An energy policy that could work
(my response is at the bottom)
By Marshall Loeb, MarketWatch
Last Update: 5:15 PM ET Mar 25, 2005
NEW YORK (MarketWatch) -- Whatever may happen in the near term, the feeling is growing among oil experts that we are in a long-term period of rising prices for the world's most important industry.
"If we continue with global economic growth, it wouldn't surprise me if the price of oil within six months approaches $70 a barrel," predicts Mark A. Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas.
"That means the national average price of gasoline would go to $3 a gallon."
Oil prices have spurted from $10 a barrel two years ago and $25 a year ago to almost $55 now. The basic reason is that in a rapidly expanding global economy, demand is outstripping supply.
There is huge new appetite for oil in China, and to a lesser degree in India and other developing nations. Meanwhile, no big new sources of supply have been discovered in recent years-anywhere.
In this environment, what the United States needs is a national energy policy, aimed at squeezing more oil from our existing supply and finding practical, economical, efficient, alternative sources of energy.
The trouble is that the United States for almost 30 years has been struggling-and failing-to produce a long-term energy policy. "Every time we think we have a policy, it founders on ideological politics, and is loaded with pork. That's a disgrace," says Robert Hormats, vice chairman of Goldman Sachs (International).
Any viable policy would rely on not only more conservation or more production, but more of both of them-simultaneously. As such, it would require a good deal of compromise. Here is a 10-point policy that many oil experts could agree to:
1. Make more of an effort in conservation, which can both save oil and cut pollution. One glaring example: The government should provide greater subsidies for the auto industry to develop-and drivers to buy-hybrid vehicles, which combine two or more sources of power (typically gasoline and either electricity or an oil substitute). Hybrids now get about twice the mileage per gallon as conventional cars. Buyers collect a $2,000 tax deduction if they purchased a hybrid in 2004 or 2005, and $500 next year; but after 2006, the tax break goes away. This false economy is madness.
2. Impose much more stringent energy restrictions on motor vehicles, and heavier taxes on gas guzzlers. Simultaneously, give subsidies or tax breaks to diesel-powered vehicles, which are more energy efficient. Cars, trucks and other vehicles account for fully 44 percent of all the energy burned in the United States, and no energy policy can succeed without bringing down that number.
3. Steadily increase the amount of natural gas used to fuel vehicles, and steadily reduce the amount of oil. This will require awesome investments in plants, pipelines, ports and ships to liquefy foreign-produced natural gas. Ship it across the oceans and deliver it to the United States.
4. Require power companies to get a larger portion of their energy from windmills, such as those that are increasingly visible in Northern Europe.
5. Spend more to develop clean coal, which would burn with a minimum of pollution. Lately, much progress has been made on this front, but more needs to be done because the potential is so huge. Whereas the United States is short on petroleum, it has an abundance of coal-a 300-year supply by today's estimates.
6. Open the Arctic National Wildlife Refuge for oil production. Environmental groups have blocked that for decades, arguing that more drilling in the 49th State would foul the pristine land and interfere with the annual migratory trek of Alaskan caribou and other wildlife. However, oil producers have made a persuasive case that their existing operations in Alaska-drilling for oil in Prudhoe Bay and sending it out by pipeline, which is a much bigger project than ANWR-has been operating successfully for 28 years, and proved to be environmentally sound. The Senate has just passed a bill that will help open ANWR, but more congressional battles lie ahead. If ANWR reaches maximum capacity, it is expected to provide 800,000 to 1 million barrels a day, a not insignificant contribution to the U.S. demand of 20 million barrels a day.
7. Enhance domestic production by selling more leases for oil companies to drill offshore-notably off the coasts of Florida and California. Practically nobody likes offshore drilling, but this is an example of the need for compromise.
8. Give tax breaks to producers who reopen and resume drilling America's many marginal "stripper" wells, which often produce only five to 15 barrels a day. Standing alone, they are not economical; but exploited in groups, those wells can be profitable and add to domestic supply. Says SMU's Baxter: "If an explorer goes in to renovate those wells, he is not worried about prices today, but he wonders what prices will be tomorrow. He needs a tax break."
9. Offer incentives for developing shale oil in the Rockies, tar sands in Western Canada and other potential sources of oil. They have been disappointing so far, but they deserve to be pursued in hopes of some future breakthroughs. Similarly, solar power has not lived up to its extravagant expectations, but it should be employed where possible.
