Energy Futures Halted Temporarily In Market Rout

Media Ignores Obama Role In HIgher Fuel Prices

The average price for a gallon of unleaded gasoline hit $3.86 on April 25, more than $1-a-gallon higher than a year earlier and less than 25 cents away from the record high price of gasoline set in July 2008.

In fact, per gallon prices are more than $2 higher than when Obama took office Jan. 20, 2009. Yet the president has been nearly exempt from criticism on the issue of rising prices, despite a six-month drilling moratorium and more regulatory hurdles for industry.

The Business & Media Institute found that out of the 280 oil price stories the network evening shows have aired since the 2010 Deepwater Horizon oil spill, only 1 percent (3 stories) mentioned Obama's drilling ban or other anti-oil actions in connection with gasoline prices.

Instead of asking whether Obama's anti-oil policies could be increasing the cost of gas, the networks blamed other factors such as Mideast turmoil or the "money game" played by speculators. Certainly, the turmoil in Libya, Egypt and surrounding nations has increased worries about oil production and can influence the price. But the networks also should have looked for explanations much closer to home, like Obama's many regulatory actions taken against the oil industry.

First there was the drilling ban, which was later overturned by federal courts as illegal. Seahawk Drilling, a Texas-based shallow-water drilling company cited that moratorium as the cause of its bankruptcy filing saying, they "have been adversely affected by the dramatic slowdown in the issuing of shallow-water permits in the U.S. Gulf of Mexico following the Macondo well blowout."

According to The Heritage Foundation, the Obama administration moved on to a de facto moratorium after the ban was overturned. Add to that the EPA's desire to regulate the industry's greenhouse gas emissions and new environmental regulatory hurdles for the Keystone XL pipeline, which would transport crude from Canada to the U.S. and create many American jobs.

Despite all of these actions on the part of the Obama administration, ABC, CBS and NBC evening news shows have barely mentioned them in stories about rising gas prices.

Obama EPA Determined to Create Energy Economic Calamity

from Fox News:

Shell Oil Company has announced it must scrap efforts to drill for oil this summer in the Arctic Ocean off the northern coast of Alaska. The decision comes following a ruling by the EPA’s Environmental Appeals Board to withhold critical air permits. The move has angered some in Congress and triggered a flurry of legislation aimed at stripping the EPA of its oil drilling oversight.

Shell has spent five years and nearly $4 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas. The leases alone cost $2.2 billion. Shell Vice President Pete Slaiby says obtaining similar air permits for a drilling operation in the Gulf of Mexico would take about 45 days. He’s especially frustrated over the appeal board’s suggestion that the Arctic drill would somehow be hazardous for the people who live in the area. “We think the issues were really not major,” Slaiby said, “and clearly not impactful for the communities we work in.”

The closest village to where Shell proposed to drill is Kaktovik, Alaska. It is one of the most remote places in the United States. According to the latest census, the population is 245 and nearly all of the residents are Alaska natives. The village, which is 1 square mile, sits right along the shores of the Beaufort Sea, 70 miles away from the proposed off-shore drill site.

The EPA’s appeals board ruled that Shell had not taken into consideration emissions from an ice-breaking vessel when calculating overall greenhouse gas emissions from the project. Environmental groups were thrilled by the ruling.

“What the modeling showed was in communities like Kaktovik, Shell’s drilling would increase air pollution levels close to air quality standards,” said Eric Grafe, Earthjustice’s lead attorney on the case. Earthjustice was joined by Center for Biological Diversity and the Alaska Wilderness League in challenging the air permits.

At stake is an estimated 27 billion barrels of oil. That’s how much the U. S. Geological Survey believes is in the U.S. portion of the Arctic Ocean. For perspective, that represents two and a half times more oil than has flowed down the Trans Alaska pipeline throughout its 30-year history. That pipeline is getting dangerously low on oil. At 660,000 barrels a day, it’s carrying only one-third its capacity.

Production on the North Slope of Alaska is declining at a rate of about 7 percent a year. If the volume gets much lower, pipeline officials say they will have to shut it down. Alaska officials are blasting the Environmental Protection Agency. 

“It’s driving investment and production overseas,” said Alaska’s DNR Commissioner Dan Sullivan. “That doesn’t help the United States in any way, shape or form.”

The EPA did not return repeated calls and e-mails. The Environmental Appeals Board has four members: Edward Reich, Charles Sheehan, Kathie Stein and Anna Wolgast. All are registered Democrats and Kathie Stein was an activist attorney for the Environmental Defense Fund. Members are appointed by the EPA administrator. Alaska’s Republican senator thinks it’s time to make some changes.

“EPA has demonstrated that they’re not competent to handle the process,” said Sen. Lisa Murkowski. “So if they’re not competent to handle it, they need to get out of the way.”

Murkowski supported budget amendments that would have stripped the EPA of its oversight role in Arctic offshore drilling. The Interior Department issues air permits to oil companies working in the Gulf of Mexico.

Let's Face It! The Obama Adminstration Lies About Domestic Energy Production

The propaganda ministry is working overtime:

Last week, Interior Secretary Ken Salazar told Congress that oil production in the Gulf of Mexico "remained at an all-time high, and we expect that it will continue as we bring new production online."  He claimed: "In 2009 there were 116 rigs in the Gulf of Mexico, in 2010 in February, 120, in February 2011, 126."But Salazar's numbers distort the true number of working rigs in the Gulf of Mexico. According to Baker Hughes:

• Four days before the Deepwater Horizon accident there were 55 rotary rigs actually drilling offshore in the Gulf of Mexico.
• On May 28, 2010, when the administration announced the six-month moratorium on deepwater drilling, there were 46 rotary rigs operating in the Gulf. 
• Last week, 25 rotary rigs were operating in the Gulf of Mexico.

