Category Archives: Energy

Three things to remember about Keystone and U.S. energy policy.

Robert Samuelson writes:

There are three things to remember about Keystone and U.S. energy policy.

First, we’re going to use lots of oil for a long time. The U.S. Energy Information Administration (EIA) estimates that American oil consumption will increase 4 percent between 2009 and 2035. The increase occurs despite highly optimistic assumptions about vehicle fuel efficiency and bio-fuels. But a larger population (390 million in 2035 versus 308 million in 2009) and more driving per vehicle offset savings.

The more oil we produce domestically and import from neighbors, the more we’re insulated from dramatic interruptions of global supplies. After the United States, Canada is the most dependable source of oil — or was until Obama’s decision.

Second, barring major technological breakthroughs, emissions of carbon dioxide, the main greenhouse gas, will rise for similar reasons. The EIA projects that America’s CO2 emissions will increase by 16 percent from 2009 to 2035. (The EIA is updating its projections, but the main trends aren’t likely to change dramatically.) Stopping Canadian tar-sands development, were that possible, wouldn’t affect these emissions.

Finally, even if — as Keystone critics argue — some Canadian oil were refined in the United States and then exported, this would be a good thing. The exports would probably go mostly to Latin America. They would keep well-paid industrial jobs (yes, refining) in the United States and reduce our trade deficit in oil, which exceeded $300 billion in 2011.

Source.

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“Putting green lipstick on a pig doesn’t turn that pig into Ralph Nader.”

Mead on green subsidies:

Advocates of industrial policy have been pointing to ‘smart subsidies’ for green technology as proof that government can function as an effective venture capitalist, directing subsidies effectively toward ‘sunrise’ industries.

We will probably be hearing less of those claims now as the public digests the massive excess, failure and fraud that have turned the Obama administration’s green subsidy program into a symbol of good intentions gone awry.  It turns out public policy is hard, and not every green minded NGO apparatchik is very good at hard things.

Decrying what it calls a “gold rush” mentality that primarily benefited companies like Goldman Sachs and others in need of no special help, a recent article in the New York Times surveyed a range of projects where taxpayer and ratepayer subsidies have taken all risk from the private sector and all but guaranteed large profits “for years to come.”  Even some of the companies involved in the porkfest acknowledge that things got a little out of hand; some projects that have been heavily subsidized “would have been built anyway,” they say.  The drunken sailor on shore leave style economic stimulus spending gets special attention as wasteful, misguided and lavished on corporate welfare for energy giants.

Read the rest here.

President Obama was recently asked my George Stephanopoulos on GMA if he regretted the Solyndra loan. No, he said, because you have to look at the whole portfolio of investments. They knew that some of the loans would fail, as many investments do.

First, based on recent investigations, the White House team feared that Solyndra was a failing business model before the loan guarantee was granted. Second, the government should play a minimal role, if a role at all, in venture capitalism. As was noted, many of the projects that were heavily subsidized would have been built anyway, but now the government can claim the credit for the success and growth. With that credit comes a license to spend more, and with increased spending comes increased waste.

When looking at the whole portfolio, as President Obama instructs us to do, we should see a stronger case for the government to cut many such green subsidies.

 

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The Market Responds… with Sheep

This is ingenious.

IN this verdant lawn-filled college town [Oberlin, OH], most people keep their lawn mowers tuned up by oiling the motor and sharpening the blades. Eddie Miller keeps his in shape with salt licks and shearing scissors.

Mr. Miller, 23, is the founder of Heritage Lawn Mowing, a company that rents out sheep — yes, sheep — as a landscaping aid. For a small fee, Mr. Miller, whose official job title is “shepherd,” brings his ovine squad to the yards of area homeowners, where the sheep spend anywhere from three hours to several days grazing on grass, weeds and dandelions.

The results, he said, are a win-win: the sheep eat free, saving him hundreds of dollars a month in food costs, and his clients get a freshly cut lawn, with none of the carbon emissions of a conventional gas-powered mower. (There are, of course, other emissions, which Mr. Miller said make for “all-natural fertilizer.”)

This is win-win-win. Let us not forget that such an idea puts no costs on others. The government is not taxing us to make us more green, nor are they banning something that we consume, such as fluorescent light bulbs. Rather, an entrepreneur with an idea is responding to the green desires of individuals, and makes a profit in doing so. Good for him. Good for them.

