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Fall 2015 • W. David Montgomery on why the encyclical's moral teaching requires better policy
Fall 2015 • Lee Lane on what the oil and gas boom means for America's geopolitical standing
Winter 2014 • Lowell Pritchard on risk and uncertainty in environmental economics
Winter 2014 • Lee Lane on clashing worldviews, green politics, and a path forward
Fall 2013 • Robert Zubrin explains what the U.S. energy boom means for the oil cartel, and argues that we should kick them while we’re up
Fall 2012 • Adam J. White on how President Obama killed the planned nuclear-waste repository
Spring 2008 • Robert Zubrin on ethanol and its critics
Fall 2007 • Robert Zubrin on how to win the war on terror by breaking free of oil
Winter 2007 • Robert Zubrin on energy charlatans and the politicians who love them
June 13, 2008 •
Billionaire oil investor T. Boone Pickens (reportedly worth around $3 billion, and the country’s highest paid hedge fund manager in 2005) had a lot to say about U.S. energy policy at Oil and Gas Investor’s Energy Capital Forum in Houston this week. He expects oil to hit $150 a barrel (it’s now around $135). Pickens is the former owner of Mesa Petroleum, which was one of the largest independent oil companies in the world. (He sold it in the mid-1990s.) Pickens is the founder and a principal of BP Capital LLC.
From the Domestic Fuel Blog:
“Energy is not a debate; it’s a crisis for this country,” Pickens said. “We cannot continue down the path were on. It’s that desperate.”...
Pickens said he plans to elevate the issue into this year’s presidential election campaign through a series of television ads talking about energy.
Hart Energy Publishing’s take on the businessman’s speech:
The energy crisis is a result of decades of lack of leadership that has led to a breakdown. Now, “somebody has to show up to fix it.” He doubts the candidates understand the urgency of the circumstances.
Pickens chided Democratic candidate Sen. Barack Obama for “throwing around the windfall profits tax like a piece of balsa wood.
“I don’t think the senator knows anything about energy. He sounds good for about two minutes.”
Republican candidate Sen. John McCain received little more support. “I don’t know how much he knows either. He wants to lower the gas tax during the summer. What the hell is he talking about? Will that fix anything?”....
He said there is “no question” that America must embrace alternate energy sources to alleviate the $700-billion transfer of wealth out of the country to oil imports....
Ethanol is “an ugly baby but it’s ours and it will move cars,” he said, emphasizing that he prefers the less-than-perfect fuel over imported oil. Biofuels, however, will never account for more than 10% of the U.S.’s energy needs, he predicts.
There are more excerpts from Pickens’s remarks in this article from Oil and Gas Investor.
May 28, 2008 •
Senate Energy and Natural Resources Committee chairman Jeff Bingaman (D.-N.M.) sent a letter to the Commodity Futures Trading Commission (CFTC) this week asking the agency to “dig more deeply” as it investigates the role of speculation and non-commercial, institutional investors in raising the price of oil to today’s levels. Senator Bingaman also questioned the “adequacy” of CFTC’s regulatory oversight. The letter comes as lawmakers face continued pressure to soften the impact of fuel prices for American families and businesses.
Bingaman’s biggest concerns, according to the press release explaining the letter:
the CFTC does not collect data on or analyze the fastest growing segment of energy commodity trading, lumps speculators together with more traditional energy market participants in its analyses, and has much lower transparency requirements for energy compared to agricultural commodities.
Bingaman says he understands that “tight oil market fundamentals and geopolitics” are playing a key role in determining oil prices — but recent analysts’ testimony suggesting supply and demand for physical barrels of oil simply cannot fully explain prevailing oil prices has Bingaman looking for other answers, specifically “the impacts of speculative investment” on prices.
A main concern for Bingaman and others critical of the energy trading platform is that more and more trading activity for crude oil is taking place on foreign boards of trade and in over-the-counter markets. Here the CFTC has limited oversight.
