R-Squared Energy Blog

Pure Energy

Catching Up

Back home now, just trying to catch up on the energy news of note. Four stories that I want to highlight. First was POET’s announcement on their progress on cellulosic ethanol:

Poet hits ‘long shot,’ cuts cellulosic ethanol costs

WASHINGTON – The head of the world’s largest ethanol producer, Sioux Falls-based Poet, said Wednesday that his company has drastically cut its cellulosic ethanol production costs.

It is a breakthrough that will allow cellulosic ethanol to compete with gasoline within two years.

Jeff Broin, Poet chief executive, told reporters during a roundtable discussion that the company has reduced its cellulosic ethanol production cost during the past year from $4.13 a gallon to $2.35 a gallon.

Andrew Leonard of Salon asked me for some comments, which he included in a story on the news:


Who cares about peak oil when you have corn cobs?

In addition to what made it into the story (and those comments were specifically about the kinds of risk factors POET faces), I said that I thought the guys at POET had done a nice job on this (that comment did make it into the follow-up story at Salon). One thing that isn’t clear to me is whether the production cost includes any capital recovery. If not, then they still have some distance to go to get that $2.35 into an economic range with ethanol presently trading at about $2.00 a gallon. [Edit: A comment from Nathan Schock of POET over at Green Car Congress indicates that this is in fact the total production cost – including depreciation]. Another question I would have is how their version of the process performs with other sources of biomass.

One other thing I said to Andrew (that didn’t make it into the story) is the really big challenge is in getting those ethanol titers up. Low titers mean lots of energy is spent in getting the water out. This is why I have always favored gasification technologies over hydrolysis technologies: You don’t have water to deal with, and thus the BTU efficiency is potentially going to be higher. (Probably your capital costs as well will be higher for gasification – depending on what you are producing from the syngas). If biomass costs rise in the future – as I expect them to – then there will be added incentive for maximizing BTU efficiency.

The second story was sent by a reader. In light of the amount of corn we produce, this could have significant ramifications:

Amaizing: Corn Genome Decoded

A team of scientists led by The Genome Center at Washington University School of Medicine in St. Louis published the completed corn genome in the Nov. 20 journal Science, an accomplishment that will speed efforts to develop better crop varieties to meet the world’s growing demands for food, livestock feed and fuel.

The United States is the world’s top corn grower, producing 44 percent of the global crop. In 2009, U.S. farmers are expected to produce nearly 13 billion bushels of corn, according to the U.S. Department of Agriculture.

The next story is about a trend that I think will continue. In my presentation in Orlando, one of the trends that I pointed out is that more refineries are being built closer to the source of the oil. Saudi produces crude, but would like to capture more of that value chain by refining it as well. There are a number of very large refinery projects underway – especially in Asia and the Middle East – and in a world with stagnant oil production that means some refineries are going to shut down. In the U.S., our refining capacity is more than three times greater than our oil production rates. I see a dismal outlook for refining in the U.S., with a lot of refiners going out of business in the U.S. Valero just announced another refinery closing:

Valero refinery in Delaware City to close permanently

DELAWARE CITY, Del. — Valero Energy said this morning it plans to permanently close its Delaware City Refinery, eliminating hundreds of high-paying jobs, because of weak economic conditions, high local costs and chronic troubles at the 210,000 barrel-per-day complex.

Company spokesman Bill Day said that a plantwide maintenance shutdown, announced late last month, was already under way, and will convert to a final closing. Plant employees will continue on the payroll for 60 days under federal rules for large-scale layoffs.

Day said the plant — which produces about 70 percent of the gasoline sold on the Delmarva Peninsula— has lost $1 million a day since the start of 2009.

About 550 full time workers will be put out of work by the decision. Valero (VLO) also has notified companies that work closely with the refinery, Day said, but effects on those operations were not immediately available.

People forget that refining is a very tough business. They remember when refiners make money – as they were doing a couple of years ago – but forget that most of the time they aren’t making money. Plus, when they do make money they are subjected to accusations of gouging and calls from politicians to tax their windfall.

Finally, readers know that I have consistently avoided wading into the debate over global warming. It takes enough of my time just trying to keep up with the latest energy news, and I decided long ago to sit out the debate on climate change. It is far too politicized and people get too emotional over the issue. However, I do think it is important that the debate takes place, and I don’t like to see people trying to shut it down. Attaching labels like “denier” to people who question the science is an attempt to shut down debate, and I don’t care how right you think you are – in my view the debate needs to go on.

A couple of days ago it was announced that some e-mails from a climate research outfit in England had been hacked:

Global Warming Research Exposed After Hack

A climate change dust-up

I have to say that some of the e-mails I have seen posted are troubling. Whatever history ultimately shows, some of those e-mails appear to be agenda-driven and not science-driven. There is no place for that.

Let the debate carry on, and let science – not agendas – determine the outcome.

November 22, 2009 Posted by | cellulosic ethanol, genetic engineering, global warming, greenhouse gases, oil refineries, POET, refining, Salon, valero | 118 Comments

A Massive Decline in Carbon Emissions?

A couple of years ago, I wrote an essay that ultimately turned out to be very controversial:

Why We Will Never Address Global Warming

That same essay published at The Oil Drum received 560 comments, and was until recently the most-commented upon post in The Oil Drum’s history. Global Warming/Climate Change is a topic that people get very emotional about, and the idea that I claimed that we would never address it didn’t sit well with a lot of people.

Now I know that I have some global warming skeptics here. And I have said many times that I am fine with that, but I don’t want to engage in that debate for multiple reasons. And in the hopes that I can focusing this essay, let me say what I really mean: We won’t stop rising atmospheric carbon dioxide concentrations. If you want to argue that increasing carbon dioxide is not resulting in climate change, fine. But I think we can all agree that carbon dioxide concentrations are steadily increasing in the atmosphere. In fact, one of the key monitoring stations is here in Hawaii at Mauna Loa, which I can see clearly from my house.

