Tuesday, August 2, 2011

More Oil and Misinformation: Crimes of the Century

I wanted to post this as a comment on the article below but it was too long...



Robert,



This is an interesting article and I admit I have been involved in oil company bashing myself on many of the accounts that you mention above.



However, what I feel you have left out are the automobile energy efficiency patents and designs that have been bought up and shut down over the past 60 years (see "GasHole") that could help us reduce our dependency on foreign oil significantly if we could just alter existing autos and produce new autos with 100+ mpg. Face it, there have been no real improvements on fuel efficiency since that late 1970's and its NOT for a lack of innovation.



Additionally what you leave out is the impact of oil production and refining on the health of people living near those facilities. (See "Fuel"). The birth defects and cancer rates near those areas are exponentially higher around the world. This MUST be related to our massive healthcare issues and costs.



You also fail to leave out the concept of peak oil and our government's incessant war for energy as explicitly defined in the Carter Doctrine. Countless lives have been lost to protect our oil interests around the world, particularly in the middle east, which has attributed to their anger against us. It has also lead to a military and defense spending that will ultimately lead to the demise of our Republic.



Perhaps the stockholders of those oil companies are not fully aware of the crimes their investments have created. Indeed they have probably chosen to turn a blind eye because of the benefits to their lifestyle and 401ks.



In summary all of the items you left out have a health, quality of life, and tax impact on our nation that is beyond comprehension.



That my friend is why we are angry, not just at oil companies, but at the members of our government for being accomplices in one of the greatest crimes in history.

Amplify’d from oilprice.com




Written by Robert Rapier

  

Tuesday, 02 August 2011 13:03

In my travels around the globe, I have never been to another country that regards their oil companies as we do here in the U.S. I have actually been in countries where people view their domestic oil companies as a source of national pride. Here in the U.S., the average person on the street views our oil companies as vile, greedy parasites on taxpayers that should be tarred, feathered, and run right out of the country. While this belief is commonly held among Democrats, even staunch Conservatives like Bill O’Reilly have gone on anti-oil company rants, while offering suggestions like “American oil companies must supply the federal government with a written explanation every time they raise the price of gas and oil.”

Why It Matters to Me

But why should I care? Well, I care because ignorance is the basis of bad energy policy decisions. Bad energy policy decisions are likely to lead to higher levels of oil imports, which will hasten the demise of the U.S. as a superpower. (Lots of bad decisions are contributing to our slide toward mediocrity, but record trade deficits brought on by record flows of money to oil exporting nations are a contributor).

But I also care because I used to work for an oil company, and therefore I take misinformation directed at the oil industry somewhat personally. As I learned how oil companies really worked, I felt compelled to explain to people why their perceptions were wrong. It pained me to see so many hard-working people — people who provide the energy that most people use every day to move around the world — treated with such revulsion. As someone once said to me “It isn’t the oil company employees that we are angry with. It is the oil companies themselves.” The problem with that explanation is that the oil companies are the employees that work there and the shareholders that own stock (which is probably you if you have an interest in a pension fund – see Who Owns Big Oil).

Don’t Marginalize if You Have No Replacement

Let me be clear that I want to see the world reduce dependency on oil. In fact developing replacements for oil is the basis of my job. But my fear is that before that day comes, we will simply marginalize our domestic oil companies, and while we are still heavily dependent on oil, that dependence is shifted to an even greater degree to foreign oil companies like Saudi Aramco. So I think it is a bad idea to put policies in place that will give foreign oil companies an advantage over domestic oil companies — and many of the proposals that are frequently floated would do just that.

HuffPo: A Fountain of Misinformation

Last week earnings were announced for several major oil companies. Any time oil prices are high, earnings for integrated oil companies are likely to be high. And that is going to lead to consumer anger, which is often fueled by a steady dose of misinformation. Huffington Post just published a story on ExxonMobil’s earnings, and the comments following the story demonstrate a stunning level of ignorance about oil companies. And it wasn’t just a few people; the article had 3,500 comments in just a couple of days and the majority were happily spreading the sort of misinformation I highlight below:

Even the title is somewhat misleading. High oil prices are driving the bulk of the profits; pure refiners like Valero also saw earnings increase, but not like those of oil producers. Some of the article is correct, some of it is most certainly incorrect, and much of it is misleading. It is definitely intended to be inflammatory. Taken as a whole, the article and the comments following the article provide ample evidence for my recent claim that Democrats are really misinformed about energy (the readers and writers of Huffington Post are overwhelmingly Democrats).

What is correct is that oil companies are making big profits, and those profits are coming out of consumers’ pockets. But numerous issues that the article raised around those points are wrong, and it is that sort of misinformation that helps keep the public so angry over this issue. So what I would like to do here is take 10 points from the article itself or the comments following the article and either provide accurate information, or at least context for the claims.

1. Taxes

The article implies that oil companies don’t pay a fair share in taxes, quoting Congressman Ed Markey as saying “it’s time for the oil companies to do their part and contribute to solving our debt crisis.” But this issue really took on a life of its own in the comments, where numerous people claimed that oil companies don’t pay any taxes to the U.S. government. For example “They pay taxes to foreign nations and they pay state and local taxes…to the Federal coffers…¬not a dime“ and “Exon Mobil did not pay any nit-wit.”

I suppose I would be pretty angry too if I thought that not only are we subsidizing oil companies with tax dollars, and not only are they reaping profits at our expense — but they don’t pay any federal income taxes while the country struggles with a budget crisis. Yes, that would be shocking and cause for anger if it was true. But it isn’t.

