American Freedom from Oil: A Bipartisan Pipedream

The following guest essay is by Kevin Kane. Kevin is a market analyst, economist, Asia political affairs strategist, and Korean language linguist living in Seoul, South Korea.

American Freedom from Oil: A Bipartisan Pipedream

By Kevin Kane

During election campaigns, presidential candidates, policy leaders, and pundits pander to both American fears and desires when they demand that the U.S. should pursue “energy independence” by eliminating oil imports. This has been a rallying cry of every President since the 1970s when American domestic production began a steady decline that continues through today.

Is energy independence a realistic policy, or as we are a part of one globally integrated economy, do we need a more relevant global energy strategy that captures the inherent economic and financial vulnerabilities associated with our age of irreversible interdependence?

Perhaps we need to look outside our domestic tunnel vision and broaden our perspectives on energy security. Seeing the bigger globalization picture will require leaders, starting with President Obama, to refocus the world’s perspective on energy from the zero-sum national to positive-sum international level. Essentially, the world needs a global energy strategy.

Global Energy Security

If leaders are serious about energy independence, they will ask the more appropriate energy question, “How can we create global energy security?”

When asking this more relevant question, we can derive many proposals, beginning, but not limited to, the following three general approaches:

(1) First, recognizing that global economic integration creates mutual energy insecurity, President Obama could propose addressing the topic through the G20, and call for the creation of a global energy security committee tasked to draft a global energy strategy proposal.

(2) Second, this global energy strategy should focus on building cooperation, creating transparency, eliminating barriers to foreign energy investment, eliminating energy trade-related tariffs, advancing liberalization, coordinating R&D, facilitating technology sharing, and managing mutual energy insecurity.

(3) Third and finally, we have to cease “framing” energy security as a national goal, and rephrase our terminology to reflect our mutual international energy insecurity.

Our Oil Interdependence

American leaders, and the proposals of many environmental, renewable energy, and oil company lobbyists, individually or collectively, are incapable of “freeing the U.S. from foreign oil.” While the U.S. may benefit from reducing oil imports and increasing investments in offshore drilling, energy efficiency, and oil substitute technology, we must recognize that these efforts do nothing to free the American economy from oil’s transnational social, economic, and financial linkages.

If one globalization-connected country’s economy were to experience a supply shortage or an industry-crippling price shock, seemingly distant and unrelated, but economically integrated, countries will feel the effects of these shocks in their own trade and financial sectors. Thus, in an era of globalization, nations connected to the global economy are mutually vulnerable to the effects of oil price and supply shocks regardless of their independent national energy strategies.

Consider how America’s subprime mortgage crisis rippled through seemingly unrelated economies across the entire globe, from South Korea to Russia. We should expect the same economic-linkages to spread the effects of an oil supply or price shock to seemingly energy-independent economies.

American policy leaders need to recognize that eliminating oil imports will not create energy independence.

Leader of the Energy World

As the tip of the globalization spear, American leaders need to think much bigger about how the U.S. will achieve energy security in a world where one nation’s energy insecurity is another seemingly unrelated nation’s economic vulnerability. American leaders have to recognize that the U.S. is only as energy secure as the world’s least energy-secure globalization-connected economy, which includes nearly every developed and developing country in the world. Americans pride themselves on being the leaders of the free world. Perhaps it is about time to lead the world towards universal energy security.

Biography

Kevin Kane is a market analyst, economist, Asia political affairs strategist, and Korean language linguist living in Seoul, South Korea. Kevin holds a BA in political science from Georgia State University and a Master of International Studies with a concentration in international trade and economics from Seoul National University.

Kevin has seven years of military experience serving in Asia and the U.S. as a leader in project management and government affairs, two years of intensive academic study in energy economics and the oil and gas industry, and three years of cumulative internship, fellowship, and consultant experience working alongside Asia policy strategists and fortune 100 business advisors. More details can be found in his resume here.

We Want Energy Independence!

That is, as long as it doesn’t increase gasoline costs by $0.40/gallon. That is one of a number of findings from Public Agenda in a new report called The Energy Learning Curve™ (PDF):

What should we do about the energy issues we face? Public Agenda, in its Energy Learning Curve study released today as part of Planet Forward, found that despite a lot of partisan debate, Americans find common ground on many proposals, including using more alternative fuels. There’s also a lot of agreement on what not to do, especially making it more expensive to drive. Our research suggests this consensus may be shaky as policymakers take up the issue – as many people had both unrealistic ideas and misconceptions about energy production and use.

I was surprised by public opinions on a few points, but mostly the survey confirms my own experience in dealing with people over energy issues. Some of their findings:

Finding 1: Right now, a majority of the public sees the price of energy and dependence on foreign oil as troubling problems. Significantly, they also believe the problem won’t go away when the price of energy falls. Climate change, however, is less of a concern.

Finding 2: There is substantial consensus on the proposals that the nation should pursue, particularly alternative energy, conservation and incentives to become more efficient. These seem promising to the public, but they may not have realistic assumptions about how quickly and easily these alternatives can be achieved.

Finding 3: Just as there’s widespread support on promising ideas, there also seems to be broad agreement on what’s off the table. Anything that increases the cost of driving is soundly rejected by the public.

Finding 4: The public’s knowledge level is low on energy, with significant numbers who do not know some basic facts about how energy is produced. This calls into question how firm the consensus is and how well it will hold up under pressure.

Emphasis mine. First, some comments on the findings. 80 percent responded that they worry that dependence on foreign oil will involve us in wars and conflicts in the Middle East. But 57 percent said they wouldn’t be willing to pay an additional $0.40 a gallon to help achieve energy independence. (Oddly, 68 percent agreed that “We should take whatever steps are necessary to gain energy independence even if it increases the cost of gas, electricity and heating fuel over the next few years.”) A majority reject an increase in gas taxes regardless of the reason. (I would like to see the results if one of the options was my proposal to refund the tax via income tax credits).

