 50% of the gasoline? President Bush’s (Sr.) former White House counsel Boyden Gray, has written extensively about the dangers of these volatile organics in the Texas Law Review. He among many other Republicans support the switch to alternative fuels like ethanol.

The American Cancer Society lists benzene’s (from gasoline) link to leukemia and other cancers on its website as a Group I carcinogen (Carcinogenic to Humans) . Two components of gasoline, benzene & butadiene top the list of the most dangerous air borne carcinogens by the EPA. The top six polluted counties in the country are in California – Riverside, San Bernadine, Los Angles, Tulare, Kern, Fresno. It is difficult to asses the healthcare cost of gasoline and oil consumption but it sure runs into the tens of billions of dollars. And do the oil companies get to pay for this out of their hundreds of billions in profits? No. Consumers get to pay hostage prices for oil and also get to pay for the health care costs, lost wages from illness and with real lifestyle damage.

But do the oilies care? Or does the damage stop here? When lead was phased out as an octane booster for gasoline the oil companies had a choice of a fuel oxygenate. They picked MTBE and have continued to use it despite it polluting our groundwater. They could have picked ethanol, a safe additive that people have been drinking for pleasure for thousands of years. But the oil companies could manufacture MTBE but they did not make as much money on ethanol. Guess what they picked as an additive? Groundwater pollution and consumer health be damned? What were they thinking? Now that they are facing significant liabilities from the ground water pollution with MTBE they are trying to limit it’s use and trying to influence peddle their way out of this liability . They are attempting to promote legislation to exempt or shield them from this liability.

But the costs of oil use don’t stop at health. As ex-Director of the CIA, Jim Woolsey (and a big supporter of alternative fuels like ethanol) likes to say, we are financing both sides of the war on terror. We send billions to the mid-east and it goes to fund terrorists. Almost a billion dollars a day goes to the murky mid-east, terrorists, oil sheiks, Iran’s nuclear program (they have almost no other viable business to fund its activities), Iraq (not counting the hundreds of billions we have spent on the war).

In a recent report by the non-partisan Council on Foreign Relations states that “energy dependence is undercutting US foreign policy”. It goes on “Russia, Iran, Venezuela are able to leverage energy to pursue their geopolitical objectives” and makes clear that we “cannot drill our way out of this problem” and that “biofuels have significant potential”. US Senate Foreign Relations Committee Chairman Dick Lugar calls for dramatic and immediate action to address U.S. energy vulnerability because of six threats from energy dependence. According to him any of the six could be a source of catastrophe for the United States and the world. He goes on to say that our failure to act will be all the more unconscionable given that success would bring not only relief from the geopolitical threats of energy-rich regimes, but also restorative economic benefit.

Do you think the oil interests are in a hurry to create alternatives to the fuels or help with efficiency improvements to reduce gasoline consumption? We need Prop 87 to do that.

Do you believe Al Gore, Bill Clinton, Senator Feinstein and Los Angeles Mayor Villaraigosa, (all unpaid)? Or do you believe the oil companies and their “bought endorsers”?”

As Tom Freidman says: “Passage of Prop 87 would be huge”. Vote Yes on 87!

In my opinion Prop 87 is good for California and good for the country. We have an energy crisis, a climate crisis, and a terrorism crisis all of them tied to oil. We need to do something and do it now. If you agree with the discussion below (and a series of subsequent and previous posts) please email a link to this blog to ten California voters and ask them to email to ten others.

As Tom Freidman put it in the New York Times: “Here’s the basic story: This Nov. 7, Californians will be asked to vote yes or no on Proposition 87, a ballot initiative that would impose a higher extraction fee on oil pumped in California. (Up to now, oil companies in California have paid a very low extraction fee compared with those in other states – a rip-off they want to keep.) The new funds raised by Prop 87, explained the San Francisco Chronicle, “would be used to finance research and development of alternative fuels in universities; education campaigns; and subsidies to consumers who buy vehicles that use alternative fuels and businesses that produce and distribute alternative fuels. … Oil companies would be taxed between 1.5 percent and 6 percent on oil production depending on the price of oil per barrel. The tax would end by 2017 or when the tax generates $4 billion, whichever occurs first.”

Part I talked about why gas prices won’t go up. Part II talked about how and why prices for gasoline will decline. I was hoping to discuss in this Part III the health and environmental costs of oil but Chevron announced financial results last week and in the opinion of people I respect was two faced and fraudulent about it. Fraudulent is a strong word, especially coming form somebody who is usually careful about word choice.