This claim seems to have originated with a 2010 article in Forbes called Big Oil’s Tax Bill. In that article, the writer stated that in 2009, ExxonMobil (XOM) paid no U.S. income taxes. In a follow-up article, the writer had to back-peddle as the context became clear:

“My mistake was in thinking that these figures somehow reflected actual tax benefits and liabilities. So what we should have written was that ExxonMobil “recorded” no U.S. income taxes for 2009 instead of “paid.” All you re-bloggers out there, please note the clarification. Mea culpa.”

For the “re-bloggers”, this didn’t matter much, as the original claim had a life of its own and soon became conventional wisdom: ExxonMobil doesn’t pay federal income taxes. Senator Bernie Sanders repeated this claim on the Senate floor: “Last year, ExxonMobil made $19 billion in profit. Guess what. They paid zero in taxes. They got a $156 million refund from the IRS.” (Politifacts investigated and said Senator Sanders was misleading “at best” and rated the claim false).

It is simple enough to address this claim. I merely linked to ExxonMobil’s SEC filings that show the breakdown of the taxes they paid in 2008, 2009, and 2010. Those SEC filings give an interesting picture of ExxonMobil’s operations. First, they show that ExxonMobil’s global income tax bill is very high: $36.5 billion in 2008, $25.9 billion in 2009, and $28.5 billion in 2010. Their foreign tax bill is much higher than their U.S. tax bill, but they do the majority of their operations outside the U.S. and are taxed on their earnings wherever they earned the money.

But then it does show their 2009 U.S. federal tax obligation to be negative $156 million. Their 2008 federal obligation was $3.4 billion and their 2010 federal obligation was $1.3 billion. ExxonMobil has stated that the reason for the 2009 obligation is that they make estimated payments on taxes due, and they had overpaid for the previous year (or years). Therefore, it wasn’t that they didn’t have a tax obligation, it was that it had already been (over)paid. It is similar to why people get tax refunds. The government isn’t giving you money, you overpaid your tax bill during the year. And if you made a lot of money in 2008 and then a lot less in 2009 (XOM’s 2009 profit was less than half their 2008 profit), you could find that the refund from your 2008 taxes was greater than your 2009 obligation. That doesn’t mean you didn’t pay taxes. It is just a reflection of when you paid them.

A related claim is that ExxonMobil only pays a few percent of their income in taxes. Some who make this claim take their worldwide earnings and only apply their U.S. tax obligation to those earnings. That is disingenuous because it doesn’t capture the fact that the U.S. is a minor part of their global operations (XOM recently put U.S. earnings at under 6% of their total earnings), and that they earn most of their money and pay most of their taxes in foreign countries. Thus presenting U.S. taxes against overall earnings paints a false picture.

One article floating around from the Center for American Progress quotes a Center for Tax Justice report that claims XOM only paid 0.4% in federal income taxes and their U.S. tax bill the past two years was only $39 million. A look at their SEC filings shows that this is blatantly false. With fictional reporting like this, it is no wonder people feel the way they do about oil companies. But people with an agenda aren’t interested in the truth if it conflicts with their agenda.

2. Subsidies

The article claims that oil companies receive “$4 billion to $8 billion a year in deficit-increasing tax subsidies.” People got really carried away with this in the comments. Not only are the oil companies not paying any taxes, but they are being supported entirely by the subsidies taxpayers are providing them. A typical comment following the essay: “Folks, listen up! This is our tax money that we pay that is subsidiziing these greedy no good SOB’s! They have the gall to be charging close to $4 a gallon!”

Several problems with this one. First, people’s responses indicated that they seem to believe these “subsidies” are cash payments to oil companies. In fact, as I documented previously, the subsidies are tax deductions that in most cases are identical to the tax deductions that other companies — including companies with far higher profit margins — receive. In the case of oil companies, they would amount to about 1.8 cents a gallon — a drop in the bucket relative to both oil company profits and the taxes they paid.

The question nobody seemed to be interested in was “What are these subsidies, and what is their intended purpose?” If you learn that the subsidies are mostly standard tax deductions or that their purpose is to keep manufacturing in the U.S. (and thus increase tax revenues), the narrative is much less interesting.

3. Oil companies control oil price

For example: “There is no way that anyone can deny that the BIG 5 oil companies collude to drive gas prices and profits higher.”

It seems to be hard for people to understand that the profits of oil companies in the U.S. are not a result of them raising oil and gas prices. Their profits went up because oil and gas prices went up. They have cause and effect mixed up. It’s the same reason corn farmers make more money when corn prices go up. The truth is that ExxonMobil — with 3% of the world’s oil production capacity — can do very little to impact global oil and gas prices.

But aren’t the oil companies profitable enough that they could give everyone a break on their gasoline prices? There are two flaws in that line of thinking. First is that even though there is speculation in the market, oil prices are a reflection of supply and demand. The growth in the economies of India and China ensure that high oil prices are here to stay, even if there are some short-term corrections. So high prices are a signal to consumers to use less and a signal to producers to produce more. Low prices and high demand are a recipe for shortages caused by over-consumption.

But to illustrate the other problem with that line of thinking, consider this analogy. You buy a $100,000 home in a neighborhood and then the price of the average home quadruples over the next 10 years. You decide that you aren’t greedy, and you are satisfied with selling your home for $200,000, even though comparable homes are selling for $400,000. This would be like ExxonMobil deciding to sell gasoline for $1 a gallon below their competitors. What happens in this case? In cases like this, some other person is going to snap that home up for $200,000 and resell it for $400,000, capturing the profit that would have been yours. Prices aren’t set in a vacuum. Most people don’t just decide to sell a $100,000 home for $400,000 or $50,000, they sell it based on what the market is paying.