The level of energy knowledge is abysmal. To me, this is the biggest obstacle in adhering to a long-term, coherent energy policy. 39% of respondents couldn’t name a fossil fuel. A majority – 51% – couldn’t name an alternative energy source. 65% thought that most of our oil imports come from the Middle East. The report sums up the problem quite well: Without certain facts, the public can’t judge what’s realistic and what’s not, and that’s bound to hamper constructive decision making. I would add that it isn’t just the public; it extends to the politicians that we elected.

The survey identified four distinct groups: the Disengaged (19 percent), the Climate Change Doubters (17 percent), the Anxious (40 percent) and the Greens (24 percent). The Disengaged don’t know much about energy, and don’t care to. The Greens are reasonably knowledgeable about energy, and distributed across both major political parties. The Anxious are more likely to be unemployed, Democrat, less educated, and under 35.

The Doubters were more likely to be male, Republican, and have a higher level of college education than the general public (one of the surprises to me). 90% of the doubters don’t worry about global warming at all, 79% would accept a nuclear plant in their neighborhood, and 89% favor increased drilling.

In the Afterword, they hit upon why I do what I do:

Climbing the learning curve involves three distinct stages. Consciousness-raising to make the public aware of the threat is the first stage. The second — and longest and most arduous stage — involves the need for people to confront their own wishful thinking and denial as they wrestle with the need to make painful tradeoffs and sacrifices. The third and final stage is resolution and support for remedial action.

Energy is such an integral part of all of lives, that I believe it is critically important to make sure the voting public is well-informed on energy issues. Too often we engage in wishful thinking, where algal biodiesel or cellulosic ethanol will come riding to the rescue as our domestic energy supplies deplete. Ironically, the Public Agenda website encourages people to go to Planet Forward to share your ideas of how we can get off of fossil fuels. One of the features is a segment on algal biodiesel, which to me falls squarely in the category of wishful thinking.

The take home message for me here is that it is important to continue pushing the dialogue on energy issues. Deep down I am optimistic that as fossil fuel prices continue to stretch people’s budgets, they will become more interested in informing themselves on energy issues.

Yes He Could

Feasible? Yes. Realistic? No.

Do I believe the U.S. can be energy independent? Yes, I believe that with certain draconian measures, the U.S. could achieve energy independence within 10 years. But emphasis must be placed on ‘draconian.’ So yes, I think Barack Obama could make good on his campaign promises and make the United States energy independent. However, it would almost certainly make him a one-term president because the population would rebel at the cost of energy independence.

I covered the expected contribution of renewables to the U.S. electricity picture in The Nuclear Comeback. Conclusion? They better start building more nuclear plants if the administration wants to move away from coal. So let’s have a look at the oil picture and get our heads around just what energy independence might look like.

We Use a Lot of Oil

Here are some numbers, courtesy of the Energy Information Administration’s database. In 2008, the United States consumed 19.4 million barrels of oil per day (bpd) and produced 6.7 million bpd (including LNG). We imported 12.9 million bpd. (You may notice that there is a 0.2 million bpd discrepancy, which is partially caused by changes in inventory levels). So, in order to bring the United States to a state of energy independence, we have to somehow eliminate those imports through some combination of decreased demand and/or increased supply.

One way the U.S. could be energy independent is if we reduced our consumption by 65% to 6.7 million bpd. This would take the 23.6 barrels consumed in 2008 by the average person in the U.S. down to 8.3 barrels. That would put U.S. per capita consumption of oil between that of Croatia and Mexico. For reference, here is a sampling of per capita consumption of oil from various countries around the world (extracted from Energy Statistics – Oil – Consumption (per capita) (most recent) by country).

Country	Per Capita Oil Usage (bbl/yr)
Saudi Arabia	30.6
Canada	25.9
USA*	23.6
Australia	17.3
Japan	14.3
Germany	10.9
UK	10.6
Croatia	8.4
Mexico	7.1
Brazil	4.6
Egypt	3.2
Afghanistan	0.06
Chad	0.05

Table 1. Oil Per Capita Energy Usage for Selected Countries

* Oil usage for the US is from 2008; usage for all other countries is from 2007.

So the US could still use almost twice the per capita consumption of Brazil and achieve energy independence (because we produce a lot more oil per capita than Brazil). But how likely are we going to be to reduce our consumption levels down to less than that of Germany or the UK? It’s hard to imagine unless oil becomes very, very expensive. But that’s an option. President Obama could make oil very expensive and potentially pull usage down toward U.S. production levels. Of course in the process, the recession would probably deepen and Obama would lose the election in 2012. More on that later.

Can Renewables Fill the Gap?

But that’s not the plan. The plan primarily involves filling the supply gap, with renewables as the most important part (see quotes below) of that plan. So what might renewables contribute? There are lots of small contributions from areas like corn ethanol and soy-based biodiesel. But let’s put those in perspective. In 2008, the US produced a record amount of ethanol: 9 billion gallons. How much does that amount to, given our need to close a gap of 12.9 million bpd of imported oil in 2008? Converted into barrels per day, 9 billion gallons per year amounts to 0.59 million barrels per day on a gross basis, but because of the lower BTUs it would only displace 0.32 million bpd. (The BTUs per gallon for a barrel of oil are higher than for gasoline; relative to oil, ethanol has 54% of the BTUs per gallon). For the purposes of this exercise, we will pretend for a moment that there aren’t big quantities of fossil fuels that enabled that 9 billion gallons.

Thus, last year’s record ethanol production is a drop in the bucket relative to the oil we use. How much ethanol – as a reference point – would we need to close that gap? Given that last year’s ethanol production in theory already should have displaced some level of oil, there is a gap of 12.9 million bpd to close with incremental ethanol. How about an additional 364 billion gallons, or more than 40 times last year’s record number? For reference, global ethanol production in 2008 is estimated to be 17.3 billion gallons.