May 27, 2008 •
The Energy Information Administration (EIA) announced last week that U.S. energy-related carbon dioxide emissions rose 1.6 percent in 2007. Some of this growth can be attributed to economic expansion; the U.S. Gross Domestic Product increased by 2.2 percent in 2007. Also, 2007 saw more heating- and cooling-degree days (which require more energy to run heating units and air conditioners), and a 2.5 percent rise in generation from power plants.
But according to an article in the Oregonian, emissions may soon begin to decline thanks to higher energy prices: “We’re likely to burn through a lot less energy over the coming decades than experts assumed as little as a year ago.”
The gist of the article is simple: higher energy prices reduce consumption, which helps limit greenhouse emissions. “In effect, the market itself -- through higher fuel costs -- is reducing use of fuels just as greenhouse gas control measures would aim to do,” the article says.
The article points to recent downward revisions in projected energy demand. EIA initially projected growth of 1.2 percent per year from 2005 to 2020. This year, the agency revised that growth projection downward to 0.7 percent per year, the article said. A downward revision in energy demand led to revisions in greenhouse emissions. Last year EIA said it expected emissions to rise 16 percent from 2005 to 2020, but this year scaled that projected increase back to just 7 percent, according to the article:
Three main factors led to the lowered forecast of energy demand, said Paul Holtberg of the Energy Information Administration. First, projections of economic growth have been pared back -- which translates into fewer new homes, for instance. Also, the Energy Independence and Security Act, passed by Congress last year, mandates new fuel economy standards for cars and efficiency standards for appliances and home lighting.
May 23, 2008 • The Transportation Department confirmed Friday that higher gasoline prices are curbing the number of miles logged on American roadways. The department's Federal Highway Administration said monthly data shows that the estimated "vehicle miles traveled" (VMT) on all U.S. public roads for March 2008 dropped 4.3 percent compared with travel for the same month a year ago. This is the first drop in March travel figures since 1979. "At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history," the administration said.
Americans are showing a modest willingness to cut back. Cumulative VMT has fallen by 17.3 billion miles since November 2006. Total VMT in the U.S. for 2006 topped 3 trillion miles.
The statement also notes that greenhouse gas emissions fell by an estimated 9 million metric tons for the first quarter of 2008. Though the statement doesn't explicitly link the decrease in driver miles with fewer greenhouse gas emissions, the assumption is that there is a connection.
April 16, 2008 •
In an article in the new issue of Foreign Affairs (“Blood Barrels: Why Oil Wealth Fuels Conflict”), UCLA political scientist Michael L. Ross argues that while the world has generally grown much more peaceful over the past fifteen years, oil-rich countries are a mess.
How do we know the world is more peaceful? Ross looks at the number of civil wars: at the end of the Cold War there were seventeen major civil wars going on in the world (meaning civil wars in which more than 1,000 people were killed). In 2006, there were just five. The number of “smaller conflicts” also dropped 18 percent from 33 to 27 over the same period.
But Ross’s main thesis is that “despite this trend, there has been no drop in the number of wars in countries that produce oil” and “oil-producing states make up a growing fraction of the world’s conflict-ridden countries.” The main reason, according to Ross, is that oil wealth often wreaks havoc on a country’s economy and politics, makes it easier for insurgents to fund their rebellions, and aggravates ethnic grievances.
Ross tries to weave the Iraq war into his essay, writing that “according to some, the U.S.-led invasion of Iraq shows that oil breeds conflict between countries, but the more widespread problem is that it breeds conflict within them” (emphasis added).
And the correlation between oil and violence is likely to grow stronger, since as Ross points out, countries in Africa, the Caspian basin, and Southeast Asia will soon become “significant oil and gas exporters. Some of these countries, including Chad, East Timor, and Myanmar, have already suffered internal strife. Most of the rest are poor, undemocratic, and badly governed, which means that they are likely to experience violence as well.”
Ross is careful to point out that “oil is not unique; diamonds and other minerals produce similar problems.” And he makes clear that oil does not guarantee strife: “Oil alone cannot create conflict,” and indeed, “almost half of all the states that have produced oil since 1970 have been conflict-free.”
