The decision to tap the strategic petroleum reserve looks based much more on politics than economics. Obama needs to do "something" about the economy to look like he's doing his job. Yesterday the Federal Reserve said it was halting the escalation of monetary stimulus. There is no chance of further fiscal stimulus, and Republicans in Congress are talking about cutting back. So this is Obama's largely symbolic response. Thirty million gallons, barrels, the amount of U.S. reserves to be released, is a teeny portion of the reserve. It's also less than two days' average consumption in the United States. (Heh. 30m gallons REALLy would be teeny.)

Texas crude is down about $4 this morning, perhaps responding more to the symbolism of the administration intervening in the markets than in the substance of a little bit of extra oil for sale. Oil prices were already declining. This isn't what many people believe the petroleum reserve is for. It's widely thought of as being there for true emergencies such as war and severe supply shocks. This isn't as nakedly political as if reserves had bene tapped in summer 2012. Nevertheless, the political overtones could hurt Obama.

Posted by Jay Hancock at 11:56 AM | Permalink | Comments (7)
Categories: Energy
        

Falling prices for solar power won't just help the environment. They'll help the economy. A positive shock from genuinely low solar prices would have salutory economic repercussions across the world, especially in the U.S.

Even better, they could end dumb arguments about global warming. If carbon-free power becomes genuinely cheap, it makes sense to buy it whether or not you think climate-change is a global liberal conspiracy. If my hunch that global-warming skepticism correlates with libertarian tendencies is correct, all those climate-change skeptics should be thrilled with the way distributed solar generation will let them go off the grid. Even if they have to embrace a tree-hugger technology in the bargain. From the Financial Times:

US solar power will compete on price with conventional generation within three years without subsidy thanks to plummeting costs, industry leaders say.

In a breakthrough for renewable generation that will lessen the dependence on fossil fuels, the cost of solar power in California is near that of gas-fired plants at times of peak demand.

Solar power costs have dropped about 60 per cent in the past five years due to technological advances, manufacturing efficiency and squeezed profit margins created by overcapacity among suppliers.

UPDATE: Here is more evidence from Climate Progress. Stephen Lacey writes that "Solar is Ready Now: 'Ferocious Cost Reductions Make Solar PV Competitive" HT Stuart.

Posted by Jay Hancock at 11:57 AM | Permalink | Comments (4)
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Maryland Gov. Martin O'Malley has ordered an in-depth study of shale-gas drilling. The study is supposed to be complete in December, before the next regular session of the legislature. Maryland hasn't issued any shale-gas drilling permits and was unlikely to do so anytime soon. Nevertheless, the study pushes everything back at least until next year.

It's a good idea to investigate the damage and pollution that hydrofracking is causing. I argue that hydrofracking, under adequate regulation (there is none now), could be a lesser environmental evil given the alternatives of coal, oil etc. (Natural gas is pretty clean and emits much less carbon dioxide than coal.) The governor is correct to look at the downsides. At stake among other things are millions of dollars for Garrett County farmers with potential wells on their land. Below is O'Malley's press release.

Governor O’Malley Announces Study of Marcellus Shale Drilling Governor signs Executive Order establishing task force to include science, business, environmental advocacy, local representatives ANNAPOLIS, MD, (June 6, 2011) – Governor Martin O’Malley today signed an Executive Order (Order) establishing the Marcellus Shale Safe Drilling Initiative. The Order requires the Maryland Department of the Environment (MDE) and the Department of Natural Resources (DNR), in consultation with an advisory commission made up of a broad array of stakeholders, to undertake a study of drilling for natural gas from the Marcellus Shale in Western Maryland. “While we are mindful of the potential economic and energy benefits that could arise from the

Continue reading "O'Malley study to further delay shale-gas drilling" »

Posted by Jay Hancock at 2:21 PM | Permalink | Comments (1)
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A contrarian piece from the Chrisian Science Monitor on the danger of nuclear-plant failure:

Fukushima is not Chernobyl, scientists repeat, and even Chernobyl was not as deadly as popularly believed.

Dire warnings of radiation spreading from Japan's embattled Fukushima Daiichi nuclear power plant to deadly effect across Japan, or even to California, are likely overblown, they say.

