Energy Archives

Lessons in "The Market"

Learned by Josh Marshall, lefty blogger at Talking Points Memo.  First, he starts out the post being inspired.

I happened yesterday on this article in The Atlantic by Jonathan Rauch about the Chevy Volt. GM is throwing tons of resources into a breakneck schedule to produce an electric powered car that is dramatically more advanced than the hybrids currently on the market. The question is whether they can have the technology developed in time for release date.

It’s sort of inspiring to see an American company try something so ambitious.

American companies try ambitious things all the time.  Energy companies might try this more often, if there wasn’t the ever-present concern that their return-on-investment might get sucked away by the government as "windfall profit".  The freedom to innovate while keeping the fruits of your labor, and responding to needs by the consumer, is a feature of what we call "the market".  Familiarizing oneself with the concept would be very helpful in the current economic climate. 

Josh then finds in himself a newfound concern about alternative energy sources.  Despite his upbringing, he says, he was never really focused on it much.

But that’s changed over the last several months: most of the key issues that face us today, from environmental issues proper, to our geostrategic position vs. other great powers and the future of our economy, all turn on our reliance on fossil fuels. Not just ‘foreign’ ones, all of them.

And what has likely contributed heavily to this rediscovered concern?  How about the gas prices that have been rising quickly over "the last several month"?  But that’s nothing to be ashamed of.  The price of an item is an amazing bit of information that gives suppliers knowledge of short-term future demand, gives consumers an incentive to buy more or less of a product, and, depending on the price itself, gives innovators an incentive to come up with new and better way to supply the need.  This is a feature of what we call "the market".  (Detect a pattern here?)

This is instead of nationalizing the particular industry or forcing the price to an artificially lower value which could easily bring about shortages (just ask Venezuelans) and stifle innovation.  I  mean, a new source of a product just may cost a bit more as it’s getting ramped up, and forcing existing prices lower make consumers less likely to make the transition, unless you force them to do so.  The keyword here, which must be used over and over again, is "force".  And when your government is forcing all of your economic decisions on you, this is a feature of what we call "socialism". 

Would Marshall know the free market it if jumped out and bit him?  I think it just did, but according to the title of his post, he’s "shocked, shocked".  Likely that’s an intentional pun on the Chevy Volt subject, but his surprise at seeing American innovation, and his lack of understanding of his changing attitudes tells me that he apparently doesn’t recognize the source of those teeth marks.

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Ten Questions for Senators

That is, the ones who are grilling oil executives.  Bruce McQuain at QandO notes questions suggested by the Institute for Energy Research.  The first 3:

1. Do you understand the fundamental economic principal of supply and demand for commodities pricing in the oil market?

2. Oil is a global commodity, bought and sold on the world market. Given that the nine largest private oil companies hold less than 5% of the entire world’s proven oil reserves, isn’t it more likely that the law of supply and demand is “manipulating” current prices than the five corporations represented at your witness table?

3. As a U.S. Senator, you have control over oil production on U.S. federal government lands. Taxpayers own these lands and the energy that lies beneath them, but 97% of the federal OCS and 94% of onshore government lands are not being used. Are you willing to help increase the world’s supply of oil – and thus reduce the price of oil and gasoline – by allowing more U.S. energy to be produced from these lands?

Read the whole thing.

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They Get It

A group of evangelical Christians is trying to get the point across that the science isn’t settled on global warming, and indeed that the "cure" may be worse than the disease.

While it may seem like everyone believes in global warming and the impending catastrophe it will bring, a group of conservative Christians countered that message Thursday by launching a national campaign to gather one million signatures for a statement that says Christians must not believe in all the hype about global warming.

The “We Get It!” declaration, which currently has nearly 100 signers, is backed by prominent Christians including Tony Perkins of Family Research Council, Dr. James Dobson of Focus on the Family, award-winning radio host Janet Parshall, and U.S. Senator James Inhofe of Oklahoma.

What supporters of the statement seek is to inform Christians about the biblical perspective on the environment and the poor, and to encourage them to look at the hard evidence, which they say does not support the devastating degree of climate change claimed by mainstream society.

The point is that there’s more to global warming than carbon offsets and fluorescent light bulbs.  There are people to be considered.

[Dr. Barrett Duke, vice president of the Southern Baptist Convention’s Ethics and Religious Liberty Commission] called it an “unbiblical” response to make policies based on unsettled data that would push the poor further into starvation and poverty.

But the SBC leader made sure to clarify that he and other signers are not “anti-earth.”

“It isn’t as though we think that the earth is here to be abused. It is not,” he said. “It is God’s creation and we have a responsibility to care for it and to do all that we can to help it be the place that God wants it to be.”

Yet at the same time, policies should not be made to sacrifice the needs of the most needy in order to “reach some kind of standard” that may not even be reachable, Duke argued.

“If humans are not causing the problem then it doesn’t matter how much we reduce CO2 emissions. It won’t make any difference,” he said.

Dr. E. Calvin Beisner, founder and spokesman for the Cornwall Alliance for the Stewardship of Creation, brought the point home. 

“The number of premature deaths, number of diseases, and the harm to the human economy that can be predicted from the policies used to fight the warming” is more destructive than even if all the IPCC (Intergovernmental Panel on Climate Change)-predicted global warming-caused disasters came true, Beisner said emotionally to The Christian Post.

“You try to cap emissions and you kill more people than die if you don’t cap emissions,” Beisner said, referring to those who would die from lack of access to energy, higher food prices, and the halt in their country’s economic development.

“We will have killed people,” he added solemnly. “We care about this issue the same way why we care about abortion. It kills people.”

This is explained in the Cornwall Alliance’s declaration itself.