Campaign Promises Revisited

I don’t know about you, but I don’t see any combination of renewables being able to close a gap like that. Remember what Obama said during the campaign?

We have to have energy independence, so I’ve put forward a plan to make sure that, in 10 years’ time, we have freed ourselves from dependence on Middle Eastern oil by increasing production at home, but most importantly by starting to invest in alternative energy, solar, wind, biodiesel, making sure that we’re developing the fuel-efficient cars of the future right here in the United States, in Ohio and Michigan, instead of Japan and South Korea.

Note what is “most important” in the drive for energy independence. To me, this is an example of someone who either doesn’t understand the scale of the issue, or someone who is just trying to score debate points.

Later on he elaborated:

The second point I want to make is — is the issue of energy. Russia is in part resurgent and Putin is feeling powerful because of petro-dollars, as Senator McCain mentioned. That means that we, as one of the biggest consumers of oil — 25 percent of the world’s oil — have to have an energy strategy not just to deal with Russia, but to deal with many of the rogue states we’ve talked about, Iran, Venezuela.

And that means, yes, increasing domestic production and off-shore drilling, but we only have 3 percent of the world’s oil supplies and we use 25 percent of the world’s oil. So we can’t simply drill our way out of the problem.

What we’re going to have to do is to approach it through alternative energy, like solar, and wind, and biodiesel, and, yes, nuclear energy, clean-coal technology. And, you know, I’ve got a plan for us to make a significant investment over the next 10 years to do that.

And I have to say, Senator McCain and I, I think agree on the importance of energy, but Senator McCain mentioned earlier the importance of looking at a record. Over 26 years, Senator McCain voted 23 times against alternative energy, like solar, and wind, and biodiesel.

And so we — we — we’ve got to walk the walk and not just talk the talk when it comes to energy independence, because this is probably going to be just as vital for our economy and the pain that people are feeling at the pump — and, you know, winter’s coming and home heating oil — as it is our national security and the issue of climate change that’s so important.

How About Drilling?

Those are certainly reasonable comments, but they won’t make us energy independent. Also, because the talk of drilling from Obama started just as McCain was gaining some traction with the ‘drill here, drill now’ campaign, many people felt like it was a campaign promise that wasn’t destined to be carried out in an Obama administration. However, it looks like Obama has looked at the issue closely enough to recognize that new production is going to have to be part of any energy independence plan that has any chance of success any time soon:

Obama to Remake Drilling Policies

Wesley Warren, director of programs at the Natural Resources Defense Council, said, “They have made a commitment to really be science-based, to look at all the facts before they make a decision. It is a new way of doing business.” The early signals from Obama and his cabinet agencies speak to that new way. Shortly after taking office, the president reversed orders issued in the closing days of the Bush administration that would have dramatically expanded offshore drilling.

Still, the Interior Department went ahead this week with a long-planned auction of drilling tracts in the Gulf of Mexico.

And Interior Secretary Ken Salazar has indicated in recent days that he’s looking for ways to expand offshore drilling in an environmentally conscious way. He has even said he’s open to allowing limited drilling at Alaska’s Arctic National Wildlife Refuge if it can be done from outside the refuge. “Oil and natural gas are, and will remain for many years to come, a cornerstone of our nation’s energy base,” Salazar told the American Petroleum Institute Thursday. “This is not, as some have suggested, a war on the oil and gas industry.”

There are still plenty of skeptics:

[Charles] Drevna of the National Petrochemical and Refiners Association said he’s concerned about Obama’s “anti-oil-refining-industry rhetoric,” the suggestion that big energy companies should face higher taxes as the nation shifts toward renewable sources.

“It is this talk about energy independence; it’s not achievable, and it probably is not desirable,” Drevna said. “Energy independence means energy isolation, and we simply cannot afford it if we expect the economy to grow.”

One could expect that we could open up offshore areas of the U.S. and potentially get some incremental production, but the administration certainly doesn’t plan to make it easy. They have more or less declared open season on the oil industry, and are pursuing policies that are certain to discourage U.S. oil production. Geoff Styles recently discussed the folly of punishing our own oil industry in The Wrong Enemy. Excerpts from his article:

I would paraphrase the Obama energy strategy as seeking to reduce US oil imports and greenhouse gas emissions by strongly promoting renewable energy and energy efficiency. Unfortunately, the administration’s actions risk putting the domestic oil and gas industry on the wrong side of the divide that creates.

Rather, we need to look to our self-interest, here. When an oil company drills in the US, its production backs out imports directly, barrel for barrel. It pays US salaries–attractive ones–and it pays hefty taxes: income taxes at a 40% effective rate, along with billions of dollars in royalties, rents and bonus bids collected by the government. When a US oil company drills elsewhere, much of the benefit is captured by foreign governments, and when the oil we import comes from a non-US supplier, our trade deficit swells and the federal government only gets to tax the profits on refining & marketing, which are often pretty thin.

Styles argues that the policies that are being pursued will almost certainly result in an increase in U.S. oil imports. If U.S. production is discouraged – and renewables aren’t up to the task of filling the gap – then guess what? Our imports will increase, and we will increase our energy dependence.

A How To Guide to Energy Independence

So how would I go about making the U.S. energy independent? As I said, it would require draconian measures. First, I would try to increase supply by incentivizing all forms of energy production. As I argued in an essay last year, I would use the proceeds of expanded offshore drilling to fund higher efficiency vehicles, electric transport, mass transit, and biofuels that aren’t highly dependent upon fossil fuels for their production. This should start to pull supply and demand closer together. But even my most optimistic scenario would still require substantial oil imports.

To close the rest of that gap requires the draconian piece. There are two choices. One is to ration fuel. Imagine that you had to get by on half the fossil fuel you normally use. Could you? I think most people – if they really dug down – could do it. It wouldn’t be easy, and we would certainly lose a lot of convenience. Someone complained to me last year that when gasoline got up to $4 a gallon, it was a real inconvenience for the family because they had to start consolidating trips. Boo-hoo. Nobody said it was a piece of cake; if it was we would already be energy independent.

