Archive for the Energy Category

Keith Hennessey

Today the Administration released their Blueprint for a Secure Energy Future: One-Year Progress Report.

Almost every time President Obama talks about energy he mentions wind and solar power. He used to talk about nuclear power as well. Doing so was politically courageous for a Democrat because nuclear power splits the environmental left. The President rarely mentions nuclear power these days, I presume because of the Fukushima earthquake + nuclear incident a year ago.

The White House blog post accompanying the Blueprint includes the following highlight:

Doubling Renewable Energy Generation: Thanks in part to the Obama Administration’s investment in clean energy – the largest in American history – the United States has nearly doubled renewable energy generation from wind, solar, and geothermal sources since 2008.

“Nearly doubled” in less than four years sounds pretty good but reminds me of this Dilbert cartoon.  In it Dilbert raises his hand and asks the marketing manager:

Are you asking a room full of engineers to be excited about a big percentage increase over a trivial base?

Let’s look at my favorite energy graph, produced by Lawrence Livermore National Laboratory, a part of the Department of Energy.  It translates all energy usage into a common unit (BTUs) for comparison.  You’ll probably want to click on the graph to see a larger (and readable) version.  In particular look at the size of the solar (yellow), wind (purple), and geothermal (brown) connecting lines, especially in comparison to the lines for nuclear (red), coal (black), and natural gas (light blue).


Wind, solar, and geothermal sources are trivially small sources of U.S. energy.  Doubling their usage is significant within those industries but when compared to the overall pattern of energy usage in the U.S., the increases are tiny.

Here are three basic facts to know about energy sources for electricity production in the U.S.:

  1. We have lots of really cheap coal.
  2. Thanks to new fracking technologies we now have lots of cheap natural gas, too.
  3. Nuclear comes in third and represents about 20% of our source of electricity production.

Don’t forget two points from yesterday’s post which you can see easily from the above graph:

  • In America there is little overlap between fuel used for transportation and electricity used to light, heat, and power our homes and businesses.
  • If you could make solar power price competitive with electricity produced from coal or natural gas you would do almost nothing to lower the price at the gas pump because there are so few electric-powered and hybrid vehicles on the road.

Let’s compare BTU totals in sources of U.S. energy excluding transportation.


From this graph you can see how small wind and solar power are relative to other energy sources in the U.S.  Even large percentage increases in the use of solar and wind power will have trivial impacts on the patterns of American energy usage.  Doubling, tripling, or quadrupling our usage of these technologies will not fundamentally change the three above basic facts about electricity production in the U.S.  Until there is a technology breakthrough, the U.S. is a land of electricity production from coal, natural gas, and nuclear, with hydro and biomass trailing and with wind, geothermal, and solar too small to matter much at all.

The value of increased solar and wind production is not the marginal short-term reductions of coal and natural gas we use in America.  These increments are too small to matter. The benefit is instead whatever we learn about producing and using these technologies that might, at some point in the future, result in innovations that so significantly reduce the cost of these technologies that it becomes less expensive to produce power from these renewable sources than it does with our abundant supplies of coal and natural gas.  If the technology ever crosses (or even approaches) those breakeven thresholds, then these energy sources will rapidly and significantly alter the shape of the U.S. energy picture.

Until then the President has a rhetorical point that sounds good but matters little to how we use and produce energy in the U.S.

(photo credit: Nedra)

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Keith Hennessey

In his weekly address President Obama said:

But you and I both know that with only 2% of the world’s oil reserves, we can’t just drill our way to lower gas prices – not when consume 20 percent of the world’s oil. We need an all-of-the-above strategy that relies less on foreign oil and more on American-made energy – solar, wind, natural gas, biofuels, and more.

Solar, wind, and natural gas have almost nothing to do with the price of gasoline.

Policies that affect oil, gasoline, ethanol and biodiesel, hybrid vehicles, battery technology, and vehicle fuel efficiency can all directly and significantly affect the price of transportation fuel (although often quite gradually).

In America there is little overlap between fuel used for transportation and electricity used to light, heat, and power our homes and businesses.  If you could magically make solar power price competitive with electricity produced from coal or natural gas you would do almost nothing to lower the price at the gas pump because there are so few electric-powered and hybrid vehicles on the road.

Similarly the development of massive shale (natural) gas resources in the U.S. will make electricity more affordable in the U.S. but will have almost no effect on the cost of our transportation fuel.

