Nothing, not even Solyndra, can compare with the government intervention into algae based biofuels and the insidious use of our military to create a guaranteed market for those fuels. It is made doubly worse in that it comes at a time when Obama is in the process of defunding our military.
the Navy’s push to develop biofuels to run its fleet of planes and warships could devolve into a “Solyndra situation” for the Pentagon, a top Republican senator said today.
During Tuesday’s hearing of the Senate Armed Services Committee, ranking member John McCain (R-Ariz.) compared the now-bankrupt solar energy company, into which the White House sank $535 million in loan guarantees, to Navy-led efforts in alternative energy.
McCain hammered away at Navy Secretary Ray Mabus during the hearing over the Navy’s continued investment in biofuel technology.
The Navy has spent more than $400 per gallon for roughly 20,000 gallons of algae-based biofuel for testing, McCain said. [emphasis added]
That kind of substantial investment in green fuels, especially during a time of shrinking defense budgets, is simply unacceptable, he said. . . .
"I think that we cannot afford not to do this," Mabus told the committee. "We cannot afford to be dependent on a worldwide commodity that has the price spikes and the price shocks that we have." Further, the Navy's operations accounts will likely suffer as the service continues to deal with the constantly changing price of foreign oil, Mabus pointed out.
That said, the Navy would never purchase any kind of alternative fuel at $400 per gallon, according to the service secretary. The Navy would only start buying biofuels en masse if alternative energy firms could provide that fuel at a commercially competitive price, Mabus said.
But Sen. James Inhofe (R-Okla.) pointed out that even at a competitive price, the Navy’s plan to use a “50/50 blend” of diesel fuel and a biofuel supplement would still cost $15 per gallon. Traditional JP-5 jet fuel used in the Navy’s fighter aircraft runs $4 to $5 per gallon on average, Inhofe said. . . .
Rep. Randy Forbes (R-Va.), a member of the House Armed Services subcommittee on Seapower and Projection Forces, took Mabus to task in February over the service’s plans.
“Shouldn’t we refocus our priorities and make those things our priorities instead of advancing a biofuels market?” Forbes asked at the time.
Before Mabus could respond, the Virginia Republican took a clear shot at the secretary: “You’re not the secretary of the Energy. You’re the secretary of the Navy.”
Mabus's claim about being dependent on foreign oil is simply ludicrous, given that our dependence is in large measure a function of the left's refusal to drill for our own natural resources. As to the "price spikes," how much would oil have to spike to make algae cost competitive with JP-4? Given that algae biofuel is at least four times as costly as oil, and given $100 a barrel oil prices today, that means that we would have to see oil spike in price by four times or more its current price in order for algae biofuel to start becoming cost competitive. There is no historic justification for that claim.
Of all the horrendous things the Obama administration has done, this is, to me, one of the most unforgivable. If Congress doesn't stop him, he will significantly weaken our military, even while he uses the military as the vehicle to create a market for incredibly cost inefficient algae biofuel.
Let's go over some of the eye-opening facts about our gas and oil industry:
- Oil Prices: The major oil companies do not set the price of oil. That price is set independently by traders based on world supply and demand, the strength of the dollar, stability in oil producing regions, and weather events, among other factors.
- Oil Usage - Transportation: Per the DOE, oil accounts for 94% of the energy used in our transportation sector.
- Oil As Our Single Largest Source Of Energy: Per the DOE, oil is our single most important source of energy, accounting for 35.6% of all energy consumed in America. In comparison, solar and wind, added together account for less than 1% of all energy consumed in the U.S. There is a reason for that. Wind and solar energy are vastly more inefficient and costly than oil, gas and coal. They are not commecially viable without substantial subsidies.
- Profit Margin: While oil companies' profits may be vast, that is because their volume is vast. America uses over 20 million barrels of oil daily. The actual profit margin across the oil industry averages less than 6 cents on the dollar. By comparison, Obama's favorite crony capitalist, GE, has a profit margin nearly 33% higher.
- Oil Companies & Taxes: The oil and gas industry is a cash cow for government. Oil and gas companies pay, on average, more than 40% of their profits in taxes. To put a number to this, over the past three years, the oil and gas industry has paid over $242 billion in taxes. Obama's favored business, GE, paid no taxes last year.
- Oil Companies & Jobs: Domestic gas and oil companies play a huge role in our private sector, supporting "9.2 million U.S. jobs and 7.7 percent of the U.S. economy."
- Reinvesting Profits: Exploring and exploiting new sources of oil is a time consuming and very expensive process. For instance, Exxon, in the first quarter of 2011, made an after tax profit of $10.65 billion. Of that, Exxon invested "$7.8 billion into capital and exploration."
- Our Trade Deficit & Foreign Oil: We are, today, transferring vast amounts of our wealth outside of the U.S. to purchase foreign oil. Approximately 62% of our monthly trade deficit comes from the purchase of foreign oil.
[A]bout 1.5 percent of the shares of oil companies are held by the officers and board members of those companies. That is comparable to other industries. Similarly, if you look at who is holding the other 98.5 percent of the shares, more than 60 percent is being held by either mutual funds or the companies that manage large portfolios for pensions. There is another 9 percent that is held directly by pension plans and insurance companies and foundations. . . . . What do you say to people who are critical of oil and natural gas industry earnings? Aren't they really being critical of the benefits that are going to millions of American consumers and retirees?
Mr. Shapiro: Those earnings go to two places. They go to the dividends and the value of the stock that is held by pensions and people saving for their retirement. That comprises the overwhelming majority of the ownership of these companies. The other place where oil and natural gas company earnings go is into investment. The oil and natural gas industry has enormous investment needs. . . . That is the other place those earnings go. They go to the retirement plans of both average Americans and certainly the beneficiaries of the major pension plans in the country. They are public employees or auto workers and the earnings also go toward investments that generate returns in the future.
What all of these facts mean are that oil companies are huge industries that, in a myriad of ways, play a very critical role in supporting our economy. Moreover, nothing is going to replace our oil usage at any point in the forseeable future. Yet, with gas prices rising and the oil industry showing huge profits in the last quarter, the left wants to show they are doing something about gas prices - by punishing the oil industry. Specifically, Obama and Harry Reid propose removing "big oil's subsidies." And in reality, this is merely the latest in Obama and the left's much larger war on our domestic oil and gas industry.
George Will recently opined that the ideology and politics of the left are "untethered from the facts." Will, noting the left's substitution of wishful thinking for plans based in reality, chalks this up to deep historical ignorance. Will is half right. The other reason the left's politics and ideology are "untethered from the facts" is because the left are at least as intellectualy dishonest as they are historically ignorant. The actions of Obama, Reid and the left, to demonize and attack our oil and gas industry because gas prices are rising is merely the most recent proof.
The first deceit of the left is that the oil and gas industry receives no subsidies. Rather, what they receive, and that which Obama aspires to remove, are four tax write downs, three of which - domestic manufacturing tax deduction, percentage depletion allowance, and foreign tax credit - are available to every manufacturing entity in the U.S. The only way in which oil companies are treated partially different than other manufacturing entities in the the U.S. is as regards:
Intangible drilling costs -- According to CNN, "[a]ll industries get to write off the costs of doing business, but they must take it over the life of an investment. The oil industry gets to take the drilling credit in the first year."