The reason I don’t believe we will stop accumulating carbon emissions is that this is a global issue, and people around the world are going to generally gravitate to the cheapest source of fuel they can find. So, many of the world’s countries can sign a well-intentioned protocol in Kyoto, but then China plans 562 new coal-fired power plants. Carbon emissions continue unabated, despite Kyoto.

This week I saw a new article by Lester Brown – author of the “Plan B” series, the most recently published version of which is Plan B 4.0: Mobilizing to Save Civilization. In his article, Brown observed that the U.S. has had major reductions in carbon emissions:

U.S. headed for massive decline in carbon emissions

For years now, many members of Congress have insisted that cutting carbon emissions was difficult, if not impossible. It is not. During the two years since 2007, carbon emissions have dropped 9 percent. While part of this drop is from the recession, part of it is also from efficiency gains and from replacing coal with natural gas, wind, solar, and geothermal energy.

The U.S. has ended a century of rising carbon emissions and has now entered a new energy era, one of declining emissions. Peak carbon is now history. What had appeared to be hopelessly difficult is happening at amazing speed.

For a country where oil and coal use have been growing for more than a century, the fall since 2007 is startling. In 2008, oil use dropped 5 percent, coal 1 percent, and carbon emissions by 3 percent. Estimates for 2009, based on U.S. Department of Energy (DOE) data for the first nine months, show oil use down by another 5 percent. Coal is set to fall by 10 percent. Carbon emissions from burning all fossil fuels dropped 9 percent over the two years.

All of that may very well be correct. But China and India continued to build new coal plants. Demand for oil around the world remained high. And the result so far is that the monitoring station on Mauna Loa shows absolutely no sign that global carbon emissions have been impacted by this sharp drop in U.S. emissions. In fact, the most recent measurements show the highest atmospheric concentrations that the observatory has ever measured:

This is one of the reasons I have never focused my time on carbon emissions. I just can’t see that anything the U.S. does or that I can advocate is going to really impact global emissions. Sure, we may reduce our carbon emissions in the U.S. But there is a long line of countries waiting to use that fossil energy that we don’t use. So I think the best we could hope for is to slow the accumulation rate. But I think the atmospheric concentration will continue to rise until fossil fuels start to run out. That’s the only thing I think will permanently rein in carbon emissions.

Let me be clear that this has nothing to do with what I would like to see happen. The reason the essay was so controversial at The Oil Drum was because some people perceived my attitude as “I don’t care about climate change.” That’s not it. This is just the way I see things playing out.

I have instead chosen to focus my efforts on changing the forms of energy we use. There is of course some synergy with those who are working to reduce carbon emissions. We both would like to see expanded use of alternative energy. For me, this is about energy security. Increasing the locally produced energy should help insulate against future energy shocks. This would also reduce localized carbon emissions.

But I don’t expect this to impact the global carbon emissions picture. If that was my goal, I think I would be very frustrated by that Mauna Loa graph. I see no reason to believe that picture will change in the next few years. But I am optimistic that we can continue to develop some alternative energy options that enhance energy security for specific locations that have limited fossil fuel resources. I think those countries with ample fossil fuel resources will continue to burn them, though, which is why I think the focus on carbon emissions is ultimately futile.

October 16, 2009 Posted by | carbon sequestration, climate change, global warming, greenhouse gases | 49 Comments

What If I’m Wrong?

Risk Assessments

I spend a lot of time playing “What if?” We all do this. I do this when I am driving – “What if that car at the next intersection pulls out in front of me?” – when I am working – “What if that high pressure line ruptures?” – and at home – “What if I wake up and find the house is on fire?” I also spend a lot of time pondering the question “What if there are energy shortages in the near future?

When we do this, we are generally trying to understand the potential consequences of various responses to a given situation. This sort of exercise is a form of risk assessment, and it is a very important tool for making decisions about events that could impact the future. Sometimes the consequences are minor. If I choose not to take an umbrella to work and it rains, there is probably a small consequence. If I choose to pass a car on a blind hill, the consequence may be severe, and may extend to other people.

In this essay I will explore the implications of the question: “What if my viewpoint is wrong?

What If I’m Wrong About Peak Oil?

I guess it was my training as a scientist that emphasized to me that conclusions are tentative (I was two years into a Ph.D. in chemistry before I decided the job prospects were better for a chemical engineer). They are subject to revision as additional data come in, and you have to always be willing to consider that you may be wrong. But acknowledging that I could be wrong has to go hand-in-hand with the consequences of being wrong.

I spend a lot of time thinking about the possible consequences of peak oil. My view on peak oil is that it presents an enormous challenge for humanity, that we will begin to face these challenges within 10 years, and that there is no easy solution. I see spiking oil prices and the subsequent fallout as a prelude to what lies ahead. These views have influenced my profession, where I have chosen to live, what I read, and what I say to others. Fear of peak oil has influenced some people not to attend college, or to quit their jobs and move away to remote locations. It has even caused some people to decide against having children. But what if I am wrong about the timing of peak oil? What are the consequences?

For me, this one has low consequences. If I am wrong and we have adequate oil supplies for the next 40 years, then perhaps I live a more frugal life than I might have otherwise. I prefer to walk, ride a bike, or take a train instead of hopping into a car to drive some place. When I drive, I probably drive a smaller car than I would have otherwise. Then again, I have always been frugal, so perhaps I would have done all of these things regardless. The one thing that it may have impacted upon in a major way is my interest in energy.

But if I am right, then I have plans in place to manage the impact as well as I can. Those plans start with minimizing my energy consumption. It is my small insurance policy. If the worst case doomers turn out to be right, then there isn’t a lot I can do except try to make sure my family and I are in circumstances that minimize the risk. Further, I have done a lot of work that is aimed at improving our energy security in the years ahead. That work includes promoting renewable energy technologies that I think can make a long-term contribution, but also arguing for conservation, and better utilization of our own natural resources. So if I am correct, then I have chosen to work on things that have the potential to mitigate the consequences.