Yes, there are linkages.  There are a few hybrid vehicles on the road, and some commercial vehicle fleets use natural gas as fuel.  But these are vanishingly small when compared with the petroleum-based and bio-based fuels we put in our cars, trucks, boats, and planes.

Some American homes are heated with oil, so reducing the cost of electricity can gradually, over many years, shift home heating away from oil.

And in some countries where oil is used to produce electricity, reducing the cost of other types of power production can reduce their usage of oil, which through the wonder of global oil markets can lower the price at an American gas station.  But these effects are for now quite small.

These linkages mean that the President’s statement is qualitatively correct. But the effects are so small that the President is quantitatively misleading the listener when he suggests that expanded use of solar and wind power will lower gas prices.

If (when?) battery technology leaps forward to make hybrid or electric vehicles a significant share of the market, then electricity and its sources will begin to act as significant substitutes for gasoline and diesel fuel.  At that point R&D to reduce the cost of solar power, wind power, nuclear power, hydro power, and natural gas power will start to affect the price at the pump enough for you to notice.

But until then fuel and electric power are for all practical purposes separate issues, and when an elected official’s response to high fuel prices is more research on or subsidies for some form of electric power production, he is either confused or misleading you.

(photo credit: MissouriS&T)

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Paul Gregory

The Times’ March 1 news piece Tensions Raise Specter of Gas at $5 a Gallon reflects an obvious media bias. As the Times news piece claims, rising gas prices are the result of international events over which President Obama has no control. I cite the first paragraph:

With no clear end to tensions with Iran and Syria and rising demand from countries like China, gas prices are already at record highs for the winter months — averaging $4.32 in California and $3.73 a gallon nationally on Wednesday, according to AAA’s Daily Fuel Gauge Report. As summer approaches, demand for gasoline rises, typically pushing prices up around 20 cents a gallon. And gas prices could rise another 50 cents a gallon or more, analysts say, if the diplomatic and economic standoff over Iran’s nuclear ambitions escalates into military conflict or there is some other major supply disruption.

Under Bush, the “rising gas price” news story would invariably mention Bush by name, Big Oil, and his long-standing ties to the oil industry.

I was about to document this media bias by searching news archives, when I found an excellent blog of March 1 by Julia Seymour, whose main results I cite below:

The Business & Media Institute examined all the broadcast network news reports mentioning gas prices during each of those time periods and found ABC, CBS and NBC aired more than 2 ½ times more stories (63 stories to 24) in 2008 than they did in 2011.

But it was more than just the amount of coverage that showed the media’s willingness to spin gas prices one way under Bush, and another way under Obama. In 2008, network reporters mentioned "Bush," the "president" or "government" in gas price reports 15 times more often than in 2011 under President Obama (15 stories to 1).

Congratulations to Julia Seymour for excellent reporting and analysis.

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Jon Decker

Why the White House is Worried

On the surface, the White House and Team Obama in Chicago have a lot to cheer about. According to the Real Clear Politics average, President Barack Obama’s approval rating is up to 48 percent. By contrast, Congress’s approval rating registers just 11 percent. Looking ahead to November, the President outpolls each of his Republican presidential hopefuls by at least 5 percent. On the economic front, employers have added 1 million workers to payrolls since July, according to the Labor Department. During that same period, the unemployment rate has dropped by 0.8 percentage point, the biggest decline since 1984. Perhaps most important for Mr. Obama, consumer-confidence measures are climbing out of the depths reached during the last recession. So with all this good news, why is the White House worried? Two words – gas prices.

U.S, gasoline prices have risen 47 cents a gallon over the last two months according to AAA. And with the summer driving season approaching, analysts expect prices to surge even higher. $5 or even $6 a gallon gas is not out of the question. White House officials and President Obama, both of whom have demonstrated a high degree of confidence over the past month, now recognize that President Obama’s chances of re-election are suddenly not exactly a slam-dunk.

Last Thursday, President Obama traveled to Miami to deliver a speech that both confronted rising public anxiety over rising gas prices and struck back at his GOP critics- who blame the President’s energy policies for the spike in prices at the pump. Yesterday, White House Press Secretary Jay Carney began his daily briefing to White House reporters with a statement that fired back at House Speaker John Boehner who claimed that approving the Keystone XL pipeline, would lower gas prices. “That’s the kind of empty promise that politicians make when we face hikes in the global price of oil that is really dishonest,” said a visibly irritated Carney.

