Climate Change Sanity

This Administration’s actions lead me to believe that President Obama is planning to nationalize the energy companies.  When will he do this?   When gasoline hits somewhere around $10 per gallon as some predict it will this year.  See, see. Maybe you think that if gasoline prices get that high, he wont be re-elected?  That is why he will act.  His narrative will be that he had to do it to save the country. Many of our citizenry will applaud his actions. Unfortunately the idea that the government is everyone’s safety net is becoming too engrained.  If gasoline does not reach $10 in his first term and he gets a second term (and a Democrat majority in Congress, a real possibility if Obama is re-elected) he will wait until then.

Demonizing Energy Companies

So you think that this not something Obama and the Democrats would do.  They nationalized most of the automotive industry and got a way with it.   Obama Care is the first step on the way to nationalizing the Health Care industry.  The Congressional Democrats have long advocated nationalizing the Energy companies as have their echo chamber, the mainstream media. See, see, see, see. President Obama is not standing on the sidelines but rather is leading the charge against energy companies.

What Are The Signs

What is going on is an all out assault on the US energy companies by all of Obama’s administration.  Coal is being regulated out of business.  By managing permitting, Oil can’t increase the supply of crude domestically or from neighbors like Canada which will result in higher crude oil prices.  Natural gas re-emergence, resulting from fracking making available vast quantities of domestic gas, is facing the EPA and other environmental groups that want to outlaw or severely restrict the use of fracking.

And the Administration seems to want to reward our foreign foes or competitors while penalizing domestic Energy Companies.    What other conclusions can be derived from the way this President and his allies are conducting business?

The US has plenty of energy.  A recent study by the Congressional Research Service (CRS) determined that the USA has the world’s most abundant supply of fossil fuels.  The fuel resources counted were oil, coal and natural gas and all were equilibrated to the energy in barrels of oil equivalent  (BOE). The Chart below has the top seven nations from the study.

Data from CRS Report “US Fossil Fuel Resources”:Issued 30Nov2010

We have the resources but President Obama does not want to use them.   All this leads to the obvious conclusion that the President is trying to create a “crisis” so he will, as Rahm Emanuel would say, “never let a crisis go to waste.”   Which brings us back to how will he use this crisis.  I believe it will be to nationalize the US energy companies.  If that happens, don’t be deluded into thinking that the Government will be able to provide us with “low prices”.  The private energy companies, e.g. BigOil, are motivated to innovate ways to locate and exploit reserves at the lowest cost possible.  They represent private enterprise at its best.  Don’t expect nationalized oil to provide this leadership or low prices.   Likely there won’t be any benefit to our economy, or boost in jobs and I suspect President Obama knows this.  The reason then must be the ultimate goal of socialists—– redistribution of wealth.

It is hoped, that the following discussion will help one understand the battle the Energy Companies are facing.

OIL

Another investigation is underway to find out if Big Oil (e.g. Exxon-Mobil, Chevron, Shell, BP, Conoco-Phillips) is manipulating the prices.   That Big Oil has been exonerated in all of the previous investigations, and will be in this one, is not the main issue here.  The Liberals know that this technique plants seeds of doubt in the publics mind. Typically, their accusations get all the headlines and the acquittal is seldom mentioned.

If Big Oil is driving up the prices how do they do it?  The American Petroleum Institute (API) listed the 20 Largest Oil and Gas Companies based upon their 2009 oil reserves.  It shows that 72% of the world’s oil reserves are owned by nations (not privately owned companies) such as Iran, Saudi Arabia, Venezuela, and Libya.  The biggest US Company to make the list was Exxon-Mobil at #17.   The Exxon-Mobil reserves as a percent of the world reserves are 0.68%.  Think about this situation where the OPEC type state owned companies have reserves 100 times greater than Exxon-Mobil.  Do you really believe that Exxon-Mobil is able to dictates the price of crude to OPEC?   Of course they can’t do that.

Well, there are those obscene earnings, right?  In 2010 the earnings as a percent of sales for Oil and Natural Gas was 5.7%.  Compare that to 19.4% for Beverages and Pharmaceuticals; 17.3% for Computers; and ALL MANUFACTURING was 8.5%.  So the average for manufacturing was 8.5% and Oil and Gas came in with 5.7%.    So, yes, their earnings are large but not out of line with their sales, in fact they are coming in lower than the average manufacturing business.  And further, U.S. oil and natural gas companies tax rates are considerably higher than the average manufacturing company. In 2010 income tax expenses (as a share of net income before income taxes) averaged 41.1 percent for Oil and Natural Gas companies compared to 26.5 percent for the average  S&P Industrial company.

Domestic oil production could make a real change in supply and it would significantly reduce our balance of payments deficit.  Further it would reduce the income of those countries that use the money to make problems for the US—Iran, Syria, Libya, Venezuela, etc.  It is said that Venezuela’s Chavez needs oil above $40 per barrel to have money to support his dictatorship.   And his friend President Obama wants to see the price much higher than $40, too.