The other option is to ration by price. The problem with this one is that there really isn’t a good feel for what kind of prices it might take to bring consumption in line with production. It could take $20/gal gasoline. Could we afford that? I would argue that we could, if the incremental gasoline tax was offset by income tax cuts. I have covered what I think would be a politically viable scheme for increasing carbon taxes in The Case for Higher Gas Taxes. But again, the problem with this option is that we don’t have a good model for how high the price would need to go before destroying enough demand.

But in my opinion, this is what it would take to become energy independent within the next decade. There is a reason that countries in Europe – with their mass transit and fuel efficient vehicles – still can’t achieve energy independence. It’s hard. It will always be difficult to achieve in a Democracy, where you have to make the voters happy lest you be voted out of office. Voters who have to make big sacrifices don’t look favorably on political leaders who ask for it.

Therein lies the problem for Obama. Yes, he could. But not with the policies he is pursuing. So, at the end of the day, “No, He Won’t.”

Why Energy Independence Eludes the U.S.

The following is an essay I wrote by request for another website. Regular readers won’t see anything they haven’t seen before, but I figured I would go ahead and post here as well. It is a condensed version of some of the topics I have hit here several times.

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Every president since Nixon has promised to make the U.S. energy independent. Yet each successive administration has seen us become ever more dependent upon fossil fuels extracted from foreign lands. Why does a noble goal such as energy independence elude the U.S.? Let’s investigate.

Money Talks

The U.S. is an energy hog. We are 5% of the world’s population, and we consume 25% of the world’s oil. We consume on average double the amount of oil of the average European, and six times the amount of oil of the average Brazilian. I will get to Brazil in a moment, but why should we consume so much more oil than Europeans? Are they simply that much more enlightened than we Americans? One could make that argument, but as someone who has lived in Europe on multiple occasions, I don’t think that’s it. I think it’s simply that people respond to price.

European governments have placed very high taxes on gasoline for many years. And in order to favor more efficient diesel engines, they provided favorable tax treatment for diesel fuel. These policies have had the effect of causing people to demand mass transit, it caused them to drive more efficient vehicles (with far more diesels operating than in the U.S.), and it caused them to live close to where they work. The overall impact is that Europeans use less oil, which also means their economies aren’t quite as sensitive to spiraling oil prices. They are not immune to higher prices, but if gasoline prices increase by $1/gallon, the impact on the average European is far less than on the average American.

Biofuel Myths

One thing high gas taxes in Europe didn’t do was to enable biofuels to gain solid footing as an alternative fuel source. Only mandates have boosted the market share for biofuels. Why? When gasoline prices reached $10/gallon this summer in parts of Europe, why didn’t we see biofuels ride to the rescue? Two reasons. First, the energy inputs into most biofuels amount to a large fraction of their overall energy content. Thus, when oil prices rise, the cost to produce biofuels rises in tandem. Second, the true cost to produce biofuels in most locations is substantially greater than it is to produce oil. Of course many producers and hypesters will claim otherwise. But the truth is that we have directly subsidized corn ethanol for 30 years. It is no closer to being able to stand on its own, subsidy and mandate-free, than it was 30 years ago. We have been working on cellulosic ethanol for 40 years. But the cost of production is too closely tied to the cost of fossil fuels like oil and natural gas because the energy inputs are so substantial.

Brazil Did It

Sugarcane ethanol can be produced efficiently and sustainably. I have been to a sugarcane ethanol plant in India, and I quizzed them intensely on their energy inputs into the process. Their energy inputs consist mainly of bagasse (sugarcane residue) that is burned for boiler fuel. Sugarcane is removed from the field during harvesting, and the bagasse is waste left at the factory after processing. The bagasse is burned for fuel, and the ash is mixed with compost from the process and returned to the soil.

Some claim that this is how Brazil reached energy independence, and the U.S. should follow Brazil’s lead. This is a myth. While Brazil is the #2 producer of ethanol in the world (the U.S. is already the #1 producer of ethanol), fossil fuels still provide 90% of their energy requirements. Brazil did recently declare energy independence – but not because of ethanol. Brazilian President Luiz da Silva made the announcement of energy independence in 2006 on the P-50 oil rig in the Albacora Leste field in the Atlantic Ocean.

So what of it? Ethanol still played a vital role in helping Brazil achieve energy independence. But the U.S. is a different ballgame entirely. The biggest problem is that in the U.S., each person uses 25 barrels of oil each year, but we produce only 6. In Brazil, each person uses 4, but they produce 3. They produce 75% of the oil they use, and in the U.S. we produce 25% of what we use. So sugarcane ethanol – which is produced with much lower fossil fuel inputs than corn ethanol – has a very small gap to fill in Brazil. In the U.S., we have a huge gap between what we use and what we produce. There is no proven biofuel technology that can economically bridge that gap.

Tax Fossil Fuels

If we can’t bridge the gap, perhaps we can make the gap smaller. How? There are many things we need to do, but I will focus on one. This summer when gasoline prices were setting new records, Americans began to conserve. They drove fewer miles. They bought more efficient cars. They embraced mass transit. As a result of high prices, we finally responded. Thus, I would argue that we need to keep fossil fuel prices high. I have proposed that we increase taxes on fossil fuels, and at the same time reduce income tax rates to prevent the taxes from being regressive. I would strive to make the fossil fuel tax revenue neutral, while providing an incentive to conserve.

There are two major advantages. First, people will know that fossil fuels are going to continue to be more expensive, and they can begin to plan accordingly. People who have been holding out for lower gas prices can finally join the people who have already begun major conservation efforts. Second, it levels the playing field for alternatives and for mass transit. Alternative energy is currently expensive relative to fossil fuels, but I would argue that this is partly because we don’t pay the true price for fossil fuels. For instance, we pay no price for carbon emissions. By raising fossil fuel taxes, those alternatives with low fossil fuel inputs will gain an advantage.