It's not especially convincing. And this paragraph is especially lame:

While workers in protective jumpsuits and ominous three-pronged radiation warning symbols flashing across television screens evoke fear, it is important to keep in mind that we are exposed to radiation waves all the time, be it from mobile phones, medical devices, or mere sunlight.

Posted by Jay Hancock at 1:04 PM | Permalink | Comments (6)
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The New York Times, which is doing an outstanding job covering the crisis in Japan, has a highly critical piece on General Electric's Mark I containment system. NYT:

The warnings were stark and issued repeatedly as far back as 1972: If the cooling systems ever failed at a Mark 1 nuclear reactor, the primary containment vessel surrounding the reactor would probably burst as the fuel rods inside overheated. Dangerous radiation would spew into the environment.

Now, with one Mark 1 containment vessel damaged at the embattled Fukushima Daiichi nuclear plant and other vessels there under severe strain, the weaknesses of the design — developed in the 1960s by General Electric — could be contributing to the unfolding catastrophe.

"Could be" are the operative words. As the article points out, it's not clear whether any containment shell could survive what's going on in Japan. The primary disadvantage of the Mark I seems to be its relative thinness. Twenty-three U.S. reactors have the Mark I shell, the paper reports. The closest Mark 1 shells to Baltimore are on two reactors at Exelon's Peach Bottom plant, just over the Pennsylvania line on the Susquehanna River, about 50 miles away.

Of course, southeastern Pennsylvania is not part of an earthquake zone. You're no more in danger from Peach Bottom today than you were yesterday. The containment buildings at Constellation Energy's Calvert Cliffs reactors are not Mark I.

Posted by Jay Hancock at 6:54 PM | Permalink | Comments (3)
Categories: Energy
        

Events in Japan are shocking, impossible to fully comprehend in their magnitude. Inevitably The rethinking of the "nuclear renaissance" has already begun. The New York Times editorial page says it still supports nuclear power as one way to ameliorate carbon emissions and climate change, a "valuable tool." But, it says, "the public needs to know that it is a safe one."

The editorial also contains the best explanation I have read about what is happening inside the reactors.

From early reports, it appears that the troubled reactors survived the earthquake. Control rods shut down the nuclear fission reactions that generate power. But even after shutdown, there is residual heat that needs to be drawn off by cooling water pumped through the reactor core, and that’s where the trouble came.

The nuclear plant lost its main source of electric power to drive the pumps, and the tsunami knocked out the backup diesel generators that were supposed to drive the pumps in an emergency. That left only short-term battery power that is able to provide cooling water on a small scale but can’t drive the large pumps required for full-scale cooling.

Previous nuclear disasters resulted from human error or the failure of human appliances in the absence of natural trauma. We have always known that earthquakes and other natural forces posed a threat to nuclear systems. Now there is terrifying proof.

Posted by Jay Hancock at 9:16 AM | Permalink | Comments (1)
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Peak Oil enthusiasts went wild when an American diplomat was revealed in a Wikileaks cable to have reported that a Saudi oil executive said Saudi Arabia's oil reserves are exaggerated. Today in the NYT energy consultant Michael C. Lynch torpedoes the notion that this is the smoking gun in exposing Saudi oil depletion. Lynch:

Actually, it does nothing of the sort. The Saudi executive, Sadad al-Husseini, a former head of exploration for the Saudi oil monopoly Aramco, has been making such claims for years. Finding them repeated in a confidential cable is news only to those unfamiliar with the field.

Posted by Jay Hancock at 12:32 PM | Permalink | Comments (8)
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Forget the Obama speech, the Tea Party, house sales and interest rates. The most important news is the revolution in Tunisia and its echoes in nearby countries. Is this 1848 for repressive Arab regimes? It's early, but what's happening is long-predicted and potentially powerful.

There have been acts self-immolation like the one that ignited protests in Tunisia reported in Egypt, Algeria, Mauritania and even Saudi Arabia. It's surprising that oil prices haven't breached $100 a barrel. Energy and stock-market investors assume that Egypt and other regimes will clamp down hard and end the unrest, or that in any event it won't spread to the big oil producers. That's probably the way to bet, but markets haven't discounted any risk that they're wrong.

