Saturday, April 26, 2008

All Is Not Lost, The Future of Oil

Periodically people take a look at the plateauing of oil reserve discoveries and oil production and compare that to the rapid increases in demand – particularly as China and India become more industrialized. They then declare that “peak” oil supplies have been reached, and the world will soon be plunged into a struggle for the remaining supplies. I made this mistake a couple of years ago, when I also concluded that the “peak” was upon us. Now, we all know that something weird is going on in oil markets as the price of oil and gasoline is advancing in large increments on a daily basis. Some, who know nothing about how these prices are set, believe it is the result of a conspiracy by oil companies. Most knowledgeable people see the cause as a combination of a deteriorating dollar (oil is priced in dollars), and a continuing rapid increase in demand.

The good news is that I and others were wrong about reaching the “peak”; just last week a discovery of a huge deposit of oil off the coast of Brazil may yield the third largest oil pool in the world, and other discoveries of large, previously unknown, deposits have now been found in the Gulf of Mexico both in Cuban and in U.S. waters and also in the Rocky Mountain states within the continental U.S.A.

What we need to do now is elect conservative Republicans to Congress who will free us from the stupid restrictions preventing us from drilling for this oil and then refining it domestically. Now that the truth about the harmful aspects of ethanol is becoming widely known, we should be able to undo the harm that Democrats and RINO Republicans have foisted on us and on the poorer nations of the world.

Brazil Oil Finds May End Reliance on Middle East, Zeihan Says
By Joe Carroll (Excerpts)
April 24 (Bloomberg) – “Brazil's discoveries of what may be two of the world's three biggest oil finds in the past 30 years could help end the Western Hemisphere's reliance on Middle East crude, Strategic Forecasting Inc. said.

Saudi Arabia's influence as the biggest oil exporter would wane if the fields are as big as advertised, and China and India would become dominant buyers of Persian Gulf oil, said Peter Zeihan, vice president of analysis at Strategic Forecasting in Austin, Texas.”

Undoing America's Ethanol Mistake
By SEN. KAY BAILEY HUTCHISON | Posted Friday, April 25, 2008 Investors Business Daily
The Nobel Prize-winning economist Milton Friedman once said, "One of the great mistakes is to judge policies and programs by their intentions rather than their results."

When Congress passed legislation to greatly expand America's commitment to biofuels, it intended to create energy independence and protect the environment.
But the results have been quite different. America remains equally dependent on foreign sources of energy, and new evidence suggests that ethanol is causing great harm to the environment.

In recent weeks, the correlation between government biofuel mandates and rapidly rising food prices has become undeniable. At a time when the U.S. economy is facing recession, Congress needs to reform its "food-to-fuel" policies and look at alternatives to strengthen energy security.

On Dec. 19, 2007, President Bush signed into law the Energy Independence and Security Act. This legislation had several positive features, including higher fuel standards for cars and greater investment in renewable energies such as solar power.
However, the bill required a huge spike in the biofuel production requirement, from 7.5 billion gallons in 2012 to 36 billion in 2022.

This was a well-intentioned measure, but it was also impractical. Nearly all our domestic corn and grain supply is needed to meet this mandate, robbing the world of one of its most important sources of food.

We are already seeing the ill effects of this measure. Last year, 25% of America's corn crop was diverted to produce ethanol. In 2008, that number will grow to 30%-35%, and it will soar even higher in the years to come.

Furthermore, the trend of farmers supplanting other grains with corn is decreasing the supply of numerous agricultural products. When the supply of those products goes down, the price inevitably goes up.

Subsequently, the cost of feeding farm and ranch animals increases and the cost is passed to consumers of beef, poultry and pork products.

Since February 2006, the price of corn, wheat and soybeans has increased by more than 240%. Rising food prices are hitting the pockets of lower-income Americans and people who live on fixed incomes.

While the blame for higher costs shouldn't rest exclusively with biofuels — drought and rising oil costs are contributing factors — the expansion of biofuels has been a major source of the problem.

