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Obama's Energy Policy: Listening When We Disagree
Posted by Robert Rapier on November 12, 2008 - 9:42am
Barack Obama has said that energy is going to be one of his top priorities. I believe he is completely sincere about this and that energy will get a lot of attention early on in his administration. I believe he is committed to moving the U.S. toward energy independence and a greener energy future. However, one can recognize energy as an important priority, yet sharply differ on the policy direction that is needed. For instance, some may have energy as a high priority because they feel that gasoline is too expensive. Their priority may be to keep gasoline prices low so people's budgets aren't adversely impacted by their fuel bills. Some can see energy as a top priority, and yet promote solutions like suing OPEC for more oil.
On the other hand, someone else may see energy as a top priority, but think low gasoline prices are not the solution, but instead a big part of the problem. This is the nature of my disagreement with some aspects of Obama's energy plans: We broadly agree on the big picture, but differ on how to get there. And since I recently heard him say “I may not agree, but I will listen”, here is my attempt to highlight what I feel are the flaws in his energy proposals.
Up front, let me state my assumptions. These will of course influence my opinion on his proposals. I believe that the present rate of fossil fuel usage in the U.S. is unsustainable. I believe that world oil production is very near a production peak, and an energy policy that is keenly aware of the potential for energy shortfalls - which will lead to severe oil price volatility - is paramount. I believe that even if oil production does not peak in the next five years, oil production will not be able to be expanded quickly enough to stay ahead of demand. Finally, I believe our current generation of liquid biofuels is too fossil-fuel dependent to enable them to make up for significant energy shortages, and that there are no obvious silver bullet technological fixes around the corner.
These key assumptions impact the direction that I believe energy policy should take. While I believe the evidence supports human-caused global warming, I don't think the world has the collective will to voluntarily reign in greenhouse gas emissions. I think this will ultimately only be accomplished by a combination of high prices and lack of availability. So the energy policy that I would propose would not focus on protocols and agreements for reducing greenhouse gases. Even though many countries signed on to the Kyoto Protocol, carbon dioxide continued to accumulate in our atmosphere - even from the signatories of the agreement. There will always be countries that will choose not to be a party to such protocols, thus I believe a greenhouse gas reduction will only come about as a consequence of a reduction in fossil fuel usage.
Thus I believe a sound energy policy should focus on 1). Minimizing per capita energy usage; 2). Finding sustainable, affordable alternatives; 3). Managing the down side of the production peak such that severe shortages are avoided. 4). Communicating to the public the nature of the problem, and explaining why sacrifice is needed.
The Fossil Fuel Blind Spot
While I think many of Obama's proposals are spot on, and with a little tweaking he could have a great energy plan, I think he overestimates how easily alternatives can displace fossil fuels. Thus, he largely ignores the need to slow the decline of U.S. oil production. Late in the campaign, he started to pay some lip service to the need to (responsibly) drill, but not too many people are expecting him to put much emphasis on that aspect. That "responsibly" qualifier is usually a sign that 1). Someone thinks drilling is not presently responsible; 2). They are going to put hurdles in place that discourage drilling. In fact, one of the Obama proposals is
• A “Use it or Lose It” Approach to Existing Oil and Gas Leases.
Oil companies have access to 68 million acres of land, over 40 million offshore, which they are not drilling on. Drilling in open areas could significantly increase domestic oil and gas production. Barack Obama and Joe Biden will require oil companies to diligently develop these leases or turn them over so that another company can develop them.
That sounds great. Just one problem, though. There already is such a provision. To continue to beat this drum is either pandering, or demonstrates a fundamental misunderstanding of the oil and gas regulations in the U.S. The way these leases work is that companies bid on them competitively. They bid because they think there might be oil there. They then pay annual fees to the government over the course of the lease as they explore, and then if they find economically recoverable oil they begin to develop the lease. But the time between acquiring the lease and the beginning of production (should oil be found there) is several years. You don't acquire a lease and immediately start producing oil. Further, if an oil company did acquire a lease and didn't develop it (which would happen if they don't find any oil there) then it goes back to the government anyway. Oil companies can't keep leases tied up indefinitely without developing them.
The fact that these are the sorts of policies that are highlights of Obama's domestic exploration plan indicate to me that he doesn't look at domestic oil production as a big part of his overall energy plan. In fact, Geoffrey Styles recently noted the same in an essay that examined Obama's plans in detail:
Senator Obama appears to consider the US tapped out for oil, and apparently expects his energy independence goals to be met without more help from that quarter. That assessment pervades his approach to the oil & gas industry, though recently he has described natural gas in more favorable terms. It is also consistent with his periodic citations of the "3% of reserves vs. 25% of consumption" soundbite, which drastically understates the remaining resource potential of the US. This may explain his 2006 vote against a modest expansion of the allowed drilling area in the Gulf of Mexico, and his restrained support for expanded access to oil & gas during this summer's Congressional debate on various drilling proposals.
I think the vast majority would agree for the need to move away from oil as our principal source of energy. But fossil fuels and nuclear power presently combine to provide more than 90% of America's energy needs (Source: EIA). And I think there are too many people who fail to understand exactly why that is the case. As Geoffrey Styles put it so well in the afore-mentioned link "it is counter-productive to pit solar, wind and biofuels against domestic oil & gas, which today contribute roughly 30 times as much net energy to the US economy, and could do more."
Not understanding the problem can lead to unrealistic choices. A key question for me is whether Obama will sit down with the oil companies, explain his vision, but then also listen to these companies explain the view from their vantage point. After all, these are the companies that provide the vast majority of our energy today. They might know a thing or two about energy. On a personal level, I can't count the number of times that my perception of a situation has been changed by sitting and hearing the opposite viewpoint. Had I not kept myself open to that, I would have made many more mistakes in my life.
I believe that 10 years from now (the time frame we could reasonably expect today's exploration projects to start putting supply on the market) we are going to find ourselves falling into a deep supply hole, and while biofuels can help, they aren't going to fill the void. By adopting policies now that will encourage U.S. oil production, the supply void will shrink, and prices should be more stable (albeit still climbing). And as I have argued before, we can earmark the tax revenue from new production to fund alternative energy. The point here is not to keep us dependent on fossil fuels; it is to address what I see as a pending supply shortage in 10 years. Adopting policies that discourage U.S. production will exacerbate that supply shortage. If we are near an oil production peak - as I think we are - then those policies that discourage domestic production will put the country at great risk.
Yet there is a second proposal in Obama's plan that will discourage domestic production:
• Enact a Windfall Profits Tax to Provide a $1,000 Emergency Energy Rebate to American Families.
Obama and Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills. This relief would be a down payment on the Obama-Biden long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief.
I have had an internal debate on this one for quite a while. I favor higher gas taxes to reduce consumption. (And I give Obama high marks for resisting the calls by McCain and Clinton for a gas tax holiday over the summer). If a windfall profits tax is in place, I believe that this will discourage investment, and ultimately lead to higher prices as supply is constrained. Hence, the same objective is ultimately achieved - except the oil companies get blamed instead of the politicians. But the biggest difference is that gas taxes can be implemented or removed in short order. Taxes that discourage investment will have unpredictable results that last for many years.
Let's also be clear here. The oil industry does make big profits, but they are also already one of the most heavily taxed industries. And their tax payments to governments increase along with their profits. There has been a lot of coverage given to the record profits being made by the oil companies, but much less to the record windfalls in the form of taxes that governments have received over the past few years as a result.
And don't forget that we have experimented with a windfall profits tax before. It raised far less revenue than anticipated, and caused investment to fall. An article from the Cato Institute notes:
We've actually been down this road before in the form of the Crude Oil Windfall Profit Tax of 1980. According to a study published by the Congressional Research Service, the tax discouraged investment in the domestic oil industry to such a degree that domestic oil production was 3 percent to 6 percent less as a result of that tax, and foreign oil imports grew accordingly by 8 percent to 16 percent. There isn't a single credentialed oil economist in the country who would argue that windfall profit taxes are good for consumers.
Geoffrey Styles also weighed in on this provision:
If anything, [Obama] seems to regard the domestic oil industry not as a potential source of new supply, but as a source of new tax revenue. His short-term energy program leads off with one-time energy rebates--$1,000 per family or $500 per individual taxpayer--funded by a windfall profits tax on oil companies. He hasn't put a price tag on this, but assuming all taxpayers would be eligible, it would require on the order of $20 billion dollars per year in new taxes over the next five years. Although there are legitimate differences of opinion on the justification for such a tax, its consequences for future US oil output are unambiguous: what you tax more, you get less of.
I don't think there is any doubt that a windfall profits tax won't help add to supplies. And refunding it back to consumers sends the wrong message: If gas prices go up, the government will protect you by taking the money from the oil companies and giving it back to you. Where is the incentive for the consumer to conserve? For the oil companies themselves, the likely impact would be that foreign earnings wouldn't be repatriated back to the U.S., and would just be reinvested overseas. For that matter, a steep windfall profits tax would provide incentive for U.S. oil companies to simply relocate overseas.
The Ethanol Blind Spot
One reason Obama feels like he can shun the oil industry is that he comes from a 'corn state' and has ties to the ethanol industry. A recent Bloomberg story reported that he wants to bail out the financially strapped ethanol industry, keep the protective tariffs on Brazilian ethanol in place, and is "fully committed to it and sees tremendous value in the renewable fuels standard and continuing down this path."
Here we have a fundamental disagreement. I have written tens of thousands of words on my opposition to corn ethanol (a random sample here). I won't repeat all of my reasons here, but will highlight the key sticking point from my perspective. Sustainability and net energy are important, and large scale corn ethanol fails on both points. I think we should make every effort to make agriculture sustainable so we leave the soil in good condition for future generations. But the way we make corn ethanol encourages highly unsustainable agricultural practices.
Where do we pay the price for strip-mining the soil? Who is going to get the bill for degraded soils and depleted aquifers? Our children will. If we are consuming natural resources and taking them away from future generations, there needs to be a really extraordinary reason, like a crisis that threatens our existence. Yet we are depleting our soil to keep our cars running on a fuel that delivers a very small energy return. Most of the energy in ethanol is derived from the fossil fuels used to produce it. If we put higher carbon taxes in place, not only would it encourage conservation, but it would directly discourage 'alternative' energy that relies heavily on fossil fuels. A cap and trade system, or a system in which the EPA has to quantify greenhouse gas savings - will quickly degrade to a lobbying effort if the ethanol industry finds itself at a disadvantage as a result of the rules (see this example).
The "benefit" of corn ethanol - unless you happen to be a corn farmer or ethanol lobbyist - is questionable. The negative consequences need to be a part of the analysis when determining whether to continue pursuing ethanol policies. At present the environment would be better off if - instead of using natural gas to produce fertilizer and steam for the ethanol plant - the natural gas was just burned directly in CNG vehicles. (To his credit, Obama does favor increased use of CNG).
However, I think we have put an ethanol infrastructure in place that can't be easily dismantled without severe consequences on Midwestern communities. I would not advocate pulling the support out from under the corn ethanol industry, but I would be looking for an exit strategy. Instead, Obama wants to expand the program. What I wish he would do - instead of making a priori assumptions about the value of ethanol for our energy policy - is put a task force together consisting of opponents and proponents - and let them document the pros and cons around all of the sticking points. Some, like the long-term consequences of aquifer depletion - don't even seem to be on Obama's radar. Yet our present policy calls for sending that bill to our children.
The Nuclear Blind Spot
Nuclear power gets a bad rap. While it is true that there have been some very serious incidents involving the nuclear industry, the truth is that all of our energy options involve difficult tradeoffs. It is also true that countries like France derive almost 90% of their electricity from nuclear power. While the majority in France supports nuclear power, in the U.S. we have attached a particularly strong stigma toward the topic. Personally, I would rather see the U.S. use more nuclear power and less coal (particulate pollution kills thousands every year).
As is the case with fossil fuels, nuclear gets only a passing mention in Obama's energy plan. The reasoning is clear: He thinks we are better off with 'clean coal' technology and a mix of renewables. In my opinion, if we discourage nuclear we will ultimately ensure that coal continues to play a dominant role in producing our electricity. While I would be the first in line for 100% solar, wind, and geothermal electricity, the EIA projects that by 2030 renewable energy will only provide 12.5% of our electricity. The EIA has a spotty prediction record, but they do a good job laying out the obstacles that renewable energy has traditionally faced:
Renewable Energy is Expensive and Capital-Intensive: Renewable energy plants are generally more expensive to build and to operate than coal and natural gas plants. Recently, however, some wind-generating plants have proven to be economically feasible in areas with good wind resources, compared with other conventional technologies, when coupled with the Renewable Electricity Production Tax Credit (described below).
Renewable Resources Are Often Geographically Remote: The best renewable resources are often available only in remote areas, so building transmission lines to deliver power to large metropolitan areas is expensive.
I personally believe we are going to exceed the EIA's projections, but I also believe that fossil fuel depletion is going to put pressure on all sources of energy. Thus, I don't believe we can afford not to encourage further development of the nuclear industry.
What I Like in Obama's Plan
As I stated, there is much that I like about Obama's plan. I have suggested my own plan in the past, and there are several areas of overlap. We agree on the need to push plug-in hybrid cars and to incentivize the purchase of these vehicles. We agree on the need to invest in a green energy future, but we differ on the details. I like his proposal to weatherize a million new homes a year, and I think incentivizing the solar, wind, and geothermal industries will pay big dividends. (I just don't know how some of this stuff is going to be paid for). I certainly agree with the need to take our energy security out of the hands of foreign powers, but we have some fundamental disagreements on how to get there.
Also, I like the aggressive targets, but I think the most realistic way of achieving them is via a pricing lever. This is one reason I haven't been overly enthusiastic about the efficacy of raising CAFE standards: We already make fuel efficient vehicles. What we need is the incentive to purchase them, which will be incentive to the auto industry to continue making and improving them.
Conclusions
While I think Senator Obama has great potential in front of him, and like a lot of his ideas, I can't fully embrace his energy policy proposals. I think there are many positive elements, but in my opinion there are glaring blind spots that could lead to energy shortages. I recognize that he is going to have factions trying to pull him in many directions, and this often leads to compromise in favor of the politically expedient over the technically best solutions. As he prepares to govern, he has to be very careful that some of the politically expedient solutions don't carve out a huge energy shortfall.
Additional Reading
Obama's Plan: New Energy for America
Geoffrey Styles on the Obama Plan
The Outline of My Energy Plan
CNN: Putting Obama's energy plan to the test
Energize America
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Vladimir Putin surely also has an energy policy, which favors Russia in general and Russian elite in particular. This policy should have a strong military component, and of course acknowledge the possibility that most of us will lose permanently a high standard of living.
It is about as reasonable to appeal to Putin as it would be to appeal to Obama.
How does one get listened to in the Obama administration ?
Does this web site really get to the decision makers ? What does ?
http://www.change.gov/page/s/yourvision
I Sent the following .....
1. Address the issue of declining fossil fuel production and exportation directly and openly with the American people.
2. Implement widespread energy conservation strategies.
3. Start the transition of the U.S. economy from fossil fuels - oil, coal, and natural gas - to renewable forms of energy (with a positive EROEI ) as quickly as possible.
"How does one get listened to in the Obama administration ?"
