Entries Tagged as 'energy'

Newt, Your Ad With Pelosi Wasn’t Dumb

December 5th, 2011 at 11:59 pm 31 Comments

Newt Gingrich recently described his 2008 appearance in a 30-second ad with then-Speaker Nancy Pelosi as “the dumbest single thing I’ve done.” Many conservatives share a negative view of it. Ron Paul, order for instance, search cites the ad as an example of Newt’s “serial hypocrisy.”

Curious, I took a look at the ad, eager to assess its dumbness. Here’s the full transcript:

Pelosi: Hi, I’m Nancy Pelosi, lifelong Democrat and speaker of the House.

Gingrich: And I’m Newt Gingrich, lifelong Republican and I used to be speaker.

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Escaping the Oil Market is a Pipe Dream

December 1st, 2011 at 5:54 pm 29 Comments

We’re not back to the energy glory days, when oceans of east Texas crude fueled the ships, aircraft, and tanks on which the Allies rode to victory in World War II.

U.S. imports of crude oil and petroleum products, however, have dropped a hair below 50 percent. And on Tuesday, the Wall Street Journal reported that the U.S. is exporting more refined petroleum products than it imports, the first time we’ve been in the black with refined fuels since the Truman administration.

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Has Perry Read His Own Jobs Plan?

David Frum October 19th, 2011 at 8:59 am 30 Comments

To my mind, Rick Perry’s most telling moment in the Las Vegas debate came before the famous hand-on-shoulder exchange with Mitt Romney. It came when he talked about his jobs/energy plan:

[T]he plan that I laid out last week, where we talk about the energy industry and this treasure trove that we have under this country, and we need to recognize that the administration that we have today is blocking mining that could be going on in the state of Nevada. I talked to Brian Sandoval before I came in here today. You have an administration that is killing jobs because they want to move us to a green energy. You have a secretary of energy who has basically said he wants to see gas prices up close to the European model. The president himself said electricity rates are necessarily going to skyrocket.

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About that Perry Jobs Plan

David Frum October 17th, 2011 at 11:03 am 54 Comments

The governor’s jobs plan is to open more of the US to energy exploration and production.

He promises that such a policy will create 1.2 million new jobs. When I heard this, it seemed to me utterly implausible: the US oil and gas industry employs 2.1 million today, coal under 100,000 – and these at a time of high prices and active production. 50% more jobs on top of that? In a capital-intense industry?

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Want Fewer Wildfires? Burn More Wood.

September 30th, 2011 at 12:47 am 19 Comments

The recent wildfires in Texas have returned forest management to the headlines. In Texas and elsewhere, wildfires have destroyed property, endangered firefighters and polluted the local environment.

While fires are a natural phenomenon, humans can increase their severity or frequency through their own actions. Counterintuitively, one way humans could manage this risk would be to increase the role of wood in our energy supply.

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Open Up Canada’s Oil Lifeline

August 31st, 2011 at 1:19 pm 51 Comments

I was on Fox Business last night discussing TransCanada’s Keystone XL pipeline. The pipeline was proposed in 2008 as a 1,600 mile extension to an existing network. Its would tap into oil currently being extracted from Alberta’s controversial tar sands and ship it south to a storage facility at Cushing, Oklahoma and again to the Gulf Coast for distribution.

Because it enters the US from a foreign country, in order for the project to proceed, the White House must first approve its construction. As such the State Department must deem it to be in the national interest. A cursory Environmental Impact Statement has met the State Department’s satisfaction so a potentially favorable ruling for TransCanada could be imminent.

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Don’t Blame the Fed for Oil Price Spikes

June 8th, 2011 at 10:26 pm 24 Comments

Congressional Republicans are having difficulty keeping their stories straight when inventing politicized explanations for high oil prices.

When they are not complaining that insufficient domestic production is the cause of high prices, they’re busy blaming the Federal Reserve for pain at the pump.

