Monday, February 28, 2011

Who Really Benefits When Oil Prices Go Up

Dr. E. Eugene Webb

Here we are once again, political upheaval in the mid east and immediately gas prices in the US take off. The question remains why? The answer is unmitigated greed. There is no shortage of oil. It is very unlikely there will be a shortage of oil. Believe me, if it looks like oil supplies are seriously threatened you will see all of the UN mumbo jumbo thrown out the window and the major oil consuming countries will move in politically and yes militarily to keep the black juice flowing. Why then is uncertainty the reason for rapid and unjustified increases in consumer prices. Answer same as above GREED. Everyone in the supply chain sees a chance to make a lot of money really fast based on fear not the reality of the cost of oil.

As long as oil trades on the open market as a commodity, speculators will use these events to artificially inflate oil prices for their own profit. Oil does not cost one penny more to produce today that it did three weeks ago. The pipe line is full and there is plenty of refined product. You might think all of this increase flows back to the oil sheik in his tent, but not so. Most of it ends up as profit for the Big Oil and the speculators who drive the futures market. Watch Big Oil’s profit reports in the next few quarters and futures divisions of the major brokerage houses. They will continue to sky rocket. Big oil loves all of this chaos. They are the ones who profit the most.

Given the strategic importance of oil to all economies, it is time put the futures traders who suck billions out of the economy, while adding no real value, out of the oil business. Oil producing and oil consuming nations need to take oil out of the futures trading market, establish a global crude oil management system and fix crude oil prices to a unique currency made up of a combination of the Euro, Dollar and Yen. Nothing would do more to stabilize the global economy and give emerging nations economic and political stability.


Wednesday, February 23, 2011

Three Reasons While High Speed Rail Will Not Work

Dr. E. Eugene Webb
Local politicos are screaming their heads off trying to figure out a way to get the Fed’s high speed rail money into Florida. The thinking is all short sighted and fails to look at the realities of business and the economy.

Reason One: All of the facts are flawed and biased; cost to build, cost to operate and the number of jobs it will create.

Reason two. Private enterprise is unlikely to go on the hook for the whole deal. If they do here is the 800 pound gorilla. BANKRUPCY. It will be set up as a subsidiary or private wholly owned company. If the rail project starts to tank private enterprise, no matter who they are, what the agreed too, or what they signed, will run away from this like rats from a sinking ship. They have too. The have their equity owners to worry about and any executive who doesn’t will be out the door in a heart beat. Just how long do the leaders of Tampa, Lakeland and Orland think these guys will hang on. Answer not very long. They will sign anything, say anything and do almost anything to get their hands on the Fed’s money. But when the money is gone, ridership doesn’t materialize and it goes south all we will see is red tail lights and the taxpayers will be stuck with the bill. If you think for one minute three cities can litigate their way through that mess, then high seed rails for you.

Reason three: Local governments have a horrible history negotiating long term contracts with private industry. Even when they have lots of time to do the deals, these agreements often fail. The local high speed rail initiative being driven by Mayor Iorio is moving at lightning speed and there is little chance they can cover all the bases to protect the citizens of these communities. So here is the question. If you live in Tampa, Lakeland or Orlando are you willing to bet your future tax rates on high speed rail? If this project fails the only place the bailout money can come from is the governments who signed on for the deal.
Think about it.


Monday, February 21, 2011

Blessing or Boondoggle - Scott Sacks High Speed Rail

Dr. E. Eugene Webb

The bleating hearts of wounded politicians have begun to cry like wolves howling at the moon. At a time when every one of their governments, Tampa, Orland and Miami are in serious economic trouble they want to focus the ire on Governor’ Scotts decision to pass on High Speed Rail. The hype concocted to sell this massive project is staggering. The Mayor of Tampa is accusing Scott of being just short of a traitor and politicians from Washington to Tampa are expressing disbelief and shock. The problem is none of these people every stopped to take a serious look at the big picture.

The ridership figures are flawed. The cost is likely way understated, the promise of the private sector picking up cost overruns and operating shortfalls cannot be guaranteed. The contracts will be full of outs and in the long run the private sector can just walk and the Florida tax payer is still stuck with the bill.
“We were hoping the process could go forward with the private sector,” said Barney Bishop III, president and chief executive officer of Associated Industries. “The problem is that ridership numbers are always optimistic and construction numbers are minimized so it ends up costing more. The governor is not looking at any more liabilities for Florida taxpayers, and we understand where he’s coming from. Economically and fiscally, that has to be a superior reason to anything else.”
It takes a lot of courage to standup and make a decision that on the surface flies in the face of logic. But the fact is there is not enough critical thinking in Government. No serious unbiased business case planning. Once a pile of money is in site all reason flies out the window. Get the money - get the money. There is not and never was a solid business case for high speed rail. Not here not in Wisconsin or Ohio. A few large companies, some consultants and contractors were going to get very rich and the rest of us would get the experience of watching an empty bullet terrain fly by us at 225mph as we drove to Orlando on a still crowed I-4. Would you really ride it? Core infrastructure that supports commerce and industry is the key to more Florida prosperity. The Mouse will due just fine bullet train or not.
Governor Scott is going to take a lot of heat over this one but he is right. We need to focus on the core infrastructure and not shiny things that cost a lot, go fast, cost taxpayers and arm and a leg and make politicians feel better. Scott’s political advisories are going to make hay over this one, casting him as the Villon. But in 7 to 10 years when the stories about states going broke supporting their high speed rail system with no riders begin to show up, Floridians may just be experiencing a good economy and reasonable taxes. Ya gotta hand it to the bald guy. He has some big ones.