Mark McHugh

The Extraordinarily High Cost of Pseudo-Capitalism

In Open Thread on Thursday, March 8, 2012 at 12:24 pm

Before we empty the SPR or start WW III, Americans should recall that basic arithmetic is our greatest enemy .  A barrel of oil from Saudi Arabia contains 5.9 million British Thermal Units (BTUs), so at the recent price of $120/barrel*, the price per million BTU is $20.34.  Nymex natural gas is already priced per million BTU, and as of this writing the spot price is $2.21   This means Americans now pay over 9 times more for foreign energy than the domestic alternative.  This is just one reason why the “recovery” Wall Street and Washington are always chattering about feels more and more like a death spiral on this side of the rainbow.   Too bad cars don’t run on natural gas, huh?  Turns out they do, but first let’s explore why I’m picking on Saudi Arabia.

We are going to have to deal with energy because we can’t keep on borrowing from the Chinese and sending money to Saudi Arabia. We are mortgaging our children’s future. We’ve got to have a different energy plan.

~Barack Obama

Presidential debate, October 7, 2008

The outstanding balance on your kids’ mortgage is up 51% ($5.2T) since those words were spoken.  The US Government owed China $587B then.  Three years later, that debt more than doubled to $1.27T and the only reason it isn’t even higher now is because China has lost its appetite for US paper.  Although the US has decreased the amount of oil imported from Saudi Arabia in recent years, it is  still America’s second biggest supplier (Canada is #1) and prices paid have more than quintupled in the last decade (the average price in 2002 was $22.81).  Just to drive home the point: Natural gas is 40% cheaper today than Saudi oil was ten years ago.

“The next time you hear some politician trotting out some three-point plan for $2 gas you let him know we know better. Tell him we’re tired of hearing phony election year promises that never come about.”

~President Barack Obama

March 7, 2012

(Thank You, Jesus)

Obama made those juicy remarks yesterday regarding Presidential hopeful Newt Gingrich’s assertion that high gasoline prices are a “direct result” of Obama’s energy policies.  Loathe as I am agreeing with anything coming out of Moon Base’s pie hole, he’s right.  When you spend most of your time completely ignoring your most viable option, bad things tend to happen.  Go ahead, see if you can find a video clip of the President talking about developing natural gas in the first two years of his administration (pack a lunch).  There’s more than 13 million vehicles worldwide running on natural gas, and less than 1% are in the United States. 

Fun Fact:  According to the World Policy InstituteIran is the World leader in natural gas vehicles, with 2.86 million NGVs as of November 2011.  

Meanwhile back in the land of PT Barnum, the Chevy Volt is cementing its reputation as the WTF product of the 21st century (and I don’t mean “Winning The Future”).  On March 4, 2012 General Motors suspended production of the Turd Volt due to poor sales.  The Volt would be a national disgrace if it could be called an “American” car with a straight face, but I won’t spend any time trying to convince you of that.  Simply google the exact phrase “Chevy Volt sucks” and you will find 10,900 results to explain it in agonizing detail.

Since 1998, Honda has been making a compressed natural gas (CNG) version of its popular Civic model in East Liberty, Ohio (’98 – ’08) and Greensburg, Indiana (’09 – present), called the Civic GX.  It has been the only natural gas passenger vehicle produced and sold in the United States and although it’s won tons of awards, including “Greenest vehicle of the year” eight years in a row by the American Council for an Energy-Efficient Economy, most of us have never seen one.  Why? Because there are less than 400 CNG stations open to the public in the country.

The Civic GX isn’t without drawbacks.  It has less responsive acceleration, reduced trunk space, and you can’t commit suicide by running it in a closed garage because its tailpipe emissions are often cleaner than ambient air.  Googling the exact phrase “Civic GX sucks” this morning produced this:

 

WMDs, again?

Of course I speak of “Weapons of Mass-media Distortion.”   If you listen to CNBS today, you’ll get the impression that cars running on natural gas is a brand spanking new idea, and that GE is racing to develop a CNG home-filling station (something Honda began offering in 2005).   GM and Chrysler say they will have engines that will run on both gasoline and nat gas by year’s end!  Neato, but Iran’s ICKO started producing dual-fuel engines in 2009. 

