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Turning Boom into Bust Energy is called “the master resource” because every other aspect of life operates off of it. Nations that are rich in energy resources such as oil, natural gas, and coal, grow wealthy. There is also something called “the curse of oil” because, if the price per barrel drops, the fate of some nations goes with it. This is the case, for example, of the former Soviet Russia whose government collapsed when it could no longer secure hard currency when oil and gas prices fell. Venezuela is an economic basket case these days, having nationalized oil and most of its financial and business sectors. The history of nationalized oil and gas-rich nations is that they tend not to invest in their energy industries. They do not engage in sufficient exploration. They do not expand their capacity to extract their natural resources or to refine it. We have seen otherwise oil-rich nations like Mexico encounter financial tremors as in the 1990s when the Clinton administration had to loan Mexico billions to keep it functioning.
If Congress imposes a windfall profits tax on the American oil industry, it will quite simply wreck the economy. As my friend, Seldon B. Graham, Jr., a longtime oil industry attorney as well as a petroleum engineer, points out, “”President Jimmy Carter started the ethanol subsidy on November 9, 1978 and signed the oil windfall profits tax on April 2, 1980.” In effect, Carter put in motion an anti-oil policy that has existed for over three decades. Why is that a bad thing? The ethanol policy has severely disrupted the price of food worldwide as corn is diverted into fuel. The justification for this is “energy independence” from the purchase of foreign oil, but U.S.-produced oil has always been cheaper than imported oil. If, however, the government creates conditions under which it is simply too risky, too expensive or prohibited to explore for more oil reserves, obviously oil production declines. There has been a 59% decline in U.S. oil production since 1980, the year the windfall profits tax was imposed. It was later repealed, but U.S. oil companies have a responsibility to their investors to act prudently and that has driven them to explore for oil outside of the U.S. or, to put it another way, to find foreign oil. When you add in the idiotic ethanol mandates, you compound the problem. Graham points out that, “After thirty years, U.S. ethanol production was only able to produce less than 3% of our oil demand last year.” Moreover, “ethanol cost taxpayers $3.3 billion in subsidies in 2007.” Environmental claims that ethanol is cleaner than oil are false. Not only do you get less energy and poor mileage when ethanol is blended with gasoline, it actually emits more carbon dioxide per mile. “It is absolutely impossible for ethanol to replace foreign oil,” says Graham. The justification for a windfall profits tax on oil companies ignores, for example, that ExxonMobil, just one of the few remaining oil companies operating in the U.S., pays more than $100 billion in taxes on the average. Less than 11% of ExxonMobil’s profits come from marketing and refining in the United States and the company recently announced it was spinning off its retail outlets. Yes, it made great profits in recent years, but it also had enormous, risk-filled expenses. Imposing a windfall profits tax on oil companies will give them cause to consider moving their corporate headquarters to other more congenial nations. The city of Dubai in the United Arab Emirates has been engaged in a vast office building effort, perhaps anticipating the movement of corporate headquarters. Americans greeted the expiration of the ban on offshore exploration and drilling with the expectation that American oil would begin to flow and thus lower their costs for this vital national asset. That will not happen if the President or a Democrat controlled Congress reinstates the ban and/or imposes a windfall profits tax. The city of Houston has been enjoying a boom due to the increase in the cost of a barrel of oil. Even at $80 dollars a barrel, it is enough to have created “its strongest resurgence in more than 20 years” according to a 2007 New York Times article about Houston. “Some energy companies are expanding and putting up new buildings.” Others, like Schlumberger among the hundreds of service providers to the energy industry have established their headquarters in Houston. Houston is home to the headquarters of ExxonMobil, ConocoPhillips, and foreign owned companies like Citgo, BP and Royal Dutch Shell also maintain corporate offices there. Destroying the oil industry in America, a process that has been in place since the Carter administration, has left the nation vulnerable to foreign sources. The U.S. already imports some 70% of its oil. There has been a significant decline in the exploration and development of national reserves. Unleashing the energy industries in America could dramatically improve our present financial troubles. Congress, having turned boom into bust, has a historical opportunity to reverse that trend. Editor’s Note: “Why Your Gasoline Prices Are High” by Seldon B. Graham ($10.95) is available from Amazon.com. A visit to my daily blog will keep you informed in ways the mainstream media never will. Kiss the Birds and Bats Goodbye! Right now, electricity generated by the wind industry represents just one percent of all the electricity used by Americans coast to coast. There are any number of very good reasons why its contribution is so small. Energy expert, Robert Bryce, author of “Gusher of Lies”, one of the best books on the myths and realities surrounding oil and other sources of power, says that, “Wind power is the electricity sector’s equivalent of ethanol; the hype has lost all connection with reality.” In my home state of New Jersey, its Energy Master Plan calls for up to twenty percent of the state’s energy to come from “renewable sources by 2020.”
