Sunday, November 05, 2006

Proposition 87

First a disclaimer. I work for Chevron. Nothing I say here has been endorsed by Chevron, it is simply my opinion.

I believe that Proposition 87 on the California Ballot in November 2006 is overall a bad idea.

Most oil production in the United States and the world carries a "royalty." That is not unusual. California was one of the few exceptions. However, California has some of the stiffest taxation in the nation, which I suspect more than makes up for it. So this is, in essence, California enacting a new "windfall profits" tax.

Is this good or bad then? Well the structure of the tax is such that the highest payments happen when prices are high. That kind of graduation is good. there is also a limit on the total amount that will be brought in, so the tax goes away at some point. That's fine in theory. Once a tax is in place, it often gets extended or rates changed. The royalty might result in fewer barrels reduced ultimately. It depends on prices and timing. There is no chance that it will result in more oil produced.

A few problems though. First, enacting taxes on top of an already high tax burden tarnishes California's "already tarnished reputation" as a place to do business.

Second, when a company considers where it is going to work, stability, or at least perception of stability is an important consideration. California's proposition system in general reduces the stability of the economic environment.

Third, the backers of this tax make it sound as if it is a tax on gasoline. It isn't. It is a tax on crude oil production. In economics 101, you learn that taxes are borne by both companies and consumers, in some varying ratio, depending on the elasticities of supply and demand. This will have the same impact. Simply passing a law that prohibits market forces from working never works. I have heard people say that the royalty will not affect prices. This might be true in times of very high price and margins like today. But here's how it works. As prices come down, (and they will come down), the price of oil will be set by whoever has the highest marginal cost of a barrel. Anyone whose barrels cost more to produce than the price will shut down production. Cost here includes everything it takes to get a barrel out of the ground and to a refinery. As prices slide, one of two things will happen, either, the companies producing in California will shut down because their costs exceed the price, or our oil becomes the price setter. Either way, consumers pay the price.

Another issue, is that this tax mainly hurts companies with production in California. Chevron having the highest production in the state. This is sad, more than anything. Chevron is actually a really good company in the scheme of things. The company has taken a lot of heat over the years for staying in California, when the clear trend is for oil companies ot go to Texas. So this measure is kind of pro-Shell, pro-BP, pro-ExxonMobil (all of which are much bigger than Chevron).

The final issue I have with it is the direction of where the funds go. There seems little oversight or governance. It is a huge obligation for what might be basic research in alternative energy. As a California resident, I want those funds to go towards reducing my tax burden, not to finance some pie in the sky boondoggle.

Monday, October 30, 2006

Oil Prices and Supply

First off, if you drive a car that gets less than 20 MPG, you have no cause to protest high prices. You are the problem.

The current high prices at the gas pumps are driven by factors that work all the way back to really basic supply and demand issues. People often say that oil is a finite, non-renewable resource. I'll buy the non-renewable part, but not the finite part. OK, oil is technically not infinite, but practically speaking we will never run out of oil.

The issue is how fast can it be produced? Today the world is producing about 85MM barrels per day. By all accounts that is with all production going full out.

Here's what will happen. When demand for oil and the world's ability to supply it are out of balacne, prices go up because demand is pushing the limits of supply capacity. Two things will happen in response. Consumers will make choices that will curtail their usage of enrgy--short and longer term structural changes; producers will ramp up efforts to deliver more.

Either that will be enough to ease the supply demand balance, or it will continue to happen for a while. In either case, ultimately the price stabilizes until there is another imbalance. If it the two effects are enough to ease the prices a bit, consumers have less incnetive to save and producers have less incentive to spend money to develop more resources.

There are a few things that you can be certain of in the absence of government interference n the free markets.

We will continue to use our technically finite supply of oil.
People will adjust their lives to compensate for the increasing cost of energy.
As cheaper alternatives appear, they will replace oil in our energy mix.

Thursday, July 20, 2006

Padel (Paddle) Should Be the Next Big Sport

I have played a lot of paddle and racquet sports in my life. I was a passable racquetball player and a horrible tennis player. I could always get a really good workout playing racquetball, but could never keep the ball alive long enough in tennis. Then you end up chasing the ball or having to go get it in the street. I did not have the patience for the learning curve. Just fuhgeddaboudit.

But tennis is nice, because it is outside.

In 1990 I moved to Argentina with my job. The country was in the grips of a craze for a sport called paddle (pronounced like pah del).

I fell in love with the game. It is a lot like tennis, scoring is the same, court kind of looks the same. It is normally played outside. The big difference is the walls. The court is surrounded by walls and fences--the walls are the boundary lines and they are live. Passing shots aren't--you get a second chance. You don't have to chase those passed balls. If the ball hits off the end of your racquet it doesn't end up three courts over. Serving is low, rather than high, so no more shoulder problems, and because it's low and slower, the service returner has a really good shot at getting the ball into play.

The learning curve is much lower and even a novice player can get a decent workout the first time he plays. The sport is big in South America, Mexico, and Spain. The court is smaller than a tennis court (its 33X66 feet), and you don't need much room around it--just a place to get in and out of the court.

What's the problem here then? Well it's the usual chicken and egg thing. It is hard to find a court, equipment is not easy to find, and good luck finding a partner or opponent.
Following is a descripion of the game that highlights some of the differences between paddle and tennis.

Paddle
A Brief Description

Paddle is a tennis-like game played with a solid paddle, on a slightly smaller court with walls and fences around it. In Argentina, paddle is normally played as a doubles game. Scoring is the same as in tennis. The lines painted on the court are in the same pattern as a tennis singles court, and they mean the same thing.

