Obama Has a Plan To Manage Our Oil Reserve

Energy is playing a pivotal role in this year's presidential election. And a crucial aspect of America's energy security not widely discussed is how to best use America's Strategic Petroleum Reserve (SPR). Sen. Barack Obama is proposing a simple maneuver -- called an exchange, or swap -- that will help lower the price of oil for consumers, increase the amount of oil in the SPR, increase energy security, and leave taxpayers better off by about $1 billion. His proposal deserves to be adopted.


In 1975, after the Arab oil embargo, the U.S. created the SPR to protect against oil supply disruptions. That reserve now consists of 706 million barrels of crude oil, the largest stockpile in the world.

As the steward of that stockpile, the Department of Energy plays an important role in oil markets. Merely announcing oil acquisitions or sales from the SPR moves oil prices. The SPR's drawdown capability of 4.4 million barrels of oil per day surpasses the daily production capacity of Iran, Iraq or Venezuela.

The authority to sell oil from the SPR is contingent on a presidential finding of a "severe energy supply interruption." In the past 33 years, there have only been two sales from the SPR: in 1991 to support Operation Desert Storm, criticized for being too late; and a widely applauded 2005 post-Katrina sale.

There is also another, little understood statutory authority that allows the Energy secretary to "exchange" oil from the SPR. This authority was created to allow the secretary to periodically change the SPR's composition to ensure that it remains useful to refiners and consumers.

The Clinton administration used this authority in 2000, exchanging crude for heating oil. Later that year, facing a possible heating-oil shortage, the administration loaned 30 million barrels of oil to the market, which was repaid with interest in the form of additional oil at a later date.

This met two objectives. The swap added oil to the SPR at no cost to taxpayers and it put downward pressure on prices.

The Bush administration has used the exchange option extensively. As a matter of policy, however, it has used this option only for minor supply disruptions, and not to intervene in markets due to high prices.

Today, with historically high oil prices, it is time to debate using the SPR. Some argue that the reserve should only be used in emergencies. Others say that we should use all the tools at our disposal to help consumers.

Fortunately, we do not have to resolve these philosophical differences. Instead, we can improve the management of the SPR and maximize its value to the taxpayer. The oil in the reserve now is all light crude, which is easier and cheaper to refine into gasoline, a reflection of refining capability at the time the SPR was created. Over the past three decades, however, U.S. refining capacity has become increasingly sophisticated and complex, because the world's oil is increasingly heavy and harder to refine. Today, about 40% of our refining capacity is configured to handle heavier crude oil.

We now confront a mismatch between U.S. refining capacity and the oil mix in the SPR. In a 2007 report, the Government Accountability Office (GAO) found that in an emergency this mismatch could reduce U.S. refinery capacity by 5% or over 735,000 barrels per day in total as some refineries scale back production to accommodate the SPR oil. The GAO recommended that the Energy Department change the reserve's oil mix to at least 10% heavy oil, roughly 70 million barrels.

This could be accomplished through a swap. From a policy perspective, this would enhance the utility of the reserve, aligning its oil with U.S. refining capacity, while also putting short-term downward pressure on oil prices. From a business perspective, the DOE could craft an exchange to either increase the oil in the reserve, yield a cash bonus, or both. Light crude is more valuable than heavy crude (by about $12 to $18 a barrel), so swapping one for the other could bring in about $1 billion at today's prices.

The House and Senate are considering legislation to mandate such a swap, and Mr. Obama has adopted the concept as part of his energy plan. The public benefits are compelling. Swaps that help energy security, refiners and consumers should be a routine part of managing the SPR.

Bush Has a Good Economic Record

By KEITH MARSDEN.- Successive speakers at the Democratic National Convention poured scorn on President Bush's economic record. The clear aim was to justify the party's call for "change," and to undermine support for Republican presidential nominee John McCain. His election would mean a "third Bush term," delegates groaned. Yet Democrats cited no good evidence for their claims that the administration has produced a stagnant economy, widening disparities of income and wealth, high unemployment, and a heavy burden of government debt (supposedly resulting from an unwise military intervention in Iraq).

How does the performance of the U.S. economy really compare with other advanced economies over the eight years of George Bush's presidency? Data published by the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), the World Bank, the International Comparison Program (ICP) (a cooperative venture coordinated by the World Bank) and the U.S. Census Bureau allow a nonpartisan, factual assessment. Here are some of the findings:

- Economic growth. U.S. output has expanded faster than in most advanced economies since 2000. The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period 2001-2008 (including its forecast for the current year). President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. This U.S. expansion compares with 14% by France, 13% by Japan and just 8% by Italy and Germany over the same period.