Classic wrong headedness is illustrated by diddling over access to Canada’s rich tar sands.  From the IBD posting “China has its eye on Canada’s oil”:

Together, the U.S. and Canada have enough oil and natural gas locked up in shale formations, tar sands, Alaska, the Canadian Arctic and the Outer Continental Shelf to make OPEC pound sand. But we won’t drill for ours and apparently; we don’t want Canada’s.

With more than 170 billion barrels, Alberta has the world’s third-largest oil reserves, behind only Saudi Arabia and Venezuela and ahead of Russia and Iran. Daily production of 1.5 million barrels from the oil sands is expected to nearly triple to 3.7 million by 2025. The only question is, will this crude be flowing south to U.S. refineries or west for export to China?

At issue is the Keystone XL pipeline, parts of which have already been built, that would bring Alberta oil to Texas Gulf Coast refineries. The pipeline also could transport oil extracted from shale formations in the Rocky Mountain West.  The U.S. Geological Survey estimates the region, dubbed the Persia of the West, may hold more than 1.5 trillion barrels of oil, six times the proven reserves of Saudi Arabia, and enough to meet U.S. oil needs for the next two centuries. By 2015, oil executives and industry analysts say, the oil-rich lands of the West, including North Dakota’s booming Bakken formation, could produce 2 million barrels a day, more than the pre-Deepwater Horizon production rate in the Gulf of Mexico.

Environmental groups oppose Keystone XL on the grounds that tar-sands extraction harms the environment through water pollution, greenhouse gas emissions and potential pipeline leaks. The State Department, which must approve any pipeline entering the U.S. across international borders, has withheld its approval pending a final decision Nov. 1.  The Chinese aren’t waiting. Sinopec, a Chinese state-controlled oil company, has a stake in a $5.5 billion plan to build the Northern Gateway Pipeline from Alberta to the Pacific Coast province of British Columbia. Alberta Finance Minister Lloyd Snelgrove met this month with Sinopec and CNOOC, China’s other big oil company, and representatives of China’s banks.

While the U.S. dithers with concerns about “dirty oil” from Alberta’s rich tar sands, energy-hungry China makes Ottawa an offer it might not refuse. Memo to Washington: Pipelines can run west as well as south.

It is not that the President does not know that the laws of supply and demand are important to price of commodities.   When he pulled the stunt of releasing 30 million barrels of crude from our Strategic Petroleum Reserve (SPR), my guess is that his intent was twofold.  Maybe he thought that OPEC would see it as a threat that he would permit additional releases from the SPR if they did up their production and thus reduce crude prices.  As the 30 million only amounted to two days of US crude requirements, it’s likely they were not too worried.  Probably the real reason was to signal that things were out of control and he was trying one of the possible levers to stop the “runaway” gasoline pricing.

COAL

The US has the largest coal resources in the world. It is inexpensive relative to other fossil fuels and it is abundant. Coal is used to produce 45% of the nation’s electricity.    While electricity is very dependant on coal, coal is highly dependent on electricity as 93% of all US coal is used to generate electricity.  But Obama wants to put coal use in the past tense.   Obama announced before he was elected that he was going to put coal out of business and he means to do just that.  He is using the EPA to put very stringent emission restrictions on coal based electrical power plants.  The price increases for the ratepayers in the Mid-Western US States are going to be ugly.

A posting in the TownHall blog, “Clearing the Air”:

EPA’s proposed “mercury and air toxics” rules for power plants are built on the false premise that we are still breathing the smog, soot and poisons that shrouded London, England and Gary, Indiana sixty years ago. In reality, US air quality improved steadily after the 1970 Clean Air Act was enacted.

EPA’s “most wanted” outlaw is mercury. But for Americans this villain is as real as Freddy or Norman Bates. To turn power plant mercury emissions into a mass killer, EPA cherry-picked studies and data, and ignored any that didn’t fit its “slasher” film script. As my colleague Dr. Willie Soon and I pointed out in our Wall Street Journal and Investor’s Business Daily articles, US power plants account for just 0.5% of mercury emitted into North American’s air; the other 99.5% comes from natural and foreign sources.

Energy analyst Roger Bezdek estimates that utilities will have to spend over $130 billion to retrofit older plants, under the measly three year (2014) deadline that EPA is giving them………, On top of that, utilities will have to spend another $30 billion a year for operations, maintenance and extra fuel for the energy-intensive scrubbers and other equipment they will be forced to install.

Many companies simply cannot justify those huge costs for older power plants. Thus Dominion Power, American Electric Power and other utilities have announced that they will simply close dozens of generating units, representing tens of thousands of megawatts – enough to electrify tens of millions of homes and businesses.

