Monday, January 23, 2012

Arguing Against Lunacy: A Rebuttal of a "Rebuttal"

Perhaps the fact that an anonymous blogger mentioned me in his blogpost today makes me famous, I don't know. But, what I do know is that the logical gymnastics required to follow his argument require that you be able to bend over backwards and....well, you get the point.

If you aren't following me on Twitter, you may have missed the "discussion" so let me fill you in on the highlights. I stumbled on a discussion about the merits of going green. One fellow Twitterer was being taken to task for his observation that in some cases it is not logistically possible to be as green as one would like. I made the observation that industries will become green when it becomes economically viable to do so.

I believe this. For example, the tarsands were not developed for decades because it cost more money to take the oil out of the sand that what you could sell it for. Currently, there is no viable cheap alternative to oil for many uses--plastic being the one I brought up in the discussion. Even in electric cars, there is a lot of, even the "green" cars are not really "green."

But, what the anonymous blogger came back to later is that electric cars should get billions of dollars in government handouts to make up for the trillions of dollars of handouts that the oil industry has received. When pressed on this point, the argument was that we built roads for gas-powered cars and that has given cars an unfair competitive advantage. Hold on I said, will not electric cars be using these same roads? Ah, yes, but how many recharging stations have you seen, was the rebuttal?

Okay, governments now own gas stations, I ask? At this point I'm left with, if you can't see how the government has given trillions of dollars to the oil industry, then I can't help you. What I translate that as is, "how dare you question me...I don't know what I'm talking about so I'll throw in an ad hominem attack to my straw man argument and call it a day. Thank you very much."

So, what of the trillions of dollars in hand-outs? I suspect "hand-out" is being translated as "tax break" or "reduced royalty" but since I've never received an answer I can't tell. Assuming, we're talking about reduced rates of taxation, can we please differentiate between tax breaks that oil companies may have received vs handouts that this particular blogger was advocating for because they are NOT the same thing.

A tax break is given to many industries in recognition of A) the money that they spend (in this case) on research (determining that there is oil) B) money they spend in building the infrastructure required to extract the oil--refineries, pipelines, drills etc. C) the number of jobs they are going to create and D) the fact that the government doesn't care where the revenue comes from as long as they get it, so they just tax the consumer directly. And, the income the government receives via taxes on gasoline is HUGE. It makes sense for them to give a tax break early on so they can tax the heck out of not just the gas but the income of every worker working in the oil industry. And they don't work for peanuts. So, that's a LOT of tax revenue. This is highly different than a handout whereby the government would take taxes from me and give it to some company in hopes that they'll use it wisely. That's not even revenue neutral. A hand-out is revenue negative.

I think most folks can understand the difference. I was dumbfounded that this particular blogger couldn't tell the maybe it's more complex than I'm making it out to be...I don't think so, but hey, maybe.

So, to be clear, I am not anti-green. I am anti government involvement in industry. I think we already have too much meddling. I am absolutely against the government spending trillions on electric cars. When electric cars become affordable, consumers will buy them. I'll buy one.

We have laws against pollution, corruption etc. We can debate where those standards need to be, but currently they are where--I would argue--most people believe they should be. So, it is up to the government to enforce the already existing laws and make new ones where needed. It is not up to the government to decide which industries are going to succeed or fail. Governments generally suck at business.

As an aside, in 2008 I bought a new car. I looked at hybrids.  The sticker price was out of my price range and the savings that I would receive on gas would not offset the higher price with the amount of driving I do. In fact, except for professional drivers, most drivers don't realize a cost benefit from pure gas vs hybrid vehicles. One day that will change. And, on that day, the number of battery re-charging stations will outnumber gas stations. Why? Because businesses have a vested interest in ensuring that when you buy a vehicle it is as easy to maintain that vehicle as possible.

Oh, if there have been trillions of dollars of government handouts to the oil industry, I'd welcome that information...and, if you're counting highways, hold your breath on that one...because well, maybe that's another blogpost.

This post is now up for discussion.


  1. There is no tar in the oil sands, other than that I agree with you 100%

    1. I'll let you write the technical blog about the process of getting oil from the tarsands...I think you get what I'm getting at though, right? Thanks for reading and commenting.

  2. There's also no oil Joebeans, not until excessively energy intensive methods are applied to melt it out of shale rock. By your same logic, there's no sea in Ocean sea water, it's ocean water. You can drink it too, you just have to process it first. So don't dicker about calling the Tar Sands what they are, when "Oil Sands" is bought and paid for to rebrand it the way you're trying to depict them.

    Brandon, you didn't mention the key point about GM and how they were convicted of destroying electric transportation systems, and invented the highway lobby to build freeways for gasoline vehicles.

    You apparently forget that it's common for governments to even own gas stations, and regulate the crap out of them. Does Petro-Canada sound familiar?

    I never said the "oil" industry alone has been the benefactor of trillions in subsidies, but they certainly have had their business model helped too. Automakers are a major force, too of course. Tire makers too. So you don't have to hold your breath, they made Google to save your life apparently.

    I don't think the government will have to spend "trillions on electric vehicles" before they'll catch on and the obvious benefits will keep their infrastructure built up and overtaking the gas fueling and repair systems.

  3. Sorry Saskboy, I stand corrected. Even though tar and oil are 2 completely different things and the only rebranding i see is from the environmental crowd Oilsands is the accepted name as they extract oil, not tar.

  4. Saskboy, I didn't mention talk about highways because that is central to your argument, but doesn't play into my argument in any way, shape or form. It's immaterial and irrelevant. Highways were built for transportation. Period. Gas or electric can use them.

