Tag Archives: Oil

Energy Subsidy

I was thinking about energy subsidies this weekend.  I know  I know, geeky shit to be sure, however – I WAS stuck watching a dance conference with my daughter in Baltimore, so slack please!

Anyway, during the election season, Obama was attacked for his green energy subsidies.  That, in his attempt to pick winners and losers, he mostly picked losers.  All of which, of course, was to highlight the waste of money that is green energy subsidies.

It occurred to me, that depending on the type of subsidy, it’s okay that we encourage alternative energy research and advancement.

To be sure, I don’t like the government actually spending money or guaranteeing loans, to one company or technology over another.  However, when it comes to reducing the tax burden so that we advance investment, I don’t see any reason why we should pick oil and gas over solar and wind.

With that said, this is an interesting graph:

From the article:

The folks at the Institute for Energy Research used the Energy Department data to calculate a subsidy per unit of electricity produced. Per megawatt hour, natural gas, oil and coal received 64 cents, hydropower 82 cents, nuclear $3.14, wind $56.29 and solar a whopping $775.64.

So for every tax dollar that goes to coal, oil and natural gas, wind gets $88 and solar $1,212. After all the hype and dollars, in 2010 wind and solar combined for 2.3% of electric generation—2.3% for wind and 0% and a rounding error for solar. Renewables contributed 10.3% overall, though 6.2% is hydro. Some “investment.”

Zooming out for all energy, the Congressional Research Service did its own analysis of tax incentives last year. It found that in 2009 fossil fuels accounted for 78% of U.S. energy production but received only 12.6% of tax incentives. Renewables accounted for 11% of energy production but received 77% of the tax subsidies—and that understates the figure because it leaves out direct spending.

Which brings me to my initial thought:

By the way, these subsidy comparisons don’t consider that the coal, oil, and natural gas industries paid more than $10 billion of taxes in 2009. Wind and solar are net drains on the Treasury.

All of this suggests a radical idea. Why not eliminate all federal energy subsidies? This would get the government out of the business of picking winners and losers—mostly losers.

Mr. Obama’s plan to eliminate oil and gas subsidies would lower the budget deficit by less than $3 billion a year, but creating a true level playing field in energy, and allowing markets to determine which energy sources are used, would save $37 billion. That’s an energy plan that makes sense.

I like that idea best.  Less government.

Peak Oil

Indeed:

The Jubilee Field in Ghana is estimated to contain 1.8 billion barrels of crude. Tullow Oil discovered the field in 2007 and is now working to develop its potential. In 2011 it produced 66,000 barrels a day.

The Chicontepec Basin in Mexico is estimated to contain 10 billion barrels of crude.

The Kashagan Field in Kazakhstan is estimated to contain 11 billion barrels of crude.

The unnamed fields in the southwest of Iraq are estimated to contain 45-100 billion barrels of crude oil.

The Santos and Campos Basins in Brazil are estimated to contain 123 billion barrels of crude.

The Orinoco Belt in Venezuela is estimated to contain 513 billion barrels of oil.

The Science Behind Fracking

The science behind energy has always been progressing.  hat started out as campfires has turned into nuclear reactions and laser shots.  We’ve gone from wood to whole oil.  Whale oil to kerosene.  Kerosene to coal and gas.  Mix in some windmills and solar panels, we’ve come a long way.

Each new advancement seems to come to as the matrix of inputs, and outputs, change.  We have oil today because we were running out of whales yesterday a delicious fact of life to present to your favorite neighborhood environmentalist].  We’ve gone from totally dependent on fossil fuels to nuclear options.  And today we’re taking advantage of natural gas through fracking procedures.

We change and adapt for several reasons.  Sometimes it’s because we develop technology.  We gave up on whales because the technology of oil extraction produced more value through oil than did hunting whales.  We’re able to tap into reserves of oil previously unreachable through new technologies and due to a changing demand for oil; the price of oil now makes new drilling economically sound.  And sometimes we have impacts to the environment that cause us to change.  As we throw soot into the air from our coal plants we discover that those effects are undesirable.  So we try to clean the exhaust.  That cleaning adds costs and those costs drive new technology.

And all of that, if done correctly, is a good thing.  It’s when the dogma surrounding the “Ought” get’s in the way when things go off track.

We forget to track the value.

Is burning the coal and sending the pollution into the air worth the benefit?  Is mining the coal and hurting/killing the miners worth the benefit?  Is the risk of a meltdown in a reactor worth the energy.  is it worth the cleaner energy that coal provides?  The comparisons can go on and on.

folks aren’t being honest if they don’t acknowledge that there are downsides to today’s energy.  And others aren’t being honest if they don’t acknowledge the benefits we enjoy due to that energy.  If reducing coal emissions meant a slow down in medical research, would that be worth it?  if we reduced the deep sea drilling and added to the cost of crude oil, would the economic impacts of higher cost of energy be worth it?

