Sunday, April 6, 2008

The Answer to Rising Fuel Costs

Here in America we are very dependent on fuel. Everything we do in our lives is linked to burning fuel - driving to work, watching TV, heating our homes - the list is endless. While we can attempt to reduce our reliance on fuel - as many are - it's impossible to eliminate our need for fuel from our daily lives.

Most fuels are made manufactured from oil. There are only a few countries

The United States doesn't produce enough oil for itself. We import well over half of the oil we consume. This gives the countries that we import from far too much power, both politically and economically.

There are many things that contribute to the price of imported oil, one of them being the expense in getting the oil here to begin with. In addition, the foreign oil companies often form cartels. Agreeing on common prices and charges, these cartels eliminate competition and keep prices high.

The answer to lowering the cost of fuel is minimizing the role of foreign companies in the equation. These outside oil companies have no current reason to offer the U.S. competitive prices because we can't go anywhere else for the oil; they know we're stuck. American oil companies have no incentive to charge less than the foreign companies because they know all the oil they produce will be bought anyway.

America needs to drill more oil. There are many untouched reserves throughout our country, including many here in Alaska. At the urge of environmentalists, among other groups, the U.S. government has so heavily regulated the industry that it is almost impossible for domestic oil production to grow, and in fact, oil production is shrinking. In 2006 the U.S. produced 5,103,000 barrels of crude oil per day, representing the lowest domestic production number since 1949. In 2005 we consumed 20,802,000 barrels per day, the highest in recorded history.

It is now too expensive in our country to open a new refinery - America's newest oil refinery was built in 1976. The number of U.S. refineries in operation as of 2007 was 149

Tuesday, April 1, 2008

Draft - Effects of Personal Responsibility on the Economy: A Layman's Point of View

Roman Pickle
I've recently found myself in a bit of a Roman pickle. If you disagree with my views that's not a good reason to stop reading. I'm not bashing others' ideas here, I'm trying to explain and justify my own. So, being a little to the right of most moderates, I have a difficult time finding people who share my opinions. I'll carry on now...

My Beliefs
I strongly believe that Capitalism is great. I don't believe the government should have a significant role in regulating our economy. Creative thinkers should have the freedom to pioneer their way into building innovative business models, and those daring enough to attempt such ventures should reap the benefits.

In a Socialist Society, these creative thinkers manage companies their country owns, if they're so lucky. They receive the same benefits as the guy running the same company across town. They both produce their goods and services to the exact specifications their government tells them to, never deviating, never experiment, never attempting development of a unique product. No chance to get ahead. If you work hard all day and the guy next to you naps the whole time, your paychecks are the same as one another. This model of society prevents personal ambition, creativity and invention. Countries like this do not advance technologically into the future. People don't have any individual voice. Socialist countries control what their people say and do, leaving them no freedom. What little money they pay you, they also tell you what you're allowed to buy with. But, if they get hurt or sick it's paid for. And if the government says you can go to college, they pay for it (but if they say you can't go, then you just can't go). I'm against Socialism for a lot of reasons I can't even think of, but perhaps primarily because it takes away personal responsibility and freedom.

Successful Business Models
When it comes to business, there are a few classic business models and ideas that are pure genius. First, vertical integration - what a wonderful thing. A great way to make a product cheaper is to minimize the number of hands (or companies, in this case) it passes through. Don't just make steel - first, mine the metals, then transport them, then refine them and produce steel products, then transport it to your customers - all yourself. The government today has legislation in place to prevent companies like this from forming.

Second, monopolies. Our government tries to prevent companies from being the sole supplier of a product. If there are two ladder companies in the country, and ladder company A wanted to buy ladder company B, thus becoming the only ladder company in the country, the government would try to stop this. The government believes this protects people from overly priced goods and lack of product choices. Well, Uncle Sam, if my ladder is a bit old and it's $5000 for a new one, guess what: I'll be keepin' that old one around for a little longer, or I'll form my own ladder company, because that's what free market competition is all about. And ladder company AB would realize that, so they wouldn't ever charge $5000 for a ladder to begin with. By allowing 2 companies to compete, keeping prices low and product quality down, the government is actually preventing smaller companies from forming because the market is overly competitive.

The US Government vs Monopolies: The 'Teach but don't Preach' model. UPS and FedEx both started as small delivery companies. Eventually they grew and grew, and they became as large as they could be by the late 70's. The USPS was the government's delivery company, and they were reliable and reasonable priced, but not always very fast. Airline Regulations in place prevented FedEx and UPS from growing further, thus maintaining the Postal Service's monopoly on most interstate deliveries. It wasn't until after airline deregulation in 1978 did FedEx truly enter the playing field as a competitor to the USPS, who now offers flat-rate deliveries 2nd and 3rd day across the US as a reasonably priced answer to UPS and FedEx.

The United States Government has a monopoly on retirement funds. While other companies exist, the US Government is the only entity in the country which requires you to pay into a specific retirement fund, thwarting any competition. They make Social Security mandatory - you must pay into it, regardless of if you already have a suitable fund set up elsewhere. It's not just a matter of requiring us to have a retirement fund set up, they even pick it for you and control it themselves. If they adopt a new policy you don't like you can't change companies, you're stuck. If I could instead take the equivalent amount of money from every paycheck and invest it in gold, mutual funds, and high-yield savings accounts I would have a much more fruitful retirement than what Social Security will be able to provide me. And on top of all that, I could retire when I chose to, not when the government tells me I can.

