Help me vote tomorrow

[mydogsarelazy]

Hello Forum Members,

I would like to know your opinions.

I am a registered Democrat and liberal in most respects. Because I consider him increasingly effective, I am considering voting for Gov. Schwarzenegger.

While we are at it, what do you say about Prop. 87?

Have at it!

JS

[PerryChase]

Schwarzenegger will win so voting for Angelides and giving the Gov. a narrower margin would ensure that he’s not too cocky.

I’m voting for Prop 87 because Bill Clinton says so. He’s my hero. 🙂

[barnaby33]

I don’t think that the two Gubernatorial candidates are that substantially different. The governator does seem to have gotten on board with the, “borrow our way to prosperity,” school of thought though. Silly me I thought only Democrats did that.

Bonds are pretty much a bad idea(spend now pay more later). He seems to be pushing for passage of a bunch, but without raising taxes to pay for them, thats just disingenuous.

Almost every proposition is being pushed by one interest group hoping to steal from another in a very acute fashion. I will however be voting for 87, the oil tax. It will raise prices a bit, and probably the money won’t solve our dependency on oil, but its better than doing nothing. The market certainly wouldn’t address the problem in a realistic fashion.

Josh

[poorgradstudent]

I’m not a fan of California’s proposition system. They seem to take power away from elected officials, and put even more of it in special interest groups who are willing to throw a lot of money at special laws they write.

Still, I’m voting yes on 87. I think worst case it will help California’s budget issues, at the expense of Oil Company profits, which have been insane the past couple of years.

I actually really like Angelides, I heard a radio interview with him and liked everything he said. I dislike Arnold, and will forever associate him with that ridiculous debacle that was the recall election. I feel like I’d be a better governor than Arnold, and that really concerns me. I’m extremely pro-environment and pro-education, which Arnold is not.

[no_such_reality]

No on 87.

It won’t help the State Budget at all. None of the funding goes to the State budget, it all goes to a special board to fund “research”.

I would vote for 87 if the money did go to the general fund. It doesn’t. It goes to unnamed future research groups.

[OwnerOfCalifornia]

Since the ‘yes on 87’ view has been represented, I’ll share my thoughts on the subject since I voted no.

Let me start by saying that I am ambivalent about passage. If it passes, and it probably will, that will cause gasoline prices to go higher than they would have otherwise, which should encourage conservation. Energy conservation is the only true solution.

Prop 87 was essentially written and paid for by venture capitalist Vinod Khosla, who’s ethanol ventures stand to benefit from its passage. Any significant push to implement E85 as a mainstream alternative to gasoline would be a disaster for California and our country, given the very difficult challenges in the years ahead with regard to energy. E85 is arguably a net-energy loser, and a terrible waste of arable land, fresh water, and natural gas.

In general, prop 87 represents more government, larger government, and more wasted public monies. On this principle alone, I voted no. Intelligent use of alternatives like solar and wind, coupled with massive conservation and lifestyle changes, are the answer. Unnecessary government bureaucracies allocating ill-gotten tax-payer money (incorrectly, no doubt) will solve nothing.

Like I said, I won’t be terribly disappointed when it passes. The inexorable climb of all types of energy prices will be amplified here in CA, and that may finally force the consumer to seriously conserve. Prop 87 is a base emotional appeal to “stick it” to those “greedy oil companies” who work diligently so that we may all have our cheap energy entitlement. If you are unhappy about oil company profits, we have the power to 1) purchase less of their product, and 2) purchase shares in the “greedy oil companies” so that we may claim title to a small bit of these profits. (disclaimer: I own CVX and XOM)

There is a TON of writing about prop 87 on the blogosphere, especially my personal favorite blog The Oil Drum (sorry Rich, this is my 2nd fav:). But here is a tidbit, just written today:

linky

[barnaby33]

Its interesting. I am pro 87, but also ambivalent. I have no desire to stick it to the oil companies, though they are by no means our friends.

I hope it accomplishes 2 things but wouldn’t be suprised if it doesn’t. First that it raises prices, which encourages conservation. Second is the less realistic hope and that is that the research dollars are put to good use. I don’t think that the govt and bureacracy are bad at everything and to suggest that they are is tendentious to say the least. Some things the market just can’t address effectively. Not doing anything is sometimes worse than attempting and failing at the right thing. Of course the underlying assumption is that we agree what the right thing is.

