Sushi Money

We™re traveling around the country this week visiting family and I’ve enjoyed the time off. I was curious to see, at least from the road, how the economic challenges are affecting people. But it™s hard to see that there are any real economic changes simply from the number of cars on the road, or people eating out at restaurants or shopping. If the nation is verging on a recession, you can’t tell it from where we’ve traveled in the western U.S. But it™s amazing to see how high gas prices are in some states! I saw diesel fuel over $5 per gallon for the first time this week. It must be taking a huge toll on the independent truck drives which is a shame.

So most Americans seem to be going about business as usual. Of course some of us have cut back driving, and reduced spending. Even for this trip we have modified our travel plans based on fuel prices. It™s obvious that some of our weekly spending that would have gone towards discretionary expenses such as entertainment or household goods are now being diverted towards expenses for fuel and food.

Yet even with a struggling economy from a national perspective, there™s growth and building still taking place, especially in the commercial arena. While home builders are sitting idle and struggling for sales, the foreclosure markets are heating up. And the commercial builders are still making new plazas and storefronts for mini-restaurants and niche stores.

Is the nation getting ready for the next leg up in the business cycle? In some places it appears that way. But so much depends on where we go from here. It™s kind of like waiting for the other shoe to drop. Will we start back on the road towards growth or do we continue a long slide towards recession?

It’s good to see the dollar strengthening on comments from Bernanke, but not so good to see that Sen. Obama wants to tax the oil companies . All for the national good right? But someone tell me how those costs are not going to be passed on to consumers? Ultimately that will be a tax on you and me.

It’s amazing how high fuel prices have gone this year.  In short, like many Americans, I’ve simply had enough of paying so much for gas.  Honestly, it’s such a total waste of money don’t you think? The quality of the ride we’re getting at $3.50 a gallon for driving doesn’t feel any better than it did at $2.25 a gallon.  For the increased price of fuel there is no additional satisfaction or more importantly, no contribution to a greater good gained from paying more to do the same thing with a gallon of gas.  It’s actually worse, and a waste of money.  And that’s the rub for most of us.

So what am I doing about it?  Personally we’ve already drastically reduced our vehicle use, and are investigating more fuel efficient cars for the future.  But that really doesn’t change much in the face of rising prices, except maintaining the status quo.  And I just don’t think the status quo is good enough anymore. I was looking back over the past 12 months and was surprised that we were paying almost a dollar less per gallon for several months last year.  Then in late summer, prices began a slow climb, spiking after the new year and reaching an average of $3.50 a gallon this week.

So now, with a humble voice from the wilderness, I’m calling for an Energy Summit for Congress, the Administration and leading oil company experts to sit down and begin devising a strategy to take the nation out of the grip of oil dependence.  Not a new theme, but has any legislator or administration official proposed anything constructive in the face of oil price inflation?  Sure oil company executives have been called on the carpet to testify before Congress, but to what end?  Grandstanding by politicians to make us think they’re doing something? Do we realistically think companies that are in business to make a profit should start to not work to make a profit?  Is that going to benefit our economy and those who need the fuel these companies produce?  Does anyone really think that making oil companies the scapegoats will solve America’s oil dependence problems?   More importantly, has the SEC or any governing body investigated the impact of energy sector speculation or the influence that the rise of sovereign wealth funds have had on market dynamics?

As much as I believe that the the U.S. is being driven towards a greater economic crisis due to energy impacts, my frustration is really a personal issue. Which is due to the simple fact that the engine of the U.S. economy is ultimately distilled into the basic economic units of individuals and families as consumers.   We are the spending sparks of economic activity that drives this great machine, and our ability to do so is being damaged with each passing day. 

A few weeks ago I took a short poll asking if high gas prices have affected people’s driving habits.  After a fairly small response, more people indicated that gas prices only affected them “a little”, while the others said “a lot.”  But gas prices really had only been higher for a couple of months.  I’m willing to bet more people would indicate “a lot” today, and over the next few months as fuel prices remain higher.  Have you changed your driving habits?