So the fact that there is an "all-time high" number of rigs in the Gulf ignores the fact that most of those rigs are not working.  Claiming an increase in idle rigs in the Gulf as a success story is like claiming the job market is great because a lot of people are unemployed and available to work. In the same hearing, the Secretary also claimed that "the production has remained at an all-time high" within the Gulf of Mexico and there is no way to actually make this true.  The Energy Department's Energy Information Administration reports that production in the Gulf of Mexico is in decline, forecasting a decline of 250,000 barrels a day from Gulf production, due partly to the moratorium and restricted permitting.  While the annual production figure for 2010 was greater than 2009, EIA's month-by-month production figures show a peak in May of 2010, and a relatively steady decline since. And EIA Petroleum Engineer Gary Long told trade publication E&E News that the rig count in the Gulf was cut in half after the Deepwater Horizon accident and that it wouldn't rebound to previous levels until the end of 2011 under the assumption that the permitting process is restored to historical rates. Further, since there is a lag time from the time an exploration permit is approved to the time of actual production, and since no only a handful of permits for new wells have been granted since April of 2010, it is likely that Gulf of Mexico production will continue to be hit hard in 2012 and beyond.
We appreciate that, when it comes to selling the administration's energy policy, Secretary Salazar is in a tough position.  Fortunately we are here to help, help provide the abundant and affordable energy that our economy needs, and help create the jobs our workers want.  As API President Jack Gerard said recently:
"Our industry remains committed to working with government to meet our current and future challenges, but we need Congress and the administration on board. Let's stop talking and let's get back to work."

Comparisons of Classes of Commodities

IEA Says Dependence on OPEC to Increase!

NEW DELHI—The global dependency on the members of the Organization of Petroleum Exporting Countries for oil will rise in the next five to 10 years as production by non-OPEC nations declines, the chief of the International Energy Agency said Friday.
"We have seen an increase in non-OPEC supplies. But in the mid-term, non-OPEC production will decline," Nobuo Tanaka, the agency's

Wind Energy: Neither Clean Nor Cheap

from Heritage.org:

Much of the justification for subsidies, tax credits, and mandates for increasing wind energy production in the U.S. is that it will create jobs and help cool our planet’s fever. We’ve explained in detail how subsidized green jobs destroy jobs elsewhere ^[1], but it also turns out that increased wind power decreases carbon emissions much less than previously thought, and in some instances, could increase emissions.
The Manhattan Institute’s Robert Bryce explains why in his recent ^[2]Wall Street Journal op-ed. First, wind power displaces power from natural gas more than it does coal, and coal combustion emits almost double what natural gas does.
Second, the intermittency of wind forces coal and gas-fired plants to operate inefficiently and actually increase emissions. Coal plants run most efficiently when continuously running, so the ramping up and down of conventional coal plants to make up for intermittent wind pumps out more carbon dioxide. Bryce likens it to the efficiency of an automobile ^[2]: “An automobile that operates at a constant speed—say, 55 miles per hour—will have better fuel efficiency, and emit less pollution per mile traveled, than one that is stuck in stop-and-go traffic.”
This has proven to be the case in Colorado and Texas, two states that have adopted a renewable portfolio standard, which mandates that wind be included in the state’s electricity supply. A recent study ^[3]commissioned by the Independent Petroleum Association of Mountain States looks at the power plant records from these two states and finds ^[3]:

Coal-fired power plants are designed to run most efficiently at stable rates and are not well-suited to accommodate the load variability imposed by the integration with wind generation. Cycling causes coal-fired power plants to operate less efficiently, and reduces the effectiveness of their environmental control equipment, which together drive up emissions. Paradoxically, using wind energy in such a way that it forces utilities to cycle their coal generation often results in greater SO2, NOX and CO2 emissions than would have occurred if less wind energy were generated and coal generation was not cycled.

The study also finds that in Texas, the use of wind saved only ^[2]600 tons of carbon dioxide emissions in 2008 and found an increase of CO2 by 1,000 tons in 2009.
So how much environmental benefit are we really getting? Let’s pretend wind power will reduce emissions as much as the government says it will. Bryce points to carbon reduction estimates from the Energy Information Administration. A renewable electricity standard (RES) mandating that 25 percent of our energy be generated from renewables would reduce emissions by only 4.9 percent by 2030. To put this in perspective, Bryce reminds us that President Obama and Congress’s target is to reduce carbon 80 percent by 2050.
If that didn’t make you grind your teeth with frustration, this will: According to climatologist Chip Knappenberger ^[4], that 80 percent reduction would moderate temperatures by only hundredths of a degree in 2050 and no more than two-tenths of a degree at the end of the century. These temperature reductions are almost too small to measure. What do you think a 5 percent reduction in CO2 will produce?
None of this would matter if wind energy could compete without mandates and subsidies and provide consumers with cheap electricity. Higher electricity prices have rippling effects throughout the economy. More expensive electric bills force businesses to make production cuts and reduce labor.
According to a new Heritage Foundation study ^[5], if Congress implemented a 22.5 percent RES by 2025, household electricity prices would jump 36 percent and industry prices by 60 percent by 2035. There would be 1 million fewer people working on average with the RES in effect than if there were no RES. And as the mandated level of renewable use rises over time, so do the losses imposed on the economy. Summing up the impacts for 2012–2035 yields a total loss of $5.2 trillion in GDP.
If wind can compete absent subsidies, mandates, or tax credits, then Americans will benefit from a more robust, competitive energy market. To suggest that windmills are the answer to our economic and alleged climate problems is nothing but blowing smoke to the American people.