Heres how;
"Obama softens ban on hiring lobbyists"
http://www.boston.com/news/politics/2008/articles/2008/11/12/obama_softe...
Big & bold energy & economic recovery idea
I took your suggestion and added my two cents on a suggestion for the new administration...
The title was "Big & bold energy & economic recovery idea..."
A little web box is too small to contain a vision for such a rich, complex and dynamic reality as the US of A.
But there is one big, bold idea developed by Alan Drake, at the Oil Drum, that deserves serious attention - expand and electrify our RR infrastructure.
Cheers,
Raymond
A) Be an agency chief the Clinton administration.
B) Be an agency chief in the current Bush administration.
C) (Insert laugh track wherever ...)
Government involvment in energy will only make the situation worse. Any one here heard of Ethanol?
Government has always been involved, and will always be involved. There is no way they will ever stand on the sidelines. And they could help, if they could get all of the special interest money and the lobbyists out of the debate.
if they could get all of the special interest money and the lobbyists out of the debate.
We are close to Christmas, do you believe that Santa Claus could help with this?
The government IS Santa Claus. Bringing sockfulls of goodies for all the unscrupulous knaves.
When the central plans fail to work, the people always say...
"Let's get a man who can make a plan work"
http://mises.org/books/TRTS/
Which special interests and which lobbyists? It is always he case that those who disagree with me are special interests (American Enterprise Institute, Cato Institute, and any fossil fuel advocates for instance) and those who agree (Vietnam Veterans of America, AFL-CIO, and AARP for instance) are simply representing me.
Ethanol is a huge success. Ethanol producers are close to supplying 10% of the US liquid fuel requirments. A lot of "smart" people were saying that even 5% was not possible. Charges that ethanol has increased the price of corn have been proved false, as corn prices have fallen recently with ethanol production increases. The price of corn appears to be tied closely to the price of oil. In comparison, wind energy has had a huge investment over the past several years and only produces about 1% of the nations electricty, with solar at a much smaller fraction of 1/10 of 1%.
Obama's continued support of ethanol subsidies is one of the few positives in his energy policy, IMO.
Ethanol is a huge success.
I have to be honest here. That's not something I would expect a conservationist to say. What are you interested in conserving?
Ethanol producers are close to supplying 10% of the US liquid fuel requirments.
Could you show your math on that, bearing in mind that 1). "Liquid fuels" include gasoline, diesel, and jet fuel; 2). Ethanol has a lower energy content than gasoline; 3). It takes a lot of fossil fuel energy to make ethanol; 4). Despite demand being down somewhat, motor fuel (excluding diesel) demand is still running at 141 billion gallons over the past 52 weeks (per the EIA's motor fuel stats)?
Charges that ethanol has increased the price of corn have been proved false
Much like peak oil was proved false when oil prices fell?
The price of corn appears to be tied closely to the price of oil.
It is, for a couple of reasons. Commodities in general were in a bull market until recently, but there are a lot of energy inputs that go into corn production (and hence ethanol production). But it is also true that corn ethanol puts pressure on corn prices. The only thing that has been proved is that the entire run-up in corn prices wasn't simply due to increased demand from ethanol. I am all for corn farmers being able to make a living, but we are encouraging overproduction from them. When they overproduce, we bail them out by increasing the mandates. As I have argued, it's a vicious circle.
"1). "Liquid fuels" include gasoline, diesel, and jet fuel;"
Total Finished Motor Gasoline 3390 million barrels. (2007)
Total Ethanol 240 million barrels (2007)
Ethanol = 7% of Finished Motor Gasoline in 2007
"4). Despite demand being down somewhat, motor fuel (excluding diesel) demand is still running at 141 billion gallons over the past 52 weeks (per the EIA's motor fuel stats)?"
Per EIA: Finished motor gasoline includes all ethanol blended gasoline (e.g. E10, E85).
Ethanol (yes even corn ethanol) is not that bad.... if you believe the numbers.
Ethanol = 7% of Finished Motor Gasoline in 2007
You saw though, I presume, that liquid fuels are only partially comprised of gasoline. That was the point; if you are truly talking about liquid fuels the number is around 200 billion gallons a year. Also, 7% by volume of ethanol does not displace 7% gasoline. One of the other points.
Per EIA: Finished motor gasoline includes all ethanol blended gasoline (e.g. E10, E85).
It does. Now, back out the ethanol, and do the math correcting for the energy content. You get maybe 5% (and less if you are talking about all liquid fuels). Now correct for the energy inputs into the ethanol. You are down to 1 or 2%.
Ethanol (yes even corn ethanol) is not that bad.... if you believe the numbers.
Depends on which numbers you are talking about, and how happy you are with the negative side-effects.
"Also, 7% by volume of ethanol does not displace 7% gasoline."
What is the portion you don't understand? Of the 3390 million barrels of finished gasoline, 240 million barrels were ethanol...
EIA does not count energy content for gasoline blends, ethanol or diesel, etc... Everything is based on volume, gallons or barrels.
I think we can be quite happy with the positive side-effects of ethanol:
Less CO2
Less dependence on foreign oil
Less rapid depletion of current oil supplies
More inland jobs
More source diversification
Cleaner exhausts
Cheaper to consumers
What is the portion you don't understand?
Entschuldigung? Are you kidding or are you some sort of moron? This is grade school stuff, and yet you 1). Don't understand it; 2). Insult others because you think you do.
But let's assume you are just kidding around. The original claim was "Ethanol producers are close to supplying 10% of the US liquid fuel requirments." That is clearly false for the reasons I spelled out. First, he is really talking about only gasoline, but said "liquid fuels", which is a much larger category. So, that amounts to a big exaggeration. Second, it takes more than a gallon of ethanol to displace a gallon of gasoline. When you correct for that, the amount of contribution toward liquid fuel supplies falls. If you don't understand that, try this. If the gasoline requirement for the U.S. is 140 billion gallons, and you supplied 140 billion gallons of ethanol, would you have supplied 100% of the liquid fuel requirements?
Finally, though, is the fact that it takes energy to make ethanol. So some of the liquid fuel that is used in the country is used to transport corn and ethanol. This lowers the net contribution even further.
Truly, that's not hard to understand. I understand it, as I think do most others here. But do you?
Entschuldigung? Are you kidding or are you some sort of moron? This is grade school stuff, and yet you 1). Don't understand it; 2). Insult others because you think you do.
Sorry, but I resent your tone in this post. What kind of person are you? Please deal with the facts.
But let's assume you are just kidding around. The original claim was "Ethanol producers are close to supplying 10% of the US liquid fuel requirments." That is clearly false for the reasons I spelled out. First, he is really talking about only gasoline, but said "liquid fuels", which is a much larger category. So, that amounts to a big exaggeration. Second, it takes more than a gallon of ethanol to displace a gallon of gasoline. When you correct for that, the amount of contribution toward liquid fuel supplies falls. If you don't understand that, try this. If the gasoline requirement for the U.S. is 140 billion gallons, and you supplied 140 billion gallons of ethanol, would you have supplied 100% of the liquid fuel requirements?
No, I am dead serious. All I tried to do was present the EIA facts in their context:
"Total Finished Motor Gasoline 3390 million barrels. (2007)
Total Ethanol 240 million barrels (2007), These are the numbers you can find at EIA.
Therefore "Ethanol = 7% of Finished Motor Gasoline in 2007" is the correct conclusion.
What makes you say that I "don't understand; grade school stuff" and similar insults? If 10 is the total number of gallons used in a certain period and ethanol is 1 of those 10 gallons, clearly ethanol would be at 10%. Would you agree to this math? And please do not try to shift the discussion to some hypothetical "gasoline requirement for the US", because that is not at all what these EIA numbers are. They are simply about what was actually used.
Finally, though, is the fact that it takes energy to make ethanol. So some of the liquid fuel that is used in the country is used to transport corn and ethanol. This lowers the net contribution even further.
Truly, that's not hard to understand. I understand it, as I think do most others here. But do you?
Where did I say that it didn't take energy to make ethanol? What makes you even think that I don't understand that?
Sorry, but I resent your tone in this post. What kind of person are you? Please deal with the facts.
Wait a second. Did you forget that you just asked "What is the portion you don't understand?" I resent your tone. What kind of person are you? There was no portion I didn't understand. The fact that we are still arguing about it says there was a lot you didn't understand. The original claim about ethanol adding 10% to fuel supplies was way wrong. That's it. I have explained why. But you clearly still don't understand, as evidenced by:
If 10 is the total number of gallons used in a certain period and ethanol is 1 of those 10 gallons, clearly ethanol would be at 10%. Would you agree to this math?
Ethanol contains less energy. If you have 10 gallons of gasoline, remove 1 gallon and replace with ethanol, you can't drive the same distance. So you end up having to add more gasoline to the pool to avoid losing energy content. Thus, the math isn't additive. Without ethanol, your pool may be 140 billion gallons. But if 10 of that was from ethanol, and it only contains the energy of 7 billion gallons of gasoline, you have to add 3 billion of gasoline back to the pool. So, because of ethanol, your overall pool has to be bigger. This is where the straightforward math falls down. (Study the example in the last paragraph, and I think you will get it).
But there is a bigger problem here. Your gasoline number is way wrong. The number you supplied above is apparently only domestic production; it only amounts to 80 billion barrels a year. We actually use around 140 billion barrels of just gasoline. We get a lot of gasoline imports, and that all has to meet the ethanol requirements as well. So, our domestic ethanol is blended into that. The number you report above - 3390 million barrels - is only about 60% of our actual gasoline consumption. Correct that and now ethanol has fallen (even by volume) to less than 5%. Add in the other liquid fuels and the 3390 million barrel number is less than 40% of our total consumption. So the ethanol number continues to fall, in direct contrast to the initial number. But I suspect my time is wasted continuing to explain this.
What makes you even think that I don't understand that?
Because of the difficulty you seem to be having understanding the implications of "total liquid fuels", "net energy", and "lower energy content of ethanol." Here's an example. This is hypothetical, but should help you understand. Let's say it took 1 gallon of fossil fuel to make 1 gallon of ethanol. (For this example, we will ignore the lower energy content, which would also impact the final number). Say your initial pool is 9 gallons of fossil fuels. Now take out a gallon of fossil fuels and replace with a gallon of ethanol. But if it took a gallon of fossil fuels to make a gallon of ethanol, the gallon that you took out has to go back in. So the final pool is 10 gallons - 1 gallon of ethanol and still 9 gallons of fossil fuel. Per your argument, you would have replaced 10% of your pool - 1 gallon of ethanol in 10 gallons of product. In reality, you replaced zero. That's what's wrong with your argument.
http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbbl_m.htm
Here you can see that annual total finished motor gasoline is 3381564 thousands in August (rounded to 3390 million annual) barrels. Which is by the way, IF YOU do the math 142 billion gallons.... Of this volume some is ethanol. ("See Definitions, Sources, and Notes link above for more information on this table.")
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_oxy_dc_nus_mbbl_m.htm
Here you can see total Ethanol produced: 20059 thousand barrels per month (August as reference). Which amounts to a level of 240 million barrel annual.
So, I maintain that per EIA ethanol was reaching a level of 7% of total finished gasoline.
You're trying to confuse the matter by putting energy content and what not. That's a completely separate issue and has nothing to do with the EIA numbers. Numbers don't lie.... These EIA numbers are about volume. A gallon/barrel of ethanol has as much volume as a gallon/barrel of gasoline. I think you're confused.
Which is by the way, IF YOU do the math 142 billion gallons
My brain fart on that number. That's what I get for doing math before coffee in the morning.
But, the other point remains the same, and I don't think you understand it. The energy content is very important, because that makes the math not additive. If you look at my last example, you will see why at first glance it can seem that ethanol is making a specific contribution, but in reality it isn't displacing a thing. I think you would agree that per my last example, if adding ethanol to the fuel system didn't result in any decrease in fossil fuels in the system, then ethanol didn't help. It didn't displace anything. Please tell me you understand that example. It isn't about trying to confuse anything; it is about what ethanol is really contributing.
Further, back to the initial claim: Total liquids. You have never acknowledged that this wasn't correct. Motor gasoline was not the claim. It was total liquids, which is (referring to your EIA link) about double the mogas number.
A gallon/barrel of ethanol has as much volume as a gallon/barrel of gasoline. I think you're confused.
But it takes more than a gallon of ethanol to displace a gallon of gasoline. Hence, a simple volume/volume calculation can't tell you what ethanol actually did as far as helping. Again, refer to that last example.
Edited to add: If you want to see the problem with the way you are trying to do the numbers, read this essay:
http://i-r-squared.blogspot.com/2007/09/wisconsin-tops-minnesota.html
If you understand that, you can see how ethanol could contribute volume-wise, but in reality isn't adding energy to the system. I think in that case, you would agree that it isn't helping - which is contrary to the point the original poster, and now you, are arguing.
I don't know what happens in your vehicle. But it seems there is some energy loss somewhere.
115000 energy in gallon gasoline (btu)
76000 energy in gallon ethanol (btu)
111100 energy in gallon E10 (btu)
320 miles trip
32 mpg gasoline
10 gallons used
1150000 btus used
29 mpg E10
11.03448276 gallons used E10
1225931.034 btus used
7% energy E10 disappeared??
Apparently your vehicle doesn't use as much of the energy in an E10 blend than the energy contained in gasoline.
Willem, it wasn't my vehicle. It was written by a guy who works for the Wisconsin Department of Transportation. I would say that his personal experience is extreme, but look at the numbers he got by looking across the entire state of Wisconsin versus Minnesota.
But you are missing the point. Whether it was -7% or -1% is irrelevant to the point that the numbers aren't additive because of 1). The lower energy content; 2). The fact that putting ethanol into the system requires the use of liquid fossil fuels to make the ethanol.
Bottom line is that the initial 10% claim was a gross exaggeration, and even your claim of 7% (assuming you are only talking about mogas) is too high if what you are trying to show is how much contribution ethanol made (you are trying to show that ethanol helps?). Because by claiming that it is adding 7%, most people are going to take that to mean our fossil fuels displacement was 7%. That would be an actual 7% contribution. That isn't what happens.
As my example above showed, you could have zero fossil fuel displacement and add 10% ethanol to the pool (hypothetically). I think most people would agree that in a case like that, ethanol didn't help at all. Yet you would claim that it contributed 10%, thus helping. That's not correct.
Yes, I realize it was mr. dikkers' vehicle. Doesn't matter though: it was the vehicle in your example.
1. Anyway, the lower energy content of ethanol IS accounted for in this vehicle example. See the math.
2. The 7% (from EIA) still stands and has nothing to do with energy content or how much fossil fuel went into the ethanol making process.
3. The "ethanol not helping at all" is probably due to the vehicle. And the stats between states show high standard deviations. Maybe ppl in Minnesota use more snowblowers, chainsaws, boats, lawnmowers or whatever.
The 7% (from EIA) still stands and has nothing to do with energy content or how much fossil fuel went into the ethanol making process.
Let's just cut to the chase. Do you acknowledge that 7% (by volume) in the motor gas pool doesn't displace 7% of the gasoline in the pool?
Do you acknowledge that the original 10% claim - especially since it was for all liquid fuels - is a gross exaggeration?
Let's just cut to the chase. Do you acknowledge that 7% (by volume) in the motor gas pool doesn't displace 7% of the gasoline in the pool?