But what if the other side is wrong? Government agencies devoted to monitoring our natural resources often reassure us that there is plenty of oil for decades to come. But what if the government, industry, etc. turn out to have missed the mark on peak oil? In that case I think we will be in for a lot of trouble.

If the peak comes quickly and the decline is steep, I believe we will be wholly unprepared. There is not a cheap, easy substitute for oil. Much higher prices will be inevitable in such a situation. Industries – such as the airline industry – won’t be prepared and we will see perhaps entire industries go bankrupt. While I do believe that over time we can transition to natural gas vehicles (and our supplies of natural gas look adequate for a while), that will take some time. If the government is wrong and the peak happens much sooner than expected, we will be in for a very difficult transition period.

What If I am Wrong on Global Warming?

Another question I think a lot about is “What If I am Wrong on Global Warming?” To me, this one is more complicated. If the Al Gore contingent is correct, then we are facing some very major problems. As I have written before, I don’t expect us to be able to rein in carbon dioxide emissions, so I see a future with ever higher atmospheric CO2. And while I tend to come down on the side that human activity is contributing to global warming, the scientist in me reminds me that “conclusions are tentative.”

On the one hand we have potential global devastation if Al Gore is correct (because again, I believe carbon dioxide in the atmosphere will continue to climb). On the other hand are those who believe that human activities play little or no role in global warming. They view the opposition as putting global economies at risk by putting a price on carbon emissions. While I think global devastation is a much worse consequence than economic stagnation, the impact of that could be pretty severe as well.

So we have two camps, each of which thinks if the other side gets their way it will lead to global disaster. So we get a lot of vitriol in this debate, which I don’t like. I don’t know what the ultimate outcome on this one will be, but one thing I don’t want to see is the debate stifled by placing derogatory labels on those with whom you disagree.

I never discount the possibility that I could be wrong about something. I would say that precious few of my views are embedded in granite. That’s why I write this blog; to discuss, debate, learn, and change my mind when reason dictates that.

July 1, 2009 Posted by | climate change, global warming, greenhouse gases, Peak Oil | 43 Comments

A Simple Climate Tax Scheme

The following guest post is by Bob Findlay, a self-employed open source software engineer who lives on a small farm just outside Toronto.

—————————-

On 07 Apr 26 an Oil Drum blogger named Squalish (http://www.theoildrum.com/node/2499) wrote a response to a debate about government’s role in climate change policy. In that piece Squalish described an idea whereby all CO2 taxes would be pooled into a separate fund and “rebated annually in an equal amount to every US taxpayer”.

This got me thinking. What a clever idea but why not bypass the government coffers entirely?

Here is how a simple scheme might work as illustrated by the story of Joe Average and Jane Median.

Joe and Jane live in different jurisdictions. Both use 1000 liters (250 US gal) of gasoline per year, which coincidentally happens to be the average for all drivers in their areas. Both Joe and Jane pay $1 per liter ($4 US gal) for gasoline at the pump which amounts to $1000 per year each for fuel.

Joe and Jane’s governments see a need to reduce fossil fuel consumption to help combat climate change. As such, each government will enact legislation to put a price on carbon.

Joe Average lives in a jurisdiction where the government introduces a revenue neutral carbon tax of $1 per liter, with vague promises to offset his pain at the pump with equivalent income tax reductions.

Jane Median lives in a jurisdiction where the government has also introduced a carbon levy of $1 litre. However, Jane’s government has appointed an arm’s-length non profit agency to collect all this levy. This agency’s sole mandate is divide and refund the total amount evenly amongst all registered drivers of which Jane is one.

Once the legislation is enacted both Joe and Jane are now paying $2000 per year for their motor fuel. Neither is happy about it. Nonetheless, unhappiness is a powerful (albeit negative) motivator to make the desired changes: to use less fossil fuel.

Meanwhile Joe is still waiting for his government to enact legislation to lower his income tax by $1000 per year. He is in a higher income tax bracket, so he doesn’t hold out much hope that he’ll see that deep a cut. Jane, on the other hand, is already receiving her refund check for $83 each month, which almost totally offsets her carbon levy ($83×12=$996). Jane’s cash reward is a powerful positive motivator. Jane is certainly in the better frame of mind than Joe.

Now both Joe and Jane are environmentally savy consumers and they embark on a conservation campaign which saves them 10% on their annual fuel usage, ie. each drops to 900 litres (225 US gal) per year. Let us suppose that Joe and Jane are ahead of the curve and the average driver in their respective jurisdictions is content for the time being to continue consuming 1000 litres (250 US gal) per year.

As a result of their conservation efforts both Joe and Jane are rewarded by an annual savings of $200 each at the pump. However, each is still paying $1800 per year at the pump, substantially more than before the carbon tax. Joe is the least happy. He is still spending $800 MORE for fuel than before his enlightened government introduced the carbon tax. Jane meanwhile still experiences the pain when she fills up at the pump. However, she is still receiving her $83 refund check each month. So her net outlay is now $800 per year or $200 LESS than she was spending before her enlightened government introduced the carbon levy. Jane feels like the program is paying her to conserve.

Both governments are of the view that to be effective, the price of carbon needs to be escalated in a predictable and scheduled manner going forward. In both cases the next scheduled increase brings the carbon tax/levy to $2 per litre. Both Joe and Jane are now going to be paying $2700 per year for fuel. They are good conservers but they are finding it difficult to conserve more than the original 10%. Fortunately, now that fuel is $3 per litre ($12 per US gal) lots of non fossil alternative fuels are price competitive. Joe and Jane switch vehicles to take advantage of an alternate fuel which is priced at $2.50 per liter ($10 per US gal).

Joe saves $450 per year by switching to an alternative fuel. However, he is still paying $1250 more per year than before the carbon tax as introduced. He is still waiting for his income tax offset to kick in.