It’s not just fuel prices though- it’s also the economic costs passed on to consumers because of fuel prices, and higher commodity prices that are causing turmoil across the nation.   So I’m the first to admit that fuel prices and grocery prices affect our family’s choices every single day.  And I feel fortunate, because technically we can afford to drive our cars, commute to work and do what is necessary each day.  So consumers are starting to feel pinched?  I think that’s an understatement.

With higher prices something else is given up to accomplish the same tasks.  We don’t go out and eat or visit new places as often as we used to.  And we won’t be traveling as much this year as last year.  We even cancelled a longer vacation we had already planned for the summer because of fuel costs.  We take fewer trips to the store, and the discretionary funds we normally spent on nice-to-have items or entertainment in the past are being used for basic needs such as food and putting gas in the tank to get to work.

But there are many other families who can barely afford to get to work or put food on the table each day.  I’ve read of some who may not have the money to pay for gas for a trip to the doctor or hospital. Many Americans live in rural areas and must travel extensively to get to work and fulfill basic needs.  High fuel prices hurt those who must travel greater distances especially hard.  This nation is larger than most nations in the world- and driving long distances is something we are accustomed to.  We are not accustomed to enormous prices for gas to be able to get to the doctor or the grocery store.

So is the government doing enough?   Is Congress and the President’s administration taking these issues seriously enough?Perhaps what really bothers me is that maybe they’ve collectively looked at it and simply shrugged, without really putting a plan together to do something about it.  The U.S. says oil prices are too high, but no one seems to have any idea what to do about it.  Instead, we push for biofuel production and increase demand for oil.  Yet biofuel production soaks up oil supplies and is being blamed for increasing hunger across third world nations as it drives up commodity prices, challenging the ability of support organizations and governments to get food supplies to people in need.

So what is going to solve the oil conundrum?   Do we not have the technology and ability to find more oil and ramp up production?  Or do we lack the collective will as a nation to do what’s necessary, simply remaining dependent on other nations for our oil needs and paying whatever the market demands?  Tapping the Strategic Reserve isn’t going to solve anything over the long term either.  I simply think we can do more as a nation to support the American family’s needs at home, that would also serve to strengthen the U.S. economy for the long term.

My hope is that we’ll see Congress and the Administration get together an conduct an Energy Summit to put a plan in place that will  support the nation’s needs.  New energy, alternative energy, new research, and yes- more oil to fulfill the nation’s needs.  One day perhaps we’ll find the holy grail that relieves our dependence on oil.  But the U.S. economy is tied to oil for countless needs right now and we risk being economically crippled for too many years if we don’t start working together more aggressively.

We are better than this dependence, and we need a little more forward thinking by our elected leadership.  We’ve put off the energy debate for so many years it’s now come back to haunt us.  Whether we enter or are in a recession now is beside the point. Consumers are spending more on fuel and food, and less on everything else.  And I think it’s a threat to our nation’s economic viability over the long term. That’s simply got to change. 

For more on The Oil Conundrum see:

• The Oil Conundrum Part II: The Blame Train and
• The Oil Conundrum Part III: Who’s On First?

Now there’s a proposal that just might help the family budget across the nation- give Americans a gas-tax holiday this summer, and double the child tax credit. Of course after yesterday, our tax consciousness is about at its limit right now, but for those with children this could really reduce taxes going forward.

Senator John McCain’s proposal isn’t as strange as it sounds, especially with the price of gallon of gas pushing past a national average of $3.30. And with fuel prices continuing to rise, it’s about time somebody does something to lessen the cost. Something else needs to give, and if we could find a way to lessen the speculative fever that might help.

But do you know how much you pay in taxes for each gallon of gas in your state?

The federal government charges 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel.  And where I live our state charges us 18 cents tax on each gallon of both gasoline and diesel. Which is not too bad considering that some states charge as much as 31 cents or more!

