In the Pipeline: 4/28/11

Somebody gets the whole idea of subsidies . . . E&E News (4/26/11) reports: House Majority Leader Eric Cantor (R-Va.) today said that he could support eliminating subsidies for major oil companies “in a broader, broader sense” as part of a tax reform effort that would close loopholes while lowering overall rates…Pressed by Fox News on the apparent support for a rollback of oil industry tax benefits that Speaker John Boehner (R-Ohio) offered Monday, Cantor sought to reboot the politically volatile debate by putting it in the context of corporate tax reform — a top priority for both parties ahead of high-stakes spending and deficit talks…Asked by Fox News if he supported “taking away the subsidies,” as pitched by Democrats and President Obama, Cantor replied: “I support doing so in a broader, broader sense, OK?”…”I’m saying that the tax code, as it stands now, has failed,” Cantor added. “We need to go about broadening the tax code, getting rid of loopholes, special interest loopholes. If you characterize this as that, fine.”

Today’s lesson in monetary policy for Treasury Secretary Geithner: a weak dollar means higher oil prices CNBC (4/28/11) reports: Oil prices slid from earlier highs on Thursday as prospects for slower growth in the world’s top economy dampened sentiment, outweighing a sliding dollar and signs of lower North Sea supplies…”I think there are some concerns about how the US GDP will come out for Q1. The dollar is still weak, while oil is falling, so I think it’s demand driven. It’s the uncertainty about the demand from the U.S.,” said oil analyst Thorbjorn Bak Jensen at Global Risk Management…Federal Reserve Chairman Ben Bernanke said on Wednesday the US labour market was still in a “very, very deep hole” and opted to keep interest rates unchanged, lowering expectations for growth prospects and fuel demand.

Supply follows demand, but the price is the gatekeeper of the free market Reuters (4/27/11) reports: Russia, the world’s largest oil producer, faces a regional fuel supply crisis that could quickly spread after an order by Prime Minister Vladimir Putin to curb domestic pump prices led oil firms to increase export volumes…Shortages that have been building since Putin told oil firms in February to restrain retail prices came to a head last weekend, when almost all independently owned gasoline stations in the Altai region ran out of fuel…If they spread, the shortages could eventually hurt the popularity of Putin, who as the head of the government bears direct responsibility for economic policy, months before a presidential election which is due next March…Motorists in Altai, a Siberian region to the north of Kazakhstan, are now queuing in long lines at stations belonging to major oil companies, primarily Rosneft (ROSN.MM) and Gazprom Neft (SIBN.MM), which are still selling fuel…”Today our drivers have been arriving late to pick up clients because it’s so difficult to find a petrol station with fuel,” Yelena, a taxi dispatcher in the nearby city of Novosibirsk, told Reuters by telephone on Wednesday.

Remedy for high gas prices? Increase taxes. I guess you don’t have to fill up your tank if all you do is walk across the student quad to get to work New York Times (4/28/11) reports: Gasoline prices are above $4 per gallon in much of the country, a reminder that our dependence on oil carries a great cost. President Obama has promised that the Justice Department will be vigilant in pursuing price-gouging at the pump, but what we really need is to address the full set of energy-related problems, with a focus on spurring clean energy innovation…Our trade deficit arises in large measure from the hundreds of billions of dollars we pay for foreign oil. The imbalances threaten America’s economic stability and national security. Our consumption of fossil fuels and our energy inefficiency are a drag on our competitiveness and increase air pollution and the threat of climate change…To compete globally, we need to encourage clean energy innovation while letting the market decide which particular technologies prevail. Experience in fields like information technology and telecommunications suggests that creating demand for innovation is far more effective than subsidizing company-specific research projects or providing incentives for particular technologies. Governments just aren’t good at picking winners; witness the billions wasted on corn-based ethanol subsidies.