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:

Pressed by McClatchy for details on how an active working group would be reconstituted, Carney said simply that rising prices are a worry now.

“What we are seeing now in the last several weeks and months is a new surge in the price of oil for a variety of reasons that have to do with the global oil market,” he said. “We are seeing then the concurrent spike in the price of gasoline that Americans pay at the pump, and the president believes that it’s important to be sure that there’s no fraudulent speculation involved in that — in those spikes in the price.”

As to why restart a working group if it didn’t find anything last year and went dormant, Carney offered that, “you don’t know until you investigate what you might find. And whatever they found or didn’t find a year ago is not dispositive towards what they might find or might not find as they investigate going forward.”

Just days earlier, McClatchy asked in a March 1 report what the task force had done over the past 10 months; the answer was, very little. Administration sources who spoke on condition of anonymity because they weren’t authorized to say such embarrasing truths acknowledged that the working group had met only five times last year, three of those soon after the April 21 formation of the inter-agency task force. The working group now has met seven times in all, the Justice Department said Thursday.

It’s less embarrassing when you realize this is nothing more than a political stunt designed to convince voters that Obama is doing something about high gasoline prices. From here we take it away to an excellent post by an economics professor/blogger on a similarly ridiculous op-ed in the NYT:

Let me close by pointing those interested in this issue to a recent survey of academic studies of the role of speculation by Bassam Fattouh, Lutz Kilian, and Lavan Mahadeva. The authors conclude:

We identify six strands in the literature corresponding to different empirical methodologies and discuss to what extent each approach sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. Instead, there is strong evidence that the co-movement between spot and futures prices reflects common economic fundamentals rather than the financialization of oil futures markets.

And another post, by Craig Pirrong, an expert in energy markets who pulls no punches:

In sum, the parts of Obama’s markets aimed at speculator-manipulators are intellectually confused, empirically baseless, and deeply irresponsible because they encourage a witch hunt atmosphere by slandering (by slimy insinuations) legitimate market actors as criminal manipulators.

Well played.  Because of all the practice, no doubt.

A few other things stand out.  First, he repeats the “we use more than 20 percent of the world’s oil and we only have 2 percent of the world’s proven oil reserves” mantra.  Hell, even he admits he says this repeatedly: “But as I’ve said repeatedly.”  Repetition of a dubious factoid does not make the conclusion it is intended to support true. Indeed, that’s a staple of the Big Lie.

Second, he continues to take credit for increased US oil output when in fact he and his administration don’t have a damn thing to do with it, except that it could have been higher yet without some of their counterproductive policies.

Third, take a look at this remark: “We’ve added enough new oil and gas pipeline to circle the Earth and then some.”  To which my first response is:  What do you mean “we” kimosabe? Again, a guy who has never done anything that would risk getting a callous taking credit for the actions of those that actually put hands to shovel and made some truly shovel ready projects realities.  Moreover, it raises the question: if building so much pipeline capacity is such a great thing, why is he doing everything in his power to stall or stop Keystone?  Is that uniquely damaging? (To the environment, I mean, not to the fortunes of Buffett’s BNSF.)

A rule of thumb to keep in mind.  Whenever Obama talks about energy generally, and speculation specifically, it is safe to conclude you are being manipulated: that’s not at all speculative.

Read the rest here. It’s definitely disconcerting that the President is denigrating a completely legitimate, and valuable, aspect of our market economy.

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.

Ethanol is blended into gasoline at refineries throughout the United States, and most gasoline that is sold in the United States is composed of 10% ethanol, 90% gasoline. If ethanol was really responsible for massively lowering the real cost (adjusted for energy content) of gasoline, we would expect E85 (a rough estimate of the actual cost of delivering ethanol to market) to cost much less than gasoline, below the break even point at least. As you can see, it doesn’t, and after adjusting for energy content ethanol is still more expensive than gasoline.