Energy Tyranny Has Arrived!

from Feedstuffs.com
Monday the American Petroleum Institute and the National Petrochemical & Refiners Association filed a lawsuit with the U.S. Court of Appeals for the District of Columbia challenging the Environmental Protection Agency's Renewable Fuels Standard 2 (RFS2) rule. The RFS2 rule was finalized and published in the Federal Register March 26.
The groups are challenging the legality of EPA's actions because the agency made the rule effective on July 1, 2010, but combines the 2009 and 2010 biomass-based diesel volumes and makes the rule retroactive to January 1, 2010.
The organizations both state they don't question the role renewable fuels can play in the nation's transportation fuel mix. In fact, API's statement said the U.S. oil and natural gas industry is the biggest consumer of ethanol and other biofuels. Almost 80% of all gasoline now produced in the United States contains ethanol. API said it supports a "realistic and workable RFS."
“While the U.S. oil and natural gas industry recognizes and appreciates the role of ethanol and other biofuels in the fuel marketplace, we are deeply concerned that the Environmental Protection Agency’s final RFS2 rule could result in higher consumer costs. By setting retroactive requirements, refiners, and ultimately consumers, will be penalized for EPA's inability to get this rule out on time as directed by Congress," API said.
The Energy Independence and Security Act of 2007 required EPA to promulgate and finalize certain standards under the RFS2 program by specific dates in 2008 and 2009.  The agency, however, failed to meet those statutory deadlines. Instead, in its recently published RFS2 final rule, "EPA retroactively and unlawfully imposed RFS2 compliance burdens on obligated parties, many of whom are NPRA members," the organization noted
“Simply put, the fact that EPA failed to meet its statutory obligations under current energy law does not give the Agency license to impose retroactively additional compliance burdens on obligated parties," said NPRA President Charles Drevna. "At the least, such action calls into serious question the fundamental fairness of EPA’s RFS2 rulemaking process."

Energy Escalation

This is looking like a broken record of 2008!

The Largest Manmade Hoax the World Has Ever Seen

Trent Loos

As we charge into 2010, those of us in agriculture have come to realize that we must deal with groups outside of agriculture that want to forever change the structure of food production and, in most cases, simply eliminate the production of meat, milk and eggs in this country. Today, I am adding another group to the list of those working against the heart of agriculture. You may have heard of it: the U.S. Department of Agriculture. If you think that sounds extreme, allow me to explain. Agriculture Secretary Tom Vilsack spoke in Copenhagen, Denmark, at last month's "climate change" conference. Here is an excerpt of what Vilsack had to say: "While climate change will affect us all, there are particular vulnerabilities and challenges for farmers, ranchers and those who make a living off the land. Higher temperatures, changing rainfall patterns and more frequent extreme events like droughts and flooding threaten to reduce yields and increase the occurrence of crop failure." I vividly remember Vilsack as governor of Iowa, and it was clear that agriculture was not his cup of tea, but he also doesn't appear to be good at history either. Forget about the 10,000-year-old models theorizing how extreme climate change has been over the history of the world. Let's just look at the past 234 years. The worst blizzards occurred before 1900, the worst hurricanes happened in 1900 and we called the decade of the 1930s the "dirty 30s" for a reason. My point is that farmers and ranchers have always dealt with climate change, and it has nothing to do with fossil fuels or carbon sequestration. While in Copenhagen, Vilsack also announced that USDA was releasing a report titled "The Effects of Climate Change on U.S. Ecosystems" (written in 2008 but not released until Dec. 17, 2009). I felt compelled to read this report, mostly because it has a polar bear on the front cover. What? A polar bear?! While I am always looking for diversity at my ranch, I thought maybe USDA was suggesting that I could start raising polar bears. Lord knows this would have been a good winter to get a herd started based on the weather we have already had in the Great Plains. Anyway, this report suggests that global warming could have a negative effect on livestock. Warmer temperatures could reduce mortality in the winter, but hotter summers will reduce productivity and increase death loss. Excuse me. The U.S. produces more than 9 billion animals each year, and the majority are in concentrated animal feeding operations. That means they are in a totally controlled environment, so no matter how hot or cold it is outside, the dairy cow, turkey, chicken or pig is in a temperature-controlled building without experiencing effects from the weather. Vilsack not only supports this global warming campaign but also rejected the advice of his own Chief Economist Joe Glauber, whose data indicate that the carbon program the government is hoping to implement is not beneficial or plausible for American farmers. Reportedly, Vilsack told Glauber to find a way to make it work. I can walk through this USDA report page by page and illustrate the incorrect statements made about modern food production, but allow me to just highlight some of what is said. The authors clearly state that there is no way to say whether humans had anything to do with climate change in the past, but "we need to change our farming practices" because we believe in our theory. In fact, on page 21, there is something that no one at USDA will likely include in their presentations to the media and the public. It reads: "For the moment, there is no viable alternative to using the existing systems for identifying climate change and its impact on U.S. agriculture, land resources, water resources and biodiversity, even though these systems were not originally designed for this purpose. "The authors of this report also have very limited confidence in the ability of current observation and monitoring systems to provide the information needed to evaluate the effectiveness of actions taken to mitigate or adapt to climate change impacts. Much of our understanding of the direct effects of temperature, elevated (carbon dioxide), ozone, precipitation and nitrogen deposition has come from manipulative experiments. Institutional support for such experiments is a concern," the report notes. Yes, it appears that we now have a new group looking to forever change the production of food in the U.S. through the use of an agenda and carefully selected bits of partial information that support its mission. This U.S. Global Change Research Program is housed -- where else? -- but at 1717 Pennsylvania Ave. in Washington, D.C., and is working with the Heinz Center to develop "observation and monitoring systems that are able to support their analyses that can aid this management challenge." Doesn't that mean gathering only data that support their theory? I believe this may well be just another public relations stunt by the Obama Administration to scare the American public into believing that U.S. agriculture and food production are in jeopardy so they can implement massive legislative and regulatory changes. I, for one, am not buying it, and I will not budge off of my notion that global warming is the largest manmade hoax the world has ever seen.