Ben Bernanke is too free and easy with the money supply, they argue, driving down the value of the dollar and consequently putting upward pressure on the price of oil.

At a Tuesday speech to the International Monetary Conference in Atlanta, Bernanke – in his measured, academic, and carefully non-partisan way – essentially told congressional Republicans that their dollar-price hypothesis is little more than the product of vivid imaginations. As if he were back at Princeton instructing a group of Econ 101 neophytes, Bernanke delivered a lecture that was as subtle as fingernails on the chalkboard.

“Some have argued that accommodative U.S. monetary policy has driven down the foreign exchange value of the dollar, thereby boosting the dollar price of commodities. Indeed, since February 2009, the trade-weighted dollar has fallen by about 15 percent. However, since February 2009, oil prices have risen 160 percent and nonfuel commodity prices are up by about 80 percent, implying that the dollar’s decline can explain, at most, only a small part of the rise in oil and other commodity prices; indeed, commodity prices have risen dramatically when measured in terms of any of the world’s major currencies, not just the dollar. But even this calculation overstates the role of monetary policy, as many factors other than monetary policy affect the value of the dollar.”

Both Bernanke and the International Energy Agency have attributed the run-up in oil prices to market fundamentals – worldwide supply and demand. Bernanke further said that his critics have their cause-and-effect argument backwards.

“As the United States is a major oil importer, any geopolitical or other shock that increases the global price of oil will worsen our trade balance and economic outlook, which tends to depress the dollar. The direction of causality runs from commodity prices to the dollar rather than the other way around.”

Which underscores the fundamental problem – heavy dependence on a commodity traded in a global market that is significantly influenced by dodgy petro-regimes. Lawmakers should adopt an energy policy that begins lowering our addiction to the sauce, not waste time on distractions that won’t.

Christie’s Climate Change Straight Talk

May 27th, 2011 at 5:41 am 31 Comments

Chris Christie has pulled New Jersey out of the Regional Greenhouse Gas Initiative, or “Reggie,” the power plant cap-and-trade program that covers NJ and nine other Northeastern states.

Left-leaning environmental groups are framing Christie’s pullout as a bag of pander candy to delight ideologues for whom climate denialism is a litmus test for any potential GOP presidential candidate.

That’s not what Christie is doing. Christie is not a climate denier. He did not put on a tinfoil hat and rant about scientists plotting world domination. He is not polishing apples for the Koch Brothers and Big Coal. He did not buy a ticket to fly Air Inhofe.

Much of what Christie said about climate change at today’s news conference was only mentioned in passing by the press. His remarks deserve a wider airing.

Such as: “Climate change is real and it’s impacting our state. There’s undeniable data that CO2 levels and other greenhouse gases in our atmosphere are increasing.”

And this: “When you have over 90 percent of the world’s scientists who study this stating that climate change is occurring and humans play a contributing role, it’s time to defer to the experts.”

And this: “We have an obligation to reduce our greenhouse gas emissions.”

Christie concluded that Reggie is not effective for getting the job done. He didn’t conclude that the job is not worth doing.

In fact, given that Pennsylvania is not part of Reggie, Christie fears that clean power plants in New Jersey could be aced out in the regional power market by “dirty Pennsylvania coal plants,” three of which Christie’s administration has sued in federal court for wafting pollution into the Garden State.

The pugnacious governor put emphasis on the word “dirty,” as if pushing back at PA for all the Jersey jokes they tell on the west side of the Delaware River.

There’s more than one way to kill the climate change snake.

An alternative that Christie prefers is to scale up cleaner energy. Last year, he signed bipartisan legislation to support development of 1,000 megawatts of offshore wind energy, including financial assistance for component manufacturers.

The state has sent the Interior Department a list of areas in federal waters off New Jersey that ought to be considered for deepwater wind energy leases. In the Northeast, offshore is where the richest wind energy resources are found.