What the study does is it looks at refinery capacity throughout the United States. Refineries in the United States often run at close to max capacity, meaning if there were suddenly a very large increase in the demand for gasoline (suppose that every car driving American decides they want to take a road trip across the country, beginning tomorrow), refineries would be unable to immediately ramp up production, and gasoline prices would skyrocket. The same would happen, as the author notes in the abstract above, if ethanol production were to suddenly disappear overnight, as their refining capacity would drop precipitously.

The study holds refinery capacity constant over the past years, and models the effect that an absence of ethanol would have on gasoline prices. This is not a realistic assumption as there is no reason to believe that in the absence of ethanol, more refining capacity would have been built in the United States over the past decade.

I wrote about this same study in June of last year, and will quote the conclusion of analysis written by the Institute for Energy Research then:

The recent Iowa State study claiming that ethanol production has suppressed the growth in gasoline prices is very misleading. It takes for granted the current refinery capacity and other infrastructure that industry uses to deliver gasoline to motorists, without realizing that federal policies over the years have distorted the development of these markets. Ethanol only survives in the market place at its current levels because it is propped up by artificial mandates and preferential tax treatment.

The regression analysis of the Iowa study doesn’t accurately capture the timeline that would have occurred had the free market been allowed to operate. Of course a sudden disappearance of all ethanol would cause a bigger price spike in the Midwest than in the East Coast. That’s because the artificial federal support has displaced the development of oil-based gasoline delivery in the Midwest more than in other regions. The fact still remains that ethanol (at its current market share) is very inefficient. Taxpayers and consumers would be richer if the government dropped its support programs for it.

The final sentence is key. Despite generous subsidies for decades and a federal mandate, the real cost of ethanol is still higher than gasoline. Even the environmentalists are on our side on this issue, having realized that the environmental benefits of ethanol production are non-existent and the net effect (once you consider how much land globally has been converted to grow corn) is possibly worse than regular petroleum production.

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.

One reason that environmentalists claim no ‘energy security’ benefits is because they believe (or claim to believe) that all of the oil is destined for export.  This is unlikely. As you may well know, the U.S. imports a good chunk of its oil from Canada/Mexico already, but also imports roughly 40% of our petroleum from countries outside the Western Hemisphere, including Saudi Arabia, Nigeria, Venezuela, Russia, etc. These non Canadian/Mexican imports must be transported across the Atlantic Ocean, and as Michael Levi notes, its unlikely that it will not ultimately be cheaper to decrease some of our imports from across the Atlantic Ocean, and increase our Canadian oil imports.

Finally, the pipeline would be a good idea even if all the oil is exported, as refiners in the Gulf will profit from the value they add as the oil is refined into gasoline, diesel, etc.

2. Environmentalists claim that gasoline prices will increase for Americans if the pipeline is approved.

This claim is ironic, as the ultimate goal of some of the more seasoned environmental veterans is to make energy (including gasoline) more expensive. Apparently this isn’t selling point for environmentalism has yet to resonate with Americans. So it’s clear that this is a bait-and-switch in terms of appealing to the average American who, at this point, does not want gasoline prices to go up.

Regardless, the effect that the pipeline has on the price of gasoline in the United States shouldn’t change the merits of the project. Some have argued that gasoline is a bit under-priced in the Midwest at the moment because there is a glut of supply and not a ton of outlets for the oil. If supplies tighten in the Midwest, they will loosen elsewhere, including hopefully refineries on the Gulf Coast. And if they happen to result in higher prices in the Midwest and lower prices globally, this is also not something we should attempt to stop. Americans generally understand that trade restrictions make us all worse off, and that free trade is beneficial. Blocking the pipeline is a form of economic protectionism, its just slightly more hidden in the form of a regulation rather than a tariff.