The diplomatic cables from U.S. missions in the region must be quite interesting this month. Without them, Juan Cole is indispensible reading.

Posted by Jay Hancock at 12:28 PM | Permalink | Comments (2)
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From AP:

Gulf oil rig explodes off US coast GRAND ISLE, Louisiana (AP) — An offshore oil rig has exploded in the Gulf of Mexico, west of the site of the April blast that caused the massive oil spill. Coast Guard Petty Officer Casey Ranel says the blast was reported by a commercial helicopter company about 9:30 a.m. CDT (1430 GMT) Thursday. Seven helicopters, two airplanes and four boats are en route to the site, about 80 miles (130 kilometers) south of Vermilion Bay along the central Louisiana coast. Ranel says it hasn't been determined whether the structure is a production platform or a drilling rig or whether workers were aboard. Ranel says smoke was reported but it is unclear whether the rig is still burning.

Posted by Jay Hancock at 11:44 AM | Permalink | Comments (2)
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Bipartisan leadership of the House Energy Committee sent a letter to the Environmental Protection Agency yesterday asking what the agency will do to do ensure that richer ethanol blends aren't allowed at gas stations without adequate study. Good to see more pushback from responsible members of Congress after the pressure to approve E15 from the Midwestern delegations. An excerpt:

In particular, EPA is currently considering a petition from ethanol producers to allow the sale of gasoline that contains up to 15 percent ethanol (E15). As you consider this petition, we believe it is important that you protect the investments the American people have made in their cars, trucks, boats, lawn mowers, and other engines and equipment, and the investments that many small business owners have made in their gas stations. While E15 may work well in some types of vehicles, preliminary information raises significant questions about whether, in other types of vehicles or engines, E15 may cause durability or operability problems, or increased air pollution.

The whole letter is below the fold.

Continue reading "House Energy Committee: Go slow on ethanol boost" »

Posted by Jay Hancock at 5:33 AM | Permalink | Comments (1)
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One of these days I'm going to get around to writing a column on the thoughtful, realistic libertarians and conservatives who realize that, not only does spending have to be cut to keep the country on a somewhat stable fiscal course, but taxes have to rise. There are many of them. For now though we'll feature the whip-smart and subtle libertarian Tyler Cowen, who not only understands that taxes will probably have to rise but also realizes that climate change and global warming is a big, scary problem that demands action.

Cowen responds to Monday's strange Ross Douthat column and subsequent blogging, in which one of the NYT's token conservative columnists admits that global warming is real (yay) but then suggests we shouldn't do much about it.

Here's Cowen favoring a carbon tax:

Even if we cut government spending a lot, some taxes will have to go up. This seems like the least bad tax to raise or create, since it has some chance of producing a better outcome...

Given that American policies are contributing to a (probabilistic) climate-based "attack" on Bangladesh and numerous other countries [through climate-driven flooding -- JH], there is a deonlogical case for trying to stop that attack. It is a libertarian rights violation issue, driven by all of us in our role as consumers....

I'll also stress -- again -- that a carbon tax needs to be combined with the strong deregulation of the energy sector, and the weakening of NIMBY, in particular for wind power.

p.s. I hear less often these days about the "global cooling trend."

Posted by Jay Hancock at 8:25 AM | Permalink | Comments (2)
Categories: Energy
        

A broad coaltion is pushing back against the ethanol industry's attempt to force through an increase in gasoline ethanol content from 10 percent to 15 percent. (See the latest anti-ethanol Hancock column here.)

After what looked like an initial lull, environmentalists, small-engine makers etc. are aggressively taking out ads and otherwise putting out the message that E15 blends haven't been tested nearly enough. It's everybody from the American Frozen Food Council to Friends of the Earth to the Engine Manufacturers Association to the National Council of Chain Restaurants to the Petroleum Marketers Association. (Gas stations worry about what E15 might do to their underground tanks and their liability for environmental damage.) Their Web site is here.

