Thursday, November 26, 2015

California Eyeing Extending Temporary Tax Rate Increases, Maybe Raising Them -- November 26, 2015

This article provides a bit of background to California's Proposition 30 and where things are headed. These are the three 30-second soundbites that give one cause for pause, especially when reading about countries like Greece and, now, Portugal:
  • California's state budget is in great shape, perhaps better than ever (at least in recent history)
  • the "soak-the-rich tax" (Proposition 30) raised state top income tax bracket from 10.3% to 13.3%
  • the "soak-the rich tax" expires at the end of 2018
It is likely that the "temporary" tax will be extended for 12 years (2030).

Others would like a "permanent" tax and at higher rates.

GDP Now 4Q15 Forecast Updated For November 25, 2015: 1.8%
Dynamic link:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.8 percent on November 25, down from 2.3 percent on November 18. The forecast for the fourth-quarter rate of real consumer spending declined from 3.1 percent to 2.2 percent after this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis.

Second Largest Producer Of Oil In Asia Pacific Is A Net Importer Of Oil And Big Consumer Of Coal -- November 26, 2015

What I know about the Indonesian oil industry I learned from The Prize but have forgotten most of the history. The IPA provides a very brief synopsis:
Exploration for oil in Indonesia dates back to 1871, with the first commercial production beginning in 1885, although most of its natural resources remained untapped until Indonesia gained its independence and became a Republic in 1945.
In the first half of the 20th century, three groups of merged companies under foreign ownership dominated exploration and production: Shell/BPM, STANVAC, and Caltex.
With independence following WWII, the oil, oil fields, refineries and supplies seized by the Japanese invasion force were returned to the Indonesian Government, and the new era of Indonesian energy exploration and production began.

The State Constitution of 1945 decreed that "All of Indonesia's land, water and natural resources are controlled by the State and will be utilized for the greatest benefit and welfare of its people."
In the Asia Pacific region, Indonesian oil production is second only to China, and its gas production is second to none.
Indonesian oil production is second only to China in the Asia Pacific region. Hold that thought.

Bloomberg/Rigzone is reporting that Indonesia is a) now ready to re-join OPEC after voluntarily leaving the organization many years ago; and b) hopes the price of oil stays low. Say what? Indonesia hopes the price of oil stays low, and yet Indonesian oil production is second only to China.

It turns out that Indonesia consumes twice as much oil as it produces:
Indonesia is projected to produce 850,000 barrels a day this year, according to a Nov. 13 report from the International Energy Agency. That’s about 789,000 less than it consumed last year. Only Libya, Ecuador and Qatar produce less among OPEC’s member states.
In October 2014, Indonesia gave up on a target of restoring output to 1 million barrels a day. Crude output has dropped more than 50 percent since the mid-1990s as shifting regulations and complicated permits deter investments in new fields.
Despite all the verbiage, I was unable to follow the reasoning why Indonesia returned to OPEC.

So, now let's take a more in-depth look at Indonesia's energy situation, going from a net exporter to a net importer in s a very short period of time. Some data points from the EIA:

Population -- 4th most populous nation in the world:
  • China
  • India 
  • US
  • Indonesia
Energy requirements -- struggles to attract sufficient investment to meet growing domestic energy consumption because:
  • of inadequate infrastructure; and, 
  • a complex regulatory environment 
Unique challenges -- Indonesia encompasses more than 17,000 islands, presenting geographical challenges:
  • matching energy supply in the eastern provinces with demand centers in Java and Sumatra; 
  • urbanization and demand in other areas of the country are rising at a faster pace than energy infrastructure development
And now we get to the real reason Indonesia is re-joining OPEC -- it needs to rebuild those ties with "old" friends to ensure adequate crude oil imports:
After suspending its OPEC membership seven years ago, Indonesia is scheduled to rejoin the cartel by 2016 as the country attempts to secure more crude oil supplies for its swiftly rising demand and greater investment from Middle Eastern members in its downstream infrastructure projects
So, in the meantime:
  • world's largest exporter of coal by weight
  • 5th-largest exporter of LNG (2014)
Energy consumption:
  • grew by 43% between 2003 and 2013, according to the Indonesian government
  • the country's petroleum share, although decreasing, continues to account for the highest portion of Indonesia's energy mix at 38% in 2013 
  • in the past decade, coal consumption more than doubled, surpassing natural gas consumption and becoming the second most consumed fossil fuel as Indonesia turned to less expensive sources of indigenous fuels
Indonesia intends to reduce its reliance on petroleum in its energy consumption portfolio to a 25% maximum share while raising the coal and natural gas portions to at least 30% and 22%, respectively, by 2025.


It's somewhat "funny" to re-read the EIA note about Indonesia -- many of their problems sound similar to those of the US (and many of them are self-imposed)
  • geographical challenges of getting production from the west to consumers in the east
  • inadequate infrastrucutre
  • complex regulatory environment (tell me about it -- the US "regulatory" environment killed the Keystone, and will probably kill the Sandpiper)
But wow, look at the growth in energy consumption and the country's increasing reliance on coal.

  • China: 1.4 billion and growing slowly
  • India: 1.3 billion and growing quickly
  • US: 320 million and growing
  • Indonesia: 250 million and growing quickly
  • Russia: 143 million, leveling off 
  • Turkey: 75 million
  • France (66 million), Germany (80 million), England (53 million): 200 million

Happy Thanksgiving!

Turkey Dinner At Home$50.11$49.41$49.04$49.48$49.20$43.47

Yearly averages from 1986 through 2011 at this site.

On Thanksgiving Day, Thank You, John D.

Reposting from a few days ago:
There's a nice article in this month's issue of The Smithsonian: "Quakers With A Vengeance: How Nantucket Came To Be The Whaling Capital of America" by a most famous authority on the subject and best-selling author, Nathaniel Philbrick. It's a great article. If there was a shortcoming in the article, it was Philbrick's failure to give credit to the man who "saved the whale." John D. Rockefeller was singularly responsible for saving multiple whale species, maybe all whale species, from extinction.

From the linked article:
By 1760, the Nantucketers had virtually exterminated the local whale population. By that time, however, they had enlarged their whaling sloops and outfitted them with brick tryworks capable of processing the oil on the open ocean. Now, since it was no longer necessary to return to port as often to deliver bulky blubber, their fleet had a far greater range. By the advent of the American Revolution, Nantucketers had reached the verge of the Arctic Circle, the west coast of Africa, the east coast of South America and the Falkland Islands to the south.
In a speech before Parliament in 1775, the British statesman Edmund Burke cited the island’s inhabitants as the leaders of a new American breed—a “recent people” whose success in whaling had exceeded the collective might of all of Europe. Living on an island nearly the same distance from the mainland as England was from France, Nantucketers developed a British sense of themselves as a distinct and exceptional people, privileged citizens of what Ralph Waldo Emerson called the “Nation of Nantucket.” 

Ring Christmas Bell, Ray Conniff Singers