BIKE: Mixed messages; TxDOT accelerates spending while...

[Roger Baker]

<http://www.statesman.com/news/content/shared/tx/legislature/stories/ 
01/22txdot.html>

79th LEGISLATURE
State transportation kitty to see sharp spike
Proposed transportation agency budget would go up 43 percent over next  
two years

By Ben Wear
AMERICAN-STATESMAN STAFF
Saturday, January 22, 2005

The Texas Department of Transportation would see a 43 percent increase  
in the state's next two-year budget cycle, according to the Legislative  
Budget Board's 2006-07 spending plan.

According to that proposed budget, subject to tinkering before the  
Legislature passes a final appropriations bill this spring and the  
governor signs it, the Transportation Department would spend $15.1  
billion in the two years starting Oct. 1. According to the budget for  
the current biennium, the agency was expected to spend $10.5 billion.

That two-year jump of $4.6 billion represents about a quarter of the  
$16 billion spending increase anticipated by the budget board's 2006-07  
spending plan, this from a department with less than 10 percent of the  
overall state budget currently.

The picture is more complicated than those numbers would make it  
appear, transportation officials say. They point out that actual  
spending in 2004-05, thanks primarily to an acceleration of how the  
state collects federal transportation grants, will be $12.2 billion  
rather than the anticipated $10.5 billion.

Using that apples-to-pomegranates comparison, the increase would be  
only 24 percent. But that's still well above the 13.5 percent spending  
increase anticipated for the state overall in 2006-07. And it comes  
when the Legislature is expected to be scratching for ways to better  
pay for social services, public schools and salary increases for state  
workers.

State Rep. Mike Krusee, R-Williamson County, chairman of the House  
Transportation Committee, said comparing the transportation budget's  
growth to that of general government likewise means setting disparate  
fruit side-by-side. The transportation budget is overwhelmingly  
supported by gasoline taxes, federal and state, with tax rates that  
haven't changed in more than a decade and by methods of borrowing money  
created in 2003 that did not require raising taxes.

Anticipated spending for the Texas Mobility Fund in 2006-07, a new  
stash of cash that will be borrowed on the bond markets and paid back  
by motor vehicle fees — along with money to be borrowed against future  
gasoline tax revenue — represent about $1.9 billion of that new money.  
And federal grants would go up about $2.4 billion from the predicted  
2004-05 amount.

"It's not as if we're taking it out of the education pie," Krusee said.  
"I would not want it to be seen as state policymakers valuing one area  
more than another."

The possibility exists that the current state of transportation plenty  
could ebb in coming years. That change in how the U.S. government sends  
money back to the state — paying for the first 80 percent of projects  
rather than 80 percent of each individual segment — will create only a  
temporary bump in that money stream. After that, the annual increase in  
federal transportation grants will return to a more measured pace. And  
the Texas Mobility Fund, at least for now, is expected to generate only  
$3 billion, money that could be exhausted by 2009 or so. But for now,  
road building will see an undeniable boom in Texas.

According to figures from the Transportation Department, about half of  
its budget in 2003 and 2004, or about $2.6 billion a year, went to  
planning, right-of-way purchases and construction of new or expanded  
roads. This year, that will grow to $3.6 billion and then to $4.5  
billion next year. And that doesn't count money borrowed on the private  
market that would be paid back by toll road revenue, such as the $2.2  
billion in bonds sold for the three roads in the Central Texas Turnpike  
Project or the $6 billion that Spanish toll road operator Cintra  
Concesiones de Infraestructures de Transportes S.A., says it will spend  
on the Trans-Texas Corridor's Interstate 35 alternative road.

Taking that money into account, as well as the department's budget  
spike and any road investments by toll road agencies in Dallas and  
Houston or regional mobility authorities, Texas could see an extra $20  
billion of highway and railroad construction in the next five to 10  
years.

Texas Transportation Commission Chairman Ric Williamson, a former  
member of the Legislature, said he hopes education and social services  
can find the needed money. He even said the transportation community  
would be open to shouldering some of that fiscal burden. But he said  
it's wrong to spin the transportation budget as any sort of negative.

"My perspective on this is that TxDOT doesn't have a lot of money, the  
state of Texas is going to get a lot of roads," Williamson said.  
"Because we damn sure aren't going to sit on it."