So when Obama says he wants to take away all of "big oil's subsidies," what he is really saying is that he wants to single out our oil and gas industry for unfavorable tax treatment as compared to all other manufacturing concerns in America. He wants to treat them as a pariah and steal more of their profits.
It is hard to imagine a plan more "untethered from reality" or more cynically designed to gain political advantage, irrespective of the expense to our nation. Basic economics dictate that this plan will negatively impact our economy.
Singling out our domestic oil and gas for special, unfavorable treatment will reduce domestic oil production, it will increase our trade imbalance, it will cost us private sector jobs, it will harm the pensions of millions of Americans, and it will result in rising gas and oil prices to the consumer. Charles Krauthammer does a great job of skewering Obama and the left for the intellectual dishonesty inherent this ostentatious push to punish our oil and gas industry:
Ultimately, this proposal by Obama and the left is going nowhere, simply because there are too many Republicans in Congress to allow them to get away with this insanity. Were this the only attack on our oil and gas industry from Obama and the left, perhaps it would be no big deal. But the reality is that Obama is waging war on our oil and gas industry very effectively by other means.
While Obama recently claimed credit for increased oil production in America under his watch, that was the height of hypocrisy. To the extent that there has been a slight uptick in production under his watch, that is because of expansions of oil drilling on private lands in North Dakota, South Texas and West Texas. Further, these figures have been bumped upward by the opening of BP's deepwater Thunder Horse well. That well was leased under Reagan, the exploratory well dug under Clinton, the well set under Bush, and production only now coming to full flow. In sum, Obama had as much to do with the increase in domestic oil production on his watch as he has had to do with the daily rising and setting of the sun.
To the contrary, as stated earlier, Obama is warring quite effectively on our domestic oil drilling. He is doing so, on one hand, by severely restricting the availability of public lands and coastal regions for exploration and drilling and, on the other hand, by limiting permits for such activities:
In 2008 there were 2,416 new oil and natural gas leases issued on Bureau of Land Management (BLM) land spanning 2.6 million acres. In 2010, under the Obama Administration, the number of new leases issued dropped to 1,308 and acres leased dropped to 1.3 million. The total onshore acreage leased under the Obama Administration in 2009 and 2010 are the lowest in over two decades, stretching back to at least 1984.
There is also, of course, the permatorium on drilling in the Gulf, though at least a few drilling permits have recently been issued. The effects of Obama's war will be with us long after Obama himself is but a distant, very unpleasant memory in our national consciousness.
What makes this war on our domestic production, with all its attendant negatives for our economy, all the more mind boggling is that Obama has promised to significantly finance Brazil's development of their own oil industry. That is inexplicable - though of course it does bear noting that George Soros has a substantial investment, close to $1 billion, in Brazil's oil industry.
Fortunately for our nation, Obama's war on our domestic oil production is something that we can change at the ballot box. But there is also another front in the left's war on oil and gas - one that wholly bypasses Congress and the ballot box. I am referring to the radical environmentalists who have been given keys to the courthouse under our environmental laws. They are seeking new ways daily to bring our nation to its knees by hitting the off switch on oil, gas and economic growth.
One of their well honed methods is to request that a species be listed as endangered under the Endangered Species Act. Once whatever little beastie is then declared endangered, any and all human activity that effects that beasties's habitat becomes enjoined. So for example, California's Central Valley, which but three years ago was a thriving bed of agriculture, has seen its irrigation water shut and is today "Zimbabwe West." The reason - a law suit brought under the ESA to protect a 3 inch fish with no commercial value, the Delta smelt.
And then there are the law suits charging that carbon dioxide is a pollutant for which emitters are liable. Their ultimate goal is to have the courts take over our nation's energy policy. Whether carbon dioxide is a pollutant and whether it is causing "global warming" are scientific questions very much at issue and that courts are unqualified to answer. Even assuming arguendo that CO2 is a pollutant causing global warming, what to do about it is a political question with massive ramifications for our economy. It is not a question to be decided by our Courts, but by our elected representatives.
Yet our federal judiciary, from the Supreme Court on down - none of whom are scientists - has shown an avid willingness to hear and decide such cases. The EPA is regulating carbon dioxide as a pollutant today under the Clean Air Act because five members of the Supreme Court felt qualified to pass judgment on this issue. Moreover, enterprising lawyers have brought suits against power companies under a nuisance theory because they are contributing to carbon dioxide in the air. These law suits are currently in the court system. If the lawyers succeed, the Courts then become the single most important arbiters of energy policy in America. On top of this, we have seen in the past week NASA's Jim Hansen, the "Bernie Madoff of climate science," file lawsuits with children as the plaintiffs seeking to have courts take complete control over our energy policy in the name of Global Warming.
While Obama's attempt to punish our domestic oil and gas industry for daring to make a profit is not going to go anywhere, his and the left's larger war on that industry is "untethered from the facts." We are all going to ultimately pay the price. I am praying that we are able to elect someone in 2012 who is both capable of articulating a coherent energy policy and who is able to take our courts and the radical left out of the business of deciding our nation's energy policy.
In the near future, Obama will be giving his State of the Union address. Here are some deeply troubling facts about our economy that you will not be hearing in that speech.
1. Food Prices At Record Highs & Heading Upwards; Ethanol Mandates & Subsidies Put Fuel In Competition With Food
Food prices are skyrocketing upward, running last month at an annualized rate of 8.7% inflation.
In December, the wholesale price of vegetables rose by 22.8 percent, and fruit was up 15.4 percent. . . . The price of beef rose 2.7 percent in December and was 15 percent higher than a year ago, the Department of Labor said in the PPI report. Pork is up 22.3 percent from a year ago, and fish is up almost as much. Turkey is up 18 percent.
In the United States, which harvested 416 million tons of grain in 2009, 119 million tons went to ethanol distilleries to produce fuel for cars. That’s enough to feed 350 million people for a year. The massive U.S. investment in ethanol distilleries sets the stage for direct competition between cars and people for the world grain harvest. In Europe, where much of the auto fleet runs on diesel fuel, there is growing demand for plant-based diesel oil, principally from rapeseed and palm oil. This demand for oil-bearing crops is not only reducing the land available to produce food crops in Europe, it is also driving the clearing of rainforests in Indonesia and Malaysia for palm oil plantations.
Bio-fuels are the world's greatest boondoggle. The fuel is inefficient, expensive and actually contributes to the growth of CO2 in our atmosphere. Not only does it make no sense to mandate or subsidize ethanol, it is a major contributing factor to poverty and hunger world-wide. Yet it is now a vested interest and thus, seemingly impossible to dislodge.
This particular problem in America has bi-partisan origins. It began under the Bush administration and now being furthered by the Obama administration. Within the past months, Obama's EPA actually increased by 50% the amount of ethanol allowable in gasoline, from 10% to 15% ethanol. Between that and the recent renewal of the ethanol subsidy, this problem of food prices will only get worse.
2. Housing Market
Our housing market has crossed the threshold into uncharted territory - it is now worse than it was during the Great Depression. Home values have declined 26% since their 2006 peak and there is no end in site to the slide. Foreclosures this year are expected to top 2010's record of one million, and over five million people are over two months behind in their mortgage payments.
3. Obama's War On Domestic Oil & Gas
It is impossible to underestimate the cost to our economy of Obama's war on domestic production of oil. An incredible 62% of our entire trade deficit now comes from importing foreign oil.
