January 2015

It was inevitable. As soon as consumers and the economy start to enjoy significant relief from a decade of pain at the pump, the political class clamors for higher gas taxes and new carbon taxes.

The recent reduction in energy costs is remarkable. The U.S. Energy Information Administration (EIA) reports a 43% decline in the energy component of the Goldman Sachs Commodity Index during 2014. According to EIA, the drop in fuel prices was not due to “strong underlying trends in global economic growth” but rather to “supply-side factors unique” to energy-related commodities.

Fuel prices are down because the revolution in unconventional hydrocarbon production increased crude oil and natural gas supplies, and Saudi Arabia has failed to persuade other OPEC members and Russia to behave like a cartel and cut output. Crude oil spot prices recently dipped below $54 per barrel.

As a result, regular gasoline is now selling for about $2.20 a gallon — roughly one-third less than in Jan. 2014.

Credible estimates of the direct and indirect consumer benefits vary, but they’re all substantial.

 AAA: Americans saved $14 billion on gasoline in 2014 compared to 2013, with many drivers saving $15-$30 every time they fill up, compared to a year ago. As of Dec. 31, 2014 gas prices declined a record-breaking 97 days in a row, with further decreases predicted “as retail prices catch up with the steep declines in the cost of crude oil.”

Bloomberg: “Plunging fuel prices will free up as much as $60 billion over the next year that the consumer can spend on a fall jacket, a movie ticket or just more groceries.” That was in October, when gas prices were still north of $3.00/gal.

WSJ: Falling gas prices will give consumers the equivalent of a $75 billion tax cut. The tax cut is progressive because low-income households pay a larger share of earnings on energy. “Households earning less than $50,000 annually spent around 21% of their after-tax income on energy in 2012, up from 12% in 2001, according to analysts at Bank of America Merrill Lynch.”

NPR: If current gas prices continue, the typical household will have an extra $1,500 to save or spend in 2015. Already, “The average American is seeing a much bigger boost from falling gas prices than from pay raises. Cheap energy could finally put the U.S. economic recovery over the top.”

So naturally, ‘progressives’ now claim that, more than ever, a carbon tax is an idea whose time has come. Harvard economist Lawrence Summers, for example, argues in the Washington Post that “Oil’s swoon creates the opening for a carbon tax.” Does it? More importantly, should it?  [click to continue…]

Ladies and gentlemen, without further ado, the comedic stylings of Sen. Joe Manchin and American Petroleum Institute CEO Jack Gerard:

According to the “race to the bottom” thesis, unless the federal government intervenes, States would compete with one another to lower environmental standards in order to better attract industry. This proposition took hold in the mid-1970s, and was a major intellectual influence of the 1977 and 1990 Clean Air Act Amendments.

In a previous post, I summarized the work of law professors who argue that there’s no evidence—neither empirical nor theoretical—supporting the existence of a “race to the bottom.” In a similar vein, with this post, I intend only to highlight current events that militate heavily against the “race to the bottom” theory. [click to continue…]

In a December 11^th blog, I noted how confused was the Obama administration regarding whether low oil prices benefited Americans. On the one hand, Secretary of State John Kerry intimated to a Peruvian audience that oil “[is] not cheaper,” despite its low price, due to the climate impacts of burning fossil fuels; on the other, Treasury Secretary Jack Lew that same day told a New York audience that low oil prices are “like a tax cut to the economy” and that increased U.S. oil and gas production is a “great success story.”

Today, I’m thrilled to report that the Obama administration has definitively determined that low oil prices are indeed a benefit to the average American. Here’s the breaking news, according to Brian Hughes at the Washington Examiner:

The White House on Monday said that plummeting oil prices are “good for the U.S. economy”… “As a general matter, the impact of falling energy prices has been good for the U.S. economy,” said White House press secretary Josh Earnest, as the price of U.S. oil Monday dropped below $50 a barrel for the first time since April 2009. [click to continue…]

Yesterday, the Wall Street Journal published a letter ($) from EPA General Counsel Avi Garbow, the purpose of which is to defend the legality of the Clean Power Plan—the Obama administration’s marquee climate initiative—from a recent influential op ed ($) to the contrary by Harvard law professor Laurence Tribe. According to Mr. Garbow,

For more than 40 years, the EPA has established an enduring track record of faithfully following the laws enacted by Congress and the dictates of sound science to achieve the twin goals of protecting public health and the environment … The proposed Clean Power Plan follows that same path to create a pragmatic approach to reducing greenhouse gases, in the form of carbon-dioxide emissions, from power plants.

Mr. Garbow is wrong to claim that EPA is “faithfully following the laws.” Below, I’ve enumerated the various laws and standards of statutory interpretation violated by the rule.

• The Clean Power Plan violates the plain terms of the Clean Air Act (as conceded by EPA and NRDC);

• The Clean Power Plan violates EPA’s Clean Air Act implementing regulations and thereby runs afoul of the Administrative Procedures Act;

• The Clean Power Plan violates the boundaries of federal authority as established by the Federal Power Act;

• The Clean Power Plan violates the Supreme Court’s “Congress doesn’t hide elephants in mouse holes” doctrine of statutory interpretation;

• The Clean Power Plan violates the Constitution.* [click to continue…]

surely, this is the Koch bros’ fault

As is almost always the case, the Sunday morning political talkies omitted mention of climate change, the greatest, most terrible, apocalyptic threat of all time. All four of the major shows did, however, give extensive mention to the Keystone XL Pipeline, either during direct interviews (e.g., with Sen. John Barrasso on NBC’s Meet the Press) or in group segments (a la ABC This Week’s Powerhouse Roundtable). Of all the Keystone mentions, the most perplexing was lent by Sen. Charles Schumer, on CBS’s Face the Nation. Below, I’ve punched up a transcript of the pertinent exchange. And at the bottom of this blog, I’ve reposted video of the entire interview.

Bob Schieffer: We understand the first thing the Republicans are going to do is pass Keystone XL legislation…what do you see happening there?

Sen. Schumer: well look, our republican colleagues say that this is a jobs bill, but that’s really not true at all. By most estimates, it would create several thousand temporary construction jobs, and on 35—35!— permanent jobs. Compare that to the number of jobs created in the economy last month 300,000. So democrats are dubious of this. But we’re going to introduce amendments that will make this more of a jobs bill. We’re going to introduce an amendment to say that the steel used in the pipeline, should be made in America, to make American jobs. We’re going to introduce an amendment that says that the oil that’s used in the pipeline will have to be used in America. Imagine building a pipeline that ships Canadian oil across America to be exported to other countries. Uhhh.. from Texas..that makes no sense at all in terms of the American working people’s interests. So we’re going to say that the oil should stay here. And finally, we’re going to add an amendment to introduce clean energy jobs…[Formatting added]

This is quite interesting. According to FedEx, Schumer’s New York is the #3 exporting State in the U.S. Its top two exports, per U.S. Census Bureau data, are gold and diamonds. Pursuant to Sen. Schumer’s logic, the “American working people’s interests” would be best served if the U.S. Congress banned exports of gold and diamonds from New York, right? Why can New York benefit from exporting a raw material (gold) and a processed raw material (cut diamonds), but North Dakota shouldn’t benefit from the export of a raw material (oil) nor Texas benefit from exporting a processed raw material (refined gasoline)? Sen. Schumer’s inconsistent position makes no sense, other than to serve himself a cake for having and consuming. [click to continue…]