The latest ICP findings, published by the World Bank in its World Development Indicators 2008, also show that GDP per capita in the U.S. reached $41,813 (in purchasing power parity dollars) in 2005. This was a third higher than the United Kingdom's, 37% above Germany's and 38% more than Japan's.

- Household consumption. The ICP study found that the average per-capita consumption of the U.S. population (citizens and illegal immigrants combined) was second only to Luxembourg's, out of 146 countries covered in 2005. The U.S. average was $32,045. This was well above the levels in the UK ($25,155), Canada ($23,526), France ($23,027) and Germany ($21,742). China stood at $1,751.

- Health services. The U.S. spends easily the highest amount per capita ($6,657 in 2005) on health, more than double that in Britain. But because of private funding (55% of the total) the burden on the U.S. taxpayer (9.1% of GDP) is kept to similar levels as France and Germany. The U.S. Census Bureau reports that 84.7% of the U.S. population was covered by health insurance in 2007, an increase of 3.6 million people over 2006. The uninsured can receive treatment in hospitals at the expense of private insurance holders.

While life expectancy is influenced by lifestyles and not just access to health services, the World Bank nevertheless reports that average life expectancy in the U.S. rose to 78 years in 2006 (the same as Germany's), from 77 in 2000.

- Income and wealth distribution. The latest World Bank estimates show that the richest 20% of U.S. households had a 45.8% share of total income in 2000, similar to the levels in the U.K. (44.0%) and Israel (44.9%). In 65 other countries the richest quintile had a larger share than in the U.S.

Investment has been buoyant under President Bush. According to the ICP, outlays on additions to the fixed assets (machinery and buildings, etc.) of the U.S. economy amounted to $8,018 per capita in 2005 compared to $4,963 in Germany and $4,937 in the U.K. Higher taxes on the upper-income Americans, as proposed by Mr. Obama, are likely to result in lower saving and investment, less entrepreneurial activity and reduced availability of bank credit. Lower-income Americans would be among the losers.

When considering the distribution of income and wealth in the U.S., another factor that should be taken into account is the sharp rise in the number of immigrants. The stock of international migrants (those born in other countries) in the U.S. grew by nearly 10 million from 1995 to 2005, reaching a total of 38.5 million according to the World Bank.

The inflow of migrants may have restrained the growth of average income levels in the bottom quintiles. Nevertheless, their earnings still allowed immigrants to remit $42 billion to their families abroad in 2006, double the level in 1995. So the benefits are widely spread among the families of immigrants remaining abroad -- an important U.S. contribution to the reduction of poverty in these countries.

- Employment. The U.S. employment rate, measured by the percentage of people of working age (16-65 years) in jobs, has remained high by international standards. The latest OECD figures show a rate of 71.7% in 2006. This was more than five percentage points above the average for the euro area.

The U.S. unemployment rate averaged 4.7% from 2001-2007. This compares with a 5.2% average rate during President Clinton's term of office, and is well below the euro zone average of 8.3% since 2000.

- Debt interest payments. The IMF reports that the interest cost of servicing general government debt in the U.S. has averaged 2.0% of GDP annually from 2001-2008, compared with 2.7% in the euro zone. It averaged 3.2% annually when President Clinton was in office.

The cost of the wars in Iraq and Afghanistan has been largely absorbed in a relatively small increase in the defense budget (to 4.1% of GDP in 2006 from 3.8% in 1995). A much higher proportion of U.S. income was devoted to the military during World War II and the Korean War.

The evidence shows that much of the Democratic Party's criticism of President Bush's economic record is wide of the mark. True, the economic slowdown now affecting most advanced countries will likely result in rising unemployment over the coming months. But thanks to sensible policies pursued by the Bush administration (not always with adequate support from a Democratic-controlled Congress), the U.S. economy is sufficiently flexible to keep unemployment below the 7.7% peak reached in the last postrecession year of 1992.

The main risk is that, if elected, Barack Obama will pursue a "social justice" strategy. This would encompass higher taxes on entrepreneurs, savers and investors, more direct government intervention in the economy, and protectionist policies (including revoking existing trade agreements) aimed at safeguarding the jobs of his union backers in "old" industries and public services. If so, the pain is likely to be more widespread and prolonged.

