Wednesday, June 25, 2008

Jimmy Carter the Worst President

Clean Gene on Jimmy Carter
■ "Mr. Carter … quite simply abdicated the whole responsibility of the presidency while in office. He left the nation at the mercy of its enemies at home and abroad. He was the worst president we ever had."
■ Senator Eugene McCarthy, Democrat of Minnesota, voted for Ronald Reagan in 1980


Blogger BC said...

You have obviously done good work here in Laguna Beach.
Your paid advertisement becons a reply:
Ignorance is not bliss. This current view is from the esteemed Brent Cook (enrgy analyst)

Energy Independence Déjà Vu - -Again

Something vaguely familiar seems to be happening in the televised version of reality around here.  There's this annoying feeling of déjà- vu; haven't we seen this energy movie before?

Since about the turn of this century Americans have generally been pretty well placated by their gizmos and gadgets.  You can't point to any big worries or annoyances that the average fellow couldn't cure with a second or third mortgage and new 52” HDTV.  Sure there are some definite problems out there but really, who has any power or time to do much about them anyway?  American Idol and Paris Hilton demand too much attention already.  There is only one thing that really ticks us off and always unsettles our insular iLives: high gas prices. 

Jimmy Carter learned this the hard way when oil prices were headed towards $38 a barrel and Ronald Reagan trounced him in the 1980 elections.  You may recall that one of Carter's primary election campaign platforms was developing energy independence, symbolized by the solar panels he had installed on the White House in 1979.  At that time Carter warned that "a generation from now, this solar heater can either be a curiosity, a museum piece, an example of a road not taken, or it can be a small part of one of the greatest and most exciting adventures ever undertaken by the American people; harnessing the power of the Sun to enrich our lives as we move away from our crippling dependence on foreign oil." 

Reagan, however, had a different approach to our crippling dependence on foreign oil. He stressed an energy policy based on deregulating the industry and opening the Continental Shelf and Arctic National Wildlife Refuge (ANWR) to oil and gas development.  He pulled the solar panels off the White House and bootlegged illegal arms to Iran in order to gain favor.  Congress generally thwarted his efforts to open new areas for development and so the Continental Shelf and ANWR remained off limits. Increased production, mostly from overseas, outstripped global demand and oil prices generally fell during Reagan's presidency.  The market worked and a number of major oil pools were discovered.

During the more recent 2000 elections when gas prices crept up from $1.30 to about $1.85, much was being made of whose fault it was and how to fix it.  Presidential candidate George W. Bush said; "I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply. I would use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot."  I am not making this up, click here for the full story.

The same day Bush touted his influence with his Arabs friends, Democratic candidate, Al Gore, unveiled his energy plan while touring Trigen Energy. Gore's proposal basically called for $125 billion in tax concessions and spending on alternative energy solutions over ten years.  Before going on to blast "big oil” Gore said, "We will say to the nation's inventors and entrepreneurs: if you invest in these new technologies, America will invest in you. And we will prove, once and for all, that we can clean up pollution, make our power systems more efficient and more reliable, and move away from dependence on others, all with no new taxes, no new bureaucracies, and no onerous regulations." Click here for article.

This election season the candidates are at it again.  McCain with Bush's unsolicited "support” proposed lifting the ban on continental shelf offshore drilling.  McCain did not however side with Bush who also favors opening up ANWR to oil development.  Furthermore, McCain called for the construction of 45 nuclear reactors by 2030 plus $2 billion a year in federal funds "to make clean coal a reality”. 

Barack Obama seems to be favoring various incentives including $150 billion in government spending over ten years directed towards alternative fuels.  Rather than support lifting any bans on offshore drilling or opening ANWR to development, he is pushing for improved fuel efficiency as the primary means of decreasing overall oil consumption.  Nuclear power does not figure in his vision for an energy independent America.

There you have it.  About every second or third presidential election sex scandals take a back seat to America's energy problems, yet again.  Wouldn't it help us all if we got past the pandering politics of half-truths and looked at some of the hard numbers regarding US oil consumption and supply?

The US currently produces about 5.1 million barrels of oil per day. It consumes about 20 million barrels of petroleum a day: approximately 25% of total global consumption.  Paying for this addiction adds about $600 billion to the annual trade deficit.  Although the balance of trade is composed of much more than petroleum imports, it is an odd coincidence worth pondering that the US trade deficit is around $600 billion. 