API is a national trade association representing the oil and natural gas industries. Remember all those API specifications for oil and such? Lots of useful info if you’re in the industry, but it’s mumbo-jumbo to most of us. But they have some really nice charts regarding the taxes we pay for fuel in America.

Total Gasoline Taxes by State

Do you drive a diesel engine vehicle? With clean-diesel technology becoming a lot more popular, expect more demand there as well. I remember when diesel was much cheaper than regular gasoline, but not any more.

Total Diesel Taxes by State

If you live where gas prices are the highest, then you probably pay some of the highest fuel taxes too. It’s no wonder fuel costs so much in California!

Senator McCain has a few other ideas about reducing taxes for Americans, but I wonder if he’ll try to keep the Bush tax cuts in place instead of letting them expire in 2010? He voted against them in the past, but now says the middle class in American needs more help and lower taxes. Maybe he’s finally coming around. I just wish a few more Democrats would see the light on lower taxes as well.

For a daily picture of the national average for fuel prices, check out AAA’s Daily Fuel Guage Report. If you’re thinking about moving or close to retirement, the Retirement Living Information Center has some great tax-related info and can give you an idea of each state’s tax burden. And here’s a list of the national averages by state for gas prices from GasBuddy.com.

That’s the mantra this week as Congress is set to grill oil company executives about fuel prices and supply concerns.  Well it’s more like the political folks have a chance to give some of the heat they’ve been taking from their constituents, back to the oil companies.  I’m all for that- not just to give the oil execs an earful, but also to see our politicians trying to find some answers.

What argument can be made in defense of big oil when they are reaping enormous profits each year?  It’s a business to be sure, and they are in business to make money like any other business.  But when the oil companies profit seemingly at the expense of the national economy, and mom and pop in small towns across America, then you have to wonder where our priorities are.

The problem is that Congress in all its wisdom may decide to tax the he#l out of the oil companies, and while that money goes straight to Uncle Sam to help pay (or expand?) government programs, it’s not solving the issue of getting more oil, or becoming more oil independent.  Think it’s going to change anything for the average family?  I don’t think so- in fact, gas prices will probably get more expensive because the oil companies are paying extra taxes.

Realistically, U.S. consumers pay some of the lowest fuel prices in the world compared to many other net importers of oil.  But that doesn’t change the fact that we are paying more than we have ever paid here in the U.S., and it affects the household budget at home in many, many ways.  Not the least of which are higher grocery prices.  Overall it’s sad that we have put ourselves in this position- but it’s the truth.  When no refinery has been built in the past 30 years in the U.S., what does that say about our priorities?  When we can’t further develop off-shore or Alaskan oil fields because the politicians are too concerned about their re-election and don’t want to appear anti-environment, then we are left to import oil from every third-world nation that has it. 

We are truly slaves to the oil trade- and we will pay what the market will bear.  The oil companies are not the really bad guys, but they aren’t helping matters either.   They’re going to grit their teeth and smile that toothy smile to make their margins.  But some of those margins are squeezed as well.  For example, in order to find and get at some of the vast resources of deep oil, they need specialized deep sea rigs.   These are amazing feats of human engineering. Billionaire John Fredriksen is Norway’s richest man, worth at least $7 billion, and he leases these things.

“His units are in such demand he can charge major oil companies nearly $600,000 a day to use them. Similar rigs were earning about $70,000 a day just five years ago. With leasing rates like these, a vessel that cost half a billion dollars to build can pay for itself in as little as four years.”

So who pays for the use of such beasts?  We all do.   We are all faced with limited supply, and too much demand across the world.  The oil is there- we just haven’t planned ahead and there are too many pigs at the trough.     I say bring back the Oil Price Wars, and let the government cut out the middle-man.   Oh wait… there’s probably not enough supply to have an oil price war.We do need to lessen our dependence on foreign oil. 

