Archives for the 'Energy' Category
When burning gas is good for the planet
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OK, so say we accept the premise that CO2 causes global warming, is there any case where energy use will be beneficial for the planet? Yes, according to New Scientist:
They say the use of biogas plants, which store the decomposing manure and capture the natural gas it releases, could improve rural farmers’ livelihoods, while protecting the environment.
Biogas digesters are used across the Indian subcontinent, Africa, and Latin America, but few rigorous studies have been done of their overall costs and benefits. So Govindasamy Agoramoorthy of Tajen University and Minna Hsu of National Sun Yat-sen University, both in Taiwan, surveyed 125 rural households in India that use biogas plants.
Preliminary thoughts on the RFA’s PR campaign
As most ethanol watchers know, the Renewable Fuels Association ran a full-page ad in The Hill magazine last week (May 6, 2008) titled: “Without ethanol, we’d be paying over $4.00 a gallon for gasoline today.” To substantiate this claim, the ad quotes from a March 24, 2008 column by Wall Street Journal reporter Patrick Barta:
“Without biofuels, which can be refined to produce fuels like the ones made from petroleum, oil prices would be even higher. Merrill Lynch commodity strategist Francisco Blanch says that oil and gasoline prices would be about 15% higher if biofuel producers weren’t increasing their output.”
What to make of this? Some preliminary thoughts.
(1) If Blanch’s analysis is correct, then proponents of the ethanol mandate, the 51-cent per gallon blenders tax credit, the 54-cent per gallon tariff, and other forms of policy privilege can no longer claim that ethanol “displaces” petroleum in the nation’s fuel supply. Rather, ethanol adds to the total stock of motor fuel. It is by increasing total liquid fuel supply relative to global demand that ethanol, in Blanch’s analysis, reduces crude oil and gasoline prices.
If correct, this is also an argument for opening the Alaska National Wildlife Refuge (ANWR) and the Outer Continental Shelves to oil production. Increased oil production should also increase supply relative to demand, lowering oil and gasoline prices.
(2) Blanch’s estimate, as far as I can determine, is not part of a formal or published study. It may merely be one analyst’s back-of-the-envelope. I find it troubling that RFA and others are making political hay out of an estimate based on assumptions, methods, and data that the RFA has not shared with the public, may not have evaluated, and may not even be privy to.
(3) The WSJ article says that global oil demand rose by 900,000 barrels per day (bpd) last year, and biofuel production rose by 300,000 bpd. We may surmise, therefore, that Blanch, assuming a particular elasticity of demand, estimated what would happen if biofuel production had not increased.
That is a reasonable thought experiment, but it tacitly assumes an “other things being equal” universe. Yes, if demand grows by 900,000 bpd and biofuels don’t grow by 300,000 bpd, then – other things being equal – the price impact might be exactly as Blanch estimates. But usually other things are not equal.
For example, the same WSJ article says that OPEC’s output “declined by about 400,000 barrels per day, according to the IEA [International Energy Agency].” How do we know that if biofuel production had been lower, OPEC output would not have been higher? If OPEC is truly the cunning cartel some commentators claim it is, then OPEC adjusts its production decisions in light of what other actors, including biofuel makers, plan to do. If OPEC’s 400,000 bpd cutback was a strategic decision, designed to prop up oil prices despite planned increases in other liquid fuels, then it wiped out any price reduction from the lesser, 300,000 bpd increase in biofuels.
For years, environmentalists have opposed opening ANWR to oil production on the grounds that its output would be just “a drop in the bucket,” the price-reducing effects of which OPEC could easily negate just by cutting back production. The same critique applies with equal merit (or the lack thereof) to ethanol.
(4) Blanch’s 15% estimate is questionable in light of recent changes in oil prices. He estimated in late March that without the increase in biofuels, oil would be $115 a barrel instead of $102. However, some six weeks later, oil hit $120 a barrel. Between those dates there was no drop in biofuel production. So it is not obvious that, in March, biofuels were responsible for the price of oil being $102 instead of $115.
