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June 22, 2007
Gas and Hot Air
We need a balanced energy policy. The new Senate bill isn't.
Yesterday the Senate passed an energy bill mandating stricter fuel economy standards for autos and more production of ethanol. As someone who grumbles every time I drive past a gas pump (much less when I shell out $50 to fill my tank), who worries that U.S. dependence on oil from overseas is not in the national interest, who loves the outdoors, and who believes that human beings are to be good stewards of God's creation, I've got to say that the tank is half-empty on this thing.
The Associated Press notes:
"The legislation would require ethanol production for motor fuels to grow to at least 36 billion gallons a year by 2022, a sevenfold increase over the amount of ethanol processed last year.
"And it calls for boosting auto fuel economy to a fleet average of 35 miles per gallon by 2020, a 40 percent increase over current requirements for cars, SUVs, vans and pickup trucks.
"The legislation also calls for:
"Price gouging provisions that make it unlawful to charge an 'unconscionably excessive' price for oil products, including gasoline. It also gives the federal government new authority to investigate oil industry market manipulation."
I'm no expert on these issues, but it seems to me we have a long way to go--Democrats and Republicans--before we have a realistic energy policy. A few random thoughts:
-- Why is there no talk of increasing our national commitment to nuclear power, which, compared to foreign oil, is clean, efficient, and carries no risk of stirring up the bin Ladens of the world?
-- Do the senators know that our already massive commitment to producing ethanol for gasoline contributes to inflation for the many food products made with corn, and that the resulting corn shortages hurt the poor in the developing world?
-- Why is there no discussion of increasing the number of oil refineries in the U.S. as a way to increase the supply of available gasoline? The system that we now have is stretched to the limit and is extremely vulnerable to events that swiftly drive up the price of oil, such as refinery fires.
-- Why don't legislators ever talk about giving back some of their own record "windfall profits" from taxes, which go up proportionately with the cost of a gallon of gas?
-- Why don't politicians come up with new and creative ways to encourage mass transit? Where I live and want to go there are virtually no transportation options except for the automobile.
-- While increased auto fuel economy would be helpful (at least for those with the means to buy new cars), are they willing to acknowledge that this will inevitably lead to more highway deaths as people drive smaller vehicles?
Yes, go after the oil companies if they are breaking the law. But remember that without the profit incentive, there would be no oil wells. We can't simply respond to the demand for oil. Let's also work on the supply side. Allow the laws of supply and demand to work. If demand is sufficient, new supplies should eventually drive down the price of oil.
Unless we simply don't want people to drive automobiles at all. For senators who get chauffered everywhere, that may not be a problem. For the rest of us, however, affordable gasoline is a moral issue.
Comments
I may be cynical, but I can't help but think the ethanol emphasis is at the behest of agribusiness and is a distraction from the real issue, which is how to encourage conservation of fossil-fuels. This bill could have put more focus on public transportation (as noted), car pool lanes and other ride-sharing incentives, regional planning, and green-technology research. The higher CAFE standards contribute are a step in that direction. As far as increased automobile deaths, small cars don't cause accidents, people do.
Posted By: Patrick | June 22, 2007 1:17 PM
Yes, ethanol is protected--Brazil can import it, like sugar, for half of what we pay for it here, but the agricultural interests have successfully lobbied to protect us from lower prices for ethanol. These savings would create more jobs and potentially higher wages in different industries, and households could improve their standards of living.
There is also a distortion from corn subsidies because the Iowa presidential caucuses start the election season, and every candidate wants to make a big spash, and so must pander to the corn intrests in that state. And ethanol is part of that distortive equation.
I am an advocate of an energy tax, BUT ONLY IF IT COMES WITH REDUCTIONS IN INCOME TAX. Many "good" and "smart" people support the energy tax, but without offsetting reductions in income tax, jobs will be destroyed and household living standards reduced.
Posted By: caveat bettor | June 22, 2007 1:31 PM
I agree and disagree at some points Stan.
1.) Nuclear Power, while efficient, poses its own problems including safety and disposal of waste. But as fossil fuels dry up, there may be no alternative.
2.) I completely agree that ethanol is not a viable long term answer for the same reasons you cited. It is possible with new produciton techniques pioneered in Brazil it may be come more efficient. Also, if it turns out switch grass can be utilized, we wouldn't tie up food production with fuel.
3.) I can't speak to the refinery question. It is a good one to ask.
4.) The "windfall" from taxes has not put the federal budget back in the black. At the same time, oil companies are making the biggest profit in human history. There is a difference.
5.) I absolutely agree with more mass transit. If we really want people to use public transit, it needs to be of quality. People will sacrifice dollars in their pocket for the convience of their own car. To counter this, mass transit needs to become more clean, safe and reliable".
6.) Don't larger cars pose threats for other drivers? While the occupant of their humvee might be baracaded with tons of steel, those around them are at more risk at the SUV's larger and more dangerous momentum. Plus, since many SUV's have higher centers of gravity--it is they who pose more risk to drivers than smaller more fuel effecient cars.
You're absolutely right that more attention needs to good workable solutions beyond talking points. The implicaitons of energy policy have effects for both economy and enviornment.
Posted By: Matt K | June 22, 2007 1:53 PM
The use of corn to make ethanol is apparently about break even (or 50% improvement--and I don't understand why there is no definitive data published, which makes me suspect break even) as far as liquid fuel goes. It takes about an equal amount of hydrocarbon based energy to produce the ethanol. This means that ethanol (from corn) has little or no effect at all on our petroleum energy needs but it does replace the oxygen requirements in our fuel mix (formerly provided by the relatively non-biodegradable and foul tasting MTBE) that are supposed to help us reduce the pollutants from automobiles.
