Saturday, March 31, 2012
Beware, Big Brother is here.
Friday, March 23, 2012
President's Energy Justification
Friday, March 9, 2012
Response to the Presidents energy policy speech March 7, 2012
On Wednesday our President put a request in to congress that they increase the tax credit for purchasing a Chevy Volt, quasi-electric car, to 10K from the current 7.5K. In spite of the 7.5K credit, Volt sales have been so anemic that the production facility has been forced to shut down for 5 to 6 weeks and lay off 1300 auto workers. I just wonder when his car Czar or one of the ideological economists on his staff will get around to explaining to him that markets don’t work when subsidies are necessary to create interest in a product. I also wonder when the said economists and Czar are going to explain to him that the people who are buying the Volt are not your everyday “99%ers” but the wealthy who are only buying the car to make a statement that they are being green. Perhaps the President should increase the Volt subsidy to 40K for anyone who makes less than 130% of the poverty level. I mean hell, we are already paying for it with taxpayer dollars and the Pres really likes to help the "handicapped" with his redistribution theories. It can be titled the next phase of the "cash for clunkers" program.
The Volt subsidy is only one indicator of the complete lack of an energy policy coming out of the Presidents mouth on a regular basis. At a press conference this week, President Obama took on the “politicians who claim the have a 3-point plan to bring gas prices down to $2.50 a gallon”. He said we should all tell them we know better. President then claimed there is no “silver bullet” to bring down gas prices. On this issue, Mr. President, yes there is. History has shown that when production increases are approved or rcovered oil is coming into the market, prices drop. Anyone who lived and drove in America during the summer of 2008 will remember that oil spiked to its highest prices due to production disruptions, but then dropped from a high of $147 per barrel in August to $33 per barrel on the day of your inauguration. This didn’t result from an increased supply so much as the approval of increased production. Actually approving the Keystone XL pipeline and approving drilling permits on public lands will have the same affect in bringing prices down. Mr. President, what we know, is that at the time you took office, the cost of Gasoline averaged $1.85 per gallon. What we know, is that gasoline is now averaging more than $3.65 per gallon. What we know is that your policies are forcing gas prices in the wrong direction.
Our President makes the claim that oil production is now at a higher level than it has been in more than 8 years. About this, he is correct, but we really have to understand the rest of the story, as the old saying goes. The increases in production are coming from privately held properties in states where permitting takes only weeks. In states where the EPA and DOE do not restrict the permitting process. The increased production comes from states where recovery begins in less than a year.
What our President does not mention is that he has prohibited, not restricted, but prohibited, the development and drilling of new wells in more than 70% of the coastal development area. What he doesn’t mention is that he has restricted the development of most of the Alaskan shelf to oil recovery. What he doesn’t mention is that since he has come into office the number of exploration and drilling permits in the continental US has declined by more than 14% and the number of offshore permits has declined by more than 6%. What he doesn’t mention is that under his watch, the average time to obtain a permit on federal land has extended to more than 3 years and the cost of obtaining a permit has increased by more than 200%.
In the states where private recovery is not being inhibited by this administration, the production of oil has increased by more than 20% over the past 3 years. What our President doesn’t mention is that in the areas of private development there is a jobs boom and unemployment is effectively at 0%. In those states, employers can’t find enough people to fill the positions available.
The President claims that the oil market is world wide and what happens in America doesn’t affect the price of oil. Let me provide two examples of just how wrong this is. The first, compare the price of West Texas Intermediate (WTI) to BRENT. WTI is American and Canadian oil traded on the international market. BRENT is the OPEC oil traded on the international market. The average daily price differential is about $20.00 per barrel at any given time. Yes, WTI averages about $20.00 per barrel less. If the price of oil is determined by the world market, why is oil recovered in America not selling at the same price as BRENT?
My second example, WTI is know as “sweet” oil. Meaning that it has very low sulfur and few impurities. If you look at a jar of oil recovered from the Texas or Dakota oil fields, it has a greenish hue and is almost clear. BRENT oil from Saudi, Iran, Venezuela and some of the other OPEC countries is high in sulfur and impurities. In a jar the recovered oil is brown and is impossible to see through because it looks like mud. The reason I mention this, the cost of refining BRENT oil is much higher than the cost of WTI. Bottom line, every barrel of oil produced in America costs less to recover and less to refine than the world oil product. So, yes Mr. President, increasing the production of oil in America, even by relatively small amounts, will affect the price of gasoline in our country.