Conclusion

Why does energy independence elude us? In a nutshell, because we are unwilling to pay the price. The political parties make energy independence promises, because 1). We love to hear them; and 2). They (and we) are naïve about the difficulty of achieving the goal. Republicans tend to think we can drill our way to independence, and Democrats overrate the ease at which alternative energy can displace fossil fuels. The fact is, we love our cheap fossil fuels (and ironically loathe the companies that bring them to us).

But if we are to achieve energy independence we will need to use less. We will need to sacrifice. We will most importantly require bold leadership, because there is no easy way to get there. This is clear, given the inability of one administration after another to make headway in that direction. The thing that these administrations lacked was a serious policy designed to cut into our fossil fuel consumption. And the only proven method of getting us to collectively use less gasoline is by making it more expensive.

America’s Energy IQ 2008

Update: I was on the call, asked the first question (about the disconnect in the EIA projections for ethanol usage of less than 10% in 2030 versus the mandate of 36 billion gallons by 2022) and then I had a phone problem. I e-mailed in the rest of my questions, which did get answered. They were on the drilling question:

1. How big is a lease? Is it a standard size?
2. Are there OCS areas that aren’t off-limits that are still eligible for sale?
3. Are there other highly promising areas around the world that are off limits?
4. What exactly has to take place to open up the areas that are off-limits?

Answers were 1). No standard size; 2). Yes; 3). Yes, but the answer wasn’t what I had in mind (mentioned Saudi, Venezuela, etc.); 4). Congressional action required.

I will post a link to the call when it is available.

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In about half an hour, I will participate in a blogger’s conference call to discuss the results of the second survey, done by Harris Interactive on behalf of the API, on America’s energy IQ. I reported on the results of last year’s survey here:

America’s Energy IQ

The API has released a podcast discussing the results. I will withhold comment until some time after the conference call. The podcast is (theoretically) embedded below, but here is the link just in case.

America’s Energy IQ 2008

Update: I was on the call, asked the first question (about the disconnect in the EIA projections for ethanol usage of less than 10% in 2030 versus the mandate of 36 billion gallons by 2022) and then I had a phone problem. I e-mailed in the rest of my questions, which did get answered. They were on the drilling question:

1. How big is a lease? Is it a standard size?
2. Are there OCS areas that aren’t off-limits that are still eligible for sale?
3. Are there other highly promising areas around the world that are off limits?
4. What exactly has to take place to open up the areas that are off-limits?

Answers were 1). No standard size; 2). Yes; 3). Yes, but the answer wasn’t what I had in mind (mentioned Saudi, Venezuela, etc.); 4). Congressional action required.

I will post a link to the call when it is available.

—————————

In about half an hour, I will participate in a blogger’s conference call to discuss the results of the second survey, done by Harris Interactive on behalf of the API, on America’s energy IQ. I reported on the results of last year’s survey here:

America’s Energy IQ

The API has released a podcast discussing the results. I will withhold comment until some time after the conference call. The podcast is (theoretically) embedded below, but here is the link just in case.

America’s Energy IQ 2008

Update: I was on the call, asked the first question (about the disconnect in the EIA projections for ethanol usage of less than 10% in 2030 versus the mandate of 36 billion gallons by 2022) and then I had a phone problem. I e-mailed in the rest of my questions, which did get answered. They were on the drilling question:

1. How big is a lease? Is it a standard size?
2. Are there OCS areas that aren’t off-limits that are still eligible for sale?
3. Are there other highly promising areas around the world that are off limits?
4. What exactly has to take place to open up the areas that are off-limits?

Answers were 1). No standard size; 2). Yes; 3). Yes, but the answer wasn’t what I had in mind (mentioned Saudi, Venezuela, etc.); 4). Congressional action required.

I will post a link to the call when it is available.

—————————

In about half an hour, I will participate in a blogger’s conference call to discuss the results of the second survey, done by Harris Interactive on behalf of the API, on America’s energy IQ. I reported on the results of last year’s survey here:

America’s Energy IQ

The API has released a podcast discussing the results. I will withhold comment until some time after the conference call. The podcast is (theoretically) embedded below, but here is the link just in case.

Book Review: Gusher of Lies

I have been a fan of Robert Bryce’s writing for a long time. His style is witty and entertaining, and he is a debunker-extraordinaire. His newest book, Gusher of Lies: The Dangerous Delusions of Energy Independence,is a must-read for anyone interested in energy issues. Concerning the topic of energy and the many myths associated with energy issues, this is a debunker’s bible.

If you aren’t familiar with Bryce, he is the Managing Editor of Energy Tribune, a cornucopia of energy news and analyses (and a regular stop for me), as well as the author of several other books topical to energy. For more, here is his biography from Amazon:

About the Author

Robert Bryce is one of America’s foremost energy journalists. He is currently the managing editor of Energy Tribune and a contributing writer for the Texas Observer. The author of Pipe Dreams: Greed, Ego, and the Death of Enron,and Cronies: Oil, The Bushes, and the Rise of Texas, America’s Superstate,he lives in Austin with his wife, Lorin, their three children, and a hyperactive bird dog named Biscuit.

In the book, Bryce takes on many of the myths that are ingrained in the collective psyche of politicians and the general public. He explains why we are so attracted to the idea of energy independence, but then spends the bulk of the book arguing that the idea of energy independence is delusional. He targets the delusions of both Democrats and Republicans, suggesting that neither major party is serious about addressing America’s energy needs. As Bryce states (and this would be a good description of my own position): “I am neither Democrat nor Republican. I am a charter member of the Disgusted Party.”