The same is true for oil prices. Even though they benefit from high prices, there isn’t too much an ExxonMobil can do to influence the global price of oil, and that has the biggest influence on the price you pay at the pump. OPEC on the other hand is a different story; they could drive oil to $200 overnight by withholding enough from the market. But no U.S. oil company controls enough oil to have much influence.

4. Apple versus the oil companies

There were a number of comments comparing Apple to the various oil companies. Apple indisputably has much higher profit margins than the oil companies, but people admire them because as one person said “they produce something useful.” Of course Apple’s products are largely made from oil, but that’s another story (a 3G phone requires 1.7 gallons of oil to produce and distribute). Here are some of the comments on Apple: One person claimed that Apple has a higher effective tax rate than do oil companies: “The oil companies are given tax breaks at virtually every stage of production¬, paying an affective tax rate of 9%. Apple effective tax rate 24.4%.”

This person’s mistake was in comparing one type of tax — the tax on capital equipment — to an overall tax rate. Looking back to ExxonMobil’s SEC filings, their effective tax rates in 2008, 2009, and 2010 were 46%, 45%, and 47% — almost double that of Apple. The reason for this is that they simply have to pay taxes that Apple does not have to pay, and in some cases they don’t receive the same tax deductions that Apple does receive (see Point 6 below).

5. Apple employs more people

Another person claimed that Apple employs more people than the oil companies: “Apple employs a lot more people than any oil company. The insane thing about oil companies is how much money they make relative to the comparativ¬ely miniscule amount of labor force required to operate.”

It is amazing how often people just make things up. Apple employs “46,600 full time employees and 2,800 temporary full time employees worldwide.” Exxonmobil employs “over 82,000 people worldwide.” In 2010 Apple earned $14 billion on sales of $65 billion (21.5% profit margin by that metric, and profits of $300,000 per full time employee). In 2010 ExxonMobil earned $30.5 billion on sales of $370 billion (8.2% profit margin, and profits of $372,000 per full time employee).

6. Apple doesn’t receive subsidies

Several people claimed that the difference between Apple or Google and XOM is that the former don’t receive subsidies: “Apple isn’t subsidized with tax money, that is the difference.”

In fact, Apple receives a 9% tax deduction from Section 199 of the tax code. Oil companies are limited to a 6% deduction from Section 199, which has been called the single biggest oil company subsidy. So Apple not only receives some of the exact same “subsidies” (although I don’t really consider a tax deduction a subsidy), they get a bigger deduction despite having much higher profit margins (which again is reflected in the relative effective tax rates).

7. Oil companies aren’t investing in their business

The article claimed: “Rather than invest their profits in such things as product development, new facilities, hot talent or research — things that could create jobs, improve consumer offerings and accelerate alternative energy production — three of the five big oil companies are spending large amounts of that money buying back shares of their own stock.”

ExxonMobil invests $25-$30 billion a year back into their business. This from a company that earned $30 billion in 2010. Other oil companies have similar investment profiles. The oil business is very expensive, and those big profits are made possible by big investments in capital, R&D, and even into renewable energy. You may have read of ExxonMobil’s $600 million algae bet. (That’s really not quite accurate to call it $600 million, but it is one example of many in which oil companies are investing in renewables). So Dan Froomkin — the author of the article — is either grossly misinformed or simply spreading half-truths. (It is true that they are buying back stock, which is why it is a half truth instead of a full lie).

8. Oil companies spent over $1 billion in lobbying

The article claims that “the oil and gas industry is enormously powerful on Capitol Hill, spending over $1 billion in lobbying since 1998.”

Per the linked source in the article, the oil company did spend $1.15 billion in lobbying over the span of 14 years. So a trillion dollar plus industry spent an average of $82 million a year on lobbying. A couple of things. First, all you have to do is read the article and the comments to see that oil companies will have to do at least some lobbying to combat the sort of misinformation people like Froomkin spread. But of course they lobby for things in their own self-interest, just like other companies. At the same linked source, you find that the pharmaceutical industry spent twice as much money as the oil industry on lobbying, and the insurance industry, electric utilities, business associations, and computer and Internet industry all spent more money on lobbying than did the oil industry.

During various ethanol debates, I always maintained that the agriculture lobby is bigger than the oil lobby. But for some reason, the link does not list the ag lobby in their Top Industries list for lobbying. But if you look at their detailed statistics, agriculture spent more money over the past 14 years than did the oil industry: $1.4 billion for agriculture versus $1.15 billion for oil companies. That would rank agriculture #4 on the list over the past 14 years. In 2010, the agriculture industry spent $121 million, had 473 clients, and employed 1,151 lobbyists. By contrast, the oil industry spent $145 million (their spending was higher than agriculture’s in 2010, but was lower in most years), had 200 clients, and employed 798 lobbyists. So, by most measures (historical spending, number of lobbyists, number of clients) the ag lobby is bigger than the oil lobby.

So the claim is true, but misleading: Oil companies did spend over $1 billion in lobbying over that 14-year time frame. But without context the claim is grossly misleading by not showing that oil companies were pretty average relative to other industries with respect to their lobbying efforts. This, despite being larger than many of these other industries, but more importantly despite facing much more open hostility from one of the political parties that would seemingly be happy to legislate them out of existence.

9. Oil companies should be nationalized

This one was pretty popular in the comments following the article. But as Ed Markey was quoted in the article “America is swimming in debt while oil companies are swimming in profits.” Now that’s a strong endorsement for the government to run the oil companies, isn’t it? Our government has shown themselves to be such good stewards of managing our tax dollars. Perhaps after a few years of government administration, the oil companies will also be swimming in debt and teetering on default and everyone will be happy.