3. The environmentalists claim that job projections are vastly inflated.

Industries lobbying for certain policies or projects exaggerate their beneficial effects, news at 11. It’s obvious that increased economic activity will add jobs, quibbling over the numbers is pointless. I will also point out that the same groups don’t have issues with accepting obviously inflated jobs numbers when the jobs involve installing windmills, solar panels, or cleaning up power plants.

4. The pipeline is “game over” for the climate. This line came from our country’s esteemed scientist James Hansen, and was delivered by assuming (1) that the oil would sit in the ground without the pipeline, and (2) that the entirety of the oil sands will be developed. Neither premise is likely. The oil can quite likely find an additional route to Asia (there’s too much money for the Canadian government in this to leave it all in the ground). Ironically, the 2nd-best route chosen by TransCanada will almost certainly be less efficient than the original planned route, and could ultimately increase carbon emissions especially if they begin shipping it directly to China. Moreover, to get the carbon dioxide emissions Hansen described (2ooppm) would take until the year 3316. Even if that number is off by a significant amount, we don’t plan even 100 years into the future (for good reason, we have no idea the effects of new technologies, etc.).

Finally, even if you agree that it is in the world’s best interest to begin drastically scaling back carbon dioxide emissions (and that the international will-power exists to do this or that its a good idea to proceed without international agreement), the oil sands are still going to be developed. The oil sands are only 5-10% more carbon intensive than a standard baseline for oil production, and would proceed even with a moderate price on carbon. Cheap carbon reductions are more likely to come, initially, from electricity production rather than oil production. Carbon free alternatives to carbon-intensive electricity production are much closer to working on a scale that would be necessary when compared with substitutes for oil, which are mostly non-existent except for the ever-fledgling biofuels industry.

**

Ultimately, the President kowtowed to a small special interest group that will play a pivotal role in his re-election, despite the conflict with other labor groups who supported construction of the pipeline. Somehow, environmentalists are happy, despite the high probability that this pipeline will still soon be built, perhaps even with President Obama’s blessings in 2013.

The Republicans may have screwed up by forcing Obama to decide on the pipeline (and giving him an excuse that he could sell to the public), though this issue will remain a large symbol in the 2012 campaign(s). Indeed, many centrist Democrats have already distanced themselves from the President’s decision.

The Administration’s reasoning for rejecting the permit is mostly bogus. They might have a legal excuse, but there are hundred’s of thousands of miles of pipelines around the U.S., and they cause no serious problems. If Obama is upset that Republicans have pushed him towards an “arbitrary” deadline, he must acknowledge that Republicans are upset that the President began this debacle by playing politics with our nation’s energy needs.

The pipeline is being routed away from what was claimed to be an environmentally sensitive area (which, many experts including the State Department, don’t really believe) to a safer area, yet we have to spend months and months studying the new route? It is overwhelmingly likely that there will be absolutely nothing wrong with the new route, and this is just a standard tactic to delay a politically tough decision.

We will see what happens in the months to come.

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:

First, we must be honest about the problem itself. The current fuels marketplace is not open. It lacks fundamental market forces. It is highly consolidated, vertically integrated, and by virtue of OPEC, price manipulated. A non-competitive marketplace alters the implicit contract with innovators and drives new technologies and entrepreneurs elsewhere. The government objective is not to prop up new fuels, but rather to fix a broken marketplace that discourages innovation and leaves our country vulnerable to economic downturn.

Second, we have to move federal energy tax policy from the 20th to the 21st century. The U.S. taxpayer has de-risked oil investments, protected oil assets, and built oil infrastructure at tremendous cost for nearly a century, because promoting oil put us in the best position to succeed in the global economy. This is no longer true. We need to align federal tax policy with the national imperative to reduce oil dependence, create new economic opportunity, and give consumers a choice at the pump. The costs of the status quo dwarf those of promoting change.

This is partially true and partially false. The fuels market is not completely “open” but few markets are due to thousands of interventions in the economy, and it does not in anyway “lack fundamental market forces.” If someone produced an incredibly cheap fuel overnight that worked better than petroleum, individuals would stop purchasing petroleum (and then the media would scream about our new “addiction”). It just turns out that this is a very difficult thing to do.