And the situation is poised to become much worse. Many expect the price of gasoline seems to spiral upwards, beyond the $4 a gallon threshold that caused nationwide discontent two years ago. Gas could well hit $5 a gallon this year. Opening up oil and gas drilling throughout America would add significantly to jobs, fill our declining coffers and significantly increase the supply of oil and gas, thus reducing the cost of gasoline. Yet the Obama administration is taking the opposite tack, warring on our oil and gas infrastructure.
The administration, has shut down all new offshore drilling and is making it ever more difficult to drill for oil on federal lands. Further, the Obama administration is in the midst of massive land and ocean grabs specifically aimed at cutting off ever more of our natural resources from exploitation. Lastly, the administration is expected to introduce even more regulations and increase taxes on our domestic oil industry in response to the report of the deeply partisan Oil Spill Commission, which, while tasked with investigating BP, instead condemned the entire oil industry.
4. Obama Is Killing Coal Mining & The Use Of Coal For Electricity With Deep Ramifications In The Future For The Cost & Availability Of Energy In America
The war on oil and gas pales in comparison to the Obama administration's war on coal - the basis for over 50% of the electrical power generation in our country. The Obama administration is doing all that it can to completely kill our coal industry:
"Coal is a dead man walkin'," says Kevin Parker, global head of asset management and a member of the executive committee at Deutsche Bank. "Banks won't finance them. Insurance companies won't insure them. The EPA is coming after them. . . . And the economics to make it clean don't work." . . .
Not a single new coal power generation plant was built in 2010. And lest there be any question whether investors should put their money into coal mines, the EPA recently took the unprecedented step of withdrawing a Clean Water permit for a mine it had approved three years ago. This from the WSJ, via Bizzy Blog:
The Environmental Protection Agency, in an unusual move, revoked a key permit for one of the largest proposed mountaintop-removal coal-mining projects in Appalachia, drawing cheers from environmentalists and protests from business groups worried their projects could be next.
The decision to revoke the permit for Arch Coal Inc.’s Spruce Mine No. 1 in West Virginia’s rural Logan County marks the first time the EPA has withdrawn a water permit for a mining project that had previously been issued. . . .
A spokeswoman for Arch said the company was “shocked and dismayed” by the agency’s decision, which it said would block an additional $250 million investment that would create 250 jobs. The company said it would appeal to the courts.
… As the EPA stressed that the permit decision had no implications beyond the Spruce mine, business groups outside the coal industry said the government’s action raised questions about whether permits previously issued for other businesses could also be revoked, potentially stranding investments and costing jobs even as the economy continues to heal.
The EPA has just added a significant amount of risk for any investor considering investment in a coal mine. This is killing jobs in the oil and coal industries. This war on coal and oil will soon have major ramifications for the domestic cost and availability of energy.
Update: Obama conducts this war even though his push for "green energy" is falling utterly flat. American Thinker covers the moras Obama has created with solar energy - a black hole for tax dollars and Democratic corruption that will not be replacing coal in our lifetime, if ever.
5. The EPA Poised To Harm Our Economy
Regulation as a whole has been creating an anti-business momentum for decades. But under Obama, and in particular with the EPA, the regulatory bureaucracy has taken wing. While Congress has refused to legislate restrictions on CO2, the EPA, with an assist from the climate scientists sitting on the Supreme Court, has assumed the right to do so under the Clean Air Act, a law ill suited for the task. The first leg of EPA's new regulatory scheme for CO2 went into effect this month. It is initially aimed at the "largest emitters" - i.e., coal fired power plants, cement plants, etc.
6. Environmental Groups & The Courts Driving Energy Policy
Unfortunately, it is not just the regulatory bureaucracy that is implicated in this ever greater assault on our economy. Each of the regulatory laws passed by Congress decades ago contain a provision giving the keys to the courthouse to environmentalists. Because of that, a major driver of our nation's environmental policy is being dictated by the Courts - with drastic consequences. For example, a Federal Court decision to protect the Delta Smelt has turned one of our nation's prime agricultural areas into "Zimbawbwe." For another example, enterprising lawyers are now filing nuisance suits to sue U.S. manufacturers and power plants for their contribution to global warming. Our Supreme Court recently opted to allow such cases to proceed. It is time for Congress to end standing for all private suits under our environmental laws as well as clarifying that the regulation of green house gasses are policy questions for our elected representatives and thus cannot be heard by state or federal Courts.
7. More Regulatory Overreach & The Looming Explosion In Regulations
Before leaving the question of the regulatory bureaucracy, it is of course not just the EPA that has engaged in power grabs of very dubious constitutionality. The FCC's recent decision to assume control over regulation of the internet is yet another shining example of regulatory agencies gone wild. And we see similar overreach by HHS as Kathleen Sebilius is in the process of taking control over health insurance pricing in the U.S. Meanwhile, hundreds of new bureaucracies remain to be staffed and reams of new regulations remain to be written for Obamacare and the Financial Regulatory bill.
The regulatory bureaucracy is clearly out of control, bastardizing our form of government. We are beginning to resemble the EU - a government run by unelected bureaucrats. That is far from the vision of our Founders. As George Will notes in a column today, reasserting Congressional authority and oversight over the regulatory bureaucracy should be at the top of the agenda for the 112th Congress. Indeed, I believe that Congress should immediately pass a law holding that no regulation will become binding and enforcable unless and until approved by Congress.
- Excise Tax on Charitable Hospitals (2010) - Tax on Innovator Drug Companies (2010) - Tax on Indoor Tanning Services (2010) - Medicine Cabinet Tax (Jan 2011) - HSA Withdrawal Tax Hike (Jan 2011) - Corporate 1099-MISC Information Reporting (Jan 2012): - Surtax on Investment Income (Jan. 2013) - Flexible Spending Account Cap aka “Special Needs Kids Tax” (Jan 2013) - Hike in Medicare Payroll Tax (Jan 2013) - Tax on Medical Device Manufacturers (Jan 2013) - Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI (Jan. 2013) - Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (Jan 2013) - $500,000 Annual Executive Compensation Limit for Health Insurance Executives (Jan 2013) - Individual Mandate Excise Tax (Jan 2014) - Employer Mandate Tax (Jan 2014) - Tax on Health Insurers (Jan 2014) - Excise Tax on Comprehensive Health Insurance Plans (Jan 2018)
9. The National Debt & The Road To Becoming A Banana Republic
Our national debt is expected to balloon over the next decade, particularly in light of massive entitlement obligations. Obama and the left have us on track to have debt rise to $20 trillion, 90% of GDP, by 2020, the consequences of which will be calamitous. It means we will soon be facing massive increase in taxes, inflation, and the need for draconian cuts in spending - or default on our sovereign debt, with unimaginable consequences not just for us, but also for the world economy.
10. Unemployment
Since Obama assumed the Presidency, we have hemorrhaged millions of jobs and remain mired above 9% unemployment. For two years, Obama has concentrated on everything but the economy and jobs for Americans, apparently assuming that the economy would bounce back of its own accord while he focused on paying off labor unions and forcing through Obamacare. We are world's away from the Bush years, during which unemployment averaged 5.2%.