Jane, on the other hand, is still ahead of the curve amongst her fellow drivers. She also saves the same $450 per year at the pump by switching to a cheaper alternative fuel. However she now receives $166 per month in refund cheques from the carbon levy fund. Her net outlay has dropped to an amazing $250 per year or $750 less than before the carbon levy was introduced! What is even more amazing is that Jane’s alternative fuel producer is receiving the full $2.50 outlay at the pump. In fact Jane’s government is able to collect a fair tax on that $2.50 alternate fuel as well. No need for profit or tax holidays to stimulate the acceptance of the alternative fuel.

The question is which of Joe or Jane would be more likely:

  1. to tell a friend about their fuel conservation/alternative fuel strategy
  2. to live in a jurisdiction which sees total fossil fuel usage drop
  3. to vote for their government next time round.

At the end of the day the purpose of any carbon pricing scheme is to reduce fossil fuel consumption. The success of any program hinges on a buy in from the consumer. The consumer has to do the conserving or switching. There are a number of reasons why this simple scheme would have a better buy in than alternatives.

  • There is a widespread mistrust of governments and government programs. Jane’s government is acting as the enabler and not the doer. The fact that this scheme is administered at arms length should lead to better public acceptance. Better public acceptance should translate into better results.
  • The collect, average and refund math naturally rewards consumers who position themselves below the average and penalizes those which are above the average. Those consumers at the average are revenue neutral. This scheme will be perceived as fair. Schemes which are perceived to be fair have a better acceptance.
  • The only way to game the system is for the consumer to reduce their fossil fuel consumption below the average. That way they’ll get a bigger refund check than they spent in the carbon levy. This motivates the consumer to do exactly what the program set out to accomplish: to reduce fossil fuel consumption or encourage a switch to non carbon fuel sources.
  • Furthermore as more consumers try to conserve their way to below the average that average itself will drop. This naturally nudges the consumer to redouble efforts to continue fossil fuel conservation or replacement. This can be further amplified if the carbon levy is itself escalating in time.
  • The monthly refund check will be viewed in a positive light. When a taxpayer overpays income tax and receives a refund check upon filing, they don’t typically think of it as the government giving them back their money but simply as the government giving them money. This extra positive reinforcement should amplify the effectiveness of the program.
  • Alternate non fossil fuels are naturally rewarded in the scheme. First of all the price of fossil fuel is raised to help new competitors enter the picture. If the consumer were to switch to biofuel, electric or hydrogen vehicles they would still receive the rebate check to offset that higher alternate fuel cost. The fossil users subsidize the non fossil users. This should accelerate the uptake of alternative fuel sources. This should help naturally sort out the alternative fuel sources which scale well from those which don’t.
  • This scheme has a natural end point. Once all the consumers have conserved to zero or converted to non fossil fuel sources there would be no carbon levy collected and no refund administered. The program will have achieved its objectives and could be disbanded without any impact on government revenues. There is no incentive to run this program beyond its natural end point.

Left on its own, price induced rationing can be very unfair. Unfairness on this global scale can lead to many undesirable consequences which are worth avoiding. The pricing scheme that Jane’s government adopted attempts to address this fairness issue by naturally rewarding those who do the right thing while at the same time penalizing those who choose not to. The beauty of this scheme is that this reward and penalty occurs regardless of your ability to pay. This is not to say that Jane’s government would find it easy to implement such a scheme. Jane’s government would have to address two vulnerable areas:

  • registry fraud
  • cross jurisdiction shopping

There are technical solutions to registry fraud (eg. biometric smart card, encription) but the political will and cost to implement them may be a problem. The cross jurisdiction shopping is a problem common to any carbon pricing scheme. Unless neighboring jurisdictions implement similar programs, consumers will purchase fuel in the lower cost jurisdiction if possible.

Some jurisdictions have examples of a government enabled arms length organizations created for the purpose of collecting and redistributing funds: eg. the state run lotteries. However, the US currently consumes 1.55 billion liters of gasoline per day (388 million US gal). At a $1 per litre levy Jane’s non profit would be handling close to $1.6 billion/day. This flow of money is orders of magnitude larger than lottery proceeds. This is a non trivial float of money and by definition will difficult to administer cleanly.

The world is facing two fossil fuel challenges going forward: carbon dioxide induced climate change and Peak Oil. Fortunately, the solution to both is the same: consume less fossil fuel. The two crisis are different, however. In the climate case, if we fail to act fossil fuel rationing will not be a natural consequence. In the Peak Oil case, if we fail to act we’ll get fossil fuel rationing regardless. The way to mitigate the climate crisis dictates that we collectively organize to artificially ration fossil fuel. Peak Oil on the other hand dictates that we collectively organize to smoothly ration a geologically declining supply of a fossil fuel (oil).

The price we pay for fossil fuel is a powerful lever in determining how much we consume. It follows that intervening in the market to put an artificial price on the carbon in a fossil fuel will induce us to consume less. This is at the heart of most climate proposals (including that employed by Jane’s government). In theory putting a price on carbon would ration fossil fuels and we’d simultaneously address the needs of climate change and Peak Oil. However, as with all artificial market interventions the devil is in the details.

There are no perfect solutions here. As Ginsburg’s Theorem dictates: you can’t win, you can’t break even, and you can’t even quit the game.

Doing nothing about these challenges is a choice. I believe that Jane’s government offers us a better choice.

January 6, 2009 Posted by | carbon tax, energy policy, global warming, greenhouse gases | 37 Comments

Thoughts on the New Energy Team

In case you are just venturing out of your cave for the first time in a week, you are probably aware that President-elect Obama has announced his new energy team:

Obama names energy team

The team includes Nobel Prize winning physicist Steven Chu as Secretary of Energy, former EPA head Carol Browner to fill the newly-created job of Energy Czar, and Lisa Jackson to head the EPA. The focus of this essay will be on Dr. Chu, but I will comment briefly on the others.