Per EIA we used an annualized figure of 3390 barrels of "finished motor gasoline". This number includes the ethanol blends.
Also per EIA, we used an annualized figure of 240 barrels of ethanol. So, in this picture out of the 3390 barrels, 240 barrels came from ethanol. Therefore it is correct to say that of the "finished motor gasoline" 7% came from ethanol. So, you could of course say that ethanol displaced 7% that otherwise would have been gasoline.
One of the errors you think I am committing is that ethanol displaces a similar percentage of fossil fuel. I never said that. You brought up EIA in your initial reaction, so I thought it was good to check their numbers and reasoned on that basis to address your "show the math" challenge to the first poster.
How much fossil fuel (farmers diesel, natgas, etc.) actually goes into the making of ethanol is a different issue.
How effective ethanol is in our current combustion engines is another issue.
Do you acknowledge that the original 10% claim - especially since it was for all liquid fuels - is a gross exaggeration?
When he said "close to 10 %" I would say that 7% is "close" to 10%.
When he said "the US liquid fuels requirements", he was a bit off, because total liquid fuels includes stuff like diesel and kerosene and other distillates. But I think that in his mind he was thinking of gasoline, since that is where ethanol is used and not in the other fuels.
So, you could of course say that ethanol displaced 7% that otherwise would have been gasoline.
You see, this is exactly what you can't say. Had it not been ethanol, it wouldn't have been 7%. It would have been less. This is the point.
One of the errors you think I am committing is that ethanol displaces a similar percentage of fossil fuel. I never said that.
You just did. You said "displaced 7% that otherwise would have been gasoline."
When he said "close to 10 %" I would say that 7% is "close" to 10%.
The claim was "close to supplying 10% of the US liquid fuel requirments." That exact claim, on a volume basis, is less than 4% for US liquid fuels. But if the argument is how much ethanol is really helping - and of course that's exactly what the argument is - then that number is (roughly) 3% when you correct for the energy content, 2% when you correct for the liquid fossil fuel inputs, and under 1% when you correct for total fossil fuel inputs.
So yeah, it was a gross exaggeration no matter how you slice it.
You see, this is exactly what you can't say. Had it not been ethanol, it wouldn't have been 7%. It would have been less. This is the point.
???? If out of a total volume of 10 gallons/barrels/liters/etc. there are 2 gallons of something else, then that "something else" is 20% of the total volume. I don't understand how this simple math can be a problem for you. Whether that something else is ethanol or water or beer, doesn't matter. So, why would you say "Had it not been ethanol, it wouldn't have been 7%"????
You just did. You said "displaced 7% that otherwise would have been gasoline."
If out of the 10 volume units of the example hereabove, there were no "something elses" but only gasoline, then the 2 volume units DID INDEED DISPLACE what otherwise would have been only gasoline. I just can't understand that one cannot grasp this simple logic.
The claim was "close to supplying 10% of the US liquid fuel requirments." That exact claim, on a volume basis, is less than 4% for US liquid fuels. But if the argument is how much ethanol is really helping - and of course that's exactly what the argument is - then that number is (roughly) 3% when you correct for the energy content, 2% when you correct for the liquid fossil fuel inputs, and under 1% when you correct for total fossil fuel inputs. All this has been addressed and doesn't need further comment. But if you want to argue "how much ethanol is really helping" as you put it, then a whole lot of other considerations have to come into the discussion. This thread is getting old. Perhaps something for another time.
Ethanol is an energy sink that provide less energy than inputs of coal, natural gas, and oil, and yields much air and water pollution, it stinks.
The Union of Concerned Scientists concluded that:
“Even if we used all of our corn to make ethanol, with nothing left for food or animal feed, we could only displace perhaps 1.5 million barrels per day of this demand [U.S. consumption is 21 million barrels per day]. Clearly, corn ethanol is a part of the solution but by itself is not a sufficient long-term solution to our oil dependence. Ethanol is currently transported mainly by tanker truck or rail cars because it cannot be shipped in existing gasoline pipelines. The potential capacity for ethanol production from corn is fairly limited. In addition to concerns about feedstock limitations, corn ethanol derives much of its energy from fossil fuel inputs.” (Emphasis added).
Review of studies by the National Resources Defense Council and Argonne National Laboratory regarding the net energy gain from the production of corn ethanol, reveal that some studies indicate some gain and one study indicates a net loss of energy. None of these studies, however, considers all of the energy inputs in all of the processes required to produce ethanol (mining and transport of ores, parts, equipment, heating of factories, all employees’ transportation and salaries/dividends (oil consumed in spending salaries), and maintenance, etc.), nor do the studies consider the opportunity costs of not using corn for food (sales). More important, ethanol cannot be transported by the existing pipeline network that covers the U.S., and transport by trains and trucks is very expensive and consumes much energy as well.
A 2007 study by the U.S. Congressional Research Service, “Ethanol and Biofuels: Agriculture, Infrastructure and Market Constraints Related to Expanded Production” concluded:
“While recent proposals have set the goal of significantly expanding biofuel supply in the coming decades, questions remain about the ability of the U.S. biofuel industry to meet rapidly increasing demand. Current U.S. biofuel supply relies almost exclusively on ethanol produced from Midwest corn. In 2006, 17% of the U.S. corn crop was used for ethanol production. To meet some of the higher ethanol production goals would require more corn than the United States currently produces, if all of the envisioned ethanol was made from corn. Due to the concerns with significant expansion in corn-based ethanol supply, interest has grown in expanding the market for biodiesel produced from soybeans and other oil crops. However, a significant increase in U.S. biofuels would likely require a movement away from food and grain crops. Other biofuel feedstock sources, including cellulosic biomass, are promising, but technological barriers make their future uncertain. Issues facing the U.S. biofuels industry include potential agricultural “feedstock” supplies, and the associated market and environmental effects of a major shift in U.S. agricultural production; the energy supply needed to grow feedstocks and process them into fuel; and barriers to expanded infrastructure needed to deliver more and more biofuels to the market….There are limits to the amount of biofuels that can be produced and questions about the net energy and environmental benefits they would provide. Further, rapid expansion of biofuel production may have many unintended and undesirable consequences for agricultural commodity costs, fossil energy use, and environmental degradation. As policies are implemented to promote ever-increasing use of biofuels, the goal of replacing petroleum use with agricultural products must be weighed against these other potential consequences.”
“Even if we used all of our corn to make ethanol, with nothing left for food or animal feed, we could only displace perhaps 1.5 million barrels per day of this demand
That's strange. We are, Today, producing a little over 700,000 Barrels/day, and we have corn coming out of our ears. Corn is down to about $3.70/bu, and we carried an all-time high 1.4 Billion Bushels over from last year.
Oh, and we planted Less Acres, and were hit with a 50 year flood. BTW, corn yield/acre is UP 67% since 1980, and Fertilizer use is Down 10%. Really "Stripping" that soil, eh?
They are talking about net energy, that is displacement, where as you are talking about voodoo energy.
Corn ethanol is ok for moonshine and white lightening, but the rest is DS.
Fertilizer use is down 10% because it cost three time as much this year(1). And that's cool we're producing 700,000 barrels/day of corn ethanol, but teh return is still under 75,700 btu/gallon while gasoline is approximately 115,000 btu/gallon(2). That's .6 energy return on a gallon. Both those numbers represent the midpoint of the arguement btw.
1 SOURCE: http://cropwatch.unl.edu/archives/2008/crop1/fertilizer1.htm
2 SOURCE: http://bioenergy.ornl.gov/papers/misc/energy_conv.html
Here's something awesome I would love TOD to explicate, because it's way too much for me (especially since I do most my reading at work lol).
http://lfee.mit.edu/public/LFEE%202008-02%20RP.pdf
Back to Budgeting!
/dies.
Yes, but you're talking 115 Octane for ethanol vs. 84.5 Octane for gasoline. This means that, in a highly-compressed engine Ethanol can deliver the same Work as gasoline (or, even Diesel.)
As the engines get better, and the "efficiencies" of refining improve (fractionation, burning the lignin for energy, fluidized-bed gassification, co-harvesting of corn cobs, removing the oil for sale as human food, or for biodiesel, etc.) and, oil is harder to reach, and refine, and, as crops such as Sweet Sorghum, and switch grass/miscanthus ethanol will be a much more ubiquitous energy source.
/double posting
That statement smells of too much Fox-News style dogma. It sounds very republican: label government as the problem, then when in power govern with incompetence, rampant cronyism and corruption. Then, implement policies written by lobbyists and other self-interested parties and, SURPRISE, we see a government that only makes the situation worse! Well no f%#!$%^& wonder!
Bad government policy is bad. That doesn't exclude the possibility of good government policy, and that is what we need: GOOD GOVERNMENT. It is up to all of us to fight for good government policy. And, that goes for Democrats too - they're certainly not immune to the influnce of corporate money and lobbyists in formulating bad policy. We will need to hold them to account just as much as we help steer public discourse on energy-related policies.
Obama's energy policy is seriously misguided. The left wing in this country (represented by the Democrat party) seems to be against anything that produces CO2. Alternative sources are a great thing, but the reality is that it will be many years before they can replace fossil fuels. What Al Gore and the Democrats are proposing is to end fossil fuel use in 10 years. That number is extremely over optimistic. 100 years is probably a better number.
And as you point out, alternatives should not be opposing fossil fuels, but supplementing them.
Obama's misguided policies may bankrupt the country before the House can be replaced in 2010. The root of the current financial crisis, I believe, is when Nancy Pelosi turned off the cameras and went home this summer, without passing an energy bill that allows for new domestic oil production. The Democrats are also against using coal.
Alternative sources are a great thing, but the reality is that it will be many years before they can replace fossil fuels.
The number of years depends upon demand re-examination and the push to field alternative sources. If we say, "it's just too far away to amount to much, so let's not rush", then foot-dragging will add years to the schedule. If we push to try to meet a 10-year schedule, the transition will happen much faster.
I agree with that logic, there's nothing wrong with setting goals, but to try and abandon fossil fuels at this point in time is dangerous.
The question is how long it takes for fossil fuels to abandon us.
The 'Incomings' plans neglect demand; the bailout of the auto industry is intended to continue the production of 10 - 12 million autos a year added to those hundreds of millions already on the road. Business as Usual means ever- increasing demand and a parallel increase in supply to support it. This demand/supply loop is 'built into' our economy; it cannot shed without the overall economy suffering the bends.
Obama exists in a trap of his own making. He inhabits a presidency that exists only to fail. He lacks both the inclination and the room to maneuver boldly. His nature is to vote 'Present'. He is constrained by the blame that is sure to fall upon him for any failure at all; blame that will also be directed toward African Americans due to the symbolist nature of his presidency; he simply cannot make - nor risk - any mistakes.
He consequently won't risk anything. His will be a continuation of the Clinton- Bush regimes. Events and circumstances rather than leadership will consequently determine outcomes. Ironically, the one resource that is being exhausted first is the one which is abstract; credit! When the end- game of credit exhaustion is reached - default and repudiation of sovereign debt held by investors overseas - the fuel situation will instantly solve itself.
Imports will cease as foreign suppliers will not accept dollars as payment. At that point, the US will have achieved energy independence, or rather, it will be achieved upon the US.
We will be stuck with what we produce; enough to barely feed ourselves and to supply some transport and little else.
The question then will be whether the Obama government will survive. If history is a guide, the answer is no.
It seems highly doubtful to me that the US economy will make it to Jan 20th before imploding.
I feel the same way. Using the unwinding of the crisis so far as a guide, the next episode of deleveraging seems likely to take place near the beginning of 2009. This episode would include the failures of the US automakers and big financial houses such as Citigroup or HSBC. This would freeze the credit markets again, requiring more liquidity as well as more bailouts.
- Paulson will still be Treasury Secretary, even if Obama names another; Paulson has effective control which he can maintain far into Obama's term, as there can only be one Treasury policy at a time and a change from Paulson's would be a 'leap into the unknown'. A leap that the conventional Obama would be loath to take, particularly under stressful circumstances. Unfortunately, by the time fortune reveals the extent of Paulson's failures it will be too late to do anything about them. Yes, this is a bet that Paulson ... or a clone like Larry Summers ... will be Obama's Treasury boss.
- Bernanke will still be Fed Chairman.
- Just about any conventional tactic that Obama could use - except for one, which I will come back to - will backfire on Obama.
- Another round of bailouts would suggest that the bailout idea itself is bankrupt. However ... the end of bailouts is the beginning of real financial terror in America. Yikes!
- Organizations like Citigroup (and probably Lehman Brothers as well) are/were too big to bail. There are too many astronomically huge liabilities on and off these kinds of companies' books.
- If Obama wants to do one smart thing now he should casually mention that he will have a Justice Department after inauguration that will investigate all 'irregularities' in the Bush bailouts ... with intention to prosecute all violations of the law. That would end the 'Bailout Parties' such as are happening at AIG.
The contrast with the bail-out in Sweden is interesting.
They have nationalised a bank, and dismissed all board members.
They will be lucky if they escape prosecution, let alone get massive bonuses as they do in the US and UK.
Just on the whole "too big to fail" thing...
Am I being naive to think that if there is a certain size for a company to grow where they become too big to fail, then no company should be allowed to grow to that size?
Without some sort of mechanism like this, then any company that size can effectiely ransom the government and control the people by threatening to fail, no?
...and here I am thinking that the financial crisis had something to do with the real estate bubble, lack of oversight and regulation, toxic derivatives, etc. The above statement seems absurd, driven more by a personal agenda than a serious exploration of the facts. Care to try to support that statement?
When you have an oil based economy and the price goes from $20/barrel to over $100/barrel in a few years, it would be absurd to think those high energy costs had no effect on the economy.
With regards to real estate, you may want to look up the "Community Reinvestment Act". Signed into law by Jimmy Carter and greatly expanded under Bill Clinton, which directed banks to give out loans to people that were not qualified.
Perhaps you should try to come up with something original, and not just Fox News talking points.
i think the talking points come from rush limbaugh.
The CRA does not "direct banks to give out loans to people who are not qualified." Yes, the CRA was a law put into place to counteract redlining, i.e. the refusal of banks to make loans to certain geographic areas. How it works is that when a bank seeks a merger, one of the considerations is whether or not the banks in question have done a good job of serving all parts of the communities where they are located. This law was signed in 1978, so if it was the cause of this housing crisis, it seems weird in that it worked quite well for 20 years.
In any event, banks can and do satisfy their CRA obligations in lots of other ways besides lending to subprime borrowers. The vast majority of the lending under CRA is probably to developers of affordable housing, in fact, along with commercial. Most of the subprime lending was in fact not in inner city areas affected by CRA, but in the far-flung suburbs, which are not affected at all.
I didn't say that the steep rise in energy prices had no impact on the economy. I said your claim that the failure to pass an energy bill was the "root cause" of the financial crisis was absurd, and you've said nothing to change my opinion on that.
I am familiar with the Community Reinvestment Act. To the extent that it encouraged making loans to unqualified borrowers, it was and is a problem. However, attributing the real estate bubble to the Community Reinvestment Act as a root cause is laughable. You once again grossly oversimplify the issue in order to produce a result that is consistent with your world view, rather than challenging your world view with a serious review of the facts. Do you think, perhaps, that the following might also have been factors in inflating the real estate bubble?
