We Report, We Decide

by Richard R. Loomis and Susan Salter

The Fox News network's famous slogan is "We report, you decide." Sounds like the essence of objective journalism - if only it were true.

Fox, like every major television network and most newspapers and magazines, has a lot at stake. To gain ratings or circulation (thereby boosting advertising revenue), outlets must do whatever it takes to grab our attention. And these days, nothing grabs attention like footage of, for instance, an Arctic glacier breaking up, or a somber talking-head predicting the end of the rainforests. Global warming sells, and thanks to the mainstream media, the American public is buying it up by the ton.

As much as we would like to credit Al Gore and his minions with the global warming craze, let us quote another unimpeachable source - Time magazine - on the subject: "[Those] who claim that winters were harder when they were boys are quite right. … Weathermen have no doubt that the world at least for the time being is growing warmer." That observation was published in 1939, and it helped herald a media fascination with predicting doom and gloom as Mother Nature throws us her best curveballs.

A mere 36 years later, Time (along with Newsweek and probably your local newspaper) was singing a different tune. The sky was falling again, only this time it was a global ice age that would threaten Life as We Know It. Indeed, the years 1974 and 1975 were a veritable golden age of media-pushed climate change. "Telltale signs are everywhere," wrote Time in 1974, "from the unexpected persistence and thickness of pack ice in the waters around Iceland to the southward migration of warmth-loving creatures like the armadillo from the Midwest." Newsweek also mentioned "ominous signs" that Earth's weather patterns "have begun to change dramatically and that these changes may portend a drastic decline in food production with serious political implications for just about every nation on Earth."

Anyone who was in school in the 1970s may remember learning of the impending ice age. The presentations were simple: a few handouts, a chart predicting cooling trends, pictures of people in warm coats, snow in Los Angeles, that kind of thing. The three channels of the nightly news occasionally ran a story associated with global cooling, but the bulk of the stories were carried by print news sources.

Today, we are connected 24/7 to news sources on TV and online, and we have come full circle back to global warming. And we are much more excited by the news. Could it be because the media is so much better at disseminating unbiased, in-depth coverage of a highly scientific issue? Well, if you believe that …

Drowning in Information

Unfortunately, the U.S. media and content providers have taken a very hard line when it comes to sharing global warming information across the media band waves. Instead of reporting on the issue and building well-rounded stories, media outlets are generating a new brand of yellow journalism. Anyone who even questions the approach the media has taken to the coverage of global warming is subject to censorship and ridicule.

"After more than a century of alternating between global cooling and warming, one would think that this media history would serve a cautionary tale for today's voices in the media and scientific community who are promoting yet another round of eco-doom," stated Sen. James Inhofe (R-Okla.), whose remarks were published in 2007 in the reference book series At Issue.

All This Talk about Windfall Profits reminds me of an article writen by Art Smith of JS Herold which appeared in World Energy Magazine a couple of years ago.

U.S. Gasoline Is Still a Great Bargain (Really!)

by Arthur L. Smith, CFA, Chairman and CEO
and Nicholas D. Cacchione, CFA, Senior Vice President
John S. Herold, Inc.

Perhaps because gasoline prices are displayed in foot-high numerals on every street corner in America, increases in gasoline prices provoke more consumer "sticker shock" rage than any other commodity. By way of comparison: the Atkins diet craze has led to sharply higher prices for protein foodstuffs. Where are the newscasts depicting irate consumer protests against alleged price gouging by bacon and egg producers?

With the average price of gasoline exceeding $2 per gallon (remember these days) across the United States, John S. Herold, Inc. has examined this price in the context of other consumer expenditures – the seventh time we’ve conducted such a study in the last 15 years. And for the seventh time, we’ve come to the same conclusion: Gasoline is still a great bargain, as the following four points attest, relative to other purchases in a typical consumer market basket.

1. Believe it or not, U.S. gasoline price increases have been moderate. While the costs of crude oil and gasoline have soared over the past year, both of these commodities are relatively inexpensive in historical terms. In fact, if the prices of gasoline and crude oil had kept pace with the general rate of inflation since the early 1980s, the price of these commodities would have been close to $4 per gallon and $90 per barrel. (These numbers seemed unachievable back then)  Since the early 1980s, the rate of nominal escalation in gasoline prices was about one-half the rate of inflation in postal rates, only one-third of that of airline fares and about one-eighth of the rate of college tuition increases.

2. For motorists, U.S. gasoline price escalation has been dwarfed by increases in maintenance and insurance. While gasoline out-of-pocket expenses are the most visible operating-cost component of running an automobile, fuel expenditures pale in comparison to the enormous run-up in maintenance and insurance costs over the past six years. The cost of gasoline/oil has increased about 9 percent to slightly more than 7 cents per mile driven, compared with a 46 percent increase in maintenance expenditures to 4 cents per mile driven, a 29 percent increase in tire costs to roughly 2 cents per mile driven and a 30 percent increase in aggregate insurance costs to $1,102 per year. Insurance costs have soared in recent years to now account for the largest share of total driving costs; at nearly 9 cents per mile, insurance costs exceeded gasoline expenditures last year. Only financing expenses have become less burdensome to the consumer over the recent past. Actually, gasoline costs in real terms as a percentage of all automobile operating expenses have trended downward – albeit irregularly – over the past 24 years since the peak in 1981 (see Figure 1).