You can currently purchase E85 at thousands of stations across the country. Most people choose not to, because it is not cost competitive with regular gasoline blends. Most automobile companies choose not to build more flex fuel vehicles because consumers have not seemed interested in purchasing it, and it makes automobiles cost more.  Unsurprisingly, many of the flex fuel vehicles exist today not due to market demand, but because they can count as offsets for automobile manufacturers in meeting fleet-wide mile per gallon standards (meaning they do not have to build as many vehicles with high fuel economy).

Does the current market place discourage innovation? No. If there were economically competitive alternatives to petroleum consumers would purchase them in order to save money. This is why many people in cities buy bicycles.

Third, there are a number of alternatives to foreign oil that are already price-competitive, but face unnecessary infrastructural and refueling challenges that impede market access. These unnecessary market barriers, which can be mitigated at little cost, should be targeted and eliminated to promote consumer choice in the immediate term.

This is classic op-ed speak for “I’m lying” but I’m going to dress my argument up in a bunch of vague buzz words so no one really has any idea what I’m saying. Exactly which alternatives to foreign oil are price competitive but are subject to “unnecessary infrastructural and refueling challenges”? And how are “infrastructural and refuelling challenges” unnecessary? Is it unnecessary to build infrastructure to deliver fuels to the marketplace? Could we just wave a magic wand instead?

Is it unnecessary for gasoline stations to spend tons of money building additional underground storage for ethanol or additional blender pumps? Is it unnecessary to include the cost to automobile manufacturers to build different engines or add modifications such that alternative fuels can be used with traditional petroleum?  Should we just pretend that these things don’t cost money and not include them in the final market price of the fuel? Of course all of these represent real costs, but that is what the authors seem to suggest.

There might be good arguments for some of these policies, but they cannot be based on support of “free markets.”

Finally, I am actually sympathetic to the idea that it would be a good idea for automobile manufacturers to build most of their fleet as flex fuel vehicles (not that it would be a good idea for the government to require them to do so), as expressed here (the author provides a similar take down of an argument put forth in the New York Times supporting a FFV requirement):

When viewed from a technical perspective, I don’t find the Council’s arguments for mandating FFVs especially persuasive. However, I think there’s a more compelling argument to be made, relying on option value. If it costs $100 to modify a car to run on other fuels besides gasoline, then that investment would still have value even if in practice the car’s owner never actually bought those fuels, as has been the case with the vast majority of the cars already capable of using E85. The option still has value because it provides an insurance policy against some future circumstance in which the only fuels available (or affordable) are non-petroleum ones, for whatever reason: an oil embargo, peak oil, pipeline failure, or some weather-related catastrophe, take your pick. That kind of competition for oil doesn’t even require large sales of non-petroleum fuels before having an impact in the market. The key question is whether it’s worth enough to us as a society to require the collective expenditure of roughly $1.2 billion a year (adapting all new cars) or up to $24 billion (retrofitting the entire light-duty vehicle fleet) to force it to happen, as opposed to leaving this as the consumer and manufacturer choice that it is today.

It would seem, from 3000 feet, that if it truly only costs $100 to make the vehicle flex fuel compatible that this might be a good idea as vehicles made these days are likely to be on the road for a very long time. It’s quite possible that the future value of having this alternative (in case biofuels happen to take off) would outweigh the immediate cost of an additional $100 to consumers. However, the automobile manufacturer’s are assuredly aware of this argument and are not convinced by it. And because they have spent a lot more time, effort, and money into investigating this issue than I have, I am likely incorrect.

(It’s also quite possible that the widely cited figure of $100 in additional cost to make a vehicle flex fuel compatible is incorrect.)

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.

