Brian McGraw

Oil Speculators Are the New Boogeymen

by Brian McGraw on April 19, 2012

in Blog, Features

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President Obama and his obedient lap dogs are out in full force this week attempting to convince voters that those evil guys on Wall Street have moved on from destroying the value of their homes to artificially raising the price of gasoline. Soon they are coming for your first born. From one of Obama’s speeches this week:

So today, we’re announcing new steps to strengthen oversight of energy markets.  Things that we can do administratively, we are doing.  And I call on Congress to pass a package of measures to crack down on illegal activity and hold accountable those who manipulate the market for private gain at the expense of millions of working families.  And be specific.

First, Congress should provide immediate funding to put more cops on the beat to monitor activity in energy markets.  This funding would also upgrade technology so that our surveillance and enforcement officers aren’t hamstrung by older and less sophisticated tools than the ones that traders are using.  We should strengthen protections for American consumers, not gut them.  And these markets have expanded significantly.

Now the ability to place blame for rising gasoline prices on Wall Street (or Republicans) is good politics, but its not true. The Center for American Progress report linked to above, chillingly titled “Is Big Oil Rigging Gasoline Prices?” begins by alerting the reader to the fact that the American people, having been polled, believe that Wall Street must be behind the recent rise in gasoline prices. Apparently the average American’s opinion on financial speculation, oligopoly pricing, and their link to gasoline prices is sufficiently meaningful to include in an article not accusing Big Oil of manipulating oil prices, but just putting the question out there. I hastily blogged about that report here, as did the editors of RealClearEnergy.

Obama pulled the exact same stunt last year. He set up some sort of task force/executive agency/working group/etc. to make sure that there isn’t any illegal price manipulation going on. The agency never found anything, and its unclear if they even really did any investigating:

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Former NASA Scientists, Astronauts Attack Agency’s Climate Change Stance

by Brian McGraw on April 12, 2012

in Blog

49 former NASA astronauts and scientists sent a letter to NASA, requesting that they stick to using empirical data to evaluate the effects of carbon dioxide, and to back off the claims of catastrophic climate change. The text of the letter is pasted below:

Dear Charlie,

We, the undersigned, respectfully request that NASA and the Goddard Institute for Space Studies (GISS) refrain from including unproven remarks in public releases and websites. We believe the claims by NASA and GISS, that man-made carbon dioxide is having a catastrophic impact on global climate change are not substantiated, especially when considering thousands of years of empirical data. With hundreds of well-known climate scientists and tens of thousands of other scientists publicly declaring their disbelief in the catastrophic forecasts, coming particularly from the GISS leadership, it is clear that the science is NOT settled.

The unbridled advocacy of CO2 being the major cause of climate change is unbecoming of NASA’s history of making an objective assessment of all available scientific data prior to making decisions or public statements.

As former NASA employees, we feel that NASA’s advocacy of an extreme position, prior to a thorough study of the possible overwhelming impact of natural climate drivers is inappropriate. We request that NASA refrain from including unproven and unsupported remarks in its future releases and websites on this subject. At risk is damage to the exemplary reputation of NASA, NASA’s current or former scientists and employees, and even the reputation of science itself.

For additional information regarding the science behind our concern, we recommend that you contact Harrison Schmitt or Walter Cunningham, or others they can recommend to you.

Thank you for considering this request.

There are an impressive 49 signatories including well-known astronauts such as Walter Cunningham and Charles Duke. Check out the rest of the signatories here. While they don’t mention him by name, the letter signatories most likely take significant issue with the public actions of James Hansen, a well known global warming activist, who recently made the news for his insightful comparison of climate change to slavery.
Indeed, it isn’t at all hard to see the moral similarities between the burning of fossil fuels (which has made the lives of everyone in the world much better off throughout history) with the brutal practice of enslaving individuals, denying their right to life and liberty.

France Calls for Retreat in E.U. Aviation Emissions Fight

by Brian McGraw on April 6, 2012

in Blog

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A surprising development from a country not known for backing down from a fight:

In a sign that Paris has little stomach for a fight over global warming, Francois Fillon, the Prime Minister, urged the European Union to retreat over plans to tax airlines for emitting greenhouse gases.

His letter to Jose Manuel Barroso, the European Commission President, undermined the EU’s claims to be united in its drive to impose ecological virtue on the aviation industry. The plan to force airlines to buy pollution permits when flying in European airspace has been denounced as illegal by other capitals, notably Beijing, Delhi and Washington.

The so-called coalition of the unwilling is pledging to retaliate unless Europe backtracks. Chinese and Indian airlines have been told by their governments to boycott the scheme.

Their American counterparts filed a lawsuit before withdrawing it last month and calling on the Obama Administration to take the lead in pressuring Europe to drop its aviation pollution package.

In France, concern has been fuelled by Airbus, the European aircraft maker, which said that China had shelved orders worth $US14 billion ($13.5 billion) because of the dispute.