Securitizing mortgage loans. Mortgages were packaged as structured investment vehicles and sold on the open market. Lending institutions could relinquish any responsibility for the long term performance of these loans, and therefore, had little incentive to truly qualify borrowers. So long as a borrower could meet the often deeply discounted payments during the initial term, they were good to go because traditional checks and balances (loan to value, income, and debt ratios) were abandoned. Since lending institutions were profiting from underwriting and selling these loans, their incentive was to write as many loans as possible, without regard for their ultimate performance. The result: lots of new (un)qualified borrowers, and an incentive to lend to them.
Fed policy. At the same time, the Fed was making massive amounts of capital available to borrowers by maintaining exceedingly low interest rates. The result: lots of cheap and easy money to lend to unqualified buyers
Lending institution capitalization requirements. Lending institutions have historically been required to maintain adequate capitalization ratios - something in the order of 10:1 (lending to capitalization). More recently, capitalization restrictions were relaxed for many lending institutions to 20:1, 30:1, 40:1, and higher. The result: lots of opportunities for lending institutions to lend cheap and easy money to unqualified buyers).
Rating agencies. Many sliced and diced mortgage backed securities were given AA or even AAA ratings, making these high return investments appear to have very low risk. The result: huge demand for securities backed by dodgy loans to unqualified borrowers.
The reality of the bubble is certainly much more complex than even this (we won't even get into credit default swaps). No conservationist, the fundamental cause of the real estate bubble was certainly not the Community Reinvestment Act - it was greed, which by and large led to the incremental monetary, fiscal, and regulatory changes that drove this perfect storm. Did some dubious lending occur due to the CRA? Certainly. Did some homeowners borrow irresponsibly? Absolutely. But, the real explanation is a great deal more complex. To offer the Community Reinvestment Act as a fundamental cause above all others is misguided, myopic, ill-informed, and simply wrong on so many levels.
What is going on is much larger than just one cause.
Oil is certainly a factor in the current crisis. But oil would not have been such a great factor if we had not had such a credit bubble. There are plenty of great analyses of why we are in a credit bubble; I like the explanations at generationaldynamics.com and suddendebt.blogspot.com. Democrats and Republicans each have some share of the blame, but according to Generational Dynamics theory, these credit bubbles happen approximately every 80 years as part of a generational cycle. When the generation that went through the last crisis dies or retires, it doesn't matter who is in power; the whole society moves to ignore the rules and precautions and lessons learned from the last crisis, and a once-in-a-generation bubble in credit builds up until it can no longer be sustained.
The credit bubble is the biggest factor in the current crisis. It had to pop eventually, but it probably could have continued on for a few more merry years if not for oil prices.
Because of Peak Oil, this may be the largest bubble we will ever see on this planet. I certainly hope and believe we can move away from fossil fuels, and the faster the better. But it certainly looks challenging in the current environment. The evidence seems to be pointing toward the long energy descent model, rather than catastrophic and sudden collapse (the die-off model).
In the end, with very poor leadership on this issue coming from both Republicans and Democrats, it falls to us to make as much of a difference locally as we can.
How many of the failed loans come under the auspices of the act you mention?
Hey Conservationist,
New domestic drilling will take years to produce any oil, so this Pelos stuff has nothing to do with the current crisis.
Disclaimer: I'm neither a Republican nor a Democrat, however from where I sit it looks to me that there is more than enough blame to to go around. It's time to admit that if we all don't stop the blame game and start a serious national discussion about what to do about our predicament it really won't matter much who is nominally to blame because it is the American people who will suffer. I think the people are quite ready to blame both parties for the mess we are in.
"The root of the current financial crisis, I believe, is when Nancy Pelosi turned off the cameras and went home this summer, without passing an energy bill that allows for new domestic oil production."
what an unmitigated crock of $hit.
Most energy programs will be driven by politics and hampered by massive debt, IMO.
Obama will stick with the current ethanol programs with an emphasis on developing cellulosic. It's also all over TV.
Future Gen clean coal will get funded as a sop to the coal companies who will get hounded by Hansen and friends.
Big Oil won't get ANY government help especially with GOM offshore oil which gets wrecked every 5 years by storms.
The antics(hookers/drugs) at the Department of Interior makes them look like loathsome dirtbags. No need for a lot of sleazy oil/gas leasing activity.
http://www.nytimes.com/2008/09/11/washington/11royalty.html?ref=business
We don't really need any new electrical capacity in a recession/depression so nukes that produce waste without Yucca are a complete non-starter. Forget it.
Wind/solar is really a GHG fighting program along with a green jobs program. Today we're at 25 GW, in 4 years it could be 100 GW (same nameplate as hydro).
Could be rebates for CNG cars to help Detroit.
Forget about fossil fuels until after Hirsch's plateau ends in 2012(which may extend further under world recession).
Obama will push energy conservation above all.
(And really, it's our only hope anyways.)
Nothing revolutionary.
"We don't really need any new electrical capacity in a recession/depression so nukes that produce waste without Yucca are a complete non-starter. Forget it."
Ok, nothing in the power/energy industry is ever revolutionary. No one should be expecting all of a sudden for things to change. There is nothing wrong with dry storage either.
You choose to build a nuke plant to get power 8-10 years from now. Does anyone have any data on electric year to year monthly electricity consumption to see if demand has dropped any? (for recessionary purposes) For a nuclear plant where capital costs dominate the cost of electricity, building during a commodity crash is a very good idea. Are you comfortable with these numbers?
http://www.eia.doe.gov/cneaf/electricity/epa/epat3p3.html
http://en.wikipedia.org/wiki/Image:Nercmap.JPG
I'd be extremely worried about Texas especially with the wind grid. I don't know how good their emergency demand drop procedures are.
For years the utilities have depended on rising capacity factors of nuclear and coal plants and power uprates for nuclear plants to keep up with the baseload demand. Now not only is there very limited ability for these plants to uprate/raise capacity factor but a lot of these plants are getting very old.
Of course building power plants is a state by state deal and has very little to do with Obama. But if Obama is about job creation, he will certainly push nuclear above the other technologies. (Plus he is from Illinois, all politics are local and guess which state has the most nuclear power?)
Your devotion to nuclear power is touching but between mandated energy efficiency cutting demand, the continuing low growth economy, and new supplies from GHG fighting wind there's no logic in developing it. Also remember that at least 25% of the public strongly opposes it and while it might be fun to ride rough shod over them it will be risky--a single Three Mile Island and the game would be over.
The Texas overloaded electrical grid is awful and very poorly maintained(local transformers are undersized and overheat constantly). More baseload power is not the solution as it will lead to more load on the system.
Knockouts are usually weather related or due to spiking summer demand. A new baseload nuke plant can't help that.
Worse, nuke plants require water for cooling and would be shutdown in summer drought just when the AC load peaks.
A better solution would be to diversify the number of generators like local PV or wind do to suppliment the grid.
Because of the danger of a central station knockout almost all power companies have backup natural gas generation so wind fluctuations would be covered though at higher costs.
A better approach would be a load shedding 'smart grid' to reduce power spiking. There's no part of the country that needs energy conservation more than Texas.
It's true that electricity demand was rising at 1.1% per year but it's all due to residential and commercial demand and is tied to GDP growth. In the old low growth scenario(2006) total demand is only up by 18% over 24 years(2006 to 2030) or .75% per year.
Given what we know about peak oil we will be lucky to see even low economic growth.
http://www.eia.doe.gov/oiaf/aeo/electricity.html
Wind alone can take care of that; (4319-3659)Twh per year/24 years or ~30 Twh per year is an addition of 12 GW per year of wind at 2500 hours per year. This year 2008 7.6 GW was installed in the current upward growth of the wind industry so we are practically meeting our future need already just with wind additions.
http://www.awea.org/pubs/factsheets/Market_Update.pdf
Incidently Texas, not Illinois is leading the nation in new wind energy.
Robert Rapier for Director of the office of Energy and the Environment!
Thanks for the post.
use it or lose it is kind of the opposite to depletion protocols and in-the-ground strategic reserves. In other words saving some for later.
cash rebates should go on approved purpose subsidies only; example solar water heaters. Apart from windfall oil profits there may also be carbon auction revenue some time, possibly tens of billions of dollars, so it needs to be done right.
auto industry bailouts could be a costly mistake. For example the new energy czar could say plug-in hybrids are best but I think Pickens may be more on track with natural gas cars. The bailouts should be an each way bet, not a single throw of the dice.
Re carbon revenue from what I see the NOx and SOx permit auctions run by the Federal EPA are better managed than the European carbon trading scheme. Maybe the US could be the first to get carbon auctions right.
Considering that Barack Obama’s Transition Economic Advisory Board has a former congressman from Michigan and the current Michigan governor, no doubt that the American auto industry will get a bailout.
The 'big 3' are bad at business, bad at making cars, and bad at trying to reduce dependence on fossil fuels. If anything, Obama should give money to Toyota (as Toyota has factories in the US) to build more hybrids.
Robert,
Your opposition to improved CAFE standards mystifies me. US car manufactures certainly make fuel efficient cars but they build and market them in EU, where standards for 2010 are >40mpg. Compare this to US standards of 35mpg in 2020!!. Far too late if oil availability starts to decline by 5% per year before 2015. By all means add incentives for fuel efficiency, but support very ambitious fuel efficiency CAFE standards sooner rather than later.
Your opposition to improved CAFE standards mystifies me.
You must not have read what I have written on that then. I fully support high mileage vehicles. But we don't require mandates to produce them. We need people to demand them. What the average person believes is that if CAFE standards are raised to 40 mpg, that means that their Suburban is going to be designed to get better gas mileage. While you might make some slight changes and improve the mileage of the gas guzzlers, the reality is that the way car makers will achieve the CAFE standards is to build smaller cars. They can do that today. Right now. The problem is not supply, it's low demand. If you can boost demand, you don't require the standards.
So, I don't oppose CAFE, I just think people are misled by CAFE. They think it means they still get to drive their Suburban, just with vastly better fuel efficiency. It's one of those situations in which the consumer thinks the only impact to them is better gas mileage.
This is the problem with what some see as necessary conditions for the bailout. They want to require higher mileage vehicles from the big 3. But the bailout will fail if they simply build more efficient vehicles. Someone has to buy those vehicles. That is why any attempt to help the auto industry needs to be demand, not supply driven. Incentivize the demand and the supply will follow.
We need feebates now.
IMO the two approaches can be complementary. Raise gas taxes, provide a flat feebate, and also up CAFE to 50mpg by 2020 (5 seater Prius already gets that now). That way, there are incentives for both consumer and producer, and the average fleet economy is guaranteed to rise.
I am in the market for a new(er) small car that gets 40+ miles per gallon (non-hybrid!). I stopped yesterday at the the local GM & Chrysler dealers. Neither of them could offer anything over 34 miles per gallon! I haven't yet been to a Ford dealer so don't know what they have. The GM salesman said they have more V-8 cars than they have ever had. And the US makers are all going broke and can't sell their gas hogs.
Mercedes Benz came out with the Smart for Two car that gets 40+ miles per gallon with no complex hybrid stuff. 100% of their 2009 US supply of cars is already preSOLD and they have a LONG waiting list of buyers. (My guess is that the person that came up with the Smart for Two car for Mercedes will get a very nice bonus this year?)
The problem is dunderheaded thinking by the US auto makers management (or should I say lack of management?) Hint, 15 years ago GM sold the Geo Metro that got 40+ miles per gallon with automatic transmission and 50+ miles per gallon with manual transmission - And now the best they can offer in a new car is 34 miles per gallon? My 1962 VW gets 35 miles per gallon!
The populatiry of the Smart for Two car proves there is a market for high milage cars.
Everyone I talk to states they believe that the low gas prices today won't last and they are making plans to get vehicles with high gas milage to be prepared for when gas preices go way up again.
US auto companies did build high mileage cars in the past, and moved away from them when they thought it didn't matter. My '95 Neon (manual shift, SOHC), gets 42mpg on the highway. My wifes' 04 Neon (same engine and tranny but bigger and heavier) gets 35mpg on the highway. I can't even buy a new Chrysler that good, as the Caliber they replaced the Neon with can barely get 30mpg. But hey, at least it's not cute...
I say the technology has existed for years to raise fuel economy 30% from present levels with little or no sacrifice in utility. The recent 35mpg by 2020 standard is a complete joke.
The Honda Fit....Check it out.
It isn't the mpg per vehicle that matters it is the total amount of fuel burned by all vehicles that matters. I have a minivan that gets 20 mpg and a compact which my daughter drives which gets 30 mpg. Over the typical month the van put on 100 miles but the compact puts on 300 miles. The minivan burns 5 gallons per month and the compact burns 10 gallons. Forget CAFE and start rationing or impose high tariffs on oil imports.
I like your plan.
It is unfortunately true that the oil companies significantly influence and direct not only production, but consumption as well. These companies are a force to be reckoned with and Obama's former employer, the University of Chicago, was founded nearly entirely with Rockefeller money.
Nuclear energy may well be the lesser of numerous evils and as you may know, Illinois is a nuclear state. Not only is Illinois a nuclear state but it is a corn growing state and although I am uncertain about Obama's debt to this heavily subsidized industry, it it reasonable to assume he has been contacted and supported by the various corn growing interests in the state.
Nevertheless I am optimistic. America's Energy Challenge is as much a sociological difficulty as it is geologic and economic.
Keep up the good work.
Kevin Walsh
Chicago Peak Oil
If a windfall profits tax is in place, I believe that this will discourage investment, and ultimately lead to higher prices as supply is constrained.
From a theoretical point of view, perhaps. However, 75% of the tax relief Exxon/Mobil experienced as part of the 2005 Energy Policy Act was used to buy back stock. They know if investment in new drilling and infrastructure is constrained, supply will be constrained and their product value will rise. It doesn't make economic sense for them to spend more to produce more if they are going to be paid less. Remember how reluctant they've been to explore even promising leases; that's why Palin kicked them off one prime lease they had just been sitting on.
but then also listen to these companies explain the view from their vantage point.
Exxon/Mobil has already stated several times emphatically that they do not want to move into the renewable energy market. I see no need to pander to a company that is making record-breaking profits and sitting on leases, driving the price up.
They know if investment in new drilling and infrastructure is constrained, supply will be constrained and their product value will rise.
While I don't like to be put in the position of defending ExxonMobil, they only control 3% of the world's oil. They don't have enough stroke to materially constrain supply. If you run some numbers, you will see that if they constrain their supplies, it will cost nobody but themselves. I worked through an example when people claimed that BP was delaying the start of their refineries to keep prices high. That might benefit all of the other refiners, but it certainly didn't benefit BP.
Remember how reluctant they've been to explore even promising leases;
An example of a promising lease they have been reluctant to explore?
Exxon/Mobil has already stated several times emphatically that they do not want to move into the renewable energy market.
Yet they are in fact investing in renewable energy. A token amount, to be sure. But their purpose is to make returns for the shareholders. What renewable options do you think they should be investing in? I have to tell you, if I think the price of my stock is grossly undervalued, you have a hard time convincing me that a major cellulosic ethanol investment is better than taking some of my shares off the market.
sitting on leases
Which ones are they sitting on? And what is your source of information?