Thoroughly researched, with hundreds of references, the book is full of thought provoking and interesting facts. One of the most interesting bits to me was a table showing just how dependent the U.S. is on a wide range of strategic materials. We are at the 100% dependence level on quite a few of them. But the book’s real strength lies in the myth-busting. The book debunks such energy independence myths as: 1). We can farm our way to energy independence; 2). We could abandon the Persian Gulf if we achieved energy independence; 3). Energy independence would reduce the flow of money to terrorists. For a flavor of Bryce’s writing – including some of the themes he tackles in the book, see his Washington Post editorial:

5 Myths About Breaking Our Foreign Oil Habit

In this editorial, Bryce writes:

With oil prices still flirting with $100 a barrel, everyone is talking about the need for “energy independence.” Late last year, President Bush signed the Energy Independence and Security Act of 2007; Sen. John McCain has declared, “We need energy independence”; and Sen. Barack Obama has called for “serious leadership to get us started down the path of energy independence.”

This may all be good politics. But the idea that the United States, the world’s single largest energy consumer, can be independent of the $5 trillion-per-year energy business — the world’s single biggest industry — is ludicrous on its face. The push for energy independence is based on a series of false premises. Here are a few of the most pernicious ones…

While you will often find yourself nodding in agreement while reading the book (or thinking “I did not know that”), there will be things in the book you disagree with – and perhaps sharply. You may raise your eyebrows at Bryce’s assertion that energy independence is not desirable. I read that, and I thought “Not achievable any time soon? Sure. But not desirable?” Some won’t like his take on Peak Oil. Some will feel that some of his writing on terrorism is a digression. I disagree with him on the subject of carbon taxes (more on that below). And corn ethanol supporters will need to round up an army of lobbyists to address his chapter on ethanol.

The ethanol chapter alone is greatness. [Full Disclosure: Bryce referenced me a number of times in the book, but especially in the ethanol chapter. You could thus argue that I have a conflict of interest in this book review - if that makes you happy ]. Bryce goes further than I ever have by tying all of the arguments up in one neat package. He covers the subject from angles I have barely touched upon. I can probably now retire from ethanol debunking, because after reading the ethanol chapter I thought “There’s nothing left to debunk.” (In fact, progress on the ethanol FAQ I have been working on ground to a halt after I read Bryce’s ethanol chapter. He covered everything I covered, and more.)

This is not a Peak Oil book. Peak Oil is covered over just a few pages, and the subject is treated agnostically – or maybe even slightly atheistically. The Oil Drum does get a mention in this section, as well as peakoil.com and hubbertpeak.com. But if you are expecting a long discussion of peak oil, that’s not what this book is about.

There was a time when I couldn’t see an iota of difference between Bryce’s positions on various energy topics and my own. It seemed we agreed on everything – right down to small details. However, Bryce gradually abandoned his position that we needed higher carbon taxes, and this is an issue upon which we now clearly diverge. And it took me a while to really pin down why we now disagree on this issue.

I am looking at the issue of carbon taxes through Peak Oil lenses. I see carbon taxes as a way individuals and individual countries can ramp down their energy usage so they are less impacted by supply shocks. I think Bryce is less concerned about these sorts of supply shocks, and is looking more at policies that will increase energy supplies, rather than those that reduce demand. This became clear to me when reading his chapter on energy efficiency. Bryce also feels like it will be impossible to make the tax revenue neutral such that it isn’t regressive. He feels like the U.S. will be putting ourselves at a competitive disadvantage to the rest of the world if we pass higher carbon taxes.

However, to that I say that Europe already has very high carbon taxes, and I don’t believe it is a coincidence that they drive much more fuel efficient cars, don’t have a lot of suburban sprawl, have excellent public transportation, have about half the per capita energy consumption of the average American, and yet still enjoy a very high standard of living. They are more insulated from price shocks than we are, because they are less dependent on fossil fuels than we are in the U.S. But because of the fossil fuel usage habits of the U.S., enabled by a long history of cheap fossil fuels, the world will approach peak oil much more quickly. I see high carbon taxes as a way of slowing down that approach and subsequent decline.

Furthermore, I don’t believe Bryce is consistent on this issue. At one point in the book, he writes “Motorists respond to high fuel prices”, and then he gives examples of how sales of fuel efficient vehicles have taken off as fuel prices crept higher. Isn’t this something we should have been encouraging all along with higher fuel prices? He reiterates this in a section on Brazil, when he points out that Brazil imposes much higher fuel taxes, and this helps explain why their per capita usage is so low. If Brazil can deal with higher fuel taxes, I expect that we can as well in the U.S.

Concluding, I highly recommend this book. It is the best overall book on the reality of the energy situation in the U.S. that I have read in a long time. In fact, specific to that topic, it is probably the best book I have ever read. There are some minor errors (e.g., Saudi’s claimed oil production capacity was reported as their oil production), and even after reading the book I still feel the attraction of energy independence. But I didn’t find a whole lot to quibble with as I read the book.

Book Review: Gusher of Lies

I have been a fan of Robert Bryce’s writing for a long time. His style is witty and entertaining, and he is a debunker-extraordinaire. His newest book, Gusher of Lies: The Dangerous Delusions of Energy Independence,is a must-read for anyone interested in energy issues. Concerning the topic of energy and the many myths associated with energy issues, this is a debunker’s bible.

If you aren’t familiar with Bryce, he is the Managing Editor of Energy Tribune, a cornucopia of energy news and analyses (and a regular stop for me), as well as the author of several other books topical to energy. For more, here is his biography from Amazon:

About the Author

Robert Bryce is one of America’s foremost energy journalists. He is currently the managing editor of Energy Tribune and a contributing writer for the Texas Observer. The author of Pipe Dreams: Greed, Ego, and the Death of Enron,and Cronies: Oil, The Bushes, and the Rise of Texas, America’s Superstate,he lives in Austin with his wife, Lorin, their three children, and a hyperactive bird dog named Biscuit.