Public policies to combat exaggerated risks can dangerously delay or reverse the economic development necessary to improve not only human life but also human stewardship of the environment. The poor, who are most often citizens of developing nations, are often forced to suffer longer in poverty with its attendant high rates of malnutrition, disease, and mortality; as a consequence, they are often the most injured by such misguided, though well-intended, policies.

The old joke goes that, finding out that the world was to end tomorrow, the mainstream media would blare out headlines, "WORLD ENDS TOMORROW – POOR, MINORITIES HARDEST HIT!"  Interestingly, in this case, and in the case of so many causes that the press is on board with, that effect is only examined long after they’ve done their persuading, if at all. 

The idea that Christians don’t worry themselves about science is, of course, completely wrong.  Indeed, what needs to be done in the case of global warming is an examination, not just of the science of climate and our globe’s history, but of the proposed solutions and how they relate to our charge as children of God.

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Free Market Update

It still works.

News flash: Skyrocketing gas prices are driving historic shifts in the habits of car buyers, pushing them away from thirsty pickups and full-size SUVs and into four-cylinder compacts.

What a surprise.

Might all the smart people behind tougher federal Corporate Average Fuel Economy rules be watching? If they are, do they understand what we are witnessing? Namely, this: It’s not arbitrary mileage goals, mostly unhinged from engineering reality and focused on a handful of companies, that are dramatically changing the behavior of the driving public. It’s the price of fuel, stupid.

Cars outsold trucks in April for the first time in a generation, according to industry figures compiled by Autodata Corp., and four-cylinder powered cars outsold those with six cylinders under the hood. The shift, clearly a blow to truck-dependent Detroit automakers scrambling to dig out of their deep hole, is confirmation that market forces are a swifter disciplinarian than the collective wisdom of Congress, career bureaucrats and the environmental lobby.

Daniel Howes continues to discuss how the market, better than any government program, quick fix or temper tantrum, has made fuel economy a big issue with consumers. 

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Multiple Economic Personality Disorder

While I don’t like paying $50 to fill my gas tank, every time I do I remind myself that this surge in oil prices is helping along the search for an alternative energy source.  When oil prices are low, there is little incentive to do R&D, especially if the cost of the new source comes in much higher.  But as the price of oil climbs, the incentive to innovate becomes stronger, and leads us closer to a solution.

But there are some that, while they proclaim they want the latter, also complain about the former.  Unfortunately, all 3 of the major candidates for President are among that crowd.

This tiff over gas and oil taxes only highlights the intellectual policy confusion – or perhaps we should say cynicism – of our politicians. They want lower prices but don’t want more production to increase supply. They want oil "independence" but they’ve declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?

Higher prices are doing what they’re supposed to do; encouraging conservation.  This is a good thing.  I know it’s hard to understand when you’re watching the numbers fly up on the pump, but in the bigger scheme of things, it can be an aid to discovering the next big, clean energy source.  I have in the past covered those who are antagonistic to clean, renewable energy (oh please, read those links; just dripping with irony), but these politicians — these allegedly smart people who supposedly see the big picture — should be the ones educating the public on this issue, not pandering and just rounding up the usual suspects.

Prices convey information.  They affect demand.  Artificially manipulating them doesn’t do any long-term good.

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The Hydrocarbon Mother Lode

Scientists have discovered a hydrocarbon reserve larger than all of our current oil and gas reserves. Hydrocarbons, as you know, are those dregs of ancient dinosaurs and plants that we mine for energy. So then, where is this incredible field?

Oh, about 750 million miles away.

Before we get too excited here, let’s remember. There’s still an energy problem. Global warming, too. Nobody’s going to be importing oil substitutes from Titan anytime soon.

That said, data from the Cassini probe orbiting Saturn has shown that the ringed planet’s moon has “hundreds of times more liquid hydrocarbons than all the known oil and natural gas reserves on Earth,” according to research reported in the Geophysical Research Letters. The stuff is literally falling from the sky.

Lakes are scattered across the moon, with each of several dozen holding more hydrocarbon liquid – largely in the form of methane and ethane — than all of Earth’s oil and gas reserves.

OK, so it’s technically not the “mother lode” since it’s not physically connected to the oil and gas here. And it’s technically not biological in nature, since (and we’re pretty sure about this) dinosaurs and plants have never existed on Titan.

Which begs the question: Where did it come from, and are the same processes happening here on Earth? If so, perhaps oil isn’t from dead dinos. Worth looking into.

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D.A.R.E. Strikes Again

No, not that D.A.R.E. I’m talking about Democrats Against Renewable Energy.

The Cape Cod Commission in Massachusetts Thursday denied Cape Wind’s application to bury electric cables needed to connect its proposed 420-megawatt offshore wind farm in the Nantucket Sound to the state power grid.

Cape Wind said in a release that it would challenge the Commission decision. The Cape Cod Commission is a local organization created by the state in 1990 to manage growth and protect Cape Cod’s natural resources.

Sen. Ted Kennedy and many residents who own coastal property from where they could see the wind turbines on a clear day oppose the project along with some environmental groups concerned about disrupting the patterns of migratory birds and the potential effect on local sea life.

The project’s supporters, who include other environmental groups, meanwhile claim it would provide renewable energy, improve air quality, lower electricity costs and increase the reliability of the power grid.

This has been going on for years, with other Leftists such as Walter Cronkite, Robert F. Kennedy, Jr. opposing it, and indeed coming out in favor of “Big Fish” (if I may coin a term). I covered it back then (here, here and here), and apparently nothing has changed in 4 years. They want you to support renewable energy, but don’t put it in their backyard, or in their view.

Thanks for the example in “liberal leadership”, guys.

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