A little more:
When the Cato Institute says that domestic production reduced, are they blaming natural depletion on the windfall profits tax? If they have already accounted for that, is it not better to save limited domestic supplies for the future? Their value system probably leads to very skewed assesments of what is good for consumers. One would probably want to look to a different source as far as consumer interests are concerned.
Chris
When the Cato Institute says that domestic production reduced, are they blaming natural depletion on the windfall profits tax?
I wondered the same, or whether that was above and beyond natural depletion. But I didn't have time to do the analysis.
If they have already accounted for that, is it not better to save limited domestic supplies for the future?
In general, yes, but that's not universal. Some domestic supplies may be forever out of reach if we don't tap them now because the financial crunch may be so severe. That was the gist of Gail's post a while back on opening up new drilling opportunities.
Remember why Palin was trumpeted as a reformer who stood up to big oil?
http://www.adn.com/oil/story/356188.html
Kind of hard to develop it when there isn't a pipeline there. Really limits your options.
Point Thompson is right on the water, so tankers could transport the oil. The pipeline Exxon has been using as an excuse is for natural gas. LNG is a solution for that, if it is really needed. Remember, Exxon has submitted 2 dozen development plans, so if they couldn't develop it to begin with, they shouldn't have acquired the lease.
I don't know too much about the situation, but from the linked article most of it looked like natural gas. LNG is a pretty expensive option relative to a pipeline. But the main question I would have is why do they keep submitting development plans? Is someone rejecting them?
The Bush or Palin administrations rejecting a full scale development plan of Point Thompson? Extremely unlikely. What's far more likely is that this represents piddling stalling tactics via insignificant drilling plans on the part of Exxon. And I'm all set to get more down arrows from Exxon readers...
So you don't know? Isn't that just aspersion casting, then? From your link, XOM proposed a $1.3 billion development that was rejected by the state of Alaska. So we do know that they have offered plans to develop the lease. Your assumption is that this is part of some sort of stalling tactic, but you have no evidence of such.
But if this is what qualifies as 'sitting on leases', then yes, there probably are some cases like that. Arizona Clean Fuels has been trying to get permits to build a refinery for the past 10 years. I guess that means they have been 'sitting on their land' the entire time. Someone should have taken it away from them, I suppose?
So you don't know? Isn't that just aspersion casting, then?
You were the one wondering if their plans had been rejected, casting implicit aspersions on 'the government'. If they've submitted 23 development plans and didn't get any of them right under "drill baby drill" Bush, Palin, and Knowles, then either they have been completely incompetent all along the way, or they are stalling. The refinery issue is irrelevant, though you know that. I'm surprised you seem to be acting as Exxon's foil; most of what I have seen of your material in the past has been much more favorable. Perhaps you're having a bad day; no worries, we'll give you a Mulligan on this one...
You were the one wondering if their plans had been rejected, casting implicit aspersions on 'the government'.
No, I am asking questions designed to come to a conclusion. You are jumping to conclusions - "What's far more likely..."
If they've submitted 23 development plans and didn't get any of them right under "drill baby drill" Bush, Palin, and Knowles, then either they have been completely incompetent all along the way, or they are stalling.
No. The original claim is that oil companies are sitting on leases. I asked for an example, as I know how these things work. Development takes time, so someone may jump to a wrong conclusion while preliminary work is being done.
So, when you show me that they have had plans rejected, we need to know why they were rejected. Neither you nor I know what the story is, but XOM is in the business to make money. It doesn't make too much sense that they would sit on a lease that they knew had oil or gas unless there wasn't an economic way to get it to market.
Finally, Palin was no friend to the oil and gas companies there. She was known as "Hugo Chavez of Alaska." So it's a bit much to suggest that she may have been helpful to XOM in getting this developed. In previous dealings with her, she scuttled several deals because she kept demanding higher terms (or wouldn't agree beforehand to a long-term tax rate).
The refinery issue is irrelevant, though you know that.
No, it's a perfect example of how - to the outsider - it can appear that nothing is being done, when in fact a lot of work is being done.
I'm surprised you seem to be acting as Exxon's foil
You offered the Exxon example. I am just trying to get you to support the contention that they are sitting on this lease. Had you offered up BP, Shell, or COP we would be discussing them instead. I don't care about XOM, but I do care about energy policy being distorted because people are falsely claiming that companies are sitting on leases to tie them up. You have offered up an example, but on inspection it is clear that you can't actually show that they are just sitting on it. In fact, you have offered up links that show they have put up plans to develop it. The question - which neither of us can answer - is whether those plans were sincere. I don't have enough facts to make a conclusion, you think you do...
Your opinion.
Funny, Exxon/Mobil said that they could start pumping oil from brand new offshore leases in a year, yet they've spent over 25 years (in some cases 45 years) pretending they were going to do something at Point Thomason. Here's what the State of Alaska had to say;
So much for "a lot being done" by Exxon/Mobil.
If you disagree with my conclusions, that's fine with me. But when you call them "false", then you have much more explaining to do to prove your point. What evidence do you have that I made any false claims?
Your opinion.
It's not my opinion, it is a fact that there are other options besides the ones you listed.
Exxon/Mobil said that they could start pumping oil from brand new offshore leases in a year
I am sure you would agree that this depends on how much infrastructure is in place. If there isn't an existing pipeline nearby, the timing would obviously take much longer. And if building the pipeline was sufficiently expensive, then it might delay the project indefinitely.
Here's what the State of Alaska had to say;
So then we have come full circle: The state of Alaska already has a use it or lose it provision. It is up to them to enforce. The federal government also has such a provision. That was my point. Obama's position on this is pandering.
If you disagree with my conclusions, that's fine with me. But when you call them "false", then you have much more explaining to do to prove your point. What evidence do you have that I made any false claims?
You misunderstand. That wasn't directed at you, it is directed at all of the campaign talk suggesting that oil companies are going out and acquiring leases with no intention of developing them. Thus, we need a use it or lose it provision to evict these SOBs. As in your own example, that provision exists. Why it hasn't been enforced, I can't say. But if things were as cut and dried as you make them out, why couldn't the state have already evicted XOM?
It's not my opinion, it is a fact that there are other options besides the ones you listed.
Sorry, I don't see it that way. If they've submitted 23 development plans and didn't get any of them right under "drill baby drill" Bush, Palin, and Knowles, then either they have been completely incompetent all along the way, or they are stalling. You are free to feel differently or prove me wrong. You've provided nothing substantive to support any other scenario.
I am sure you would agree that this depends on how much infrastructure is in place. If there isn't an existing pipeline nearby, the timing would obviously take much longer.
Why? How much longer does it take to build a pier to pump the oil onto a tanker than to build the pipelines from offshore rigs to one some distance inland? Less time? Same amount of time? Another year, maybe two? Perhaps, but certainly not 25-45 years that Exxon et al have had on the Thomason Point lease. If you have reliable information to the contrary, please provide it.
And if building the pipeline was sufficiently expensive, then it might delay the project indefinitely.
So if Exxon were trying to hold the government's feet to the fire to build them a pipeline, it seems they overplayed their hand. Since Bush, Palin, and Knowles are so pro-oil, it seems Exxon really must have overplayed their hand.
So then we have come full circle: The state of Alaska already has a use it or lose it provision. It is up to them to enforce.
No. I was talking about oil companies that were sitting on leases without producing on them (while crying about needing to drill offshore). You took exception with that and have yet to present anything substantive to dispel that opinion. Again, you can have your opinions and I mine, and they don't all have to be same. I have no problem agreeing to disagree.
(False claims statement) wasn't directed at you,
No? Sure seems that way. You said I do care about energy policy being distorted because people are falsely claiming that companies are sitting on leases to tie them up, This was exactly the claim I was making. If you are retracting or correcting that statement, I'll accept that.
it is directed at all of the campaign talk suggesting that oil companies are going out and acquiring leases with no intention of developing them.
I don't see that this is necessarily accurate; all they were saying was that the companies are not developing many leases. Yes, there are expiration terms to leases, though it seems that they are not enforced, are too vague, or too lengthy. So when the oil majors come in making politically charged statements about not having enough oil leases to drill on, it's perfectly appropriate to point out where they are sitting on leases that they are not developing. This is OBE after the election anyway, so I don't know why you are still bothered by it. I put it in the same bin of political-gimmicks-to-feed-on-the-population's-addiction as I do the "Gas Tax Holiday".
But if things were as cut and dried as you make them out, why couldn't the state have already evicted XOM?
It's not a matter of could they have enforced the lease, it's when they chose to do so. It's no secret that Alaskan state leaders have been very chummy with the oil companies for years, plus the majors had been submitting development plans all along that gave the impression they were earnest about doing something, but when the majors sit on a lease too long without providing jobs and royalties to the state, after over 25 years (and in some portions, 45 years), the leaders finally got fed up and enforced the terms of the 10 year lease.
Sorry, I don't see it that way.
I know you don't. You have adopted the position that it must be XOM at fault, and not the government. By the same token, one could argue that if the government has received 23 plans for development, they are either incompetent or stalling for much better terms not to have seen one they could live with. And you've provided nothing substantive to support your version over that one. It is simply your opinion, but by your own links XOM's plans were rejected by the government. What evidence do you have, other than your mistaken belief that Palin was somehow conducive to getting deals done with oil companies? The option that you have rejected out of hand is that the government has complicity in not getting these leases developed.
This was exactly the claim I was making.
If the shoe fits, fine. But it wasn't directed specifically at you. What I expect is that if someone is going to make the claim that oil companies are sitting on leases and not developing them, they come with evidence, and not innuendo. Your evidence consists of "well, even though XOM has submitted many plans that were rejected by the government, it must be they, and not the government who are at fault." Come on. Imagine you are in court trying to prove that case, and this is all of the evidence you have provided. Do you think those charges stick?
Bottom line is that you have claimed that they were sitting on their leases. Two things we know, from your own links. They have submitted plans that were rejected. Your conclusion is that this is the fault of XOM. But there are 'use it or lose it' provisions in place, which was exactly what I stated in the essay.
Your evidence consists of "well, even though XOM has submitted many plans that were rejected by the government, it must be they, and not the government who are at fault."
I only spoke of one plan that was rejected by the government. Are you presupposing more were? Perhaps you can provide evidence, no?
Come on. Imagine you are in court trying to prove that case, and this is all of the evidence you have provided.
This is anything but a court. Otherwise, you would be called to prove your statement, Obama's position on this is pandering.
one could argue that if the government has received 23 plans for development, they are either incompetent or stalling for much better terms not to have seen one they could live with.
Are you stating that the government has rejected all 23 plans? On what basis do you make that claim? Evidence?
The option that you have rejected out of hand is that the government has complicity in not getting these leases developed.
If you are talking partial complicity, then no, I'm not. If you are talking full complicity, or even the major share, I am indeed. Remember, we are talking 25-45 years; Palin has been there only a couple.
Are you stating that the government has rejected all 23 plans? On what basis do you make that claim? Evidence?
What's the alternative? Offer a plan and then withdraw it? Perhaps you could instead - since this is your claim - provide some sort of evidence that the other plans that XOM offered weren't rejected by the government. We are trying to show that XOM is idly sitting on leases, no?
I just can't see any other options besides rejected or withdrawn. The truth is that neither of us know for sure, but the basis of your position is apparently that the plans weren't offered in good faith. What we do know is that plans were offered. So we know - whether in good faith or not remains to be seen - that XOM offered plans for development. We also know that since there is a 'use it or lose it' provision in place, the government should have gotten these leases back years ago if they determined that XOM was just goofing off.
What's the alternative? Offer a plan and then withdraw it?
Ok, so you are admitting that you don't know. I appreciate the candor. There are other options, such as submitting a plan, and then not implementing it.
We are at a stalemate; I can't prove beyond a shadow of doubt that Exxon et al chose simply to sit on leases they've had for 25-45 years; you can't prove that they made good faith efforts to plan for full scale development of the leases, nor can you prove your assertion that people's claims of oil majors sitting on leases is false. The facts we do know are that they made 23 development plans over 25-45 years, did little in the way of development, and lost those leases after the Alaskan government became fed up and pulled those leases. When in the face of incomplete data, people have to analyze the information they have and come to conclusions that make sense to them in light of the experience and past outcomes they have to draw from. No one has the same two sets of the aforesaid, so it is not unusual that people have differing opinions.
I have found the vast majority of your articles to be informative; however, political posts such as this invariably move the audience away from reason and rationale and into the realm of emotions, partisanship, and bias. One traditional way of ending such disagreements peacefully is to offer an olive branch; please accept this one from me as I offer it with all earnestness and sincerity .
I think that discouraging new exploration for oil is a good thing but that the windfall profits tax is an imperfect method. We need to cut consumption enough that the price of oil falls low enough that no one will want to invest in oil that is going to cost more than $15/barrel to produce. There is a wholesale move to lower efficiency in the oil business as a consequence of depletion of the useful sort of oil. We need to make sure that the expensive and pointless oil like that from tarsands does not get produced.
Also, I think Robert is getting the windfall profits tax wrong. This is a one time tax that rebates consumers once, not the ongiong source for the permanent tax cut. And, rebating consumers does not mean that they will go spend that money on oil industry products. Where we have produced permanent demand destruction, that will continue.
It is worth remembering that oil is not a competitive business so all its profits are suspect. The supply is not set by competition but rather by collusion. Thus, attaching those profits makes very good sense to discourage gain as a result of anti-competitive behavior.
Chris
All well and good Chris but don't forget that the WFT folks are talking about is a consumption tax the oil companies will pass thru to the consumers. It's not going to cut into their bottom line one cent. But, on the bright side, it should cut consumption which is always a good move IMO.
What one hopes to accomplish is that the excess profits do not go to investors or investments. If the price of gasoline is held much higher than the cost of producing it, then we can tax them again.
Chris
This is a one time tax that rebates consumers once
Riiiight. Just a one time deal.
And, rebating consumers does not mean that they will go spend that money on oil industry products.
It tells them that they needn't concern themselves with high oil and gas prices, because the government will take care of this for you.
The supply is not set by competition but rather by collusion.
If you are talking about OPEC, I agree. If you are talking about the U.S. majors, then this that's dead wrong.
Thus, attaching those profits makes very good sense to discourage gain as a result of anti-competitive behavior.
You aren't impacting OPEC, the source of the anti-competitive behavior. To the contrary, if U.S. investment is discouraged, it makes things better for OPEC.
If we think of the majors as a bunch of hoovers following along behind the nationals vacuuming up cash that spills from the sack that they used to rob the bank then we have a pretty good picture of what is going on. The majors should not be allowed to keep the stolen money even if we can't recover from the nationals.
Ultimately, we do have the government taking care of oil for us. Much of our military spending is devoted to keeping supply available. A windfall profits tax just acknowledges that we do a lot for the oil companies and they ought to behave better.
Chris
What kind of economics it that? There is probably no longer more than 20-30 million barrels per day of oil in the world that could be produced at $15 per barrel. What would be your mechanism for cutting demand to that level that would also cause the price to collapse? Just destroy 80% of the world's current vehicle fleet? No conceivable market mechanism other than a near total economic collapse could do that. Are you thinking about that, very coercive statist solutions or dreamland enlightenment?
Most oil that is produced today was also produced when the price was last $20/barrel. That is a profitable level if you don't bother to invest in more expensive replacement oil. Also, some new Caspian and Kazakhstani oil costs well less than $15/barrel to produce. You are off in your estimate by quite a lot I think.