10. Renewable energy creates more jobs

Actually, this one is true, but most people likely never stop to consider why that is. With fossil fuels, nature already grew the biomass, harvested it, and used the temperature and pressure of the earth to chemically convert it into an energy dense form of energy like oil. Humans are left to collect that energy dense material and convert it into usable energy.

With renewable energy, humans must do the planting, growing, harvesting, and then ultimately process it into usable energy. Because humans are engaged in more steps of the process than in fossil fuels, it necessarily takes more people to produce one energy unit of renewable energy against an equivalent unit of fossil fuels. This is a big reason why renewable energy has long been more expensive than fossil energy. It probably won’t be that way forever, and it isn’t true in every single case. As fossil fuels become ever harder to reach, I believe that more renewables will compete on a level playing field. And maybe some day when oil is much more difficult to extract it will take just as many people to produce a barrel of oil as it does to produce a barrel of renewable fuel.

Conclusions

The biggest takeaway from all of this is that people are grossly, horribly misinformed about oil companies. But another big lesson here is that they don’t seem to care. Often, when I would engage someone to correct them on one point or another, they would simply ignore the correction and toss out another bit of misinformation. People just weren’t really interested in getting to the truth of the matter. They “know” oil companies are bad, and they won’t hear anything to the contrary.

Most of these people likely can’t imagine what their life would be like without the oil that is produced, refined, and turned into fuel, plastics, and medicines. In the U.S, the idea that oil companies are parasites with few redeeming qualities is so embedded in many people that it would likely take a serious oil shortage — and a realization of just what life will be like without ample supplies of oil — before attitudes change. This is doubly-true since one of our major political parties has long considered the demonization of the oil companies to be a great way to win votes. But they should be careful what they wish for, because life won’t be as pleasant as they think if they drive our domestic oil companies out of business or out of the country.

Read more at oilprice.com
 

Alt-State of the Union Address 2012

Mr. President, Mr. Speaker, Members of the 96th Congress, fellow citizens:

These last few years have not been an easy time for any of us. As we meet tonight, it has never been more clear that the state of our Union depends on the state of the world. And tonight, as throughout our own generation, freedom and peace in the world depend on the state of our Union.

The 21st century has been born in turmoil, strife, and change at home and around the world. This is a time of challenge to our interests and our values and it's a time that tests our wisdom and our skills.

At this time here at home, Americans are still held captive by an oligarchy of petroleum cartels known as the Seven Sisters.  Over 100 years ago, following intensive investigative journalism by an everyday American citizen named XXXXX, outrage swelled and Congress acted to split up Standard Oil which at the time was the greatest monopoly in our nation.  However, clearly Congress did not go far enough.  The descendants of Standard Oil continued to monopolize global oil markets and continued their abusive practices of racketeering, price fixing, price gauging, war mongering, speculation, and may other despicable practices that can only be called predatory capitalism.

These actions over time, along with our own foreign policy based on poor intelligence, a lack of empathy for people's of the world, and extreme greed, lead to fanatical views within the Muslim community, and eventually lead to acts of revenge, which we called terrorism.

At the same time, for over 100 years, we allowed our own Federal Reserve and monetary policy to be dictated by a banking cartel that chose to pursue wealth at all costs, regardless of the impacts of their actions. This has lead the American city, state, and federal government into a situation of extreme debt, while destroying our middle class with severe inflation.  Abroad it has caused civil unrest as the speculators in the commodities markets traded food for profit and

Walmart, Monsanto, climate change, peak oil, ...

These xxx actsxxxx  present a serious challenge to the United States of America and indeed to all the nations of the world. Together, we will meet these threats to peace.

I'm determined that the United States will remain the strongest of all nations, but our power will never be used to initiate a threat to the security of any nation or to the rights of any human being. We seek to be and to remain secure—a nation at peace in a stable world. But to be secure we must face the world as it is.

Three basic developments have helped to shape our challenges: the steady growth and increased projection of Soviet military power beyond its own borders; the overwhelming dependence of the Western democracies on oil supplies from the Middle East; and the press of social and religious and economic and political change in the many nations of the developing world, exemplified by the revolution in Iran.
Each of these factors is important in its own right. Each interacts with the others. All must be faced together, squarely and courageously. We will face these challenges, and we will meet them with the best that is in us.

And we will not fail.

In response to the abhorrent act in Iran, our Nation has never been aroused and unified so greatly in peacetime. Our position is clear. The United States will not yield to blackmail.

We continue to pursue these specific goals: first, to protect the present and long-range interests of the United States; secondly, to preserve the lives of the American hostages and to secure, as quickly as possible, their safe release, if possible, to avoid bloodshed which might further endanger the lives of our fellow citizens; to enlist the help of other nations in condemning this act of violence, which is shocking and violates the moral and the legal standards of a civilized world; and also to convince and to persuade the Iranian leaders that the real danger to their nation lies in the north, in the Soviet Union and from the Soviet troops now in Afghanistan, and that the unwarranted Iranian quarrel with the United States hampers their response to this far greater danger to them.

If the American hostages are harmed, a severe price will be paid. We will never rest until every one of the American hostages are released.

But now we face a broader and more fundamental challenge in this region because of the recent military action of the Soviet Union.

Now, as during the last 3 1/2 decades, the relationship between our country, the United States of America, and the Soviet Union is the most critical factor in determining whether the world will live at peace or be engulfed in global conflict.