No one should deny that drilling, deep sea or shallow land, doesn’t impact the environment.  However, there shouldn’t be any doubt to the benefits that drilling provides either.

All this brings me to fracking.  This form of energy extraction isn’t any different than the ones we’ve already discussed.  There are puts and there are takes.  The rub comes in the value.  And this is where I think today’s ‘Green Energy” folks are getting it wrong.

I get that wind and solar are easier on mother Earth.  But they don’t have the economic ability to make themselves viable.  The benefit ain’t worth the downside; dramatically more expensive power.  And those same “Green Energy” folk’s hatred of fracking follows the same blindness to the value proposition that they exhibit in solar and wind.

Fracking gives us access to substantially cheaper gas than we’ve had in the past.  AND we have massive amounts of it.  Are there downsides?  Sure.  But they may not be as bad as they say:

PITTSBURGH — In the debate over natural gas drilling, the companies are often the ones accused of twisting the facts. But scientists say opponents sometimes mislead the public, too.

Critics of fracking often raise alarms about groundwater pollution, air pollution, and cancer risks, and there are still many uncertainties. But some of the claims have little — or nothing— to back them.

Examples?

…reports that breast cancer rates rose in a region with heavy gas drilling are false, researchers told The Associated Press.

Fears that natural radioactivity in drilling waste could contaminate drinking water aren’t being confirmed by monitoring, either.

And concerns about air pollution from the industry often don’t acknowledge that natural gas is a far cleaner burning fuel than coal.

Ironically, the same groups that accuse the right of ignoring the science of global warming*, are the same folks who might be ignoring science themselves.

“The debate is becoming very emotional. And basically not using science” on either side, said Avner Vengosh, a Duke University professor studying groundwater contamination who has been praised and criticized by both sides.

More on the science:

Opponents of fracking say breast cancer rates have spiked exactly where intensive drilling is taking place — and nowhere else in the state. The claim is used in a letter that was sent to New York’s Gov. Andrew Cuomo by environmental groups and by Josh Fox, the Oscar-nominated director of “Gasland,” a film that criticizes the industry. Fox, who lives in Brooklyn, has a new short film called “The Sky is Pink.”

But researchers haven’t seen a spike in breast cancer rates in the area, said Simon Craddock Lee, a professor of medical anthropology at the University of Texas Southwestern Medical Center in Dallas.

David Risser, an epidemiologist with the Texas Cancer Registry, said in an email that researchers checked state health data and found no evidence of an increase in the counties where the spike supposedly occurred.

And Susan G. Komen for the Cure, a major cancer advocacy group based in Dallas, said it sees no evidence of a spike, either.

“We don’t,” said Chandini Portteus, Komen’s vice president of research, adding that they sympathize with people’s fears and concerns, but “what we do know is a little bit, and what we don’t know is a lot” about breast cancer and the environment.

And back to the radioactive water:

Another instance where fears haven’t been confirmed by science is the concern that radioactivity in drilling fluids could threaten drinking water supplies.

Critics of fracking note the deep underground water that comes up along with gas has high levels of natural radioactivity. Since much of that water, called flowback, was once being discharged into municipal sewage treatment plants and then rivers in Pennsylvania, there was concern about public water supplies.

But in western Pennsylvania, the Pittsburgh Water and Sewer Authority did extensive tests and didn’t find a problem in area rivers. State environmental officials said monitoring at public water supply intakes across the state showed non-detectable levels of radiation, and the two cases that showed anything were at background levels.

And finally the irony:

Critics of fracking also repeat claims of extreme air pollution threats, even as evidence mounts that the natural gas boom is in some ways contributing to cleaner air.

Marcellus air pollution “will cause a massive public health crisis,” claims a section of the Marcellus Shale Protest website.

Yet data from the U.S. Energy Information Administration show that the shale gas boom is helping to turn many large power plants away from coal, which emits far more pollution. And the U.S. Environmental Protection Agency passed new rules to force drillers to limit releases of methane from wells and pumping stations.

Some environmental groups now say that natural gas is having a positive effect on air quality.

Earlier this year, the group PennFuture said gas is a much cleaner burning fuel, and it called gas-fired power plants “orders of magnitude cleaner” than coal plants.

Does burning gas impact air quality and the environment around it?  Sure.  To a degree.  But is it worth it?  Is it worth burning gas in order to bring to our doorsteps life saving medications, educational advancements, new advancements in cancer research?  Also, sure.

We need to watch and make sure that we’re taking care to increase our value.  We don’t kill whales for whale oil just because there’s whale oil in the ocean.  And maybe one day, when we can more effectively split the atom, we’ll stop drilling for oil.  But until then, please, run through the value proposition.

