Steve Lopez Myopia on Oil

FEB. 4, 2011

by JOHN SEILER

L.A. Times columnist Steve Lopez this week enthuses for bikes, buses and the potential of fusion power — and he attacks oil and gas-powered cars. I’m all for fusion power — when it gets here. But it’s not here now.

In the meantine, let’s look at some of Lopez’s fallacies:

* He writes:

I also wanted to meet with a UCLA student who had e-mailed me to say that he was ticked off about opposition to the proposed bus-only lane for Wilshire Boulevard. David Auerbach, a doctoral candidate who has no car and commutes by bicycle and bus, called the piecemeal scaling back of the bus plan “a great example of the typical L.A. governance.” He didn’t mean that as a compliment.

But most people in Southern California still drive cars, something that isn’t going to change. And how about allowing jeepneys, like they do in the Manila in the Philippines (pictured at right), and some countries in South America? They’re freelance transportation organized by small operators. But here, you’d have to defy the powerful government unions of L.A. bus drivers and other transportation workers.

Mexico in the Middle East?

* Lopez: “We don’t get much of our oil from Egypt, but we get it from a part of the world made more complicated by the events of the last week” — meaning the Middle East.

Actually, here’s the list from the Department of Energy on Jan. 28, 2011 of where America gets its oil imports. The number is thousands of barrels of crude oil barrels imported per day in November 2010:

Canada 1,975
Mexico 1,229
Saudi Arabia 1,119
Venezuela 884
Nigeria 806
Colombia 489

Last time I checked a map, Canada and Mexico were friendly neighbors. Lopez can check that out by driving south of L.A. about 200 miles. Venezuela is run by a pest, Hugo Chavez, but he’s not really a threat to the U.S. Nigeria and Colombia are friendly to us. That leaves longtime ally Saudi Arabia as the only Middle Eastern country in the Top Six export countries.

It could end up with a revolution like Egypt and Tunisia. But whoever might rule it would end up selling the oil anyway. Already, most Saudi goes to Japan and China. If there’s a disruption, it would be their headache.

Moreover, as I keep pointing out, oil today is a mature global commodity. Since World War II, the price almost always has been an ounce of gold = 15 barrels of oil. Today, as I write, it’: $1,334.22 for an ounce of gold and $90.92 for NYMEX Crude. That’s $1,334.22/$90.92 =  $14.67. Round it up to $15.

Bingo.

You don’t get many constants that accurate in economics or commodities.

What that means is that we’re not “running out of oil.” We don’t “depend on the Middle East” for our oil. And that even the recent turmoil in Egypt and Tunisia has had no impact on the price of oil.

The reason oil prices have risen is because gold has risen. And the reason gold has risen is because the. U.S. Federal Reserve Board’s “quantitative easing” — a euphemism for inflation — has reduced the dollar’s value. It’s similar to what happened during the 1970s, and we’ve got the same “malaise” now: stagflation — stagnation plus inflation. Click here to hear Rep. Ron Paul explain what’s happening in a YouTube audio.

Chriss Street warning

Moreover, as former Orange County Treasurer Chriss Street wrote on Jan. 30, 2011 on BigGovernment.com, it’s the “quantitative easing” itself that has caused the problems in the Middle East, by driving up the cost of commodities. Street:

that QE2 [Quantitative Easing, Part 2] money quickly drove up commodity food prices around the world. This price rise is barely noticeable to Americans who only spend 10% of their personal income on food for three meals a day; but the impact of food inflation is devastating the over half the world that spends approximately 50% of personal income on food for two meals a day. The 15% QE2 induced commodity food price increase has reduced the amount of food poor people can purchase by almost 1/3.

The riots and revolutionary activity burning down Tunisia, Yemen, and Egypt are about gut-level economics. Do you think Americans would riot and throwing out our government if we were forced to cut back to eating 1-1/3 meals a day? Once riots start people in cities hoard food to survive and becomes dangerous for farmers to transport food. This is exacerbates food shortages and drives prices even higher.

Street warns:

QE2 was like pouring inflationary lighter fluid on the world and then lighting a match. With food inflation now running at 15% in poor countries, the Middle East is just the first area to burn, but fire is smoldering in much of the world and other fires will break out soon.

* Lopez: “Our addiction to cars — and the oil they consume — complicates our role in a region with more than its share of corrupt and oppressive rulers.” No. It’s not an “addiction.” It’s a commodity, as I just showed. And cars are relatively cheap transportation. Just think, despite recent inflation, if your car gets 30 mpg on the freeway, you can travel from California to New York City for 100 gallons, or about $350. It beats a conestoga wagon.

Lopez:

But decades of irresponsible planning, half-hearted public transportation efforts and provincial interests have kept us riding alone in our cars, fuming about traffic and smog.

It’s true that planning has been idiotic. The building of the interstate highway system itself in the 1950s and 1960s meant stealing tens of thousands of people’s property through eminent domain and ripping up cities and neighborhoods. There were better ways to do it, as the Europeans have shown.

But we’re past that now. The roads are there. The best way to deal with coming traffic problems would be to privatize the roads — all of them. Begin with the “freeways.” Charge for use. That would reduce how often people “fume” in their cars.

The smog Lopez mentions is greatly reduced, and goes down every year.

Lopez:

Glen M. MacDonald, director of the UCLA Institute of the Environment and Sustainability, said alternative power sources like solar, geothermal and fusion energy are a long way from becoming practical and widely available. (And even when they are, they won’t solve our traffic problems).

But citizen uprisings in the Middle East have “got to be a wake-up call” for the United States, MacDonald said, because of the potential effect on global economic, foreign and energy policy.

Even though Egypt produces and controls access to only a small portion of the oil we import, MacDonald said, oppressed citizens of corrupt neighboring countries may feel emboldened and spawn their own revolutions.

“What if this really goes off the rails and we have movements sweep across the main sources of our oil — Saudi Arabia and the gulf states — and the regimes in their place are not friendly to us?” MacDonald asked. “We cannot control, and in some ways can’t even properly anticipate, what’s going to happen in some of those countries.”

No, but we can gradually wean ourselves from oil. We can vow to quit losing green jobs to China. And we can wake up and realize that energy independence, national security and environmental survivability are close cousins.

Again, our dependence on Mideast oil is low, as I showed above. And the price of oil remains stable, at close to 15 barrels / ounce of gold. The real problem is the Keynesian inflation obsession of Fed Chairman Ben Bernanke and President Obama (and, before them, by President Bush and Fed Chairman Greenspan).

Bike paths for national security?

Lopez even brings up China and the “national security” bugaboo. Well, the ChiComs, as we called them in Cold War days, now are capitalists only to happy to sell you solar panels — while the go gangbusters building coal-powered plants for their burgeoning industries.

And any “vow to quit losing green jobs to China” would involve more government intervention similar to the enviro-Maoist AB 32. There’s only one real way to “quit losing” jobs — green or otherwise — to China. And that’s to out-capitalist them.

In California, we need to cut taxes, cut regulations beginning with AB 32, and start treating businesses with respect — instead of as milch-cows for budget waste and guinea pigs for social experiments.

Maybe Lopez hasn’t noticed, but California now has the second highest unemployment in the country, at 12.5 percent and rising. You don’t bring that number down with more regulations and dreams of a fusion future.