According to press release by the Yes on 87 campaign, Chevron confirmed Prop. 87 will not reduce California oil production, which is the cornerstone of the oil companies’ misleading campaign ads. With this admission, Chevron CFO Steven Krowe declared that Chevron expects to continue at least current levels of oil production in California after Prop. 87 passes. In announcing its $5 billion third quarter profits, Chevron’s CFO said “we could see at current prices and current production levels a penalty on Chevron in the order of $200 million.” Chevron then issued a subsequent statement denying it said that Prop 87 would have no impact assuming current prices and production levels. Whatever they said, it is clear the oil industry has been on a massive mis-information campaign. During the summer with peak oil prices they kept insisting in full page ads in major national newspapers that world oil prices determine gasoline prices and they have no control over this. Today they are saying exactly the opposite in California, except when the truth inadvertently slips out. Saying they will cut production in California in public statements would be fraudulent if they did not intend to. You be the judge.

In one state they have raised almost $90 m (the last Presidential election each candidate spent about $125 million in all 50 states!) to spread their mis-information. Money can buy a lot and they are buying it. The Los Angles Times recently said “The oil industry, fighting the Proposition 87 oil tax, has paid $35,000 to Aaron Read. Read heads one of Sacramento’s top lobbying firms, representing police and firefighters unions. Police officers and firefighters are featured prominently in the No-on-87 campaign” .It went on “ Police and firefighters have received more than $220,000 for being featured prominently in both the No-on-86 and No-on-87 campaigns. One reason may be that lobbyist Read represents many public safety unions.” My understanding is that the California Chamber of Commerce was paid $345,000 to endorse the No on 87 campaign.

Proposition 87 has been endorsed by former President Clinton and former Vice President Al Gore. Senator Feinstein and the American Lung Association have all endorsed it. None of them were paid. Nobel Prize winning Stanford economist, Prof Paul Romer, has blogged about the fact that there should be no noticeable impact on gasoline prices but that voice, unpaid, has been drowned out by the chorus of heavy spending on slick oil ads on economists stating otherwise. You can decide if it is likely that many of these economists were paid. Reasonable people can disagree on this tax but money should not be able to buy these opinions. Economist Greg Mankiw, former Chairman of President Bush’s Council of Economic Advisors, does not like Prop 87 because it does not raise gas prices. Alan Greenspan also wants higher oil prices. Well known energy economist Severin Borenstein discusses it plusses and minuses. But paid opinions are something we should rebel against.

It is offensive and dis-heartening to see how the oil money is being used. Tom Friedman said in his op-ed piece in the New York Times recently “Up to now, oil companies in California have paid a very low extraction fee compared with those in other states a rip-off they want to keep.” When the tragedy of Katrina happened the oil companies were able, with their vast campaign and lobbying contributions, to push to get $7 billion form the relief funds. An oil severance tax has been tried in the California assembly starting in the 1950’s by then Governor Brown and more recently by the current Mayor of LA, Mayor Villaraigosa when he was in the assembly. But campaign contributions and lobbying backed by billions of dollars of clout wins out every time. The oil companies manage to get out of paying their fair share. One energy company (Peabody Energy) actually spends almost 5% of its revenue on lobbying almost nothing on research. What?

One of the most revered and old British scientific Societies, the Royal Society which counted Isaac Newton and Albert Einstein as members, accuses Exxon of “misleading and inaccurate” information about climate change by financing groups that misinform the public on this issue. Exxon had pledged to stop giving money to such groups that spread misinformation the society considers misleading. That is a clear admission that they are spreading mis-information. Recently Senators Rockefeller ( D) and Snowe ( R ) said that ExxonMobil’s extensive funding of an “echo chamber” of non-peer reviewed pseudo-science had unfortunately succeeded in raising questions about the legitimate scientific community’s virtually universal findings on the detrimental effects of global warming. Is it a surprise that they gave Stanford University over $50 million and the funded group is very kind to Exxon’s views? Even a university can be bought. It just takes more money and the oilies have enough.

According to the Sept 21, 2006 NY Times front page, four government auditors in lawsuits claim they were blocked by their bosses in the interior department from pursuing fraudulent underpayments on oil and gas leases. Money can buy anything! Even government policy or immunity. And luckily oil prices have declined just before the election. Are you intrigued by the timing? Luckily for whom? Do you see a pattern of behavior here?

In my next blog, Part IV, I will discuss “extensive health and environmental costs of oil”.
Do you believe Al Gore, Bill Clinton, Senator Feinstein and Los Angeles Mayor Villaraigosa, (all unpaid)? Or do you believe the oil companies and their “bought endorsers”?”
As Tom Freidman says: “Passage of Prop 87 would be huge”. Vote Yes on 87!

In my opinion Prop 87 is good for California and good for the country. We have an energy crisis, a climate crisis, and a terrorism crisis all of them tied to oil. We need to do something and do it now. If you agree with the discussion below (and a series of subsequent and previous posts) please email a link to this blog to ten California voters and ask them to email to ten others.