Josh

[zk]

flinger,

Great post. Balanced, fair, level headed, non-partisan. Nuanced, even. We get so much noise and rhetoric and bluster, it’s good to see clear thinking for a change. Keep it coming.

[Anonymous]

Prop 87 will not raise gasoline prices

There’s a popular misconception that all cost increases are passed on to consumers. This is notion is incorrect. Economics is all about supply and demand. The price of any good is where supply and demand intersect. Notice, there is no cost of prodction on a supply and demand curve. The Y-axis is sale price and X-axis is number of units.

Prices increases only occur when the costs shift how much producers are willing to produce at a given price level. The commodities like oil, the global market sets the price for oil. California produces less than 1% of the worlds oil and it’s share declines every year. California oil producers can not raise prices above market price since the buyers of crude oil (refinaries) would buy oil from other producers. To increase oil prices, the drop in the California oil production would have to be so large as to raise the global price for oil. At less than 1% share of global oil production, it is quite unlikely that CA oil production can significantly effect global oil prices.

There likely will not be any drop off in California production. Oil fields take a long time (years) to come on line. They are only built if investors think will they will profitable at projected prices for oil. Since high crude prices are a recent development, existing oil fields in California were built at much lower expectation of the oil prices, like $35/barrel. The oil companies are making huge profits since the difference between what they expected $35/barrel and the market price, $60/barrel goes straight into their pockets. Paying a 4%-6% tax (it varies based on the price of oil) is not going to make projects that targeted $35/barrel unprofitable when the price of oil is 65%. CA oil producers will only lower production if production become unprofitable which 87 will not cause.

[Diego Mamani]

Prop 87 will not raise gasoline prices
There’s a popular misconception that all cost increases are passed on to consumers. This is notion is incorrect. Economics is all about supply and demand. The price of any good is where supply and demand intersect. Notice, there is no cost of prodction on a supply and demand curve. The Y-axis is sale price and X-axis is number of units.

As a former econ prof, I’m shocked to read the text above! The supply curve is given by marginal cost of production. Increasing costs will shift the supply curve upwards and to the left, hence raising gas prices. Every Nobel price winner in econ is against this proposition. (I know, many conspiracy theorists probably think that Nobel prize winners, oil companies, and aliens from Mars are all in cahoots).

This proposition is really bad. It creates new taxes, it creates a bureaucracy that is not required to accomplish anything, it increases gas prices for consumers, and discourages exploration and maintenance of existing oil infrastructure.

[Anonymous]

Mr Mamani,

There’s no licensing for professors or economists. If your claim was true, the production in California would have increased dramatically as crude oil prices have increased, yet this report shows production dropping off rapidly over the last decade.

As a professor, you should know the short run supply curve is horizontal. The long run supply curve can only produce increased supply to if there is additional oil to extract in the state and there are not regulatory barriers to doing so. Regulatory barries and environmental concerns prevent new oil wells in CA thus you can only claim that producers will reduce proudction after the tax even though every unit they produce today will still be profitable after production.

It’s possible at the margins that a few wells that are barely profitable today, could go off line. But now we’re talking about a movement of epillson in the global supply of oil. To claim gas prices will rise, over an infinitesimal drop of in supply could be true in theory but those of us who live in the real work will never see it.

Finally your rudimentary analysis does not address the fact that the major oil producers of the world adjust their pumping to maintain a fixed range of the oil prices. Saudia Arabia does not want oil prices too low (lost profits today) or too high (lost long run profits and people move away from oil) so your shifting supply curve shifts back down.

Finally, you seem like a hack to me since you don’t have a number much less a confidence interval for your claimed increase. Of course, you wouldn’t want to produce 95% condfidence interval for your non-existant predicton since it would almost certainly include 0. Prop 87 will no more raise gas prices than me lowering my demand curve for gasoline by taking the train once a week to work will lower prices. Both effects are too small to measure but less notice at the pump and will swamped by the volatility in both oil and gas prices.

[no_such_reality]

Well Jay, Mamani is right about the supply. The supply curve is dictated by the marginal cost of production.

Prop 87 is bad.