The December unemployment report showed that the jobless number dropped to 9.4%. That seemingly small piece of good news is illusory. This from Morning Bell via Bizzyblog:
You are going to hear a lot of noise from the White House about how this drop from a 9.8% unemployment rate to 9.4% means the economy is in a strong recovery. This is false. The reality is that the only reason the unemployment rate dropped is because the U.S. labor force decreased by 434,000. More importantly 260,000 Americans dropped out of the labor force entirely. This means that the Obama economy is now driving Americans out of the labor force faster than it is bringing them in.
Unemployment will remain an intractable problem under this deeply incompetent administration. Indeed, it will take a major change to all of the conditions dicussed above if we are to turn our country around, lower unemployment and grow our way out of this fiscal crisis.
11. Conclusion
Obama inherited a bad economy that he has made worse. Instead of changing tack, he is on the cusp of making our economy infinitely worse. True, he has finally appointed a token capitalist with business experience to his administration - William Daley. But unless this means Obama is willing to do an economic u-turn on gas, oil, Obamacare, the EPA, the FCC, ethanol and deficit spending, nothing is going to pull us out of our downward trajectory between now and 2012. The best we can hope for is for the House to slow the slide. But don't expect to hear any of that at the State of the Union.
Advances in technology . . . make serious offshore oil spills a thing of the past. One hundred eight platforms were destroyed and hundreds more damaged in the Gulf of Mexico by hurricanes Rita and Katrina without a single major spill. Californians may remember the damaging spill off Santa Barbara, but that was 40 years ago and was the result of ancient technology.
New technology also means the coastlines would not be marred by unsightly oil platforms. Drilling now goes miles deeper to capture oil once out of reach--and much farther offshore. . . .
While we can look on what Mr. Barnes wrote as a bit of a Pollyanna, the plain fact is what he was saying was accurate. Modern technology for offshore drilling comes with an impressive array of redundant safety features that have worked over the past several decades to make offshore drilling so free from spills that the most hazardous part of the oil production process came to be transporting the oil by tanker to the mainland. Some of those safety systems were discussed in a recent article on the spill in the Gulf:
Blowouts are infrequent, because well holes are blocked by piping and pumped-in materials like synthetic mud, cement and even sea water. The pipes are plugged with cement, so fluid and gas can’t typically push up inside the pipes.
Instead, a typical blowout surges up a channel around the piping. The narrow space between the well walls and the piping is usually filled with cement, so there is no pathway for a blowout. But if the cement or broken piping leaves enough space, a surge can rise to the surface.
There, at the wellhead of exploratory wells, sits the massive steel contraption known as a blowout preventer. It can snuff a blowout by squeezing rubber seals tightly around the pipes with up to 1 million pounds of force. If the seals fail, the blowout preventer deploys a last line of defense: a set of rams that can slice right through the pipes and cap the blowout.
Deepwater Horizon was also equipped with an automated backup system called a Deadman. It should have activated the blowout preventer even if workers could not.
So what happened at the Deepwater Horizon site, where the well head sits one mile below the surface of the water, in a perpetual night? The pressure at that depth is about 2,367 psi, far beyond the ability of any human to withstand. Indeed, only specialized submersibles can work at that depth.
The Deepwater site was in the process of being changed from an exploratory well head to a working well, with concrete poured 20 hours before the explosion and safety devices in the process of being emplaced. Somehow, some methane, which exists on and in the sea floor in the form of a slush like semi-solid, methane clathrate, was released into the pipe. This from ABC News:
As the workers removed pressure from the drilling column and introduced heat to set the cement seal around the wellhead, the chemical reaction created heat, destabilizing the seal and allowing a [methane] gas bubble to form inside the pipe.
. . . [A]s the bubble rose up the drill column from the high-pressure environs of the deep to the less pressurized shallows, it intensified and grew, breaking through various safety barriers, the interviews said.
“A small bubble becomes a really big bubble,” Bea said. “So the expanding bubble becomes like a cannon shooting the gas into your face.”
It is not completely clear whether all of redundant safety systems were fully in place at the time of the blowout, and if not why not, though it is clear that what was in place suffered a cascade failure. Obviously it will be of great importance to identify how this accident managed to occur and insure that another like it is reasonably guarded against. Indeed, those who recognize the need for us to exploit our natural resources, including drilling for oil offshore, should be the loudest voices in demanding that we identify the precise causes of this Deepwater Horizon spill and in demanding that solutions be identified and tested before resumption of new drilling in the Gulf.
As an aside, we should likewise vociferously demand a thorough evaluation of the response to this Titanic of oil spills. Clearly, when Department of the Interior chief of staff Tom Strickland, responsible for coordinating the response to an oil spill, is on vacation and sees no need to return to work, there is an obvious problem. And that is only one small part of what appears to be the lack of any sort of robust response to the oil spill from the Obama administration.
But for many, this is an excuse to demand that the U.S. stop offshore drilling. If we give into that call, we will be foolish indeed. Phil Weingart at Plumb Bob Blog puts this accident, terrible though it might be, in context:
Incidents like the Exxon Valdez and this one give us reason periodically to consider the cost of maintaining an industrialized society.
The technological explosion and economic growth of the 19th and 20th centuries raised billions of people out of abject poverty and provided the great mass of ordinary people around the globe with basic sanitation, antibiotics, inexpensive clothing and food, transportation, communication, and other advantages in a lifestyle that was unavailable to kings in earlier eras. The West has nothing for which to apologize when we consider the advances conferred by technology. And yet, the price of that technology includes occasional accidents of a magnitude previously only produced by random acts of God, like volcanoes or earthquakes.
The question is, can we face those, work sensibly to minimize and contain them, and yet not succumb to the temptation to abandon technology? Victims and governments will initiate a head-hunt soon, looking to find a scapegoat on which to pin the blame. Gulf coast fishermen are grousing about how they were misled by BP, and some have already filed suit. Environmentalists are already using photos of waterfowl endangered by the oil slick to obstruct public support for the issuing of new offshore drilling leases. Can we competently assign responsibility without succumbing to the urge to create demons?
Accidents happen. So do stupid humans. And so long as those things are true, the advance of technology will be accompanied by the periodic accident.
Like accidents, politicians and governments also happen. Wherever they do, the self-righteous posture and puff to use the events to enhance their own images, and the gullible are taken in by the display. “At least they’re doing something.” Sure thing.
The important things that need to be done are procedures for minimizing the occurrence of accidents and improving the response to them. This almost never requires new regulation; BP is already, under existing law, going to pay the cost of the cleanup, not to mention the exorbitant public relations cost of having owned the platform that caused the incident. The incentives to avoid future accidents of this sort far exceed anything that can be accomplished by new regulations, and none of the techniques currently being used to prevent or clean up spills are the result of regulation. But new regulations will be written, because politicians need to appear to be doing something in order to impress gullible constituents.