As Tom Freidman put it in the New York Times: “Here’s the basic story: This Nov. 7, Californians will be asked to vote yes or no on Proposition 87, a ballot initiative that would impose a higher extraction fee on oil pumped in California. (Up to now, oil companies in California have paid a very low extraction fee compared with those in other states – a rip-off they want to keep.) The new funds raised by Prop 87, explained the San Francisco Chronicle, “would be used to finance research and development of alternative fuels in universities; education campaigns; and subsidies to consumers who buy vehicles that use alternative fuels and businesses that produce and distribute alternative fuels. … Oil companies would be taxed between 1.5 percent and 6 percent on oil production depending on the price of oil per barrel. The tax would end by 2017 or when the tax generates $4 billion, whichever occurs first.”

My last post talked about why gas prices won’t go up. Here I want to talk about how and why prices for gasoline will decline.

Given the current oil situation the ONLY way oil prices will go down is if we have alternatives to oil. In my opinion the alternatives exist today but the oil interests don’t want us to have them. Given the massive profits they make on oil they wouldn’t want a cheaper alternative in the marketplace. That is fair except if they use unfair means to perpetuate their stranglehold. It is also unfair if they use their political clout to wrangle billions of dollars of subsidies from American taxpayers. And they often make us pay for their R&D. “California drives have few alternatives to driving and oil companies are fully prepared to use this leverage to increase their profits to new record highs” says Jamie Court, Foundation for Taxpayer Rights and Consumer Rights.

The world use about 12 billion gallons of ethanol today. If that was removed form the market oil prices would spike up. If we produce more, oil prices will decline as supply increases. For the last thirty years R&D in energy has been declining. A hugely profitable company like Exxon spends 0.2% of its revenue on R&D and most of that is directed towards finding or extracting more oil. A few token projects to “sound green” are thrown in but almost no money goes into finding real alternatives to oil. Even the small technology oriented Silicon Valley company can spend 20% of its revenue on R&D. Isn’t it time we had a policy of more research and innovation in energy? Prop 87 directs significant funds to University-based research in energy alternatives. This is the only way we can and will get alternatives to oil and reduced oil prices and.

California recently passed Assembly Bill 32. It mandates that by 2020 we reduce our carbon emissions to 1990 levels. If we continue using fossil fuels and don’t find alternatives (both cleaner sources as well as efficiency improvements) we will end up with punitive taxes on all fossil fuels. Without alternatives we will be paying a lot more for gasoline. Prop 87 will create both more alternatives to oil and reduce its consumption by helping finance efficiency improvements. It will help finance alternative fuel vehicles like flex fuel cars and plug-in hybrids, reducing petroleum consumption.

A Saudi sheik is often quoted as having warned decades ago that the stone age did not end for the lack of stone. What is not reported is that he went on to say that “technology is our enemy”. Why? Because technology can create alternatives. And Prop 87 will help rush technologies and alternatives to market. Maybe, finally the consumer will have a choice – including a choice to not buy gasoline. To get real choices we need vehicles capable of alternative fuels. But we won’t get vehicles capable of alternative fuels until we have the fuels. And we wont have fuels till we have vehicles. Prop 87 will help solve this chicken and egg problem. And we will get choices. Already Richard Branson, who has committed a 100% of all profits from all his transportation businesses, estimated to be $3 billion over ten years to clean energy investments, has said he would invest a lot more of that money in California if Prop 87 passes. He has talked about opening Virgin Fuels, a renewable fuel brand. This extra investment will help increase competition and reduce prices for gasoline in a permanent way.

The oilies are scare mongering with their massive dollars. Many of them don’t want us to stop being hostage to oil. President Clinton has said ethanol is 33% cheaper. I know it is cheaper to produce, even with the subsidies oil currently manages to get.

In my next post, Part 3, I will discuss “extensive health and environmental costs of oil”. Later I will address the unfair oilie tactics, and the benefits to be had from freedom from their stranglehold.

As Tom Freidman says: “Passage of Prop 87 would be huge”. Vote Yes on 87!

In my opinion Prop 87 is good for California and good for the country. If you agree with the discussion below (and a series of subsequent posts) please email a link to this post to ten California voters and ask them to email to ten others.

As Tom Freidman put it in the New York Times: “Here’s the basic story: This Nov. 7, Californians will be asked to vote yes or no on Proposition 87, a ballot initiative that would impose a higher extraction fee on oil pumped in California. (Up to now, oil companies in California have paid a very low extraction fee compared with those in other states – a rip-off they want to keep.) The new funds raised by Prop 87, explained The San Francisco Chronicle, “would be used to finance research and development of alternative fuels in universities; education campaigns; and subsidies to consumers who buy vehicles that use alternative fuels and businesses that produce and distribute alternative fuels. … Oil companies would be taxed between 1.5 percent and 6 percent on oil production depending on the price of oil per barrel. The tax would end by 2017 or when the tax generates $4 billion, whichever occurs first.”