Christie also has pushed back against the “drill, baby, drill” dogma that is touted as a magical answer for energy security and high fuel prices. He doesn’t want to see any drilling rigs off New Jersey or off the coasts of nearby states, such as Virginia, where a blowout could smear the Jersey Shore with tourist-repelling brown goo.

Reasonable people can debate the right mix of incentives and standards for spurring replacement of dirty energy with cleaner alternatives.

That’s the sort of debate that Republicans and Democrats should have. Christie deserves credit for taking part.


Don’t Pick on Big Oil For Having Big Profits

May 18th, 2011 at 12:07 am 33 Comments

Repeal the so-called subsidies to oil and gas? Ostensibly this is a punitive measure that targets oil companies for the rise in the price of gasoline at the pump, doctor even though most gas stations are independently owned, unhealthy and need to make a profit in their businesses.

First of all, these are not subsidies per se.  Rather they are tax breaks aimed at the entire manufacturing industry — a category that includes oil & gas – and which can be broken down into four components, only one of which is specifically targeted to the industry.  (It also is the least significant.)

  • Domestic manufacturing tax deduction– $1.7 billion.  This is a tax deduction given to every manufacturer in the US as an incentive to keep manufacturing facilities in the United States.
  • Percentage depletion allowance — $1 billion.  Any business can write down the cost of its capital equipment.  Oil in the ground is treated as capital equipment.  Again, all companies get it, not just oil companies.
  • Foreign tax credit– $850 million.  All companies get credit for taxes they pay to other countries, not just oil companies.
  • Intangible drilling costs — $780 million.  As opposed to over the life of an investment, the oil industry is allowed to write-down drilling credits in year one.  This is the only “subsidy” that treats oil companies differently than the rest of the manufacturing world.

So what are we talking about here?  A total annual savings to the federal government of $4.3 billion?  (And this assumes no negative economic impact which is hardly a guarantee.)  This is enough money to run the government for less than ten hours.

If you want to have a debate about all subsidies (tax breaks) then by all means let’s.  But to single out one industry because its product happens to be in demand and as such it had the temerity to make a profit, is ludicrous and irresponsible.  It is targeting people who are in the wrong business as far as politics is concerned because they happen to be in the right business as far as demand for their product goes.  “Big oil” is more than just CEOs in a corner office.  A company like Exxon-Mobile employs 82,000 people worldwide in all capacities from rig workers, to truckers, to geologists, surveyors, mechanics, pilots, schedulers, traders, cooks, pipeline workers, marketers, mid-level managers, etc. These are honest, hardworking people who are providing for their families while supplying world’s energy needs.  Is it a crime that they get paid for their services?  Apparently on Capitol Hill it is.

And yet, those same evil oil companies pay enormous taxes that far outweigh any tax breaks.  Exxon alone paid $8 billion in taxes in just the first quarter.  This is twice as much as the entire industry receives in annual subsidies.  Yes, say our politicians, but look at Exxon’s profits.  No company should be allowed to make $10.5 billion in profits while American drivers are getting squeezed at the pump. Oh? Who exactly decides what is enough?  Chuck Schumer?  Obama’s energy czar? Exxon provides a product that the world needs. One we cannot live without in fact.  And for every dollar they make in gross profits, they pay forty-three cents in taxes.  In fact, the oil & gas industry averages roughly a 9.5% profit margin, placing it down at number 23 in the list of profitable businesses.

In case you’re curious, breweries are number one at 26% profit margin.  Yet I have never seen Pete Coors raising his right hand before a bloviating committee and Lord knows I need beer as much as gasoline!  If big oil is “gouging” us, then other industries are positively robbing us blind.  Industries that average higher profit margins than oil & gas include: applications software (22.7%), cigarettes (17.4%), railroads (12.9%) and wireless communications (11.1%).