The American Wind Energy Association issued a news release noting that the recent $700 billion bailout bill included “a one-year extension of the single major Federal policy to support renewable energy.” No federal (and state) dollars would mean the end to this astonishingly impractical, inefficient, and very expensive way of generating electricity. It’s not like the United States doesn’t have hundreds of year’s worth of coal, the source of more than fifty percent of all the electricity currently keep the lights on in the nation. It’s cheap, it’s abundant, and, according to environmentalists, it’s “dirty.” Well, that dirty source of power has been keeping the lights on since Thomas Edison invented the incandescent light bulb. (Does it strike you as odd or a coincidence that the federal government has literally outlawed the incandescent light bulb a few years hence?) If you sat around and tried to dream up ways to make life in America more expensive and unpredictable, the first thing you would do would be to undermine its ability to turn on the lights and reliably run everything that involves the use of electricity. As bizarre as the notion of carpeting America with solar farms, the notion of wind farms defies the imagination for being a more monstrous and stupid way to generate electricity. Even in their advertisement welcoming an off-shore wind farm, the state’s largest utility, Public Service Electric & Gas, in addition to acknowledging they have a fifty percent ownership in Garden State Offshore Energy, noted that “Wind turbines are difficult to locate in a populated area like ours”, adding that the proposed farm would be located “away from the paths of migratory birds.” Tell that to the birds. The slaughter of all manner of species of birds and of bats has already aroused the fears of groups devoted to their preservation. Then there’s the problem of sound. Living anywhere near a wind farm can drive one crazy and induce a variety of ailments. At the heart of the matter, however, is the fact that wind farms are notoriously unreliable sources of electricity. Bryce notes that “In July 2006, wind turbines in California produced power at only about ten percent of their capacity.” That means that coal, nuclear, and hydroelectric plants had to back up the wind turbines to insure the steady provision of electricity. These plants all have to operate no matter how much or how little electricity wind farms provide. The only reason Californians see the blades of wind turbines turning all the time—even when no wind is blowing—is that they are hooked up to plants that keep them turning. If they did not, the turbines would suffer mechanical breakdowns. The obvious question is why build wind farms at all? Why throw millions of dollars at the construction of wind farms for electricity when coal, gas, hydroelectric, and nuclear are established, affordable and reliable sources of electricity in a nation whose needs by 2030 will require many more such traditional sources of power? As PSE&G noted, wind farms must be located far away from the populated areas which they are intended to serve, but this puts additional stress on the nation’s already troubled “grid”. As an August article in The New York Times reported, “The basic problem is that many transmission lines, and the connections between them, are simply too small for the amount of power companies would like to squeeze through them.” Electrical generation “is growing four times faster than transmission, according to federal figures.” Even without wind and solar power, this portends inevitable brownouts and blackouts without improvements to the grid. While environmentalists cite the wind farms that have been built in Europe, they tend to overlook the way, for a week in February 2003, there was virtually no wind power generated by thousands of turbines located along Denmark’s western coast. Britain’s National Audit Office, Bryce notes, concluded that “wind energy was the most expensive way to cut carbon dioxide emissions in Britain, putting the cost at up to 140 British pounds (about $278 U.S. dollars) per ton of avoided carbon.” Here, then, is the source of the justification made for wind or solar power. Greenhouse gas emissions. We have been told that carbon dioxide (CO2) will doom the Earth and bring about global warming. Therefore massive reductions are required. In addition, “Cap and trade” programs for the sale of millions of dollars of so-called “carbon/pollution credits” have been initiated, but there is NO global warming. The Earth is a decade into a new, natural cycle of cooling. It isn’t getting warmer. It’s getting colder. The need to reduce CO2 emissions is a fiction, a lie that has no scientific justification. The entire global warming hoax is predicated on computer models that are useless for long term climate predictions. Such models in use by the U.S. Weather Service and others can at best predict near-term weather changes no more than a week in advance and, even then, can be subject to error. Neither climate, nor weather models can incorporate a major weather factor, clouds! If by now you have begun to wonder who will benefit from these idiotic and mendacious schemes involving “clean energy”, “renewable energy”, and “cap and trade” programs to sell useless “pollution credits”, the answer must trace back to those advocating them. They are essentially fraudulent, high risk ventures that, without government mandates and involvement, would not exist. The immediate losers will be the future consumers of energy and the ultimate loser will be a nation that lacks sufficient sources of power and transmission to meet its growing needs. The Center depends on your donation to maintain its independence, do the research necessary to keep you informed, and to speak out on the issues of our times. Please consider sending $15.00 or more. Thanks.
©
2008 Alan Caruba. |
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America has adopted anti-energy policies because of incessant environmental propaganda about “dirty” coal, out of the fear of nuclear power, and the refusal to permit exploration of 85% of the continental shelf and, of course, Alaska’s ANWR area, a tiny fraction of that State’s landmass.
“Renewable” sources sounds good right up to the moment you examine what they are and what they cost. It is the name applied to wind and solar power, two sources of electrical energy that would not exist without billions of dollars in subsidies. For example, a wind farm that New Jersey has just approved will involve “up to $19 million in state grants.” The entire wind and solar industry nationwide would not exist if it were not for its access to the public treasury.