A strong global climate policy would slash our cost of foreign oil. Environmentalists, pay attention!
News: Domestic Weekly Summary
Hybrids run on gas but are extra efficient because their engines run at the perfect speed all the time. This trick is done with batteries and an electric motor. This gives them great gas mileage. Plug-in Hybrids will be here soon.
Just grow our own oil! In 2006 it cost $8 billion extra for 1.1% energy independence and 0.06% reduction in GHGs. Was that real cost or just excess profits? If you care about climate change, don't fall for this ADM-Bush-corn-subsidy shenanigan.
Every other year Congress reinstates the 2¢/kWh subsidy and wind power takes off. Every other year Congress lets the subsidy die and wind-power stagnates. But there are a lot of other wind subsidies, and it's difficult to find the true cost. My best guess is $70 to $100/MWh, and for comparison, the average wholesale cost of power in California is $30/MWh. That means it costs around $80 to $140 per ton of carbon saved. That's much more than we need to pay, but wind turbines or oh so cool.
|BrightSource: 400 MW|
November 22, 2011. Solyndra has just given solar technology a black eye, but unfortunately, it's well-meaning environmentalist who deserve it. Huge subsidies for half-baked solar production is not what solar needs. BrightSource's almost-complete, 400 MW Ivanpah project probably made some sense as a real-world test of stat-of-the-art solar thermal. But what solar really needs is more research. That's the only way to pull ahead of China, and the only way solar can come of age.
I'm hoping to look into this pretty soon. It just might be better than wind.
November 22, 2011. Nothing's perfect, but at present, but conservation sure beats whatever's in second place. And if you don't like paying taxes to our Uncle Sam, stop for a moment to consider what we pay to Iran and Saudi Arabia (yes, I know we mainly buy from Canada, but that just means someone else pays Iran for us). I'm not getting off track here, our best conservation opportunity is aimed squarely at the world oil market.
The American Economic Review (look) just estimated what it cost to improve a car's mileage by 1 mile per gallon. Between $9 and $27 on the price of a new car. And how did they figure this. They took a very careful look at how car companies use and don't use loopholes in CAFE standards. When they make only partial use of a very cheap loophole that proves they are not up against any high-cost barier. And that's what we see.
This completely gives the lie to car company's moaning and groaning over how much it would cost them (and by implication, us) to give us better gas mileage. It also confirms what Amory Lovin's has said for years (and I'm not fan of Lovin's) and what I explained in my book Carbonomics. By fighting car companies on their own turff -- engineering -- they set themselves up for failure. And fail they did. This is all because environmentalists love command and control, which gets them right into the engineering -- what's practical and how much will it cost.
The right way to solve this problem is economics. That's how to put real pressure on car companies. Use a fee-bate. Charge a fee for cars with low mileage and give a rebate for cars with high mileage. Then the car companies can never argue, "Oh we can't possibly meet that standard." With a fee-bate there is no standard. And that's what makes environmentalist nervous. But they need to curb their control-freak habits and learn some economics. After all, it's greed that drives corporations. Learn how that works and you can weild some power. So would your rather get the job done, or try to get some satisfaction out of telling car companies what they can and cannot do. Given that the companies win anyway, I'd have to call that a no-brainer.
Estimating the cost of regulation is difficult. Firms sometimes reveal costs indirectly, however, when they exploit loopholes to avoid regulation.
We apply this insight to fuel economy standards for automobiles. These standards feature a loophole that gives automakers a bonus when they equip a vehicle with flexible-fuel capacity. Profitmaximizing
automakers will equate the marginal cost of compliance using the loophole, which is observable, with the unobservable costs of strategies that genuinely improve fuel economy. Based on this
insight, we estimate that tightening standards by one mile per gallon would have cost automakers just $9–$27 per vehicle in recent years. (JEL L51, L62, Q48)
We analyze the market for flexible-fuel vehicles that burn ethanol. While interesting in its own right, this market is especially important because it indirectly provides information about the cost of tightening the fuel-economy standards that apply to all automobiles. Efforts to reduce gasoline consumption in the United States have historically focused on mandating vehicle efficiency through CAFE standards. The merits of these standards are not always clear, in part because it is difficult to measure the cost of regulation in the absence of market prices and because automakers have an incentive to overstate the costs of compliance. Domestic automakers claim that aggressive increases in CAFE standards would cost them tens of billions of dollars in profit, force them to close plants and cut tens of thousands of jobs, increase car prices by thousands of dollars, and “cripple” the domestic auto industry.
We estimate that the marginal compliance cost of the CAFE standard, as revealed by profit-maximizing behavior in the auto industry, was relatively low during much of the last decade. To do so, we demonstrate that automakers exploit an incentive or “loophole” in CAFE regulation that allows them to relax CAFE standards up to a point by producing flexible-fuel vehicles. We show theoretically that constrained automakers will equate the marginal cost of improving fuel economy using flexible-fuel vehicles with the marginal cost of improving fuel economy through other means. Thus, because we can observe the cost of producing a flexible-fuel vehicle, automakers that produce flexible-fuel vehicles without exhausting the loophole indirectly reveal their marginal compliance costs. Based on this approach, we estimate that tightening CAFE standards by one mile per gallon would have cost domestic automakers only $9–$27 in profit per vehicle in many recent years. Our estimates are substantially lower than estimates in other recent studies, which use different methodologies and require a broader set of assumptions. Our estimates are also well below the $55 statutory fine, a plausible upper bound, which has been used as a cost estimate in previous research.
January 3, 2012. On Sunday January 8th, the 30-year old ethanol subsidy will expire. Given the price of gas, and the escalating federal alternative-fuel mandate, there will likely be little or no drop in production. Tax payers will pay less by 45¢/gallon of ethanol or 4.545¢/gallon of the gasoline-blend most of us buy. But that does not mean we will pay more at the pump.
The reason the ethanol industry has lobbied hard for this in the past is because they get the money. And that means that without the subsidy they would lose the money. And that means they don't think they could just pass the cost on to us. This makes sense economically, because in the long-run, the price of ethanol sticks very close to the price of gasoline. So I think this is a win for taxpayer/drivers, and a loss for the ethanol factories.
But it won't help the environment. Ethanol will still increase CO2 emissions a bit because it requires significant fossil inputs and because producing a barrel of ethanol will not force Saudi Arabia or Exxon to [#pump a barrel less of oil]. Besides the CO2 emissions, the increased production of corn requires huge amounts of nitrogen fertilizer, much of which which ends up in the Gulf of Mexico, and it raise the price of corn for the worlds poor. Subsidies, even environmental ones, are usually poisonous (research is the main exception.)
We use only data from pro-corn-ethanol researchers, & the National Academy of Sciences —no data from anti-ethanol researchers. We love cellulose ethanol.
Energy Independence? 2.8%
According to the pro-corn-ethanol US Dept. of Agriculture, 2006 ethanol production was enough for 1.5% oil independence, and by 2017, we will max out at 3.7%. But this ignores the foreign fossil energy input to ethanol production, shown at the right. (see Driving)
Greenhouse gas reduction? 0.2% max
Less than 0.2% in 2017. These global warming emissions calculations based on data from the National Academy of Sciences (NAS), which is more optimistic than data from UC Berkeley's Renewable and Appropriate Energy Lab. Corn's heavy use of nitrogen fertilizer is contributing to the dead zone in the Gulf of Mexico — the NAS again.
How did we get into corn ethanol anyway?
Follow the money. Huge subsidies, huge profits, lots of votes. The politicians are for it. They're doing the math, but not the global warming emissions math. Who started it?
How big are the subsides?
In 2006, the feds paid ethanol blenders $2.5 billion and ethanol corn farmers $0.9 billion. We paid an extra $3.6 billion at the pump. Total was $2.21 extra per gallon of gasoline replaced. Of all that, $5.4 billion went for windfall profits, creating what USDA's chief economist called "ethanol euphoria."
|[=pump a barrel less of oil] Producing more ethanol cause oil producers to pump less, and oil users to use more. There is no direct effect—nothing forces any producer or consumer to change behavior—so the effects work only through the world price of oil. The net result is that ethanol displaces roughly 70% of what environmentalists expect. So its carbon reduction is 30% less and that ends up meaning that the ethanol production actually increases carbon emissions. So Why does the Environmental Protection Agency mandate it? Because environmentalists are not good economists. Here's the paper I wrote on this for the Clean Air Task Force, to help them sue the EPA to stop the ethanol mandate.|
|[=PopNotes] Just hover over green-underline links above to see the "pop" notes.|
Many who want to slow global warming support corn-ethanol subsidies. It seems to make sense because corn takes CO2 out of the atmosphere so using corn-ethanol is carbon neutral. The problem is that making corn ethanol makes lots of GHGs.
ADM, a big multinational corporation, was the first big lobbyist for corn ethanol, but once it got going the farm states got behind them. It's not just the ethanol makers who make money, all corn farmers make money, even the ones who sell their corn for chicken feed, or corn syrup. The demand for ethanol corn drives up the price of every bushel of corn, and corn is the biggest crop in the US.
In 2006, over $8 billion in subsidies (some direct and some from artificially high ethanol prices) went into the ethanol market. This doesn't even count the extra money made on the 80% of corn that is not used for ethanol. Any politician that tries to cutting off that much money will lose a lot of votes. Here's the ADM story.
How ADM makes a killing on ethanol
Excerpts from the NY Times, June 25, 2006
Farmers are seeing little of the huge profits ethanol refiners like Archer Daniels Midland (ADM) are banking. ... The ethanol explosion began in the 1970's and 1980's, when ADM's chief executive, Dwayne O. Andreas, was a generous campaign contributor and well-known figure in the halls of Congress who helped push the idea of transforming corn into fuel.
Given the glut in corn, the early strategy of Mr. Andreas was to drum up interest in ethanol on the state level among corn farmers and persuade Washington to provide generous tax incentives. But in 1990, when Congress mandated the use of a supplement in gasoline to help limit emissions, ADM lost out to the oil industry, which won the right to use the cheaper methyl tertiary butyl ether, or MTBE, derived from natural gas, to fill the 10 percent fuel requirement.
Adding to its woes, ADM was marred by scandal in 1996 when several company executives, including one of the sons of Mr. Andreas, were convicted of conspiracy to fix lysine markets. The company was fined $100 million. Since then, ADM's direct political clout in Washington may have waned a bit but it still pursues its policy preferences through a series of trade organizations, notably the Renewable Fuels Association. ...
But ADM has not lost interest in promoting ethanol among farm organizations, politicians and the news media. It is by far the biggest beneficiary of more than $2 billion in government subsidies the ethanol industry receives each year, via a 51-cent-a-gallon tax credit given to refiners and blenders that mix ethanol into their gasoline. ADM will earn an estimated $1.3 billion from ethanol alone in the 2007 fiscal year, up from $556 million this year, said David Driscoll, a food manufacturing analyst at Citigroup. ...