    Which subsidies are you specifically referring to? I can't think of any. But, again, I would argue that any handout to any industry is or black so I won't hold you to pointing out specifics...which should let you off the hook because if your examples existed you would have pointed them out by now.

    Thanks for commenting. We will agree to disagree.

  5. It's worth pointing out that it wasn't until about 20 years ago or so that the majority of gas delivery companies were municipally or provincially owned (think Public Utilities Commissions). They built a fair chunk of the delivery system for gas, and while that's not gasoline, it is a fair chunk of subsidy given towards the oil sector -- needed, of course, so we wouldn't freeze in the dark.

    And then there's Petro Canada, which means a fair number of gas stations were built and subsequently owned by the taxpayers of Canada before it was sold off...

    1. Thanks for you input James. Petro Canada is a good example of potential gov't handouts, but since a private company subsequently bought them is it fair to use that as an example?

      What was the tenor of governement involvement? Do those conditions still exist? For example, in Saskatchewan SaskTel and many of the other Crowns got involved because of the rural nature of our province and the sparse populations and the reluctance of private-enterprise to get involved in creating the necessary infrastructure...that's positive I would argue.

      However, I'm not convinced that the argument for Crowns in that case extends today to the argument that the government should give billions towards the development of an electric car industry.

  6. Two points:

    First you said "I am anti government involvement in industry." Fair enough (in fact for the most part I agree), BUT how is giving some industries tax breaks not government involvement? Especially when new potentially disruptive technologies from new players (who often don't have the same lobbying clout)do not get the same tax breaks. It distorts the market.

    Second is the issue of externalities. The price of fossil fuels is is artificially low because many of the costs (according to some estimates the bulk of the costs) associated with their burning are not being paid by the consumer. This further distorts the market and prevents better alternatives from taking hold.

    These two factors are IMO the main reasons why alternatives have failed to be much more than a niche in the market, and while perhaps not technically the same as a direct handout have very similar effects. Anyone who claims to favour the free market should be quite receptive to remedying those flaws.

    This is why I quipped on twitter: where is a good capitalist when you need one?

    1. Thanks for your comments. I'd argue there is a difference between tax breaks and handouts (actually, I did :)

      Governments will offer tax breaks when they perceive there are benefits in terms of employment which would then lead to more workers to tax. Generally, tax breaks per industry are the same so that all competitors have the same "breaks" ie all potash companies pay the same royalties.

      I think you're arguing that alternative energy companies don't get the same tax breaks. However, it's a different industry. How many people do they employ? What are there input costs? Who are the consumers of their products?

      Laws of supply and demand still apply. Once there is a demand, the supply will increase. To attempt to influence increased supply is risky if there is no demand as there would be no opportunity to recoup the tax breaks given.

      Should ALL industries have the same level of taxation? Do all industries employ the same amount of people? Do all industries purchase the same volume of spin-off material? I don't think it's reasonable to think that every industry should pay the same rate of tax. Every company within a given industry should--and, as far as I am aware, that is the case.

      But, again, tax breaks are different than hand-outs. And, I disagree that having different levels of taxation distorts the market.

      Now, this is theoretical...heck, maybe hydrogen-cell producers ARE getting tax breaks...and in that case we're all just talking out of our "hoops" as my daughter says. Do you have any data to indicate taxation levels in these industries?

    2. " I'd argue there is a difference between tax breaks and handouts"

      Yes I know, I even stated that in my comment. But both handouts and tax breaks both distort the market. That was my point.

      More importantly I strongly disagree with your notion that traditional energy companies and alternative energy companies are different industries.

      They both produce the same product, and both compete in the same market place. Tax breaks on some players but not others is what distorts the market.

      Add to that the issue of externalities (which you did not address) and you have a situation where the deck is stacked strongly against anything but the status quo.

    3. I think the real issue is that tax breaks are given when one can forecast the economic impact of that front-loaded discount. With new energy alternatives, as there is not the same demand, there is no guarantee that a) it will work or b) that the public will adopt it en masse. So, it is not up to the government to create the demand, but rather for the companies to do the hard work of building their base.

      Cars didn't appear overnight and they had no real roads all had to be created. So, in one sense electric cars already have an advantage.

      It is not up to the government to create a short-but for them to create a market share. Entrepeneurs and business people will find ways to build their business in the existing happens every day.

      You bring up "status quo" and that I believe is the crux of the issue. Those that believe the status quo is untenable want change now. Others believe that, for the most part, we're heading in the right direction and there is no need for revolutionary change.

      Thanks for the discussion.

    4. I am having trouble reconciling your claim that you are anti government involvement in industry with your apparent defending of tax breaks for fossil fuel companies. Seems self-contradictory.

      Governments all over the world have had a heavy hand in the energy industry since its inception, it is more than a little strange for someone to argue that this is no big deal but then cry foul when anyone suggests that the deck is stacked against new disruptive entrants into the market.

  7. Ok there is more "Highways were built for transportation. Period. Gas or electric can use them."

    True but highways are not the only possible transportation option. For example why not a comparable rail system? (note I am not advocating for one here, it is just an example)

    The point I think Saskboy was trying to make is the the fact that the government builds and maintains a network of highways means that the market favours the 'car paradigm' of transportation. But surely there are others. But they wont get the benefit of having their infrastructure paid for by government. Again this distorts the market.

    Admittedly I am not sure what to do about this. Though it is worthwhile to understand (and if possible quantify) the effects such indirect 'subsidies' have on the market. Pretending they don't exist will only make the solutions to the problems we face that much harder to achieve.