oil

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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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…]

Arguments Against Keystone Pipeline Fall Flat

by Brian McGraw on January 20, 2012

in Blog, Features

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Professional environmentalists are cheering President Obama’s rejection of construction permits for the KeystoneXL Pipeline. They are the only ones cheering, aside from a few NIMBY groups and The New York Times Obama’s always-loyal damage control cohorts. Even The Washington Post voted against Obama in this struggle. The pipeline was a small, but important part of our energy infrastructure and none of the arguments put forth against construction of the KeystoneXL Pipeline are convincing.

1. An initial argument claims that the KeystoneXL Pipeline will somehow not provide energy security for the United States.

Because consumers from around the country (and the world) use oil, pipelines are necessary to transfer mind-bogglingly large amounts of it around the country each day. Imagine a scenario where we randomly begin shutting down oil and natural gas pipelines around the United States. The obvious result of decreasing our capacity would be decreased security, as we are less capable of moving oil around our country to deal with shocks, disasters, etc. Now think about what adding a pipeline does: it increases our capacity to transport oil around the country. Ultimately, this must increase to some extent our energy security. [click to continue…]

Ethanol Advocacy Groups Want More Ethanol

by Brian McGraw on September 26, 2011

in Blog

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In a post titled “An ‘open’ and shut case for an enduring American energy policy: The infallibility of free markets underscores the philosophy for FuelChoiceNow” two authors argue that markets are generally the best method to reward new products and technologies while dismissing those that don’t quite pan out.

So, its odd to see that the the rest of the post goes on to demand that the government intervene in the market to require that automobile producers adjust their industrial processes and begin to build each car as flex-fuel compatible, meaning that it can run on higher blends of ethanol. Let’s address their arguments:

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Rick Perry on Ethanol

by Brian McGraw on August 29, 2011

in Blog

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Rick Perry seems to be taking a tough position against government support for renewable fuels:

Not satisfied with that answer, Iowa Corn Growers Association president Dean Taylor tried again, stepping to the microphone to ask if Perry as president would support the renewable fuel standard that’s currently the law.

Perry answered: “Here’s my position on this issue again. I go back to ridding you of the regulations.

“The oil and gas industry will be asked the same thing. Would you rather have the subsidies, incentives, whatever you want to call them or would you rather have a government that actually removed the regulations?

“Think about what the EPA costs you every day in this country. What it costs John Deere. What it costs every manufacturing plant. [click to continue…]

Eight Reasons to Love the Keystone XL Pipeline

by Marlo Lewis on August 26, 2011

in Features

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The State Department is expected as soon as today to release its final environmental impact statement (FEIS) on the proposed 1,700-mile Keystone XL pipeline to bring up to 850,000 barrels per day (bpd) of Canadian heavy crude from Alberta’s oil sands down to refineries on the U.S. Gulf Coast.

According to anonymous sources at State, the FEIS will confirm the agency’s earlier finding that construction and operation of the pipeline will have “limited adverse environmental impacts,” reports Juliet Eilperin in the Washington Post. This will remove a key obstacle to State issuing an assessment that the pipeline is in the U.S. national interest. Then, presumably, this $7 billion, shovel-ready project could start creating thousands of high-wage jobs.

In July, the House passed H.R. 1938, the North American-Made Energy Security Act, by 279-147. The bi-partisan bill would require President Obama to issue a final order granting or denying a permit to construct Keystone XL by no later than November 1, 2011. The Center-Right is putting pressure on Team Obama, in the run-up to an election year, to expand U.S. access to oil from our friendly, democratic, politically stable neighbor to the north.

At the same time, Eilperin notes, Keystone XL “has strained President Obama’s relationship with his environmental base and become a proxy for the broader climate debate. Protesters from across the country have gathered daily in front of the White House since Saturday, resulting in 275 arrests so far.”