Edit: Here is a figure from the WEO 2008 that rembrandt posted.
As you can see most available conventional oil costs less that $20/barrel to produce.
Chris
As you can see most available conventional oil costs less that $20/barrel to produce.
? There isn't a single category on there that list listed at less than $20/bbl. I have dug into the report yet, but I presume that those first 3 categories are all conventional?
Robert, just one error:
You talked about a report that showed that cellulosic ethanol could actually be worse than gasoline/diesel in terms of CO2 emissions, but that's only if you consider the effects of the land no linger being a carbon sink. But if you wanted to consider that as part of cellulosic ethanol's CO2 tab, you'd need to do the same for any agricultural practice. Should all farmers be taxed on any land that they happen to use?
...that's only if you consider the effects of the land no linger being a carbon sink
Two things. First, it isn't an error because all I am showing is that these things are going to be politicized as the system is currently set up. That is a prediction I made, and a now demonstrated fact per the link.
Second, remember that there has never been a complete energy balance done of a commercial cellulosic system. All of the ones you have ever seen are based on hypotheticals. So even if you exclude the land usage impacts, you still can't say that this is the only thing pushing cellulosic ethanol into a poor GHG position.
After all the reading I've done it is clear Obama has no energy plan. He is like a physician who prescribes aspirin for a rapidly spreading cancer. It is politically incorrect to come out and say that we are in serious trouble or to question the idea of constant economic growth.
Ethanol is a joke, more domestic oil is a joke, alternative energy sources are a joke, taxing stratagies are a joke, etc. Its all about coal and oil and its availability at an affordable price now ! The only realistic approach to energy is massive conservation and greater efficiences in housing, heating, appliances, and transportation. Everything made must last longer, use less energy, and be made in the USA.
The private automobile will go the way of the Dodo and the braindead industry that produces them shall perish. This puts Obama between a rock and a hard place. Serious changes need to be made but these changes are revolutionary and fly in the face of all the vested interests who are incapable of rapid change. In summation, the very existance of capitalism is at stake, therefore we see paralysis and impotent responses to the greatest crisis of our time.
In saying this, I am not advocating any other economic system, I am only pointing out what is obvious. My customers are calling for a DOW at 4,000 in three months, our local economy is crumbling; the great capitalist roadster has blown a head gasket. Can the knuckle dragging morons called Congressmen and Senators put on their mechanics overalls and fix the great roadster under the baton of maestro Obama? Once they have made their repairs with baling wire and Duck tape, will we be able to afford the fuel to resume our happy motoring?
Don't despair, just close your eyes and click the heels of your ruby slippers together saying, Hope, Change, Hope, Change and everything will be all right.
R^2,
What increased extraction numbers do you expect to see if drilling opposition was removed in the U.S.? 0.1 MBD? 1 MBD? 2 MBD? And this forms a bridge to where?
I think we should nationalize our oil companies and instead of plowing more and more investment into harder to recover oil, we should invest in alternatives and conservation.
GG
What increased extraction numbers do you expect to see if drilling opposition was removed in the U.S.? 0.1 MBD? 1 MBD? 2 MBD?
I did some calculations on that in my previous essay on drilling:
http://www.theoildrum.com/node/4339
And this forms a bridge to where?
I would characterize it as a tourniquet.
A tourniquet indeed! If this oil is produced it will be sold to the highest bidder, China perhaps? Unless the oil is nationalised, why refer to it as any solution at all. With population growth, the demand for oil only increases. Where is the 100 year plan? Stop beating around the bushes and get to the heart of the matter, we need massive conservation now! Constant economic growth will not be possible in the future, keep clicking your ruby slippers.
ExxonMobil spends more of advertising than they do on alternatives.
The increased oil extraction will be needed to smooth the transition from liquid petroleum fuels for transportation to something else. This is regardless of the sizxe of the production
My concern is that the government (whether Obama led or Bush led) is squandering the resources needed to ease the coming transition. An example is the comercial scale cellulosic ethanol plants recieving large U. S. Government grants to start construction. As you are aware normal development proceeds from laboratory scale to pilot plant to semiworks to comercial scale. Whether the technology is cellulosic ethanol or battery powered cars it is my hope that Mr. Obama hires someone who can cut through the hype and tell which technologies are ready to go commercial and which are still in the laboratory. Then Mr. Obama has to listen to this person and not special interests. Failure to set up this screening will in my opinion invite disaster.
Shirley, you must be joking.
13 mbpd x 365d/y=4.75Gb/y.
You said 86Gb of US oil, currently untapped-starting from zero. Assuming a wildly improbable ramp up to 4.75 Gb per year in just 10 years you would end up with (86-10*4.75/2)/4.75=13.1 years of zero oil imports.
4.75 Gb is +double current US production 2 Gb (5 mbpd)
which is falling incidently..in 10 years.
http://www.eia.doe.gov/basics/quickoil.html
Yeah...right.
Besides, I thought you liked Robert Ryder who says energy independence is STUPID.
STUPID QUESTION!
Could you explain your formula?
:D
First I convert 13 million barrels per day of imports to
4.75 billion gallons of oil per year
13 mbpd x 365d/y=4.75Gb/y.
R^2 said 20 years of zero import oil which is his number of 86 gigabarrels of untapped US oil reserves (billion barrels)/4.75=18.1 years which is close to 20...
Except we need to ramp up to 4.75 Gb/year. How fast can we go from zero to 4.75 billion barrels of extra oil per year?
We did it between 1950 and 1970--20 years.
Under that scenario we get add a triangle 4.75 Gb year high times 20 years long or 47.5 Gb. Subtract that from 86 Gb we get 47.5 Gb which is 10 years of zero imported oil.
That is ten years, starting 20 years in the future.
If we pretend that we can get to 4.75 Gb in just 10 years
that's a triangle of 23.7 Gb, so (86-23.7)--whats leftover/
4.75Gb/y (peak oil production worth 13 mbpd) is 13.1 years
of zero oil imports, not 20 years as R^2 stated. Starting 10 years in the future.
R^2 has previously expressed skepticism about energy independence citing Robert Bryce(Gusher of Lies). (Oops, not Ryder--me bad.)
Now he submits a plan for energy independence?
What gives?
http://i-r-squared.blogspot.com/2008/03/book-review-gusher-of-lies.html
http://www.nytimes.com/2008/03/07/books/07book.html
At least I hope you get the idea.
And now I'm going to take a drink.
R^2 has previously expressed skepticism about energy independence citing Robert Bryce(Gusher of Lies). (Oops, not Ryder--me bad.)
Now he submits a plan for energy independence?
What gives?
As I said in the book review (and elsewhere), I agree with him that many of the plans for energy independence are pie in the sky. I disagree with him about the need for energy independence. I think we need it; he doesn't. And I still felt that way after reading the book.
Nice critique Robert. I was encouraged when about a week ago when i heard NPR report that Al Gore was emphasizing the need to revamp the current US electrical grid. Electricity is a huge part of our energy future and we will need a complete overhaul of the current system, so I think any energy plan for the future must pay much attention to the issue of scale. Wind, water, [clean] coal, nuclear, etc - will all take huge investments in infrastructure - lowering the EROI. Anyways - nice post!
Fifty per cent of our electricity comes from coal. More dirty coal plants will be the course de jour. Where is all the investment capital supposed to come from to rebuild our electrical infrastructure, borrowing from the Chinese perhaps? Forget Nukes, too expensive. We will become China, filthy air and all. They do not serve oerdourves on the deck of a sinking ship, forget clean energy. Welcome to Dumpster America, breath deep the gathering gloom.
Super post. Lots of good ideas. For the sake of discussion (and a bit of devil's advocacy :), I have a few comments. Full disclosure... I am an independent who has voted for candidates of both parties many times. In this instance, I voted for Obama.
First, I think we all understand that politicians say a lot of things and make a lot of promises during campaigns, knowing full-well that they cannot (even if they truly want to) keep them. Politics is perception. That said...
Use it or Lose it and Increased Drilling.
I think that use it or lose it is a sound bite. As you say, the basic idea is already in place. I suspect that Obama will be supportive of some increased drilling with conditions, but I also suspect, perception being what it is, that higher fuel prices will be required to drive public demand for it. Obama will need public demand in order to appease elements of his base that are fundamentally opposed to any additional drilling. As a result, any significant easing of additional drilling will come later. Personally, I think that even if we opened all the OCS immediately, significant supply would not arrive for at least 8-10 years, and would not be sufficient to offset decline rates, let alone the growth in demand that any economic recovery would entail. Still, I suspect Obama will end up allowing some drilling eventually.
Windfall Profits Tax.
Here I basically agree with you. I think this is an inefficient way to raise fuel prices. Gas tax or carbon tax would be a much better play, but, politically, much tougher to sell. Politics is perception. Still, I didn't hear Obama talk about this as much in the later part of the campaign. My gut feeling is that this is probably a negotiable point for them. Still, the oil companies might do themselves some PR favors if they spent more of those profits on new production (or aging infrastructure) instead of on stock buybacks. Stock buyback may be the "right" thing to do, financially speaking, but it is really bad PR and, honestly, it makes it a lot easier for politicians to support things like WPT, whether it's a good idea or not.
Ethanol.
Obama is already on record as saying corn-base ethanol is non-optimal.
Still, the guy is, currently, a senator from a corn-belt state, so maybe we need to cut him a little slack. After all, he probably wanted to have a fall-back position if the whole president thing didn't work out. ;-) I suspect that ethanol will get support, but that most of the money will flow to things other than corn over time. However, it will not be cold turkey. Politics is perception.
Nuclear.
I'm going to disagree, a little, on nuclear. I think the arguments against nuclear playing a major role are significant and generally well discussed (for example, see http://www.americanprogressaction.org/issues/2008/nuclear_power_report.html). Given the age of the current power plants, the reality is that it will probably take major nuclear investment just to maintain the existing share of energy production currently provided by nuclear power. Combined with the non-renewable nature of uranium, and the political/security implications of nuclear in general, and fuel storage or reprocessing in particular, I think nuclear will be hard-pressed to maintain let alone expand significantly.
Overall, I think that we are largely in agreement. Obama's plan, like virtually any other, is imperfect. However, it contains a number of very good points. If Obama can surround himself with good people, as he appears to have done during the campaign, and can remain open to at least considering alternative views, then I think there is some hope for positive action. Will it be big enough soon enough? I don't know. In truth, to be so the government must drive it, but the government probably will not drive it until we the people demand it. Politics is perception.
Brian
Given the log-normal distribution of uranium, its fair to say its non-renewable the same way the hydrogen in the sun is non-renewable.
As for fuel storage, this is and allways has been a purely political problem. It costs nearly nothing to do dry cask storage for centuries.
While I agree that a carbon tax, oil tax, or gas tax would probably be more effective that a windfall profits tax, I don't think any of the foregoing have a snowball's chance of being enacted. The primary objective should be to reduce fossil fuel use, including oil. The fact that a windfall profits tax might discourage exploration or production does not concern me as it will help raise prices. Again, it makes more sense to do things like tax oil directly, especially the imported kind, but I don't see anyway that is going to happen. Obama certainly didn't run with that in his campaign which would make it doubly difficult.
As far as this goes, we should have rationing of gas through tradeable credits. This way, the profligate would be doubly penalized while the frugal would be doubly rewarded.
My biggest disappointment is Obama's continued call for so called clean coal, a total oxymoron. Go ahead and invest in research. In the mean time, stop the construction of any new coal plants and phase out existing ones.
Yes, yes, yes. Nuclear as opposed to coal any day. Nuclear will always have risks but it is less likely to make the planet largely uninhabitable, just parts of it.
Now that O has a national constituency, maybe he will see the light on ethanol. But then there is always the need to get the corn state's support. At least, however, he won't have to worry about the Iowa primary unless he really screws this up.
In any event, things are going to be far, far better with Bush out of office. At least the man believes in science and global warming.
Encourage domestic drilling, biofuels have a role, pro nuke, avoid shortages at all costs... BAU.
"A “Use it or Lose It” Approach to Existing Oil and Gas Leases."
imo, that was just a bumper sticker to combat drill baby drill.
the federal leasing program probably could use some updating. and now that we have a reprieve from campaigning this might be a good time to look at it.
most states that i am aware of lease minerals for a 5 yr term vs 10 yrs for fed leases. the federal version is to increase the annual delay rental from $ 1.50 per acre to $ 2.00 per acre during the last 5 yrs. i just dont see that a $ 0.50/acre increase in delay rental is going to encourage anyone to develope anything.
stable prices would do more to encourage drilling than any tinkering with federal leases. and as long as we are socializing everything, can the oil companies be far behind ?
You are correct about “Use it or Lose It” being a bumper sticker and I might add a bumper sticker for stupid people who know nothing about oil leases. The best approach to increase lease utilization would be to streamline permitting, such as was done for the Alaska pipeline.
As always, the solution to the problem is largely ignored: we clearly need to stop driving everywhere. Even the well intentioned, and even those who call themselves environmentalists or conservationists are willing to squander every possible resource so we can keep driving - largely using 4,000 lb. vehicles to transport one dude when a 40 lb. vehicle could easily get the job done (and it should be obvious what that vehicle is).
Obama has expressed that we would expect us, in terms of making sacrifices, to rethink the way we use energy and do transportation. Coming from Chicago, which has a nice robust mix of transportation options (which I am familiar with, living relatively close), one would have high hopes that we could finally transition to a country that doesn't revolve completely around cars. But more recently he has stated that the US auto industry is key to reducing our dependence on foreign oil. Is this a joke?? What are the real prospects of largely replacing our vehicle fleet with cars that run on much, much less oil (meaning, within the bounds of domestic production) or that run on electricity (with very expensive battery packs)? And I don't mean prospects for even the not-distant future, I'm talking right now, because we clearly don't have time to keep dicking around. Does America have the financial means to suddenly discard its current auto fleet and trade them in for $40,000 Chevy Volts, even if that many could be produced (which clearly won't be anywhere even close to the case)? These are pipe dreams.
It still ceases to amaze me that New Urbanism gets so little attention. These folks came up with solid and comprehensive solutions long ago. Meanwhile, almost everyone else is still beating around the bush. I know a transition to NU is a huge ordeal, but there is absolutely no reason why we can't start now. There's also no reason why we can't start using bicycles much more right now, even in suburbia without any new infrastructure, though it would be sloppy considering that the current accomodations for it are so shameful. Any infrastructure that would be appropriate - bike racks, possibly some lane markings - is surely far, far less expensive and resource-instensive than what we continue to waste on cars.
We have a choice: either keep squandering every possible resource on cars, most shockingly now those that sustain life, or transition to something that makes a lot more sense. Until we choose option 2, there's no reason for me to believe that the future will not be disastrous.
You can drive anywhere you want as long as you don't drive too far-15 miles a day is only 5500 miles a year.
Of course you "can" drive anywhere you want, even 55000 miles a year. The question we should be asking ourselves is whether we should, and any way you slice it, using a 4,000 lb. vehicle to transport a 200 lb. person is wasteful.
Re: Ethanol blind spot:
It is RR who has the ethanol blind spot, not Obama. RR refuses to acknowledge that the concept of EROEI is fallacious. I have railed many times about the errors of EROEI and will not do it again here.
It has been debated ad nauseum.