10. Develop much more nuclear power. It is the cleanest form of energy, and probably the most efficient form, at least for electricity. And its supply is limitless. Despite fierce opposition from environmentalists, nuclear power today produces about 20 percent of America's electricity. But Japan, France, Germany, Britain and other developed countries get much larger shares of their electricity from nuclear power. In the United States, both the government and the industry should mount campaigns to sell the people on the idea that nuclear power is also safe. Over time, it seems likely that the United States will transition from an economy based on oil, to one based on natural gas, to one based on clean coal, to-ultimately-one based on nuclear power.
my reaction:------------------------------------------------------------------
Here's my thoughts:
You may yet be a prophet of things to come, but I still hope not.
You should read the pro-nuke article in Wired from last month (a
magazine I subscribe to but was somewhat disillusioned with for
running this story)
http://www.wired.com/wired/archive/13.02/nuclear.html
also check the recent update on the vulnerability of spent fuel
http://www.truthout.org/docs_2005/032805Z.shtml
my reactions to this policy follow (first of all I think it's odd that
they finish with nuclear as #10 when it's bright (radioactive?) red it
should really be their first point, but whatever).
1. (AGREED) Make more of an effort in conservation, which can both
save oil and cut pollution. One glaring example: The government should
provide greater subsidies for the auto industry to develop-and drivers
to buy-hybrid vehicles, which combine two or more sources of power
(typically gasoline and either electricity or an oil substitute).
Hybrids now get about twice the mileage per gallon as conventional
cars. Buyers collect a $2,000 tax deduction if they purchased a hybrid
in 2004 or 2005, and $500 next year; but after 2006, the tax break
goes away. This false economy is madness.
To that I would add that hybrids are a baby-step in the right
direction; I think we need a massive commitment to fuel-cell hydrogen
technology, as well as bio-diesel and hybrid forms of the above.
2. Impose much more stringent energy restrictions on motor
vehicles, and heavier taxes on gas guzzlers. Simultaneously, give
subsidies or tax breaks to diesel-powered vehicles, which are more
energy efficient. Cars, trucks and other vehicles account for fully 44
percent of all the energy burned in the United States, and no energy
policy can succeed without bringing down that number.
Um, yes this is somewhat obvious point but is so politically unpopular
in the current SUV-mania that dominates the country; very slim chance
of passing without either a) severe surges in gas prices or b)
shortages
3. Steadily increase the amount of natural gas used to fuel
vehicles, and steadily reduce the amount of oil. This will require
awesome investments in plants, pipelines, ports and ships to liquefy
foreign-produced natural gas. Ship it across the oceans and deliver it
to the United States.
I don't think we should be importing resources at all. Why should we
(4% of the world's population) be consuming more than 25% of its
resources? (When we only have 3% of its oil reserves) Just because
we (barely still) have the economic might to buy it off other
countries doesn't mean that from a sustainability point of view it is
ours to use. If we want to talk about awesome investments, let's see
an awesome commitment to funding innovation in solar and hydrogren
power.
4. Require power companies to get a larger portion of their energy
from windmills, such as those that are increasingly visible in
Northern Europe.
But of course, this is good.
5. Spend more to develop clean coal, which would burn with a
minimum of pollution. Lately, much progress has been made on this
front, but more needs to be done because the potential is so huge.
Whereas the United States is short on petroleum, it has an abundance
of coal-a 300-year supply by today's estimates.
Isn't clean coal somewhat of an oxymoron? If by clean coal the author
means technology that reduces emissions, much like the same technology
that has been mandated by the EPA for years for coal-burning plants,
this is nothing new.
6. Open the Arctic National Wildlife Refuge for oil production.
Environmental groups have blocked that for decades, arguing that more
drilling in the 49th State would foul the pristine land and interfere
with the annual migratory trek of Alaskan caribou and other wildlife.
However, oil producers have made a persuasive case that their existing
operations in Alaska-drilling for oil in Prudhoe Bay and sending it
out by pipeline, which is a much bigger project than ANWR-has been
operating successfully for 28 years, and proved to be environmentally
sound. The Senate has just passed a bill that will help open ANWR, but
more congressional battles lie ahead. If ANWR reaches maximum
capacity, it is expected to provide 800,000 to 1 million barrels a
day, a not insignificant contribution to the U.S. demand of 20 million
barrels a day.
When you consider that the reserve is only going to last for about 6
months at that rate, It's definitely not worth it.
