Energy the Big Tax Cut

Big Red Car here. Ahh, the ATX is going to be a bit chilly today but then back into the 60’s tomorrow and the rest of the week.

Hey, it is winter here in the ATX, right?

Have you been following the price of oil and gasoline?

You should be because it’s providing a big boost to the economy and maybe even world peace if we let it. First let’s take a look at a graph from Doug Short at Advisor Perspectives. The entire article is right here.

You really owe it to yourself to read it. This guy is brilliant and so comprehensive.

What this shows is that the background for everything related to energy right now is being improved by the lessening demand for gasoline even while the elasticity of the price of gasoline may be theoretically driving some phantom increased demand. Looking at sales on a twelve month moving average smooths things out and you can see the real trends stripped bare of seasonality, weather and timing. The demand for gasoline in the United States is decreasing and that is a good thing. This is the demand side of the equation.

The price side of the equation — look at the red curve above — is also very positive. Falling energy prices are beneficial for the economy. They lower the cost of everything and they leave the consumer with more money in their pockets not just from the lower level of direct purchases but also the lower cost of general transportation. Delta Airlines sees a $40MM savings for every penny decline in jet fuel. Wow!

This also means that now is the exact right time to fashion a coherent national policy something the Obama administration has been unable or unwilling to do. Here are some concrete things that should be done.

1. First, let’s acknowledge that the US has become the world’s largest producer of energy. This is due to such things as Texas, South Dakota, North Dakota and others drilling and producing more energy than ever before. Why? Enlightened state governance.

2. Thank you, fracking and directional drilling and oil shale. Can we get an amen here? Amen!

3. How about we build the damn Keystone XL pipeline?

4. How about more Federal lands being held out for bids? This enrichs the Federal coffers at a time we can use the revenue, right? How about sorting things out offshore New Jersey, Virginia, California and the eastern Gulf?

5. How about four or five new refineries being permitted in the US?

6. How about removing the hysteria from nuclear power?

7. How about rescinding the prohibition against exporting crude oil from the US?

All of these things done together have the potential to deliver gas at the $1.50/gallon price range. Talk about another shot in the arm for the American economy and jobs?

We will also become less prone to see our fate in the Middle East as dictated by oil gunboat politics. The Straits of Hormuz will become a trivia question answer.

The situation is only going to get better as Libya, Iraq, Iran and other oil producers return to the supply side.

An added benefit is that Russia will be struggling to fund its wickedness as half of their economy is energy dependent. Starve those bastards.

Now is the time to create an Old School energy policy which provides a huge “tax cut” to the American economy. Why would we not do this?

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car.



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