The International Food Policy Research Institute estimates that biofuel production accounts for between one-quarter and one-third of the recent spike in global commodity prices.

For the first time in 30 years, food riots are breaking out in many parts of the globe, including major countries such as Mexico, Pakistan and Indonesia.

The fact that America's energy policies are creating global instability should concern the leaders of both political parties

Restraining the dangerous effects of artificially inflated demand for ethanol should be an issue that unites both conservatives and progressives.

As a recent Time cover story pointed out, biofuel mandates increase greenhouse gasses and create incentives for global deforestation.

In the Amazon basin, huge swaths of forest are being cleared to meet the growing hunger for biofuels.

In addition, relief organizations are facing gaping shortfalls as the cost of food outpaces their ability to provide aid for the 800 million people who lack food security.

The recent food crisis does not mean we should entirely abandon biofuels.
The best way to lower energy prices, and reduce our dependence on foreign oil, is to accelerate production of all forms of domestic energy.

Expanding biofuels while refusing to take other measures, such as lifting the ban on oil and natural gas production in Alaska and the Outer Continental Shelf, is counterproductive. We should be tapping into a broad portfolio of energy options, including clean coal, nuclear power and wave energy.

The key is increasing energy supply. By taking these measures, we can enable biofuels to be part of the energy solution, instead of contributing to the energy problem.

Congress must take action. I am introducing legislation that will freeze the biofuel mandate at current levels, instead of steadily increasing it through 2022.
This is a common-sense measure that will reduce pressure on global food prices and restore balance to America's energy policy.

As the Senate debates this issue, we must remain focused on the facts.
At one point, expanding biofuels made sense for America's energy security. But the recent surge in food prices has forced us to adapt. The global demand for energy and food is expected to rise about 50% in the next 20 years, and the U.S. is well-positioned to be a leader in both areas.

That will require a careful, finely tuned approach to America's farm products.
By freezing the biofuel mandate at current levels, we will go a long way to achieving that goal.

Freezing biofuel mandates at current levels is a good first step, but we have also learned that the production of a gallon of ethanol consumes at least a gallon of petroleum and contains less energy than a gallon of gasoline. Ethanol use only seems to shift pollution from cities to farming areas, and actually makes no sense at all. I hope that this is the beginning of the end for biofuel production in the USA, at least until we learn how to make it from non foodstuffs without consuming significant amounts of petroleum.

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At 11:52 AM, Anonymous Anonymous said...

Didn't we elect conservative Republicans in 2000, 2002, 2004? Yet they still didn't remove any of the stupid restrictions on drilling oil. What now?

At 12:10 PM, Blogger RussWilcox said...

Many Republicans, Senators Martinez of Florida, Snowe of Maine, Chafee of RI and McCain of Arizona, to name a few, are not conservative at all. We have a tough fight, and perhaps the Republican Party is finished as a conservative organization.

At 9:22 AM, Anonymous Anonymous said...

I'm not sure the impact on world prices can all be blamed on US (ethanol) Rice has doubled and tripled in price for example.


At 3:35 PM, Blogger RussWilcox said...

The problem is that acreage is being shifted over to corn (for ethanol) from other crops. We already know that this is causing shortages of soy beans. This may also be true of wheat and rice where the USA is a major world producer of both.

Drought and population increases are also reasons for rice shortages.

At 9:20 AM, Anonymous Anonymous said...

It makes sense that we back off the ethanol boondoggle until we get switchgrass or some other source that has higher yields.

I watched a segment last nite explaining how some poor people are actually eating dirt so they at least have something for their stomachs to process...


At 12:26 PM, Anonymous Anonymous said...

The price of food is actually higher per yield, than the equivalent of biofuels. most biofuels are produced from the byproducts of normal agriculture. the costs of biofuels on world food prices, pales in comparison the fuel and climate costs.

At 12:26 PM, Anonymous Anonymous said...

The price of food is actually higher per yield, than the equivalent of biofuels. most biofuels are produced from the byproducts of normal agriculture. the costs of biofuels on world food prices, pales in comparison the fuel and climate costs.


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