Customers pay $1 per sheep per day, but Mr. Miller also accepts barter payments, which have so far included karate lessons, jugs of maple syrup and the use of one homeowner’s truck. He has done around 20 homes so far, and has so many requests he can’t keep up with them.

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“We may as well try to enjoy it while it lasts.”

China is producing cheap solar panels and essentially subsidizing our green energy. Should we rejoice at the free panels or feel a Sputnik moment for fear of letting this future industry slip away?

Megan McArdle:

But won’t they gain a permanent strategic advantage over us, I hear you cry?

Well, this does sometimes happen. But it’s actually really rare. Notice how all the electronics goods seem to be manufactured in China? Even though we invented many of them (and the Japanese are responsible for a lot of the rest?)  Notice that all the jobs assembling sneakers and looming textiles seem to have moved along with them?  Sure, we had know-how and strategic supplier networks.  But these were no competition for enormously cheap labor.

Green energy will only be the next great industry for us if we are the ones to profit from it. Being the first mover in an industry does not guarantee the profits. Subsidies do, however, guarantee that we pay the R&D costs. Let China continue to subsidize our solar power consumption while we work on advancements in industries in which we have a comparative advantage.

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Six-figure Salaries, But Homeless

This is not an Onion headline.

 

WILLISTON, N.D. — They’re pulling in fat paychecks, but now they’re also homeless.

In the town of Williston, N.D., America’s newest oil boomtown, more than 6,000 job seekers have come from every corner of the country looking for work. Yet, oil companies and other developers haven’t been able to build housing units fast enough.

In the past year, only about 2,000 new housing units have been built, leaving many workers out in the cold.

With dozens of job seekers arriving by the day and fewer and fewer spots for them live in, people are taking some desperate measures.

Newer arrivals who can’t find vacant hotel rooms or apartments sleep in their cars or in sleeping bags on spare patches of grass along the highway. The luckier ones nab a spot in one of the dozens of dorm-like facilities, known as “man camps,” that the oil companies have built to house their workers.

The living conditions are far from ideal, but to some of these workers the lure of doubling or tripling their salaries far outweighs the physical and mental toll it can take.

I applaud both their work ethic and self-sacrifice. Good on ’em.

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Who Besides Solyndra Got Loan Guarantees?

Megan McArdle explains, with many helpful infographics.

She also explains why the program’s success rate is misleading. Most of the firms receiving the money don’t need the help. They’d succeed with our without it. Those that most need the help – e.g. Solyndra – may fail, but the failure rate is hidden by the “success” of the other loans.

That is, I hope that the infographic will be broadly useful to people who support the program: I figure everyone should be interested to know where the money went.  (And here’s a spreadsheet for those who want to trundle through the data themselves). But I have highlighted what jumped out at me: most of the money has gone to enormous companies that should have no trouble accessing capital.  Established utilities, large multinational auto manufacturers, a global warehouse owner.  The bulk of these funds are not going to rectify some gap in the capital markets.  They’re straight subsidies to huge corporations.  Even some of the smaller firms/deals are owned by large corporations like Total SA.
Giving large, established companies extra-cheap loans to build power plants, run transmission lines, and fix up the roofs of their warehouses is, in the immortal words of P.J. O’Rourke, like paying a Dairy Queen owner to keep his ice cream freezers on.

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Filed under Domestic Politics, Economy, Energy, Role of Government

A Case for Exploration and Drilling

From The Economist:

Commodity prices are acting as regulators of global growth. The emerging markets are first in the queue for supplies because they are often able to use each extra barrel of oil or shipload of ore more gainfully. Their demand raises prices and lowers real incomes in the rich world, which gets crowded out. Rich countries had become used to unlimited access to cheap raw materials: prices had been falling for a century or more. Now there is competition for primary resources. Producers are benefiting and rich-world consumers are suffering, at precisely the time when they are also increasingly anxious about job security as China and India rise and rise.

True, but there is no reason why we can’t be both a producer and a rich-world consumer. We need an energy policy that encourages exploration and extraction of all commodities available, including oil. “Drill, baby, drill!” might be a cheap campaign slogan, and the belief that we can drill our way out of the problem is naive, but we are choosing to transfer our wealth to producers of commodities by choosing not join them. We could create both jobs and wealth quite easily with the correct incentives and regulations. Instead we choose Solyndra.

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Filed under Economics, Energy, Environment