From The Princeton Economic Institute:
In the introduction to "Art of War", translated by Thomas Cleary, he
relates an interesting story that nicely captures the Taoist
philosophy:
"According to an old story, a lord of ancient China once asked his
physician, a member of a family of healers, which of them was the
most skilled in the art.
The physician, whose reputation was such that his name became
synonymous with medical science in China, replied, "My eldest
brother sees the spirit of sickness and removes it before it takes
shape, so his name does not get out of the house.
"My elder brother cures sickness when it is still extremely minute,
so his name does not get out of the neighborhood.
"As for me, I puncture veins, prescribe potions, and massage
skin, so from time to time my name gets out and is heard among
the lords."
If there are 209 Million cars in America and we consume 29 Million bbls
of oil per day, the question is, "How do we bring down our consumption
so as to reduce the risk of being forced into another MidEast War?"
For every 3 mpg that we raise the average fuel efficiency of today's
car fleet, we save a million bbls per day in the consumption of oil.
Do the math....imagine if we raised the average mpg from less than
20 to over 40?
Sure we can send troops to the MidEast to preserve our National
Interest in securing a source of oil, but how intelligent is that as a
foreign policy? That is no better than the physician that punctures
veins and applies potions. The real answer is to think deeper,
to eliminate the disease before the symptoms become apparent.
Why fight for oil in the MidEast if there is an alternative?
Sure we can search for more oil the Arctic Reserve, but it is not
clear that this oil will be anywhere near sufficient to solve the
problem.
It will take at least 5 years to lay the pipeline to get the oil to the
market
and that oil may supply 1 million bbls/day for another 10 or 20 years,
if we're lucky. Is that really addressing the problem? 1 million
bbls/day???
Some of our clients working in the Gulf of Mexico have pointed to
similar problems in that area. There is still oil in the Gulf if you're
willing to drill in deep water, but just how are you planning to get
it to market fast enough to meet our ever increasing demands
for oil? The pipelines being laid do not allow enough flow of oil
to solve the problem. Laying new pipelines as the oil companies
move to tap larger fields deep in the Gulf or in environmentally
sensitive areas like the Arctic Reserve, is costly and time-consuming.
In any case, there just isn't enough oil in either the Gulf of Mexico
or in Alaska to meet our needs now, much less into the ever
rising energy demand future. To visualise our country as viewed
by oil driller, think of a "pin-cushion" with needles in every potential
location. There just isn't a whole lot more oil to be found in the US.
We import more than 50% of our oil and soon that percentage will
rise to over 70%. We are so much less vulnerable to an oil shock
than Japan. To rely solely on more oil drilling to solve our energy
needs is
dangerously irresponsible at best.
No one is asking the right questions. Today the administration is
again
asking OPEC to supply more oil to the West as Winter begins to bite
and the price of oil shoots ever higher. We are likely to see a
challenge
of the $40 mark before Winter is over. And some time in the year 2002
we are likely to see oil at $60, $80, $100, or higher. We don't have
time to wait for the pipeline to be laid in Alaska. We don't have time
to wait for the pipelines to be laid to deep water oil in the Gulf of
Mexico.
And even if we did, the oil in those places will not be sufficient to
meet
demand.
Clearly we do not have an energy policy at present. I would like to
believe the Gore/Lieberman argument that they will actually do
something to promote energy conservation, if elected, but the truth
is Gore has had 8 years to do something and clearly he has done
nothing. Why should we trust him to do something now that he hasn't
done already?
I am not optimistic that Bush would do the right thing either, but Gore
has a pretty bad track record when it comes to telling the truth.
I have a real problem with someone who lies on the small things
on such a regular basis. Perhaps that's why this election has been
such a close fought battle. No one is happy to have either one
of these guys as President. I would go so far as to say that each
voter out there is split down the middle as to who he thinks should
be the next President. If there is a piece to the puzzle that gives
me insight into the financial markets, its the fact that this election
battle will continue and the country will suffer. You cannot have
100 lawyers on both sides fighting over who will be President,
and yet expect the country's interests to be well served.
This means the Bear Market is not yet over.
If you haven't listened when we warned to get out the stock markets
before the September Turning Point, then you may believe that
you have ridden out the storm....think again!
There will be a time to buy stocks again. See our reports to
confirm the timing. For now we still recommend caution.
But what about the longerterm issues of energy self-sufficiency?
If the average car gets 20mpg or less, how can we double that
in a hurry to avoid dragging us into another war in the MidEast?