Those who argue now that, as a result of the spill, we should forgo further exploitation of our resources are the same people who have been yelling for decades against any new drilling and further, that we need to ween ourselves off of dependency on fossil fuels. The reality is that we have made very significant advances in energy efficiency over the past few decades, but there is no realistic chance that, even with these advances, we can be weened off of oil at any point in the foreseeable future. This from Stephen Hayward at the Weekly Standard:
One remarkable fact is that American oil consumption has remained virtually flat over the last 30 years. Today, we use only slightly more oil than we did in 1978, even though the economy has more than doubled in real terms. This is testimony to the steady improvement in energy efficiency over the last generation, including—yes—our cars and trucks. Since 1975, energy consumption per dollar of economic output has fallen 50 percent. Though efficiency and conservation measures are beloved of environmentalists, it is doubtful any of the government’s manifold mandates, tax incentives, or direct subsidies have made a significant difference in the overall trend of energy efficiency in the United States. The basic market drivers—higher energy prices and expanding profits through resource efficiency—account for most of the improvement. So when we hear the handwringing about our growing dependence on foreign oil, now over 60 percent of our total oil consumption, we should be clear that this trend is entirely the result of declining domestic production and not any soaring demand for oil. Domestic oil production has fallen by more than 1 million barrels a day over the last 10 years. The United States now produces less oil than it did in 1947. This is pathetic. And unnecessary.
Leading up to the recession, the cost of gas at the pump topped $4 a gallon and the screams from the rank and file were so loud that they led candidate Obama to promise to allow offshore oil exploration. Instead, since getting in office, Obama has not merely renigged on his promise, but made drilling for oil in the U.S. even more difficult - in addition to conducting what could only be described as a war on coal production.
Gas prices are climbing again - as are our dependence on foreign oil and our payments for foreign oil. A big part of our trade deficit lies with the latter.
The price of gas is an issue that will bite us every bit as much if not more than Obamacare when it rises to crisis levels again. This from PJM:
. . . After gas prices fell in late 2008, many of the “Drill Here, Drill Now” crowd apparently moved on to other causes. As a result, we didn’t drill here and we now face the prospect of paying $3.25 (or more) a gallon for our gasoline this coming summer. And estimates are that this approaching price increase will raise the average American’s monthly gasoline expenditures beyond what many can bear.
To put this into perspective, during the first week of 2010 gasoline prices had already increased so much that the Associated Press reported that “a typical motorist [would pay] about $50 more a month” for gasoline in the early months of 2010 than that same motorist paid during the latter months of 2009. Moreover, if we broaden our view so that it includes the country as a whole and not just individual motorists, a future without expanded domestic drilling looks bleak. According to Oil Price Information Service analyst Tom Kloza, “The current U.S. fuel bill [is] about $1.066 billion each day. A year ago, that daily outlay was about $625 million.’’
. . . What makes the pending higher gasoline prices so frustrating is that it doesn’t have to be this way. For example, we know that one area known as the Green River Formation (GRF) in Colorado, Utah, and Wyoming “holds the equivalent of 800 billion barrels of recoverable oil.” That’s as much as America “would use in 110 years, at current consumption levels, and three times the proven oil reserves of Saudi Arabia.” And if we consider the GRF, ANWR, and all our offshore opportunities together, our untapped reserves are “estimated at about 2.3 trillion barrels, nearly three times more than the reserves held by the Organization of Petroleum Exporting Countries (OPEC) and sufficient to meet 300 years of demand.” . . .
And who’s behind this lack of drilling? Are Chevron, Exxon, and that rascally Marathon Oil Corporation working together to make petroleum scarce in order to drive prices up? Nope. Instead, the usual suspects are at work here: House Speaker Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV), along with President Obama and his interior secretary, Ken Salazar (D-CO). These people seek to hide their refusal to drill behind the mask of environmental concerns.
It was Salazar who recently halted drilling in the GRF until “stricter environmental standards” for the oil and gas companies can be implemented. “We don’t believe we ought to be drilling anywhere and everywhere,” Salazar told the Wall Street Journal, adding that instead, “we believe we need a balanced approach and a thoughtful approach.”
By now we should know we’re in trouble when a leftie like Salazar uses the phrase “thoughtful approach” when he stops domestic drilling in the name of saving rodents on the endangered species list. . . .
Yet I can scarcely find an elected Republican who’s calling for expanded drilling. Nor do I hear a peep out of the grassroots conservatives who, just two years ago, couldn’t quit screaming “Drill Here, Drill Now.”
Even if we take a pragmatic look at drilling, this widespread silence is crazy because this is a winning issue for conservatives and Republicans alike. Just like tax cuts, smaller government, and the Second Amendment, a renewed push for expanded domestic drilling is always a hit with free men who want to remain free. . . .
The left is suicidal in so many ways, this being just one of them. And I could not agree more with the author of the above article. This is an issue that needs to be brought front and center yet again.
A religion is what the faith in catastrophic man-made global warming has become. It is now a tissue of assertions impervious to evidence, assertions that everything, including a historic blizzard, supposedly confirms and nothing, not even the absence of warming, can falsify.
Gore has emerged from his Climategate hibernaton – and he is in full hysterics mode as he attempts to protect his gravy train in a lengthy NYT op-ed. He opens his tome of yesterday by warning that we face “unimaginable calamity” if we don't institute the “large-scale preventive measures.” Gore's Anthropogenic Global Warming (AGW) theory posits that as man introduces more carbon dioxide into the atmosphere, then temperatures around the globe will warm. Gore:
- ignores that there is no historic link in geological history between carbon dioxide in the atmosphere and temperatures. Sometimes there have been high temperatures and high CO2, such as during the Cretaceous, but at other times the link does not appear. For example, a recent study shows that 81,000 years ago, sea levels were 1 meter higher than today, but that carbon levels were significantly lower.
- ignores that the world warms and cools naturally – and that even the IPCC in its pre-hockey stick days admitted that the Medieval Warm Period (MWP) was both a reality and warmer than today, even though there was no human contribution to carbon dioxide then. High priest of the AGW Church Phil Jones admitted the other day that global proof of the MWP would undercut the AGW theory.
- ignores that the very computer models he relies on to forecast “unimaginable calamity” are fatally flawed. Gore is relying on them to forecast doom a century from now, yet not a one of these computer models predicted the apporximately 15 yr. period through today in which temperatures have plateaued even as ever more carbon has been pumped into the atmosphere. The link between carbon dioxide and warming temperatures is not established.
And if carbon isin't the culprit, those “large-scale preventive measures” he wants in place, most of which would involve a sizable transfer of the world's wealth to Gore and his cronies in the name of minimizing carbon dioxide output, would be worse than useless.
I say “worse than” because it would take away our ability to respond to real climate crisis. For example, in the name of AGW, we have moved to highly subsidized “bio-fuels,” a move that has seen a significant increase in agricultural land being used for fuel rather than food. That move alone has driven a significant portion of the worlds poor from above to below the poverty line and contributed significantly to world hunger. It harms, not helps, the environment, and actually leads to more carbon dioxide production than it saves. Moreover, if those who predict that the sun is the prime driver of temperatures – hardly an unreasonable thesis – are correct, than we may actually be in for a period of global cooling which could very seriously impact agricutural production.
The one very valid point that Gore makes in his tome is that “we . . . still need to deal with the national security risks of our growing dependence on a global oil market dominated by dwindling reserves in the most unstable region of the world, and the economic risks of sending hundreds of billions of dollars a year overseas in return for that oil.” I couldn't agree more. Which is why we need to be exploiting our own natural resources to their fullest potential. Drill baby drill - and mine baby mine. We have the resources to substantially, if not in the near term completely, reduce our dependence on foreign oil. But we are doing next to no new drilling, we are not even able to explore in many locales, and Obama is waging a war on coal. Instead, Gore and the left would have us bet our nation's economic future on “alternative energy” that is neither cost effective nor proven to scale. In the UK, where a similar scenario is already playing out, energy prices have doubled in five years and portend to grow exponentially over the next decade. While this doesn't sound like too good a deal for the unwashed masses, it would make Gore and his ilk fabulously wealthy.
