Archive for August, 2005

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Jave jive or jive talking?

August 29, 2005

Michael Giberson

When the Ink Spots sang “I love the java jive and it loves me” in 1940, they could not have known how right they were.

Coffee not only helps clear the mind and perk up the energy, it also provides more healthful antioxidants than any other food or beverage in the U.S. diet, according to a study released Sunday. [...]

The findings by Joe Vinson, a chemistry professor at the University of Scranton, in Pennsylvania, give a healthy boost to the warming beverage.

So says an Associated Press story appearing in The Mercury News. Or see any of the other 350+ hits resulting from a Google News search on “coffee Vinson.”

I’ll drink to that. Curiously, however, while the findings are all over the online news sources, it isn’t clear from news reports what is actually new about the research. Visit Vinson’s webpage and you can readily find a 1999 article, “Take Two Cups Of Coffee And Call Me Tomorrow,” which featured the same result. A quote:

Vinson decided to study all of the antioxidants together, excluding vitamin C. In terms of polyphenol content, he found that “coffees are lower than teas and lower than wines, but higher than just about anything else you can think of in beverages (like fruit juices).” But because Americans drink a lot of coffee, it represents their top source of antioxidants from food.

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Moneyball vs. old school on the sacrifice bunt

August 28, 2005

Michael Giberson

The sacrifice bunt is evil, say the sabermetricians with their numbers and charts and spreadsheets. The cost of the out given up is greater than the value of the base gained, and they can prove it mathematically. Offer to elaborate about this to Washington Nationals Manager Frank Robinson, to show him the charts and spreadsheets, and a big hand emerges from below his desk and jabs — palm out, fingers spread — at the air in front of your face: Stop. Put your charts away, son.

“I don’t live by the numbers,” Robinson said firmly, “and I don’t manage by the numbers. I put on the bunt when the situation calls for a bunt.”

So writes Dave Sheinin in the Sunday Washington Post in an excellent article on the analysts and the old guard in baseball. I expect that Skip Sauer at The Sports Economist will be commenting shortly.

UPDATE: Sauer’s post is up at The Sports Economist.

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Tax collectors feel pain at the pump

August 27, 2005

Michael Giberson

For months we have been treated to media reports telling us gasoline consumption was undeterred by higher prices. Apparently, not any more. Prices have become high enough to reduce consumption, and because a reduction in gasoline consumption leads to a reduction in gasoline tax collections. State government officials are taking notice, according to the Washington Post:

In June and July, when prices started jumping and drivers started changing habits, total gas tax receipts dropped by nearly $1 million in Virginia compared with the same months last year.

The same was true in the District, where gas tax revenue dropped sharply in June, to a level nearly $1 million less than last year. June also was disappointing in Maryland, where taxes came in $1 million less than projected.

The article reports that the federal gas tax is 18.4 cents per gallon, Virginia charges 17.5 cents per gallon, the District of Columbia charges 20 cents per gallon, and Maryland charges 23.5 cents per gallon.

The situation is a little different in New York, one of nine states that charge a sales tax on gasoline (in addition to an 8 cent per gallon excise tax). As prices go higher, the sales tax brings in more revenue per gallon sold. A New York newspaper reports that the state Department of Taxation and Finance expects to bring in an additional $40 million in tax revenue due to higher gasoline prices.

The stories remind us to consider the effect of gasoline taxes when calculating “historic high prices” at the pump. Gasoline prices have been up and down over the past fifty years, but gasoline taxes have been mostly just up. The American Petroleum Institute reports current gasoline taxes by state (pdf file) as of July 1, 2005. On that date, they said, eight states increased gasoline taxes, while one (Nevada) showed a decline.

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Regulators clash on air quality and electric reliability

August 26, 2005

Michael Giberson

Regulatory authorities and public policy goals have collided on the Virginia side of the Potomac River, just across from D.C. This has been a slow-motion collision, long in coming and probably weeks or months still to go, so pull up a chair and watch the show. Virginia state officials have caused the shut down of a power plant that the Washington, DC utility regulator calls vital to protecting the reliability of the electric power system in the area.