Posted by Jay Hancock at 6:03 AM | Permalink | Comments (4)
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The ethanol lobby is out with this:

America’s Number One Smartphone Locates America’s Number One Alternative Fuel

(July 15, 2010) Washington - E85 fuel? There’s an app for that. The Renewable Fuels Association (RFA) is proud to announce the new iPhone application used to help flex-fuel vehicle (FFV) drivers access the latest, most accurately geo-coded E85 stations throughout the United States. Developed by Digital Laundry, a Customer Experience Consultancy, this application will also work on the iTouch and iPad. The RFA will sponsor a free download for the first 500 users.

Now somebody needs an app for E0 -- pure, unadulterated fossil energy. Everywhere in central Maryland sells E10 because of summertime pollution regulations. I hear there are a few, sought-after places on the Eastern Shore that sell zero-ethanol gas.

Posted by Jay Hancock at 10:14 AM | Permalink | Comments (9)
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Big Picture by Barry Ritholtz is one of my favorite financial/economics blogs, along with Marginal Revolution. Ritholtz is smart, provocative, informed and responds to evidence and logic, not some ideological cookbook. Today he repeats an earlier theme: Gas-guzzling Americans are much to blame for the BP oil spill. Our insatiable demand for petrol helped push oil companies to the edge of technology and safety, and that led to the disaster. Ritholtz:

[BP was] trying to fulfill our own reckless and irresponsible demands for cheap and plentiful energy. Anyone who is an energy consumer cannot ignore their contribution to what happened.

We can be a bit hypocritical in the US of A. We have $50k earners who bought $750k houses, then complained about Goldman Sachs; Walmart shoppers who buy 12 packs of tighty whiteys for $2.99 — then complains about job losses. Or the non voters (the majority of us) who complain about Congress. We energy consumers ought to realize that it is our demand that led to drilling in the GoM.

Its sure is much easier to blame BP, than to accept responsibility for our own role in the spill…

Today he refers to a Bloomberg poll in which a large majority opposed a ban on deepwater drilling. "Almost three-fourths, or 73 percent, say a ban is unnecessary, calling the worst oil spill in U.S. history a 'freak accident,' according to a Bloomberg National Poll," the Bloomberg story says. "Asked who was most to blame for the spill, 44 percent say BP, and 19 percent say lax federal regulations and oversight. One in five say no one is to blame." Responds Barry:

Think about that: 20% of those polled think this is nobody’s fault. So much for the era of personal responsibility . . .

Well, it was a rare accident, an anomaly. And lax federal oversight was certainly a factor. But America's perpetual and petulant demands for cheap oil are the fundamental cause. Would a $2-a-gallon tax on gas, a "Pigou tax" of the kind favored by Ritholtz (and Greg Mankiw, who was head of George W. Bush's Council of Economic Advisers) have prevented the BP catastrophe? That is impossible to say.

Posted by Jay Hancock at 8:36 AM | Permalink | Comments (8)
Categories: Energy
        

In Sunday's anti-ethanol column, I noted that 15-percent ethanol blends could be especially harmful to small engines such as those in lawnmowers. Publishing in newspaper on the edge of the Chesapeake Bay, I should have mentioned marine engines, which are said to have the same vulnerability. Reader Pete emails:

Thanks for your excellent article on ethanol. E10 has ruined many marine engines and fuel systems, and E15 would be a disaster. The marine industry is a huge asset to Maryland, so you might want to check out the feelings of this sector too.

Posted by Jay Hancock at 11:10 AM | Permalink | Comments (1)
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Matthew Simmons is very unlikely to win his $10,000 bet with NYT columnist John Tierney that the average price of oil in 2010 would be more than $200 a barrel. Of course that was true before 2010 even started, but it's quadruply true now that 2010 is half-over and oil is $73. Simmons needs oil to go well over $300 for the rest of the year.

At the end of 2008 Simmons was still confident, expecting a sharp, "V-shaped" economic recovery that would shatter the record prices set for oil that year. “We’re going to create a ’V’ that’s very dangerous," he told me. “We could pierce through the old price high like a hot knife through butter in a very short period of time.”

Haven't talked to him lately, but it's hard to imagine him being that confident now.