We just had an election in which President-Elect Obama won. He has been clear in his support for ethanol and ethanol subsidies.
Now comes RR again, with his tired ethanol critique which has been rejected by a large majority of Americans. RR has lost the argument.
Senator Obama would not be President-Elect but for his support for ethanol which enabled him to beat Hillary Clinton in the Iowa caucuses.
He also won corn producing states like Indiana, Ohio and Pennsylvania in the general election partially because of it. To suppose he will now listen RR's specious arguments defies belief.
Obama's ethanol stance was a significant factor in his success. He is one smart dude and don't forget it.
I have railed many times about the errors of EROEI and will not do it again here.
You have made a number of repetitive claims that have been debunked numerous times. There's a big difference between that and railing about errors.
Now comes RR again, with his tired ethanol critique which has been rejected by a large majority of Americans.
Let me get this straight. Right and wrong is determined by what a large majority of Americans believe? Do you really want to argue that?
I think it bears repeating for "X", aka "Practical" aka a corn farmer whose finances are looking up as a result of the corn ethanol subsidies:
"It's difficult to get a man to understand something if his salary depends on him not understanding it." — Upton Sinclair
Since when a "majority" makes an argument?
Oh! 100,000,000 flies can't be wrong?
Eat shit!
Having participated in the Iowa caucus and representing Richardson at the county level I can tell you that ethanol wasn't an issue in Decatur County. Things like health care and the war were important and Obama's opposition to the Iraq war from the beginning is what gave him the advantage. Iowa is also a big beef producer and having to compete with ethanol for feed corn shows that not all of Iowa supports ethanol.
Bravo, RR, timely post. What I have noticed is that not only is the majority of the population technically illiterate but that the upper reaches of both the corporate and government bodies are increasingly filled with people who couldn't pass any sort of science exam. The truth is that the vast majority these guys, probably Obama included, couldn't describe a heat pump system or tell you how a transformer works or explain the basic mechanism of a fractional distillation column - all stuff we depend upon every day. We are being run by lawyers, accountants and salesmen. Obama appears to be a lawyer and salesman.
If you think I'm wrong, just do some stats on the number of BSc degrees in the boardrooms and legislatures. I've seen small and successful operations run by chemists and engineers being gobbled up by money conglomerates and the scientifically literate staff being relegated to far enough down the pole as to be effectively silent.
The 'old' technical model is running aground and those at the top will continue to avoid the voices of the technical people who will only be consulted when all else has already failed. This is a crisis of technical literacy within the ruling class and its manifestations in our decision making bodies. I don't think that the people who have been running GM, today's example, meant to fail or were incompetent within their parameters, but that their parameters were narrow and shortsighted to the point of collapse when confronted with an inevitable and foreseeable, to us anyway, change in the technical geography of the world.
Yes, that's what it is - a technical change in geography of society's support systems - which will require technically literate decisions by the elite. Good luck. You'd be hard pressed to find a scientific background among them. We chose accountants, lawyers and salesmen. Robert Rapier for Secretary of Energy? An actual automotive engineer as head of GM? An actual economist at Treasury instead of a securities salesman?
What will it take to return the running of things to those who actually know how they work or why they don't? The problem is that they probably don't know whether Robert Rapier is right on or up his ass. They may, in all honesty, just not know. We didn't choose them on that basis so why should they?
Can we sell you some clean coal?
You make some good points about technical illiteracy. The thing I find most discouraging is if my memory is correct the last two technically trained presidents were Herbert Hoover(Mining Engineer and by all accounts a good engineer) and Jimmy Carter (Naval Academy Engineering graduate who ended up doing the White House staff tennis court schedule).
In the interests of full disclosure I have a BS in Chemical Engineering.
Its very nice clean coal, all white and shiny. I have a truckload of it just out on the street here, only double the price of the dirty stuff.
Exactly. Well said, entire post.
Well said.
You can thank Adam Smith for this situation. We have eagerly become a world full of specialists, none of whom can step back and see the big picture.
Yes, if you want to win an election you have to be a well polished specialist in the dark arts of salesmanship and political spin.
If you want to become chairman of GM you have to be a well polished specialist in the dark arts of corporate in-fighting and presenting a good facade to the public through public relations.
There is no room at the top for people who, heaven forbid, understand science.
Most engineers are nerds hired to do calculations or repair equipment.
Every company I can think of is run by accountants and salesmen to make a profit.
Engineers are so ignorant of money that they need special courses in engineering economics.
They usually lack any leadership skills from being isolated, doing mental work.
They are valuable to the collective as workers rather than organizers.
BTW,engineers are not scientists by any stretch of the imaginations--more like glorified mechanics.
In Soviet Russia, where there were no 'capitalists' I think Brezhnev was an exception--a metallurgical engineer by training.
Gorbachov and Lenin were lawyers. Mao was a schoolteacher. Stalin worked in an oil refinery(as a radical agitator).
A few scientists have become politicians--GM PM Merkel is
a physicist and Roosevelt's VP Henry Wallace was a geneticist are exceptions.
Inside the Peak Oil movement is a utopian movement called Technocracy which thinks the world should be turned over to engineers and scientists, but it turns out they don't
understand how our society works. Under Technocracy, society should be run like the military.
It is based on the ideas of Fredrick Taylor, which has been replaced in business by human relations models based on sociology and psychology.
http://en.wikipedia.org/wiki/Taylorism
As Hubbert might say "Money does not obey the laws of physics".
So their scientific training wouldn't help them much.
http://en.wikipedia.org/wiki/Technocracy_movement
You should get out more.
http://content.spencerstuart.com/sswebsite/pdf/lib/2005_CEO_Study_JS.pdf...
20% of CEOs of Fortune 500 companies have engineering degree. This is more than accounting, business administration, or economics. More CEOs have liberal arts degrees than accounting degrees. And it isn't like they just got promoted up to that level or something, most fortune 500 companies don't have anything to do with engineering.
(I should be noted that it used to be higher, and it should also be noted that our economy used to be in better shape too. And while that may not be related, I suspect that engineers understand systematic risk better than accountants do...)
majorian,
Who knows what inner demons drove you into an all out attack on "engineers".
Are you perhaps a salesman or accountant who couldn't make it through your Physics 101 class?
Anyway, that said, thanks for the link to "Taylorism".
"Division of Labor" and specialization have their pluses and minuses.
In the plus column (assets side for you accountants), specialization allows some people to become extremely well skilled in what they do, be it manipulating other people and organizing them into efficient work groups or playing with machines (i.e. programming computers) and not engaging with people.
On the minus side (liabilities as you people call it), specialized people often have a hard time seeing the bigger picture. Every problem looks like another nail waiting for their specialist's hammer to strike at it. They can't see it any other way.
So yes, when an economic crisis hits (or Peak Oil rears its ugly head again in the form of higher crude prices), politicians see the answer lying in a political process, accountants see the problem as a mere book keeping error, salesmen as a motivational challenge, journalists as a reporting opportunity, and engineers as a system feedback issue. The business as usual (BAU) picture is that of the blind men circling the elephant. None of them is capable of understanding the whole of the elephant or explaining the part they specialize in to the next blind man.
Robert, thanks for your article. Several comments:
1. WRT domestic production: I start with a different take on the matter. I assume that the Alaska pipeline and all the rest of the associated Alaska oil & gas infrastructure is not going to be able to be kept operational forever. Thus, we had better get out whatever we can from Alaska while the getting is good. It will not last very long, of course. However, getting as much as we can out, vs. getting considerably less out than we theoretically could because we waited too long and lost the infrastructure, will make a big difference wrt the ultimate volume within the "tail" of future domestic production, and thus will make a difference on the ultimate shape of that tail as well.
Similarly, I very much doubt that we can manage to just go out and "drill, drill, drill" everywhere offshore, all at once, in a "shotgun" fashion. Some sort of systematic, staged planning needs to be applied on a regional basis so that manpower, materials, and money are deployed in an optimal fashion. We've really got to give careful thought as to how we are going to husband and marshal our increasingly scarce resources, or we're going to find ourselves unable to make good on our plans.
2. WRT a windfall profits tax: I would prefer to see a broader-based tax that captures some of the profits on any sort of held asset that increases in price solely due to inflation or speculation. Why single out just the oil industry for this? Similarly, corporate and agricultural subsidies need to be reconfigured and generally eliminated, except to help out producers hit by commodity price decreases, thus balancing the other side of the equation. I believe that such an approach would go a long way toward removing a lot of distortions in the economy, and serving as an automatic damper against self-reinforcing price spirals up or down.
Maybe this approach should be applied to windfall profits realized in the financial industry as well. I suspect that recent history would have played out rather differently had such a tax regime been in place.
3. WRT ethanol: It might be asking a lot to expect Obama to do a 180 degree turnabout right away. How about simply asking for a few steps in a better direction? For example, instead of producing ethanol from corn, how about reconfiguring incentives to encourage it being made from sweet sorghum instead? The EROI is clearly going to be considerably better for sweet sorghum than for corn (although still well below Brazilian sugar cane levels), and most farmers that are presently growing corn could switch to sweet sorghum without a whole lot of trouble or expense.
4. Nukes: At the very least, we are going to have to start building replacements for reactors that will soon be decommissioned. Since those for the most part are being proposed on the same sites as existing plants, that minimizes the NIMBYism. There are already a number of proposals before the NRC - the approval process should be facilitated and expedited as a good first step.
5. Automobiles: There might be some opportunity to structure some sort of grand deal, linking financial assistance to a near-bankrupt auto industry with the need to incentivize the production and sale of highly efficient vehicles. What definitely should not happen is a bailout to the tune of tens of billions of dollars just to sustain BAU. The auto industry has been hidebound, short-sighted, and recalcitrant for years; now that they are on the ropes, it is time to use that to bring "Change" to Detroit as well as to Washington.
6. Weatherizing homes: Even better would be the formation of a new "Civilian Conservation Corps", where legions of the newly unemployed (and forever unemployable in their former, dying industries) can be trained in work that has a real, productive future. Simply giving homeowners financial incentives won't be enough; we are going to need a program where teams of people that have been trained in the work can go into the house and get it done, at low or no cost (beyond materials) to the homeowner.
Robert:
You've given a thorough delineation of your opinions on energy policy. We agree on many, not on all. I'll point out just one.
In making your "drill here, drill now" argument (http://www.theoildrum.com/node/4339) and here in comments), you use a tactic that I always warn about to attendees of my peak oil presentation: implicit assumptions. It's a tactic that most peak oilers avoid, but most oil and coal companies love.
You quote the EIA that there may be (in areas then but no longer restricted) "18 billion barrels of oil offshore and 10 billion barrels in ANWR". And then you say "...there is potentially enough there to eliminate oil imports for nearly 6 years. IMO, that represents a highly misleading and factually wrong implicit assumption that you can actually produce 13 million bbl/day for six years (about equal to our imports).
You fail to quote the EIA's estimated production rate from all new (previously restricted) offshore areas of 0.2 mb/d by 2030. And in ANWR, their most optimistic "high resource" estimate is 1.45 mb/d in 2028. So at best, with all offshore areas and ANWR fully developed, we might (let's be the optimists!)get 1.65 mb/d of new oil from all these areas. "Eliminate oil imports for six years"? Hardly. EIA projects cumulative oil production through 2030 for the "high resource" ANWR case at 4.3 GB. That's less than one year's imports, spread over the next 22 years.
Let's be honest about the scale of the problem here. Like them or not, CAFE standards alone could easily reduce our oil imports more than the EIA's estimate of all the oil we can pump out of the ANWR AND new offshore.
As to whether we NEED CAFE standards at all? Well, the price-is-everything free-market approach is, in fact, working. Buyers are flocking to Toyota while Detroit is begging at the public trough in Washington to subsidize continued production of their trucks and SUVs.
You say that "On a personal level, I can't count the number of times that my perception of a situation has been changed by sitting and hearing the
opposite viewpoint". Yet your article suggests otherwise. I would feel much better about your policy views if you had ended your post with the words Obama has used: "I may not agree, but I will listen".
Respectfully,
Tommy
You quote the EIA that there may be...
But as I have also said, we really don't know, and won't know until we look. I think we need to look, so that we may potentially plug some of the supply hole we are going to find ourselves in 10 years from now.
IMO, that represents a highly misleading and factually wrong implicit assumption that you can actually produce 13 million bbl/day for six years (about equal to our imports).
I have also addressed that explicitly. I am in a bit of a rush, but I think I spelled it out in that essay. That comparison is merely to give a flavor for the magnitude of what is estimated to be there. I don't presume that we will actually eliminate imports, nor do I assume that the oil would be produced over that short time frame. Thus, I thought it was pretty clear that it is simply to give an indication of volume. It's the same as the comparison I use of a million Douglas firs a year to keep a cellulosic ethanol plant going. People say "We aren't going to use Douglas firs, we are going to use switchgrass." The thing is, people can instantly visualize a tree. But if I said "x million tons of switchgrass", that has no meaning at all for most people.
Like them or not, CAFE standards alone could easily reduce our oil imports more than the EIA's estimate of all the oil we can pump out of the ANWR AND new offshore.
By building cars people won't buy? As I have argued before, it isn't that we need higher CAFE standards. We need for people to demand fuel efficient cars. CAFE standards, in my opinion, attack the problem in a backwards fashion.
Yet your article suggests otherwise.
I don't know how you get that. My positions have come about as a result of many iterations of listening, understanding, debating, and modifying. I do change my mind, but the positions I laid out weren't a result of waking up one morning and formulating them without a lot of listening to different viewpoints. This is why I don't vacillate much: I have already had several rounds of debates to formulate my conclusions. So it generally takes some compelling new arguments, or technology breakthroughs, before I am going to make a big shift in my positions. It's the same way I operate in my career. I encourage my team to challenge me and debate the issues out. I don't go in with preconceived notions.
I wish it were so. You don't like CAFE standards but you support 55 mph speed limits. You don't like a Windfall Profit Tax but you think raising the gasoline tax is hunkey-dorey. And you don't see the inconsistencies there? Even after many iterations of listening, understanding, debating, and modifying? I know you've looked at the reduced consumption rates after our first CAFE standards, so you know they work.
We need for people to demand fuel efficient cars? Isn't that what I said people are doing? Why do you think SUV and truck sales have plummeted? I'll be interested to see whether you agree with Obama that we should bail Detroit out.
It's hard to have it both ways. Deregulate the banking industry, then bail them out when the free market fails to protect the common good. Avoid CAFE standards, deny California the right to regulate emmissions, then bail out Detroit after the free market fails to produce vehicles with long-term viability.
Ah well. Maybe Americans will decide to just quit driving. Then we won't need CAFE standards, WPT, or gas taxes!
I wish it were so. You don't like CAFE standards but you support 55 mph speed limits.
That's because 55 mph definitely saves fuel. It isn't that I oppose CAFE, I just don't think this attacks the problem in the right way. As I said, fuel efficient cars aren't the problem. Getting people to buy them is. Why do I support gas taxes? Encourages people to buy fuel efficient cars.
What the consumer expects is that they will continue to drive their SUV, but the magic of technology is going to vastly boost the fuel efficiency. What they need to understand is that the only way this works is for them to downsize vehicles ala Europe. If we had higher gas taxes, CAFE would be irrelevant and you would be attacking the problem head on.