Lisa Jackson is trained as a chemical engineer (as was the outgoing Secretary of Energy Samual Bodman). It should go without saying that I like to see technical people in roles like this, where understanding science and data are both critical. Carol Browner, while not trained as a technical person, has a lot of administrative experience within the EPA. Incidentally, I once met Mrs. Browner, as she was the person who presented my research group with the 1996 Green Chemistry Challenge Award at the National Academy of Sciences.

While I don’t know nearly as much about Browner and Jackson, Dr. Chu has a very long public record. I have been searching through his various publications, speeches, and presentations to get a really good view of the man. Here is what President-elect Obama had to say about Dr. Chu:

“His appointment should send a signal to all that my administration will value science. We will make decisions based on the facts, and we understand that facts demand bold action.”

If you asked me for a few characteristics that would top my list of desirables for the spot of Energy Secretary, I would want someone who is 1). Knowledgeable about a broad range of energy technologies; 2). Someone who is passionate about the subject; 3). Someone who isn’t highly partisan, and can work with diverse groups.

Dr. Chu’s record indicates to me that he easily fills these three criteria. Dr. Chu is currently director of the Lawrence Berkeley National Laboratory. Among his accomplishments there was to secure a $500 million partnership with BP to do alternative energy research. (See this story from Salon for more details.) This suggests someone who can work with industry on next generation energy technologies. I am not sure how quickly he feels we can transition away from oil, and therefore whether we need additional exploration and drilling. However, he has been outspoken over his opposition to coal, and his concerns about global warming. Some quotes on these topics from Dr. Chu. First, his position on coal is pretty clear:

“Coal is my worst nightmare.”

He favors nuclear energy over coal (it should come as no suprise that a physicist like Dr. Chu is pro-nuclear):

“The fear of radiation shouldn’t even enter into this.”

“Coal is very, very bad. Nuclear has to be a necessary part of the portfolio.”

Chu, who also is professor of physics and molecular and cell biology at UC Berkeley, said nuclear is the preferred choice to coal, pointing out that coal releases 50 percent more radioactivity than nuclear power plants.

His concerns over global warming have been well-publicized:

Consider this. There’s about a 50 percent chance, the climate experts tell us, that in this century we will go up in temperature by three degrees Centigrade. Now, three degrees Centigrade doesn’t seem a lot to you, that’s 11° F. Chicago changes by 30° F in half a day. But 5° C means that … it’s the difference between where we are today and where we were in the last ice age. What did that mean? Canada, the United States down to Ohio and Pennsylvania, was covered in ice year round.

So think about what 5° C will mean going the other way. A very different world. So if you’d want that for your kids and grandkids, we can continue what we’re doing. Climate change of that scale will cause enormous resource wars, over water, arable land, and massive population displacements. We’re not talking about ten thousand people. We’re not talking about ten million people, we’re talking about hundreds of millions to billions of people being flooded out, permanently.

He is no fan of corn ethanol:

We can indeed make fuel out of crops. Corn is not the right crop. The reason it’s not the right crop is because the amount of energy you put into making a fuel and growing the corn and fertilizing the corn fields and plowing the fields is within ten or 20 percent of the amount of energy you get by making it into the ethanol that you can put in your car.

Also, the amount of CO2 you create by growing corn is again within 20 percent of the amount of carbon dioxide you make by drilling and refining oil and putting into your car.

He favors higher gas taxes:

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” Source.

From that same article:

Lee Schipper, a project scientist with the Global Metropolitan Studies program at U.C. Berkeley, hailed Obama’s nomination of Chu as Energy Secretary and praised his colleague’s support for higher gasoline taxes.

Schipper thinks Obama’s concerns about not placing additional burdens on America’s families can be addressed by agreeing to rebate all — or close to all — of the money raised by higher fuel taxes. “The answer is: raise the price of gasoline and give all the money back,” said Schipper.

Hmm. Where have I heard that before?

He appreciates the need for greater energy efficiency (and like me, wants to be emperor of the world):

“I cannot impress upon you enough how important energy efficiency is.”

“Just refrigerator efficiency — bigger refrigerators by the way — saves more energy than all we’re generating from renewables [today], excluding hydroelectric power.”

“If I were emperor of the world, I would put the pedal to the floor on energy efficiency and conservation for the next decade.”

And finally recognizes that the U.S. can be a leader in new energy technologies, but are starting to fall behind in some areas.

“We have an option to be a leader in energy technologies, but we are not because our support system for that is on again off again. The future wealth of the United States will come from our ability to invent new technologies.”

“Americans take for granted that the United States leads the world in science. But we’ve lost many of these leads, especially when it comes to energy.”

“The U.S. is making it easier for other countries to catch up and pass us.”

So, let’s see. He has had a career devoted to energy, is clearly passionate about the subject, doesn’t favor making ethanol from corn, thinks we need higher gas taxes, favors nuclear power, favors alternative energy funding, is pro-science, and favors higher energy efficiency. That’s exactly how I would describe myself, so from my perspective he is a very good choice. I like his priorities. He has also been involved in research on cellulosic ethanol, and will likely send more research dollars flowing in that direction.

I think the issue that will generate some controversy is his very strong position on global warming. Not since Al Gore was Vice-President will there be such a staunch proponent of reducing greenhouse gas emissions at the highest levels of government. Global warming activists will love him. Skeptics probably won’t be quite so enthusiastic.

——————

Here are the quick bios of the rest of the energy/environment team, courtesy of Wired:

Lisa Jackson, EPA head

Quick bio: Trained as a chemical engineer at Princeton, she has spent her entire career with government environmental agencies. She worked her way up through the EPA from 1987-2002, then moved to the New Jersey Department of Environmental Protection, eventually becoming its head in 2006. She was appointed as New Jersey Governor John Corzine’s chief-of-staff less than a month ago.

Carol Browner, energy czar

Quick bio: The longest-serving EPA administrator in the history of the agency, Browner is the non-scientist on the team. She came up through politics, working as Al Gore’s legislative director in the late 1980s, before heading the Florida Department of Environmental Regulation. She was appointed by Bill Clinton in 1993 to helm the EPA and left in 2001. Since then, she’s been a consultant with The Albright Group.