                     ********************************

<http://www.forbes.com/business/2005/01/10/cx_da_0110doomoil.html? 
partner=msn>


The Coming Oil Crisis
Dan Ackman,  01.13.05, 6:00 AM ET

The world economy has gotten fairly comfortable with oil at $45 a  
barrel. But how will it react to paying $100 a barrel three years from  
now? Or $150 in five years?

  That's what the future holds according to Stephen Leeb, president of  
Leeb Capital Management and author of The Oil Factor (Warner Books  
2004). The result, Leeb says, will be double digit inflation--if we're  
lucky. If we're not, it will be a severe depression. We asked Leeb to  
explain the gilding of black gold.

  You say the price of oil will rise much higher than it already has.  
Why?

"The problem we have is that there are 2.3 billion people in Chindia,"  
Leeb says, using shorthand for a combined China and India. "Today,  
China and India use the energy-equivalent of 5.5 barrels of oil per  
person per year, while rich nations use 39. No matter how rosy your  
thinking is as to the global supply of oil, there is no way there is  
going to be enough to satisfy the demands of an extra 2.3 billion  
people coming online."

As China and India become rich nations, the demand for oil could grow  
at 6% per year, compared to 2% recently. Currently, the world has  
almost no excess supply. The planet is operating at anywhere from 95%  
to 99% capacity, Leen says. "There is no margin for error." The only  
way the system can respond is continued price increases.

How bad will it get?

At the end of 1999, oil was trading for around $10 a barrel. Since  
then, it has risen by about 29% per year. Simply extending the trend  
line means that oil will be at $100 a barrel in about three years and  
at $160 in five years, Leeb says. If prices rise the way they have in  
the last year, the resulting levels will be even higher, and that's  
without any major geopolitical crisis in the Persian Gulf or anywhere  
else. "It's not a heroic position," Leeb says. "But I don't know how  
you avoid it."

What will the result be?

We'll see historically high inflation of 11% to 15%, according to Leeb.  
"That's not even so unusual," Leeb says. He notes that the U.S. has had  
bouts of inflation at that level during the two world wars and in the  
1970s at the tail end of Vietnam.

  "We're kind of overdue," he says.

  Economically, the U.S. is already on a kind of war footing, with the  
war on terror, Iraq, massive military spending and a shortage of a key  
commodity, specifically oil.

  "I hope I'm wrong," he says. "I've never wanted to look more like an  
idiot than I do right now. But I don't see it."

When and why will it bottom out?

"I don't see it bottoming out soon," he says. " I think it's a decade-  
or generation-long problem. A depression would stop it. But as long as  
the Federal Reserve keeps real interest rates negative, that can be  
avoided."

  The better outcome may be that "as energy prices continue to rise,  
we'll organize a worldwide effort to develop alternative energies,"  
Leeb says. "Maybe that will even bring the world together."

                        *******************************************

Ken Deffeyes just updated his current events blog
(http://www.princeton.edu/hubbert/current-events.html) with the
following.

Rob Bracken
San Francisco


January 20, 2005

The production and reserves data for 2004 appeared in Oil & Gas
Journal. During 2004, world oil production showed an uptick of 3 1/2
percent, in increase of about 2.5 million barrels per day over the
2003 figure. More than half of the increase came from two sources:
Iraq and Russia. Production in Iraq doubled, and Russian production
increased by 8 percent. There have been no reports of major Russian
oil discoveries or field extensions, presumably the increase comes
from catching up on maintenance deferred during the Communist era. My
interpretation is that the uptick is part of the normal up-and-down
jitter in the production curve. Worldwide, there have not been major
discoveries or innovations that would put a permanent dogleg in the
long-term trend.

Of particular interest is the 2004 production from Saudi Arabia: 8.75
million barrels per day. Early in 2003, Saudi Aramco and the
government of Saudi Arabia announced that their production was maxed
out at 9.2 million barrels per day. Yet there have been persistent
stories that the Saudis could increase production to 11 million
barrels per day. Both statements may be true! They could increase
production, but they would soon regret having done so. An abrupt
increase in their production rate would pull water up through the
dolomitized streaks in the Ghawar field, like a teenager sucking on a
soda straw. Saudi Arabia was supposed to be the world's last source
of unused production capacity. At this point, there seems to be no
surplus oil production capacity anywhere in the world.
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