At this point you have all the information you should need to determine if the American energy policies of the last decade have helped or hurt working Americans, and if those policies,  or lack thereof,  were the product of greed and corruption or the fact that our elected officials are utter idiots.  No matter what your opinion, we are here and it is now, so here’s a much more important question:  Why doesn’t the US Government step in and buy natural gas futures and options?  In doing so they could put a cap on energy prices for years to come and create millions of  jobs while transitioning  to a more sensible energy policy.  Stable prices and maximum employment (does that ring a bell?).

They won’t.  They’ll say, “It’s not the government’s place to interfere in the free market.”   Really?  The same government that spent $170B last year propping up the housing market to keep big banks solvent doesn’t like interfering?  $100B+ in student loans to keep education over-priced and young people in debt doesn’t count?

The cruel nature of capitalism is supposed to kill stupidity, by sending the misguided to the poorhouse and the criminal to the jailhouse, yet time and time again, we have seen the natural outcomes of capitalism deemed “unacceptable” by our politicians.   The US Government and/or the Federal Reserve rushed in with trillions of other people’s money to rescue Countrywide, Bear Stearns, Merril Lynch, AIG, Goldman Sachs, General Motors, General Electric, Citigroup, Wachovia, Bank of America, Morgan Stanley and JP Morgan from the fate they rightly deserved.   Yet when faced with the opportunity to help ordinary Americans, create millions of jobs and move the nation toward energy independence, all of a sudden, they’re laissez-faire?  

The Obama administration recently accused Iran’s elite of profiteering  “on the back of the average Iranian” regarding imposed US sanctions.  I guess our government would know an awful lot about that sort of thing….

Hopefully you’re beginning to understand just how expensive pseudo-capitalism is.

 

 

 

Data Sources:

US imports from Saudi Arabia:

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTIMUSSA1&f=M

Imports from all countries:

http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_m.htm

Most recent “top importers”

ftp://ftp.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

 Gross Heat Content of Crude Oil by Country, Most Recent Annual Estimates, 1980-2007

 www.eia.gov/international/RecentGrossHeatContentCrudeOil.xls

Natural Gas Prices:

http://www.eia.gov/dnav/ng/hist/rngwhhdm.htm

 Note: Prices actually paid for Saudi oil are based on the Argus Sour Crude Index, which is almost as elusive as the Argus Apocraphex (stifle your curiosity unless you have an hour to waste). 

http://www.cmegroup.com/trading/energy/crude-oil/argus-sour-crude-index-financial_quotes_settlements_futures.html

 Debt to the Penny:

http://www.treasurydirect.gov/NP/BPDLogin?application=np

 

  1. Very good article, I’m glad to find your site. I get a monthly natural gas check from a well I have an interest in and have watched my check get smaller as oil has gone through the roof. Why won’t anybody mention this? I feel like I’m taking crazy pills.

  2. Thanks for the comment Charlie. I am all too familiar with that “Crazy pill” feeling.

    Like I state at the beginning, it really only takes a teeny bit of math to totally confuse most Americans. So most have no clue how much more expensive oil is vs Nat Gas. To me, it boils down to only two possibilities: A completely failed energy policy (and even “completely failed” really doesn’t adequately describe it), or it is the deliberate product of a corrupt government trying to destroy its own people. I think I made my feelings clear in the article.

    You’re right about no one wanting to discuss it either. Most of my articles get picked up in other venues, but not this one. When I wrote it I realized this article reads like a total hit piece on Obama (I assure you, I’m an equal opportunity hater), I thought the conservative propagandists would run with the story, but they haven’t. Sure they’ll bitch about gas prices, but they’re not interested in discussing motives or solutions.

    Destroying the American middle class is the prime objective of both parties. That’s why they waste their time arguing about who’s a slut, etc. Just a sideshow to distract us from the shackles.

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