The technology is there to get 100 mpg. It is merely of function
of cost. Many people have complained that the govt is incapable
of designing a sensible plan of action. In Arizona the plan to
encourage alternative fuel vehicles turned into a $420 Million
boondoggle.....so say the editorialists. It wound up costing
the state taxpayer dearly. Many people in Arizona bought
SUVs that were able to take both alternative fuel and regular
gas, and guess what.?.....they have been only using regular
gas in those vehicles. The state govt subsidized the cost
of those alternative fuel vehicles and sharp consumers took
advantage of the plan to get a cheap car without making
any sacrifices in the driving habits.
As costly as that plan was, it did provide some interesting
lessons. The govt will have to think carefully in designing
a plan before implementing it. But was that $420 Million a total
waste? No! Many consumers were sincere. They bought
alternative fuel vehicles and are using them as such. Those
who use regular gas in their alternative fuel vehicle did get
quite a deal, but it may also be a useful hedge in an energy
crunch. If they can resort to alternative fuel when needed,
then they will also be serving the national interest.
Where many people see a boondoggle in Arizona, I see
some important positive changes. The tremendous interest
in this program is proof that if the govt supplies the incentive,
many, many people are ready to make the switch to better
gas mileage and alternative fuel vehicles.
Detroit should actually support this idea. It would be in their
own self interest to support a subsidy or tax incentive plan
that encourages the purchase of alternative fuel vehicles
and high mileage hybrid vehicles. Detroit is having more
and more trouble selling new vehicles. Recent evidence
suggests that Detroit is marketing only to the upper upper
middle class and above. They do not sell many cars that
are not fully-loaded with all the options. The simple reason
is that the price of a car has risen so fast that most average
people are holding onto their old cars longer....or buying
used cars. Used cars are lasting longer nowadays and
many people cannot justify the cost of a new car.
(Incidentally, this puts the ""Lie" to the CPI claim that inflation
is only rising at 2-3% per year. We all know that cars are
rising at 5% or more and that health care is rising at double
digit rates).
Detroit has figured out how to make money. They only make
real money on the most expensive vehicles. On large SUVs
the profit can be over $10,000 per vehicle. That is rather
enticing to Detroit, which explains why they focus so heavily
on the truck and SUV market sector. But is it intelligent to
continue producing ever more expensive SUVs to a
rich clientelle that is just now realizing that their paper profits
in the stock markets are not real????
Who are these guys in Detroit? Can't they do basic math?
Obviously they are banking on the idea that the stock market
will continue higher and that the good times will roll on forever.
They just don't get it.
Like the wise physician that cures a sickness before the symptoms
appear, Detroit should be lobbying the govt to provide tax
incentives for the purchase of hybrid cars and alternative fuel
vehicles. It would actually make Detroit popular in the eyes
of the public....something that has never ever happened before.
Instead, they will likely fight any such legislation. They are
too weak to stand up to the competition coming from Japan on
hybrid vehicles.
Incidentally, your Congress, those rascals who pay themselves
highly out of your tax dollars, have decided in their wisdom, not
to pass legislation on a $3000 tax deduction to promote
the purchase of green vehicles. It is possible that this legislation
will pass during the next session, but for now they have killed
it.
Who are these guys we pay to represent us in Congress and
what exactly are they thinking? When will they wake up and
smell the coffee? I'm tired of Detroit. I'm tired of Congress.
I'm tired of the Presidential candidates.
You might say that if we apply a program like that of Arizona
to the whole United States, that it would cost us $100 Billion
or more.....and you'd be right. Incidentally, do you know how
much the Gulf War cost? Sure the Saudis picked up a big
part of the tab, but do you expect them to do it again, during
the next MidEast War? What if Osama Bin Laden were
to take Saudi Arabia in a coup? Let you mind wander,
you'll come up with a million scenarios....but precious few
of them will replicate the Gulf War scenario where a rich
oil producing country picks up the tab for the war.
The failure of economics is in not factoring in costs that we
have yet to incur. It is hard for economists to put a price tag
on air pollution let alone a war that has yet to happen. A war
that many would like to believe will never come. Economists
know the price of everything of the value of nothing.
I have no doubt that we will see a war in the MidEast in the next
few years. It will no doubt involve the US. It will be very very
very costly. Scare tactics?? You bet. But before you write
me off....just reflect for one minute. The same models that
predicted the stock market selloffs this year are also predicting
a Panic Cycle Year for Oil for the Year 2002.
But who is going to change govt policy on the basis of cycles?
Only a physician who cures disease before the symptoms
appear would even consider such a crazy idea.
Our physicians (both Gore or Bush) are your classic quacks
who puncture veins and apply potions. The real "Art of War"
is in choosing your wars and in never allowing yourself to be
forced into a war you don't want to fight. . The time to act
is now. Send a letter to your Congressman. |