ADM has huge production facilities that dwarf those of its competitors. With seven big plants, the company controls 1.1 billion gallons of ethanol production, or about 24 percent of the country's capacity. ADM can make more than four times what VeraSun, ADM's closest ethanol rival, can produce.
Last year, spurred by soaring energy prices, the ethanol lobby broke through in its long campaign to win acceptance outside the corn belt, inserting a provision in the Energy Policy Act of 2005 that calls for the use of 5 billion gallons a year of ethanol by 2007, growing to at least 7.5 billion gallons in 2012. The industry is now expected to produce about 6 billion gallons next year. ...
Now, government officials are also pushing for increasing use of an 85-percent ethanol blend, called E85, which requires automakers to modify their engines and fuel injection systems.
In the ultimate nod to ADM's successful efforts, Mr. Bodman [Energy Secretary] announced the new initiatives in February at the company's headquarters in Illinois.
"It's been 30 years since we got a call from the White House asking for the agriculture industry, ADM in particular, to take a serious look at the possibilities of building facilities to produce alternative sources of energy for our fuel supply in the United States," said G. Allen Andreas, ADM's chairman and Dwayne Andreas' nephew. ...
Boom in Ethanol Reshapes Economy of Heartland
By ALEXEI BARRIONUEVO, June 25, 2006, New York Times
What's in the 2005 Energy Bill?
On the gasoline front, the big ticket item is subsidies for ethanol—as usual. Archer Daniels Midlands (ADM) owns 7 ethanol plants with a production capacity of 1,103,000,000 gallons per year. The ethanol tax subsidy is 51¢/gallon, so that comes to $562,000,000/year. (Now there's a lobbying effort that paid off.) But we need energy independence, right? Unfortunately, reducing fossil imports by the energy in 1 gallon of gasoline costs us a couple dollars in subsidies. (There is hope for better ethanol.)
Why we like cellulosic ethanol
Only a small part of most plants is sugar or starch, the part that can be digested by humans and fermented by yeast into ethanol. Most of the rest is cellulose. Naturally, using the bulk of the plant is more efficient. Better yet, we need not use our food plants. Some grasses store more energy in cellulose than does corn, and require far less nitrogen fertilizer, far fewer pesticides, and less process heat (energy).
The main drawback now is expense. Of course cellulose ethanol could be overdone like anything else, but much more could be produced with much less ecological damage. And with some plausible advances, it could be cheaper than gasoline.
Shown below is a table from the Chief Economist, USDA, March 2007 cellulosic ethanol. It's the best snapshot you'll find of the current state of cellulosic ethanol production.
The first demonstration plant making cellulose ethanol
Currently, Iogen Corporation in Ottawa, Canada produces just over a million gallons annually of cellulose ethanol from wheat, oat and barley straw in their demonstration facility.
Best summary of Cellulose Ethanol —DOE's 2006 Annual Energy Outlook
Inside the first cellulose-ethonal plant
Currently, Canada’s Iogen Corporation is trying to commercialize an enzymatic hydrolysis technology for ethanol production. The company estimates that a plant with ethanol capacity of 50 million gallons per year and lignin-fired CHP will cost about $300 million to build. By comparison, a corn ethanol plant with a capacity of 50 million gallons per year could be built for about $65 million, and the owners would not bear the risk associated with a new technology. Co-location of cellulose ethanol plants with existing coal-fired electric power plants could reduce the capital cost of the ethanol plants but would also limit siting possibilities.
A commercial cellulose-ethanol plant is on its way
Vinod Khosla, a co-founder of Sun Microsystems and a venture capitalist who bet big and early on Google and Amazon, is now betting on Celunol Corp. Celunol is developing a 55-million gallon ethanol production facility in Jennings, Louisiana [Which seems to have gone bust -- 11/2011]. That's 55 times bigger than the Canadian demonstration plant—this is a full-blown commercial plant.
In 1995 Celunol bought rights and patents from the University of Florida to commercialize their cellusose technology and has since acquired and developed more cellulose technology.
The sugar in cellulosic biomass is locked up in cellulose, which contains normal C6 sugar, and hemicellulose, which contains Xylose (C5) sugar. Since normal yeast can't ferment Xylose, Celunol has acquired genetically engineered E. coli bacteria which can turn almost all of it into ethanol.
The diagram explained. First the hemicellulose in the biomass is broken into Xylose sugar (gray bar). Then the Xylose is separated from the remaining cellulose (blue bar). The Xylose is fermented with E. coli (top yellow), and the cellulose is broken down into normal glucose (red) which is fermented the normal way (bottom yellow). Finally all the ethanol is distilled (the water and lignin byproducts removed). The lignin is burned in the the still's boilers.
A Report from Fortun "Brainstorm" During a discussion on energy resources this afternoon (June 29, 2006) Vinod Khosla offered a deal to Royal Dutch Shell CEO Jeroen van der Veer. Khosla said he'd be willing to sign a long-term fixed-price contract guaranteeing to supply Shell with ethanol. The price would be set to allow Shell to retail the stuff for $1.99 a gallon at the pump and make a profit. Or something like that--Afterwards I saw Van der Veer and Khosla sitting in the shade of a tree on the Aspen Institute grounds, deep in discussion.
Iogen's Milestone: It's Selling Ethanol Made of Farm Waste
By CHRISTOPHER J. CHIPELLO
Staff Reporter of THE WALL STREET JOURNAL. April 21, 2004
MONTREAL -- Iogen Corp., a Canadian firm at the forefront of efforts to turn agricultural waste into ethanol, has become the first supplier of such biofuel to the commercial fuel market.
The moderate initial shipment marks a milestone in the development of so-called cellulose ethanol, made from farm refuse such as wheat straw and corn stalks, instead of the corn or other grains used for the ethanol now commonly blended with gasoline. Turning farm waste into fuel for automobiles has long been an alluring, but technically tricky, prospect.
Iogen officials have said they hope to begin work on a full-scale commercial plant next year, but significant hurdles remain.
Iogen is ahead of other firms seeking to commercialize ethanol from farm waste, said John Ashworth, an official of the Department of Energy's National Renewable Energy Laboratory in Golden, Colo., which has a pilot plant where companies test cellulose-ethanol concepts. Iogen's much-larger plant in Ottawa is the only demonstration plant for the technology, he said.
The plant, which has an annual production capacity of 260,000 gallons, began about two weeks ago to turn wheat straw into ethanol that meets Canadian fuel specifications, according to people familiar with the situation. Petro-Canada will take delivery today of Iogen's initial 1,300 gallon shipment.
Proponents of cellulose ethanol argue that it has great potential to help reduce greenhouse-gas emissions, since the feedstock is readily available as a byproduct of farm crops. But wheat straw or corn stalks must be broken down into sugars that can be fermented, making the production process for cellulose ethanol more complex and costly than for conventional ethanol. Iogen and others have been developing techniques to reduce those costs.
Within the next year or so, Iogen hopes to begin construction of the full-scale plant, which would cost around US$250 million, and have annual production capacity of about 52 million gallons. But company officials have acknowledged that the risks involved in scaling up production will make it difficult to secure conventional financing for the project.
Gas prices are soaring, pipelines are burning.
Here are four ways to fix the mess before the well runs dry.
Fortune Magazine, 23 August 2004
One biomass fuel offers tremendous promise, though it will take time to put into wide-scale use, is cellulosic ethanol-- which shouldn't be confused with corn-based alcohol best known for the size of its subsidies. Cellulosic ethanol is made from switchgrass, poplar trees, and straw. And it yields more energy than the corn version, says Carnegie Mellon University economist Lester Lave.
One group of supporters, the Energy Future Coalition, a bipartisan group that includes ex-Senator Wirth and Republican former White House counsel Boyden Gray, has put forth its own modest proposal. The World Trade Organization has issued rulings against farm subsidies for cotton and sugar. If the rulings stand, the US will need to either end the subsidies or pay billions in fines. As Wirth puts it, "No politician I know wants to take something away from a lot of constituents." He proposes shifting subsidies from cotton and sugar to switchgrass and trees. It would cost the government nothing, but would provide benefits for consumers, farmers, and even the environment (grass and trees take a lesser toll on land than cotton). Even without the subsidy swap, a $500- million-a-year investment in ethanol could pay off bigtime, allowing for gas spiked with 20% cellulosic ethanol within 20 years. All of a sudden--if you assume that hybrids and other measures hold the line on usage--you can actually reduce gasoline consumption by that same 20%.
Reality check: Like most alternative fuels, cellulosic ethanol is expensive (though subsidies will reduce the cost), and significant production remains at least five years away. As of now only one plant--run by a company called Iogen in Canada (with the support of Shell)--is producing it. Moreover, as economist Lave acknowledges, many tens of millions of acres would be required to grow the biomass. Still, it is promising enough that it earned the endorsement of a Pentagon-commissioned study last year, which looked at how the US can prepare for a post-oil world.
Make ethanol from cellulose, not corn starch
John D. Podesta speaking to the Appolo Alliance
Detroit, Michigan, February 9, 2004
Instead of using the starch from the corn kernel, using cellulose will increase the amount of ethanol from a crop because more of the plant will be used. This also avoids the consumption of food crops for industrial applications.
Starch-based ethanol has limited benefits in terms of oil displacement and greenhouse gas emissions, due to the substantial fossil fuel inputs required to grow grain and convert it to alcohol.
The benefits of cellulose conversion are dramatically larger; indeed, a conventional internal combustion engine operating on cellulosic ethanol produces fewer greenhouse gas emissions on a life-cycle basis than a fuel cell operating on hydrogen derived from fossil fuels.
The energy of ethanol relative to gasoline
A. 76,000 = BTU of energy in a gallon of ethanol
B. 116,090 = BTU of energy in a gallon of gasoline
C. .655 = 2/3 = GGE of energy in a gallon of ethanol. A / B. (GGE =energy in a gal. of gas)
D. 1.53 = Gallons of ethanol with the energy of 1 gallon of gasoline. D = B / A.
The basic story on ethanol mileage and cost
Some Ethanol proponents claim it doesn't hurt their mileage, but this goes against physics, and you will not find the ethanol lobby making such fraudulent claims--they could be sued. But just to be sure, zFacts analyzed all of EPA's ethanol mileage tests for one year and, big surprise, ethanol gave exactly 2/3 the mileage of gasoline.
Now there is one possible loophole and it is used by a Swedish sports car, the SABA 9-5 Bio-power. Here's the trick. Higher compression ratios make engines more efficient, and because of its high octane, ethanol can take a higher compression ratio. The Bio-power is turbo charged and when it uses E85 it switches to a higher compression ratio. It still gets fewer mpg on ethanol, but it does a little better. Unfortunately it's very expensive. An easier approach is to use diesel, which also gives you a high compression ratio and mileage as good as a hybrid at less cost. That's why all big trucks are diesel.