Now, consider another issue in the cost of gasoline, ETHANOL. Our government, in its infinite wisdom, decided that it wanted to have our fuel burn cleaner so it subsidized the development of ethanol. In other words, it pays the producer, with our tax dollars, for every gallon of ethanol produced. When that failed to produce the desired results because the product didn’t meet market standards, the government stepped in and regulated that all gasoline producers must blend gasoline with at least 10% ethanol. The result? Increased cost of fuel and lower gas mileage, but the ethanol producers are now profiting hugely from our tax dollars. Don’t misunderstand, this is not an action taken by our current president, but he hasn’t made any attempts to eliminate the subsidies or requirements to blend gasoline with ethanol either. Eliminating this requirement will cause an immediate drop in gas prices and force the ethanol producers to produce a competitive product or go out of business.
This is just another example of how our President tries to offer platitudes to the unknowing and uninformed in order to bolster his ideology. We have to watch what he does and not what he says, because the two are very different. In fact, actually doing what he says he is doing rather than talking the talk will bring down oil prices dramatically. As we have seen in the past, a true energy policy does include “all of the above”. In order for the all the above scenario to work, the government has to encourage an all the above approach through a market based solution. When the government subsidizes a product or an industry with incentives, loan guarantees, subsides or tax credits, the developers are no longer required to meet the competitive requirements of the marketplace and become less innovative. When the government restricts the development and recovery of natural elements in favor of less efficient artificial products, it corrupts the marketplace and causes the price of all goods and services to increase. This is basic economics that even a lawyer/politician should be able to understand.
The next time the President tells us that we should let people know we are smarter than to believe a politicians line, we should agree. We should tell him we are smarter than to fall for his disingenuous lines and half truths. We need to tell him we would have much more respect for him if he were willing to tell the truth and let the chips fall where they may. We are tired of being treated like we’re not smart enough to see through his pandering speeches.
Saturday, March 3, 2012
The latest Rushbo Controversy
Thursday, March 1, 2012
Natural Gas -- the real obstacles to its adoption as a vehicle fuel
I wrote this article in September of 2009. It is as appropriate today as it was then and to date there has been very little progress and no reduction in the onerous and unnecessary regulations.
In the very early years of the 20th century the “Horseless Carriage” came into being. As this new technology evolved everything from steam to electricity was used to power these vehicles. As the demand for convenient, fast long range transportation developed, gasoline became the fuel of choice for the following two reasons -- the power coefficient and the availability. Gasoline is a very powerful explosive when ignited in a confined space and is also easy to transport in a container. This makes it very suitable for use as a transportation fuel. As a result, the entire transportation industry, from trains to planes to automobiles adopted oil derivatives as their preferred fuel.
During the period from the early 20th century through the beginning of the 1970’s, automobile use in the US increased from Henry Ford creating the Model T through Herbert Hoovers campaign promise of “A car in every garage and a Chicken in every pot” to the late sixties hot rods and drag races. The automobile became an iconic expression of American Freedom. Supplies of gasoline were abundant and cheap. There was little incentive for technological improvement except to make the car go faster or look better.
As the seventies unfolded, we experienced the first signs that the golden days of readily available oil had reached their zenith. Coming of age at the end of this era, I too was a fan of the hotrod, but remember well the day during my senior year in High School when I had to pay the exorbitant sum of $7.00 to fill the tank in my 1969 American Motors AMX.
Around the same time, we experienced our first gas shortages and lines at gas stations. Our President, Richard Nixon, rather than push a national referendum to seek alternative fuels, decided to place wage and price controls on the purchase of gasoline products. As any economics student knew, and as history has shown, this had an opposite effect than the one desired. Gasoline became scarce and industry was negatively impacted to the point that a recession was felt across the entire country.
People were also becoming concerned about the harmful pollutants being emitted from the tailpipes of our cars. Government stepped in and legislated emissions requirements on the auto manufacturers. Gas efficiency, never really great, plummeted and emissions testing became a requirement in order to license your automobile.