In the book, Bryce takes on many of the myths that are ingrained in the collective psyche of politicians and the general public. He explains why we are so attracted to the idea of energy independence, but then spends the bulk of the book arguing that the idea of energy independence is delusional. He targets the delusions of both Democrats and Republicans, suggesting that neither major party is serious about addressing America’s energy needs. As Bryce states (and this would be a good description of my own position): “I am neither Democrat nor Republican. I am a charter member of the Disgusted Party.”

Thoroughly researched, with hundreds of references, the book is full of thought provoking and interesting facts. One of the most interesting bits to me was a table showing just how dependent the U.S. is on a wide range of strategic materials. We are at the 100% dependence level on quite a few of them. But the book’s real strength lies in the myth-busting. The book debunks such energy independence myths as: 1). We can farm our way to energy independence; 2). We could abandon the Persian Gulf if we achieved energy independence; 3). Energy independence would reduce the flow of money to terrorists. For a flavor of Bryce’s writing – including some of the themes he tackles in the book, see his Washington Post editorial:

5 Myths About Breaking Our Foreign Oil Habit

In this editorial, Bryce writes:

With oil prices still flirting with $100 a barrel, everyone is talking about the need for “energy independence.” Late last year, President Bush signed the Energy Independence and Security Act of 2007; Sen. John McCain has declared, “We need energy independence”; and Sen. Barack Obama has called for “serious leadership to get us started down the path of energy independence.”

This may all be good politics. But the idea that the United States, the world’s single largest energy consumer, can be independent of the $5 trillion-per-year energy business — the world’s single biggest industry — is ludicrous on its face. The push for energy independence is based on a series of false premises. Here are a few of the most pernicious ones…

While you will often find yourself nodding in agreement while reading the book (or thinking “I did not know that”), there will be things in the book you disagree with – and perhaps sharply. You may raise your eyebrows at Bryce’s assertion that energy independence is not desirable. I read that, and I thought “Not achievable any time soon? Sure. But not desirable?” Some won’t like his take on Peak Oil. Some will feel that some of his writing on terrorism is a digression. I disagree with him on the subject of carbon taxes (more on that below). And corn ethanol supporters will need to round up an army of lobbyists to address his chapter on ethanol.

The ethanol chapter alone is greatness. [Full Disclosure: Bryce referenced me a number of times in the book, but especially in the ethanol chapter. You could thus argue that I have a conflict of interest in this book review - if that makes you happy ]. Bryce goes further than I ever have by tying all of the arguments up in one neat package. He covers the subject from angles I have barely touched upon. I can probably now retire from ethanol debunking, because after reading the ethanol chapter I thought “There’s nothing left to debunk.” (In fact, progress on the ethanol FAQ I have been working on ground to a halt after I read Bryce’s ethanol chapter. He covered everything I covered, and more.)

This is not a Peak Oil book. Peak Oil is covered over just a few pages, and the subject is treated agnostically – or maybe even slightly atheistically. The Oil Drum does get a mention in this section, as well as peakoil.com and hubbertpeak.com. But if you are expecting a long discussion of peak oil, that’s not what this book is about.

There was a time when I couldn’t see an iota of difference between Bryce’s positions on various energy topics and my own. It seemed we agreed on everything – right down to small details. However, Bryce gradually abandoned his position that we needed higher carbon taxes, and this is an issue upon which we now clearly diverge. And it took me a while to really pin down why we now disagree on this issue.

I am looking at the issue of carbon taxes through Peak Oil lenses. I see carbon taxes as a way individuals and individual countries can ramp down their energy usage so they are less impacted by supply shocks. I think Bryce is less concerned about these sorts of supply shocks, and is looking more at policies that will increase energy supplies, rather than those that reduce demand. This became clear to me when reading his chapter on energy efficiency. Bryce also feels like it will be impossible to make the tax revenue neutral such that it isn’t regressive. He feels like the U.S. will be putting ourselves at a competitive disadvantage to the rest of the world if we pass higher carbon taxes.

However, to that I say that Europe already has very high carbon taxes, and I don’t believe it is a coincidence that they drive much more fuel efficient cars, don’t have a lot of suburban sprawl, have excellent public transportation, have about half the per capita energy consumption of the average American, and yet still enjoy a very high standard of living. They are more insulated from price shocks than we are, because they are less dependent on fossil fuels than we are in the U.S. But because of the fossil fuel usage habits of the U.S., enabled by a long history of cheap fossil fuels, the world will approach peak oil much more quickly. I see high carbon taxes as a way of slowing down that approach and subsequent decline.

Furthermore, I don’t believe Bryce is consistent on this issue. At one point in the book, he writes “Motorists respond to high fuel prices”, and then he gives examples of how sales of fuel efficient vehicles have taken off as fuel prices crept higher. Isn’t this something we should have been encouraging all along with higher fuel prices? He reiterates this in a section on Brazil, when he points out that Brazil imposes much higher fuel taxes, and this helps explain why their per capita usage is so low. If Brazil can deal with higher fuel taxes, I expect that we can as well in the U.S.

Concluding, I highly recommend this book. It is the best overall book on the reality of the energy situation in the U.S. that I have read in a long time. In fact, specific to that topic, it is probably the best book I have ever read. There are some minor errors (e.g., Saudi’s claimed oil production capacity was reported as their oil production), and even after reading the book I still feel the attraction of energy independence. But I didn’t find a whole lot to quibble with as I read the book.

Book Review: Gusher of Lies

I have been a fan of Robert Bryce’s writing for a long time. His style is witty and entertaining, and he is a debunker-extraordinaire. His newest book, Gusher of Lies: The Dangerous Delusions of Energy Independence,is a must-read for anyone interested in energy issues. Concerning the topic of energy and the many myths associated with energy issues, this is a debunker’s bible.

