1. Ethanol Mandates: In an effort to further “energy independence,”* major agricultural producing countries have enacted Soviet-style production quotas for ethanol, a motor fuel distilled from food.
This year, about a third of the U.S. corn crop will be used to manufacture 13 billion gallons of ethanol. By law, that will increase to 15 billion gallons every year after 2015. The European Union mandates that ethanol distilled primarily from palm oil and wheat, constitute an increasing percentage of the fuel supply, ultimately 10% by 2020.
Global ethanol production is a new and tremendous source of demand for food that has had a significant impact on the price of grains and oilseeds. According to a report commissioned by the World Bank, global demand for fuels made from food accounted for nearly 70% of the historic price spike in wheat, rice, corn, and soy during the summer 2008.
2. Rainforest Protections: Burning rainforests is an important link in the global food supply chain. In Brazil, farmers are clearing the Amazon rainforests to meet rapidly growing global demand for soybeans. In Indonesia, they slash rainforests to harvest palm oil seeds for export to Europe.
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The Wall Street Journal today reported on a statement by the International Energy Agency’s governing board, calling on oil producing countries to increase their output to “help avoid the negative global economic consequences which a further sharp market tightening [i.e., higher oil prices] could cause.”
Here’s the full IEA statement:
The IEA Governing Board, at its regular quarterly meeting on 18-19 May, examined oil market developments and their impact on the global economy. Despite a near-10% correction since 5 May, oil prices remain at elevated levels driven by market fundamentals, geopolitical uncertainty and future expectations. The IEA Governing Board expressed serious concern that there are growing signs that the rise in oil prices since September is affecting the economic recovery by widening global imbalances, reducing household and business income, and placing upward pressure on inflation and interest rates. As global demand for oil increases seasonally from May to August, there is a clear, urgent need for additional supplies on a more competitive basis to be made available to refiners to prevent a further tightening of the market.
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Did you know that mixing Mentos Freshness with Coca Cola Classic in a confined space produces explosive entertainment? See for yourself.
Something similar took place in C-Span’s Washington D.C. studio last weekend, when my Competitive Enterprise Institute colleague Myron Ebell and the Center for Biological Diversity’s Bill Snape squared off in a Washington Journal rumble. See for yourself.
One hundred eighty-six Members of Congress have signed on to H.R. 1830, the New Alternative Transportation to Give Americans Solutions (NAT GAS) Act of 2011, better known at this Web site as the Pickens-Your-Pocket Boonedoggle Bill, in honor of its chief lobbyist and beneficiary, billionaire T. Boone Pickens.
The bill would provide targeted tax breaks to subsidize the manufacture and purchase of natural gas vehicles, installation of natural gas refueling infrastructure, and production of compressed and liquefied natural gas for use as motor fuel. The bill includes no overall budget authorization. Moreover, many of the provisions modify current sections of the tax code, which in turn refer to other sections, and the Congressional Research Service inexplicably has yet to provide a bill summary. So the total amount of the tax breaks is anybody’s guess.
Nonetheless, the final tab has got to be huge even by Washington standards. Each manufacturer could claim credits of $4,000 per vehicle up to an overall amount of $200 million per year. Each purchaser could claim credits ranging from $7,500 to $64,000 per vehicle depending on how much the vehicle weighs. Each property installing natural gas fuel dispensers could claim a credit up to $30,000 (or $100,000 — it’s unclear). Each maker of compressed or liquefied natural gas could claim a credit of 50¢ per gallon for every gasoline-equivalent gallon sold. With anywhere from 225,000 to 400,000 18-wheelers sold in the USA each year, the vehicle purchase credits alone could cost billions.
T. Boone’s lobbying for these tax subsidies is all about patriotism and energy security and has nothing to do with rent seeking or corporate welfare. Just ask him! “I’m sure not doing this for the money,” the Texas Gas Mogul told New York Times columnist Joe Nocera. [click to continue…]
On E&E TV. The title mistakenly claims that the NCGA supports ending ethanol subsidies, which they don’t. They are willing to give up a specific tax credit in exchange for different government subsidies or incentives to continue lining their pockets with taxpayer dollars by encouraging ethanol production.
Rick Tolman, the CEO, discusses the reasons the corn industry has come under attack, noting that they have moved into selling a lot of corn for ethanol production. He kind of hides the whole reason for this, which are the corn ethanol production mandates, preferring to vaguely refer to “productivity improvements” which allowed them to also begin exploring additional markets. Unfortunately, markets are blind to everything except prices, so if the mandates had been stringent enough, corn would be converted to ethanol even if we weren’t producing enough additional corn to meet other needs.