The USDA tells us that ethanol cost 57¢ more per gallon on average over the last 25 years (and it still does). Put that together with the fact that it takes 1.53 gallons to equal a gallon of gasoline.
23% extra fuel cost of using E85 with 2006 models
The EPA has measured the gas mileage of 2006 flexible fuel models. For the 31 models they tested the average reduction is 26% fewer miles per gallon. For example a car that gets 30 mpg on regular would typically get 22.2 mpg with E85. This is exactly what is predicted from the fact that E85 has less energy per gallon than gasoline.
For these calculations, the EPA assumes that E85 costs $2.00 and regular $2.20/gallon. Obviously they are on the low side, especially for ethanol, but this proportion is similar to what DOE predict for the next few years. The loss in mileage more than makes up for the cost savings, and on average the EPA predicts driving on E85 will cost 23% more than driving on regular.
Here's a letter from someone using only E85.
He's getting slightly worse mileage than predicted by ethanol's low energy: 2/3 the energy of gasoline. But Sam has been fooled by the deceptive (but true) claim that Ethanol has high octane and thinks he should actually get better mileage.
I have a 2003 Chevrolet Suburban. The ONLY fuel I have used on this vehicle is the Ethanol 85, and I am not happy.
1.) I have seen that in other states the price of Ethanol is LOWER than regular gas. I go to the gas station in Annapolis, Maryland on West Street. The price for this fuel is $1.95 per gallon. The regular gas price is $1.43 per gallon in my area.
2.) This fuel is rated at 100 Octane and SHOULD result in better fuel mileage. My vehicle is rated from 16-22 MPG. Since I have gotten this vehicle and using this fuel I cannot get ANY better than 13.2 MPG.
I believe in this program and want to continue to support it. I am a retired police officer and not made of money. My friends laugh at me and call me a fool. They say my intentions are great, but NOT at that cost.
This letter was posted by National Ethanol Vehicle Coalition. They answered, but did not tell him why he was getting low mileage—they don't want people to know.
This is what the Iowa Dept. of Agriculture tells us:
"E85 is priced to be competitive with 87-octane gasoline. In Iowa, prices typically range about 8-10 cents more than regular unleaded."
Even at the same price, E85 would be 41% more expensive than regular gasoline.
Ethanol has only about 2/3 the energy of gasoline
The lower heating value (LHV) of conventional gasoline = 115,500 Btu/gallon
Hence it takes 115.5/76 = 1.52 gallons of Ethanol to replace the energy in one gallon of gasoline.
Every fuel has two energy values, sometimes called lower and high heating values. The lower value is the energy you can get without condensing the water out of the exhaust. "Condensing furnaces" for your home do just that and can almost recover the higher heating value. Cars cannot use steam in their exhaust; it just goes out the tailpipe.
For cars, and all internal combustion engines, the lower heating value is the relevant value, yet DOE almost always publishes the higher heating value.
How much should you pay for E10 and E85?
If regular gas is $3.00/gallon you should pay
$2.90 / gallon for E10 (10% ethanol).
$2.13 / gallon for E85 (85% ethanol).
If regular gas is $2.00/gallon you should pay
$1.93 / gallon for E10 (10% ethanol).
$1.42 / gallon for E85 (85% ethanol).
Then you will be paying the same amount per mile driven.
The formula is this: For EX, where X is the percent ethanol
Ethanol price should = Gasoline price times (100 – X + X/1.52)/100
Notice that 100 – X is the percent of gas and X/1.52 is the percent of ethanol adjusted down by about 2/3 because it has less energy.
New Recipe For Gasoline [Ehanol] Helped Drive Up the Price
NY Times, May 6, 2006, By MATTHEW L. WALD
WASHINGTON, May 5 — Nine months after Congress passed major energy legislation, one provision affecting gasoline formulas is helping to drive the price of gas up much faster than the rising price of crude oil.
Ethanol is pricey and energy-poor. Its price is up by about $1.30 a gallon in the last year, in part because of heavy demand for something to replace MTBE. But ethanol has only about two-thirds as much energy.
And because the new gasoline recipe contains less energy, mileage per gallon is declining.
On Friday, ... the Energy Policy Act of 2005 ended the requirement that gasoline sold in areas prone to air pollution include an "oxygenate." ... Refiners over most of the country's big gasoline markets, anticipating the rule, have already dropped the chemical MTBE.
The refiners were not explicitly required to drop MTBE, but virtually all have done so because it has polluted groundwater and exposed them to liability suits. ... But now refiners must replace that ingredient. And they need a substitute that is also high octane, as MTBE is. Refiners have turned in part to ethanol, which is also an oxygenate but not a pollution worry.
Ethanol costs more than gasoline, and shipping it from the Midwest, is cumbersome and expensive, because it has to go by barge, railroad tank car or tanker truck, rather than pipeline.
West Texas Intermediate, the American benchmark oil, was up only about 39 cents a gallon last month compared with April 2005, while the wholesale price of gasoline rose about 64 cents over the same period. ... Experts at the Energy Department, the refiners' trade association and elsewhere agree that the changeover from MTBE was a factor, although they differ about the amount. ...
The oxygenate requirement has been obsolete for years. It was intended to make the fuel mix leaner, reducing air pollution. But that works only on older cars, with carburetors, not in modern vehicles with oxygen sensors and fuel injectors.
Does the SAAB 9-5 beat the ethanol mileage problem?
Autobog gives these values.
More ethanol subsidy info from the heart of ethanol country. June 2, 2009
Corn ethanol subsidies totaled $7.0 billion in 2006 for 4.9 billion gallons of ethanol. That's $1.45 per gallon of ethanol (and $2.21 per gal of gas replaced).
Even with high gas prices in 2006, producing a gallon of ethanol cost 38¢ more than making gasoline with the same energy, so ethanol did need part of that subsidy. But what about the other $1.12. Not needed! So all of that became, $5.4 billion windfall of profits paid to real farmers, corporate farmers, and ethanol makers like multinational ADM. Why is it the farm states put up with this?!
Where did those subsidies come from:
That's quite a bit when you figure it only made us 1.1% more energy independent and only reduced US greenhouse gases by 1/19 of 1%.
Who should get the subsidy?
In 2006 ethanol blenders were handed $2,500 million in subsidies while the Department of Energy awarded $385 million spread over four to six years to help build cellulose ethanol plants. That's about 32 times less per year. But celluse gets a bit of subsidy from the USDA. Altogether it may get 10% as much as corn-ethanol. The problem is the lobby for cellulose is much weaker than the corn-ethanol lobby.
Corn ethanol does not need subsidies. Cellulose ethanol research does--it would actually do some good. But's what's needed is research, and very small-scale plants, not the big ones that are being built on pretense.
Oil get's big subsidies, not ethanol. Wrong by 54 times!
"Ethanol Today," (8/'05) states "Five years ago, a US General Accounting Office report showed that ethanol had received $11.6 billion in tax incentives since 1968, while the oil industry had received over $150 billion in tax benefit over the same period.
Probably true. But the oil industry produced 1068 times more energy so the subsidy rate per unit energy was 54 times higher for ethanol. That's like ethanol gets 54¢ and oil gets 1¢. Now if we had oil subsidies, and we do, and ADM is making more profit than ...
|Solyndra Panels click|
House Speaker Jonh Boehner (R-Ohio) is backing a $2 billion Energy Department loan guarantee (Boomberg News) sought by a uranium enrichment plant in Piketon, Ohio. He's also backing a "relentless" investigation of the $0.5 billion Energy Department loan guarantee for Solyndra. What's the difference? The nuke plant is stimulus for Ohio, Boehner's, home state, but Soyndra is in California.
The Solyndra fiasco cost a hair less than President Bush wasted ever day for 2,134 days on Iraq.
There have also been ridiculous charges of corruption, as if the Administration was intentionally give Solyndra money to line its pockets. This would mean DOE did not care about success, but only about payoffs. It's just the opposite. The were desperately looking for a big success for solar. But, I still blame the environmentalists. Why? Because solar subsidies are no way to stop global warming, and they are a great way to give a black eye to those of us who care about America's energy problems and the environment.
Am I just being a Monday morning quaterback? No, I've been upsetting my environmentalist friends for years by railing against solar subsidies. You could save five to twenty times as much carbon for the same money, and sooner or later, you will be found out. I predicted this would someday be a real setback for clean energy, but I had no idea how bad it would actually be. Sure the Republicans are misleading, but don't tell me you're surprised.
400 ft tower + 2,650 mirrors
Click -- it's awesome.
I've been a solar-power fan since the late 1950's. By the late '60's an old college friend was telling me solar was almost here and needed government support. No flip-flopper, he's still telling me the same thing forty years later. Now Krugman's saying it too. He's a great economist, but he's been snookered on solar.
But I'm still a big fan of solar. I think it's made great progress and is our best green-energy hope (except for one of those unknown unknowns). But now is the time for an intense research push, and not a time for big production subsidies. Here's why.
In 1888, the first large wind generator began producing power. It had 144 blades and powered the home of Charles Brush, an inventor who drew a crowd of thousands by illuminating a park in Cleveland with electric light shortly before Edison "invented" the light bulb. Today's wind turbines produce 100 times more power with only three blades.
How important is wind generation?
Can wind power make much of a difference? The short answers are "No" for energy independence and "some but not much" for global warming. Wind generation mainly replaces coal-fired generation and the US has its own coal. That's bad news for independence but good news for CO2 reduction, as coal is the worst source of CO2. Thirty years from now, wind power might be cutting global GHG emissions by 10%. But that cut in emissions is not from today's level, it's a cut from the future level, which would be much higher.
In 2006, wind power supplied 0.6% of US electricity but reduced CO2 emission from electricity production by a full 1%. This amounted to a 0.4% reduction in CO2 emissions from all fossil energy use, and a 0.36% reduction in total US GHG emissions. The wind industry is hoping to produce 20% of US electricity by 2030, which would result in a 13% reduction in CO2 relative to 2030 levels without wind. This would not be enough to hold CO2 emissions constant.
Wind generation grew 27% in 2006, but that is from a very low level. Its future growth rate will depend largely on the level of subsidies, since these are the primary drivers of wind investment.
Is wind power too expensive?
What really matters is the cost to society. With current subsidy methods, it costs around 3¢/kWh of subsidy to get wind turbines built [2011 update, I'm now hearing from insiders that more like a 5¢/kWh subsidy may be required]. This is because the up-front costs of wind turbines are huge and the payback takes twenty years. Investors require fast paybacks and this "costs" extra. But this is not a social cost. Much of that money is just a transfer to stock-holders. By evaluating a different subsidy method, a more accurate social cost can be found and it is only 1.2¢/kWh.
Although the amount of wind that could be installed this cheaply is limited, it is interesting to ask how much it would cost to solve the global warming problem if all GHG reductions could be accomplished so cheaply. The answer is they could be eliminated for a cost of $81 billion per year. That is 0.63% of GDP, and considerably cheaper than the Iraq war.