Nevertheless, there almost seems to be what Ross calls an “oil curse.” Great oil wealth often deprives a country “of the benefits of dynamic manufacturing and agricultural bases ... leaving it dependent on its resource sector and so at the mercy of often volatile international markets.” And a sudden glut of oil revenue can be highly disruptive: “Few oil-rich countries have the fiscal discipline to invest the windfalls prudently; most squander them on wasteful projects.”
Oil wealth, Ross writes, “both exacerbates latent tensions and gives governments and their more militant opponents the means to fight them out.” International sanctions are likely to be useless to quell the violence in countries where deadly conflict has broken out, since the coffers in those countries are flush from oil revenue. And the solution Ross considers ideal — essentially making those countries poor again and challenging them to find a new source of revenue — is, he concedes, not very realistic. Instead, he proposes a mix of other mild and meek solutions, including encouraging the governments of resource-rich states to be more transparent; having oil-importing countries like the United States disclose where their petroleum supplies come from; and help oil-exporting states better manage the flow of their oil revenues. And in some cases, Ross notes, “the best way to steer clear of the oil curse may be not to sell oil for cash at all but to trade it directly for the goods and services their people need,” as Angola and Nigeria are attempting to do.
Again, Ross’s article can be read here.
April 9, 2008 •
A new report (Motor Gasoline Consumption 2008) released April 8 by the Energy Information Administration (EIA), the statistical arm of the Energy Department, has the look of just-another-government-report-on-oil-prices-and-gasoline-consumption. But the short report — it’s only 14 pages — contains some interesting facts about Americans and fuel consumption today and historically.
First, the report makes the obvious point that higher gasoline prices are motivating consumers to drive less, and thereby to use less gasoline. And then come some surprising nuggets:
- The big picture: It isn’t the high price of gas alone that is leading to the drop in driving. It is the combination of high gas prices (specifically prices over $2.50 per gallon) and a slowing economy that has grabbed consumer attention and pocketbooks.
- The embargo reaction: “The 1973 oil embargo and the recession of the following year temporarily halted the upward trend in motor gasoline consumption, but then consumption resumed its upward march as the economy recovered and prices subsided.” Is there any reason to believe that today’s trend in consumer behavior will be permanent? Since there seems to be little indication that the price of oil will tumble sharply in the near term, perhaps consumers will become locked in to new consumption patterns.
What’s more, consumer decisions to purchase more fuel-efficient vehicles will have some long-term impact. The EIA report notes that, following the Iranian revolution of 1979 and the 1980-1982 recession, the statistics for vehicle-miles traveled (the number of miles that residential vehicles are driven) resumed their upward march even though overall gasoline consumption was slowed by more fuel-efficient vehicles. “Gasoline consumption did not return to its 1978 peak until 1993, even though gasoline-powered vehicle-miles traveled had grown by almost 50 percent.”
What differentiates the 1983-1993 pattern from the post-1997 pattern? There was little increase in vehicle fuel efficiency (miles per gallon) after 1997 and gasoline consumption growth was more than double than the earlier period.
- Baby boomers behind the wheel: The median age of the population on the roads has risen, so that most driving is now done by people age 26-55. “As the baby boomers aged, the proportion of the total population within these peak driving-demand years grew.” As the boomers age, however, some slow-down in the miles traveled is expected.
- American motorists are consuming less gasoline: In 2006, consumption grew 1 percent; in 2007, it grew 0.4 percent; and in 2008, it is projected to decline 0.3 percent. (Click to enlarge the graph below.)
- Bigger, not more: Since 1946, higher real income per household led to increased vehicle ownership, with some drop-off periods correlating to recessions. More recently, the continued growth in real income has gone to the purchase of larger vehicles rather than more vehicles — think light trucks, SUVs, Hummers.
- More ethanol in fuel tanks will mean less vehicle fuel efficiency: “The net energy content of ethanol is only 76,000 btu per gallon compared to about 114,000 btu per gallon for motor gasoline produced from crude oil refining. The increase in ethanol’s share of the total motor gasoline pool will therefore reduce average automobile fuel efficiency.” (Click to enlarge the graph below.)