Why Obama Can't Close the Sale

By AL HUBBARD.- Even before John McCain shook up the presidential race by tapping Gov. Sarah Palin to be his running mate, polls weren't showing the late-August lead that Barack Obama (and many Republicans) expected. Why so?


It's not because of the brilliance of the McCain campaign. Rather we believe that -- despite the media's best efforts to exempt Mr. Obama's policies from critical examination -- American voters aren't sheep. They pay attention to the candidates and positions and make wise decisions about who should lead the country.

True, Mr. Obama enjoys several advantages. Republicans are struggling nationwide in head-to-head contests. Democrats lead in voter registration, and have a well-funded presidential candidate.

Yet Americans have not committed to Mr. Obama. Why?

Clearly, Mr. Obama's weakness on foreign policy is a factor. He has a knee-jerk preference for diplomacy with China, Europe and Russia over the security of the American people and our closest allies. He hasn't explained his shifting positions on Iraq and Iran, among other hot spots. And he felt compelled to make up for his experience gap with Mr. McCain by picking Sen. Joe Biden to be his running mate.

But here's the thing: It's not that Mr. Obama hasn't been specific enough in his governing plans. To the contrary, he has been very specific about his tax policy, health-care and energy proposals. It's that voters are paying attention and appear not to like what Candidate Obama is saying.

Mr. Obama has proposed a massive tax increase on investors, business owners, and the "wealthy." At a time when the American people rate the economy as the central issue of the campaign, a tax hike doesn't make a lot of political sense. Voters know that a tax hike won't help the economy.

Moreover, Mr. Obama's tax plans would directly or indirectly harm U.S. investors by raising the capital gains and dividend taxes. More than half of U.S. households are equity owners, so Mr. Obama's proposal risks alienating half the population.

Mr. Obama claims to offer a tax cut to moderate-income families, but a significant portion of Mr. Obama's tax plan is a welfare giveaway costing more than $648 billion over 10 years, according to the Tax Policy Center.

How so? He would authorize a hodgepodge of refundable tax credits covering everything from education, mortgage payments, child care and other items for people who do not pay income taxes now.

About 38% of U.S. households pay no income tax today. Under a President Obama (whose policies would shave 15.3 million households off the tax rolls) that share would grow to nearly half of all American households.

We have been repeatedly told that everyone should pay their fair share. So this sounds grossly unfair and like a return of tax-and-spend liberal economics. No wonder there is a lot of doubt about the wisdom of the junior senator from Illinois.

Mr. Obama's health-care proposal is not quite HillaryCare, but it comes close. A national health insurance, heavily subsidized by taxpayers, would be offered to the currently uninsured. Mr. Obama's instincts on health care are always to move more people onto rolls of government-paid and government-mandated insurance, while depriving the marketplace the oxygen it needs for greater innovation, life-saving cures, and efficiency.

Americans have heard the refrain for government-provided health care before and know an expensive government giveaway when they see it.

Mr. Obama's energy policy is to drill less, consume less, tax more, and spend more. With barely a nod to nuclear energy -- the only meaningfully large, carbon-free source of domestic energy -- he is promising a massive increase in domestic, noncarbon-based energy from sources that produce only a fraction of our energy now.

He has also proposed massive tax increases on U.S. oil and gas companies while continuing to cut off vast swaths of U.S. territory to drilling.

Again, Americans are wiser than they are given credit. They know that if you restrict supply and tax production, prices go up.

The economic wisdom of Americans should not be doubted. They can see through Mr. Obama's proposals. They know that they will have to pick up the bill if Mr. Obama sends checks to people who already don't pay taxes; they know a centralized government-controlled health-care system will be more expensive, less efficient, and less friendly to patients and doctors. They know that the most effective way to bring down energy prices is by keeping all our energy options open, including more drilling in the U.S.

And they know that if a candidate has spent his entire career taxing more and spending more, that's what you'll get -- and more of it.

Mr. Obama is wondering why he can't shake Mr. McCain. His problem isn't his plans for the campaign. It's his plans for governing the country. Americans just aren't buying into them.

FDC atribuye alzas precios a carteles de comercios.-

La Federación Dominicana de Comerciantes (FDC) atribuye el que los precios de los productos que componen la canasta básica en el país se mantengan elevados a la existencia de "carteles agropecuarios" que manejan desde sus "alas de poder" las asignaciones de importaciones de mercancías. Iván de Jesús García, dijo en compañía del economista Miguel Sang Ben, que los actuales secretarios de Agricutura, Salvador-chío-Jiménez; y el Administrativo de la Presidencia, Luis Manuel Bonetti, asignan importaciones de productos básicos.

