Production @ MindSay

Date Line June 17, 2007

Can you envision gasoline being affected by the Right-wing doctrine of inflicting "The most harm on the most people?"

Have you heard of ethanol? That great product which will be grown and serve to replace gasoline? You understand, of course, that the production of ethanol consumes significant energy and, as touted by many, will cause an increase in food prices. You do know that?

Well, in anticipation of the current joint effort of Congress and the Whitehouse, the oil industry has begun to scale back plans to expand refinery capacity. Smart move.

If the political unification holds, and produces the usual quality of planned social destruction, ethanol will be a bust.

However, even if it is successful, the objective is to increase the cost of energy; and that cannot be done if there is more product on the market.

Bush has called for a twenty (20) percent decline in gasoline use by 2017; that mandates a twenty percent decline in necessary production.

Why expand capacity, when the stated point is to reduce the amount of product currently being consumed by a fifth?

Obviously, if the only eighty (80) percent of current, or projected, gasoline needs is available, the reduction goal shall be achieved. Bush will enjoy his first and only successful "stated" objective.

Of course, the real cost of gasoline at the pump will probably double. More important, it will take far more than ten years to make ethanol a viable, widely distributed, alternative fuel.

In terms of scaled back capacity, what are we talking about?

Last year, the industry had projected a ten (10) percent increase in capacity; or roughly 1.6 million production barrels a day.

The Senate is seeking ethanol production to reach 15 billion barrels, or 41 million barrels a day, by 2015. The Senate also expects that to double by 2022.

Clearly the Senate expects there to be more ethanol than gasoline. If we put that in comparative terms, 41 million bbl ethanol verses, at the ten percent expanded capacity, about 18 million bbl gasoline.

Those figures would make the United States a net exporter of energy.

There has to be something wrong with this picture. The published numbers simply do not make sense. The America cannot grow that much raw material; we don’t have it in corn, or in grass, or wood.

The cost of any capital expansion project is amortized over decades. It is not expensed against income in the year the expenditure is made. If you reduce future income, you reduce the justification for capital investment. If you threaten profits, you reduce the basis, justification, for business expansion.

Back to high school economics, the Supply & Demand curve; there is an optimal point where production matches demand producing neither shortage nor excess. Let demand exceed supply and watch prices rise.

Cut production capacity, with constant demand, and unit prices will be seen to increase. Cut production capacity, with constant decreasing demand, and unit prices will be seen to remain constant.

Let Congress try to manipulate the marketplace, and shortages are inevitable. To manipulate a market, it is necessary to control all aspects of that market.

To decrease our reliance on gasoline, it is necessary to do the thing Congress refuses to do; it is necessary to double the milage vehicles receive from a gallon of fuel. Look to Japan and Europe to push in that direction while American firms manipulate both their books and their Congressional delegation.

How do we impose the most harm to the most people? The American economy is twenty percent of the world economy. If we can destroy the American economy, we can collapse the world economy.

How do we impose the most harm to the most people? We must make the cost of goods and services in America increase. To do that we must decrease the supply side, while allowing the consumption side to remain constant.

Have you heard of "Supply-side Economics"? Ronald Reagan and the Right-wing Conservatives touted that, as they ran up record deficits.

Fudge with the supply and the demand, as reflected in real need, is unaffected. The only effect that can come from supply-side shortages is price increases; these will be followed by a collapse of competitive ability; which, in turn, will lead to more out-sourcing of back office analytical services, or out-sourcing of production.

Out-sourcing does not affect only one business class, that which is dependant on face-to-face contact with the consumer. Once all the industries, including food production, have been outsourced, there are no consumers, because there is no economy.

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