Since the end of the Second World War, America has led other nations in meeting the challenge of mounting Soviet power. This has not been a simple or a static relationship. Between us there has been cooperation, there has been competition, and at times there has been confrontation.

In the 1940's we took the lead in creating the Atlantic Alliance in response to the Soviet Union's suppression and then consolidation of its East European empire and the resulting threat of the Warsaw Pact to Western Europe.

In the 1950's we helped to contain further Soviet challenges in Korea and in the Middle East, and we rearmed to assure the continuation of that containment.

In the 1960's we met the Soviet challenges in Berlin, and we faced the Cuban missile crisis. And we sought to engage the Soviet Union in the important task of moving beyond the cold war and away from confrontation.

And in the 1970's three American Presidents negotiated with the Soviet leaders in attempts to halt the growth of the nuclear arms race. We sought to establish rules of behavior that would reduce the risks of conflict, and we searched for areas of cooperation that could make our relations reciprocal and productive, not only for the sake of our two nations but for the security and peace of the entire world.

In all these actions, we have maintained two commitments: to be ready to meet any challenge by Soviet military power, and to develop ways to resolve disputes and to keep the peace.

Preventing nuclear war is the foremost responsibility of the two superpowers. That's why we've negotiated the strategic arms limitation treaties—SALT I and SALT II. Especially now, in a time of great tension, observing the mutual constraints imposed by the terms of these treaties will be in the best interest of both countries and will help to preserve world peace. I will consult very closely with the Congress on this matter as we strive to control nuclear weapons. That effort to control nuclear weapons will not be abandoned.

We superpowers also have the responsibility to exercise restraint in the use of our great military force. The integrity and the independence of weaker nations must not be threatened. They must know that in our presence they are secure.

But now the Soviet Union has taken a radical and an aggressive new step. It's using its great military power against a relatively defenseless nation. The implications of the Soviet invasion of Afghanistan could pose the most serious threat to the peace since the Second World War.

The vast majority of nations on Earth have condemned this latest Soviet attempt to extend its colonial domination of others and have demanded the immediate withdrawal of Soviet troops. The Moslem world is especially and justifiably outraged by this aggression against an Islamic people. No action of a world power has ever been so quickly and so overwhelmingly condemned. But verbal condemnation is not enough. The Soviet Union must pay a concrete price for their aggression.