Brazil makes the ethanol from sugar cane and reports a factor of 7-10 times more fuel made than consumed. I tend to believe these data since they are not buying much oil. The plants take cut cane and remove the juice which is fermented. The cane is burned to provide the energy for the production and some plants even export a little electricity in addition to the ethanol. Why we are not doing this in the sourthern part of our country (Louisiana/Texas) is another puzzle. Sugar cane obviously makes more fermentable material than corn per acre.
The tax windfall is, I think, largely non-existant. Most of the gas taxes are set up on a per gallon basis so the price per gallon is not relevant. The oil companies should be paying high taxes but these changes are a drop in our tax "swimming pool."
Any refinery construction (new site) faces huge resistance from the neighbors and environmental organizations--and they generally carry the day. We have been incrementally expanding refineries for years. Incremental expansions generally keep us in the >85% of capacity operation which reduces inventory (large inventories are a huge drag on profits because they reduce the prices). The "spot market" basically is setting the price for gas, not the cost of production and the spot market is very sensitive to everything these days. A snake got into an electrical substation at a local refinery and gasoline prices spiked several cents even though no production was actually lost. Elimination of oil company profits apparently would cut the price of gasoline by (at most) 10% so while profits are higher than deserved, they are not the basis of our high costs.
It goes back to the price of crude oil. OPEC has finally become somewhat of a "real cartel." This has been mostly through mis-management of their production capacity rather than through real "cartel like" behaviors--but none the less they have managed to reduce their production capability and keep the price up for several years. Of course the US consumption of gasoline and the behavior of the US government has not helped with stabilization of crude prices at levels that in any way relate to production costs.
What I saw in the oil shortages of the 1970's (my county south of Houston suffered real shortages of fuel) is that only a shortage can really change our behaviors. There is nothing like waiting in line for 8 hours to get a fill up so you would be sure to have "get out of town fuel if a hurricane comes" to get your head straight on car pooling and getting errands organized.
Bennett
Posted By: Bennett Willis | June 25, 2007 1:09 PM
So many things that we complain about would be fixed with a 100% gas tax--there would be loads of money for mass transit, local business would flourish, big box stores would be strangled by their own supply chains. The auto makers would flock to 50mpg technology, suburban sprawl would stop. . .
Posted By: Neil Gussman | June 25, 2007 5:01 PM
The best way to allow freedom and prosperity to flourish is to (gulp!) use the organic compounds of oil and coal we find naturally in soil and water. Using our food supply or legislating some mirage of alternative energy from the utopians is already being seen through high prices, ethanol shortages, and giving credance to the well connected special interest groups. I'll take Yankee ingenuity any day and not apologize for it, as will millions upon millions of other Americans.
Posted By: Bruce | June 25, 2007 6:37 PM
Neil Gussman, why stop at 100%? Just go to $1 million per gallon, and our national debt is history!
Posted By: caveat bettor | June 26, 2007 9:14 PM
Good discussion, interesting points, but bad conclusion. Affordable gas prices are not a "moral issue." Egregious American consumer patterns are. If we life a simpler lifestyle, gas problems go away by themselves. But we are too attached to our so-called middle class way of life, which mocks the poverty of the rest of the world. Iran rioted over a 20% gas price increase, when the level was raised to 84 cents. Let's find some real issues to wail over.
Posted By: Jayson | June 27, 2007 3:40 PM
And what exactly does this have to do with Jesus Christ?
Posted By: david A. Le | June 28, 2007 1:11 AM
David, the fifth sentence in Jayson's post has everything to do with Jesus Christ.
Posted By: Patrick | June 28, 2007 10:09 AM
Stan is correct that the energy bill does not go far enough and Bennett gives a good overview of some of the complexities surrounding the issue. I also agree with those who don't view gas prices as a moral issue; although I recognize that high gas prices hit the poor disproportionately. Energy policy is clearly an issue which should engage Christians. We are called to be stewards of the earth. Energy forms the backbone of our economy and access to commercial energy is one of the key factors to significantly reducing structural poverty. That said, we use different kinds of energy sources for different purposes. Nuclear energy is primarily used to generate electricity. It would replace coal not petroleum which the US has an ample supply of although there are significant pollution issues surrounding coal global warming not withstanding. There are nuclear technologies available which significantly reduce the risks and the wastes which should be explored. Petroleum as an energy source is primarily used for transportation. Ethanol especially corn ethanol is not a silver bullet for the US. We currently produce more ethanol than Brazil and we cannot meet our needs. In order for our energy policy to lead to energy security, it will need to encompass a number of different approaches including efficiency & conservation, nuclear,new technologies such as methane, fuel cell technology, renewable energies. Reaching energy security will require Americans to sacrifice but it doesn't need to a devastating sacrifice. Our leaders will need to actually lead the people and communicate why this is important. Americans will also need to give up their NIMBY and BANANA attitudes so our electricity grid can updated and expanded, refineries built,and new modern nuclear power facilities built. We also need to realize that if the whole world lived like us we would need 3 earths; so unless we want have resource wars will need to figure out how to get our consumerism in check. By the way in the 70's and 80's consumerism as a sin was covered in a number of Christian living books.
Posted By: Julia Pfaff | June 28, 2007 12:57 PM