Fossil Fuel Will Continue to Power Economy

By Institute for Energy Research  Wednesday, December 23, 2009
Washington, DC – Yesterday, the Energy Information Administration (EIA) — the independent statistical analysis arm of the US Energy Department — issued its Annual Energy Outlook, an evaluation of the United States energy consumption and production for the next 25 years.
“Today’s announcement only validates the well known fact that fossil fuels will continue to power America for decades to come,” said Mary J. Hutzler, former EIA deputy administrator and a distinguished senior fellow at the Institute for Energy Research (IER).
“This forecast clearly shows the continued and increased role fossil fuels will play in powering our economy. Specifically, EIA finds that demand for liquid fuels will be up nearly 10 percent, natural gas by almost 7 percent and coal will increase by 12 percent above 2008 levels – in 2035. Fossil fuels remain dominant and necessary for economic growth and this analysis reinforces that.”
The EIA analysis — which IER has summarized HERE — also shows an increase in the use of renewable energies, namely biomass and wind power. However, it is important to note that wind energy flat-lines in 2013, which also happens to be the year that many of the generous government-mandated subsidies are eliminated to the industry — demonstrating that wind energy is not economically feasible without massive taxpayer support.
In terms of the non-carbon dioxide emitting fuels, EIA is forecasting an increase of 11 percent for nuclear energy, and 81 percent for all forms of renewable energy (hydropower, biomass, wind, solar, and geothermal). Despite these sizeable increases, carbon-free energy can only lower the fossil fuel share of consumption by 6 percentage points from its current 84 percent share.
Overall, according to EIA, energy consumption in the United States is expected to increase by 14 percent by 2035.
“While renewable energy sources are projected to nominally increase, the Administration and lawmakers on Capitol Hill must acknowledge that markets ultimately decide which energy sources are more efficient. And despite the massive taxpayer handouts for unreliable and intermittent ‘green’ energy forms, according to this analysis, fossil fuels will remain the most powerful, reliable and affordable energy forms for years to come,” concluded Hutzler.

Cap and Trade - Capitalism's Nemesis

from Washington Times:

President Obama is the most radical leader in U.S. history. Much of the public is focused on his ambitious plan to nationalize health care. The more they hear about it, the less they like it. Hence, Mr. Obama's poll numbers are dropping like a stone.

Yet his environmentalist agenda is just as dangerous. If passed, it will destroy America's free-market system. Like most liberal elitists, Mr. Obama is an incremental socialist. He does not believe in revolutionary change through blood and iron -- as did Soviet dictator Josef Stalin or Cuban despot Fidel Castro. Rather, Mr. Obama champions evolutionary socialism: the state's gradual takeover of key sectors of private industry. He is anti-capitalist and pro-big-government.

His cap-and-trade initiative seeks to severely limit carbon-dioxide emissions. Every business involved in carbon emissions would be required to purchase permits from the government. Over time, emissions allowed would be curbed, making the permits increasingly valuable -- and expensive. Companies would be allowed to trade or sell them on the open market.

Cap-and-trade would impose huge costs on the economy and undermine job creation. Moreover, it would transform America into an impoverished socialist superstate. It would create a new ruling class that would oversee economic development, forcing an eco-friendly lifestyle on every resident.

The House of Representatives already has passed the draconian legislation. It faces an uphill fight in the Senate. However, if Mr. Obama gets his way on health care reform, that may generate unstoppable momentum for his environmental package.

The carbon-trading scheme is built on the myth of man-made global warming. It is not based on sound science, but leftist ideology.

To compel Americans to accept a massive expansion of government power and tax increases, the left has resorted to a campaign of fear and hysteria: Global-warming theory claims carbon-dioxide emissions cause a "greenhouse" atmospheric effect, leading to rising Earth temperatures. The result, it says, will be a global catastrophe of biblical proportions -- the melting of ice caps, rising sea levels, the flooding of entire islands and coastal cities, droughts, economic devastation, mass starvation and death.

Yet leading scientists from around the world have debunked the theory of human-caused global warming. Environmentalists cannot answer a basic question: Why is it that for centuries the Earth's temperature has ticked slightly up and down, constantly repeating the same cycle even before the emergence of the Industrial Revolution? Therefore, curtailing the use of fossil fuels -- oil, coal and natural gas -- would not stop climate change.

It would, however, dramatically erode our standard of living. In a rare, candid moment during the 2008 election campaign, Mr. Obama admitted his goal was to scale back Americans' consumption, including driving big cars, using air conditioning and eating cheeseburgers: He wants to reduce our prosperity.

"We can't drive our SUVs, and eat whatever we want, and keep our homes at 72 [degrees] all the time, whether we live in the desert or the tundra, and keep consuming 25 percent of the world's resources with just 4 percent of the world's population, and expect the rest of the world to say 'You just go ahead. We'll be fine.' That's not leadership. That's not going to happen."

By the administration's own estimates, cap-and-trade would cost taxpayers at least $645 billion. Other estimates say the burden would be threefold higher. This would cost every American $2,100 to $6,300.

Carbon-trading is a large indirect tax on businesses, forcing them to purchase expensive emissions permits. The policy would increase the price of gas, oil and electricity to encourage consumers to use alternative energy sources. This would mean higher prices at the pump, soaring heating bills and rising food costs. Mr. Obama and liberal Democrats want Americans to consume less electricity (mostly produced by coal, oil and natural gas). The result of this would be less use of computers, iPods, microwaves, cell phones, washers and dryers, dishwashers, air conditioners and refrigerators -- the very conveniences of modern life.

For years, the left has railed against the military-industrial complex. Yet cap-and-trade is an integral part of what environmentalist skeptic Bjorn Lomborg calls the "green-industrial complex" -- the unholy alliance of the powerful green lobby, special business interests, scientific research and government policy. Billions of dollars are to be made in selling and trading carbon permits. And everyone -- from Al Gore to George Soros to now-bankrupt Lehman Brothers Holdings Inc. -- wants a slice of the action.

Environmentalism has very little to do with protecting the environment. It is green socialism. Its objective is to achieve what red communism couldn't: the conquest of capitalism. Instead of central planning and a command economy, we would have a highly regulated, highly taxed bureaucratic corporatism that would stifle economic growth and individual initiative.

Beginning in the 19th century, much of the Western intelligentsia lost faith in God. The 20th century saw numerous attempts - Marxism, fascism, national socialism -- to construct a society without God. They failed. Now the West's liberal elites are seeking to infuse the radical secular project with new meaning and purpose -- man's salvation through the worship of Gaea, Mother Earth.

The green movement is a form of pantheism. It hopes to sacrifice prosperity, abundance and wealth at the altar of a false god.

Mr. Obama is its prophet of doom. And America is its victim.

Jeffrey T. Kuhner is a columnist at The Washington Times and president of the Edmund Burke Institute, a Washington-based think tank.