If you aren’t familiar with Bryce, he is the Managing Editor of Energy Tribune, a cornucopia of energy news and analyses (and a regular stop for me), as well as the author of several other books topical to energy. For more, here is his biography from Amazon:

About the Author

Robert Bryce is one of America’s foremost energy journalists. He is currently the managing editor of Energy Tribune and a contributing writer for the Texas Observer. The author of Pipe Dreams: Greed, Ego, and the Death of Enron,and Cronies: Oil, The Bushes, and the Rise of Texas, America’s Superstate,he lives in Austin with his wife, Lorin, their three children, and a hyperactive bird dog named Biscuit.

In the book, Bryce takes on many of the myths that are ingrained in the collective psyche of politicians and the general public. He explains why we are so attracted to the idea of energy independence, but then spends the bulk of the book arguing that the idea of energy independence is delusional. He targets the delusions of both Democrats and Republicans, suggesting that neither major party is serious about addressing America’s energy needs. As Bryce states (and this would be a good description of my own position): “I am neither Democrat nor Republican. I am a charter member of the Disgusted Party.”

Thoroughly researched, with hundreds of references, the book is full of thought provoking and interesting facts. One of the most interesting bits to me was a table showing just how dependent the U.S. is on a wide range of strategic materials. We are at the 100% dependence level on quite a few of them. But the book’s real strength lies in the myth-busting. The book debunks such energy independence myths as: 1). We can farm our way to energy independence; 2). We could abandon the Persian Gulf if we achieved energy independence; 3). Energy independence would reduce the flow of money to terrorists. For a flavor of Bryce’s writing – including some of the themes he tackles in the book, see his Washington Post editorial:

5 Myths About Breaking Our Foreign Oil Habit

In this editorial, Bryce writes:

With oil prices still flirting with $100 a barrel, everyone is talking about the need for “energy independence.” Late last year, President Bush signed the Energy Independence and Security Act of 2007; Sen. John McCain has declared, “We need energy independence”; and Sen. Barack Obama has called for “serious leadership to get us started down the path of energy independence.”

This may all be good politics. But the idea that the United States, the world’s single largest energy consumer, can be independent of the $5 trillion-per-year energy business — the world’s single biggest industry — is ludicrous on its face. The push for energy independence is based on a series of false premises. Here are a few of the most pernicious ones…

While you will often find yourself nodding in agreement while reading the book (or thinking “I did not know that”), there will be things in the book you disagree with – and perhaps sharply. You may raise your eyebrows at Bryce’s assertion that energy independence is not desirable. I read that, and I thought “Not achievable any time soon? Sure. But not desirable?” Some won’t like his take on Peak Oil. Some will feel that some of his writing on terrorism is a digression. I disagree with him on the subject of carbon taxes (more on that below). And corn ethanol supporters will need to round up an army of lobbyists to address his chapter on ethanol.

The ethanol chapter alone is greatness. [Full Disclosure: Bryce referenced me a number of times in the book, but especially in the ethanol chapter. You could thus argue that I have a conflict of interest in this book review - if that makes you happy ]. Bryce goes further than I ever have by tying all of the arguments up in one neat package. He covers the subject from angles I have barely touched upon. I can probably now retire from ethanol debunking, because after reading the ethanol chapter I thought “There’s nothing left to debunk.” (In fact, progress on the ethanol FAQ I have been working on ground to a halt after I read Bryce’s ethanol chapter. He covered everything I covered, and more.)

This is not a Peak Oil book. Peak Oil is covered over just a few pages, and the subject is treated agnostically – or maybe even slightly atheistically. The Oil Drum does get a mention in this section, as well as peakoil.com and hubbertpeak.com. But if you are expecting a long discussion of peak oil, that’s not what this book is about.

There was a time when I couldn’t see an iota of difference between Bryce’s positions on various energy topics and my own. It seemed we agreed on everything – right down to small details. However, Bryce gradually abandoned his position that we needed higher carbon taxes, and this is an issue upon which we now clearly diverge. And it took me a while to really pin down why we now disagree on this issue.

I am looking at the issue of carbon taxes through Peak Oil lenses. I see carbon taxes as a way individuals and individual countries can ramp down their energy usage so they are less impacted by supply shocks. I think Bryce is less concerned about these sorts of supply shocks, and is looking more at policies that will increase energy supplies, rather than those that reduce demand. This became clear to me when reading his chapter on energy efficiency. Bryce also feels like it will be impossible to make the tax revenue neutral such that it isn’t regressive. He feels like the U.S. will be putting ourselves at a competitive disadvantage to the rest of the world if we pass higher carbon taxes.

However, to that I say that Europe already has very high carbon taxes, and I don’t believe it is a coincidence that they drive much more fuel efficient cars, don’t have a lot of suburban sprawl, have excellent public transportation, have about half the per capita energy consumption of the average American, and yet still enjoy a very high standard of living. They are more insulated from price shocks than we are, because they are less dependent on fossil fuels than we are in the U.S. But because of the fossil fuel usage habits of the U.S., enabled by a long history of cheap fossil fuels, the world will approach peak oil much more quickly. I see high carbon taxes as a way of slowing down that approach and subsequent decline.

Furthermore, I don’t believe Bryce is consistent on this issue. At one point in the book, he writes “Motorists respond to high fuel prices”, and then he gives examples of how sales of fuel efficient vehicles have taken off as fuel prices crept higher. Isn’t this something we should have been encouraging all along with higher fuel prices? He reiterates this in a section on Brazil, when he points out that Brazil imposes much higher fuel taxes, and this helps explain why their per capita usage is so low. If Brazil can deal with higher fuel taxes, I expect that we can as well in the U.S.

Concluding, I highly recommend this book. It is the best overall book on the reality of the energy situation in the U.S. that I have read in a long time. In fact, specific to that topic, it is probably the best book I have ever read. There are some minor errors (e.g., Saudi’s claimed oil production capacity was reported as their oil production), and even after reading the book I still feel the attraction of energy independence. But I didn’t find a whole lot to quibble with as I read the book.