He goes on “Naturally, oil companies like Exxon Mobil – which just paid its outgoing chairman, Lee Raymond, $400,000,000 in his final year – are financing misleading ads to try to fool Californians into rejecting Prop 87”. Oil companies, led by Chevron and Aera Energy, an operation of Shell and ExxonMobil affiliates, have poured $73 million so far into defeating the measure, claiming that it will raise gas prices at the pump. They are using all those dollars, the most expensive campaign in the country, trying to scare consumers into believing gas prices will go up.

So why won’t oil prices go up?

(1) Oil companies have been saying world oil prices determine gasoline prices (even if one forgets the no pass through provision in Prop 87). They have run full page ads in the New York Times claiming they cannot control these prices. There is no way California production costs affect world oil prices in any material way. $400 million per year in fees in a greater than a trillion dollar market will make prices go up? How stupid do they think we are? And they are happy to talk out of both sides of their mouth. They are not responsible for world oil prices and yet world oil prices will go up if there is a fee in California. A Nobel Prize winning economist told me that he did not see how this fee would make a noticeable difference in oil prices. University of California energy economists have arrived at the same conclusion and neither got paid to arrive at this view. I suspect many oil company validators have had incentives to agree with the oilies.

(2) No pass through would be the law. If oil companies try to pass through this fee to consumer they will be breaking the law. But the oil companies keep scaring people into thinking they will break the law and pass it on anyway. Free markets will ensure, as described above, that they cannot even if they try to.

(3) At recent oil prices and expected future prices the fee will be in place much shorter than the maximum ten years that is allowed. This is too short a period for oil investments to change especially given they will all know that the fee is going away soon. Oil companies don’t make investments for a few years only generally.

(4) The real deal is that each dollar invested in alternative energy is much cheaper in “oil production” than the dollar that wont be invested in oil production. Chevron’s much touted Tahiti oil field will cost $4 or so for each gallon of capacity. The same investment would produce many times more ethanol capacity as a cleaner renewable fuel for the same capital investment. But the oilies will do everything to avoid investing in an alternative that loosens their stranglehold on our transportation fuel needs. And they make a lot less money if we get a cheaper fuel!

(5) The opponents assume that a 100% of that fee will go into drilling for new oil and if there was a fee the projects will not get funded. What % of the oil fee savings will go into digging new wells anyway? And even if there was a fee would they not do the project if there was a $3 fee and it cost them $18 to produce oil (as oil does roughly in California) when they can sell it for $50 or so? As for marginal wells there are special provisions in the initiative to exempt wells called stripper wells. Do they ever talk about that? Have they stopped producing in any of the states with much higher fees than are proposed in California? And why is California the only major oil producing state where they don’t want to pay a fee? Is that fair? Or is it that their massive campaign contributions always let them get their way?

(6) Most importantly, prop 87 will reduce the demand for oil by creating oil alternatives like biofuels and reducing oil consumption through efficiency improvements like hybrid cars. The Rocky Mountain Institute has estimated that it costs $16 to save a barrel of oil while it costs about $60 to buy one at today’s prices. But would an oil business like this reduction in consumption? There are cheaper alternatives the oil companies prefer we did not have because it would reduce their profits. In my opinion this fee invested in efficiency and production of alternatives produces much larger returns and far greater reduction in the demand for oil than the same dollars invested in producing oil.

The oilies are scare mongering with their massive dollars. Many of them don’t want us to stop being hostage to oil. The American Petroleum Institute is constantly lobbying against alternatives. How do we stop them? If they thought they could pass the fee on to consumers would they be spending all this money to avoid the fee?

How do we get the cheaper, greener, more diverse fuels that are available but ones they will impede. President Clinton has said ethanol is 33% cheaper. I know it is cheaper to produce, even withteh subsidies oil currently manages to get. Why not have some fair competition?

Before I got involved with prop 87, I tried to see if there was anything material the oil companies would commit to do without an initiative, anything at all. They approached me to not get involved. I got lots of sweet talk and no real interest in anything that would make a difference on this critical issue. So here I am. In my next blog I will discuss “THE ONLY WAY WE GET LOWER PRICES FOR GAS”. Later I will address the health care costs, the unfair oilie tactics, and the benefits to be had from freedom from their stranglehold.

As Tom Freidman says: “Passage of Prop 87 would be huge”. Vote Yes on 87!