Paris Hilton proposes a hybrid of McCain’s proposed energy policy (off shore drilling) and Obama’s (incentives for alternative fuels) — limited off shore drilling that are heavily taxed to support alternative fuel development and incentives.

The U.S. Labor Department reports that whiolesale prices jumped 1.8 percent in June. I expect the increase to level out a little, but if you maintained 1.8 over an entire year that annualizes to an inflation rate of nearly 22%. Most of this increase is due to the large jump in the price of fuel and food, in case you haven’t noticed.

The “core inflation” rate went up a more reasonable 0.2%. This is the price increase of things at the retail level and excludes food and fuel. This means that manufacturers and retailers are really eating their cost increases right now.

Some predictions from me:

• I think off shore drilling is inevitable.
• Alaska, too.
• California voters will approve funding for the LA to SF high speed rail line.
• Earlier I would have said Obama will win in November, but right now I think McCain is saying the things that most voters now want to hear. That is, “drill, drill, drill.”
• Interbike will be huge this year.
• Voters will increase calls for mass transit and bike facilities.
• Unprecedented job losses, either this year or the next.
• More bicycling all around. More golf carts and other electric mobility devices — scooters and e-bikes and so forth, too.

Don’t forget the contest!

Like Brian says, always look at the bright side of life.

With public transit use nationally at a 50-year high, traffic dropped 2.1% in the first four months of this year across the country. That mileage reduction — along with people driving smaller cars, and more slowly, to save gas — could mean that 12,000 fewer people will die in traffic accidents this year, according to a study by professors Michael Morrisey at the University of Alabama at Birmingham and David C. Grabowski at Harvard Medical School. Air pollution has been reduced enough, according to UC Davis economics professor J. Paul Leigh, to prevent 2,200 respiratory-related deaths over the last year. Less eating out and more walking and biking could mean a 10% reduction in obesity, according to Charles Courtemanche, an assistant economics professor at the University of North Carolina at Greensboro. And, apparently, higher gas prices also keep econ professors employed.

Read more in the Los Angeles Times: “The Joy of $8 gas.”

Meanwhile, the Wall Street Journal takes another look at the old national 55 mph speed limit. While Pelosi asks Bush to open up the Strategic Petroleum Reserve and Democratic lawmakers are now joining Republicans writing up bills to open up drilling in Alaska and offshore, Senator John Warner (R-Va) sent a letter to the U.S. Department of Energy and the GAO asking them to look at dropping the speed limit as part of the debate on an energy policy. The WSJ also looks at other impacts of speeding besides energy costs: a $40.4 billion cost to society (way more than those bicycling scofflaws who run lights and ride without helmets!) and 13,000 fatalities, according to the NHTSA.

Back to Los Angeles: the importance of reporting road harassment to the police.

As usual, thanks to Jack for the WSJ article!

Link from Jack.

I’m 80 years old and I’ve been an oilman for almost 60 years. I’ve drilled more dry holes and also found more oil than just about anyone in the industry. With all my experience, I’ve never been as worried about our energy security as I am now. Like many of us, I ignored what was happening. Now our country faces what I believe is the most serious situation since World War II.

If we don’t do anything about this problem, over the next 10 years we will spend around $10 trillion importing foreign oil. That is $10 trillion leaving the U.S. and going to foreign nations, making it what I certainly believe will be the single largest transfer of wealth in human history.

Read more In the Wall Street Journal.

Pickens believes the United States can cut oil imports by a third within a decade with wholesale construction of wind turbines across the Great Plains. The electricity produced can then be used to shut down natural gas power plants so we can use natural gas for transportation, though I’m surprised to see Pickens claim that natural gas in the United States is “abundant” and “cheap” since U.S. gas production peaked last year and prices are at record levels.

Locally, more and more people are taking public transportation to reduce their reliance on imported oil. Here’s what Caltrain looked like this week during my commutes.

On a related note, bikes on board the Highway 17 Express service is on the agenda for this Friday’s meeting of the Santa Cruz Metro Board of Directors. I spoke with Board Vice Chair Dene Bustichi this week about the issue — he didn’t commit to anything but I hope I was able to convey the importance of bikes on board the bus.

I was flipping through the New York Times this morning and saw a couple of interesting articles:

• “Rethinking life in Denver’s far suburbs” discusses the impact that higher commute and heating costs are having on housing prices in the far suburbs around Denver, Colorado. Denver’s city center, in the meantime, is seeing a revival of shiny new condos and restaurants around LoDo and along the Cherry Creek River. I used to ride my bicycle in that area and it’s indeed become a very nice area over the past 10 years.
• “Low Mexican gas prices draw Americans” reports that many Americans in border towns cross into Mexico to buy discounted gasoline and diesel. Gasoline in Ciudad Juarez is only $2.66 per gallon, the result of subsidies that costs the government of Mexico over $20 billion this year. Trucking companies fuel their fleets in Mexico. Meanwhile, gas stations in El Paso, TX are empty and pushed to the edge of bankruptcy. Seee the video report for more.
• A similar article on gas tourism in the Wall Street Journal looks at San Diego and Tijuana, where individuals are installing extra large fuel tanks on pickup trucks and other work vehicles so they can buy subsidized Mexican fuel for resale to friends in the USA.

The Wall Street Journal does a good job covering the big reason that oil prices have risen so dramatically over the past year: exports fell 2.5% last year in spite of a 57% increase in prices. The conventional wisdom is that higher prices always lead to technological improvements and more investment. This drop in exports “defies traditional market logic,” according to the article.

One of the big factors in decreased exports mentioned in the WSJ article is what geologist Jeffrey Brown calls the “Export Land Model.” Picture an oil producing country — “ExportLand” — that produces two millions barrels of oil per day. It keeps one million for domestic use and exports the remaining one million to the United States at $50 per barrel. As prices rise to $100 per barrel and more, all of that American cash flowing in to ExportLand leads to more consumption, bigger houses, more roads, more SUVs to drive on those roads, suburbs, big box outlet stores, yachts and private jets. This results in more domestic consumption in Exportland, which in turn results in a drop off in exports.

ExportLand has a finite quantity of oil, so that two million barrels per day production is declining over time. In the real world example of Mexico, production dropped a dramatic 15% from 2006 to 2007 while domestic consumption increased. Similar things are happening in Norway, Russian, Saudi Arabia and throughout the Middle East.

Another real world example is the United Kingdom, which went from a major supplier to a net importer in only six years. One time exporter Indonesia became a net importer. Mexico is expected to become a net importer within five years. Even Iran — the world’s fourth largest oil producer — is expected to become a net importer in a few years.

The question to ask yourself: When all of the large oil exporters become oil importers, who will they import the oil from?

“The sense in the market is that peak oil is here and that things will only get worse,” says Lehman Brothers oil analyst Adam Robinson. He continues, “the verdict is still out on that,” because of ultra deep water drilling planned off the coasts of Brazil, Australia, West Africa and the Gulf of Mexico. Going for the difficult oil that’s only profitable when oil is above $100 per barrel is, of course, part of the very definition of Peak Oil — when the easy stuff is gone, you must spend more time, effort, resources and money in squeezing the last little bit that’s left in the sponge.

Read more in the WSJ. The article explains things fairly well, IMO. Thanks to Jack in STL for the heads up on this.