He also notes that the oil industry is very upset that the ethanol industry has taken about 10% of their market. Well of course they’re upset, as they should be. There’s no other industry (energy) in America that I can think of which is so heavily reliant on government policies for their existence. Imagine if the government began requiring that 10% of your daily calories come from Starbucks? Isn’t it reasonable that every other food industry (to say nothing of citizens) in America would be justifiably furious? Note that ethanol already has its own E-85 market through flex-fuel vehicles, and its very small, because ethanol is more expensive than gasoline. [click to continue…]
Three of the Congress’s most influential energy policymakers this week “urged” the Environmental Protection Agency to delay an ultra-costly regulation targeted at coal-fired power plants, the source of 50 percent of America’s electricity generation. For the sake of keeping the lights on, all Americans should hope the Obama administration heeds these Congressmen’s request.
Senate Environment and Public Works Ranking Member James Inhofe (R-OK), House Energy and Commerce Chair Fred Upton (R-MI), and House Energy and Power Subcommittee Chair Ed Whitfield (R-KY) yesterday sent a letter to Environmental Protection Agency Administrator Lisa Jackson demanding a longer comment period for a proposed regulation known as the Utility HAP MACT
[The HAP stands for “Hazardous Air Pollutant,” and the MACT stands for “Maximum Achievable Control Technology”; to learn what these terms entail, read this summary of the regulation, Primer: EPA’s Power Plant MACT for Hazardous Air Pollutants.]
The EPA issued the Utility HAP MACT in mid-March, and it gave the public 60 days to comment. The Congressmen “urge the agency [to] extend the comment period to a minimum of 120 days to allow adequate time for stakeholders to assess and comment on the proposal.”
The extended comment period is well warranted. For starters, the EPA included a number of “pollutants” in the proposed regulation that shouldn’t be there. The EPA’s authority to regulate hazardous air pollutants from power plants is derivative of a study on the public health effect of mercury emissions. The EPA’s proposed regulation, however, would regulate acid gases, non-mercury metals, and organic air toxins, in addition to mercury. Yet the EPA’s evidence only pertains to mercury. The EPA’s authority to regulate these non-mercury emissions, despite their not having been a part of the aforementioned study, will be challenged, and the DC Circuit Court ultimately will decide.
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Has Subsidy-Scrapping Time Arrived?
Peter Hannaford, American Spectator, 18 May 2011
Energy Subsidies: Our Gifts That Keep on Taking
Larry Bell, Forbes, 17 May 2011
John Huntsman and Global Warming
Greg Pollowitz, Planet Gore, 17 May 2011
An Inconvenient Truth: A Fifth Anniversary Tribute
Mark Hyman, American Spectator, 17 May 2011
One Tiny Cheer for President on Drilling
Nicolas Loris, The Foundry, 16 May 2011
Latest Threat to Wind Power: Prairie Chickens
Steve Everly, Kansas City Star, 15 may 2011
With gas prices hovering near $4/gallon, Democrats are trotting out fanciful “solutions” to temper the price of oil.
On Saturday, President rolled out a three-part plan to relieve Americans’ pain at the pump. The third part was the elimination of Big Oil “subsidies” (in fact, they are tax breaks, not subsidies). This doesn’t make any sense. The point of the tax breaks to Big Oil is to decrease the cost of production. That is, they make oil cheaper to extract. Removing these “subsidies” will in no way decrease the price of gas.
Meanwhile, Senate Democrats are blaming evil “speculators” for bidding up the price of oil. This is utter malarkey. The price of oil is dictated by a global market. Ill-defined “speculators” are a straw man.
Removing Big Oil’s “subsidies” and prosecuting “speculators” are empty political gimmicks of the sort that the 2008 version of Obama campaigned against. (So much for “Change,” right?) I suspect that the President and Senate Democrats are relying on these bogus non-solutions because, otherwise, they’d have to acknowledge that the price of oil is a function of supply and demand. And if they concede that the market, and not “subsidies” or “speculators,” is to blame for high oil prices, then they’d also have to acknowledge that increasing supply would decrease the price. That is, they’d have to admit that “drill, baby, drill” works. Of course, they don’t want to do that, because doing so would upset their environmentalist base.
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The Wall Street Journal has a long piece today about the prospect of using the state to move part of the U.S. transportation fleet from oil to natural gas. It gives prominent voice to the massive public affairs campaign of T. Boone Pickens to add billions to his natural gas fortune as a swansong to a prosperous career.
This campaign takes the form of a bill embraced by ostensible fiscal hawks, causing an uproar from those conservatives who took umbrage at Members abandoning their pledges of fiscal sobriety at the drop of a billionaire’s phone call. This enabled the media to describe the Republicans’ ‘circular firing squad.’ Well played, gentlemen.
The vehicle was not Pickens’ first choice. His first choice was a windmill mandate, transparently pushed by a handful of gas interests, including Chesapeake Energy’s Aubrey McClendon, to put a green hat on their efforts to use the state to displace coal’s market. In this effort, they found natural allies in environmentalist special interests.
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