Her position: The new “energy czar” will coordinate (and politically shepherd) the President-elect’s various proposals around energy and the environment.

December 17, 2008 Posted by | cellulosic ethanol, coal, conservation, DOE, energy policy, gas tax, global warming, greenhouse gases, politics, Steven Chu | 40 Comments

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | Comments Off on Hillary’s Stupid Energy Plan

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | Comments Off on Hillary’s Stupid Energy Plan

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | 34 Comments

Hillary’s Stupid Energy Plan

I had intended for this, my 500th essay on this blog, to be about my recent trip to Choren’s new plant in Germany. But Hillary Clinton has just come out with a plan for high gasoline prices so asinine, it had to be addressed. Note that I have already picked on McCain’s plan, and Obama’s plan isn’t all that different from Hillary’s. In my opinion none of these candidates have demonstrated that they actually have a grasp of the reasons for high oil and gas prices.

So, in stark contrast to the proposals I laid out in my previous essay, here is Clinton’s plan, along with some comments from me:

Hillary Clinton’s Plan to Address Soaring Prices at the Pump

Hillary’s plan includes:

Imposing a windfall profits tax on oil companies and using the money to suspend the gas tax for the peak summer months;

Closing $7.5 billion in oil and gas loopholes and using the funds to provide assistance for lower-income families to pay their energy and grocery bills;

Cracking down on speculation by energy traders and market manipulation in oil and gas markets that are driving up the price of oil by at least $20 a barrel;

Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries

Stopping new additions to the Strategic Petroleum Reserve and standing ready to release oil to counter market spikes and reduce volatility.

This plan builds on Hillary’s long-term plan to reduce our dependence on foreign oil and address global warming.

Notice the irony in that last phrase? Let’s lower gas prices and address global warming! Hey, I know what else we can do. Let’s eat more, and lose weight. It’s genius.

Let’s pick apart her proposals, and I will tell you why her positions are stupid.

Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months. Hillary will ensure that this relief is passed along to consumers by charging the Federal Trade Commission with conducting aggressive oversight. Unlike Senator McCain’s plan, Hillary’s plan will be fully paid for by taking away oil company profits through a windfall profits tax. This will ensure that the Highway Trust Fund is not affected at all by the gas tax suspension, and can continue to support critical repairs and maintenance for our infrastructure and highways.

Why This is Stupid

If Hillary had anyone on her staff who had a clue about energy issues, they would see that refineries are already cut back due to low margins. Historically, low margins are the very reason that underinvestment has taken place in the refining sector. I seem to recall many politicians screaming about this underinvestment last year (even as they argued to confiscate profits which happened to be good in the refining sector last year). Total oil company profits are currently a result of very high oil prices – and most of that is flowing right out of the U.S. So there are a couple of ways this could break, both contrary to Hillary’s expectations.

If the policy could actually be implemented as Hillary outlines it, it ensures that demand remains high through the summer months. It sends a message to consumers that high gas prices really aren’t a worry; the government is going to take care of you. Thinking about buying a Prius? No, don’t do that. Because you see, the government is going to do everything possible to ensure that gas prices stay low, so you can continue to contribute your carbon emissions and we can continue our dependence on oil.

But that’s not really how it is likely to pan out. What will happen is that oil companies will allocate those taxes to their already struggling refining sector (they don’t produce all that much oil in the U.S.) Then what happens? Percent refinery utilization, which is currently running in the low 80’s (normal for this time of year, when margins are usually better, is upper 80’s or lower 90’s) will fall into the 70’s. Why? Let’s say you run a business, and you are making thin profits on one of the products you sell. Now someone wants to tax it at a higher rate. What do you do? Personally, I would shift my investments into something that offered a higher return. That’s exactly what oil companies will do. There will be less incentive to focus on upgrading and maximizing refining capacity.

Next up:

Oil and gasoline markets contain loopholes for traders, and the markets are inadequately policed by regulators under current law. As a result, there is considerable concern that current market prices reflect the influence of speculators and other forces beyond supply and demand. In early April, an Exxon Mobil executive testified under oath before a House committee that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.

Why This is Stupid

So now you trust ExxonMobil? Do you believe them all the time, or only when you are trying to make a specific point?

The reason this proposal is stupid is not because there isn’t speculation in the market: There is. The problem is trying to identify how much, how to police it, and most importantly – how to apply those policies world wide. Because haven’t you heard? The oil market isn’t specific to the U.S. We don’t pay higher prices than they pay in Asia because of speculation. If speculation was responsible for $50 of the price as Clinton implies above, shouldn’t we see gross disparities in crude pricing?

How about taking on OPEC? A stupid plan wouldn’t be complete without threatening to bring legal action against OPEC in order to force them to lower prices for us:

OPEC recently reiterated that it will not even consider increasing crude output until September 2008, even though limited supplies are contributing to record oil prices. Hillary believes we should be taking more aggressive action to address OPEC’s control over global production levels and hold OPEC accountable for its decisions. President Bush’s efforts to pressure OPEC over the past seven years have been inconsistent and unsuccessful. Hillary supports sending a strong signal to OPEC that the era of complacency has ended. Hillary will:

Use the WTO to Challenge OPEC’s Production Quotas – With nine of the thirteen OPEC member countries also being members of the WTO, Hillary believes we should use the tools available at the WTO to address OPEC’s refusal to increase production.

Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law – Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market.

Why This is Stupid

This is probably the stupidest of her proposals. Oh, the can of worms it would open up. Here’s the analogy I have used before. Let’s say Saudi Arabia loves American wood. They love it so much, that their purchases start to drive the price higher. It seems other countries love American wood as well, so supplies are tight. But Saudi feels like they have a God-given right to cheap wood. Therefore, they demand that we increase production of our wood to bring prices back down. They demand that we overproduce our resources in order to meet what they would prefer to pay, because they have grown dependent on our wood. So, they threaten to sue and take us before the world court.