7. Enhance domestic production by selling more leases for oil
companies to drill offshore-notably off the coasts of Florida and
California. Practically nobody likes offshore drilling, but this is an
example of the need for compromise.
Compromise? Let's all compromise by driving less and buying more
things locally. Take this quiz at
http://www.earthday.net/footprint/index.asp to see how much
consumption you personally require. Compromising natural resources
for extravagant lifestyles is old hat. We know all about it already.
Compromise yourself; drilling offshore is a third-rail no-win
plundering of what little oil remains.
8. Give tax breaks to producers who reopen and resume drilling
America's many marginal "stripper" wells, which often produce only
five to 15 barrels a day. Standing alone, they are not economical; but
exploited in groups, those wells can be profitable and add to domestic
supply. Says SMU's Baxter: "If an explorer goes in to renovate those
wells, he is not worried about prices today, but he wonders what
prices will be tomorrow. He needs a tax break."
Nah, give them incentives to clean up and shut down. What about a tax
break for taking public or fuel-less transportation to work once a
week?
9. Offer incentives for developing shale oil in the Rockies, tar
sands in Western Canada and other potential sources of oil. They have
been disappointing so far, but they deserve to be pursued in hopes of
some future breakthroughs. Similarly, solar power has not lived up to
its extravagant expectations, but it should be employed where
possible.
The thinly veiled conservatism of the author is all-too-apparent in
this odd paragraph, as he throws a bone to solar energy, which
especially when bundled with wind (which is a form of solar energy)
remains a serious underdeveloped source of energy. If it's been
disappointing, perhaps its because we haven't had the same beautifully
lucrative profits for big business that drive the oil market, open any
National Geographic and you see the petro-companies paying lip-service
to renewable energy but when it comes down to investment, no one is
doing nearly enough.
10. Develop much more nuclear power. It is the cleanest form of
energy, and probably the most efficient form, at least for
electricity. And its supply is limitless. Despite fierce opposition
from environmentalists, nuclear power today produces about 20 percent
of America's electricity. But Japan, France, Germany, Britain and
other developed countries get much larger shares of their electricity
from nuclear power. In the United States, both the government and the
industry should mount campaigns to sell the people on the idea that
nuclear power is also safe. Over time, it seems likely that the United
States will transition from an economy based on oil, to one based on
natural gas, to one based on clean coal, to-ultimately-one based on
nuclear power.
Absolutely not. Efficient? I'll agree to that in theory, but in
reality, the cost of construction, security, maintenance, and
"disposal" (there is no safe disposal) is exorbitant. What about the
workers who suffer some exposure in the long run? Just a risk of the
job? What about when a serious natural accident or bombing renders
one faulty and we have another meltdown? With expanded production do
you think Chernobyl or 3-mile-island are just "costs of doing
business"? There is nothing that can justify the incomprehensible
risks of nuclear.
When compared to the cost of constructing nuclear plants as well as
the perpetual duty to guard and safekeep spent radioactive materials
(not to mention the risk of terrorist attack or natural catastrophes)
green energy is much much cheaper and decentralized by its very nature
which means more accessible.
I am aware that pro-nuclear groups have attempted to analyze possible
terrorist attacks on the scale of 9/11 stating that a breach in
nuclear materials (like Chernobyl) is unlikely.
http://www.world-nuclear.org/news/resistance.htm Why they think that
someone would use the same means as was used on 9/11 is beyond me, and
yet I think that the issue is a clear choice without the additional
risks added by the possibility of terrorism.
Here's a far better sounding plan from the NRDC:
# Long-term Solutions for U.S. Energy Security Raise fuel economy
standards to 40 mpg by 2012 and 55 mpg by 2020.
# Require fuel-efficient replacement tires by 2002.
# Enact tax incentives for hybrids and fuel-cell vehicles.
# Reinvest in public transit and inter-city railroads.
# Promote "smart growth."
# Make fuel from farm wastes.
# Launch an "Apollo Project" for fuel cells and hydrogen fuel.
Short-term Solutions for U.S. Energy Security
# Check your tire pressure.
# Obey the speed limit.
# Turn off the car engine while waiting in line.
# Use car pools and public transit, and telecommute.
# Keep cars tuned and use fuel-efficient engine oil.
# Buy the most fuel-efficient car that meets your needs.
here are a couple of resources for more environmental solutions
http://www.worldwatch.org/topics/energy/energy/
http://www.nrdc.org/air/energy/fensec.asp