(5) As you’d expect, RFA ignores the many ways in which ethanol increases the price of gasoline. These include the increased costs to store and ship ethanol, the increased cost to refine gasoline mixed with ethanol to counteract ethanol’s volatility and the associated hydrocarbon emissions, and the fuel economy penalty resulting from the fact that ethanol has one-third less energy content by volume than gasoline. To what extent Blanch’s estimate takes these factors into account is unknown at this point.
In closing, let me make clear that I mean no criticism of Blanch. Making estimates is what economists do. But I am troubled by the facile conclusions that the RFA and others are drawing from his estimate. They may have no idea what assumptions it is based on. They very likely have never considered whether the estimate takes into account potential strategic behavior by OPEC, or whether it is reasonable to give ethanol credit for lowering oil by $13 a barrel in March when oil prices were $18 a barrel higher in May.
Farm Bill veto would be richly deserved
Right after House-Senate conferees announced that they had reached agreement on a new farm bill yesterday, the U.S. Secretary of Agriculture said that President Bush would veto it because it didn’t reform wasteful farm programs, continued to provide subsidies to rich farmers, and still used some budget machinations to hide the costs.
Indeed, the boondoggle bill deserves a White House rejection for its almost $300 billion of farm programs that will be paid for by taxpayers and consumers. Farm bills, however, no matter how wasteful, have a way of surviving, and this legislation may be no exception, since it’s a case study of bipartisanship gone bad.
Besides the sugar provisions we’ve written about here and here, the biofuels programs’ grants and loan guarantees, plus moneys for R&D and “energy efficiency” projects, together with the extension of the tariff on imported ethanol, will continue to exacerbate the food vs. fuel program.
How ethanol producers see the world
From The Onion. (Yes, it’s ironic. )
Slow pace of corn planting — more pressures on prices
This year’s corn crop is being planted much later than normal because of cool, wet weather in the Corn Belt and other production areas, according to a Reuter’s story today. The slow planting has caused a jump in corn futures:
Corn futures at the Chicago Board of Trade surged as much as 4 percent on Tuesday, with an all-time high of $6.60-3/4 a bushel set by the July 2009 contract.
According to the U.S. Department of Agriculture’s weekly agriculture summary, the pace of planting is significantly slower this year:
Corn: Twenty-seven percent of the Nation’s corn crop was planted by week’s end, 18 and 32 points behind last year and the 5-year average, respectively. In the central Corn Belt, Ohio Valley, Tennessee Valley, and central Great Plains, producers gained momentum and were able to plant 20 percent or more of their crop between rain showers, but remained well behind normal in most areas. Elsewhere, farmers planted at a slower pace, awaiting warm, dry conditions to resume fieldwork. Progress was the farthest behind normal from Missouri and Illinois northward.
If lower crop production occurs, higher prices could add to rising food costs.
And, of course, the increased use of corn for biofuels has exacerbated the rise. As the USDA noted in a May 2008 report:
The data suggest that while U.S. corn used for ethanol production had only a small effect on global markets in the 1980s and 1990s, the increase in U.S. ethanol production over the past 5 years and the related significant changes in the structure of the U.S. corn market have had a more pronounced impact on the world’s supply and demand balance for total coarse grains recently. Importantly, since the United States is the world’s largest corn exporter, some of the higher prices resulting from increased U.S. demand has spilled over onto world markets.
Drill for Oil to Save the Environment
In the Washington Post, Robert Samuelson’s column “Start Drilling“ points out that ethanol production is far worse for the environment than drilling for oil in Alaska’s Arctic tundra, yet Congress promotes ethanol subsidies to reduce our reliance on foreign oil, even as it blocks drilling in the Arctic and ”the Atlantic and Pacific coasts” that would do far more to reduce our reliance on foreign oil. “What keeps these areas closed are exaggerated environmental fears, strong prejudice against oil companies and sheer stupidity,” he writes.
A news story today in the Post describes how ethanol production is devouring our food supply, even though a study shows that “greenhouse-gas emissions from corn and even cellulosic ethanol ‘exceed or match those from fossil fuels and therefore produce no greenhouse benefits.’ By encouraging an expansion of acreage, the study added, the use of U.S. cropland for ethanol could make climate conditions dramatically worse. And the runoff from increased use of fertilizers on expanded acreage would compound damage to waterways all the way to the Gulf of Mexico.”