Of course the big difference here is that wood is a renewable resource. When Saudi’s oil is gone, what else do they have? Yet we demand that they produce according to the price we prefer to pay – not necessarily what’s in their own best long-term interest. How self-centered is that? Can’t Hillary recall when the Mideast cut us off from their oil because they didn’t like our policies? Does she think they couldn’t do it again?

Hey, we haven’t pulled the Big Oil card since the first paragraph. You just can’t do that often enough when you are pandering for votes:

Hillary believes that in addition to imposing a windfall profits tax on large oil companies, Congress should move immediately to end the approximately $7.5 billion per in tax giveaways and subsidies that we continue to provide to oil and gas companies, despite their record profits. These subsidies are in part a result of the 2005 Energy Bill she voted against. She would use those resources this year to provide assistance to lower-income families who are not only being hit at the gas pump, but with skyrocketing energy and food bills as well.

Why This is Stupid

Similar to her first proposal, Hillary wants to send a message that it isn’t the consumer here that is the problem, it’s those big, bad oil companies and their gouging ways. That’s why you are paying higher prices: Greed. She will take that money and return it to the consumers, thus achieving her goal of lowering prices AND fighting global warming. Don’t start that car pool just yet – Hillary is going to refund the extra money you have been paying. No need to worry.

Any why not tap the SPR?

Hillary is calling on President Bush stop taking oil off the market and putting it into the Strategic Petroleum Reserve (SPR). The SPR is now 97 percent full, which analysts believe is more than adequate. Continuing to fill it at these high prices exacerbates high oil prices and costs taxpayers money. Hillary also believes that the SPR should be more actively managed to enable releases from the SPR to counter market spikes and reduce volatility.

Why This is Stupid

If the SPR is 97 percent full, why do you need a policy to stop filling it? Won’t that happen pretty quickly anyway? Also, it seems that Hillary (and many others) don’t understand the purpose of the SPR. It is for national emergencies. The fact that I am paying more for gasoline is not a national emergency. A war with Iran that could curtail our imports sharply is more along the lines of what the SPR is for. And if you drain it right now for political purposes, and then you need it for an actual emergency, it wasn’t very strategic, was it?

Using it to try to counter market spikes suggests that you can predict where the market will be in the future – when you need to buy the crude back. The fact is, politicians on both sides have been urging releases from the SPR ever since oil was at $20/bbl. Where would we be now if we had done so? With an empty SPR, and with oil prices still at very high levels.

In the long term, Clinton proposes the following:

Proposals to Reduce our Dependence on Foreign Oil Over the Long-Term

Key elements of that plan include:

Raising fuel efficiency standards (CAFE) to 55 miles per gallon by 2030;

A $150 billion investment in researching, developing, and deploying renewable and alternative energy;

Cutting our foreign oil imports by two-thirds by 2030;

Providing $1.5 billion per year for public transit, an additional $1 billion for intercity rail, and additional funds for congestion reduction, better traffic management and telecommuting;

Providing tax credits and research and development funding for plug-in-hybrid vehicles, which can get up to 100 mpg; and

Conserving fuel in the federal fleet. Hillary will call on all federal government agencies to suspend non-essential travel and other activities that use gasoline or diesel fuel, and encourage employees to carpool, telecommute, and use public transportation to reduce fuel use. And she will direct federal employees to reduce maximum speeds to conserve fuel, with exceptions for law enforcement and other emergency services. Under Hillary’s plan, the agencies will to report to the White House once a month on their energy use and the impact of conservation efforts.

That 3rd one is brilliant: Cut our oil imports by 2/3rds. Why didn’t someone already think of this?

I won’t call those proposals stupid, but they all have something in common: The painless fix. There isn’t a single proposal there that suggests consumers need to cut back (except for the last one, in which government employees are asked to do so). For the average consumer, this all sounds great. They get to continue the status quo, and Hillary is going to see to it that they are not inconvenienced.

This is the kind of shallow political rhetoric that put us where we are in the first place. Two thumbs down for Hillary’s energy plan. Now where’s that president with courage; the one I was looking for in my previous post?

April 29, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, John McCain, politics | Comments Off on Hillary’s Stupid Energy Plan

An Open Letter to Our Next President

Mr. or Madam President,

Vice President Dick Cheney once famously quipped “The American way of life is non-negotiable.” I submit that while our next president might not be so brash in stating this, the root of our energy problems can be traced to this attitude. But, nature doesn’t negotiate. It doesn’t appear that any of the remaining presidential candidates understand the basis of the problems we face: Oil is a depleting, finite resource – albeit one crucial for the “American way of life.”

Because this resource is so crucial – and obviously not just for Americans – depletion is going to drive prices up as consumers bid for dwindling supplies. Threatening to sue OPEC isn’t going to change that. Threatening to tax Big Oil into submission isn’t going to change that. Mandating that we will invent new technologies to meet a greatly increased Renewable Fuel Standard isn’t going to change that. These are the sorts of proposals that merely demonstrate that your grasp of the problem is superficial. And you have to understand the problem in order to begin addressing it.

Shouldn’t we also consider what happens when our “non-negotiable” way of life impacts the way of life for others worldwide? What if the Saudis also consider their way of life non-negotiable? Is suing them supposed to force them to negotiate? What about the person in Kenya whose way of life is eased by the very small amount of oil they consume? Shall we negotiate with that person, or just not invite them to the table while we price them out of the market?

Let’s first consider common ground that you and I may have. I presume we would agree that our dependence on oil is not healthy. It puts the economy in a very vulnerable position. It helps to enrich some countries that are hostile to us. It increases carbon dioxide emissions. I think this reflects the positions of all remaining candidates, and is consistent with my own position.

Now let’s consider a position on which apparently differ sharply: Gas prices must come down. While I understand the position of the average American that we are paying too much for gasoline – what impact do you think price has on demand? Higher prices will eventually spur conservation and encourage alternatives – which helps achieve the objectives of lowering our dependence by lowering our usage. Isn’t this what you want? Instead, all three candidates propose measures to bring down gasoline prices – thus encouraging consumption. Can’t you see the inconsistency in your position?