"Aquí prácticamente se ha entregado el control de los precios de los productos que más se consumen a cuatro compañías dominicanas y nosotros entendemos que eso no puede ser", afirmó García.

Dijo que productos como el ajo, cebolla, azúcar, y habichuelas pudieran estar llegando a más bajos precios a la población, pero que por un manejo de entrega de cuota a unos pocos, esos grupos se han puesto de acuerdo en la oferta de precios y se han ganado una millonada.

Puso de ejemplo que esas compañías compraron unos 30,000 quintales de ajo que se cosecharon en Constanza el pasado año y este año están haciendo lo mismo. Explicó que una libra de ajo importado desde China sale a RD$8.75 puesto en puerto valor FOB ($0,25 centavos USD), y si se suman los impuestos que envuelven RD$1.85, la libra sale a RD$10.60 (0,30 centavos de Dollar).

Sin embargo, el precio del ajo oscila entre RD$65.00 ($1,87 USD) y RD$89.85 ($2,54 USD) en los supermercados, dijo al explicar que eso se debe a que los supermercados compraron ese bulbo alos importadores a RD$38 libra ($1.08 USD)

Al explicar la "madeja" de esa comercialización, García indicó que el negocio está en que cuatro empresas importan más de 100,000 quintales al año y compran 30,000 quintales de ajo criollo, y que como el ajo importado desde China cuesta US$600 por tonelada, el valor por libra es de RD$8.75 (0,25 centavos de dollar) puesto en el país. Señaló que deja RD$500 millones (15 millones de dolares) "en beneficio de cuatro compañías".

Asimismo, indicó que también ocurre una sobreprotección de productos como el azúcar, la cebolla, y las habichuelas pintas.

Señaló que la cuota de importación de habichuelas desde Nicaragua la entregan a la FDC, pero la del mismo producto proveniente de EEUU "la otorgan ellos" directamente y ahí es que el negocio es grande". Aclaró que en el caso de los Contingentes agropecuarios (volúmenes de importación en un período determinado) se entregan por comisión y se publica todo por la Internet, por lo que no está hablando de esos permisos. A la FDC, dijo, le otorgaron 500 TM, de los Contingentes.

Según el presidente de la FDC con el caso de las habichuelas pintas el aspecto es más dramático todavía, porque compran las habichuelas de San Juan de la Maguana, y les autorizan importar las de EEUU, que les sale a US$30 el quintal (0,85 USD) , pagan RD$120 de impuestos ($3,20 USD) , es decir que el quintal les sale a RD$1,200 ($34 USD) , y sin embargo, la venden a RD$2,400 ($68 USD) "con una ganancia de RD$1,300 ($37 USD) se ganan RD$750 millones solamente en habichuelas (21 Millones de USD)

"Son carteles que hay, pues lo mismo pasa con la cebolla", recalcó García al explicar que la venden a RD$18 la libra al por mayor, la compraron a RD$8.00 (0,25 USD) y llega a RD$30 (0,85 USD) al consumidor.

Indicó que el precio de la cebolla es de RD$25 y 34.95 libra, en lo que esos intermediarios se ganan RD$225 millones. ($6,4 millones dolares)

Precisó que el escándalo más grande se da con el precio del azúcar, producto que no entra en los contingentes agropecuarios y donde se ganan más de RD$1,250 millones al año (36 Millones de dolares) , porque aquí todo el mundo sabe que hay un monopolio en el azúcar refino y quien lo tiene vende el producto a quien quiere y por eso hay una intermediación que se está ganando RD$300 por quintal ($8,75 USD) .

CEMENTO

El presidente de la Federación Dominicana de Comerciantes (FDC) informó que el sector comercial comenzó a reunirse para iniciar la importación de cementos, porque no ve razón para que el producto se esté comercializando entre RD$200 ($5,71 USD) y RD$210 ($6 USD) la funda.

Iván García considera que la funda de cemento gris debe costar RD$140 ($4 USD)

Afirma que también este producto, al igual en el de las varillas, hay un oligopolio, ya que hay cuatro cementeras que tras la "guerra de precios" se han puesto de acuerdo.

Mientras que en el caso de las varillas hay dos grandes productores que también controlan el precio y se ponen de acuerdo para bajarlo cuando saben que hay una importación grande para "explotar" a quien la hace, y luego que logran su objetivo fijan otro precio mas bajo.