In the American Spectator, Iain Murray notes that ethanol production has caused “food shortages and massive increases in food prices around the world. There have been food riots in Indonesia, Mexico, Egypt, and most recently, Haiti — where the poor have been reduced to eating cakes made with bleach and are on the verge of bringing the government down. Even in America, some grocery stores have begun to institute a form of rationing. Meanwhile, massive tracts of rainforest are being cleared in Indonesia to produce biodiesel, threatening the orangutan and other magnificent animals with extinction. In Brazil, the growth of sugar cultivation for ethanol is forcing food producers into the Amazon.”
By contrast, one of the Audubon Society’s chief bird sanctuaries (the Paul J. Rainey Wildlife Refuge in Louisiana), has 37 oil wells on site, and has produced natural gas for 50 years without harming the environment. Drilling for oil hasn’t harmed the birds a bit. But ethanol production causes environmental destruction, mass hunger, starvation, and rioting worldwide.
Disclosure: like many Americans, I have a retirement plan (both a 401(K) and an IRA). Like most retirement plans, it contains mutual funds. And most of those mutual funds own some stock in oil companies. So when politicians demand that the government impose a “windfall profits tax” on oil companies, what they are really trying to do is take money from my retirement plan — and your retirement plan, too, if you have one. That’s not going to encourage exploration for new sources of oil, or reduce our dependence on foreign oil.
The Rhetorical Impact of the Global Warming Bandwagon
Cellulosic ethanol—derived from wood scraps and other forms of inedible plant mass– may or may not turn out to be a real technological breakthrough. On the one hand, it could reduce the ruinous impacts of grain-based ethanol on food prices. On the other hand, the extensive set of federal mandates and subsidies for cellulosic ethanol is not a good omen—good technologies rarely need federal help, and the existence of federal aid is often a tip-off that a new technology is a loser.
But here’s another question: if cellulosic ethanol does take off, what impact would that have on the clichés we use? Would we have to scrap the old saying about separating the wheat from the chaff, and instead talk about separating the chaff from the wheat?
Global warming policies can cost jobs – says EU steel industry
Though a bit late in figuring things out, the steel industry in the European Union and a steel workers’ union have said that the EU’s proposals to cut CO2 emissions will have a devastating effect on their industry. According to a Reuters article today,
Europe’s steel industry joined forces with a workers’ union on Monday to warn that European Union efforts to curb climate change could put tens of thousands of steel industry jobs at risk.
The EU aims to cut CO2 emissions by at least one fifth by 2020 from 1990 levels, but several energy intensive industries say the cost of curbing emissions will make them uncompetitive against rivals from outside the bloc.
Check out what CEI was saying — way back in 1996 — about the costs of global warming policies. And one of the major costs projected was – jobs. Also check out CEI’s global warming website for up-to-date information.
All You Ever Wanted to Know About Ethanol…
But were afraid to ask can be found in Chapter Two of The Really Inconvenient Truths, which you can now get for free via this site. I’ll be on the Jim Bohannon Show tonight at 10pm talking about this and many other things the left doesn’t want you to know about the environment.
More on Deadly Ethanol Subsidies
Nate Beeler has an an excellent editorial cartoon, “Food for Thought,” that captures the deadly and costly consequences of ethanol subsidies, in today’s Washington Examiner. Many go hungry because of the greed of a few. We wrote earlier about how ethanol subsidies are causing hunger and starvation worldwide. Rioting and violent protests have occurred in many countries, including Mexico, Pakistan, Egypt, Indonesia, Haiti, El Salvador, Bangladesh, Burkina Faso, Ivory Coast, Cameroon, Senegal, Ethiopia, Mauritania, Madagascar, and the Philippines. Ethanol subsidies are also contributing to environmental destruction.
The Bottom Line on ‘Earth Week’
Our good friend Tim Carney’s Examiner column this week connects a few very interesting dots - what, for example, does Alicia Silverstone talking about energy efficiency on NBC have to do with corporate welfare for one the nation’s largest companies? Tim puts it all together.