US Consumption, Production and Net Imports

In rough numbers 60% of the 20 million barrels a day is imported: Canada supplies 10%, OPEC 27% and the rest comes from a variety of unaffiliated countries.  Approximately 65% of America's oil consumption goes towards making gasoline.  Putting this number into perspective, that's about 330 million gallons of gasoline a day going through our cars and into the atmosphere.  Is this a sustainable and economically intelligent use of capital and a dwindling resource?  How much oil does America have lying around waiting to be exploited?

As of December 31, 2006, US proven oil reserves stood at 21 billion barrels. The US Geologic Survey and other government agencies have computer modeled the Outer Continental Shelf (OCS) and ANWR to estimate undiscovered, technically recoverable petroleum. On OCS leases that are available for development in the lower 48 states they estimate 41 billion barrels of crude may be recoverable. On OCS areas that are not open to drilling they estimate an additional 59 billion barrels may be recoverable.  In ANWR, the mean computer modeled technically recoverable oil is 10 billion barrels.  Economically recoverable figures for these areas will probably be less.  It is important to point out that these are only educated estimates based on the available data: reality could be significantly different.  Higher exploration and development costs could make much of this guesstimated oil uneconomic, while new recovery technologies could make much more of it economically feasible.

Based on the resource estimates for ANWR, a US Energy Information Administration analysis projected that opening it to oil and natural gas development now would increase domestic crude oil production starting in 2018. In their mean case scenario, additional oil production from ANWR would reach 780,000 barrels per day by 2027 and decline thereafter.  At current US consumption of 20 million barrels of oil per day the additional production from ANWR equals about 4% of the US daily consumption and knocks roughly 0.6% (78 cents) off the current spot price for a barrel of oil.  Obviously not a terribly successful way of appeasing the American public.

Average automobile fuel efficiency in the US is approximately 21 miles per gallon.  This compares with about 40 miles per gallon in Europe.  Congress and Bush passed the Corporate Average Fuel Economy (CAFE) standards that prescribe new fleet-wide average fuel efficiency of 35 miles per gallon by 2020.  Achieving these standards is estimated to result in a savings of 1.1 million barrels of oil per day.  That's about 6% of current annual US consumption.  Once again this has little effect on the price at the pump we are so ticked off about.

I would be remiss in our discussion of foreign oil if I didn't bring up the topic of Iraq.  Iraq has proven reserves of approximately 112 billion barrels of oil and potentially 100 billion barrels yet to be found. Prior to the Gulf War and current occupation, Iraq produced about 3.5 million barrels per day - equivalent to approximately 18% of US consumption.  They currently produce approximately 2 million barrels per day.  Recently, no-bid oil service contracts were awarded to Exxon-Mobil, Shell, BP, Total and Chevron.  These do not grant any rights to oil development per se but are certainly a toehold to much larger contracts for Iraq's major oil fields. Despite Donald Rumsfeld's insistence that even the suggestion that the US was after Iraq's oil was "utter nonsense” and that "we don't take our forces around the world and take other people's resources”, some of our foreign friends may not be seeing it that way: if it quacks like a duck. . .  The financial price tag for the Iraq invasion is officially about $550 billion. Doing the math, that comes to about $5 per proven in-the-ground barrel of oil so far.

It is clear that the US cannot drill its way out of its dependence on foreign oil.  The philosophical debate concerning putting oilrigs and pipelines in a place where no one goes is a meaningless distraction from the real issue of energy independence.  Likewise, increasing fuel efficiency, although morally commendable, is not the sole solution.  Whether oil was the motive behind the Iraq invasion or not, this foray has to be viewed from a global perspective as a total failure in terms of securing the US with cheap oil.  The simple fact is that the US will be dependent on foreign oil and therefore subject to the whim and will of these countries far into the foreseeable future. 

In the near term, decreased energy consumption will come about through higher and higher fuel costs which force Americans to change their energy usage patterns.  Nothing is more effective than hitting Americans in their pocketbooks: something that will continue to be exacerbated by a falling currency. 

The US has to start burning through less than 25% of the global petroleum budget. If a solution exists, it will ultimately involve a long-term commitment consisting of increased US production through more drilling, improved technology, better energy efficiency, alternative fuels and an intelligent foreign policy. High prices and market economics will force the change generations of politicians have hindered. It will not happen near as quickly as the crowning of next year's American Idol: we're talking decades.  Rather than déjà vu all over again we could very well see this crisis push America to the forefront of alternative energy innovation and conservation this time around.

June 29, 2008  

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