Props 1B, 1C, 1D & 1E are also bad. They are bonds. What are bonds? Taxes for the stupid. For every dollar you spend in a State bond, you will get to pay two dollars worth of taxes over the next ten years.

If these props are good, then let’s be a state and raise the taxes to pay for the stuff.

[OwnerOfCalifornia]

Josh:

I hear you about higher gas prices encouraging conservation. Unfortunately, it has been made quite clear that a huge chunk of the research dollars would go to developing e85 as a transportation fuel. This would be, IMO, worse than if we did nothing. We would find ourselves 10 years into the future, having wasted precious remaining time and resources, no better off and with no one to hold accountable for a failed energy plan. The final link in my original post summarizes my thoughts quite well on this subject.

Oil companies are not our friends, indeed. They are massive corporations that supply us with a perceived need, which we voluntarily purchase. All of us have the power to change our lifestyles and cosume less of their products, whose price we may find disagreeable.

Jay:

Yes, oil is a global commodity. But gasoline produced for the California market is not. There are many grades of crude; you only see the benchmark ‘West Texas Intermediate’ quoted in the mainstream media. The raw material for gasoline, crude oil, is only a part of the final price we pay at the pump. Further, rising prices don’t necessarily mean that production will increase. To quote Matt Simmons: “Oil is not a concept. It must be discovered and produced.” It is a matter of great controversy and debate these days about exactly how quickly the remaining oil can be produced. Currently no producer anywhere on the planet can regulate their production to affect prices. Hence the volatile (read: mainly rising) prices we have seen these last few years. California, and the United States as a whole, has only seen declining production for 35 years (Yes, environmental regulations and NIMBY issues may have affected production rates here in CA, but the cheap, high-flow stuff is gone).

As to exactly why gas prices will go up, start by reading this essay. Essentially, oil companies will pack up their E&P budgets and seek greener pastures in the face of a more hostile business climate. Specific CA crudes will become more expensive to produce. We must then acquire crude from elsewhere, refine it elsewhere, transport it greater distances, and combined with our more expensive local oil, the cost of the end product at the pump must go up.

[Anonymous]

I voted Saturday just as NSR listed.

Flinger, thanks for the insightful commentary.

[Anonymous]

The argument that gas prices will go up in California rests on three assumptions (1) that oil production will decrease in CA as a result of prop 87, (2) that decrease will cause the prices refiners pay for gasoline to increase, (3) and that increase will passed on to consumers.

(1) I heard zero credible arguments for the production will decrease. Oil production is falling in CA in-spite of rising oil and gasoline prices. If you empirically derived the supply curve for CA oil from the production and price data over the last 10 years, you have a downward sloping supply curve. Suppliers are apparently producing more when the price is lower. Clearly, the lower prices were not causing supplier to produce more but claims that supply curve shifts due to price or cost are empirically false. The supply curve is vertical against any reasonable range of price. Additionally, I would challenge anyone who thinks the price will increase to name one project that will receive reduced investment due to prop 87. I’ve made this challenge on other sites and so far no takers.

(2) While all oil is not the same, this argument assumes there is a substitution cost for using non-CA oil. Again, zero evidence presented any where. I’ve seen this assertion over and over again but nobody can back it up. CA produces less than 1% of the world’s oil but we use more than 1% of of the world’s oil so our refineries must already be using foreign oil.

(3) CA has consistently higher gasoline prices than the rest of the nation. Aside from deflating the theory that in-state production lowers gasoline prices, this fact shows that refiners have market power since there is no cost reason why CA gas should cost more. As such, refiners are pricing more reductions in marginal revenue than increases in marginal cost.

At the end of the day, anybody with mean prediction and a confidence interval for this illusory gas price increase due to prop 87 is blowing smoke. This increase could literally be $0.000000001 / gallon.

In fact, fuel costs go down with prop 87 because alternative energy research funded by prop 87 brings new cheaper technology.

[OwnerOfCalifornia]

Jay,

I never suggested that oil production will decrease. Production of existing fields will continue to be constrained by geology and infrastructure. The global price of WTI, or any local CA crudes, has no affect on production at this point.