3. U.S. gasoline is extremely cheap compared with European countries. Even with the recent run-up, domestic gasoline still costs less than half the amount it does in most European countries (see Figure 2). Why? Taxes. European countries have adopted political policies to discourage oil consumption and promote conservation.

How? With taxes equivalent to more than $2.50 per gallon. (That’s more than 100 percent of the total cost of today’s "outrageous" $2 per gallon U.S. retail price). Note that our great ally, the United Kingdom, has decided to highly tax petrol, although it is self-sufficient in both oil production and natural gas production.

Does anyone else get the impression that Congress needs to be sent to the corner for a time-out? Our policymakers seem to be willing to look into any issue that makes real media headlines, especially if it involves characters like Roger Clemens and Al Gore. Our federal government busies itself with topics like steroid use in baseball and whether or not football hand signals have been stolen. Then all action comes to a halt when Al Gore pays a visit with his mantra of global warming.

If we lived in a country where food and shelter were birthrights, terrorism was unheard of, crime was nonexistent, health care was a given, jobs were plentiful and gasoline sold for a buck a gallon, such issues as juiced-up sports stars may well have a place on the congressional agenda.

But while the American people suffer under escalating economic stress, Capitol Hill dutifully begins to address the very critical issue of steroids and global warming. Talk about fiddling while Rome burns!

The headlines of all the major news sources tell of encroaching recession in the United States. Energy prices are at an all-time high, gasoline is heading toward $4.00 a gallon in the United States and demand is still increasing. At a time when we need a plan to reduce energy costs, here are two bills that Congress is currently pushing:

S.280: To provide for a program to accelerate the reduction of greenhouse gas emissions in the United States by establishing a market-driven system of greenhouse gas tradeable allowances, to support the deployment of new climate change-related technologies, and to ensure benefits to consumers from the trading in such allowances, and for other purposes.

S.2191: To direct the Administrator of the Environmental Protection Agency to establish a program to decrease emissions of greenhouse gases, and for other purposes.

If these two Senate bills don't fill you with a certain sense of foreboding, then you likely haven't had the opportunity to thumb through the 120-plus pages of each bill. Well placed within their text is advocacy of a "market-driven system,"as S.280 puts it, that is economically ineffective at best and potentially harmful at worst.

We are talking, of course, about carbon-trading programs, or "cap and trade."

S.2191, for example, seeks to reduce total U.S. greenhouse gas (GHG) emissions to 63 percent below their 2005 levels by 2050. Specifically, the bill calls for a cap-and-trade system.

This sounds well and good. Who couldn't applaud a system in which markets get the incentive to clean up their act by buying and selling emissions credits? After all, isn't "let the market take care of itself"part of our capitalistic credo?

The truth, however, casts a different light on cap and trade. In March the National Association of Manufacturers (NAM) and the American Council for Capital Formation (ACCF) unveiled a jointly commissioned study assessing the potential national and state economic impacts resulting from S.2191, authored by Sen. Joseph Lieberman (I-Conn.) and Sen. John Warner (R-Va.).

NAM spokesperson Laura Narvaiz released the findings of the study, which concluded that if S.2191 were passed into law, the result "would have a profound economic impact on U.S. businesses, consumers and governments."Specifically:

• Gross domestic product losses of $151 billion to $210 billion in 2020 and $631 billion to $669 billion per year in 2030.
• Employment losses of 1.2 million to 1.8 million jobs in 2020 and 3 million to 4 million jobs in 2030.
• Household income losses of $739 to $2,927 per year in 2020 and up to $6,700 in 2030.
• Electricity price increases of 28 to 33 percent by 2020 and 101 to 129 percent by 2030.
• Gasoline per-gallon price increases of 20 percent by 2020 and a whopping 77 to 145 percent by 2030.

Off the Kyoto Track

Even if the economy takes a hit from these kinds of emission controls, at least the environment is benefiting, right? Not according to the Little Green Data Book 2007, published by the World Bank. This report, released last May, shows that the carbon dioxide levels of current Kyoto Protocol countries are actually up. In the European Union, for instance, emissions have grown 3 percent. "As a group, rich countries are largely off-track with respect to the Kyoto commitments,"notes the World Bank. The exception is countries where emissions have dropped due to the recession of the 1990s. Are we willing to send our country further into economic stress in the quest to reduce emissions?

Despite such evidence against a cap-and-trade system, policymakers seem to have embraced the idea with the same enthusiasm (deluded as it may be) they displayed for expensive, inefficient ethanol. Just listen to our presidential candidates:

• From one frontrunner: "I support a cap-and-trade system that will require all pollution credits to be auctioned. A 100 percent auction ensures that all polluters pay for every ton of emissions they release, rather than giving these emission rights away to coal and oil companies."
• From another: "I endorse a cap-and-trade program that auctions 100 percent of permits alongside investments to move us on the path towards energy independence."
• And the third: "We and the other nations of the world must get serious about substantially reducing greenhouse gas emissions in the coming years or we will hand off a much-diminished world to our grandchildren. We need a successor to the Kyoto Treaty, a cap-and-trade system that delivers the necessary environmental impact in an economically responsible manner."

Can you guess which candidate said what? Not that it matters; they are the same statement. But if you must know, Barack Obama authored the first statement, Hillary Clinton the second. The third comes from John McCain, during his speech to the Los Angeles World Affairs Council on March 26, 2008.