While this invasion continues, we and the other nations of the world cannot conduct business as usual with the Soviet Union. That's why the United States has imposed stiff economic penalties on the Soviet Union. I will not issue any permits for Soviet ships to fish in the coastal waters of the United States. I've cut Soviet access to high-technology equipment and to agricultural products. I've limited other commerce with the Soviet Union, and I've asked our allies and friends to join with us in restraining their own trade with the Soviets and not to replace our own embargoed items. And I have notified the Olympic Committee that with Soviet invading forces in Afghanistan, neither the American people nor I will support sending an Olympic team to Moscow.
The Soviet Union is going to have to answer some basic questions: Will it help promote a more stable international environment in which its own legitimate, peaceful concerns can be pursued? Or will it continue to expand its military power far beyond its genuine security needs, and use that power for colonial conquest? The Soviet Union must realize that its decision to use military force in Afghanistan will be costly to every political and economic relationship it values.
The region which is now threatened by Soviet troops in Afghanistan is of great strategic importance: It contains more than two-thirds of the world's exportable oil. The Soviet effort to dominate Afghanistan has brought Soviet military forces to within 300 miles of the Indian Ocean and close to the Straits of Hormuz, a waterway through which most of the world's oil must flow. The Soviet Union is now attempting to consolidate a strategic position, therefore, that poses a grave threat to the free movement of Middle East oil.
This situation demands careful thought, steady nerves, and resolute action, not only for this year but for many years to come. It demands collective efforts to meet this new threat to security in the Persian Gulf and in Southwest Asia. It demands the participation of all those who rely on oil from the Middle East and who are concerned with global peace and stability. And it demands consultation and close cooperation with countries in the area which might be threatened.
Meeting this challenge will take national will, diplomatic and political wisdom, economic sacrifice, and, of course, military capability. We must call on the best that is in us to preserve the security of this crucial region.
Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.
During the past 3 years, you have joined with me to improve our own security and the prospects for peace, not only in the vital oil-producing area of the Persian Gulf region but around the world. We've increased annually our real commitment for defense, and we will sustain this increase of effort throughout the Five Year Defense Program. It's imperative that Congress approve this strong defense budget for 1981, encompassing a 5-percent real growth in authorizations, without any reduction.
We are also improving our capability to deploy U.S. military forces rapidly to distant areas. We've helped to strengthen NATO and our other alliances, and recently we and other NATO members have decided to develop and to deploy modernized, intermediate-range nuclear forces to meet an unwarranted and increased threat from the nuclear weapons of the Soviet Union.
We are working with our allies to prevent conflict in the Middle East. The peace treaty between Egypt and Israel is a notable achievement which represents a strategic asset for America and which also enhances prospects for regional and world peace. We are now engaged in further negotiations to provide full autonomy for the people of the West Bank and Gaza, to resolve the Palestinian issue in all its aspects, and to preserve the peace and security of Israel. Let no one doubt our commitment to the security of Israel. In a few days we will observe an historic event when Israel makes another major withdrawal from the Sinai and when Ambassadors will be exchanged between Israel and Egypt.
We've also expanded our own sphere of friendship. Our deep commitment to human rights and to meeting human needs has improved our relationship with much of the Third World. Our decision to normalize relations with the People's Republic of China will help to preserve peace and stability in Asia and in the Western Pacific.
We've increased and strengthened our naval presence in the Indian Ocean, and we are now making arrangements for key naval and air facilities to be used by our forces in the region of northeast Africa and the Persian Gulf.
We've reconfirmed our 1959 agreement to help Pakistan preserve its independence and its integrity. The United States will take action consistent with our own laws to assist Pakistan in resisting any outside aggression. And I'm asking the Congress specifically to reaffirm this agreement. I'm also working, along with the leaders of other nations, to provide additional military and economic aid for Pakistan. That request will come to you in just a few days.
In the weeks ahead, we will further strengthen political and military ties with other nations in the region. We believe that there are no irreconcilable differences between us and any Islamic nation. We respect the faith of Islam, and we are ready to cooperate with all Moslem countries.
Finally, we are prepared to work with other countries in the region to share a cooperative security framework that respects differing values and political beliefs, yet which enhances the independence, security, and prosperity of all.
All these efforts combined emphasize our dedication to defend and preserve the vital interests of the region and of the nation which we represent and those of our allies—in Europe and the Pacific, and also in the parts of the world which have such great strategic importance to us, stretching especially through the Middle East and Southwest Asia. With your help, I will pursue these efforts with vigor and with determination. You and I will act as necessary to protect and to preserve our Nation's security.
The men and women of America's Armed Forces are on duty tonight in many parts of the world. I'm proud of the job they are doing, and I know you share that pride. I believe that our volunteer forces are adequate for current defense needs, and I hope that it will not become necessary to impose a draft. However, we must be prepared for that possibility. For this reason, I have determined that the Selective Service System must now be revitalized. I will send legislation and budget proposals to the Congress next month so that we can begin registration and then meet future mobilization needs rapidly if they arise.
We also need clear and quick passage of a new charter to define the legal authority and accountability of our intelligence agencies. We will guarantee that abuses do not recur, but we must tighten our controls on sensitive intelligence information, and we need to remove unwarranted restraints on America's ability to collect intelligence.  The decade ahead will be a time of rapid change, as nations everywhere seek to deal with new problems and age-old tensions. But America need have no fear. We can thrive in a world of change if we remain true to our values and actively engaged in promoting world peace. We will continue to work as we have for peace in the Middle East and southern Africa. We will continue to build our ties with developing nations, respecting and helping to strengthen their national independence which they have struggled so hard to achieve. And we will continue to support the growth of democracy and the protection of human rights.
In repressive regimes, popular frustrations often have no outlet except through violence. But when peoples and their governments can approach their problems together through open, democratic methods, the basis for stability and peace is far more solid and far more enduring. That is why our support for human rights in other countries is in our own national interest as well as part of our own national character.
Peace—a peace that preserves freedom-remains America's first goal. In the coming years, as a mighty nation we will continue to pursue peace. But to be strong abroad we must be strong at home. And in order to be strong, we must continue to face up to the difficult issues that confront us as a nation today.
The crises in Iran and Afghanistan have dramatized a very important lesson: Our excessive dependence on foreign oil is a clear and present danger to our Nation's security. The need has never been more urgent. At long last, we must have a clear, comprehensive energy policy for the United States.
As you well know, I have been working with the Congress in a concentrated and persistent way over the past 3 years to meet this need. We have made progress together. But Congress must act promptly now to complete final action on this vital energy legislation. Our Nation will then have a major conservation effort, important initiatives to develop solar power, realistic pricing based on the true value of oil, strong incentives for the production of coal and other fossil fuels in the United States, and our Nation's most massive peacetime investment in the development of synthetic fuels.
The American people are making progress in energy conservation. Last year we reduced overall petroleum consumption by 8 percent and gasoline consumption by 5 percent below what it was the year before. Now we must do more.
After consultation with the Governors, we will set gasoline conservation goals for each of the 50 States, and I will make them mandatory if these goals are not met.
I've established an import ceiling for 1980 of 8.2 million barrels a day—well below the level of foreign oil purchases in 1977. I expect our imports to be much lower than this, but the ceiling will be enforced by an oil import fee if necessary. I'm prepared to lower these imports still further if the other oil-consuming countries will join us in a fair and mutual reduction. If we have a serious shortage, I will not hesitate to impose mandatory gasoline rationing immediately.
The single biggest factor in the inflation rate last year, the increase in the inflation rate last year, was from one cause: the skyrocketing prices of OPEC oil. We must take whatever actions are necessary to reduce our dependence on foreign oil-and at the same time reduce inflation.
As individuals and as families, few of us can produce energy by ourselves. But all of us can conserve energy—every one of us, every day of our lives. Tonight' I call on you—in fact, all the people of America—to help our Nation. Conserve energy. Eliminate waste. Make 1980 indeed a year of energy conservation.
Of course, we must take other actions to strengthen our Nation's economy.
First, we will continue to reduce the deficit and then to balance the Federal budget.
Second, as we continue to work with business to hold down prices, we'll build also on the historic national accord with organized labor to restrain pay increases in a fair fight against inflation.
Third, we will continue our successful efforts to cut paperwork and to dismantle unnecessary Government regulation.
Fourth, we will continue our progress in providing jobs for America, concentrating on a major new program to provide training and work for our young people, especially minority youth. It has been said that "a mind is a terrible thing to waste." We will give our young people new hope for jobs and a better life in the 1980's.
And fifth, we must use the decade of the 1980's to attack the basic structural weaknesses and problems in our economy through measures to increase productivity, savings, and investment.
With these energy and economic policies, we will make America even stronger at home in this decade—just as our foreign and defense policies will make us stronger and safer throughout the world. We will never abandon our struggle for a just and a decent society here at home. That's the heart of America—and it's the source of our ability to inspire other people to defend their own rights abroad.
Our material resources, great as they are, are limited. Our problems are too complex for simple slogans or for quick solutions. We cannot solve them without effort and sacrifice. Walter Lippmann once reminded us, "You took the good things for granted. Now you must earn them again. For every right that you cherish, you have a duty which you must fulfill. For every good which you wish to preserve, you will have to sacrifice your comfort and your ease. There is nothing for nothing any longer."
Our challenges are formidable. But there's a new spirit of unity and resolve in our country. We move into the 1980's with confidence and hope and a bright vision of the America we want: an America strong and free, an America at peace, an America with equal rights for all citizens-and for women, guaranteed in the United States Constitution—an America with jobs and good health and good education for every citizen, an America with a clean and bountiful life in our cities and on our farms, an America that helps to feed the world, an America secure in filling its own energy needs, an America of justice, tolerance, and compassion. For this vision to come true, we must sacrifice, but this national commitment will be an exciting enterprise that will unify our people.
Together as one people, let us work to build our strength at home, and together as one indivisible union, let us seek peace and security throughout the world.
Together let us make of this time of challenge and danger a decade of national resolve and of brave achievement.
Thank you very much.