Impact Of Cap and Trade

report from the National Association of Manufacturers:

U.S. jobs decline by 1.8 million under the low cost case and by 2.4 million under the high cost case. The primary cause of job losses is lower industrial output due to higher energy prices, the high cost of complying with required emissions cuts, and greater competition from overseas manufacturers with lower energy costs...
By 2020 gasoline would increase between 8.4% and 11.1%, electricity between 5% and
7.9%. By 2030, gasoline prices increase between 20% and 26.1%, natural gas by 56.3% and 73.5% while electricity prices increase by up to 50%. Table 1 shows the increase in
energy prices faced by a typical household compared over the 2020-2030 period...
the primary impact would fall on the electric sector. W/M would result in the electric industry shutting down most carbon-based generation and/or using expensive, as yet
unproven technology, to capture and store CO2. To meetthe stringent goals of W/M, the electric industry would also have to substitute high cost technologies, such as biomass
and wind, for conventional generation.

Here is the original.

Pressure to Curb Speculation Will Have Opposite Effect -- Higher Prices

from Reuters:

Some fear new rules to curtail speculation could make markets less efficient by reducing trading volumes and moving traders to offshore exchanges. Fewer speculators would mean fewer traders willing to absorb risk and lead to higher prices.

Imagine that! Excessive regulation leading to higher prices and shortages! When hasn't that been the case! Just look at what Chavez has done to Venezuela as the latest example. Also, as speculators send their capital elsewhere, the capital flight will crush the Dollar, which -- surprise -- leads to higher commodity prices!

Bloomberg: Cap and Trade Will Increase Oil Imports, Reduce Domestic Production

from Bloomberg:
America’s biggest oil companies will probably cope with U.S. carbon legislation by closing fuel plants, cutting capital spending and increasing imports.

Under the Waxman-Markey climate bill that may be voted on today by the U.S. House, refiners would have to buy allowances for carbon dioxide spewed from their plants and from vehicles when motorists burn their fuel. Imports would need permits only for the latter, which ConocoPhillips Chief Executive Officer Jim Mulva said would create a competitive imbalance.

“It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment,” Mulva said in a June 16 interview in Detroit. Houston-based ConocoPhillips has the second-largest U.S. refining capacity.

The same amount of gasoline that would have $1 in carbon costs imposed if it were domestic would have 10 cents less added if it were imported, according to energy consulting firm Wood Mackenzie in Houston. Contrary to President Barack Obama’s goal of reducing dependence on overseas energy suppliers, the bill would incent U.S. refiners to import more fuel, said Clayton Mahaffey, an analyst at RedChip Cos. in Maitland, Florida.

“They’ll be searching the globe for refined products that don’t carry the same level of carbon costs,” said Mahaffey, a former Exxon Corp. refinery manager.

Prices Seen Rising

The equivalent of one in six U.S. refineries probably would close by 2020 as the cost of carbon allowances erases profits, according to the American Petroleum Institute, a Washington trade group known as API. Carbon permits would add 77 cents a gallon to the price of gasoline, said Russell Jones, the API’s senior economic adviser.

“Because it’s going to be more expensive to produce the stuff, refiners will slow down production and cut back on inventories to squeeze every penny of profit they can from the system,” said Geoffrey Styles, founder of GSW Strategy Group LLC in Vienna, Virginia. “We will end up with less domestic product on the market and a greater reliance on imports, all of which means higher, more volatile prices.”

U.S. motorists, already facing the steepest jump in gasoline prices in 18 years, would bear the brunt as refiners pass on added costs, Exxon Mobil Corp. Chief Executive Officer Rex Tillerson told reporters after a May 27 meeting in Dallas.

Energy Shortages Coming in 3-5 Years Without More Development

from Bloomberg:
Reduced spending on energy would slow the economic rebound, trigger a surge in prices and hurt future prosperity, the Group of Eight industrialized nations said at the close of their meeting in Rome.

“The current financial and economic crisis must not delay investments and programmed energy projects which are essential to economic recovery and sustainable prosperity,” ministers from the G8 and 15 other countries including Saudi Arabia, China and India said in their concluding statement yesterday after a three-day meeting.

The global economic slowdown has restricted credit for new energy projects and eroded demand for fuels, leading to a 58 percent slump in crude prices from their high of $147.27 a barrel in July. Oil companies’ spending this year dropped almost $100 billion, or 21 percent, according to a report this month from International Energy Agency.

Oil prices may jump in four to five years because energy companies, fighting the worst recession in more than six decades, are cutting investment in new projects, IEA Chief Economist Fatih Birol said in the report.

Climate Talks Amount to Bunch of "Gas"

from Marketwatch:
China is taking a tough line ahead of key climate talks next month, demanding heavy cuts for other, richer nations and payouts to itself, according to a Japanese news report Friday.

The Nikkei report cited official Chinese statements Thursday calling on wealthier countries to cut greenhouse gas emissions 40% by 2020 from 1990 levels, and help pay for reduction schemes in poor countries, according to a published report.

China also repeated its position that developing countries -- including itself -- should only curb their emissions on a voluntary basis, and then only if the curbs "accord with their national situations."

Formal climate-change negotiations are slated to begin on June 1 in Bonn, Germany.

China's argument that developed countries should be legally required to give at least between 0.5% and 1% of their annual economic worth to help poorer countries curb greenhouse gas emissions isn't likely to be warmly received by the U.S. and European Union, the report noted, citing analysts as saying the position may just be posturing ahead of the negotiations.

The Chinese government has estimated it would need to spend the equivalent of $146 billion per year to curb its greenhouse gas emissions, the report said.

Also:

Members of the House Energy Committee on Thursday approved a sweeping bill aimed at arresting climate change, the first step in a potentially enormous re-ordering of U.S. energy policy.

By a vote of 33 to 25, members approved language cutting carbon emissions by more than 80% below 2005 levels by 2050 through a "cap-and-trade" system. The bill would also boost use of renewable energy and set new targets for energy-efficient buildings.