Subsidies for wind power
The most obvious subsidy is the production tax credit (PTC) which began at 1.5¢/kWh in 1992 and which increases at the rate of inflation. It is now about 2¢/kWh. Almost all wind generators have qualified for this and will receive it for 10 years.
The second subsidy is double declining 5-year depreciation. This allows investors to take a 40% tax deduction the first year and a 24% deduction the second year. At the end of five years the deduction is complete. Assuming the investor can use this against a 43% combined federal-state tax rate, it is worth about and additional half a cent/kWh.
The third subsidy is the most obscure and most unpredictable. About 20 states have adopted renewable portfolio standards (RPS), and it is no surprise that searching this term in Google brings up the Wind Energy Association first. An RPS requires retail electric providers to purchase a certain percentage of their power from "renewable" resources, and wind is often the cheapest alternative. To the extent wind power costs more than is covered by the first two subsidies, an RPS requirement will force the retailer to provide the necessary remaining subsidy.
How Expensive is Wind-Generated Electricity?
Once a wind-turbine is built and paid for, it generates electricity almost for free. Once your house is built and paid for, it provides housing almost for free. In each case the cost of the service is mainly a financing cost, but it is real nonetheless. Comparing wind generation cost with other generation costs will put the matter in perspective.
|Capacity (usage) Factor||
The one-time, installed cost of wind seems to be up closer to $1,900 in 2011, compare with these estimates from about 2006.
Notice that wind power has the the lowest (zero) variable cost. Variable cost refers to fuel cost and maintenance costs that depend on power output. Unfortunately wind has the highest fixed costs in spite of costing less per MW of capacity than nuclear. This is because the same capacity nuclear plant generates three times more power than a wind turbine. Spreading the capital cost over one third the output results makes it very expensive per kWh generated.
Is wind power cheaper than gas-turbine power?
The cheapest power plant to build, per unit of output capacity, is a gas-turbine, a GT. This is basically a low-quality jet engine hooked to a generator. But power from GTs is expensive because gas is expensive and it's expensive to let a plant sit idle 85% of the time. This results in wholesale power that typically costs more than retail power. How do they stay in business? They produce the most valuable power. They run during the 15% of the hours (or sometimes many fewer) when they are most needed and when the electricity price is highest.
Unfortunately, the wind blows when it wants to, and wind power is at most worth the average price of power. This is about the price paid to coal and nuclear units, which run almost all the time. Coal is wind's real competition, and wind power costs about 3¢/kWh more than coal power. This cost difference is not terribly accurate, but it is base on the Department of Energy's cost data and on financing assumptions used in major regulatory cases by two major electricity markets. Depending on where a project is located and proce fluctuations in the turbine market, the price difference might range from 2¢/kWh to 5¢/kWw.
Business Cost vs. Social Cost
The above calculation asks how much it would cost to induce investors to build wind turbines by subsidizing their electricity revenues. Because of taxes and investor risk premiums, this is an expensive method of inducing investment.
Costs vs. transfer payments. Economics distinguishes between payments that are used up and payments that simply transfer money from one person (usually the tax payer) to another. The first is type of payment is a cost, and the second type is a transfer payment. If the government spends $100 billion building fighter planes that don't work, the country is poorer by $100 billion, but if it simply gives the money to Halliburton or to the unemployed, then some are poorer and some richer, but the country as a whole is no poorer.
Economists have a theory of the social discount rate which helps them find the true social cost in situations such as wind subsidies, but it is not especially accurate, and is completely opaque to the uninitiated. A market-based approach will somewhat over-estimate costs, but is more transparent, and still provides a far more accurate evaluation than the standard calculation shown above.
A lower-cost subsidy. Another approach to subsidizing wind will show that subsidies need not be so expensive. To get investors to build wind turbines instead of coal plants, a wind project could be subsidized and charged just enough to make its costs identical to those of coal. First, to replace 1 kW of coal generation, almost 3 kW of wind generation will be needed, because wind turbines run at 30% output on average as compared with about 88% for a new coal plant. This raises the initial cost to $4,013/kW compared with $1,338/kW for coal, which requires a subsidy of $2,676 to make up the difference. Next, the wind investor is required to pay the government exactly as much per kWh generated as the coal plant would pay for coal. This makes their "fuel costs" equal.
With this financial matching approach, the investor has the same capital costs and the same fuel costs whether building a coal plant or a wind turbine, and because the wind turbine has been scaled up, the investor will sell the same amount of power. The only difference is when the power is sold, but this is a very small difference becuase both projects spread their power production over peak and off-peak hours quite uniformly. Since the projects have the same costs and revenues, wind can be push ahead of coal with only a tiny extra payment.
The final step is to find what this subsidy has cost the government. As before, a 20-year project life is assumed. Suppose the government has financed the initial subsidy with 20-year Treasuries. The cost of paying off such a loan can be computed using a spreadsheet's mortgage-payment formula and that cost is $203 per year for 20 years. This comes to 2.7¢/kWh of electricity generated, but the investor pays 1.9¢/kWh in "as if" coal payments. This leaves the government holding the bag for just 0.9¢/kWh, and that is the cost of this form of subsidy.
Why is this so much cheaper? Essentially, the government has borrowed the money for the subsidy from the public instead of from the investor. This transfers less money to investors, but it still covers all real costs. Also the money is borrowed at a market rate that reflects scociety's valuation of future cost and savings. This caluclation values the future cost savings of wind power properly.
The bottom line on wind costs. Although turbine costs and financing costs are difficult to pin down, the initial calculation of 3¢/kWh is consistent with the fact that wind projects get 2¢/kWh in PTC subsidy, 0.5¢/kWh in accelerated depreciation, and often but not always, a bit more from RPS requirements. In fact, discussion with those close to the industry suggest, that wind turbines are actually being built with less than 3¢/kWh of subsidy. That indicates the DOE cost numbers presented above are realistic.
If a wind turbine costs $1,254/kW and has a 30% capacity factor, it will generate power for about 2.4¢/kWh--not counting future generation as less valuable. The only reason wind power seems expensive is because investors severely discount the value of future generation. Society also discounts future values, but its willingness to lend money at 5% to the Treasury proves that they discount its value much less. Using this more far-sighted social rate of return, shows that the cost to society of wind power is only about 1¢/kWh more than conventional power costs.
Wind energy policy
Current wind energy policy is not far off the mark on average. But some states subsidize is much more than others. This means we will buy expensive wind power in one state while passing up cheap wind power in another. But the larger problem is that other energy policies are far out of line with wind. To see this requirese a close look a wind subsidies and than at other energy subsidies.
Current wind energy policy is so murky that when asked for help on evaluating wind subsidies, they throw up there hands and say it's impossible. A simple and transparent policy would work better and save money. Since coal is the direct competitor of wind and many other CO2 reducing alternatives, an unTax on coal, a charge refunded on a per-person basis, would be ideal. Until that becomes politically feasible, the federal production tax credit should be the sole subsidy and it should be stabilized.
India and China are expanding their use of wind power. The demand for wind turbines has particularly accelerated in India, where installations rose nearly 48
percent last year, and in China, where they rose 65 percent, although from a lower base.
Global wind energy council
DOE's Wind Information
Organizations with Semi-Sensible Energy Proposals
The Apollo Alliance
NRDC's Re-Energize America
|NASA's Solar & Wind Data|
Just the Facts: The wind industry has set a target of 100 GW of installed capacity by 2020. This is about 100 nuclear plants worth of capacity. But, unlike nuclear plants, wind turbines don't run full tilt all the time. The wind is not so steady. This much wind capacity will produce about as much electricity as 30 nuclear plants, and that will be a bit less than 5% of the country's electricity. Compared to all fossil-fuel energy it will be just over 1%.
So wind is no panacea. But neither are other options. Corn ethanol could supply a bit more, but only at much greater cost. While it costs us over $7 extra to save the fossil energy in a gallon of gas by subsidizing ethanol, we can save the same amount of energy at a cost of only 25¢ by subsidizing wind generation. That’s over 28 times cheaper.
Ethanol from corn is quite expensive and not very ecological, so we probably do not want it to increase to the 1% level. That would require more corn acreage for cars than for feed and food.
That’s where eco-ethanol comes in. That’s ethanol made from cellulose, which is all the unused parts of plants. This is far more energy efficient and ecological because that is now wasted—well not quite. The unused parts of crop plants are usually returned to the soil to enrich it, or more accurately, to avoid impoverishing it. There is still a cost to using plant cellulose, but much less than from growing corn just to make gas for our cars.
* A Quad is a quadrillion (15 zeros) Btu.
Introduction: Coal mining accidents have killed 10s of thousands, and in China coal pollution kills 100s of thousands per year. The world is almost out of hydro power and that too has done a lot of damage. Like it or not, nuclear power has killed very few people, and emits almost no carbon.
Thorium reactors are vastly safer but were apparently rejected because they were of no use to for making nuclear weapons. This needs more documentation, but you must admit, it's plausible. Given that global warming may well prove serious, we should take another look at what Dr. Strangelove rejected.
A Thorium Reactor Lesson by: Karl Denninger, Friday, April 01, 2011. (edited by Steven Stoft)
Consider this: There is 13 times as much energy in coal in the form of Thorium as there is in the form of Carbon!
What is Thorium? It's a an element like Uranium, but it's not capable of fission. Instead, it can be turned into to fissile Uranium (U-233) by the neutrons that come from nuclear fission. So once you get that started, it can self perpetuate.
Unlike traditional nuclear reactors which uses water a moderator and coolant Thorium reactors use a liquid salt, and they need some help getting started.
The US ran one for nearly four years in the 1960s at the Oak Ridge National Laboratory. It was scrapped in favor of the traditional uranium fuel cycle we use today because the fuel it produces is very difficult to exploit for nuclear weapons, and it breeds fuel at a slow rate. The natural process of the nuclear reactions in the core of such a unit produces a byproduct that is a very strong gamma emitter that is difficult to separate from the other reaction products. For this reason - and because we wanted both nuclear power and nuclear weapons - we built the infrastructure for uranium and plutonium rather than thorium.
Thorium-based reactors have several significant advantages and a few disadvantages. We have much less experience with them, simply because we stopped working with them for political and war-fighting reasons. They use a fluoride salt which is quite reactive when in contact with water, but the reactivity is a bonus in all other respects, because it tends to encapsulate the reaction products (the nasty fission products that you don't want in the environment) through that same chemical process. It runs at a much higher temperature (typically 650C) than a traditional reactor and unlike a traditional reactor the fuel and the working fluid is the same - there are no fuel rods that can melt and release their nasty fission product elements, as the fuel is dispersed in the coolant.