Third, Cartels. Cartels are created when an agreement is reached among companies to sell their similar or identical product for the same price as one another, thus giving the companies the appearance of market control. The pricing strategy could be cutthroat in order to remove other competitors from the market, and later raised very high once a higher level of market control is attained. Our government has outlawed cartels because they believe cartels will reduce market competition. Interestingly enough, the foreign countries who sell us oil are essentially a cartel, and we have little choice but to buy oil at the prices they set. Disturbingly, because of how our nation's laws are enforced, we cannot have any cartels to sell those countries goods. In effect, our government's infringements on our personal freedoms are preventing us from fairly competing on a global scale.

So this is supposed to be all about my Roman pickle, so here it is. As much as I am anti-socialist and anti-government control, I do believe I contradict myself. In terms of ideas, the government shouldn't protect them so tightly, because this prevents competition. It is the individual companies' responsibility to closely guard their secrets. Recently a man was charged with distributing a copy of a commercial video game that was not yet completed. The game company should have done more to protect itself, and after they were violated, it's their own responsibility to take legal action against the individual. He is now under house arrest.

Community Products
And so for the real pickle: if I support so strongly the right for companies to do as they please, in an economic sense, they why do I support the use of open-source software over commercial software? This is what I keep trying to explain to myself - not that I feel at all guilty about using open source, because I don't. As a Capitalism cheerleader is it odd to convey the idea that a group of individuals can create, maintain and manufacture a product that exceeds that of an entity motivated by profit? I'm not sure. Do I really contradict myself?

Perhaps nay. As possibly the most monopolistic company in our country at this time, Microsoft controls over 95% of the desktop OS market. While I applaud those capitalists that make it to the top, as Bill Gates has, I also applaud those who try to stand up to fight a giant. But Microsoft isn't competing against another giant, it's the little guys - over 1,000 people from more than 100 companies (and let's not forget the individuals) contribute the development of the just the linux kernel alone, not to mention the thousands of other great software that's out there, written by the community.

Personal Responsibility
I'm still trying to explain to myself how this isn't contradictory. Am I more for businesses or what? I think what it comes down to is that I'm for the freedom of everyone. While I don't think that government should regulate business as heavily as it does, it is the responsibility of the individual to see a monopolistic threat and do something about it, and not expect the government to protect them from it. With Freedom comes Personal Responsibility.

Part of that same Personal Responsibility says that if a company is doing something unethical, or at least something you don't like, then don't buy their product. Don't invest in a company that takes part in in questionable activities. On the flip side to that, if you see a company who is buying up it's suppliers and competitors and you think they're being unfair, then don't invest in them; if that same company stands to make investors tons of money, then it's your right to invest.

Familiar Example

So many Americans are naive to the capital control we carry as consumers. I can recall a pop culture example that many may be familiar with: near the beginning of the Iraq war in 2003 the Dixie Chicks spoke out against President Bush, claiming they were ashamed he was from Texas. After a public boycott of the Dixie Chicks' music, along with many radio stations pulling their tunes from the air, they would never again reach their previous level of success. Concert ticket sales were low, and in some cases, because local radio stations refused to advertise for the Dixie Chicks, some concerts were canceled altogether. The Dixie Chicks maintain that they were within their right to free speech. The lesson learned here is that if you upset consumers, whether by immoral and illegal activities, or just controversial comments, it affects the market. After the comment, President Bush hit the nail on the head when he summed it all up in an interview with Tom Brokaw, saying "...Freedom is a two-way street..."

Being Responsible for Yourself
These are interesting thoughts. Personal Responsibility; Freedom. They go hand-in-hand, but most people don't realize it. Perhaps people who don't want to be responsible for themselves think it's ok to give up personal freedoms? I have a survival-of-the-fittest mentality. If you can't be responsible for yourself and the things you do, then that's your problem. Don't lean on the government for support because you made poor decisions. Survival of the fittest - if you can't work, don't expect the government to feed you from other peoples' pockets.

Universal Health Care
Today I read a Reuters article about a recent poll, claiming this:
"More than half of U.S. doctors now favor switching to a national health care plan."
When I hear the term 'more than half' it implies that over half of the doctors in America have said, "Yes, I favor a universal health care system." And yet, I read on, only to find what half really means to these biased journalists.

"...Of more than 2,000 doctors surveyed..."
It makes one wonder. Are there only 4,000 doctors in America? How could 2,000 doctors be half? Of over 700,000 doctors in this country, how many groups were surveyed? Was this possibly the 8th or 9th group surveyed, but the first group giving the researchers results they wanted to hear or publish? What types of doctors were surveyed? Did the researchers specifically poll doctors who deal with uninsured, underinsured, and non-paying clientele? Again, it makes one wonder.

Take personal responsibility for yourself. If you want health care, then pay for health care. If you don't want to pay to take care of yourself, then just take care of yourself. Eat healthy foods. Don't smoke. Don't drink. Don't play tackle football without pads with your grandson's high school buddies.

I take pretty good care of myself. I don't drink often and I've never smoked, but with universal health care, I have to pay to care for people who do. In America we have the freedom to choose to have health care or not to. The proposal of having universal health care in this country takes away from our personal freedom. Since I'm healthy, I don't pay into a health insurance plan. That is a choice that I am free to make. If I was 10 years older and I had a 20 year smoking habit and a drinking problem, I may be more interested in paying into a health insurance plan.

The fact is, I don't want to pay to take care of an overweight 45 year old alcoholic with a two-pack-a-day habit who already has high blood pressure and his first heart attack under his belt, especially when we both pay the same amount for health insurance. If I'm going to pay to take care of someone's health, it's going to be my own. How many Americans, perhaps subconsciously, will let their health slide knowing that they have their health care paid for? And let's not overlook what universal health care has done for other countries - how overburden, for example, the health care industry is in Canada. And besides all that, do we really trust the government to run this?

Stay Free, America!