Earth Day was Tuesday, and NBC Universal has extended the celebration into “Earth Week.” Reprising its “Green Week” from last fall, NBC and its affiliates worked some sort of environmental message into all of its programming this week.
Amid its calls for individual sacrifices in the name of the environment and paeans to “green” legislation, the network once again failed to disclose prominently that its parent company stands to get rich off of “environmentalist” laws.
NBC Universal is owned by General Electric, which plays a regular role in this column because of how aggressively the company has hitched its profits to its lobbying successes. GE spends more than any other corporation in America on lobbying the federal government — more than $20 million annually over the past three years — and Green Week and Earth Week probably should be disclosed as lobbying efforts.
In many of GE’s businesses, the profit model appears to be: (1) invest in something for which there isn’t much demand; (2) then lobby to mandate or subsidize it.
This is all also part of of GE’s must discussed “ecomagination” campaign, which so far seems mostly to have produced ever more imaginative ways of getting U.S. taxpayers to pay GE to manufacture technologies consumers don’t want.
Global Food Crisis: “A Silent Tsunami”
“Sharply rising food prices” “have sparked riots around the world and threaten U.N.-backed feeding programs for 20 million children, the top U.N. food official said Tuesday.” The news story that reported this quoted the British Prime Minister as saying that “25,000 people a day are dying of conditions linked to hunger,”"with one child dying every five seconds from hunger-related causes.” Food riots have recently occurred in Haiti, “Bangladesh, Burkina Faso, Ivory Coast, Cameroon, Egypt, Indonesia and Senegal,” as well as Ethiopia, Mauritania, Madagascar, the Philippines, Pakistan, and Mexico.
The story doesn’t explore the role of ethanol subsidies in causing starvation, although it notes that “the diversion of some crops to produce biofuels” is contributing to rising food prices, and that “the increasing use of crops to produce biofuels has been criticized as contributing to food shortages.”
Finance ministers in the Third World are now calling for an end to ethanol subsidies. South Africa’s finance minister calls them “criminal.” India’s finance minister declared that “in a world where there is hunger and poverty, there is no policy justification for diverting food crops towards bio-fuels. Converting food into fuel is neither good policy for the poor nor for the environment.” Ethanol subsidies are terrible for the environment.
The Windy Denmark Question
Yesterday, a listener on the Michael Medved show challenged me that (I paraphrase), “Denmark has adopted wind power at no cost.” I said that I was no expert on Denmark but that there were significant subsidies involved. As this Economist article makes clear, it is certainly not correct to say that Denmark has adopted wind power at no cost:
Researchers in Denmark have gone a step further and put a value on this effect. They believe that wind power shaved 1 billion kroner ($167m) off Danish electricity bills in 2005. On the other hand, Danish consumers also paid 1.4 billion kroner in subsidies for wind power.
The Danish government cut wind power subsidies that year. The result:
The building of wind turbines has virtually ground to a halt since subsidies were cut back. Meanwhile, compared with others in the European Union, Danes remain above-average emitters of the greenhouse gas carbon dioxide. For all its wind turbines, a large proportion of the rest of Denmark’s power is generated by plants that burn imported coal.
Moreover, because you cannot store any wind power that is generated when no-one wants to use it, Denmark has to sell excess wind-power to Sweden at a price of 0c per KWh. This has caused some trouble:
Much has been written about Denmark’s success as the world’s wind power pioneer. But the regularly repeated claim – that Denmark generates 20 percent of its electricity demand from wind sources – is highly misleading. That 20 percent of electricity is not supplied continuously from wind power. Denmark’s wind supply is so variable that it relies heavily on neighbors Norway and Sweden, taking their excess production. In 2003 its export figure for wind power electricity production was as high as 84 percent, as Denmark found it could not absorb its own highly variable wind output capacity into its domestic system. The scale of Denmark’s subsidies was such that in 2006-07 the government increasingly came under scrutiny from the Danish media, which claimed the subsidies were out of control.
Overall, Denmark, a small, flat, windy country of about 5.5 million souls cannot be a model for the US to follow, even if they had succeeded in making wind power work efficiently.