This is the time to show political leadership. The pandering sickens me. So what if the average person thinks we are paying too much for gas? The average person also voted for your predecessor – so let’s not presume that we must bow to the wishes of the average person. I offer the following unsolicited advice for dealing with this problem. This is how I would address Americans on this subject:

My Fellow Americans,

Spiraling gasoline prices are having a negative impact on the overall economy. Recent polls have shown that high energy prices are one of the biggest concerns of the American public. However, I have to be bluntly honest: There are no easy solutions. The situation we find ourselves in is a result of many years of policies that are short-sighted and have essentially ignored the long-term consequences of a dependence on fossil fuels – which in turn translates into a dependence on crude oil imports. One administration after another has paid lip service to energy independence, and yet our dependence has risen during each administration since Nixon. We are obviously doing something wrong. I believe I know what it is.

We have failed to truly understand why we have a problem. We have failed to understand why we are addicted to oil. We have failed to appreciate the nature of oil, and why it is so difficult to replace it with low energy density biomass. The truth of the matter is that we are addicted to oil because of the unparalleled conveniences it provides us. We sought painless solutions to our addiction. But if breaking an addiction was easy, we wouldn’t be addicted.

I don’t believe it serves a useful purpose to continue promising easy solutions. On the other hand, a big part of the reason that you find yourselves in this vulnerable position is because of the previous hollow promises that were made. So I propose the following measures to begin the process of breaking our oil addiction:

1. We must improve the fuel efficiency of our automotive fleet. It is an embarrassment. Here again, we have sought the easy solution: Just increase CAFE standards. Most people view this as a relatively painless solution. They think that instead of their Ford Expedition getting 14 mpg, the automotive industry has tricks up their sleeves that can push it to 24 mpg. All that is required is a bit of legislation, which doesn’t affect me, the consumer. But that’s not the way it works. To achieve 24 mpg, we are going to require a fundamental change in the SUV mindset.

We have fuel efficient vehicles available now, we just need to convince people to buy them. I propose to offer rebates ranging from $500 to $2000 for vehicles that achieve high fuel efficiency. I propose to penalize vehicles that achieve low fuel efficiency. I propose to phase these changes in over the next 3 years.

2. Continuing with theme of the first proposal, we need to find other ways to reduce our fuel consumption. Europe provides a useful guide here, as the average per capita energy consumption in Europe is half that of the U.S. How do they achieve this?

Primarily, they have achieved this by making fuel very expensive. Because I don’t think it would be fair to penalize you as a result of the decisions made by previous administrations, I propose to make this proposal revenue neutral. The goal here is not to collect more taxes; it is to encourage behaviors that reduce fuel consumption. So here is the specific proposal.

The average American consumes 1,000 gallons of gasoline a year. I propose to increase the federal gasoline tax by $0.20/gallon this year, $0.30/gallon next year, and then $0.50/gallon in each of the three following years. The total tax increase I am proposing is $2.00/gallon. This would still put gasoline prices at less than they are in Europe, but by having a clear understanding that gasoline prices won’t be going down, this will encourage conservation measures.

In order to offset the burden of these higher taxes, I propose a tax credit equivalent to the increased tax burden for the average American. This is equivalent to $200 in the first year of the tax. Those who use less gasoline than the average will actually see their overall tax burden go down. Those who consume more than 1,000 gallons per year will see an overall increase in their tax burden – and will therefore have a strong incentive to reduce their fuel consumption. For those whose fuel usage is for business use, the fuel taxes can be deducted against your business income.

3. Solutions will be required on the supply side as well. However, too many “solutions” to date rely heavily on fossil fuels, which is the very problem we are trying to mitigate. Therefore, I am appointing an independent panel of experts across multiple disciplines – environmental, energy, agriculture – to evaluate various sources for 1). Reliance on fossil fuels; and 2). Negative side effects. There will be specifically defined criteria that alternative sources must meet in order to qualify for tax breaks. For example, energy “producers” – fossil and alternative – will pay a surcharge on the fossil fuel inputs they use to run their operations. This will encourage a move away from the use of fossil fuels to produce “renewable” energy.

4. In order to lessen our dependence on fossil fuels for heating and electricity, I propose to extend tax credits for installation of solar systems, especially those for solar water heating. Tax credits for installation of wind power, geothermal power, tidal power, and various other qualifying energy sources will be extended for 10 years.

5. From my viewpoint, we need to move to a future in which electricity drives our transport systems. The electricity would be derived initially from existing sources like coal and nuclear power, but increasingly from solar, wind, and various other renewable sources. Improved battery technology and energy storage technologies are the key enabling technologies required. Therefore, I am proposing to significantly increase the funding and resources devoted to these technologies. Cash awards will also be available to inventors meeting certain key milestones – as inspired by the Automotive X PRIZE.

These five proposals are merely a start. I understand that for some of you, these changes will be painful. But the pain is coming regardless; I am just proposing to manage it in a more effective and predictable manner. For too long, we have been too passive in managing our oil addiction. The time has come for more aggressive measures.

Such proposals would not be without harsh critics, and would require strong leadership to push them through. Special interests will line up to protect their pocketbooks. Short-sighted politicians will try to protect a few at the expense of many. Will you be the president who takes a stand, tells the hard truth about our energy predicament, and pushes through measures that secure a brighter future for our children? Or will you be like the long succession of presidents who have made hollow promises and offered false solutions – only to see our dependence worsen?

Addiction can be a difficult thing to beat. But make no mistake: The path we have been traveling down is unsustainable, and the bills are starting to come due. If we don’t start paying them now, we will put an enormous burden on our children.

April 28, 2008 Posted by | Barack Obama, energy policy, gas prices, global warming, greenhouse gases, Hillary Clinton, John McCain, politics | 75 Comments