The company said that officials in China, which represents 20 per cent of Airbus sales, were withholding their signature on contracts for 35 long-haul A330s and 10 A380 superjumbo planes. [click to continue…]

Environmentalist Infighting: Solar Panels in the Mojave Desert

by Brian McGraw on April 6, 2012

in Blog

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The Los Angeles Times takes a look at some infighting going on in the environmental movement, with local chapters of large environmental organizations feeling ignored by the large national groups pushing renewable energy projects. This specific controversy concerns a large solar panel project in the Mojave desert in southeastern California. Needless to say, I don’t think a vast array of solar panels should be built in the Mojave desert either, but likely for different reasons than the local environmental groups. Here’s the introduction:

AMARGOSA VALLEY, Calif. — April Sall gazed out at the Mojave Desert flashing past the car window and unreeled a story of frustration and backroom dealings.

Her small California group, the Wildlands Conservancy, wanted to preserve 600,000 acres of the Mojave. The group raised $45 million, bought the land and deeded it to the federal government.

The conservancy intended that the land be protected forever. Instead, 12 years after accepting the largest land gift in American history, the federal government is on the verge of opening 50,000 acres of that bequest to solar development.

Even worse, in Sall’s view, the nation’s largest environmental organizations are scarcely voicing opposition. Their silence leaves the conservancy and a smattering of other small environmental organizations nearly alone in opposing energy development across 33,000 square miles of desert land.

“We got dragged into this because the big groups were standing on the sidelines and we were watching this big conservation legacy practically go under a bulldozer,” said Sall, the organization’s conservation director. “We said, ‘We can’t be silent anymore.’ ” [click to continue…]

Ethanol Still Not Lowering the Real Cost of Gasoline

by Brian McGraw on March 29, 2012

in Blog, Features

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In the wake of high gasoline prices, the ethanol industry is making the rounds in Washington, and they want you to believe that the Renewable Fuel Standard has lowered gasoline prices by up to $.89 per gallon. This would be remarkable, if it were true. The ethanol industry relies on a study produced by the Center for Agricultural and Rural Development at the University of Iowa. Here is the abstract:

This report updates the findings in Du and Hayes 2009 by extending the data to December 2010 and concludes that over the sample period from January 2000 to December 2010, the growth in ethanol production reduced wholesale gasoline prices by $0.25 per gallon on average. The Midwest region experienced the biggest impact, with a $0.39/gallon reduction, while the East Coast had the smallest impact at $0.16/gallon. Based on the data of 2010 only, the marginal impacts on gasoline prices are found to be substantially higher given the much higher ethanol production and crude oil prices. The average effect increases to $0.89/gallon and the regional impact ranges from $0.58/gallon in the East Coast to $1.37/gallon in the Midwest. In addition, we report on a related analysis that asks what would happen to US gasoline prices if ethanol production came to an immediate halt. Under a very wide range of parameters, the estimated gasoline price increase would be of historic proportions, ranging from 41% to 92%.

If we go to E85prices.com, we see that as of March 29, 2012 the average nationwide price-spread between E85 and E10 is 14.7%, with E85 costing an average of $3.31/gallon and E10 costing an average of $3.89/gallon. Ethanol has less energy content than gasoline, so a direct price comparison is not appropriate. The generally accepted metric is that E85 must be priced about 28% lower than E10 in order to break even, meaning that the cost per mile driven is equal between E85 and E10. [click to continue…]

General Electric CEO Jeff Immelt Sours on President Obama

by Brian McGraw on March 20, 2012

in Blog

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Jeff Immelt, chairman and CEO of General Electric, has gone sour on President Obama:

Back when he agreed to advise the Obama administration on economics, General Electric CEO Jeff Immelt told friends that he thought it would be good for GE and good for the country. A life-long Republican, Immelt said he believed he could at the very least moderate the president’s distinctly anti-business instincts.

That was three years ago; these days Immelt is telling friends something quite different.

Sure, GE has managed to feast on federal subsidies, particularly the “green-energy” giveaways that are Obamanomics’ hallmark.

But Immelt doesn’t think he’s had anywhere near as much luck moderating the president’s fat-cat-bashing, left-leaning economic agenda of taxing businesses and entrepreneurs to pay for government bloat.

Friends describe Immelt as privately dismayed that, even after three years on the job, President Obama hasn’t moved to the center, but instead further left. The GE CEO, I’m told, is appalled by everything from the president’s class-warfare rhetoric to his continued belief that big government is the key to economic salvation.

This is rich. While I happen to agree with Immelt that increasing the size and scope of government is not in our nations best interests, GE/Immelt are an infamous symbol of crony capitalism, where big government and big business get together and rig the game to enrich themselves while the American taxpayers get the shaft. In General Electric’s case this consists of support for all sorts of tax credits and subsidies for wind energy production, support for the Waxman-Markey cap and trade bill, spending almost $40 million lobbying in 2010, and the list goes on. [click to continue…]

No, Mandates Are Still Not Pro-Market

by Brian McGraw on March 2, 2012

in Blog

The title of an op-ed published in The Wall Street Journal claims: “A Flex-Fuel Mandate Is Pro-Market.” The ethanol industry has made this argument time and time again, that somehow forcing private corporations to adjust their products in a way that will pad the wallets of certain energy sectors is somehow pro-market. Unsurprisingly, his argument relies on the notion that OPEC controls significant portions of oil output, so thus, the U.S. government ought to intervene to level the playing field:

The price of oil is set by a foreign cartel. The Organization of Petroleum Exporting Countries (OPEC) owns almost 80% of global oil reserves yet produces only 36% of daily global supply. This dominant position enables OPEC to raise or lower their production to maintain the global supply-demand relationship that suits their interest. If U.S. oil companies produce more, OPEC will produce less.