Internal Russian Report Suggests Upcoming Wars Over Energy

from AP:
A Kremlin policy paper says international relations will be shaped by battles over energy resources, which may trigger military conflicts on Russia's borders.

The National Security Strategy also said that Russia will seek an equal "partnership" with the United States, but named U.S. missile defense plans in Europe among top threats to the national security.

The document, which has been signed by President Dmitry Medvedev, listed top challenges to national security and outlined government priorities through 2020.

"The international policy in the long run will be focused on getting hold of energy sources, including in the Middle East, the Barents Sea shelf and other Arctic regions, the Caspian and Central Asia," said the strategy paper that was posted on the presidential Security Council's Web site.

"Amid competitive struggle for resources, attempts to use military force to solve emerging problems can't be excluded," it added. "The existing balance of forces near the borders of the Russian Federation and its allies can be violated."

Energies Rebound in Sync With Stocks

Natural gas continues to show significant strength today, along with crude oil and gasoline. The natural gas daily chart is shown below.

Carbon Emissions, Cap and Trade Policy: Back to Reality

from John Mauldin's Outside the Box, Peter Huber says the following in an article called "Bound to Burn":

Like medieval priests, today's carbon brokers will sell you an indulgence that forgives your carbon sins. It will run you about $500 for 5 tons of forgiveness -- about how much the typical American needs every year. Or about $2,000 a year for a typical four-person household. Your broker will spend the money on such things as reducing methane emissions from hog farms in Brazil.

But if you really want to make a difference, you must send a check large enough to forgive the carbon emitted by four poor Brazilian households, too -- because they're not going to do it themselves. To cover all five households, then, send $4,000.

If making carbon this personal seems rude, then think globally instead. During the presidential race, Barack Obama was heard to remark that he would bankrupt the coal industry. No one can doubt Washington's power to bankrupt almost anything -- in the United States. But China is adding 100 gigawatts of coal-fired electrical capacity a year. That's another whole United States' worth of coal consumption added every three years, with no stopping point in sight. Much of the rest of the developing world is on a similar path.

Cut to the chase. We rich people can't stop the world's 5 billion poor people from burning the couple of trillion tons of cheap carbon that they have within easy reach. We can't even make any durable dent in global emissions -- because emissions from the developing world are growing too fast, because the other 80 percent of humanity desperately needs cheap energy, and because we and they are now part of the same global economy. What we can do, if we're foolish enough, is let carbon worries send our jobs and industries to their shores, making them grow even faster, and their carbon emissions faster still.

We don't control the global supply of carbon.

Ten countries ruled by nasty people control 80 percent of the planet's oil reserves -- about 1 trillion barrels, currently worth about $40 trillion. If $40 trillion worth of gold were located where most of the oil is, one could only scoff at any suggestion that we might somehow persuade the nasty people to leave the wealth buried. They can lift most of their oil at a cost well under $10 a barrel. They will drill. They will pump. And they will find buyers. Oil is all they've got.

Poor countries all around the planet are sitting on a second, even bigger source of carbon -- almost a trillion tons of cheap, easily accessible coal. They also control most of the planet's third great carbon reservoir -- the rain forests and soil. They will keep squeezing the carbon out of cheap coal, and cheap forest, and cheap soil, because that's all they've got. Unless they can find something even cheaper. But they won't -- not any time in the foreseeable future.

We no longer control the demand for carbon, either. The 5 billion poor -- the other 80 percent -- are already the main problem, not us. Collectively, they emit 20 percent more greenhouse gas than we do. We burn a lot more carbon individually, but they have a lot more children. Their fecundity has eclipsed our gluttony, and the gap is now widening fast. China, not the United States, is now the planet's largest emitter. Brazil, India, Indonesia, South Africa, and others are in hot pursuit. And these countries have all made it clear that they aren't interested in spending what money they have on low-carb diets. It is idle to argue, as some have done, that global warming can be solved -- decades hence -- at a cost of 1 to 2 percent of the global economy. Eighty percent of the global population hasn't signed on to pay more than 0 percent.

Accepting this last, self-evident fact, the Kyoto Protocol divides the world into two groups. The roughly 1.2 billion citizens of industrialized countries are expected to reduce their emissions. The other 5 billion -- including both China and India, each of which is about as populous as the entire Organisation for Economic Co-operation and Development -- aren't. These numbers alone guarantee that humanity isn't going to reduce global emissions at any point in the foreseeable future -- unless it does it the old-fashioned way, by getting poorer. But the current recession won't last forever, and the long-term trend is clear. Their populations and per-capita emissions are rising far faster than ours could fall under any remotely plausible carbon-reduction scheme.

Might we simply buy their cooperation? Various plans have circulated for having the rich pay the poor to stop burning down rain forests and to lower greenhouse-gas emissions from primitive agricultural practices. But taking control of what belongs to someone else ultimately means buying it. Over the long term, we would in effect have to buy up a large fraction of all the world's forests, soil, coal, and oil -- and then post guards to make sure that poor people didn't sneak in and grab all the carbon anyway. Buying off people just doesn't fly when they outnumber you four to one.

Might we instead manage to give the world something cheaper than carbon? The moon-shot law of economics says yes, of course we can. If we just put our minds to it, it will happen. Atom bomb, moon landing, ultracheap energy -- all it takes is a triumph of political will.

Really? For the very poorest, this would mean beating the price of the free rain forest that they burn down to clear land to plant a subsistence crop. For the slightly less poor, it would mean beating the price of coal used to generate electricity at under 3 cents per kilowatt-hour.

And with one important exception, which we will return to shortly, no carbon-free fuel or technology comes remotely close to being able to do that. Fossil fuels are extremely cheap because geological forces happen to have created large deposits of these dense forms of energy in accessible places. Find a mountain of coal, and you can just shovel gargantuan amounts of energy into the boxcars.