When Jimmy Carter became our president, his administration reviewed the situation with the oil supply, determined that America was using more oil than domestic production could supply and that America was importing an incredible 20% of our domestic demand. His response -- create a bureaucracy -- The Department of Energy, to develop ways to decrease our dependence on the importation of foreign oil. The result of this was more shortages, rapidly increasing prices and a bureaucracy which today has a budget of 16.5 BILLION DOLLARS per year while we as a nation have increased our imports of foreign oil to approximately 50% of demand.
During this period of turmoil in the marketplace, the government has responded with additional legislation on fuel efficiency and emissions standards. Regulations have been layered one on top of the other until the goal of lower emissions and fuel efficiency have become contravening interests.
Advance to the spring of 2008, oil traded at the stratospheric price of $55.00 per barrel on the world market. By June, it had jumped to $86.00 per barrel, yet demand continued to rise while supplies coming out of the Oil Producing and Exporting Countries (OPEC) declined due to the war in
There are numerous alternatives on the horizon, electric cars will continue to become more popular, but will not become viable until significant advances in battery technology are achieved. Diesel is growing in favor, but doesn’t come close to reducing our dependence on foreign oil. Hydrogen fuel cells remain quite a few years from perfection and distribution poses a major problem. The most reasonable alternative in the world today is Compressed Natural Gas (CNG). Natural gas is often described as the cleanest fossil fuel, producing less carbon dioxide per BTU delivered than either coal or oil, and far fewer pollutants than other fossil fuels.
Currently, Natural Gas is selling for less than $2.60 per thousand cubic feet. For comparisons purposes, a gallon of gasoline produces 124,000 British Thermal Units of energy, while 1000 Cubic feet of Natural Gas produces 1,028,000 British thermal units of energy. Both cost approximately $2.60 at today’s prices. Yet, cleaner burning Natural Gas does not compete with gasoline as a transportation fuel because it has been much harder to package and meter in the automobile. The major difficulty in the use of natural gas is transportation and storage because of its low density. The easiest form of delivery is via pipeline and pipelines now cover more than 70% of America. Natural gas pipelines are economical, but many existing pipelines in
Contained within the borders of the
In countries around the globe, primarily the developing countries of Pakistan, Argentina, Brazil, Iran and India use of CNG as a transportation fuel is becoming commonplace. CNG use as a transportation fuel in America is primarily limited to fleet vehicles.
Why has America been slow to convert to the use of CNG? Easy availability of gasoline is one answer. On many street corners, in every community, there is a filling station which open 24 hours per day seven days a week. Another reason is a lack of desire. As long as gasoline is cheap and readily accesible there has not been a desire to seek out alternatives.
As the cost of gasoline increases, why isn’t America rushing to convert their cars to run on Natural Gas? The answer is our government. Natural Gas as a transportation fuel is regulated by our government to the point that producing CNG vehicles is much too costly. Conversion of gasoline or diesel powered engines requires a Certificate of Conformity from EPA or an Executive Order from the California Air Resources Board (CARB). This requirement applies to each specific engine family. This means that each type of engine produced must undergo certification. To obtain a Certificate or EO, the manufacturer must submit substantial emissions performance data and related documentation to EPA and/or CARB for review. Additionally, manufacturers may be asked to submit a converted vehicle for rigorous testing to verify this data. The process of engineering, manufacturing, installing, pre-testing and then submitting a proposed retrofit system to an EPA- or CARB-approved laboratory for certification is a time-consuming and expensive process that costs $200,000 or more per engine model. It is economically unrealistic to expect the major automobile manufacturers to undergo this expense for every engine model they build and offer when the demand is so narrow currently.
Most vehicles driven in the
Vehicles which fall outside the EPA guideline, those older than 10 years or with more than 120,000 miles, encounter another obstacle. They are still required to pass emissions tests. When converted to CNG, emissions levels are so low that an error is indicated on the testing equipment resulting in a fail situation. Without passing the test, State motor vehicle department authorities will not allow the automobile to be licensed.
On
There is no question that CNG produces fewer emissions than burning oil based fuel. This is undisputed fact. There is no argument that Natural Gas supplies come from within our country. The supply of Natural Gas is sufficient to power every vehicle in
We don’t need to spend another 150 Million Dollars and 5 years to tell us something we already know. We need to use common sense and eliminate all restrictions and laws on the conversion of vehicles. We do not need protection us from ourselves. Get the government out of the way and let the private sector and market conditions determine what will work most effectively. If we do, within 10 years, we will virtually eliminate the import of foreign oil, all the while, cleaning our air.