“Would you rather have those removed or would you rather have the government say, ‘We’re going to give this industry this tax credit and this industry that tax credit.’ That’s the federal government picking winners and losers.

He goes onto encourage them to compete in a free market and believes that they can do so absent what he labels ‘regulations.’ It isn’t clear exactly which specific regulations Perry is referring to in this instance, as its a sure bet that the ethanol industry is a net beneficiary from governmental regulations. Nonetheless, it is rare for a Presidential candidate to take what many would consider a principled stance on an issue that is important to Iowan voters. And as far as energy policy, removing governmental support for renewable fuels is a no-brainer for free marketers.

As governor, Rick Perry had previously attempted to remove Texas from the Renewable Fuel Standard.

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.

Here are my original reasons for loving Keystone XL:

1. Keystone XL is totally market-driven. This $7 billion shovel-ready project will be funded entirely by private investment. Taxpayers will not be on the hook for any new government spending or loan guarantees.
2. Keystone XL will help alleviate pain at the pump. As the Perryman Group explains, a stable expectation of “incremental supplies from reliable sources leads to lower costs, thereby putting downward pressure on prices.” Or, as James Burkhard of IHS Cambridge Energy Research Associates puts it, “A more flexible and robust supply system is better able to manage supply and demand developments, which is a big positive for the U.S. economy and consumers.”
3. Keystone XL will help stabilize gasoline prices. As former Canadian Energy Minister Murray Smith observes, unlike tanker oil, which may be traded several times and marked up by speculators, the price of pipeline oil is mostly fixed at the start of its journey to the refinery.
4. Keystone XL will stimulate the ailing U.S. economy. The Perryman Group estimates the pipeline will induce $20.9 in new business expenditures, add $9 billion to U.S. GDP, increase personal incomes by $6.5 billion, generate $2.3 billion in retail sales, and create 118,935 person years of employment.
5. Keystone XL will enhance U.S. energy security. It will deliver up to 850,000 bpd of crude from a friendly, stable, democratic neighbor. Every barrel of oil we import from Canada is a barrel we don’t have to import from despotic, unfriendly, or volatile countries like Saudi Arabia, Venezuela, or Nigeria.

Here are my new reasons:

1. A win for Keystone XL is a defeat for the global warming movement. Green groups view Keystone as an opportunity to regain momentum and offset their losses after the death of cap-and-trade. If friends of affordable energy win this fight, which seems likely, the greenhouse lobby will take another hit to its prestige, morale, and influence.
2. Keystone XL strains relations between Obama and his environmentalist base. If Obama approves the pipeline, greenies will be less motivated to work for his re-election. If he disapproves, Republicans and moderate Democrats will hammer him for killing job creation and increasing pain at the pump. Either way, the prospects for new anti-energy legislation should be dimmer.
3. Keystone XL is bringing aging, New Lefties out of the woodwork, where they can misbehave and get themselves arrested.

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.)

This isn’t the first report on the green jobs fiasco. There are numerous reports of outrageous amounts of money spent “creating” very few jobs. There are reports of stimulus-receiving green-tech factories closing (or moving abroad), some after receiving praise from Obama himself.  Could the failure of promoting ‘green’-jobs have been predicted? Well, you could have looked at Spain, or Germany.

Finally, does the Times seem pessimistic on the results of the Brookings Institute study? Because that’s not the impression I got from reading certain other blogs, which loudly cheered the alleged 2.7 million green jobs. Upon closer inspection, it turns out that a large portion of those jobs are in fields not traditionally seen as representing the future of green-technology, such as waste management or mass transit services. It’s also worth noting that the ‘number of jobs saved or created’ should be secondary to the amount of wealth produced. The fewer workers necessary to produce this (again, contra the green blogs who snub the oil industry for its efficiency), the more workers freed up to focus on other parts of the economy.

It is rumored that President Obama is set to announce another attempt at job creation later this fall. Let us hope that he avoids the ‘not actually shovel ready’ green jobs approach and instead focuses on liberating the economy.