For years, residents of Alexandria, Virginia have complained about the emissions coming from the Mirant’s Potomac River power plant. The emissions are particularly a problem for the folks living at Marina Towers, a 14-story apartment and condominium built 300 yards from the power plant. The five-boiler coal burning power plant, which produces about 500 MW, has been operating since 1949. It is old enough – by a substantial margin – to have been exempted from the most stringent air quality regulations, but apparently hasn’t been able to comply with the laxer standards do apply.

The Mirant plant, formerly owned by D.C. electric utility Pepco, supplies power into DC and Maryland, but does not directly provide power to its Virginia neighbors. This slight mismatch between costs and benefits probably contributes to the plants political troubles.

A recent study, commissioned by Mirant pursuant to a consent decree with the Virginia Department of Environmental Quality, concluded that the plant had the potential to produce well in excess of allowable levels of sulfur dioxide and nitrogen dioxide under worst-case conditions, and was likely in violation of the particulate standard too. The plant met requirements for Carbon Monoxide and Mercury emissions. In response to the study, the Virginia DEQ has ordered Mirant to clean up or shut down. Mirant concluded it had no readily available compliance fix, and so began shutting down the plant on Wednesday.

On Thursday, the District of Columbia Public Service Commission filed a request with the Federal Energy Regulatory Commission to order the reactivation of the plant. The Business Gazette (Maryland) reports:

The District of Columbia Public Service Commission filed an emergency petition Thursday with the Federal Energy Regulatory Commission, seeking to reverse the shutdown of Mirant Corp.’s power plant in Alexandria, Va.

The commission said the shutdown “will have a drastic and potentially immediate effect on the electric reliability in the greater Washington, D.C., area.” [...]

FERC spokeswoman Celeste Miller said Thursday that a comment period will be open until Monday on the District’s petition.

Potomac Electric Power Co. customers in the District make up the bulk of users of power generated by the plant. Pepco has 750,000 customers in the nation’s capital and Montgomery and Prince George’s counties.

“Barring any additional problem, we’re fine,” said Pepco spokeswoman Mary-Beth Hutchinson. “We have contingencies in place as long as it doesn’t shoot up to 96 degrees.”

Whew, that’s a relief, they got a plan in place to keep the power flowing unless the temperature rises.

I’d say the long term prognosis for the Mirant plant is not good. Mirant in is bankruptcy, and so is likely to be a little short on cash for big improvements. If Mirant does have the money for big improvements, they’ll likely end up triggering the more stringent environmental standards that apply to new sources. All in all, Mirant may be better off taking down the plant and building “Marina Towers II.” After all, they have a prime piece of property on the Alexandria waterfront.

Notes:

The Mirant study is available from the Virginia Department of Environmental Quality website.

Va DEQ also has a handy “In the News” page which lists many media reports on the issue.

A Google News search on “Mirant Potomac” reveals many more stories.

A quick visit to the Weather Underground reveals that since 1975, over 1/5 of the days during the end of August/beginning of September period have had temperatures above 90 degrees F. The average high this time of year is nearer 87 degrees.

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KP northwoods style

August 26, 2005

Lynne Kiesling

I am outta here, headed on a week’s vacation to the Boundary Waters in Minnesota. No computer, no cell phone reception, so no LK KP. Mike will soldier on here while I’m gone.

But please keep talking! I love seeing the conversation that has started.

TTFN!

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An even better statistic on gasoline household spending

August 25, 2005

Lynne Kiesling

OK, Manhattan in hand … here’s an analysis that improves on the first one. I’ve taken the ratio of [gasoline price x gasoline quantity] to median household income. The gasoline quantity data are from Table 5.13a of the DOE’s Annual Energy Review 2004, in thousands of barrels.

Table 5.13a reports “estimated petroleum consumption, residential and commercial”. That means that I am overstating the amount of residential petroleum consumption, which at least will bias the results in the direction I want; if I’m overstating residential consumption, I’m overstating residential expenditure, so if it declines, then we know that in truth the decline is even larger than depicted. The analysis would be more precise if I could break them out. But here it is anyway:

gasspendinc

If anything, this decline is larger than just the ratio of gas price to median household income. Interesting.

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An even better statistic on gasoline household spending

August 25, 2005

Lynne Kiesling

OK, Manhattan in hand … here’s an analysis that improves on the first one. I’ve taken the ratio of [gasoline price x gasoline quantity] to median household income. The gasoline quantity data are from Table 5.13a of the DOE’s Annual Energy Review 2004, in thousands of barrels.