Monday, August 1, 2011

1929 Stock Market Crash Brought Glass-Steagall

Amplify’d from en.wikipedia.org

In 1932, the Pecora Commission was established by the U.S. Senate to study the causes of the crash. The U.S. Congress passed the Glass–Steagall Act in 1933, which mandated a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.

The Roaring Twenties, the decade that led up to the Crash,[4] was a time of wealth and excess. Despite caution of the dangers of speculation, many believed that the market could sustain high price levels. Shortly before the crash, economist Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau."[5] However, the optimism and financial gains of the great bull market were shattered on "Black Thursday", October 24, 1929, when share prices on the New York Stock Exchange (NYSE) collapsed. Stock prices plummeted on that day, and continued to fall at an unprecedented rate for a full month.[6]

The Wall Street Crash of 1929 (October 1929), also known as the Great Crash, and the Stock Market Crash of 1929, was the most devastating stock market crash in the history of the United States, taking into consideration the full extent and duration of its fallout.[1] The crash signaled the beginning of the 12-year Great Depression that affected all Western industrialized countries[2] and that did not end in the United States until the onset of American mobilization for World War II at the end of 1941.

Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even.
Read more at en.wikipedia.org
 

Financial Sector Looking at Laying Off 80,000? Unemployment Heading Up? @JeffReevesIP

Ouch! This is not a good sign. So why is oil up?

Amplify’d from money.msn.com

30,000 HSBC layoffs only the beginning

The financial sector has seen lots of job cuts, and Wall Street should brace for more -- perhaps 80,000 by year's end.

In July, as financial-sector layoffs mounted, a top executive search firm estimated as many as 80,000 jobs might go in this coming round of financial layoffs.

"This is kind of like the beginning of a tsunami," said Richard Stein of Caldwell Partners. "You don't get it in one go -- it comes in sort of short shock waves."

Well, those shock waves have kept coming, with Monday's brutal announcement from HSBC (HBC) in London that by 2013 it will cut an additional 25,000 jobs on top of 5,000 posts already being eliminated. But if recent news is any indication, the layoffs are far from over.

Financial-sector layoffs have reached a fever pitch as bank earnings have rolled out. Just a few of the announcements include:

  • Barclays (BCS), another top England bank, announced it will lay off several hundred workers soon in addition to 600 earlier in the year.
  • Switzerland's UBS (UBS) has been rumored to be considering layoffs of up to 5,000 people in July.
  • Credit Suisse (CS), another Swiss bank, plans to ax about 2,000 staffers, mostly in Europe, despite weathering the financial crisis better than eurozone peers.

That's a staggering total, and it doesn't include layoffs we haven't had confirmed or had leaked to the press yet. And if you haven't noticed, most of those big banks are abroad.

Read more at money.msn.com
 

Zero Progress on Fuel Efficiency Despite Record Gas Prices

Amplify’d from en.wikipedia.org

Corporate Average Fuel Economy

The Corporate Average Fuel Economy (CAFE) are regulations in the United States, first enacted by US Congress in 1975,[1] and intended to improve the average fuel economy of cars and light trucks (trucks, vans and sport utility vehicles) sold in the US in the wake of the 1973 Arab Oil Embargo. Historically, it is the sales-weighted harmonic mean fuel economy, expressed in miles per gallon (mpg), of a manufacturer's fleet of current model year passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 pounds (3,856 kg) or less, manufactured for sale in the US.

This system would have changed with the introduction of "Footprint" regulations for light trucks binding in 2011, but the 9th Circuit Court of Appeals returned that rule for reconsideration for, among other things, being "arbitrary and capricious".[2] The most recent revision of CAFE, passed in 2007, bumped the light-truck exemption (which includes SUVs and passenger vans as well as pickup trucks) from 8,500 lb (3,900 kg) to 10,000 lb (4,500 kg) GVWR, but continued to maintain separate standards and separate bins for "passenger cars" and "light trucks", despite the majority of "light trucks" actually being used as passenger cars. More than half a million model-year-1999 vehicles exceeded the 8500-pound GVWR and were omitted from CAFE calculations.[3] In 2011, the standard will change to include many larger vehicles.[4] The US and Canada have the weakest standards in terms of fleet-average fuel economy rating among first world nations, e.g. 25 mpg in the US, versus 45 mpg in the European Union and higher in Japan (2008).[5]

The National Highway Traffic Safety Administration (NHTSA) regulates CAFE standards and the US Environmental Protection Agency (EPA) measures vehicle fuel efficiency. US Congress specifies that CAFE standards must be set at the "maximum feasible level" given consideration for:

  1. technological feasibility;
  1. economic practicality;
  1. effect of other standards on fuel economy;
  1. need of the nation to conserve energy.