Finally, the unit is intrinsically safe. It does not require high pressure; the working fluid and coolant is a liquid at ordinary atmospheric pressure. This gets rid of the need for high-pressure pumps, pipes and similar materials. Without the moderator the reactivity is insufficient to sustain a chain reaction, and the moderator is in the reactor vessel itself through which the fuel/coolant is pumped, so criticality is impossible outside of the reactor vessel and inside the vessel the fuel and coolant are the same, and a liquid. The working fluid is contained in the reactor loop by an actively-cooled plug. If power is lost cooling ceases and the plug melts; then the working fluid drains into tanks by gravity under the reactor and cools into a solid, as it cannot maintain criticality outside of the reactor itself (there's no moderator in the tank or the plumbing.) As the fuel is in the fluid, there is no core to melt as occurred in Japan and being dispersed over a much larger area the working fluid naturally cools from liquid to solid without forced pumping and cooling. This safety feature was regularly tested in the unit at Oak Ridge - they literally turned off the power on the weekends and simply went home!
There are some downsides. The working fluid requires special metals made out of Hastelloy. But these are no longer particularly-special materials, being used in other chemical plants where highly-corrosive material is commonly handled. They are expensive, but then again so are traditional reactor pressure vessels which require high-pressure integrity and thus special welding and inspection techniques. [End of Denninger excerpt.]
Some benefits of thorium fuel when compared with uranium were summarized as follows:
- Weapons-grade fissionable material (233U) is harder to retrieve safely and clandestinely from a thorium reactor;
- Thorium produces 10 to 10,000 times less long-lived radioactive waste;
- Thorium comes out of the ground as a 100% pure, usable isotope, which does not require enrichment, whereas natural uranium contains only 0.7% fissionable U-235;
- Thorium cannot sustain a nuclear chain reaction without priming, so fission stops by default.
However, unlike uranium-based breeder reactors, thorium requires irradiation and reprocessing before the above-noted advantages of thorium-232 can be realized, which makes thorium fuels initially more expensive than uranium fuels. But experts note that "the second thorium reactor may activate a third thorium reactor. This could continue in a chain of reactors for a millennium if we so choose." They add that because of thorium's abundance, it will not be exhausted in 1,000 years.
The Thorium Energy Alliance (TEA), an educational advocacy organization, emphasizes that "there is enough thorium in the United States alone to power the country at its current energy level for over 1,000 years.
The German THTR-300 was the first commercial power station powered almost entirely with Thorium. India's 300 MWe AHWR CANDU type reactor will begin construction in 2011. The design envisages a start up with reactor grade plutonium which will breed U-233 from Th-232.After that the input will only be thorium for the rest of the reactor's design life.
|Gas Price 1970 –> Now|
Gasoline prices follow the price of oil. They lag behind a bit when the price of oil rises and they lag behind a bit more when it falls. But as you can see above, they can still fall very fast, as they did in the last half of 2008.
|Price Up, Imports Down|
We are witnessing the second largest drive toward energy independence in our history. The first was in response to the 1973-1985 OPEC crisis, and ...
Convert any kind of energy to any other. E.g. tons of coal to gallons of gasoline.
January 29, 2012. President Obama has postponed the final decision on the Keystone pipeline, saying his rejection was "not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people." Although the big question is probably oil spills, the case for the pipeline is based on jobs. Let's take a look.
“President Obama's decision to reject the Keystone XL crude oil pipeline is as shocking as it is revealing,” declared Mitt Romney, while Newt Gingrich called the decision a “stunningly stupid thing to do. ... it’s as if they were [#governing Mars].” Pretty harsh criticism. So, who would not want to move us toward energy independence?
First remember that this is a Canadian pipeline (with some U.S. investors) that will transport Canadian tar sands sour crude oil to the U.S. for refining. It should be easy to read between the lines that what is meant is that the Canadian tar sands oil will help us become independent of Middle East oil, and the Middle East is currently a little "unstable." And for some it means independence from those Muslims. As hinted in Bob's recent joke note, "Coffee in Heaven," we all know how much Muslims are disliked, right? (43% of Americans admit to feeling at least "a little" prejudice toward Muslims. - Gallup poll, 2010, http://www.gallup.com/poll/
Forty percent of Canadian oil comes from tar sands and, currently, 20% of the United States' oil imports come from Canada. The United States currently imports 21% of its oil from the Middle East. - Investopedia
America’s #1 export in 2011 was refined fuel. Shocked? Don’t be. Despite the staggering price of gas at the pump, the US ships gas, diesel and jet fuel off to developing countries like China. The reason? US consumption of oil has declined since 2006 and North Dakota has a glut of shale oil. Underutilized Midwest refineries refine the shale and export to China [and other countries]. And Big Oil wants to export even more.
That’s where the Keystone Pipeline XL enters the room. Few Americans understand that Keystone is an export pipeline. It will link Alberta Canada’s tar sands to Gulf Coast refineries where it will be exported to the highest bidder, most likely China and India.
The TransCanada Corp. folks want you to believe Keystone will benefit you. It will do nothing of the tar sands sort. It will not reduce American dependence on Middle Eastern oil. It will not reduce the price of gas. It will not produce thousands of permanent jobs. - MetroWest Daily News, Jan 29, 2012
Valero, the top beneficiary of the Keystone XL pipeline, has recently explicitly detailed an export strategy to its investors. The nation's top refiner has locked in at least 20 percent of the pipeline's capacity, and, because its refinery in Port Arthur is within a Foreign Trade Zone, the company will accomplish its export strategy tax free.
The oil market has changed markedly in the last several years, with U.S. demand decreasing, and U.S. production increasing for the first time in 40 years. Higher fuel economy standards and slow economic growth have led to a decline in U.S. gasoline demand, while technological advances have opened up new sources in the United States. Increasingly, U.S. refiners are turning to export.
The construction of Keystone XL will not lessen U.S. dependence on foreign oil—rather, it will feed the growing trend of exporting refined products out of the United States, thereby doing nothing to enhance energy security or to stabilize oil prices or gasoline prices at the pump. If completed, it will successfully achieve a long-term objective of Canadian tar sands producers—to gain access to export markets. - Policy Innovations http://www.policyinnovations.
25 percent of Gulf Coast refinery output is now going to export and Keystone XL will feed this growing trend because the heavy sour oil derived from tar sands is ideal for producing diesel, the product most in demand on the export market.
Keystone XL will help maximize Big Oil’s profits while doing nothing to enhance U.S. energy security.
• There is currently a glut of pipeline capacity from Canada to the U.S. with around 50% currently unused;
• Canadian oil production is not forecast to fill existing pipeline capacity until after 2025;
• This means that Keystone XL would simply be diverting oil to the Gulf Coast that would have supplied the Mid West;
• This will likely raise the price of Canadian oil in the Mid West as Canadian oil moves from surplus to shortage;
• Gulf Coast refiners represent a comparatively limitless market because they are able to export products to anywhere in the world;
• With U.S. gasoline demand in terminal decline, Gulf Coast refiners are maximizing diesel output to serve the export market;
• With 25% of refinery output, and growing, going to export, the Gulf Coast is becoming an international refining center in which U.S. domestic demand is becoming increasingly irrelevant.
- Oil Change International, NRDC http://priceofoil.org/
Lower Gas Prices
As chairman of the House Energy & Commerce Committee, Rep. Fred Upton (R-MI) is among its most ardent and unequivocal supporters. In a July interview with CNBC he stated:
"According to the Department of Energy, this one project will "essentially eliminate" oil imports from the Middle East. It will create more than 100,000 jobs and strengthen our relationship with a close ally and trading partner. A project like this should be a no-brainer, and there's simply no good reason it has been stuck in the State Department's red tape for nearly three years."
Rep. Upton also stated that the project would likely help lower gasoline prices and reduce volatility. In that same interview he said:
"If we take steps today to safely develop our resources for the future, we can quickly and consistently hold down prices. I think the American people understand supply and demand, and they understand if we increase the supply of American-made energy, prices will come down. It's as simple as that.
Well, this is probably obviously not true if the tar sands sour crude is destined for export.
TransCanada's tar sands pipeline will actually INCREASE gas prices for Americans—especially farmers—according to TransCanada’s 2008 Permit Application which states “Existing markets for Canadian heavy crude, principally [the U.S. Midwest], are currently oversupplied, resulting in price discounting for Canadian heavy crude oil. Access to the USGC [U.S. Gulf Coast] via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in [the Midwest] by removing this oversupply. The resultant increase in the price of heavy crude is estimated to provide an increase in annual revenue to the Canadian producing industry in 2013 of US $2 billion to US $3.9 billion.”
Independent analysis of these figures found this might increase per-gallon prices by 10-20 cents/gallon in the Midwest. - Cornell University Global Labor Institute http://www.ilr.cornell.edu/
Well, hooey. So it might RAISE gas prices.
|[=governing Mars] “President Obama's decision to reject the Keystone XL crude oil pipeline is as shocking as it is revealing,” Mitt Romney, the frontrunner for the GOP nomination, said in a statement. “By declaring that the Keystone pipeline is not in the ‘national interest,’ the president demonstrates a lack of seriousness about bringing down unemployment, restoring economic growth, and achieving energy independence. He seems to have confused the national interest with his own interest in pleasing the environmentalists in his political base.” . . . At a campaign event in Warrensville, S.C., Newt Gingrich called the decision a “stunningly stupid thing to do.” The large crowd gathered to see Gingrich roared. “There’s no better word. These people are so out of touch with reality, it’s as if they were governing Mars.” —Los Angeles Times,|
|[=PopNotes] Just hover over green-underline links above to see the "pop" notes.|
March 25, 2012. You know the story. When Obama took office:
But now (3/2/12)
Incredible. And we understand—because our politicians explained it to us, like so ...
And, that pushes the price up, and high oil prices cause high gas prices. If we had drilled, supply would be up and the price would be down. Maybe down to $1.00/gal like under Clinton ([#March 1999]).
|Free. Many Varieties|
So I dare you to guess which Obama scenario on the graph above is correct. Don't cheat. Guess before you click to see the answer. Don't believe it? — See for yourself where the data comes from.
Under Obama, drilling has skyrocketed as never before, and the price of gas went from $1.95 to $3.95 (April 1, 2012). There's a reason.
|A Historic Reversal|
More surprising facts:
[#PopNotes] Used Above
|[=March 1999] Regular gasoline actually got down to $0.90/gallon in early March, but I like round numbers.|
|[=upset Sierra Club]Sierra Club President, Michael Brune quotes Obama saying "we are drilling all over the place," and headlines his op-ed "Obama’s energy March madness." (March 25, SF Chronicle) But, Obama was right, and I say this as a member of the Sierra Club.|
|[=gas price widget]Enter a 2-letter State Abbreviation at the bottom of the widget to find your state's prices. Many variations are available for your website.|
|[=PopNotes] Just hover over green-underline links above to see the "pop" notes.|
zFact: This is the biggest oil-drilling surge in 30 years, and likely the [#biggest ever].
See the unprecedented impact of Drill-Obama-Drill.