According to Gore, the sum total of the case against AGW amounts to nothing of any import:
[T]he reality of the danger we are courting has not been changed by the discovery of at least two mistakes in the thousands of pages of careful scientific work over the last 22 years by the Intergovernmental Panel on Climate Change. In fact, the crisis is still growing because we are continuing to dump 90 million tons of global-warming pollution every 24 hours into the atmosphere — as if it were an open sewer.
It is true that the climate panel published a flawed overestimate of the melting rate of debris-covered glaciers in the Himalayas, and used information about the Netherlands provided to it by the government, which was later found to be partly inaccurate. In addition, e-mail messages stolen from the University of East Anglia in Britain showed that scientists besieged by an onslaught of hostile, make-work demands from climate skeptics may not have adequately followed the requirements of the British freedom of information law.
This charlatan is shameless. He would have us pity the poor climate scientists who hide their data and refuse to make their methodology and code public to allow testing of their experiments. To paraphrase Gore - “why can't you just take it all on faith.” And it is no wonder that AGW theorists have been able to operate so long with so few errors made public. The worst thing that the IPCC and climate scientists have done is to corrupt the “scientific method” and to substitute a bastardized peer review process in its place as a facade of reliability. As the Institute of Physicists wrote the other day:
The CRU e-mails as published on the internet provide prima facie evidence of determined and co-ordinated refusals to comply with honourable scientific traditions and freedom of information law. The principle that scientists should be willing to expose their ideas and results to independent testing and replication by others, which requires the open exchange of data, procedures and materials, is vital. The lack of compliance has been confirmed by the findings of the Information Commissioner. This extends well beyond the CRU itself – most of the e-mails were exchanged with researchers in a number of other international institutions who are also involved in the formulation of the IPCC’s conclusions on climate change.
In other words, Gore is asking us to trust the work of “thousands” even though the wide spread practice among them is to publish results but not the materials that would allow reproduction and verification of their published results. To put this into perspective better, read Steve McIntyre's submission to the British Parliament on the corruption of the scientific process by the IPCC scientists. As he opines:
CRU has manipulated and/or withheld data with an effect on the research record. The manipulation includes (but is not limited to) arbitrary adjustment (“bodging”), cherry picking and deletion of adverse data. The problem is deeply rooted in the sense that some forms of data manipulation and withholding are so embedded that the practitioners and peer reviewers in the specialty seem either to no longer notice or are unoffended by the practices. Specialists have fiercely resisted efforts by outside statisticians questioning these practices – the resistance being evident in the Climategate letters. These letters are rich in detail of individual incidents.
As to the errors found, there are more than two, and they are being found at rapid pace. For example:
- Gore ignores that the “hockey stick” graph – of parmount importance to the AGW theory - continues to be an issue that has regular revelations – the most recent of which is Ken Briffa's cherry picking of the Yamal tree ring data – indeed, so outrageous as to amount to scientific fraud – all in an effort to shore up the hockey stick. It took years to get Briffa to put up his data – just as it took seven years and an act of Congress to get Michael Mann to post even the basic data for the original hockey stick graph, MBH98.
- Just recently, it was found that the IPCC, again relying on non-peer reviewed data, understated by half the annual increase of Antarctic ice.
- Just recently, it was found that the IPCC's claim that global warming will reduce African crop yields by 50% by 2020 was wholly unsubstantiated.
- Gore ignores the fact that, as the CRU e-mails clearly demonstrate, many of the central theories of “AGW” remain unchallenged because a cabal of AGW scientists made damn sure that the work was not published. Possibly the most infamous story of this type concerns physicist Henrik Svensmark who has theorized that our climate is driven by cloud production seeded by solar rays. It is a theory still being tested, but that seems borne out in large measure by the historical record. Not merely was he ostricized for articulating this theory, but he was publicly criticized by the IPCC chairman as “naive” for positing his theory.
Here is one of my favorites from the Goracle's tripe in the NYT: “even though climate deniers have speciously argued for several years that there has been no warming in the last decade, scientists confirmed last month that the last 10 years were the hottest decade since modern records have been kept.”
Would those climate deniers include Phil Jones and Kevin Trenberth, two scientists at the very top of the AGW cabal? Both have concluded its not warming and, as Jones points out, hasn't been for "15 years."
The problem with the surface data temperature is that it, like seemingly everything else in AGW, is subject to massive manipulation and adjustments. It is fundamentaly untrustworthy. Measurements themselves are not standardized. Rural and colder measuring stations have been culled by the thousands, leaving 80% of the data stations in the U.S. in locals that are below standard. Raw data from these stations show adjustments that cannot possibly be justified, but which invariably act to more warming in recent decades even while ignoring the Urban Heat Island (UHI) effect. We know this not because the changes are transparent and the code is provided for public inspection, but by individuals pulling reverse engineering that CRU and others have done in back rooms. It is a massive fraud.
The rest of the Goracle Manifesto is mostly pure drivel. He attacks capitalism, free markets and Faux News. Then he comes to this:
From the standpoint of governance, what is at stake is our ability to use the rule of law as an instrument of human redemption.
"Redemption" is the language of sin and theology. In biblical terms, redemption is an individual choice, and to be redeemed, a person must want it. As the Goracle uses the word, he uses the language of the inquisition, where “sinners” were forcibly redeemed by the police powers of the state using the auto-de-fe. Is there any person of rationale mind who thinks that using the police powers of the state for “human redemption” is a good idea?
My suggestion, let's feed Gore to the polar bears and be done with it.
To repeat that which bears repeating ad infinitum, cap and trade is the single most ill advised piece of legislation quite likely ever in our nation's history. Cap and trade is not a "green" bill. It will do nothing to reduce global temperatures - though the sun has taken care of that for us these past seven years. Cap and trade is a massive regressive tax, it is an attack on business, and it is a vehicle for a massive power grab by the left side of our government.
Today, Robert Zubrin at Roll Call does some 'back of the envelope' calculations on the real costs of the cap and trade bill. It is a must read. As he notes, the cap and trade bill portends to be "a massive and highly regressive tax on the U.S. economy, and could potentially cause not only extensive business failures, unemployment and privation within our borders, but starvation among poorer populations elsewhere."
This from Mr. Zubrin:
. . . According to a report issued by the Environmental Protection Agency in April, by 2015 the price of carbon emission indulgences required by the bill for industries to operate could be expected to run between $13 and $17 per ton of CO2 emitted. . . . That said, let’s stipulate the $15/ton midrange of the EPA estimate, and see what it implies.
The United States emits about 9 billion tons of CO2 per year. Therefore, at a rate of $15/ton fee for emission indulgences, the bill would impose a tax of $135 billion per year on the nation. Divided by the U.S. population of 300 million, that works out to a cost of $450 per year levied on every American man, woman or child, or $1,800 for a family of four. While for wealthy individuals like Al Gore such an impost might represent a mere pittance, for working families struggling hard to make ends meet it would be a very significant burden.