Electricity costs are set to skyrocket, just as the President promised. Consumers can expect to pay at least 20% more in many states by 2014 or shortly thereafter. According to the Chicago Tribune, Illinois families and businesses will shell out 40-60% more! How’s that for an incentive to ramp up production and hire more workers? How’s that “hope and change” working out for families that had planned to fix the car, save for college and retirement, take a nice vacation, get that long-postponed surgery?

For a mid-sized hospital or factory that currently pays $500,000 annually for electricity (including peak-demand charges), those rate hikes could add $300,000 a year to its electricity bill.

And it’s not just private businesses that will get hammered. As the Chi Trib notes, if the Chicago public school system wants to keep the lights on and computers running for two semesters, by 2014 it will get hit for an extra $2.7 million it doesn’t have, to pay for skyrocketing electricity costs.

Carry those costs through much of the US economy – especially the 26 states that get 48-98% of their electricity from coal-fired power plants – and we are talking about truly “fundamental transformations.” Millions will be laid off, millions more won’t be hired, millions of jobs will be shipped overseas – and millions will endure brownouts, blackouts and social unrest.

The Chairman of the EPA’s Clean Air Scientific Advisory Committee Jonathan Samet implies there is no limit to the EPA authority according to a Junk Science Posting “Samet” No End To EPA Air Regulations:”

What Samet is saying is that there is no scientific basis for EPA not continually reducing manmade air emissions until there aren’t any. As Samet points out, under the Clean Air Act, the EPA could literally regulate us out of any sort of industry without regard to the consequences.

Classic doublespeak by those who are  our “betters” that want us to use mercury laden lights that are much more expensive than low cost incandescent bulbs (that they are banning) when Energy Secretary Steven Chu said “ We are taking away a choice that continues to let people waste their money.”

Natural Gas

Fracking technology involves pumping high-pressure water, sand and some chemicals into a borehole to create fractures in the shale formations in which natural gas and oil resides.  The fracturing of shale makes paths for the gas and oil to move to the collection piping and up to the surface.   This technology has been used by the oil and gas producers for some while but recently fracking has been used to tap massive quantities of natural gas. The quantities are so large that some estimates of the available natural gas are said to be equal to a 200-year supply for the US.

But the Obama administration never sleeps when it comes to seeking ways to deprive the nation of new supplies of energy.  The EPA has begin to study fracking:  National Review Online’s “The Fracas about Fracking” raises concerns about the likelihood of the study providing a fair review or a predetermined outcome which will reflect unfavorably on the practice of fracking:

In deciding on a policy on fracking, we should not wait for a congressionally mandated EPA report on the impacts of hydraulic fracturing on drinking water, due in 2012. A congressional hearing held in May revealed fatal flaws in what was supposed to be a definitive, vigorously peer-reviewed study. For one thing, it will be an inside job from the EPA; the study’s review panel excludes anyone with professional expertise in current industry practices or the technology of hydraulic fracturing. Under the current administration, industry experts, like highly credentialed professors of petroleum engineering, are assumed to be shills for greedy enterprises.

The EPA study has some other serious defects. It will cherry-pick only four wells, out of hundreds of thousands, for full forensic analysis, and it has excluded representatives of state regulatory agencies — which have six decades of experience in regulating this practice, which began in 1948 — from its review panel. Nor do the researchers seem aware of the difference between, on one hand, models of the assumed effects of hydraulic fracturing and, on the other, physical measurements of the results of hundreds of actual fracking treatments. To learn the fundamentals of this issue, the EPA would have to bother to speak with experts on the technology.

The study seems designed to substantiate a predetermined conclusion: that hydraulic fracturing poses grave risks. Therefore the EPA must either assert regulatory control on all drilling using this technology, or issue a “temporary” moratorium — as in the aftermath of the 2010 Gulf spill — until further study is complete. If fracking is delayed or discontinued, massive resources will remain untapped, hundreds of thousands of jobs will not be created, and billions of dollars of potential federal, state, and local tax revenues will be lost.

And some thoughts about this study from the American Thinker “Obama continues his war on cheap American Energy”:

Even if the panel should somehow miraculously decide that fracking is safe, there is a history of Obama appointees rewriting decisions from panels evaluating the safety of energy development, so as to change the outcomes to suit Obama’s biases against cheap and abundant (and American) energy. When the Gulf of Mexico oil-drilling platform Macondo sprang a leak, a panel’s conclusion regarding the safety of offshore oil drilling was doctored by White House political appointee Carol Browner (or someone operating under her authority) to make it appear that the panel of experts endorsed a moratorium on offshore drilling. When this manipulation of science was brought to light, many members of the panel objected to the distortion of their views and disavowed the “report”.

Stacking panels with ideological soul mates is Barack Obama’s modus operandi. If that does not work to accomplish his goals, creative re-writing is the next step. There is always one more trick in Obama’s pocket that he can use to keep us away from cheap, abundant and American energy.

There are some things we can do—–you probably know what they are.  Anyway, I will list some in my next blog.

cbdakota