Your challenge is specious reasoning. I cannot list any projects that will receive reduced investment as a result of prop 87, but you cannot list any projects that won’t receive reduced funding. I am not on the BOD of any major oil companies so I have no idea how they will allocate their production budgets. Furthermore, we don’t know the results yet from prop 87 so oil companies don’t know either.

As to points #2 and #3, I don’t think you read the essay I posted, so I’ll quote from Robert Rapier on The Oil Drum:

Each year, oil companies decide where they will allocate capital based on expected returns for various projects. After the initiative passes, it will be less profitable to extract oil in California. The expected returns for some capital projects in California will decrease. California will get just a bit smaller capital allocation from corporate budgets, which over time will squeeze supplies. Not only will the returns from California be lower, but initiatives such as this are viewed as hostile toward the industry, providing another disincentive for investing capital in California. As investment slows and gasoline capacity fails to keep up with demand, higher prices will result.
Some proponents have declared this scenario unrealistic, because oil and gas prices are set on the global market. For example, in a recent report, ABC news reporter Mark Matthews asked the following question: “But will 87 raise the price of gas?” He then answered the question with “The price of oil is set on a world market, not state by state.” What many people don’t seem to understand is that there isn’t a single price for oil. Oil prices vary greatly in different locations based on a number of factors, as Ana rightly pointed out in her previous essay. Prop 87 will improve the economics for importing oil into California, simply because it will increase the operating costs for California oil producers. So, even though West Texas Intermediate, for example, is set on the world market, the price for crudes produced in California will reflect California’s specific circumstances. And those specific circumstances are set to change with passage of this proposition.

I suggest that the report you showed indicates that while we are not wholly dependent on CA crudes, we still get a large enough chunk (37% in 2005) to affect gasoline prices here. Additionally there is a cost basis for higher gasoline taxes here in CA since we pay some of the highest taxes in the nation when considering the complete gasoline taxation picture. When taxes on 37% of our crude input goes up, that can only make matters worse. For reasons of infrastructure, we cannot simply whisk cheaper crudes from all over the world to compensate and expect to receive it for the spot price of WTI. There is time, infrastructure, tanker royalties, pipeline royalties, etc. that dictate the reasons why we acquire 37% of our crude from in-state. I suppose we could eventaully readjust our fuel portfolio but…that’s will cost money :).

Finally, as this assertion:
In fact, fuel costs go down with prop 87 because alternative energy research funded by prop 87 brings new cheaper technology.

This statement is too vague. There is no guarantee that prop 87 will bring any new technology. Some research efforts succeed, some fail. When one looks at progress in the energy industry, you can see that research has been going on for decades in all sorts of niche sources. Yet we still use ever-increasing amounts of oil in the world. There are no alternatives currently in place, or none of the drawing board, that will make us less dependent on oil. Only conservation will.

[bubba99]

Prop 87 has many really interesting arguments about what will happen after nominal taxes are added for an “oil extract fee”. Most have missed a fundamental issue with crude here in California vs Texas, or UAE. And that is the oil is here. It is cheaper, and it does not need to be transported 1000 or ten thousand miles to get here for refining. Diane Fienstein asked for a GAO investigation in 2005 as to why CA crude was so much less expensive than WestTexas benchmark. To date, no answer but the oil companies have lost a lot of litigation on the issue. (If the oil companies can keep the cost artifically low, they pay less under current royalty agreements. link http://www.mms.gov/ooc/PDFs/cahis.pdf

Our current cost of fuel is not based on price of manufacture, but nominal utility of the product – what the market will bear. Nominal taxes will not effect the marginal utility of gasoline or even close. Their only comments about the higher cost California mixture is that “it is more expensive to produce” even with lower cost California crude. The oil companies do not discuss production costs, only world prices of crude – not impacted by the lower cost California crude even at 106%% of its lower cost. They will not stop producing “California” crude, because it is too profitable.

[anxvariety]

Vote no on everything and you’ll win a prize.

[CAwireman]

Get your ponies… 

Hi, Here are a few things to check out if you haven't made up your mind just yet:

1) A link from Berkley that's more tuned to SD – Definitely worth a look.

Link 

 http://www.igs.berkeley.edu/library/election2006/endorse2006.html

2) From San Diego City Beat Magazine, enlightening or at least entertaining.

Link

http://www.sdcitybeat.com/article.php?id=4969

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