But that is not even the worst part of it. As a result of the markup of carbon costs, a lot of those working families will be out of work and unable to pay their existing bills, let alone new ones. Consider: Burning one ton of coal produces about three tons of CO2. So a tax of $15 per ton of CO2 emitted is equivalent to a tax of $45/ton on coal. The price of Eastern anthracite coal runs in the neighborhood of $45/ton, so under the proposed system, such coal would be taxed at a rate of about 100 percent. The price of Western bituminous coal is currently about $12/ton. This coal would therefore be taxed at a rate of almost 400 percent. Coal provides half of America’s electricity, so such extraordinary imposts could easily double the electric bills paid by consumers and businesses across half the nation. In addition, many businesses, such as the metals and chemical industries, use a great deal of coal directly. By doubling or potentially even quadrupling the cost of their most basic feedstock, the cap-and-trade system’s indulgence fees could make many such businesses uncompetitive and ultimately throw millions of working men and women onto the unemployment lines.
A gallon of petroleum-derived liquid fuel produces about 20 pounds, or 1 percent of a ton, of CO2 when burned. But it takes about 1.5 gallons of oil to produce one gallon of refined liquid fuel. So a $15/ton tax on CO2 emissions will also cause an increase in the price of gasoline, diesel and jet fuel on the order of $0.22/gallon. This will not only hit consumers’ pockets, but increase transport costs throughout the economy, thereby disabling businesses and increasing unemployment levels still more. While harming the economy, such a gas tax will do nothing material toward the truly essential goal of decreasing America’s dependence on foreign oil. Indeed, the bill’s dramatic hikes in electricity costs will have the opposite effect, since only 3 percent of America’s electricity is derived from oil, and by forcefully increasing electric power costs, the bill will actually discourage adoption of electric means of transport, . . .
But all these bad aspects of the Waxman-Markey bill pale before its potential impact on the world’s food supply. America’s agricultural sector is one of the greatest success stories in human history. In 1930, hunger still stalked the entire globe. Not just in Africa, India and China, but even in Europe and America, the struggle to simply get enough food to live on still preoccupied billions of people. Since 1930, the world population has tripled. But instead of going hungrier, people nearly everywhere are now eating much better. This miracle is the work of American farmers, who have not only produced huge surpluses to feed the world, but used the income gained from such good work to pioneer ever more advanced techniques that have enabled farmers everywhere to grow more. . . . But this miracle depends upon the availability of cheap fertilizer and pesticides, which in turn require carbon-based process energy to produce. If you tax carbon, you tax fertilizer and pesticides. If you tax these things, you tax food, and by no small amount. A $15/ton CO2 tax would increase fertilizer production costs directly by about $60/ton, with the cap-and-trade bill’s increased transport costs inflating the burden still more. That’s enough to make many farmers use less fertilizer, and less fertilizer means less food.
To get a sense of what it would mean for farmers to abandon fertilizer, it is only necessary to go to the supermarket and compare the price of the “organic” produce, grown without chemical fertilizer, to the regular produce, which, while just as nutritious, typically costs less than half as much. . . .
In the 220 years of our republic, there may have been worse pieces of legislation enacted by Congress than the Waxman-Markey bill, but none readily comes to mind. The Senate needs to take a stand and stop this disastrous act from passing into law.
Got that? A tick over 88% of U.S. electricity comes from three sources: coal, gas and nuclear. Petroleum brings the contribution of so-called "evil" energy--that is, energy that is carbon- or uranium-based--to almost 90%.
The remaining sources of U.S. electricity, the renewables, are, by comparison, tiny players:
7.1% -- Hydroelectric 2.4% -- Other Renewables 0.7% -- Other
Hydroelectric accounts for 70% of renewable energy in America. But, of course, hydro is mostly tapped out. Almost every dam that could be built has been built. Ironically enough, political opposition to building more dams comes from the same crowd of tree huggers who oppose coal, gas and uranium.
Do you see where I'm going?
The Waxman-Markey bill that passed the House on Friday by a 219-212 margin will punitively tax energy sources that contribute 90% of current U.S. electricity (or 71% if you want to leave out nuclear). The taxes will be used to subsidize the 10% renewable contributors (but really just 3% after you leave out hydro).
In other words, Waxman-Markey is betting the future of U.S. electricity production on sources that now contribute 3% . . .
If passed, I have no doubt that cap and trade will ultimately be repealed, but not before doing untold damage to our economy that might take decades to repair. And the people who ultimately will pay the highest price for this epic boondoggle will be the poor and the lower middle class. The intelligentsia of the left speak of populism and concern for the poor, but the reality is that they value power above all, irrespective of who suffers as a result of their acts. Controlling carbon allows the left to expand their power into every aspect of our economy and our life. If you doubt Speaker Pelosi's honesty when she said that, to control carbon, the left had to examine "every aspect of our lives," then just look at what else is in the cap and trade bill. This from Doug Ross, discussing some of the ancillary provisions in the House Cap and Trade bill:
It creates hundreds of new bureaucracies that benefit Obama's contributors; for example, it creates a "Development Corporation for Renewable Power Borrowing Authority" that issues "Community Building Code Administration Grants" under a "Low Income Community Sustainable Development Capacity Grant Program". This scam serves two purposes: it rewards failed housing programs like those run by Presidential Adviser Valerie Jarrett; it also provides yet another spigot of funds -- in blocks of $1,000,000 -- for groups like ACORN.
• It creates and regulates every building code in the country and will purposefully overrule any "city, county, parish, city and county authority, or city and parish authority having local authority to enforce building codes and regulations and to collect fees for building permits."
• It reaches into every neighborhood by eradicating "any private covenant, contract provision, lease provision, homeowners' association rule or bylaw, or similar restriction" to force localities to accept "green technologies" whether it fits in the neighorhood or not.
• It touches every aspect of water and sewer systems by regulating every "residential water efficient product or service"; ensuring those offerings are rated and forcing state government, local or county government, tribal government, wastewater or sewerage utility, municipal water authority, energy utility, water utility, or nonprofit organization to comply. . . .
• It defines "energy-efficient mortgages" (with our favorite GSEs, Fannie Mae and Freddie Mac, so what could possibly go wrong?) that artificially boosts the income of the borrower based upon how much "green technology" is employed. In other words, the Democrats are socially engineering mortgage underwriting standards again, just as they did in the nineties, which will lead to yet another financial disaster. . . .
Read the entire post. God help us if the Senate now passes this utter abortion.
Our economy, already in serious trouble, faces yet another crisis waiting in the wings - energy prices. They are going to rise and rise sharply. How high they will get is anyone's guess. The causes will be multiple - and most of our own making. They are:
1. Obama's war on fossil fuels through cap and trade.
2. The alternative energy Obama is pushing on America is untried at scale and considerably more expensive than fossil fuels.
3. Rising global demand for oil.
4. Obama's decision to renege on his campaign promise to allow exploitation of our extensive domestic resources.
5. The expected rise in cost of shipping foreign oil to U.S. ports because of a new proposed UN tax on CO2 produced by ships.
6. Oil is priced in dollars. The devaluation of the dollar through inflation will cause a rise in prices.
7. Investment in repair and replacement or our existing energy infrastructure.
The direct effects of Obama's war need little elaboration. I've covered them in detail in the post, "Throwing Green Fuel On An Economic Fire." He intends to introduce a cap and trade system that will punish the use of fossil fuels for power generation, imposing a massive regressive tax that will touch every aspect of our economy and that is estimated to cost every American family just under $4,000 annually. This is completely in line with his plans, articulated in a January, 2008 interview: "Under my plan of a cap and trade system, electricity rates would necessarily skyrocket."