Shoveling wind and sun is much, much harder. Windmills are now 50-story skyscrapers. Yet one windmill generates a piddling 2 to 3 megawatts. A jumbo jet needs 100 megawatts to get off the ground; Google is building 100-megawatt server farms. Meeting New York City's total energy demand would require 13,000 of those skyscrapers spinning at top speed, which would require scattering about 50,000 of them across the state, to make sure that you always hit enough windy spots. To answer the howls of green protest that inevitably greet realistic engineering estimates like these, note that real-world systems must be able to meet peak, not average, demand; that reserve margins are essential; and that converting electric power into liquid or gaseous fuels to power the existing transportation and heating systems would entail substantial losses. What was Mayor Bloomberg thinking when he suggested that he might just tuck windmills into Manhattan? Such thoughts betray a deep ignorance about how difficult it is to get a lot of energy out of sources as thin and dilute as wind and sun.

It's often suggested that technology improvements and mass production will sharply lower the cost of wind and solar. But engineers have pursued these technologies for decades, and while costs of some components have fallen, there is no serious prospect of costs plummeting and performance soaring as they have in our laptops and cell phones. When you replace conventional with renewable energy, everything gets bigger, not smaller -- and bigger costs more, not less. Even if solar cells themselves were free, solar power would remain very expensive because of the huge structures and support systems required to extract large amounts of electricity from a source so weak that it takes hours to deliver a tan.

This is why the (few) greens ready to accept engineering and economic reality have suddenly emerged as avid proponents of nuclear power. In the aftermath of the Three Mile Island accident -- which didn't harm anyone, and wouldn't even have damaged the reactor core if the operators had simply kept their hands off the switches and let the automatic safety systems do their job -- ostensibly green antinuclear activists unwittingly boosted U.S. coal consumption by about 400 million tons per year. The United States would be in compliance with the Kyoto Protocol today if we could simply undo their handiwork and conjure back into existence the nuclear plants that were in the pipeline in nuclear power's heyday. Nuclear power is fantastically compact, and -- as America's nuclear navy, several commercial U.S. operators, France, Japan, and a handful of other countries have convincingly established -- it's both safe and cheap wherever engineers are allowed to get on with it.

But getting on with it briskly is essential, because costs hinge on the huge, up-front capital investment in the power plant. Years of delay between the capital investment and when it starts earning a return are ruinous. Most of the developed world has made nuclear power unaffordable by surrounding it with a regulatory process so sluggish and unpredictable that no one will pour a couple of billion dollars into a new plant, for the good reason that no one knows when (or even if) the investment will be allowed to start making money.

And countries that don't trust nuclear power on their own soil must hesitate to share the technology with countries where you never know who will be in charge next year, or what he might decide to do with his nuclear toys. So much for the possibility that cheap nuclear power might replace carbon-spewing sources of energy in the developing world. Moreover, even India and China, which have mastered nuclear technologies, are deploying far more new coal capacity.

Remember, finally, that most of the cost of carbon-based energy resides not in the fuels but in the gigantic infrastructure of furnaces, turbines, and engines. Those costs are sunk, which means that carbon-free alternatives -- with their own huge, attendant, front-end capital costs -- must be cheap enough to beat carbon fuels that already have their infrastructure in place. That won't happen in our lifetimes.

Another argument commonly advanced is that getting over carbon will, nevertheless, be comparatively cheap, because it will get us over oil, too -- which will impoverish our enemies and save us a bundle at the Pentagon and the Department of Homeland Security. But uranium aside, the most economical substitute for oil is, in fact, electricity generated with coal. Cheap coal-fired electricity has been, is, and will continue to be a substitute for oil, or a substitute for natural gas, which can in turn substitute for oil. By sharply boosting the cost of coal electricity, the war on carbon will make us more dependent on oil, not less.

The first place where coal displaces oil is in the electric power plant itself. When oil prices spiked in the early 1980s, U.S. utilities quickly switched to other fuels, with coal leading the pack; the coal-fired plants now being built in China, India, and other developing countries are displacing diesel generators. More power plants burning coal to produce cheap electricity can also mean less natural gas used to generate electricity. And less used for industrial, commercial, and residential heating, welding, and chemical processing, as these users switch to electrically powered alternatives. The gas that's freed up this way can then substitute for diesel fuel in heavy trucks, delivery vehicles, and buses. And coal-fired electricity will eventually begin displacing gasoline, too, as soon as plug-in hybrid cars start recharging their batteries directly from the grid.

To top it all, using electricity generated in large part by coal to power our passenger cars would lower carbon emissions -- even in Indiana, which generates 75 percent of its electricity with coal. Big power plants are so much more efficient than the gasoline engines in our cars that a plug-in hybrid car running on electricity supplied by Indiana's current grid still ends up more carbon-frugal than comparable cars burning gasoline in a conventional engine under the hood. Old-guard energy types have been saying this for decades. In a major report released last March, the World Wildlife Fund finally concluded that they were right all along.

But true carbon zealots won't settle for modest reductions in carbon emissions when fat targets beckon. They see coal-fired electricity as the dragon to slay first. Huge, stationary sources can't run or hide, and the cost of doing without them doesn't get rung up in plain view at the gas pump. California, Pennsylvania, and other greener-than-thou states have made flatlining electricity consumption the linchpin of their war on carbon. That is the one certain way to halt the displacement of foreign oil by cheap, domestic electricity.

The oil-coal economics come down to this. Per unit of energy delivered, coal costs about one-fifth as much as oil -- but contains one-third more carbon. High carbon taxes (or tradable permits, or any other economic equivalent) sharply narrow the price gap between oil and the one fuel that can displace it worldwide, here and now. The oil nasties will celebrate the green war on carbon as enthusiastically as the coal industry celebrated the green war on uranium 30 years ago.

The other 5 billion are too poor to deny these economic realities. For them, the price to beat is 3-cent coal-fired electricity. China and India won't trade 3-cent coal for 15-cent wind or 30-cent solar. As for us, if we embrace those economically frivolous alternatives on our own, we will certainly end up doing more harm than good.

By pouring money into anything-but-carbon fuels, we will lower demand for carbon, making it even cheaper for the rest of the world to buy and burn. The rest will use cheaper energy to accelerate their own economic growth. Jobs will go where energy is cheap, just as they go where labor is cheap. Manufacturing and heavy industry require a great deal of energy, and in a global economy, no competitor can survive while paying substantially more for an essential input. The carbon police acknowledge the problem and talk vaguely of using tariffs and such to address it. But carbon is far too deeply embedded in the global economy, and materials, goods, and services move and intermingle far too freely, for the customs agents to track.