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.

The EPA has been quite vocal about its interest in enforcing the mandate, despite an unfortunate bump with reality. The rest of Congress might be less enthused. I suspect uncertainty is over the future of the Renewable Fuel Standard and the expiration of the cellulosic ethanol tax credit. And contra the AEC claim, there is a downside to optimistic requirements, as when they cannot be met, they are a tax as the refining industry is required to buy fake credits to ‘meet’ the apparent goal of sending $6 million dollars to the EPA. Of course, it would be sensible for the EPA to waive this requirement, but no government agency has ever turned down money.

It seems clear now that the tax credit and tariff will terminate at the end of the year. It also seems quite obvious that no-time soon will cellulosic ethanol be commercially viable with petroleum, and there isn’t much more room for increasingly large blends of ethanol in the fuel supply that can’t compete on cost. It’s time to discuss ending the renewable fuel standard. I suspect their will be much less support from establishment politicians for such a move (admitting they made a giant mistake).

We must avoid, what Robert Rapier points out, allowing corn ethanol to fill the entire renewable fuel standard. The corn ethanol industry is now lobbying to gain access to the rest of the mandate, as corn ethanol has hit its quota and will continue to easily exceed it:

Corn ethanol producers — in another move that I have long predicted –  have a different solution. They want an end to “corn-discrimination.” They would like to step into that void and supply the missing ethanol, thus raising the 15 billion gallon corn ethanol mandate that they currently enjoy to potentially 36 billion gallons by 2022.

More than doubling the amount of ethanol production will have a significant effect on food prices, among other questionable effects of massive ethanol production on the environment. This recent study suggests that increases in ethanol emissions might negatively effect human health (though note that this should be compared with potentially similar effects from petroleum).

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.

The EPA is requiring oil refiners to buy permits for cellulosic ethanol, because no one is capable of producing it but they have to save face for the “mandate” they are enforcing. I wrote more about this senseless industry tax last month:

No companies have to this date been able to produce cellulosic ethanol that qualifies by EPA’s definition. Yet, presumably to save face, the EPA has not lowered the cellulosic ethanol “mandate” to zero gallons.

Now, what the mandate actually means is that companies will be heavily fined if they do not blend sufficient quantities of ethanol into the fuel supply — each gallon of ethanol having its own identification number, which is generated when the ethanol is created (of course, companies have to devote significant resources to navigating this regulatory-maze). Being that this ethanol does not exist, rather than facing fines for not being able to buy it, refiners are required to purchase “credits” from the EPA. Essentially, the EPA is requiring them to send them money in lieu of meeting the cellulosic ethanol mandate. The product they are required to use does not exist, and rather than giving them a pass, the EPA requires that they pay for phantom credits, despite not getting anything out of it.

The refiners haven’t complained much about this. I wonder if the EPA has ‘encouraged’ them to keep quiet in order to ensure the mandate stays on the low end of impossible.

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.”

He takes a particular cheap shot in regard to ethanol. The Koch’s have repeatedly stated that they are against the ethanol program, but as refiners they are practically required to participate in order to stay competitive. They even fund numerous groups that have spent money in hopes of ending the ethanol tax credit (Pickens also hasn’t been following the news, as it seems the ethanol tax credit is likely going away). When Pickens resorts to taking cheap shots against opponents of his policy,  it seems clear that his proposals are without merit. When conservatives provide widespread support for the Pickens Plan, their resistance towards subsidizing other forms of energy is undermined.

Finally, Pickens claims that a transition towards fueling vehicles with Natural Gas vehicles is already underway for trucks, and that it is economical. If this is true, great, let the market work and get out of the way. It’s certainly is being used commonly in vehicles where centralized infrastructure can be used, such as city buses. Let us hope that the T. Boonedoggle Pickens plan does not move forward. CEI has written more about the plan here, here, here,  and here.