The White House’s concern is understandable. A recent Associated Press/GFK poll shows that 39 percent approve of President Obama’s handling of gas prices; 58 percent disapprove. Those numbers are troubling for Team Obama, particularly when you factor in that seven in 10 of those polled by AP/GFK find the issue of rising gas prices deeply important.

It’s not just motorists who have taken notice of the gas price spike—every time they fill up their tank. So have the Republican presidential candidates. Newt Gingrich is hoping the issue jumpstarts his flagging campaign. “I’ve developed a program for American energy so no future president will ever bow to a Saudi king again, and so every American can look forward to $2.50-a-gallon gasoline,” said Gingrich at last Wednesday night’s GOP debate in Mesa, Arizona. Former Pennsylvania Senator Rick Santorum and former Massachusetts Governor Mitt Romney have each begun including lines in their standard stump speeches that criticize President Obama over the surge in gas prices.

Their political instincts are spot on. With the U.S. economy showing signs of recovery, the one issue that is most promising for Republicans hoping to win back the White House is gas prices. President Obama knows this. And OFA – “Obama for America” knows this. If Republicans can own this issue, Barack Obama will be on the defensive all the way through November. And like Jimmy Carter, it could mean a one-term presidency. That would give Mr. Obama plenty of time to test-drive that Chevy Volt he says he intends to buy when he leaves the White House.

(photo credit: photoloni)

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Laura Huggins

Trade a Tortoise

Two years ago in PERC Reports Todd Gartner wrote, “I am helping the American Forest Foundation develop a market-based habitat credit trading system in portions of Georgia and Alabama. The incentive-based framework will complement other efforts in the region to keep the eastern population of the gopher tortoise off the Endangered Species list.”

Today, Gartner, in collaboration with Josh Donlan and James Mulligan of  Advanced Conservation Strategies, are ready to launch their first pilot transactions.

Here is how the gopher tortoise candidate conservation marketplace is being designed and piloted:

  • An interested and eligible private landowner (the “seller”) receives a negotiated payment to conserve, manage, or restore longleaf pine forests capable of supporting healthy populations of gopher tortoises on his or her property. In so doing, the landowner generates gopher tortoise habitat credits.

Continue reading Laura Huggins…

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Victor Davis Hanson

As the global economy gets better, as we freeze federal leases, and as the Middle East heats up, will $5-a-gallon summer gas be good or bad? Suddenly the administration seems to think that high energy prices are bad and, in fact, that it has done a lot to lower them.

The Obama team’s various explanations for addressing skyrocketing gas prices so far seem threefold: It claims that by getting out of Iraq it is settling down the Mideast; it is reducing demand; and it is increasing production. All of these are either half-truths, or developments that are irrelevant to the presidency. And the fact that gas prices have doubled since January 2009 suggests that whatever the current Obama policy is, it has not worked — at least if lower gas prices were the aim.

Our departure from Iraq has had nothing to do with calming oil prices. When Obama entered office, Iraq was already quiet; the month we left, no U.S. soldiers were lost. As for Middle East oil, in 2002, the last year before the Iraq invasion, Iraq produced slightly over 2 million barrels per day; oil production exceeded that prewar figure already by 2007 after the success of the Petraeus surge. In 2011 (with thousands of troops still in Iraq), it hit a 3 million barrels average, with projections for even more this year. The Iranian mess, no doubt, has fostered speculation, but I will leave it to others to judge whether Obama’s policies toward Iran have created calm and reassurance in the Gulf region.

Continue reading Victor Davis Hanson…

(photo credit: Paulo Ordoveza)

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Bruce Thornton

Nature Fakery

At the turn of the twentieth century, President Theodore Roosevelt became embroiled in a public controversy over how some writers and naturalists described the natural world in overly anthropomorphic and sentimental terms. In a 1907 article attacking Jack London, among other writers, Roosevelt popularized the moniker “nature fakers,” those writers whom Roosevelt called “an object of derision to every scientist worthy of the name, to every real lover of the wilderness, to every faunal naturalist, to every true hunter or nature lover. But it is evident that [the nature faker] completely deceives many good people who are wholly ignorant of wild life.”

The “nature” the sentimentalists described was not the real nature, but one conjured from old myths and imaginative projections of human ideals onto an inhuman natural world. Unfortunately, a century later “nature fakers” are still promoting their sentimental myths about nature, only now with serious repercussions for our national interests and security.