The cap and trade plan will also directly effect energy production in a way I did not anticipate. Obama's cap and trade legislation seems designed to directly attack our refineries. This from testimony before the House Energy Committee the other day:
If climate-change legislation passes Congress in its current form, Lion Oil Co., an El Dorado refinery, will have to shutter operations within a year and lay off 1,200 workers, a company executive told a congressional panel Tuesday.
Passage of the bill "will make our survival impossible," Steve Cousins, vice president of refining, testified before the House Energy and Commerce Subcommittee on Energy and the Environment.
. . . "This bill's treatment of domestic refiners with respect to the allocation of allowances is simply a thinly veiled attack on crude oil as an energy source and domestic refiners as a provider of energy to consumers, farmers and truckers," Cousins said.
This will be bad news indeed. We already have insufficient refining capacity in the U.S. as it is, and thanks to the left, we haven't been able to build a new refinery in the U.S. since 1976. It cap and trade marks a major attack on our domestic refineries, then this alone could have a major impact on energy prices.
2. Alternative Energy
It bears repeating that none of the Obama desired replacements for fossil fuels are cost effective or proven to scale. For example, the costs of solar power per kilowatt hour in the U.S. are 26 cents to 35 cents. That compares to about 5 cents for coal. It is one thing to move off one form of energy to another that is proven equally as reliable and cost effective. It is another thing entirely to do so when that movement is made without any such proof - but a profound belief, as Obama demonstrates - that they can be made more cost effective than fossil fuels at some point down the road. It is quite literally gambling with America's future. And, as Prince Turkial Faisal recently noted:
The U.S. has rising energy needs despite the economic downturn," Prince Turki said. "If you are going to be paying for wind, electric and solar energy equivalents that cost five or 10 times more than it costs to use oil, you are going to price yourself out of the market. You are going to lose whatever competitiveness you have in your products."
It's not like we can't see this freight train bearing down on us.
3. Supply and Demand are still with us.
The fall in energy prices since November has occurred because world wide demand has fallen in the face of a contracting world economy. Contrary to the claims of the left during the energy crisis of last year, they did not successfully repeal the laws of supply and demand. China, India, and the rest of the developing world are going to become ever more voracious consumers of oil and other fossil fuels - as will we - once we start to move again from a bear to a bull economy. As I documented in an earlier post, it was their increasing demand for oil that caused the spike in oil prices over the past two years. Even if we were to do absolutely nothing to proactively cause a rise in oil prices, we can still forecast with near certainty that oil prices will again skyrocket based on global supply and demand.
4. Obama has reneged on his campaign promises to allow exploitation of our own natural resources.
We have extensive domestic resources. Our coal reserves are the largest in the world. And as to oil, estimates are that we have: oil shale – 800,000,000,000 – 2,000,000,000,000 barrels of oil; continental shelf (East & West Coast) – 115,000,000,000 barrels of oil; ANWR – 10,000,000,000 barrels of oil.
The oil sits untouched.
During the campaign, at the height of the energy crisis and with gas topping $4 a gallon, Obama promised that he would allow for greater exploitation of our domestic energy resources. That promise did not last long after the inaguration. Indeed, within two weeks of taking office, Obama "shelv[ed] a plan announced in the final days of the Bush presidency to open much of the U.S. coast to oil and gas drilling, including 130 million acres off California's shores from Mendocino to San Diego."
All of this means that we will become ever more dependent on foreign oil to power the engine of America. Our dependence on foreign oil, already at 70%, will continue to rise, with implications for both our economy and our national security. That means $250 a barrel oil within a few years, if one Gazprom executive is correct, and $300 a barrel oil within a decade if T. Boone Pickens is right. Those types of numbers would put a stake into our economy.
5. Shipping Costs
The cost of shipping foreign oil to U.S. ports - and the costs to ship all of the other 80% of world trade that is shipped - are set to rise dramatically as the UN pushes through an international CO2 tax on shipping. We rely on foreign sources for 70% of our oil. Of that, on a typical day, we get from Canada and Mexico about 3,403,000 barrels of oil. The rest must be shipped considerable distances. This includes:
A typical supertanker carries two million barrels of oil. I do not have the figures yet to tell just how much this rise in shipping costs will be, but according to David Smick, writing at the Washington Post, "[t]he U.N. agreement last October on sulfur-burning levels for ships . . . are expected to send shipping costs skyrocketing."
6. Oil and devaluation of the dollar
Four months ago, oil was at $30 a barrel. It has already climbed to $72 a barrel, in part because of a weakening dollar, and looks to climb higher quickly. With oil priced in dollars, a weakening dollar means rising prices for oil. That said, Obama seems to be doing his best to devalue the dollar. He has created a mountain of debt and the Fed has turned on the money supply spigots like never before seen outside of the Weimar Republic:
It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. . . .
The bottom line is that we may well see the collapse of the dollar. As that happens, the price of oil will be forced drastically upwards.
7. Repair and replacement of our energy infrastructure.
Our energy infrastructure needs to be constantly repaired and replaced. But from where will the money come to repair and replace fossil fuel burning plants if Obama is threatening them with massive taxes and refusing to grant permits for the creation of new plants? For example, only a few months ago, Obama's EPA took the extraordinary step of recalling a permit issued under the Bush administration for the building of a coal fueled generator plant in a Navajo reservation in New Mexico. According to Hot Air:
The EPA . . . said that the Navajos should have proposed using a gasification process that’s still in the experimental phase and hasn’t been proven at all. In fact, Al Gore called it a myth just this month, so apparently the EPA expected the Navajos to include a mythical system in order to retroactively justify the permit they had in their hand.
If that is what is required to build or improve our fossil fuel based energy infrastructure, we will see our nation in serous trouble in just a few years. Lest there be any doubt as to Obama's ideological stance on coal, he said in a January 2008 interview, "if somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted." Hot Air has the video.
This is not yet a problem, but it can quickly become one and add appreciably to the cost of energy in America. And Obama is leading us on the exact same path as Britain in that regard, where the failure to repair the fossil fuel based infrastructure is bringing that nation ever closer to a severe energy crisis. EU Referendum has the details.
8. Global Cooling
Here is a real bit of irony - and a wild card. What if, instead of global warming, we stand on the cusp of another "Little Ice Age." The sun's near total inactivity and the seven year decline in average temperatures point to that far more than they do to global warming. If that is so, if we see a drop in average temperature of 3 degrees Fahrenheit equal to the Little Ice Age during the medieval period, than we can expect a sustained increase in the need for energy - not to mention a sustained increase in the need for CO2 to improve crop yields, but I digress.
The bottom line is that we face, with near certainty, an energy crisis in the coming years, if not in the fairly near future. This is a situation that demands we act and act now to minimize the effect on our economy. But Obama and the left are so bound up in their ideology and so invested in the belief of anthropogenci global warming that, not only do they refuse to acknowledge the signs, but they are all set to compound the problem exponentially. It is the same sort of dysfunctional psychology you can see at work here. This will get much worse before it gets better.