We need to foster alternative technology, and yes- we need to develop and build nuclear power plants to help supply our energy needs so we aren’t using natural gas or coal to do so.  And we need to stop kicking the empty can and try to produce enough of our own oil to fulfill the needs in our own country. Or we can abandon all that when someone invents the next miracle engine, fuel or transportation device…   

Personally I think we should build out a vast network of maglev trains and small commuter vehicles.  Begin in the suburbs of the major metropolitan areas and let them grow.  This could be the rail and gold spike victory for the next century.  And somewhere during that timeframe, we might even be able to abandon the use of oil for fuel altogether.

My goodness, fuel prices are totally absurd!  There, I’ve said it… I’m complaining online about gas prices.  I’m half ashamed, especially because after this week’s storms and tornadoes, there are whole towns of people without homes, let alone vehicles to drive.  My heart goes out to them, and we can only do so much to help them rebuild their lives and communities.  Life within the nation still goes on… there is tragedy every day locally and nationally, and yet we must go on, doing the best we can in our own lives.

But I think fuel prices are a tragedy as well.  What makes me frustrated, even angry perhaps, is that we have the technology, the resources and the ability to have plenty of oil and gas… if we really wanted to.  The supply and demand issue is real, but is a house of cards that we built over many decades.  The fact that a new oil refinery has not been built in this nation in 20-30 years is staggering.  But the congressional leadership has thus far lacked the political will to make the decisions necessary to change anything.  I’m all for environmental stewardship and conservation of our natural resources.  I strongly believe in protecting the environment and doing what we can to lessen our impact on the world in which we live.  But at some point the very real human and economic needs must become a paramount concern for how we use our natural resources.  We can balance sustainable resource use with environmental priorities.  They are not mutually exclusive.  And yes, we can focus on renewable energy and further research to lessen our need and dependence upon oil.  But the fact remains that world populations are expanding, especially in Asia.  We drive millions of vehicles at home and internationally- and the demand for oil will only increase.  I believe the research that shows the world’s supply of oil is actually quite abundant.  The limitations we face are finding, gathering and refining that oil to support the nation’s needs.

What can we do?  We can open up key areas off the nation’s coasts to offshore exploration and drilling, as well as the Alaskan oil fields.  What are we waiting for?  It takes years of research and investment for a major oil company to find and begin production of a new oil field.  But our political leaders have not made it any easier.  And no U.S. oil company has had any incentive to try and build a new refinery- the environmental regulations challenge their efforts at every turn.  Do I blame the oil companies for high fuel prices?  No, not really.  It’s too easy to place blame on the very companies that make it possible for us to use the fuel we need.  They compete with the world’s demand to find and bring oil to our nation’s shores.  I place blame on OPEC and those near third-world  nation’s leaders who are laughing all the way to the bank while we pay through our nose to buy fuel.  I also blame myself.  I haven’t done anything to voice my opinion with my legislators, at least not recently.  And those whom we have elected have done little to change the situation.  There’s also a lot of speculation in the energy markets… in an earlier post I blamed Enron for being an example of how a company, or a cartel, can yank resource use around to make billions of dollars of profit.  I don’t believe U.S. companies are doing that at the expense of the American consumer, but I’m sure there will be more congressional hearings on that issue.  Maybe a little out there from the conspiracy theory viewpoint.  But there is a lot of money in the energy markets and that plays a role.   I don’t know when it’s going to get better, but it doesn’t look like anytime soon.  We’re going to feel these prices at the grocery store and everywhere else that shipping costs must be reflected in the prices we pay for goods.  It’s time to really do something… to bring the nation’s leadership together with the oil companies if necessary and figure out a strategic approach to providing more oil and energy resource needs for the U.S. economy.  At some point the nation’s economic needs cross the boundary of security needs. We’re getting there pretty dang quick.   Some research shows that Americans spend less on fuel costs than we did many years ago, as a percentage of total household costs, etc.  But I’m not sure I believe that, especially with the amount of commuting we do, and the number of cars most households have these days.  Just ask the the person in the car next to you at the gas pump how they feel about it… I got an earful the other day.