Ethanol Subsidies Kill Forests and People and Scar the Planet
In the Washington Post, two prominent environmentalists have an editorial, “Ethanol’s Failed Promise,” which explains how ethanol subsidies and mandates are destroying the environment and fueling hunger and violence worldwide. “Turning one-fourth of our corn into fuel is affecting global food prices. U.S. food prices are rising at twice the rate of inflation, hitting the pocketbooks of lower-income Americans and people living on fixed incomes. . .Deadly food riots have broken out in dozens of nations in the past few months, most recently in Haiti and Egypt. World Bank President Robert Zoellick warns of a global food emergency.”
Moreover, note Lester Pearson and Jonathan Lewis, ”food-to-fuel mandates are leading to increased environmental damage. First, producing ethanol requires huge amounts of energy — most of which comes from coal. Second, the production process creates a number of hazardous byproducts, and some production facilities are reportedly dumping these in local water sources. Third, food-to-fuel mandates are helping drive up the price of agricultural staples, leading to significant changes in land use with major environmental harm. Here in the United States, farmers are pulling land out of the federal conservation program, threatening fragile habitats. . .Most troubling, though, is that the higher food prices caused in large part by food-to-fuel mandates create incentives for global deforestation, including in the Amazon basin. As Time Magazine reported this month, huge swaths of forest are being cleared for agricultural development. The result is devastating: We lose an ecological treasure and critical habitat for endangered species, as well as the world’s largest ‘carbon sink.’ And when the forests are cleared and the land plowed for farming, the carbon that had been sequestered in the plants and soil is released. Princeton scholar Tim Searchinger has modeled this impact and reports in Science magazine that the net impact of the food-to-fuel push will be an increase in global carbon emissions — and thus a catalyst for climate change.”
In Human Events, Deroy Murdock explains how rising food prices resulting from ethanol have forced Haitians to literally eat dirt (dirt cookies made of vegetable oil, salt, and dirt), caused tortilla riots in Mexico, and fueled violent protests in unstable “powder kegs” like Pakistan and Egypt.
We previously wrote about the unsavory politics that led to this crisis, the rioting it has caused, and the starvation that countless people across the globe face as a result. Finance ministers and central bankers are now calling for an end to ethanol and other biofuel subsidies and mandates in an effort to prevent enormous loss of life.
Stagflation on the horizon?
Today’s Wall Street Journal carries a front-page story by Ann Davis and Russell Gold on the surge in natural gas prices. The subtitle reads, in part: “Further gains likely despite 93% spike.”
Davis and Gold begin with this cheery prognostication:
Americans feeling the pain of record gasoline prices now face the likelihood of another fuel shock, from natural gas. Prices in the U.S. have risen 93% since late August as power-hungry nations like South Korea and Japan compete in a global natural-gas market that scarcely existed a half-decade ago. Still, U.S. prices are as low as half the level of some overseas markets, suggesting they have much further to rise.
High natural gas prices are a big deal. “Natural gas heats half of U.S. homes, generates 20% of the country’s electricity and is used to make everything from fertilizer to plastic bags,” note Davis and Gold.
They believe even higher prices are likely. Thanks to the development of methods for super cooling and transporting the fuel across the ocean in liquefied form, natural gas is now a global commodity. Other things being equal, this helps moderate U.S. gas prices, by increasing the supply available for domestic consumption. But it also means that U.S. prices now reflect not only U.S. demand but also fast-growing demand in India and China. In addition, competition for liquefied natural gas imports in the global marketplace means that high prices in Japan, for instance, exert upward pressure on prices in the United States.
Now, contemplate this fact: “Overall, gas demand from the U.S. power sector grew by 10% last year, according to the Energy Information Administration,” even though Congress has not enacted a Kyoto-style cap-and-trade bill. Cap-and-trade would penalize electricity generation from coal, further ramping up demand for natural gas. A “moratorium” on the construction of new coal-fired power plants, as advocated by Al Gore and just about every environmental group on the planet, would inflate gas prices even more dramatically.
If natural gas prices skyrocket because Congress enacts cap-and-trade or bans new coal plants, stagflation could have a very big future. Are any of the three main presidential contenders even aware of this risk?
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