What a week for news. First, because the National Oceanic and Atmospheric Administration released updated data showing that global warming has not been on pause over the past 17 years. Now, if one completely discounts the so-called ideological studies from groups like the Heartland Institute or others, anyone who’s kept up with the climate story since the late 90s understands that respected scientific organizations — the Max Planck Institute in Germany and climatologists at the University of Alabama, among others — have all agreed that in fact the planet’s climate warming was on hold, and has been for almost two decades.
Most have added that this doesn’t mean that the warming caused by anthropogenic (manmade) emissions’ being put into the atmosphere won’t resume in the near future — and possibly with a vengeance. Nor does it mean, they emphasize, that the overall theory of global warming is not valid.
There You Go Again!
That sharp disconnect is the problem with the reporting on global warming. These respected climate scientists would issue numerous reports during the year saying that yes, the planet has stopped warming. And then at the end of each year yet another group’s report would claim with absolute conviction that year was the hottest on record. Which was it? A 17-year pause in warming, or always breaking records for the hottest year?
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Fortunately for the faithful, the NOAA report shows that if you “improve” your current data set and add more measuring stations worldwide, you will find that there has been no pause in global warming at all. But here’s the kicker: According to the New York Times the “disappearance of the slowdown comes largely from adjustments in ocean temperatures.”
“Adjustments?” That’s right, there’s no new information here, simply scientists massaging the old data to a new set of standards, and now saying again with absolute conviction, “OK, now we’ve got the science right.”
Really? Because every single year-end report on our climate over the past generation has been frightening as to our future, not open to debate; critics vilified and attacked even when they were other climate scientists. At no point in the past 25 years do I remember one year-end climate report coming out with the line, “Science is always working to improve,” thereby putting into question their published results, as Thomas R. Karl of the National Centers of Environmental Information told the New York Times in columns discussing these new adjustments to the data.
Big Oil: “Carbon Tax OK”
Still, this “adjustment” comes at a good time. The UN is working on a draft piece limiting atmospheric emissions, and just last week some of the biggest oil companies in the world, including BP, Royal Dutch Shell, Eni, Statoil and Total of France, agreed that it was finally time to tax carbon to incentivize its non-use. Really. It should be noted that Exxon and Chevron were not part of that letter writing campaign, but the very fact that major oil companies are now ready to back carbon taxation is a fundamental shift in their business platform.
Of course, the Financial Times of Canada published an opinion piece about it. The writer suggested that what the oil companies are likely going to do is suggest that the highest carbon taxes go on the worst offenders for carbon dioxide emissions, meaning that this plan would pound the coal industry the most. That would leave the oil and natural gas industry to take up the slack.
In that same column we read that possibly the correct carbon tax for gasoline might well be 50 cents per liter. Or, based on that day’s exchange rate between the Canadian loonie and our dollar x 3.78 liters per gallon of gasoline, you could pay a new carbon tax of $2.34 per gallon to fill up your vehicle.
Who Ties Their Shoelaces?
Then came the EPA’s multiyear study of the fracking industry and its dangers to the nation’s water supply; and for the first time in a long time we have a report that the energy industry held up and waved as solid proof that fracking was exactly what they said it was. The environmentalists, though, held up the same report and said, “See? We were right to warn you about the dangers of fracking.”
Really? OK, here’s what’s in that report. The EPA found “no real proof of widespread damage” to the nation’s water supply caused by fracking, but did find “potential vulnerabilities to our drinking water” — including the huge amounts of water needed for fracking, fracking in formations that also hold drinking water, problems with the casings around wells and how the wastewater and fracking chemicals are disposed of.
Didn’t we know all of that, long before we got into fracking in a big way? One wonders exactly how much money the government spent to tell us exactly what we knew about fracking a decade ago.
And then the Los Angeles Times did a huge story on Elon Musk and how his business empire, including Tesla Motors, SolarCity and SpaceX, exists only because of $4.9 billion in government subsidies.
Really? That’s not exactly breaking news. Many newspapers and magazines have pointed out that another of Silicon Valley’s Ayn Rand believers is ironically also one of America’s top Welfare Queens.
Who Does His Math?
No week’s news would be complete without another prediction by Morgan Stanley’s auto analyst, Adam Jonas; his latest augury is that a major and “massive consolidation” will happen among new and used car dealers. According to Jonas, “The U.S. Auto retail pie is worth nearly $1 trillion split roughly 10,000 ways.” Jonas then goes on to claim that in the future as few as 10 groups could end up owning every dealership in America.
Really? Does anyone know what it would cost to consolidate “nearly $1 trillion” in value? And how did he arrive at that valuation? Looking at the total retail cost of the 16.5 million vehicles we may sell this year — 16.5M x $33,800 average sales price — yields a figure of $557.7 billion. But that doesn’t include all of the used cars that were sold, service business, parts or body shop repairs.
OK, let’s do a really rough educated estimate here of what it would take to buy out all of the independent new car dealers in America.
There are around 17,500 dealerships and on average, depending on which survey you use, they earn around $750,000 a year. Now, good money for selling your store is around 5 times earnings, or $65.625 billion. That doesn’t include buying the real estate, parts inventories and new and used cars on the dealers’ lots. Therefore, you would probably need a similar amount for the real estate loans. Then you’d need $1.25 billion to finance all of the unsold new cars already at dealerships, possibly half that amount for the used car inventory, and who knows how much for any parts in dealership bins at the moment.
We’re well over $130 billion, aren’t we? That’s actually doable. But even if they could, would it happen? Many privately owned dealerships find they actually do much better after their local competitor sells out to a national chain. Therefore those dealers will likely never sell out, and that ruins this prediction. Besides, manufacturers would never allow such extreme consolidation in the retail industry; they’d lose too much of their power over the system.
And now, having brought you the news and analysis of everything happening in and around the auto industry in just a four-day period a week ago, I’ve got to rush off to my doctor’s office. Maybe he can prescribe me something to stop my head from spinning.
© Ed Wallace 2015
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism. He hosts Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: email@example.com; read all of Ed’s work at www.insideautomotive.com.