Consider your next Google search. As noted in a recent article in Harper's, "Google . . . and its rivals now head abroad for cheaper, often dirtier power." Google itself (the "don't be evil" company) is looking to set up one of its electrically voracious server farms at a site in Lithuania, "disingenuously described as being near a hydroelectric dam." But Lithuania's grid is 0.5 percent hydroelectric and 78 percent nuclear. Perhaps the company's next huge farm will be "near" the Three Gorges Dam in China, built to generate over three times as much power as our own Grand Coulee Dam in Washington State. China will be happy to play along, while it quietly plugs another coal plant into its grid a few pylons down the line. All the while, of course, Google will maintain its low-energy headquarters in California, a state that often boasts of the wise regulatory policies -- centered, one is told, on efficiency and conservation -- that have made it such a frugal energy user. But in fact, sky-high prices have played the key role, curbing internal demand and propelling the flight from California of power plants, heavy industries, chip fabs, server farms, and much else (see "California's Potemkin Environmentalism," Spring 2008).

So the suggestion that we can lift ourselves out of the economic doldrums by spending lavishly on exceptionally expensive new sources of energy is absurd. "Green jobs" means Americans paying other Americans to chase carbon while the rest of the world builds new power plants and factories. And the environmental consequences of outsourcing jobs, industries, and carbon to developing countries are beyond dispute. They use energy far less efficiently than we do, and they remain almost completely oblivious to environmental impacts, just as we were in our own first century of industrialization. A massive transfer of carbon, industry, and jobs from us to them will raise carbon emissions, not lower them.

The grand theory for how the developed world can unilaterally save the planet seems to run like this. We buy time for the planet by rapidly slashing our own emissions. We do so by developing carbon-free alternatives even cheaper than carbon. The rest of the world will then quickly adopt these alternatives, leaving most of its trillion barrels of oil and trillion tons of coal safely buried, most of the rain forests standing, and most of the planet's carbon-rich soil undisturbed. From end to end, however, this vision strains credulity.

Perhaps it's the recognition of that inconvenient truth that has made the anti-carbon rhetoric increasingly apocalyptic. Coal trains have been analogized to boxcars headed for Auschwitz. There is talk of the extinction of all humanity. But then, we have heard such things before. It is indeed quite routine, in environmental discourse, to frame choices as involving potentially infinite costs on the green side of the ledger. If they really are infinite, no reasonable person can quibble about spending mere billions, or even trillions, on the dollar side, to dodge the apocalyptic bullet.

Thirty years ago, the case against nuclear power was framed as the "Zero-Infinity Dilemma." The risks of a meltdown might be vanishingly small, but if it happened, the costs would be infinitely large, so we should forget about uranium. Computer models demonstrated that meltdowns were highly unlikely and that the costs of a meltdown, should one occur, would be manageable -- but greens scoffed: huge computer models couldn't be trusted. So we ended up burning much more coal. The software shoe is on the other foot now; the machines that said nukes wouldn't melt now say that the ice caps will. Warming skeptics scoff in turn, and can quite plausibly argue that a planet is harder to model than a nuclear reactor. But that's a detail. From a rhetorical perspective, any claim that the infinite, the apocalypse, or the Almighty supports your side of the argument shuts down all further discussion.

To judge by actions rather than words, however, few people and almost no national governments actually believe in the infinite rewards of exorcising carbon from economic life. Kyoto has hurt the anti-carbon mission far more than carbon zealots seem to grasp. It has proved only that with carbon, governments will say and sign anything -- and then do less than nothing. The United States should steer well clear of such treaties because they are unenforceable, routinely ignored, and therefore worthless.

If we're truly worried about carbon, we must instead approach it as if the emissions originated in an annual eruption of Mount Krakatoa. Don't try to persuade the volcano to sign a treaty promising to stop. Focus instead on what might be done to protect and promote the planet's carbon sinks -- the systems that suck carbon back out of the air and bury it. Green plants currently pump 15 to 20 times as much carbon out of the atmosphere as humanity releases into it -- that's the pump that put all that carbon underground in the first place, millions of years ago. At present, almost all of that plant-captured carbon is released back into the atmosphere within a year or so by animal consumers. North America, however, is currently sinking almost two-thirds of its carbon emissions back into prairies and forests that were originally leveled in the 1800s but are now recovering. For the next 50 years or so, we should focus on promoting better land use and reforestation worldwide. Beyond that, weather and the oceans naturally sink about one-fifth of total fossil-fuel emissions. We should also investigate large-scale options for accelerating the process of ocean sequestration.

Carbon zealots despise carbon-sinking schemes because, they insist, nobody can be sure that the sunk carbon will stay sunk. Yet everything they propose hinges on the assumption that carbon already sunk by nature in what are now hugely valuable deposits of oil and coal can be kept sunk by treaty and imaginary cheaper-than-carbon alternatives. This, yet again, gets things backward. We certainly know how to improve agriculture to protect soil, and how to grow new trees, and how to maintain existing forests, and we can almost certainly learn how to mummify carbon and bury it back in the earth or the depths of the oceans, in ways that neither man nor nature will disturb. It's keeping nature's black gold sequestered from humanity that's impossible.

If we do need to do something serious about carbon, the sequestration of carbon after it's burned is the one approach that accepts the growth of carbon emissions as an inescapable fact of the twenty-first century. And it's the one approach that the rest of the world can embrace, too, here and now, because it begins with improving land use, which can lead directly and quickly to greater prosperity. If, on the other hand, we persist in building green bridges to nowhere, we will make things worse, not better. Good intentions aren't enough. Turned into ineffectual action, they can cost the earth and accelerate its ruin at the same time.

My thoughts: What a great idea! Let's bankrupt the country, send all our jobs to other countries, destroy our economy, and raise our cost of living (inflation), all at the same time! We'll call it "cap and trade"!