…

Let’s open our market to good old American competition. Friedrich Hayek and Milton Friedman stressed that the foremost economic duty of government is to eliminate cartel pricing. Bills are now pending in both houses of the Congress (HR 1687 and S1603) that seek to do exactly that by requiring car makers to enable fuel competition in their own product lines—adding flex-fuel, all electric, hybrid electric, or any other way auto makers choose to implement the law. [click to continue…]

Ethanol Industry Hurting from Loss of Tax Credit

by Brian McGraw on February 29, 2012

in Blog

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The expiration of the Volumetric Ethanol Excise Tax Credit (VEETC) at the end of 2011 has led to a number of ethanol plants shutting down, and others operating in the red:

After predicting they would survive the end of a major federal subsidy without problems, it looks like officials at the nation’s ethanol producers may have been too optimistic.

Since the subsidy ended Dec. 31, ethanol profit margins have declined sharply, even slipping into negative territory. Experts see no quick turnaround in sight.

Now that the subsidy has disappeared, the ethanol downturn is being felt nationwide, including in Minnesota. The state’s $2 billion-plus industry ranks fourth in the nation in capacity and production.

At the Al-Corn Clean Fuel ethanol plant in southeast Minnesota, CEO Randall Doyal sees how the loss of the subsidy has hurt this business. He said his profit margin — the difference between the cost of making the corn-based fuel and what he can sell it for — has disappeared.

“Since the first of the year it’s been even-to-slightly negative,” Doyal said.

It’s not exactly satisfying to see economic activity being shuttered during a time of high unemployment, as undoubtedly hard-working individuals at these plants are temporarily out of work. But those who support aligning our energy economy more closely with market principles are in a minority, so we don’t necessarily get to choose when and where some of these decisions (that can be painful in the short run) are made. [click to continue…]

Media Skips Details, Creates Narrative in Heartland Case

by Brian McGraw on February 22, 2012

in Blog

Whining about the way in which the media covers climate change stories is probably absolutely a waste of time, but many mainstream media outlets seem to consistently misinterpret (intentionally or unintentionally) the skeptical position on climate change.

This is to be expected from organizations who are well-established as being on the other side of the fence (I will call them climate hawks, which I believe is a neutral term), but one would like to think that the allegedly objective media would make an effort to at least accurately express the views of those they write about (the U.S. is, admittedly, better than many things I’ve read from Europe):

I don’t know every small detail regarding Heartland’s attitude towards climate change, but I’ll work off of Joe Bast’s recent comments to the WSJ.

Where do we start? [click to continue…]

T. Boone Pickens Still Wants Subsidies

by Brian McGraw on February 6, 2012

in Blog

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Fresh off a nod from President Obama’s State of the Union speech, T. Boone Pickens has again began to circle the country touting the alleged benefits of providing subsidies for the transportation sector to convert more vehicles to natural gas power. Today, he writes in The Chicago Tribune:

If you are going to transform American energy to address the national security and economic risks associated with our OPEC oil dependence, there is only one solution: move our natural gas reserves into transportation, with an emphasis on the heavy-duty truck and fleet-vehicle markets.

Free-market advocates argue that’s bad public policy. They fail to understand that OPEC is far from a free market. They’ll tell you we shouldn’t pick winners and losers in the transportation fuel segments. I say it’s time to pick America over OPEC. Let’s go with anything American. I’m fine with the battery, but remember, it won’t move an 18-wheeler.

Imagine the impact natural gas could have in solving our energy problem. Targeting heavy-duty trucks and fleet vehicles — about 8.5 million in all — could cut our OPEC oil dependence in half in 10 years or less.

Fortunately, while we wait for Washington policymakers to lead, the move to replace more expensive, dirtier OPEC oil, diesel or gasoline with cheaper, cleaner domestic natural gas is gaining private-sector support. At an event in Chicago last week, two leaders in the natural gas vehicle industry — Navistar and Clean Energy Fuels — announced a plan to aggressively develop a comprehensive system to build natural-gas truck engines and provide the infrastructure to fuel them.

Over-the-road trucks tend to run the same routes on the same schedule. Drivers stop in the same places to rest, eat and refuel. Putting natural-gas refueling stations along the major travel routes is a relatively minor logistical issue. Building natural-gas engines for those trucks will be a major job creator.

The fact that OPEC isn’t a “free market” does not allow one to conclude that the U.S. should further distort markets without further argumentation, which Pickens does not provide, deciding to go the “national security” route that so many arguments deviate towards when they run out of good points.

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