Hey California...Why Wait Until 2030?

Thursday, June 11, 2015

By Marc J. Rauch, Executive Vice President/Co-Publisher of THE AUTO CHANNEL.

AUTO CENTRAL - June 10, 2015: Later today, a meeting will be taking place in Sacramento (California's capital), to examine California Governor Jerry Brown's new energy and climate proposal calling for a 50 percent reduction in petroleum use by 2030.

The event will be broadcast LIVE over the Internet for those in the world who are not available to personally attend. It begins at 2:30PM PST and can be seen at http://www.realclearpolitics.com/topic/in_the_news/california_energy_challenge.

The invitation to attend or watch the live stream reads, "A panel of thought leaders in policy, academia and industry will convene in Sacramento to debate (and) examine whether California can balance climate and clean air goals while still meeting America's most populous state's significant energy requirements, transportation demands and economic prosperity."

If man-made climate change is occurring...If additional clean air measures are necessary...If California's economic prosperity is in jeopardy...then why wait until 2030? California, and America, and most of the world has the solution right now, today.

The solution doesn't require significant engine conversion; it doesn't require futuristic technology or not-yet-available innovation. It merely requires taking the blinders off, and the gags out of public officials' mouths to inform the public that they should use more ethanol in their gasoline-powered vehicles, and ethanol-based bio-diesel in their diesel-powered vehicles.

Government officials and business leaders simply have to tell the truth about ethanol. They have to stop the pernicious lies and gross exaggerations about the effects of ethanol on the vast majority of vehicles on the road. If public officials and business leaders don't know the truth then they should be allowed to hear it without interference from Big Oil's checkbook.

Virtually every single gasoline-powered vehicle manufactured since the mid-1990's can use high level blends of ethanol-gasoline fuel; blends that are much higher in ethanol than E10 or E15. The very vast majority of gasoline-powered vehicles on the road were manufactured after the mid-1990's.

If California thinks they have the power to make demands on automobile manufacturers, and they do think so, then California should mandate that all automobile manufacturers extend their warranties to include the use of higher level blend ethanol-gasoline fuels. If California can ram electric-powered vehicle mandates down the manufacturers' throats, then this should be a snap. Why would it be a snap? Because whereas building electric cars costs every manufacturer thousands of dollars in profit, ethanol acceptance would require little if any new capital outlay. Everybody would be happy, and healthy, and more prosperous.

The only people who would not be happy is OPEC and Big Oil, you know, the people who brought us poisonous tetraethyl-lead gasoline, gasoline with MTBE, oil spills, explosions, wars to defend their foreign oil fields, and hundreds of thousands of dead or wounded American service men and women. If California is planning on big changes anyway by 2030 — changes that will have profound financial effects on the oil industry — then why wait? Do we need more dead soldiers, sailors, and airmen? Does California need to be further hurt financially? If man-made global warming/cooling is really happening do we really need to wait until more damage is done?

All that has to happen is for Jerry Brown to call a press conference, step up to the microphone, scratch his head thoughtfully, give a little "aw shucks" grin, and announce: "You know folks, it turns out that ethanol really is safe to use in your cars and trucks. It turns out that we let the oil industry do what the tobacco industry did for so many years...lie. So please start using more ethanol in your gasoline vehicles immediately. Please start using more ethanol-based bio-diesel immediately. Thank you and have a nice day."

That's all that Jerry Brown has to do. It will help California, it will help America, and it will help the world.

Oh, and if Brown wanted to announce that he's cancelling the stupid high-speed train and shifting the money to build desalinization plants and pipelines to bring down water from Washington or Canada, this might be the perfect opportunity to finally do something for the people who have been so good to his family for so long.

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Former CIA Director James Woolsey Interviewed by T. Boone Pickens

Friday, May 29, 2015

They talk about "energy independence" in America, which is an imprecise and therefore misleading term. The U.S. is already independent with electricity. What we need is fuel independence. But more importantly, a robust market competition among fuels, which is entirely possible with the new few choice bill.

Listen to the interview here: Former CIA Director James Woolsey on American energy independence.

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Can the American Energy Revolution Survive a Deal with Iran?