Table 5.13a reports “estimated petroleum consumption, residential and commercial”. That means that I am overstating the amount of residential petroleum consumption, which at least will bias the results in the direction I want; if I’m overstating residential consumption, I’m overstating residential expenditure, so if it declines, then we know that in truth the decline is even larger than depicted. The analysis would be more precise if I could break them out. But here it is anyway:

gasspendinc

If anything, this decline is larger than just the ratio of gas price to median household income. Interesting.

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Internal consumption of ethanol

August 25, 2005

Lynne Kiesling

OK, last word before I go make that Manhattan … contrary to what Glenn said in his follow-up post, I have no enthusiasm for ethanol as a fuel! Except for when it’s taken internally from a bottle with a red polymer top …

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Gas price relative to median income has fallen

August 25, 2005

Lynne Kiesling

OK, here’s the data to show that relative to median household income, gasoline prices have fallen:

gasinchist

Data used to create figure:

  • Median household income data for 1980-2000 from Table H-11 of Census historical statistics, in current dollars
  • Median household income data for 2001-2003 from Table H-8 of Census statistics from the Current Population Survey, in current dollars.
  • Average price of regular unleaded gasoline, 1980-2003, from Table 5.24 of the DOE Annual Energy Review 2004, in current dollars.

GINORMOUS ASSUMPTION MADE: The above graph assumes that the quantity of gasoline consumed per household has been constant over the past 25 years. This is a heroic assumption, but the BLS website was not sufficiently user-friendly to enable me to find data on household spending on gasoline in a useful form, and I desperately want to go downstairs and make that Manhattan!

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Summary of reasons why oil and gasoline prices are currently so high

August 25, 2005

Lynne Kiesling

In KP’s three years of life there’s been a lot of coverage of oil and gasoline markets, and some dominant themes have persisted:

  • The unintended consequences of price caps are usually pernicious.
  • Environmental regulation, in this case in the form of the EPA federal fuel oxygenate requirement, causes balkanization of regional gasoline markets, causes price differentials across regions, and exacerbates seasonal price spikes.
  • The price of oil is one among many factors influencing gasoline prices; environmental regulation is another, as are taxes. Regulation and taxes vary by jurisdiction, causing prices to vary.
  • Gasoline prices, like most other retail prices, follow a “rockets and feathers” pattern of response to oil prices. However, just because retail prices are slow to fall when oil prices do, that does not mean that retail gasoline markets are uncompetitive. It’s more a reflection of the inelastic demand for gasoline.
  • Part of the reason why the demand for gasoline is inelastic is what I mentioned this morning; fuel is a smaller share of household budgets for most US households.
  • Every spring like clockwork, gasoline prices rise for a combination of complex reasons (winter-to-summer fuel switchover, summer driving increase, etc.).
  • Every spring like clockwork, Illinois Senator Dick Durbin whinges about “greedy, price-gouging” oil refiners who are sticking it to consumers.
  • Every spring like clockwork, the Federal Trade Commission spends a lot of time and effort to investigate the competitive conditions in retail gasoline markets. Every spring like clockwork, they find no evidence of oil refiners’ abilities to influence retail prices in an anticompetitive fashion.
  • Right now, high oil prices are being driven by China’s (distorted and subsidized) demand and by risk premia due to uncertainty in the Middle East, Venezuela, and Africa.
  • OPEC and its shaky ability to sustain a successful cartel (because of hard-to-detect cheating from smaller members) does not determine world oil prices. OPEC’s decisions influence world oil prices, but they are only one part of a much more complex story, and that complexity is beneficial because it dilutes their ability to withold and raise prices.
  • [I saved this for last because it's the important long-run point] Petroleum is scarce, perhaps even finite, in its supply. Technological change has helped us locate more of it, and pull it out of the ground where we might otherwise not be able to or where it would otherwise have been too costly. That’s the primary reason why prices fell in the 1990s. OPEC’s inability to sustain a cartel exacerbated that price decline. Price increases reflect expectations of future scarcity relative to demand and risk. That is the most powerful mechanism by which we learn both to conserve and to innovate.

[Leaves professor mode, goes downstairs to make herself a well-deserved Manhattan]

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