These days “nature fakery” lives on in school curricula and popular culture, from Earth Day celebrations to Disney cartoons like Pocahontas. Only now this myth is renamed “environmentalism” and disguised with a patina of scientific authority. Worse yet, this allegedly scientific information provides the basis for government policies that impact our economic productivity and national security. The furor over global warming illustrates this unholy alliance of ancient myth and misleading science. For years we have heard claims that the evidence for global warming caused by human-generated “greenhouse gas” is “incontrovertible,” as the American Physical Society claimed last year in a policy statement, and that “if no mitigating actions are taken, significant disruptions in the Earth’s physical and ecological systems, social systems, security and human health are likely to occur.”

Continue reading Bruce Thornton…

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Laura Huggins

Hunting Endangered Species

The scimitar horned oryx . . . the addax . . . the dama gazelle – endangered animals one would expect to encounter in Africa. Yet, as some Texas ranches are proving, helping to bring back large numbers of these endangered species can be a profitable pastime. As a 60 Minutes segment shows, by allowing a number of these animals to be hunted for a high price, exotic wildlife ranches have achieved a major feat in wildlife conservation. A billion dollar industry, supporting more than 14,000 jobs—exotic ranches have worked to bolster the populations of approximately 125 different endangered species.

The funds collected from hunting a small percentage of the endangered animals gives ranchers the money they need to continue to run their ranches. Thus, hunting endangered species in Texas has provided economic incentives for ranchers to continue to conserve and protect the species.

Read Terry Anderson and Shawn Regan’s article, “Shoot an Elephant, Save a Community,” to see how assigning economic value to animals in Africa is also working to conserve wildlife.

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Kori Schake

The Market Value of Iranian Threats

It’s a banner week for Iran: opportunities abound for its rulers to demand international attention and, perhaps, distract Iranians from repeating their 2009 dissent against a government and ruling elite that has served Iranians poorly.  Campaigning has begun for Parliamentary elections that will be held in early March.  Inspectors from the International Atomic Energy Agency recommence their review of Iran’s nuclear programs.  The Iranian Parliament is considering a law that would immediately cut off oil exports to the European Union in retaliation for EU sanctions.  Secretary Panetta said he believes Iran could have a nuclear weapon within a year, and the ability to attack our homeland with it in two to three years.

While Iran supplies a significant amount of oil to EU countries (as high as 13% of total crude for Italy and Spain), oil is even more important to the fortunes of Iran: 65% of government revenues result from selling oil. Iran’s threat to retaliate against the European Union by halting oil exports this week fell flat.  The price of benchmark crude was completely unaffected by Iran’s threat.  In fact, it fell below $100 a barrel.  Which means one of two things: either markets disbelieve Iran would turn their spigots off, or markets have a high degree of confidence other suppliers will fill any shortfalls Iran causes.

The European Union’s willingness to accept significant economic dislocation at a time of weak economies has sent a powerful signal into Iran about the acceptability to “the West” of the Iranian government’s choices.  Not only has Saudi Arabia offered to source any supply shortfalls caused by Iran, they have agreed to do so at current market prices.

This is a welcome development in an otherwise very difficult problem.  Markets, aided by major oil producers like Saudi Arabia, have taken away one of the few aces Iran holds.  And it comes immediately after Iran attempted to upset markets with the threat of closing the Straits of Hormuz, through which 20% of the world’s oil is shipped.  Iran’s threat to close the Straits was also not believed, attributable to a combination of political leaders not acting alarmed and our military providing operational reminders of its dominance.

The argument against attacking Iran’s nuclear infrastructure hinges on the widespread belief that Iranians would “rally ‘round the flag” and we would succeed in delaying their nuclear program only at the cost of uniting Iranians in support of their government and enraging the “Arab street.”  While we should be circumspect of how little we actually know of what Iranians think, there are indications Iranians question the value to them of their government’s dedication to its nuclear programs.  Moreover, Iran’s Arab neighbors are intensely concerned, some even advocating U.S. attacks on the nuclear infrastructure.  At a time when those governments are under democratizing pressure at home, they would not likely advocate such positions if they believed there would be a domestic backlash.

If Iran cannot cripple the economies of countries concerned by its nuclear programs, what sway can it expect to have?  Thankfully, very little.

(photo credit: ezioman)

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