The Oil Dividend

One of the few welcoming declines in this economy is the continued downward spiral of the price of oil. Crude oil prices have plunged from their highs of $140 a barrel this past summer to $42.14 a barrel for January - prices last week alone fell more than 25%, the biggest one-week decline since the Persian Gulf War in 1991.

As the economic picture worsens, lower energy prices fueled by oil may be one of the factors that help to cushion the fall for many tax payers. Diminished demand has translated into lower prices at the gas pump, acting as a natural tax cut for many Americans. The timing for this couldn’t have been better - lower oil prices will also mean that more Americans will be able to heat their homes as we head into the winter months.

In response, OPEC has signaled that it would most likely cut production of oil to stave off declining prices. OPEC group president Chakib Khelil told reporters last week that a "severe" cut may be needed to halt declining prices.

But Calculated Risk doesn’t see it that way. The economics and forecasting blog notes that oil prices are below Gulf Cooperation Countries (GCC) expenditures ($40 per barrel compared to $50 per barrel in government spending), making a talk of production cuts just what it is – talk. As an aside – there is some great material on this site, but be forewarned: if you’re looking for a Kudlowesque view of the economy you’d better look elsewhere.

Another effect of declining oil prices - it appears to lessen the demand for electric cars.

The Jindal Effect?

Louisiana voters have spoken, and they’ve sent two republicans to Congress: one will replace scandal-tainted democrat William Jefferson and the other will replace a retiring incumbent republican. Interestingly, Anh "Joseph" Cao, who beat Jefferson by three percentage points will become the first Vietnamese-American in Congress (nice to see this in the republican party).

In a year of devastating losses for republicans, these victories provide small consolation. But they may also be viewed as a positive sign for LA Governor Bobby Jindal, who may or may not be harboring national political aspirations in the near future.

Hey Zardari, Is Your Refrigerator Running?

Sorry to make light of a very tense situation, but this story made me chuckle. As a Howard Stern fan for many years, I envisioned the following phone conversation when I read the story:

Caller: Uh, yes…is Asif there? This is Pranab Mukherjee
Pakistan: Hold on, let me get him.
Caller: (giggle)..shh, shh, he’s coming to the phone!
Zardari: Hello?
Caller: Ah, yes, Asif, this is Pranab Makherjee, India’s Foreign Minister.
Zardari: Yes, yes, I know who you are, what do you want?
Caller: Well, we have captured another terrorist and he is saying that your office had direct participation in the Mumbai attacks!
Zardari: That’s impossible, what’s his name?
Caller: Bahb al Booie…
Zardari: Bahb al Booie? Bahb al Booie?
Caller: Yes, Bahb al Booie, and he was captured with Howard Stern’s Private Parts in his possession!
Zardari: @&*^$! (hangs up phone) Who the Hell is screening my calls?

What A Tangled Web Charlie Weaves...

Now he’s getting downright blatant – federal records show that Rep. Charlie Rangel (D-NY) paid $57,500 from a campaign account to his son’s web design company for modifications to the representative’s internet page (addition of a Donate NOW radio button, no doubt) over a two year period – the highest amount of any other House member during the same period. And while using campaign funds to pay relatives technically isn’t illegal, it is indicative of why the American public hates Congress.

Rangel, Chairman of the House Ways and Means Committee, is already in hot water with the House Ethics Committee (har!) for possible tax improprieties, including charges that he improperly used a rent-subsidized New York apartment as his office; and that he failed to disclose rental income from a luxury villa in the Dominican Republic purchased in part with loans from a lobbyist. Rangel’s defense – he wasn’t aware of the implications of his activities, as his work on Ways and Means (you know, the body that writes the tax code) prevented him from understanding tax laws.

We have our own Untouchable here in Philly; and as is usually the case, karma will eventually catch up.

Stimulus Package Bleeding Green

This is what I was referring to last night amid my alcohol-infused rant - a major portion of the stimulus package under consideration – over a half trillion dollars over two years – is to be spent on tax rebate checks and a myriad of “green” projects ranging from home weatherization to renewable energy.

Look, I realize it’s politically expedient for Obama to appear to be championing the Middle Class in its hour of need, but stimulus checks are the economic equivalent of feeding a man a fish versus teaching him how. And I even concede that this particular downturn may a different animal than in past recessions, requiring the government to step in to minimize job loss through spending on infrastructure improvement projects. For one thing, they are sorely needed; for another, I feel it will help to stave off a larger more ominous downturn in commercial construction that is right around the corner.

But let’s stick to what we know – government can’t create wealth, it can only foster its creation and subsequently spend it. So let’s stimulate the economy through smart tax policy while addressing infrastructure improvements and energy independence through practical investment on bridges and highways, clean coal plants, nuclear energy, and additional petroleum refining capabilities.

Friday Night Ramblings...

It’s Friday, and I have my trusty red by my side. Tonight, it’s a 2006 Clos de los Siete, a fine inexpensive dandy from Argentina, and it’s going down very smoothly. Perhaps too smoothly. So if any of the following is incoherent or offensive (more so than my sober dispatches), I apologize in advance – I really do love you - it was the booze talking.

• Well now, the Dow appears to have ended up sharply today. That’s it, the recession is over, there is nothing to see here…please return to your lives. Despite a US economy that shed over 533,000 jobs last month (the worst in 34 years) investors apparently had a lot to be happy about as the averages gained over 250 points…the upturn was fueled on speculation that the federal government had no choice but to pass a massive stimulus package…um, yeah...as to what that package might be is anyone’s guess…if Obama includes cuts on corporate and marginal tax rates designed to stimulate investment, then we’re on to something…if they amount to more government welfare, er, Middle-Class tax credits, then we’re in big trouble…strike that, bigger trouble
• In a series of confusing motions, OJ Simpson was sentenced to up to 33 years in prison earlier this afternoon. Simpson’s years of dogged detective work in searching for his wife’s killer on Florida’s golf courses and night clubs have come to an end. Karma’s a bitch OJ. Speaking of Karma, our favorite Karma Chameleon, Boy George, has also been found guilty in a court of law, but for offenses wholly different from OJ’s – he’s been found guilty of kidnapping, and chaining his male escort to a bed. Oh, if only poetic justice could be a factor in sentencing…
• Reports out of New York tonight that Caroline Kennedy has expressed interest in filling the senate seat of outgoing Senator Hillary Clinton, should Clinton be confirmed as Secretary of State. Kennedy’s previous political experience is that….wait for it…she’s a Kennedy, who also happened to back the right horse at the right time this past presidential season…
• And while we're on horses, whatever happened to John Kerry? I mean seriously, the guy gives Obama his big break in 2004, allowing the-then state senator from Illinois the spotlight in an otherwise standard issue Democrat snoozefest, and then was one of Obama’s most enthusiastic, early supporters…word was that he was a shoo-in for State, and then…crickets…psst, John, did you tell them you served in Vietnam?

Big Oil Has Nothing on Big Education

According to a new report by the National Center for Public Policy and Higher Education, college tuition and fees have increased 439 percent since 1982, almost three times higher than the increase in family incomes.

In1982, the average cost of tuition at a public four-year institution was about $800, while the average cost of tuition at a four-year private institution for the same year was $4,639.

To put things into perspective, the average price of a gallon of gasoline in 1982 was $1.20. In December 2008, the average price for a gallon of unleaded gasoline is $1.81, down from its July 2008 high of $4.05/gallon (when’s the last time college tuition actually decreased?).

Now guess who is frog-marched in front of Congress to answer “To the People” for their predatory pricing practices?

I’ll give you a hint – it’s not the president of Harvard.