[#PopNotes] Used Above
|[=PopNotes] Just hover over green-underline links above to see the "pop" notes.|
|[=biggest ever]The 1981 surge may have involved more rigs, but today's rigs can drill much faster, more flexibly and more accurately. (Before 1987, oil & gas rigs are not separated in the data.)|
|[=exact data]See North American Rotary Rig Counts, tab 9, "US Oil & Gas Split."|
|[=lower drilling spike]Look closely and you will find that it includes drilling for natural gas. That has been slowing down because the price of natural gas has plummeted. This graph is for oil drilling, and that's what counts for gasoline.|
Drill-baby-drill is supposed to work like this:
As you can see, the huge drilling boom under Obama has caused an unprecedented increase in oil production. Step #1 worked. But ...
zFact: This is the biggest 3-year increase in oil production since US production peaked in 1970.
If you thought drill-baby-drill would bring down the price of gas (and you probably didn't), you were conned. How did they do that?.
Drilling is not a bad idea; just don't expect miracles at the pump. In fact, with a lot of drilling, count on pain at the pump. Take a look at these prices! (Find out why.)
This Is Not an Accident — When Drilling is Up, Price is Up.
The two times (early 1980's and now) when drilling has set records, the price of gas has gone through the roof. When drilling was at it's lowest in 50 years under Clinton, gasoline got down under $1.00/gallon. Sarah Palin probably doesn't know this. Newt probably does. He's smart and a liar.
zFact: With a lot of drilling, the price will be high. With little drilling, it will be low.
What's Wrong with the Drill-Baby-Drill Theory?
|Newt's $2.50 gas for China⇒|
Here's What Happens Instead:
In a nut shell, here's the awful truth:
zFact: US drilling is 10% of half the story. We pump 10%. Demand is the other half.
[#PopNotes] Used Above
|[=used in politics]Newt told FoxNews, "I have a $2.50 goal as a maximum price. ... we outline step by step how to do it. I think it is doable." Doable?! $2.50 for gas means $1.50 for oil (see the Iron Rule). And $1.50 times 42 gallons/barrel = $63/barrel -- a little over half what it costs now. And Newt will make that the maximum price of oil for the world from now on. Sure thing.|
|[=PopNotes] Just hover over green-underline links above to see the "pop" notes.|
As the price has risen over the last three years, US exports of gasoline to China, India, Europe and South America have tripled to 20 million gallons per day.
We'd like the gasoline to stay here and drive the price down. That's not gonna happen. No oil company will sell to you for less than China or Europe will pay. That means two things:
His unworkable plan is to bring the price down for the whole world.
The price of gasoline (in 2012 dollars) has been [#$1.00 more] per gallon than the price of oil for the last 25 years (see graph below). There were some small deviations, but nothing systematic. There's nothing we can do about this unless we change the [#world oil price] — or we subsidize gasoline like Iran and Venezuela.
PopNotes Used Above
|[=gas price widget]Enter a 2-letter State Abbreviation at the bottom of the widget to find your state's prices. Many variations are available for your website.|
|[=$1.00 more] The $1.00 value is just a lucky coincidence. It covers the cost of refining, delivery and taxes. Three or four years from now, after about 10% more inflation, this will be $1.10 or so.|
[=world oil price] The US price or the World price of oil?
This graph uses the world price of oil which is best represented by the Brent (North Sea) price of Oil.
[=bets on the future]All about Speculation: If your skeptical of this claim, good for you. But then you should check this out. It's the clearest explanation you'll find anywhere.
PopNotes Used Above
[=Sources] Recent weekly prices (year 2000 and after) for regular gasoline from U.S. Department of Energy (DOE )
Gas prices 1973-1999 from Bureau of Labor Statistics (BLS )
Gas price before 1973 (annual) from DOE
Consumer price index from BLS - U.S. All items, 1982-84=100 - CUUR0000SA0
|[=maybe]They probably added oil rigs faster, but they were not as good as today's. (We're not sure because they didn't count oil and gas separately back then.)|
The oil-speculation myth holds that dastardly Wall-Street speculators are buying up our oil cheap, driving the price up, and making tons of money. Then I suppose, they sell high priced oil to you and me. Well, I'm not buying this story. This is lot of nonsense, because, for the most part — 99% — speculators don't buy any oil at all! They just buy oil futures.
What are oil futures? They are bets. Speculators are gamblers. Say you think the price of oil is going to $200 per barrel, and I don't. So we bet. Say we bet on 10 barrels. We agree to bet on a price of $170/bbl. So six months from now, if the price of oil is $200/bbl I will owe you $30 × 10 bbl = $300. And if the price is $120, then you will owe me $50 × 10 bbl = $500, and so on. That's a futures contract. Well, not quite. It's not a standard contract backed by a big commodity exchange, so technically it can only be called a forward contract, but it's the same thing. That's financial speculation.
So does our bet make the price of oil go up? No. If one-half the the US bets the other half that the Euro is going to $10 next week, will that make the Euro go up? No. Betting on the horses doesn't make them run faster.
There is, however, another kind of speculation, but it doesn't happen on Wall Street. And this kind of speculation can have a real effect. Here's how it works.
If you believe that the price of oil is going to $200 in six months, you could buy a big tank and fill it with $100/bbl oil now. Then in six months you could sell it for $200 — if you turned out to be right. Now, your single tank would not be big enough to make a difference to the oil market, but what if lots of Big Physical Speculators did this? It would affect the price Now. Because buying all that oil Now to put in their tanks would be extra demand for oil Now and more demand always drives up the price. So physical speculation can drive up the price for a while — until the speculators' tanks get full.
But after the physical speculators' tanks are full, they've got to sell to stay in the game, and, of course, the whole point is to sell (at a profit) some time in the future. But selling depresses the price just as buying raises it. So if physical speculation works, the speculators will raise the price when they buy at low prices, and lower the price when they sell at high prices. So if they succeed, they even out the price swings. And if they don't succeed, then they buy high and sell low and go out of business.
On top of that, physical speculators don't own enough storage capacity to have much of an impact. The daily flow of oil on this planet, 86.4 million barrels a day (1000 barrels a second), is just too great.
Shale oil comes from cooking oil shale — not from fracking shale containing "tight oil," which is ordinary oil that is trapped in shale. Tight oil is what is causing today's oil boom, shale oils is the stuff Jimmy Carter was after and Newt Gingrich is proclaiming to be the wave of the future.
Tight oil comes out of the rock on its own, once the rock is fractured. But shale oil is hydrocarbons that have not been naturally cooked long enough to turn into oil and so we have to finish the cooking process for nature. This requires a lot of energy, and most ways of doing it make a far greater mess of the land than does fracking.
Newt's second point is "End the ban on oil shale development in the American West." That's the dirty expensive oil Jimmy Carter was after. And yes there's a lot of it. But at $2.50/gallon of gas it's not profitable. The reason Big Oil is after shale oil is because they know the world price of oil is likely to average over $100/barrel. So the real plan is this:
America takes the environmental hit. Big Oil takes the profits, the whole world gets slightly gas prices, and a bigger risk of climate change. (Yes this will drive the price of oil down a bit, compared to what -- $120?) So the question we're facing is, will the voters fall for yet another energy scheme from the politicians?
How to Save on Gas—Use Less
Plenty of sites will tell you how to find a cheap gas station, but lets think big. One big-picture approach is the OPIC described on the oil-price page. But a more direct and complementary approach is to make CAFE standards tougher—or maybe not. New research brings good news and bad news. First, better mileage is far cheaper than we knew. Second, that means CAFE standards have been doing squat.
Better mileage is tantalyzing, not just because the price of gas is going crazy again, but think of the big picture. America has a choice. We can spend our money on better cars which are mainly made in America (even Toyotas). Or we can continue spending a few hunderd billion a year on foreign oil, which pollutes our cities and warms the globe. On top of that, the best way to reduce the price of oil is to [#buy less] oil/gasoline for our cars.
But Fuel Efficiency (CAFE) standards have flopped. They were not raised for 30 years and they left open a huge loophole—sell trucks instead of cars. And sell huge cars (SUVs) that qualify as trucks. The result has been a massive switch to low-mpg "trucks" over the last 30 years, because their CAFE standards are weak. Unfurtunately, to qualify as trucks, SUVs need a high front-end approach angle, which means they kill more people when they crash into mere cars ([#blame it on CAFE]). Sure, they now tell us the standards will get tougher. We've been through this before.
In the June issue of American Economic Review (a top economics journal) there's a new estimate of how much it costs to build higher mileage cars. This is an age-old mystery because the car makers say it costs a lot, and environmentalists say it costs very little, and both are prone to exaggeration. But this article took a new and very [#clever approach] based on a CAFE loophole. The result was terrific. It costs somewhere between $9 and $18 to get one more mile per gallon. And the car companies are not doing that because the loophole is cheaper.
Let's do the math. Say a car gets 25 mpg and goes 125,000 miles. It would use 5,000 gallons. But at 26 mpg, it will use 4% less—that's 200 gallons less. That's about $700. So GM and Toyota could save us $700 on gas by selling us a car that costs, maybe, $15 more. And they are not making these improvements.
The trouble with CAFE standards is that the car companies have all the advantages when they go before the NHTSA. They have all the data on costs and market "problems," and they have the lawyers. I've read the arguments and they are hundreds of pages of technical stuff the NHTSA cannot check. Plus the car companies are experts at cooking up new loopholes.
The trouble is that CAFE is bureaucratic command and control. Environmentalists love that feeling of control, but it's just a feeling. You know this is true when we see that all this "control" has not even got them to spend and extra $9 to $18 a bucks a car.
It goes by the awkward moniker of "feebate." It's not a tax, since the government collects no money. But high mileage cars pay a fee and low-mileage cars get a rebate. Given how cheap it is to give us better mileage, a very low feebate of say $50 per mile/gallon would have beaten the socks off 30 years of CAFE.
What can the car companies say — Oh we can't meet that standard for years? That standard will cost way too much? This standard would cause technical problems? All of their excuses are out the window and there is no use for their technical expertise — because there is no standard with a feebate!!
They can build whatever they want. The only pressure, but it's extreme, comes from competition. If the other car company makes 30 mpg cars and they make 20 mpg cars they are forced to, in effect, pay the other car company $250 per car on average. What could they hate more than paying their competitor?!
So car companies don't have to do a thing, but they will. They will do far more than they ever have.
And it's easy to argue for a strong feebate. Better mileage saves a lot of money, so companies that save us that much should be rewarded handsomely — with a stronger feebate.
Now check out how our biggest oil barons skew our politics.
|[=PopNotes] Just hover over green-underline links above to see the "pop" notes.|
Oil prices are monthly average import prices at the refinery in 2011 dollars. Prices run through May 2011 and annual imports through the year ending May 2011. ([#Sources])
September 19, 2011. We are witnessing the second largest drive toward energy independence in our history. The first was in response to the 1973-1985 OPEC crisis, and the second started in 2006 soon after oil prices broke $60/bbl tripple their price seven years ealier.