A company like Exxon puts up big numbers because it is a very big company valued at roughly $396 billion.  $18 billion is well within expectations of a successful enterprise of such scope and size.  And they do not sit on this cash.  Almost three-fourths of their after-tax profits are poured back into exploration and drilling.  They must constantly be seeking out and delivering more energy for the consumer whose insatiable appetite continues to grow globally.

I find it fascinating that many who rail against “greedy big oil” probably do so on their iPads.  Apple’s market cap is now an astounding $305 billion.  And its profit margin is a whopping 21%: double Exxon’s. Steve Jobs is far more wealthy than Exxon CEO Rex Tillerson.   How come?  Well, one reason is that an Apple iPad 2 currently sells for $729.  Yet its actual cost to make with Chinese workers [who take home a mere $185 per month] is $293, which means a gross margin of 54%.

So who is really the “gouger”?  Exxon or Apple?   Why is multi-billionaire Steven Jobs not in front of Congress explaining himself?  Because, like his oil counterparts, he shouldn’t have to.  He makes a product that people are willing to pay an exorbitant sum relative to its manufacturing cost to possess.  And one can argue that we need iPads a lot less than we need energy.

I notice that coffee futures have come off in the past few weeks yet Starbucks hasn’t reduced the price of a venti skim latte mocha chi-chi foo-foo cinnamon two pump steamer.  Should we have the boys in the van abduct Howard Schulze and drag him before the committee to explain his 9.7% profit margins that partly resulted from hiking prices 25 cents on some drinks when the coffee futures went up, but not giving us back that quarter when the market sold off?  Of course not…

Clearly what is happening in Congress is a shameful attempt at laying the blame for their own inability to cope with the rise of prices across the board, and energy in particular, even though Washington’s policies from a decade of loose money, to sitting idle while we grew ever more dependent on overseas fossil fuels, to cordoning off huge deposits of domestic crude in our own waters and backyards are far more to blame than any CEOs.  It may be politically expedient to finger-point at “big oil” for committing the cardinal sin of doing their jobs well and showing a profit (while ignoring the true ‘gougers’ in the higher profit sectors). But it makes for poor policy, and an astounding waste of taxpayer resources.

Clearly what is happening in Congress is a shameful attempt at laying the blame for their own inability to cope with the rise of prices across the board.


Obama’s Cynical Drilling Drive

May 16th, 2011 at 4:45 pm 20 Comments

What President Obama’s Saturday radio address should have said:

“My fellow Americans. Today, I am directing the Department of the Interior to conduct annual lease sales in the National Petroleum Reserve-Alaska.

“This is a transparently political move. My order will not reduce gasoline prices this year or next year. However, if you believe that my action today will help lower gasoline prices, your misplaced belief might improve my chances for re-election next year. That’s important.

“Just so you know, gasoline prices are a function of crude oil prices, which are set in a worldwide market. Even if additional oil from northern Alaska came on the market this year – which it won’t – it wouldn’t add enough supply to the global market to drive prices down significantly.

“You should also know that oil companies producing new oil from Alaska will not give Americans a discount because I was kind enough to order up more production in America. They will sell that oil at the world price. That world price will largely determine the price of gasoline that you pay. If rising Chinese demand causes the world oil price to rise, gasoline prices will rise also. That’s just tough cookies, folks.

“My Republican friends in Congress will probably dismiss my transparently political move as too little, too late. That’s OK, but I would ask them to acknowledge that they too are trying to hoodwink the voters with glib statements that more domestic drilling is an easy answer to high gasoline prices.

“Oil dependence is a strategic liability. As long as we’re heavily dependent on oil, our economy will be vulnerable to price spikes and our security will be at risk. However, Congress and I are not likely to do much about this until after the next election, or after the  following election. Hey, that’s just politics.

“Meanwhile, I hope you have great vacation plans for summer. Better budget more money to keep your gas tank filled. There is nothing that I or Congress can do this year to help you. Thanks for listening.”