Friday, March 20, 2015

By Gal Luft, originally published in Downstream Today:

There is no lack of voices warning against the dangerous implications of the nuclear agreement the Obama Administration is advancing with Iran. The opposition has mostly focused on the destabilizing geopolitical impact of a nuclear Iran and what it means for the security of the U.S. and its allies. But there is one less obvious casualty — the North American oil and gas industry.

Undoubtedly in the event of lifting of the sanctions, cash-starved Iran would do all in its power to quickly ramp up its oil exports to make up for lost revenues, and the oil market could face an injection of 500,000-800,000 barrels/day of Iranian crude. At a time when U.S. crude oil supplies are already at their highest level in more than 80 years and storage facilities are reaching their maximum capacity, an influx of Iranian oil could easily slice current oil prices by half. This would be a crippling blow to America’s oil and gas industry, effectively marking the end of the North American energy renaissance.

Even before Iran opens the floodgate the industry finds itself in a precarious situation. To cover their capital investment and operational costs, North American oil drillers have collectively borrowed in recent years about half a trillion dollars. This debt was secured from financial institutions on the premise that the oil would be sold for $100 a barrel or so. But at $50 a barrel the revenues are out of tune with expectations. To avoid bankruptcy, oil companies are forced to pump as much oil as they can to generate sufficient cash flow in order to service their debt. But such Red Queen practice cannot go on for much longer. Hence, many projects have been shelved or streamlined; U.S. rig count, a key barometer of drilling activity, has been declining for the past six months; oil services companies have announced 40,000 layoffs to cope with lower oil prices; and independent oil and gas companies, particularly those with high production costs, are facing defaults and bankruptcies.

The slide in oil prices also impacts the natural gas market. The North American shale revolution has unleashed huge amounts of natural gas but due to lack of infrastructure to export the gas to international markets America’s gas is under-demanded and oil companies holding large amounts of gas in their portfolios are losing their shirts on this commodity as well. So far, the industry has put its faith on the construction of several multi-billion dollar LNG terminals from where the gas could be shipped to Europe and Asia. And indeed five such projects have been approved for construction by the Federal Energy Regulatory Commission (FERC). But a few of these projects could be derailed if the Iranian oil tsunami occurs. LNG prices in Asia are indexed to oil. This means that low oil prices drag down LNG prices — the spot price of LNG in Japan in at its lowest level in five years despite the fact that the country's fifty nuclear reactors are still idle — making America’s LNG less competitive in the Asian market compared to Australian or Qatari gas. Developers of LNG liquefaction facilities in the U.S. who for years struggled to obtain export permits will soon realize that their revenue projections and debt structure may no longer be viable under the low price scenario.

If there is any salvation for the industry it is in the creation of a new market for its product. This can be done in the sector in which it already has a big stake — transportation. Indeed this is the only sector that can gobble an amount of domestic natural gas significant enough to recover the depressed natural gas market.

A barrel of oil has roughly six times the energy content of a million Btu of natural gas. At current oil prices gas is almost three times cheaper than oil on an energy equivalent basis. This means there is enough room for oil prices to come down without crowding out gas from the transportation fuel market. But to generate demand for natural gas in transportation, cars, trucks and ships must be opened to fuels derived from the commodity, like methanol, ethanol, compressed natural gas and electricity. For this to happen automakers should be offered an option to reduce their fuel economy obligation — an unachievable 54.5 miles per gallon by 2025, twice the current efficiency level — if they open most of their cars to some sort of fuel competition, whether through flex fuel engines, electric motors, natural gas engines, fuel cells etc. The abundance of choice enabling vehicles would give rise to greater demand for natural gas and this would pad the balance sheets of America’s energy companies and keep them viable until the oil market rebalances itself. It will also provide consumers with lasting protection against future oil price hikes.

Unlike other industries that are used to investing a great deal of resources in creating demand for their product, oil and gas producers have never been challenged to seek new sources of demand. It has always been there for them. But the new market conditions beg for a new industry mindset — one that views fuel choice not as dangerous competition but rather as a lifeline in what could be a protracted and challenging period.

Gal Luft is Co-director of the Institute for the Analysis of Global Security and Senior Adviser to the United States Energy Security Council. He is also Co-chairman of the Global Forum on Energy Security.

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