Monday, February 11, 2008

Dessert Recommendation

On Sunday night my wife and three kids had the "Lemon Meringue Ice Cream Pie" at the Half Moon Bay Inn. It was one of the best desserts I have ever had. For dinner I had the cheeseburger, also one of the best burgers I've ever had.

I'd like to put in a Google Maps link, but Maps doesn't have it! Half Moon Bay Inn is at 401 Main Street, Half Moon Bay, CA 650-560-9758.

Subsidizing wheat in Afghanistan

Afghanistan grows most of the world's opium. Opium is technically an illegal crop there, and it is one of the few crops that makes enough money to support a farmer in Afghanistan. If you grow opium, the central government is officially supposed to stop you, and the local official will probably look the other way if you pay him off. It may seem cheaper and easier for the folks growing opium in the Taliban-controlled areas, since the Taliban actively helps farmers sell their crop, in exchange for some of the profit. I'm sure many farmers prefer the Taliban for purely economic reasons.

If wheat sold for more money, perhaps 3 times the world price (which is around $350-$400/metric ton), some folks think the value of the wheat crop would be large enough to encourage many farmers to switch to wheat production. Wheat is legal to grow, so their is no disadvantage for a wheat farmer to having a functional Afghani government. Foreign aid organizations could run grain mills which bought wheat at $1100/ton and sold the flour for $350/ton. Bread prices would presumably stay low as flour flooded the market, and Afghanistan would presumably become an exporter of flour.

Folks in Pakistan and Iran would be encouraged to sell grain to Afghanistan for milling. I'm not entirely sure this is an entirely bad thing. Presumably economic conditions do not vary dramatically as you cross the border, so that areas outside Afghanistan are probably also growing opium. And, as long as we stop bulk cargo deliveries of grain to Afghanistan, one would think it would be expensive to move large quantities of grain by, say, mule across the border. There is some subsidy at which it is not worth moving grain by mule. Hopefully it's cheaper for small Afghani farmers to get their product to the mills than it is for Pakistani importers.

So, how much would this cost? Afghanistan produced 4.4 million metric tons of wheat in 2007/2008, so someone would have to cough up $3.3 billion/year to carry this subsidy. That's real money, and apparently we'd have to keep it up for a decade or so. If there are not large agribusinesses in Afghanistan now, there will be within a year or two. These businesses will get efficient at growing grain in Afghanistan, and start to produce the majority of the grain there. The subsidy on grain will decrease over time, large efficient businesses will capture nearly all of it (as they capture farm subsidies in the U.S.), and the marginal farmers will move back to poppies. I don't have a great deal of hope for this effort.

By the way: anyone have a clue what this is?

Tuesday, February 05, 2008

Cost of oil, revisited

Last time I looked, oil was priced at $22/barrel and we were importing 9.14 million barrels a day, which made up 20% of our trade deficit of $374 billion. We were actually importing more, but I hadn't counted the refined stuff. So it was actually 12.6 million barrels/day, so $101 billion or 27% of the trade deficit.

Now, as you know, the oil spot price is around $95/barrel, but $72/barrel is closer to the average price, and we are importing 12.2 million barrels a day (crude plus some refined products). The census bureau has nicely summarized the data here, which doesn't quite match the simple math I would do. For Dec 2006-Nov 2007, they see petroleum imports as $283 billion (35%) of a $813 billion deficit.


How much does a plug-in hybrid help?
  • Over a 20-year lifetime, the car is driven 250k miles.
  • It gets 75 mpg rather than 25 mpg.
  • It burns 80 barrels of oil rather than 320 (and burns a bunch of domestic coal instead).
  • It saves the importation of $15,500 of crude.
  • It saves the user $23,000 in gas.
  • It costs the user $5800 in electricity. (250k miles) / (3 miles/kw-hr) * (0.07 $/kw-hr)
My guess is that a practical plug-in hybrid chews up more electricity and gasoline than this, but it still seems pretty good. Unfortunately,
  • It's made by Toyota in Japan, and costs $25,000, so the net trade debt increases. At least the money is going to a responsible nation like Japan. I will cede that eventually Toyota will make most of these plug-in hybrids here, and so only the profits will go to Japan.
  • If 10 million cars in the U.S. were plug-in hybrids, it would reduce our oil imports by 282,000 barrels/day, or 2.3%.
That last point is a killer. It is just incredibly hard to replace oil.