*It’s important to point out that there is a difference in accepting man made warming and accepting catastrophic global climate change.  And much of the emotional back and forth in this debates comes from ignoring this fact.

 

An Inconvenient Truth: Delicious Irony

We’ve all heard the complain from the left; Oil is going to kill us – we need to shift to alternative forms of energy.

And so we begin to experiment with things like wind, solar and geothermal.  And we find out that these things, at least right now, aren’t economically viable as a replacement to fossil fuels; oil, natural gas and coal.  In certain applications these technologies have value, but they will never be able to provide the energy to say, lift an airliner off the ground.

Undeterred, the movement has advanced an agenda that has Obama shutting down the coal industry all while subsidizing bankrupt solar companies.

It doesn’t work.

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The Evils Of Oil Speculation

The price of oil, and perhaps more accurately, gas, has been steadily rising during  the last several months.  All kinds of people have all kinds of reasons for this but one of the common themes has been the impact that oil speculators have on the market.  Many on the left are calling for legislation that would limit the ability of people to speculate on oil:

Experts have been clear: Wall Street speculators are artificially driving up the price at the pump and causing pain to millions of American consumers.

Now others have a different view of the impact that oil speculators play:

But economists and traders cautioned that pushing smaller investors out of markets would only hand greater influence to the largest hedge funds and Wall Street banks. Ultimately, there may not be enough traders left to do business with oil producers and consumers looking to hedge their needs.

“Reduced liquidity often means greater volatility,” said broker Jay Levine at Enerjay LLC in Maine.

So let’s compare.  Let’s take a look at an example of a commodity that prevents speculation and compare it to oil.

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Drilling For Oil And The Price Of Oil

The price of gas continues to go up.  And I’m pretty sure it’ll continue to go up until just after Memorial Day.  For some reason I think I remember hearing that Memorial Day is traditionally considered the height of seasonal highs of gas prices; I dunno.  I guess I could look:

Typically, prices peak in the summer months, or around Memorial Day, as has been the case in 2010 and 2011

[ I love the internet ]

So we have about 2 more months to look forward to rising prices at the pump.  Other than this causing Obama extreme discomfort, this sucks.  It hurts people directly and indirectly; things that depend on the price of gas are going up as well.

So we all wanna know what we can do.  And the biggest call from the Right is for the administration to increase drilling.

But would it help?

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The Price Of Gas: What Can We Do

Obama is faced with rising gasoline prices.  And as we head into an election year he is going to be asked what he’s gonna do about it.  His answer, I suspect, is that there is little a President can do to influence the price of gasoline.  The market dictates the price and that market is fed by the forces of supply and demand.

And, because it IS an election year, he’s going to demonize the “oil speculators” and claim that they are getting rich while the middle class is getting hammered.  Count on it.

But is that the real story?  Is it fair to let Obama skate on this issue so easily?

No.

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Bill O’Reilly: Wrong On Gas Prices

 

Bill O’Reilly has launched a pretty big offensive regarding the price of gasoline.  He’s been on air several times extolling the administration to get ahead of the situation and take a leadership role.  Personally, I’m not sure that Obama has  had much influence on the price of gasoline today.  Prices are high today not because of supply and demand, policies where Obama is clearly wrong, but because of the tension in the Middle East.  Specifically with Iran.

Given the nature of the world market there is no wonder that gasoline prices are going up.  And fast.

But O’Reilly loses me on his solutions.

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Domestic Oil Production: The Liberal Myth

During the 2008 campaign, we heard a lot of Sarah Palin extolling America to “Drill Baby Drill”.  And, from the Left, we heard the mockery of such a policy.  Chief among them the complaint that any oil production is more than 10-15 years away.  We’ll simply never see the oil is what they would say.

It’s starting to look like that’s not a true statementHat Tip to the incomparable Care Diem

A new record for monthly production: 13,768,395 barrels, a 34.6% increase from last August.  In just a little more than two years (since June 2009), oil production has doubled in North Dakota.

Like anything, expose it to the market and the benefits will astound you.

 

Drill Baby Drill

Three words. Two if you don’t count ’em twice.

But they’re pretty powerful.

On each side, Left and Right, those words elicit emotion. On one, it brings to mind an independence. On an ability to depend on one’s self for the requisite needs.

On the other, it brings to mind ugly environmental dangers, global warming and corporate greed.

But the biggest argument against increasing our domestic output of oil is that it simply won’t impact the price of a gallon of gas. The incremental gains that we would see will take years to realize. And even then they won’t amount to any meaningful impact on the global supply of oil.

I have a thought experiment.

If the addition of oil to the market won’t lower the price, then the reduction of oil to the market shouldn’t raise the price.

Right?

Wrong.

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