Posted by Jay Hancock at 8:42 AM | Permalink | Comments (1)
Categories: Energy
        

Detailed piece from the Worldwatch Institute on the natural gas revolution, which stands to keep natural-gas prices low for years and, if managed correctly, replace much of the U.S. oil economy with natural gas. Here's my recent column on the natural-gas boom. Here are some excerpts from the Worldwatch report:

The rise of gas stands in sharp contrast to the three-decade decline in U.S. oil production. Since 1990, total U.S. gas production has increased 20 percent while oil production fell 33 percent.Today, the United States produces more than twice as much gas as it does oil, and that gap will almost certainly widen in the coming years...

A National Research Council study published in 2009 estimated that the environmental damages associated with electricity from natural gas are 95 percent lower than from coal...

Growing concern about climate change in recent years has also worked in favor of natural gas. Gas contains 25 percent less carbon than oil and half as much carbon as coal. Planned and proposed federal and state actions to curb greenhouse gas emissions—from stricter requirements for emissions control technology to renewable or clean energy portfolio standards to a cap on carbon—all expose oil and coal investments to much higher risk than natural gas.

Posted by Jay Hancock at 8:25 AM | Permalink | Comments (1)
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The generation of electricity by the use of wind turbines is growing rapidly, as indicated by Tim Wheeler's story on the Massachusetts Cape Wind project and what it might mean for wind projects off the coast of Maryland.

As the graph below shows, U.S. wind generation capacity grew from less than 2,000 megawatts in 2003 to 8,000 in 2008. (These figures are from the American Wind Energy Association.) Figures for wind capacity vary by source, perhaps because the notion of "capacity" for generators that depend on highly variable and uncertain wind currents is a moving target. But in any case the trend is clear. The chart below will have much higher bars for 2009 and 2010 once the data are plugged in.

But whatever the figures, wind energy is still relatively scarce. Total U.S. generation capacity is about 1 million megawatts. And wind power is still very expensive, although the cost is coming down thanks to the economies that usually accrue to maturing technology, scaling-up of production and so forth. A large factor driving the construction and use of wind capacity is large government subsidies. The Union of Concerned Scientists gives a good summary.

Posted by Jay Hancock at 8:55 AM | Permalink | Comments (4)
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Here are Mayland Public Television's Jeff Salkin and me talking about BP Solar's recent decision to stop all manufacuturing of photovoltaic hardware in Frederick.

Posted by Jay Hancock at 1:47 PM | Permalink | Comments (0)
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Not only is coal bad for the environment and the people above ground, it's terrible for the folks who dig it out of the ground. The tragedy at Massey Energy's Upper Big Branch mine sadly reminds us of this. If you're a Baltimore Gas & Electric customer, you're probably burning some Massey coal every time you turn on a light.

To say Massey has a "spotty" record on safety, to quote the Associated Press, is to put it mildly. Just in the last year the company has been fined more than $300,000 for violations at Upper Big Branch of protocols designed to prevent this kind of disaster. Violations include "failing to follow the plan, allowing combustible coal dust to pile up and having improper firefighting equipment," AP says. In late 2008 Massey admitted to criminal safety violations in an accident that killed two at its Aracoma mine. Failures in that incident included not conducting safety drills and faking a record book to make it look like the drills occurred.

But coal mining is dangerous even when safety procedures are followed. And Massey is the company that blows up mountaintops to get coal. Burnt coal spews poisonous sulfur dioxide and mercury into the air.

Some readers objected to Sunday's column on the benefits of newly accessible natural gas from Appalachian shale formations, which might allow us to burn less coal. Yes, there are environmental and safety concerns associated with shale gas, as people pointed out. But compared with those attached to coal, they seem minor. And I don't know of anybody who has died extracting shale gas.

UPDATE: To be clear: This is not meant as disrespect to those who have been devasted by the tragedy. Our thoughts ought to be with the families of those who died and of those who are missing. And to promote shale gas is not really anti jobs, either. The beauty of shale gas is that it's creating tens of thousands of jobs in many of the same regions where coal is mined. And it doesn't involve buying foreign oil. And it's a lot safer.