Currently imports are down 37% below the conservative trend line in the graph. That is not only the result of the Great Recession. Parly it is, but mostly it is the price effect. About 5% out of the 37% is explained by increased production, but most of it is price-induced reduction in oil consumption. Contrary to environmentalists (who love command and control) prices work.
The increase in production, though relatively small is impressive considering the U.S. has been runing out of oil since 1974.
The key is to realize that the oil market is a world market. This has some amazing consequences:
The world market produces and consumes about 95 million barrels a day. The US, uses about 19 and produces about 7.5 million bbl/day[#1]. In 2010 Alaska produced 0.6 million bbl/day, or about 0.6% of the worlds oil. As you can guess, that does not change the price of oil by much. So if baby drills like crazy in the Gulf and the Alaskan National Wildlife Refuge, the most you could hope for would be about a 1% drop in the world price of oil. So how much is that for gasoline?
Well when oil is $126/bbl, which is $3.00/gallon, gas is about $4.00/gallon. So another Alaska might save us and the other oil addicts about 3¢/gallon. China, the next biggest addict expects to be importing 80% of its gasoline by 2030. Of course Japan, Korea, and Europe import almost 100%. So they will all thank us (or they should) for drilling in our wildlife refuge and our fishing grounds.
Use ethanol and you don't use gasoline. But where does the gasoline go? Do the Saudi's put it back in the ground? Nope. They pump their quotas no matter what. Does BP put it back in the ground? Nope, but they might pump less. But why? Because they notice we are using ethanol and they think, "Oh, so we should pump less oil?" Never. Oil companies with expensive production will pump less if and only if the price of oil falls. And since it's a world market, increasing supply (with ethanol) will drive down the price. But here's where the enviros are wrong. They think the lower price only reduces supply. But remember, it's supply AND demand, that rules the market. A lower price will increase the demand for oil. Because of this ethanol is about 30% less effective than the 100% supply-cut that EPA counts on. And since corn ethanol is not so good to start with, producing it actually increases CO2 emissions, once this global rebound effect is factored in. [#Source].
But you knew that. Every time there's a big oil price spike Exxon makes about an extra $30 billion per year. That buys a lot of love. And it's a free ride. The Saudi's have to cut production to raise the price, but Exxon, does not help at all. So they appear to have clean hands, and it's all gravey. In return, they quitely protect OPEC.
Back in 1975 many advocated an Organization of Petroleum Importing Countries. In fact, the U.S. led the formation of the International Energy Agency (IEA), which Henry Kissinger designed specifically to act as a counter-cartel against OPEC. And it did give it a try, but the the Iranian revolution knocked out Iranian supply and sent prices throught the roof. This had the effect IEA intended to have—non-OPEC supply grew, and global oil demand fell. The result was OPEC crushed itself for about 18 years. Surprisingly the demand-side effect was far stronger and much longer lasting. (You can read about that in my book, Carbonomics.)
So what is by far (many times over) the strongest climate policy ever implemented. Of course, it's OPEC. But OPEC hates climate policy! Exactly. They hate other people's climate policies. If they run the climate policy, they collect all the carbon taxes—something like $500 billion a year. But if the world organizes an OPIC, we could make quite a dent in that. But we need to start more modestly, big organizations are tricky to organize. So we make a deal with China. We both tax oil imports. So we use less, so the world price of oil falls. That's win-win. The price only falls if the world uses less and emits less carbon. This brings together environmentalists and everyone who hates paying OPEC's exhorbitant prices. That's one powerful political coalition. Except it's not because environmentalists don't want to talk to those interested in paying OPEC less (to be honest, they are mainly [#confused]).
PopNotes Used Above
|[=Sources] Refinery cost are from EIA's MER, Table 9.1 in Energy. Import are from EIA's MER Table 5.1.|
|[=Source] "Renewable Fuel and the Global Rebound Effect," by Steven Stoft, a report filed by the Clean Air Task Force, in a complaint againt EPA's Renewable Fuel Standard Program (RFS2)|
|[=1] EIA Petroleum|
[=confused] Environmental Oil Confusion
Enviros think that if we reduce the world price of oil everyone will consume more oil. But that's not true if we all tax oil imports. Then there are two prices: the world price and the after-tax internal price. The low world price saves America billions, while the high internal price makes us (and the Chinese) use less—and using less is what cuts the OPEC price.
But won't the government get all those tax revenues? If the enviros have their way, then, Yes. But, instead, we should refund all the money on an equal per-person basis, as Alaska does ($1000/person per year), or like British Columbia, or like the Climate Scientist James Hansen advocates.
The Organization of Petroleum Exporting Countries (OPEC) cartel — and the world's failure to curb demand in the face of it — produce a "tax" on gasoline that is far greater than U.S. gas taxes.
Oil price forecasts from 2002 — before oil prices began increasing sharply (see graph below) — provide an estimate of the size of the OPEC gas tax. The 2002 forecast by the U.S. Department of Energy predicted oil prices of $28 per barrel in 2008 (accounting for inflation). Perhaps that would be $35 per barrel, now, in 2011.
With oil selling for about $100 per barrel that's a $65 per barrel OPEC tax on oil, and that translates to, very roughly, a $2.00/gallon OPEC tax on gasoline.
The Federal gas tax is 18.4¢/gallon. State gas taxes — including sales taxes on gasoline — averaged 27.4¢/gallon as of March 2007 (American Petroleum Institute). Thus, combined Federal and State gas taxes are about 46¢/gallon.
And remember, that state and federal taxes go for building and repairing our roads. What does the OPEC tax go for?
But, it would require an alliance between those who don't like paying OPEC and those more interested in guarding against climate change.
March 6, 2010. Checking the Vets' YouTube Video
Is it true? "Oil goes up a $1—Iran gets another $1.5 billion to use against us."
Not quite. The US DOE says Iran had net oil export revenues of $55B in 2009, and their average price was $60 (DOE ). So they make only $0.9B not $1.5B extra per year when the price goes up $1/barrel. Did the Vets lie? Not really. They forgot that Iran does not profit from the oil it uses domestically. But with oil up $40/barrel in a bit over a year, that's a lot of money.
Also, Iran doesn't use all that money against us. A lot goes to buy votes to keep Ahmadinejad and Supreme Leader Ayatollah Khamenei in power. That money is used, more or less, against the whole world.
Is it true? "Break our addiction by passing a clean-energy climate plan."
The basic idea is right. Cutting oil use helps the climate. Cutting oil use takes money back from OPEC -- Saudi Arabia, Iran, etc. The crazy part is that the environmentalists hate to admit this. Instead we find James Woolsey, the former director of the Central Intelligence Agency and a staunch backer of the Iraq war, driving a 58-miles-per-gallon Toyota Prius. Why? For the same reason as the Vets give on YouTube.
How does it work?
Not like people think. Iran will sell its oil one place or another. The trick is that, when we use less oil, it actually reduces the world price of oil. That shouldn't be so surprising, because OPEC has be doing the reverse to us, on and off, for 37 years. Right now the Saudis are cutting back their own production by 27 percent. That's much of what's driven the price up from below $40 to about $80/barrel in the last year.
Has cutting oil use ever been tested?
Yes. Between 1980 and 1985 the world cut back, because OPEC drove the price of oil up. But that high price caused the world to conserve, and the Saudis had to cut production ever more deeply. By 1985 they had cut their output down to 25% of what it had been. Even then, price fell by about 1/3. Finally, the Saudis cried uncle and cut the price by one more third. For 18 years the price stayed low, but now OPEC is back and more unified than ever.
Carbonomics: How to Fix the Climate and Charge it to OPEC (Amazon) explains how to do what the Vets suggest—make energy security and clean energy work together. It also predicted the Copenhagen debacle and tells what to do about it.
Right wing nuts:
They are out in force saying: Global warming is a hoax so down with the Vets. Scientists have been studying global warming since 1856. I learned about it in 1965, well before Al Gore was on the scene. The UN report concludes correctly that we still don't know the answer -- it only says there's a 90% chance that more than half the warming since 1950 is man made. But I'm a skeptic. Climate science is tough. Sometimes scientists go off track for a few decades. So let's say it's not 90%, there's only a 50/50 chance the earth is in big trouble.
What should we do? Well the chance you'll have a house fire this year is 1/2 percent. So you do nothing. Right? No. Everyone buys fire insurance. So with a 50% chance of serious damage to the earth -- we buy insurance. And as a fringe benefit we recover some of the money OPEC is picking out of our pockets.
Carbonomics calculates that the present level of proposed climate policies could actually pay for themselves by taking our own money back from OPEC.
Left wing nuts:
They are just as bad. I've read them saying the Vets are just trying to start a war with Iran. What? So we let OPEC pick our pockets because taking our own money back might start a war? Good energy policy would reduce the chance of war and weaken the Iranian tyrants.
Sensible climate policy (not the cost-doesn't-matter type) and sensible oil security policy (not the coal-into-oil type) are both inherently non-partisan issues. It's the opposite of conservative to risk our home planet. It's the opposite of liberal to oppose taking our own money back from mid-east religious tyrants. The polarization we see is the worst side of American politics. There is a middle path that is not a compromise wishy-washy position but rather a smart and powerful answer to the two biggest risks facing our country. No, scientists are not sure of the climate or the terrorists — but that's no reason to sit around waiting to see what happens to us.
P.S. Who's for OPEC?
I suspect, but cannot prove, that the real reason the US has never defended itself against OPEC is because it's an inside job. OPEC has the most powerful lobby in Washington and almost no one sees it. In fact one arm of that lobby, the National Petroleum Council, is actually a part of the Dept. of Energy — but funded almost entirely by the oil industry. The trouble is fundamental. Whenever OPEC raises its price—the world price of oil—all oil companies profit. In fact Big Oil does better than the Saudis because they need not cut back production to raise the price. OPEC does their dirty work. Exxon made roughly $30 billion off the last OPEC price spike. That's enough to buy quite few politicians. Naturally, though they will never say it, big oil companies are OPEC's biggest fans.
Converts between (and defines) all of the following:
Energy units: Btu, joule, kWh, Tonne of oil equivalent, etc.=]
Fuels: Oil, gasoline, hydrogen, ethanol, etc. By weight and volume.
Usages: Total energy used by US in 2005, energy per person-day, etc.
1. If a change does not happen automatically, hit the Calculate button.
2. The number 3.24 billion can be entered as 3.24e9. (e9 means "times 109 ).
Carbonomics is a book that tackles energy and climate policy together. Right now, "drill baby drill" and "save the planet," are out to kill each other. But when OPEC first used its "oil weapon" against the US and Europe, the global response was to fight the OPEC cartel, and the [#Republicans] did that by organizing a counter cartel [#(the IEA)] to fight OPEC.