First to be arrested was Canadian actress Margot Kidder, who played Lois Lane in several Superman films. Her top reason for opposing the pipeline: “It’s bound to leak, there’s no way it’s not going to…. They always assure us these things are safe, and they never are.” By that logic, no pipeline should ever be built, and all should be dismantled. And then we could all live in Medieval squalor. Planet Saved!

I’ve been a Keystone booster for some time, but the fracus at the White House has taught me new reasons to love the pipeline.

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The Green Jobs Fumble

by Brian McGraw on August 19, 2011

in Blog

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Coming out of The New York Times of all places, “Number of Green Jobs Fails to Live Up to Promises.” Unsurprisingly, it has the green groups riled up.

A study released in July by the non-partisan Brookings Institution found clean-technology jobs accounted for just 2 percent of employment nationwide and only slightly more — 2.2 percent — in Silicon Valley. Rather than adding jobs, the study found, the sector actually lost 492 positions from 2003 to 2010 in the South Bay, where the unemployment rate in June was 10.5 percent.

Federal and state efforts to stimulate creation of green jobs have largely failed, government records show. Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes, California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter, according to the State Department of Community Services and Development.

The weatherization program was initially delayed for seven months while the federal Department of Labor determined prevailing wage standards for the industry. Even after that issue was resolved, the program never really caught on as homeowners balked at the upfront costs.

(Note that it took seven months, as in 210 days or almost 60% of a year, to figure out wage standards for an industry. Good enough for government work.)

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Where is the Cellulosic Ethanol?

by Brian McGraw on August 17, 2011

in Blog

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Last month the EPA released its proposed 2012 cellulosic ethanol “mandate.” It suggests that there will be somewhere between 3.45-12.9 million gallons of qualifying cellulosic ethanol produced in 2012, though the number will be finalized in November. Note, as discussed previously, the industry has still not produced any qualifying cellulosic ethanol, and the EPA has consistently lowered the ‘mandate’ by over 90% in previous years. (A recently announced cellulosic plant claims it will produce cellulosic ethanol from, wait for it,  corn waste. So much for being a bridge fuel to the future).

In comments on the proposed 2012 production volumes, the ethanol industry begged the EPA to use the higher end of the standard:

In contrast, Brooke Coleman, executive director of the Advanced Ethanol Council, urged the EPA to continue its aggressive goals regarding cellulosic biofuels, stating that the agency’s mandated volume directly affects the industry’s ability to produce fuel. “There is this funny thing going here where you guys have to go out and measure capacity, but the numbers you come out with and the amount of capacity that you put into the Federal Register will have a giant effect on how much capacity we actually create,” he said.

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WSJ Hits Cellulosic Ethanol Hard

by Brian McGraw on July 15, 2011

in Blog

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Following up on Marlo’s post yesterday concerning the difficulties of bringing cellulosic ethanol to market, the Wall Street Journal wrote an editorial about the (lack of) fuel, and EPA’s decision to require refiners to buy ‘credits’ — Cellulosic Ethanol and Unicorns:

The EPA set the 2011 standard at six million gallons. Reality hasn’t cooperated. Zero gallons have been produced in the last six months and the corner isn’t visible over the next six months either. The EPA has only approved a single plant to sell the stuff, operated by Range Fuels near Soperton, Georgia. The company used to be a press corps favorite and has been lauded by the last two Presidents, but it shut down its cellulosic operations earlier this year to work through technical snafus.

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From the Pickens’ Mouth

by Brian McGraw on July 12, 2011

in Blog

T. Boone Pickens went on Bloomberg to discuss the Pickens Plan:


Pickens claims that Koch is working for himself, while the pure hearted T. Boone Pickens is working for America. Now yes, Koch Industries has a financial incentive to not support federally built infrastructure for a fuel that competes with a product that he sells, but it also clearly aligns with a free-market perspective of not providing federal support for any particular energy sources. Furthermore, if it wasn’t obvious, Pickens would stand to make tons of money from increasing the use of natural gas in America, so its beyond disingenuous to pretend that he is solely “doing good.” [click to continue…]

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