Posted by Jay Hancock at 8:42 AM | Permalink | Comments (25)
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Expensive gas substantially increases the price of fuel-efficient used cars, as people become increasingly willing to pay more for a vehicle now to save on fuel costs later. This is what economic theory predicts. For every $1-per-gallon increase in the cost of gas, the price for the most-efficient 25 percent of used cars goes up $2839, on average, finds a new paper at the National Bureau of Economic Research.

But the pattern is far less striking for new cars. Demand for fuel-sipping cars caused by a $1 gas increase drives up the price of the 25 percent most fuel-efficient new cars by only 3 percent. The difference, the authors find, is that the supply of fuel-efficient new cars is much more elastic than the supply of efficient used cars. When gas prices soar manufacturers crank up the production of efficient vehicles. But the supply of used efficient cars, dependent on previous production patterns, is more or less fixed.

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (1)
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Nuclear energy (from already-built and -depreciated reactors) is already cheaper than energy from fossil fuels. A tax on carbon -- directly or indirectly through a cap and trade scheme -- and nuclear energy gets even more competitive. That's behind today's statement by Constellation Energy CEO Mayo Shattuck favoring an agreement in Copenhagen to cut carbon dioxide emissions. From his statement:

There appears to be a global consensus that the world needs to cut its emissions in half by 2050, compared to today’s levels,” said Shattuck. “At Constellation Energy, we are particularly focused on the technological and industrial transformation that will be necessary to meet that objective. Nuclear energy currently provides about 14 percent of the globe’s commercial electricity and that number needs to increase substantially if we are to meet the 2050 long-term goal.

Posted by Jay Hancock at 10:35 AM | Permalink | Comments (3)
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The mystery of the paralyzed police cars remains. Yes, I realize this undercuts my speculation that a world awash in ethanol is prompting people to spike the gas supply with excess corn likker.

Contradicting statements by Baltimore officials, the supplier says gasoline blamed for crippling much of the city's police fleet last week did not contain excess amounts of ethanol. Norfolk, Va.-based IsoBunkers conducted its own tests and found the gas was 10 percent ethanol -- just what it was supposed to be, company President Charlie Joanedis told me on the phone.

"They obviously had a problem with a certain number of their vehicles, but we still don't know what caused the problem," Joanedis said. "We took a sample out of the tank at the filling station and sent it to a petroleum inspection company. Everything they tested was on spec."

A week ago more than 200 police cars had problems after being filled with IsoBunkers gas. As much as a third of Baltimore's fleet was briefly out of action. City officials tested the fuel and blamed ethanol, which is added by law to reduce pollution and is also the subject of a huge federal subsidy directed toward corn farmers and refiners.

IsoBunkers got the gas from a Baltimore marine terminal, where the ethanol was added as it went into the truck, Joanedis said. From there the truck went straight to the city service station, he said.

"We want to find the answer," he said, just like the city. "We didn't make the gas. If our supplier gave us bad gas I want to know about it and I want to go back to them for recourse."

Joanedis wondered why only police cars and not other city vehicles seemed to be affected. One theory, which he admitted was speculative: Perhaps the Chevies were unusually sensitive to normal seasonal changes in the gas formula that take place at the end of September.

Given IsoBunkers' results, the city will continue its inquiry, said Khalil Zaied, director of general services.

"We're not done yet," Zaied said. "If the outcome of their work came up agreeing with ours, we would probably stop investigating."

UPDATE: This is a response from Matt Hartwig at the Renewable Fuels Association. He responded to my original post last week. I meant to include it with this post & forgot. Matt sez:

This issue of improper blending by some petroleum marketers is serious and our industry does not support selling ethanol blends in excess of 10% unless they are properly labeled for use in flex fuel vehicles designed to use higher level ethanol blends. However, you seem to blame the fuel itself for finding its way into gasoline in higher than recommended levels rather than the people doing the blending.

When used properly, ethanol has proven a very effective fuel additive, and in the case of E85, a gasoline replacement. In fact, the entire Indy Car Series uses pure ethanol to fuel its race cars, as do some drivers in Brazil.

While we certainly have concerns about your mischaracterization of the environmental and energy securities values of ethanol, this is an issue on which we both can agree: ethanol, like all fuel additives, should be used within the bounds of the law.

Matt Hartwig

Director of Public Affairs

Renewable Fuels Association

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (16)
Categories: Energy