The first Republican policy was good for energy independence and good for the environment. And that's the kind of policy we need today. But it's been subverted.
Now the IEA is working closely with OPEC and the the US oil industry has an official advisory committee [#inside] the US Department of Energy.
Of course this means Exxon is also against climate policy and so is the coal industry. But oil is the key to the energy/climate problem, because oil is where the money is. To fight this much money, we need a clever political strategy based on sound economics. Environmentalist have done a pretty good job of sounding one alarm, but the Republicans, back in the 1970's, actually did much better on the policy-economics front, although, in the end, the oil industry took them over.
Carbonomics covers both national and international policies. Here's a sample.
China cares about global warming, but it knows how to bargain. Gore just cares: "If the United States leads, [#China will follow]." Wrong!
"You cap and you trade [to] pay for investments in energy independence." No, actually, that's the reason. Cap and trade was invented by economists, and its purpose was to put a price on pollution—not to raise money for environmental subsidies. Economists hate that! What economists recommend (listen up Nancy) is a revenue-neutral carbon tax — one that raises no money for subsidies. And the best such tax is the untax, which doesn't raise any money for anything — so it's not really a tax.
Tax oil refineries and coal mines. That will raise energy prices. But refund all the tax revenues on a per-person basis just like Alaska does with its Permanent Fund. This will be stronger environmentally than a cap-and-trade tax that charges as much on average! And, the refunds will cover what we pay in higher energy prices.
|[=Republicans] Secretary of State, Henry Kissinger under President Richard Nixon|
|[=(the IEA)] The International Energy Agency|
[=inside] Believe It or Not
the National Petroleum Council, funded by the fossil energy industry, was made part of the Department of Energy when it was created in 1977.
|[=China will follow] Associated Press|
|[=permits from foreign countries] "A carbon protection racket," Christian Science Monitor, July 27,2009|
What's a tax? That's when the government takes your money and spends it. Right? What's an untax? That's when the government charges you but refunds all the money and doesn't keep any. What's the point of that?
An untax is almost magical, but not quite. There would be a charge for carbon emissions, but all the money would be refunded on an equal per-person basis. That's exactly what Alaska does with its tax on the oil pipeline—it puts the money in the "Alaska Permanent Fund" and out of that it pays every resident of Alaska, young or old, about $1,000 every year.
If you stay as good as average, yes. And if you do better than average, you come out ahead. But if you do worse than average, it will cost you — but only for the amount you emit above average. This is why it works. People are rewarded for helping out and charged for using more than their share.
Only big carbon producers would be charged—refineries, coal mines, gas fields. This would hit all the sources of carbon without bothering individuals or most businesses. And when the price of oil is very high, we could slack off on the charge to refineries since the OPEC tax would be high enough.
|Click to enlarge.|
|US energy use went almost flat for the 11 years of high OPEC prices. Graph is Figure 8.1 from Dick Cheney's 2001 National Energy Policy Development Group.|
Yes. It's a way to put a price on carbon emissions, and pricing is the way markets get people to do things — prices, not regulations, drive the whole economy. By far the most effective carbon policy ever implemented — probably fifty times stronger than any policy implemented by environmentalists — was carbon pricing. And it only priced oil carbon, not coal or natural gas carbon. That was OPEC's 1974 – 1985 oil-price-spike policy. That caused the world to change in a million different ways, CAFE standards on cars, gasoline taxes in Europe, general energy conservation consciousness. The lasting effect of that policy is still saving more carbon in the US (compared to what would have happened) than all the carbon now emitted by driving.
You can read Carbonomics—the one book that explains the untax—free on Google .
[=per Person] No we can't give you back your exact carbon charge.
That wouldn't work. Then the more you emit, the more you get back and that reward will exactly counteract the charge for emitting. But a per-person refund works perfectly.
Cap-and-trade has been more popular in the US and Europe, but here's a list of arguments for and supporters of a tax-or-untax.
James E. Hansen, Climate Scientist, 2008. “Cap and trade” generates special interests, lobbyists, and trading schemes, yielding nonproductive millionaires, all at public expense. The public is fed up with such business.
John Larson, House Democratic Caucus Chairman of Connecticut. NY Times . One of the most vocal supporters of a carbon tax.h
Al Gore, February, 2009. "I certainly believe that the simplest and easiest way to solve this problem would be a C02 tax that is 100 percent refundable."
Paul Krugman. The most straightforward policy would be an across-the-board carbon tax. • [A pollution tax] commands the assent of virtually every card-carrying economist.
Martin Weitzman, a Harvard economist. “It’s much easier for me to think of scenarios where cap-and-trade goes crazy, prices fluctuate like mad, and people get turned off,” said “That could end up discrediting the system for a decade or a generation.”
Joseph E. Stiglitz has international carbon taxing including enforcement with trade sanctions as advocated here and taught us about the WTO precedent for using such sanctions. In January 2010 he published and op-ed advocating "a commitment by each country to raise the price of emissions (whether through a carbon tax or emissions caps) to an agreed level."
Fredrik Reinfeldt, Prime Minister of Sweden, Taiwan News , June 10, 200
Thomas L. Friedman, NY Times , April 7, 2009 "Advocates of cap-and-trade argue that it is preferable to a simple carbon tax because it fixes a national cap on carbon emissions and it “hides the ball” — it doesn’t use the word 'tax' — even though it amounts to one. ... That was true ... In the past two weeks, you could hear a chorus of Republicans, coal-state Democrats, right-wing think tanks and enviro-skeptics all singing the same tune: 'Cap-and-trade is a tax.'"
David de Kretser, Governor of Victoria, Australia, Stock & Land , April 2009. Favors a carbon tax.
Greg Ebel, President and CEO of Spectra Energy Corp, Huston Chronicle , April 2009. "But a carbon tax – not cap-and-trade – better stimulates the substantive behavioral shift we need ... The best carbon tax would be revenue neutral, allowing both businesses and individuals to innovate, invest and deliver lower carbon emissions from their activities and be neutrally affected or, potentially, even better off economically."
From the Economist (an excellent and moderately conservative magazine)
DURING Canada’s 2008 federal election campaign Stephen Harper, the Conservative prime minister, warned that an opposition promise to introduce a carbon tax would “screw everybody”. Partly for that reason, Mr Harper is still the prime minister. But in the same year, the provincial government in British Columbia introduced a carbon tax of its own. Despite the levy, its economy is doing well. What is more, the tax is popular: it is backed by 54%, says a survey in the province by Environics, a pollster. Gordon Campbell, the Liberal premier who introduced the tax, won a provincial election the next year.
When arguing for the carbon tax, Mr Campbell faced the same political obstacles that have stymied such plans elsewhere. Only environmentalists were enthusiastic. Businesses feared it would add to costs and slow the economy. The leftish New Democratic Party (NDP) worried it would hurt the poor. But these fears have proved groundless. “The carbon tax has been good for the environment, good for taxpayers and it hasn’t hurt the economy,” says Stewart Elgie, a professor of law and economics at the University of Ottawa.
It helped that the law introducing the levy required its proceeds to be recycled back to individuals and companies as cuts in income taxes. The new tax was initially set at C$10 ($10) per tonne of carbon-dioxide emissions, rising by increments of C$5 per year to C$30 in 2012. It seems to be working as planned. Since 2008 fuel consumption per head in the province has dropped by 4.5%, more than elsewhere in Canada. British Columbians use less fuel than any other Canadians. And British Columbians pay lower income taxes too.
The new tax has not weakened the province’s economy, which has been boosted by high world prices for its commodity exports. Unemployment is slightly below the national average, and growth slightly higher. Because the tax started low and its rises were set out in advance, businesses had plenty of time to make plans to cut their carbon use.
A recent poll by the Pembina Institute, a green think-tank, found that 70% of British Columbians think their province should be a leader in cutting emissions. Christy Clark, Mr Campbell’s successor as premier, is committed to keeping the tax. Adrian Dix, the NDP leader in the province, says his party should have supported it. Both leaders want future carbon revenues to be used for energy-efficient infrastructure projects rather than more tax cuts. Only John Cummins, the Conservative leader in British Columbia, still opposes the tax.
At C$25 per tonne, British Columbia’s tax already exceeds the price of carbon in Europe’s emissions-trading scheme. But it is still too low to prompt radical changes in behaviour: it adds just five cents to the price of a litre of petrol. Getting the most energy-intensive industries to make big cuts might take a tax four times as high. Even so, British Columbia has shown the rest of Canada, a country with high carbon emissions per head, that a carbon tax can achieve multiple benefits at minimal cost. Unless Mr Harper reconsiders his opposition to the idea, in the future it might be him who faces being screwed.
July 16, 2009. If you want to set back environmentalism, just enlist California's Air Board. They gave us those millions of Zero Emission Vehicles back in the 1990's. This time we're getting way-cheaper-than-free climate control. They say "It's amazing." Here's how they do it: Pick your favorite projects, make costs estimates, then ... just do all of them, even the horribly expensive ones.
Dumb: In 2008 they came up with a plan -- their Scoping Study -- which calls for 27 different carbon reduction measures. They figured the savings from these would be about double their costs to get emissions to 30% below what they would have been. Chairwoman Mary Nichols remarked "It's amazing." They decided to get five independent reviews—none of the reviewers knew who the others were. Five Ph.D. economists all came to exactly the same conclusion. It's amazing all right, amazingly unbelievable.
Dumber: I can understand over-optimism about your pet projects. But they compiled a list of how much it cost to use each of the 27 measures they picked, to save carbon. And what bothers me is that those costs ranged from plus $156 per ton of CO2 saved to minus $408. Now if someone told you that you could buy something for $156 or you could be paid $408 for taking the the exact same thing, what would you do? Well if you're the Clean Air Board you'd say, Oh, I'll have a random amount of every measure. In fact, the measure they bought second most of was Renewable Electricity for $133/ton carbon saved. By their own calculation, they could have bought a whole lot more carbon reduction for under $20/ton using cap and trade. But they didn't. They wanted a whole bunch of the $133 carbon instead. There is no difference. Saving a ton of carbon dioxide one way or another has precisely the same impact on the climate.
I am not making this up. The State Legislative Analyst’s Office, said "Selection of particular measures and the mix of measures appear not to have been directly influenced by cost-effectiveness consideration." Right. I mean who would have thought to consider cost-effectiveness? We're talking environment. It's sacrilegious to consider cost.
What's going on? What I really don't understand is why most environmentalists will not say one word about this. The five reviewers did and they are all environmentalists. But does it really require a Ph.D. to figure out it's best to buy the cheap one and not the super expensive one? Or is their something funny going on in the environmental world?
Bottom line for saving the environment: Don't waste other peoples money. (1) It's morally reprehensible, (2) It will make you unpopular, (3) This will reflect badly on environmentalists generally. (4) This will mean we take less care of the environment.
Wasting other people's money means: Using tax dollars to abate carbon but not buying the cheapest abatement available, and instead, buying your pet projects.