The main differences between tennis and paddle have to do with the walls. In the back, and extending partway down the side is a concrete or brick wall 4 meters high. On the sides, in the center part of the court is a chain link fence. It is normally either 1.5 or 4 meters high. Essentially, the fences and walls can be thought of as a vertical extension of the back and side lines. If the ball hits a wall or fence on the fly, it’s out (there is an exception to this though, Exception No. 1). If it hits after one bounce it’s still alive (there’s an exception to this too, Exception No. 2).

Exception No. 1 is as follows. I said that the walls and fences are like a vertical extension of the lines. The exception is that you can hit the ball against your own back or side wall on the fly (not the fence). This allows a player to smash the ball into his own back wall as a last resort when he can’t get back fast enough to make a “normal” return.

To put the ball into play, the server bounces the ball, and hits it to the service court diagonally opposite from him. The ball must be below his beltline when it’s hit. It must bounce in the opposite service court after crossing the net, and it can’t hit the wire fence even after bouncing (this is exception No. 2). Rules for double faults, etc., are basically the same as in tennis. There is one trick to watch for; what would otherwise be a let serve, isn’t, if it hits the wire fence before bouncing for the second time.

The person returning the serve must let the ball bounce once before hitting it.

Miscellaneous:

• You don’t have to use the tether on the paddle. Therefore, you can switch hands if you want.

• If a legal shot, after bouncing on the opposite court, leaves the area of play, the point goes to the team that hit it.

• As in tennis, a “Murphy,” i.e. hitting the opposing player with the ball, goes to the team that hit the ball.

• You can normally tell whether a ball hit the floor or the back wall first by its spin. If the ball rebounds strongly towards the net, it was long. If it kind of dies, it was good. If the ball isn’t spinning, it hit at the intersection of the walls and was therefore good. Bounces at the side walls can often be determined similarly.

Wednesday, June 28, 2006

Flag Burning

So here's the deal.

What makes America great is that we have a diversity of views and, more importantly, that people are FREE to express those views. The principles upon which our nation are founded recognize that govenment does not GRANT freedom, it can only take it away.

I hate that people want to burn the flag and that they believe that is the best way to express their views. But at the same time, I believe that is their right, unless they are breaking local fire safety ordinances, endangering others, or impinging on others' rights.

A flag burning amendment is simply the wrong approach to this issue.

Like the gay marriage amendment, this is a bill that was pushed through congress in a transparent attempt at election year labeling. You will begin to hear it soon, "Not only is my opponent pro-gay, he is also for flag burning."

In any case, the whole point of this country is that you CAN burn the flag. Removing that right diminishes us.

Saturday, June 10, 2006

Amazing Slide

This is an incredible chart showing George Bush's amazing slide since his 90% approval rating following 9/11. You can argue that there was nowhere to go but down and that is true. Now there is nowhere to go but up.

His administration has been based on trying to get a series of short term feel good wins, while they ignored the principles that made America great.

This is a Marathon not a sprint. I believe that history will not be kind.

Wednesday, June 07, 2006

Stolen Elections

Imagine the Republic of Kazbekluchistan. They have moved towards a representative democracy, but of course they need to establish a democratic tradition.

They have observers for their national elections because there is great concern that the currently elected president will use his powers and influence to manipulate the elections.

Going into the elections a number of irregularities are observed: the government changed rules to prevent people from receiving their absentee ballots, People were illegally removed from voter rolls, last minute changes prevented people from voting at all.

On election day, areas that were favorable to the contender had severe shortages of voting machines, some areas, known to be favorable to the current president had unrealistically high turnouts, while other areas had unrealistically low turnouts. Some areas even blocked out the official observers citing security emergencies. The people running the elections were closely affiliated with the current president.

The majority of the "anomalies" were in favor of the ruling party. There is good evidence that the ruling party gained over 300,000 votes through these anomalies, while the election was decided by less than 100,000.

Kazbekluchistan is a fictional place of course, but the circumstances are not. The above describes what happened in Ohio in 2004, handing George Bush a second term.

It is disgraceful. If this happened in another place we would shake our heads and say "Those Kazbekluchistanians." But it happened here, here in the United States of America.

Robert Kennedy Jr. has a compelling article in Rolling Stone magazine, "Was the 2004 Election Stolen?" Why didn't the big news sources pick this up? Why is the Rolling Stone the only news source that has really picked up on this? Why not sooner? Some days I'm not too proud to be American.

I still think America is a great country, full of people of principle, who believe that stealing elections is a bad thing, even if their guy wins as a result. It's sad. We used to stand for something, more and more it seems that we stand for winnning at all costs. I hope that somehow we can find our center again.

Saturday, January 14, 2006

Loss

Continual loss is a fact of life. That sounds really harsh, but it's true. From the day you are born, you begin to leave innocence and youth behind. When we are young, the loss has some very powerful compensations. Wisdom replaces innocence, strength and ability replace youth.

At some point, growth in wisdom tapers off, but it does grow until, perhaps, dementia sets in. Strength begins to decline shortly after you get it unless you work hard to maintain it, in which case you lose time. But those are the gradual losses. We see them coming and they are inevitable. We accept them.

Sudden wrenching loss is inevitable for most of us too. The parent or spouse who dies in an accident or from a heart attack. The swindler who cons us out of our life savings (think Enron).

These wrenching losses change us--even when they happen to someone else. When we hear of a child who is kidnapped while walking to school, we start driving the kids everyday. We lose time, the kids lose exercise and independence and they learn to fear.

And these changes are like a ratchet. Once they happen we seldom go backwards. We learn. But this is a rare case in which learning may not be completely positive. With learning comes the risk of completely losing our youthful spirit.

So a challenge that I put to you is once a day, think about your youthful defiance and determination. Put aside learned fear and stand up for something that is right. Be fearless.