Historically, the EPA has encouraged consumers to buy more fuel efficient vehicles, while the NHTSA expressed concerns that smaller, more fuel efficient vehicles may lead to increased traffic fatalities.[6][7] Thus higher fuel efficiency was associated with lower traffic safety, intertwining the issues of fuel economy, road-traffic safety, air pollution, and climate change. In the mid 2000s, increasing safety of smaller cars and the poor safety record of light trucks began to reverse this association.[8]

If the average fuel economy of a manufacturer's annual fleet of car and/or truck production falls below the defined standard, the manufacturer must pay a penalty, currently $5.50 USD per 0.1 mpg under the standard, multiplied by the manufacturer's total production for the U.S. domestic market.

Read more at en.wikipedia.org
 

#Obama Surrenders #2012 to #GOP w/ #Debtceiling #Compromise

Say goodbye to your 401K, hello WW3.

Amplify’d from www.jornada.unam.mx
El incumplimiento de pagos habría sido devastador, señala el presidente
El senador republicano por Kentuky, Mitch McConnell, luego de la aprobación de las medidas para reducir el déficit en Estados Unidos, que ponen fin a una prolongada disputa política que tuvo en vilo a la economía mundial Foto Ap
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As USG Publicly Links AlQueda and Iran, Is WW3 Imminent?

China, Russia, and Germany are heavily invested in Iran for their oil. The USA could never make an offensive move without upsetting three of the most powerful governments in the world.

Amplify’d from seeker401.wordpress.com

The U.S. for the first time formally accused Iran of forging an alliance with al Qaeda in a pact that allows the terrorist group to use Iranian soil as a transit point for moving money, arms and fighters to its bases in Pakistan and Afghanistan.

The Treasury Department outlined on Thursday what it said was an extensive fund-raising operation that uses Iran-based operatives and draws from donors in oil-rich Persian Gulf countries such as Kuwait and Qatar. The Treasury said it had sanctioned six al Qaeda members for allegedly overseeing this network.

The U.S. has long been concerned about alleged Iranian support for the terrorist group, though Iran and al Qaeda hold differing interpretations of Islam and divergent strategic interests.

But Tehran, anticipating the U.S. troop withdrawals from Iraq and Afghanistan, has been moving increasingly to assert its regional influence. Iran has helped smuggle sophisticated weapons into those countries to hasten the withdrawal of American forces, the U.S. says—a charge Tehran has denied.

U.S. officials said on Thursday that they believe Iranian assistance to al Qaeda is driven by the same motivation: ridding the Middle East and Central Asia of U.S. forces. “The Iranians are allowing their territory to be used by this network…I think it stands to reason that Iran is getting something out of this as well,” said a senior U.S. official.

Officials at the Iranian mission in New York called the allegations “totally baseless.” Alireza Miryousefi, the mission’s spokesman, said “the Islamic Republic of Iran itself has been a victim of acts of terrorism in the past which have resulted in the loss of hundreds of innocent Iranian lives.”

Read more at seeker401.wordpress.com
 

PIMCO CEO Says Despite #Compromise & #Debtceiling, StockMarket & #USD Will #Collapse

Get out of your stock market positions now! Gold, silver, food commodities are safer. UK Pound perhaps, but currencies will tank along with global stock markets. The official collapse of the American Empire begins now

Amplify’d from abcnews.go.com

PIMCO CEO Mohamed El-Erian: Budget Deal Will Only Bring Short-Term Relief


By IMTIYAZ DELAWALA
WASHINGTON, July 31, 2011


One of the most prominent global investors says that a potential budget deal in Washington will only bring short-term relief, and it won't remove the threat of a U.S. debt downgrade by credit rating agencies.


"I think this compromise will lead to an increase in the debt ceiling, and therefore avoid default," said Mohamed El-Erian, CEO of PIMCO, a global investment firm and one of the world's largest bond investors said today on ABC's "This Week With Christiane Amanpour." "But this relief will be short."


"We have one rating agency out there that said it would downgrade unless certain things happen, and these things are not happening fast enough," El-Erian said of the budget framework being negotiated.


"If the U.S. loses that AAA status, it will be much more difficult for the U.S. to restore growth, so it's unambiguously bad," El-Erian added.


The potential budget deal may not settle world markets concerned about the U.S. financial outlook, he believes.


"The rest of the world is watching, and this will do very little to reduce the concern that the rest of the world has about the role of the U.S. in the global economy," El-Erian said.


The potential budget agreement "does nothing to restore household and corporate confidence. So unemployment will be higher than it would have been otherwise, growth will be lower than it would be otherwise, and inequality will be worse than it would be otherwise."


El-Erian questioned the impact of discretionary spending cuts that will likely make up the short-term budget savings in any final agreement.


"We have a very weak economy, so withdrawing more spending at this stage will make it even weaker," El-Erian said.


ABC News' Jonathan Karl reported overnight that negotiators had reached a tentative framework for a deal that would include a debt ceiling increase of up to $2.4 trillion and guarantee an equal amount of deficit reduction over the next decade.


But Karl cautioned that the mantra on Capitol Hill remains the same -- "nothing is agreed to until everything is agreed to." And ABC's Jake Tapper reports that White House officials put the odds of reaching an agreement before Tuesday's deadline at 50/50."

Read more at abcnews.go.com