Here is an example that might help you understand what my issue is with CAFE. Ask someone what kind of car they will drive once CAFE standards are increased. Then ask them what kind of car they will drive if gasoline is going to be $5/gal. You will get different answers.
I know you've looked at the reduced consumption rates after our first CAFE standards, so you know they work.
There are enormous loopholes in the CAFE program that render it pretty useless. When an E85 gas guzzler is only being charged for the 15% gasoline they are using - and the standards are based on the assumption that the driver will always use E85 (and that E85 is a 'green' fuel)
Why do you think SUV and truck sales have plummeted?
Yet that happened without needing to change CAFE standards, didn't it? It happened because people respond to price signals, which is why I think gas taxes are better than CAFE.
Avoid CAFE standards, deny California the right to regulate emmissions, then bail out Detroit after the free market fails to produce vehicles with long-term viability.
You are making my points for me. Build cars for which there is no demonstrated demand? That's why Detroit hasn't built fuel efficient vehicles. CAFE says "You must build fuel efficient vehicles." If I am Detroit, I respond to customer demand - which would be influenced toward fuel efficiency by higher gas taxes.
By building cars people won't buy?
Then if they don't want to buy the cars, they can walk, bike, carpool, take a bus/subway, etc. The "I gotta have a gas-guzzler truck" attitude has changed significantly in the US, even when they are practically giving away the current truck inventory. Indeed, sales of high fuel economy vehicles was beginning to outstrip their manufacture rate until the financial crisis.
The wonderful thing is that under an Obama administration the immigration policy will be unchanged from the Bush administration. Still an increasing legal immigration, coupled with an increasing illegal immigration. The naive may think that during a financial crisis, with fossil fuel production peaking, population growth is contraindicated. However, a deeper faith-based analysis reveals that from among the never ending millions will come the solution to our problems.
Obama and Congress do not know what is happening.
Peak Oil is depressing news that the scientific community, not politicians, should give the nation. Politicians will never do it.
Neither the president nor Congress will know what to do with this catastrophe, and they are heavily influenced by interest groups and public opinion, both of whom want more jobs and consumerism and business as usual.
Soon, Peak Oil will present the nation with continuing crises that require hard decisions. It is better to base decisions on scientific study than on interest groups pressures.
Common sense tells us that there must be energy alternatives, and that is what we all want. But alternatives yield electric power, which is not what we need for tractors/combines, 18 wheel trucks, trains, and ships and for heating oil. Algal biodiesel is in the early R&D phase and 20 years and trillions of dollars away from delivering a cubic mile of oil annually -- if it is feasible.
Many believe that electric power can provide transportation and power for heating. But my exhaustive analysis of available scientific studies indicates that the electric economy will not work without ample supplies of oil.
The Energy Watch Group (funded by the German Parliament) concludes much the same about alternative energies in PEAK OIL COULD TRIGGER MELTDOWN OF SOCIETY, it is interesting to note what:
"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."
http://www.globaliamagazine.com/?id=482
The nation could waste much time and investment on developing alternatives, only to find out later that they can't provide the energy required.
Without ample oil, we are facing the collapse of the highways that depend on diesel trucks for maintenance of bridges, cleaning culverts to avoid road washouts, snow plowing, roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, transformers, steel for pylons, and high tension cables, all from far away. With the highways out, there will be no food coming in from "outside," and without the power grid virtually nothing works, including home heating, pumping of gasoline and diesel, airports, communications, and automated systems.
The National Academy of Sciences is the only source that can provide unbiased and authoritative answers to these questions, and it is the only source that has the stature and credibility to advise the president and Congress.
It is time to prepare for Peak Oil impacts. But it will take the NAS to get us there. Currently, there is little study or effort toward planning for the day when there will be no oil.
dup
dup
You are still referring to your alleged 'exhaustive analysis' I see.
What we actually find on visiting your site is a couple of pages starting at page 38.
In what way is this an 'exhaustive analysis?'
Of course, this does not mean that it will be definitely possible to switch from the use of oil, but your analysis in fact is no more than a list of assumptions.
Do you imagine that Toyota, which is peak oil aware, have not done a rather more exhaustive analysis than you have?
Battery technology is still difficult, but just the same billions of dollars have been invested, and we now have technology which is far more capable than it was.
What do you think that you know that BYD, in China, for instance, don't?
Perhaps you ought to write to them to inform them that it is pointless spending the vast sums they are in battery research and production, as you have already determined that it will not succeed.
If your primary objection is financial, presumably the situation is far less grave in China, which has a budget surplus, than the US, which has a vast deficit.
Personally I do not know whether a successful transition will be made, although I am quite confident that the technology exists or is at a late stage of development to carry out most of the functions of oil with electricity, and where it is not the use is small enough that the remaining oil reserves will cover it, or the industry such as aeroplanes can be severely curtailed.
A two or three page statement of your position does not constitute an exhaustive analysis.
Hey Dave,
More pages than that.
Exhaustive in that the report reviews all truly credible sources, like the National Academy of Science, National Academy of Engineering, Congressional Research Service, etc.
And how do you account for this (the same conclusion as mine):
The Energy Watch Group (funded by the German Parliament) concludes much the same about alternative energies in PEAK OIL COULD TRIGGER MELTDOWN OF SOCIETY, it is interesting to note what:
"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."
http://www.globaliamagazine.com/?id=482
It may be that the Energy Watch Group cites my study. I had a request last year to allow a translation of my report into German so it could be posted on the major German Peak Oil website. It prolly was since now I get a ton of really trashy spam in German at that email address :)
cjwirtg,
You are not making a good case. Note the energy watch group is saying "COULD" not "WILL". What is meant by dramatically lower? 10%, 20% 90%??
"The nation could waste much time and investment on developing alternatives, only to find out later that they can't provide the energy required."
So are you saying that if renewable energy can only replace 95% of the FF energy we should not bother, because we will still be short 5%? So are you recommending doing nothing so we will be short 100%??
The oil required to maintain the electricity grid and to install a massive increase in solar and wind generated electricity is a tiny ( 1-2% at most) of present oil consumption. Compare the workforce involved in electricity maintenance with the total workforce, or the amount of steel used in wind turbines compared to steel used in vehicle manufacturing.
The main points are the 2 reports together and this from the German Parliament Funded Energy Group:
You do your basic hard work in much of the rest of your report no service by grossly over-stating your case, in one instance in your section starting on pg 38:
That's it. That is your 'exhaustive analysis' on the impossibility of substituting oil
by the use of electricity.
Without bothering to look at all of the bare assertions which you claim as analysis,
in the first paragraph you state:
'Shortages of one type of energy cannot be filled by other types.'
This is not an argument, it is simple assertion.
An analysis of this sort of proposition would look at different areas, some of which
allowed easy substitution, some of which don't, and would lead inevitably to very
nuanced conclusions.
To take just one example, much freight is currently transported by rail. This, when it became
prevalent, in fact had substituted for the earlier transport by rail using coal, and so your statement
is falsified from the historical record. I also know of no-one, save presumably yourself, who would seek
to argue that large amounts of freight could not be switched back to rail, and hence to electric.
You also set up straw men for your arguments.
I have no difficulty in acknowledging that peak oil 'could' trigger the meltdown of society, as other
reports argue.
The problem is when you transmute that into 'will'.
Your crystal ball is cracked.
Your degree of absolutism would be unwarranted even had you done the 'exhaustive analysis' you claim.
This is not an analysis, but a statement of prejudice, and a very skimpy one at that.
As typical, cjwirth begins with a conclusion, then (does a very poor job of) developing evidence. Then likely laments other peoples lack of facility with the scientific method.
Hi Dave, there are many more pages, you just select this and say that's it.
I reply to your case as you state it.
This is the section on the non-fungibility of energy resources, and in no way demonstrates what you allege it to do.
I have no intention of going through the whole of your report, most of which is in any case not germane to the point of contention, when the issue is your blanket assertion that oil is not replaceable by other energy resources, since the highlighted sections alone contain numerous misstatements.
For a start, you re-interpret what the EWG says, which is that the shortage of oil COULD lead to collapse, to your own interpretation that it WILL, without argument, do so.
It is also a gross misrepresentation to call these couple of paragraphs on the non-fungibility of oil an 'exhaustive analysis', which when questioned on that specific subject you repeatedly do.
This is what you have written on the subject, as presumably that is why it has that heading, and it provides no support for your conclusions.
And Davy, don't forget that the Hirsch report indicated that Peak Oil would devastate the global economy with massive inflation and unemployment.
I have not addressed you disrespectfully.
Please return the compliment.
If you do not wish to address the issues raised by your statements, then please do not simply change the subject.
You stated, quite flatly, that energy sources could not be substituted.
I demonstrated that this is not the case, using the example of railways, which have historically been used to transport goods, were supplanted by roads and oil instead of coal, and now may be called upon to replace trucks with electricity.
Since your statement is demonstrably false, please withdraw it if you seriously wish to rationally debate.
If you wish to substitute a weaker statement, such as that you feel that the degree of substitutability will be inadequate to enable the grid to be maintained, then that is what you should say.
it would still merely remain your opinion without detailed case by case analysis of energy demand.
You have also not responded to my point that you have asserted that you have an 'exhaustive analysis' of the non-fungibility of energy resources, when what you actually have is a page and a half of assertations with no analysis of any kind.
There is no basis at all for your repeated statements that you have 'proven' that the grid cannot be maintained in an oil-poor world.
Hey Dave,
Sorry if I offended you.
No 18 wheelers for long haul. 40 mph on the level for 60 miles, won't do it.
And what is the source of electric power -- 50% from dirty coal, 20% from natural gas, some from nuclear and oil.
And a 50% plus loss of fossil energy in power generation.
Then some loss in power transmission.
Then a 25% loss in the batteries.
Sounds to me like a lot of waste of fossil energy to get electric energy.
And what about the infrastructure for all of the electric economy, there are not even any plans for how to do all of it, and it would be trillions of dollars of infrastructure for the thousands of miles of highway.
Big capital costs in change over that will not be made in today's global bankrupt economy.
Seems like solar folks are dreaming, rather than what is real.
And in so doing the above you are not looking at reality, the end of oil and time for risk management. We are moving at 100 MPH and the end of the tracks is just ahead, but you can't see it as you dream of what can never be.
No problem, Clifford.
Your post is however simply changing the subject.
You state that energy resources are not fungible, no if, ands, buts, or maybes.
I have clearly shown that it is in fact fungible.
Whether this is to a degree that will allow the grid to function is another question, but if it is a question of degree you should say so.
Loose statements are simply unacceptable in anything which purports to be an analysis, and neither is introducing entirely extraneous new statements.
Your argument is as it stands in what you declare to be your exhaustive analysis.
So do you or do you not stand by your statement that energy resources are not fungible?
Efforts to manage the Peak Oil crisis will be limited by the limited by the difficulty in substituting one form of energy for another (without making expensive and time-consuming modifications).
And we can see how the Pickens plan of using natural gas collapses, for example.
Fungibility is not fun :)
You really do not want to answer the question, do you? Do you accept that your statement that energy resources are not fungible is incorrect?
Until you are prepared to seriously look at what you are claiming, and this is only one of many over-statements, you can't begin to present a reasonable, moderate and factually correct appraisal.
If you would like to properly begin to make correct statements, perhaps you could acknowledge that you are also grossly overstating the case when you call your page and a half of blog on the non-fungibility of energy resources an 'exhaustive analysis?'
Well said. Glad you pointed out the obvious. Is any one listening?
Peak Oil is depressing news that the scientific community, not politicians, should give the nation. Politicians will never do it.
And as we sadly saw regarding the Bush Regime's criminal push to justify destroying Iraq, the media is likely to look only to the politicians for the "facts".
Amen. The media is just an apologist for the government's antics. Journalists? Ha, don't make me laugh. Thank God for the Internet.
"I don't think there is any doubt that a windfall profits tax won't help add to supplies. And refunding it back to consumers sends the wrong message: If gas prices go up, the government will protect you by taking the money from the oil companies and giving it back to you. Where is the incentive for the consumer to conserve?"
The incentive is to conserve more than everyone else. Assume the average person in the US buys around 500 gallons/year. If gas prices go up $1, (and it all becomes profit, and all gets taxed back out and given to consumers,) that means everyone will get around $500/year. You won't have to present your credit card statements to get the rebate, it won't be based on how much you buy, everyone gets $500 regardless of if they drive a Hummer a 100 miles/day or if they don't have a drivers license. But if you bought less than 500 gallons of gas in the year, you'll be money ahead paying more and getting $500, where as the person that bought more than that 500 gallons is worse off.
Of course, it doesn't all become profit, (because costs are rising too,) and it doesn't all get taxed back out, (because a lot of the oil is imported,) but that doesn't change the point: It is still in your best interest to conserve.
In many ways, it functions very similarly to a carbon tax.
RR: I'm probably in about 90% agreement, which is pretty good. From my standpoint, the more voices saying roughly similar things, the more likely the message is to get through. Now for a few tweaks I would make to your analysis:
(1) I would be very very wary, of quoting CATO. IMO, the propaganda to noise ration is pretty high, and you will have to work pretty hard task to disentangle the wheat from the chaff.
(2) I think there is likely to be some low hanging oil demand reduction fruit in the diesel consuming part of the economy. And, diesel is in relatively greater scarcity than oil (and freeing diesel from industrial usage would allow more efficient diesel cars to be supported). So we should come up with some proposals for hitting this sector hard. Of course such applications won't seem sexy to the average voter -who would rather enjoy a subsidy for a plugin. But, I think the rate the next oil shock will develop is such that we cannot afford any non-optimality in our plans to mitigate it's effects. I have some crude ideas, like truck aerodynamics, and hybrid delivery trucks, buses , and garbage trucks -basicaly things that get a lot of hours use per day. They should deliver more fuel savings per KWhr of battery storage capacity than plug-in cars. And advanced battery production capability is likely a limiting factor. Hopefully some TODers with the necessary knowledge, and time can fill in the details.
(3) I think the economics of adding significant Nuclear capacity are questionable. Although we shouldn't easily give up the option. But we gotta figure out how to make them affordable, or we just won't get much accomplished.
(4) Aggreed, as well with others, that the overreliance on political/legal/economists, versus people with a background in the hard sciences is a problem, and should be featured in any advice given.
Thanks, for the great work.
I have a hunch that the gist of peakoil is that slogans like "Yes, we can" are countered by nature's answer to that: "No, you can't anymore."
Mother Nature is such a party pooper!
We humans were having such good fun making our party noises: yes we can, we believe, we shall overcome (--the laws of thermodynamics), fight-fight-fight, drill baby drill. And then comes the sobering conservation of energy bill on the morning after.
Who's throwing the next good party and where? AIG at the Hamptons? Enron in Palm Dessert? Hank Paulson in Las Vegas? I can't wait. Don't gulp down all the ethanol before I get there, please.
Our leaders (I do use the term loosely): auto-makers, Congress, energy barons have been DINOUSAURS in their thinking. No visionaries. Just foxes guarding henhouses. More interested in acquiring wealth and a good dinner at the Country Club than bold, enlightened innovation. Americans themselves must get the ball rolling. I don't have much faith in our leaders, but am hoping Obama will be an exception.
Good post here on practical tips for reducing home heating costs:
http://www.vaboomer.com/the_portal_to_boomeranger/2008/11/new-ideas-to-h...