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December 04, 2014

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CAREFUL WHAT YOU ASK FOR. Interesting that the press seems to think that huge, rapid oil/gas/natural gas drops will lead to a resurgent economy. Hey politicians are already lining up to replace the price drop with higher taxes on gasoline. One thing for sure if Gas goes back up which it will in spring when the new formula adds 15 cents to the price at the very least. And, if the price actually goes up the tax doesn't return to zero.
Then we have the layoffs coming in the oil patch. 20,000 coming on the first big acquisition. Many freezes already on at the drilling sites. Exploration already slowing the demand for geologists. And, in 27 states we have the increased real estate activity, the accountants hired for the boom, the sales force increases, the lawyers doing land leases, etc. Then comes the lower tax revenues on oil production. Sooner or later the manufacturing of pipe, drill bits, storage units, oil rigs, etc will slow. Then we will also have the slowing of the demand for water/sand chemicals for production.
It is not likely to be the boom in retail everyone predicts. Oil giants Chevron and Exxon provide the higher dividends for millions of seniors pension plans, 401k plans, IRA's etc. Not all will be rosy.
And, then there is the potential overseas turmoil that can result from oil price drops. Governments can fail to provide social services and civil unrest increase.
Of course if you are a happy environmentalist you have to worry that lower oil prices lead to increased demand and more global warming. Long term low process mean the wind farms are not developed. The electric car sales slow down. Solar panel manufacturing slows. Clean, green jobs become extinct.
I like my SUV and it is fun to fill it for less than $100 now. But, I know the politicians have never seen a taxing opportunity that can ignore.

ON THE CALIFORNIA DELUSION. Bill, it is pretty simple when you look at how the system in America works. The blue states especially the big blue states led by the big cities are basically takers. Look what 60 or more years of Democratic dominance has done to Detroit, Chicago, San Francisco and LA. NY City escapes because for some reason NY City occasionally elects a Republican mayor to keep balance with the Blue base. They are mired in debt, crime, failing schools, failing businesses and high unemployment. Constantly they require national budget/pension bailouts and take a high percentage of social welfare funds. Basically they are the black holes of our country consuming tax revenues, and requiring infrastructure needs. Their politicians are elected year after year on the votes of inner city blacks, labor unions run by questionable leadership and public service employees. Their politicians promise solutions only to fail to deliver. Washington DC just finished "honoring" Mayor Barry a drug taking, bribe taking politician who mostly worked his district for his own benefit and embarrassed the city with his public illegal activities. Illinois is known as the deadbeat state. Chicago is the murder capital of the country. Detroit is virtually gone and bankrupt. California needs federal bailouts. Today Atlanta's mayor announced proudly that Atlanta has the fastest growing population of foreign born people in the country. And, all he has to do to make it worth the city's while is find the money to educate and support the growing population. As time has gone by this gravitation of the needy to the big blue cities has skewed the electoral votes and Congressional power more an more toward the Blue party. All the Democrats need to do to win the White House is carry about 6 key states and Ohio or Florida. As long as that happens they can continue to fund themselves with the taxes derived in the remaining 30 Red states and the 10 swing states--what I refer to as the black hole consuming America. The President calls it "leveling the playing field". Economists might call it income or asset redistribution. Bottom line, Bill, it is not a delusion it is a long time political strategy that ultimately leads to socialism. And, it is the same strategy by the way that Muslims are using to take political control of Europe. Conquest by immigration followed by population explosion.

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