Energy Crisis

I thought it only suiting to follow up manmade Global Warming with an assessment on energy. Gasoline prices have soared to over $4 a gallon in the US and estimates only predict prices going higher. I have heard from some that Bush is an oil man and since he took office the oil companies have recorded record profits so prices must be the result of the “failed policies” of this administration. The prices have definitely risen since W’s election so what are the policies he has enacted that have caused the prices to soar?

Both President Bush and Congress can share credit/blame for ethanol. Uncle Sam began subsidizing Ethanol production in 1978 and has done nothing but increase since to the tune of $7 billion in 2006. The goal of ethanol was to reduce our dependency on oil and reduce greenhouse gases, a noble cause! Ethanol is blended into the gasoline to reduce our oil consumption 10-12%, but at what cost? Ethanol is 20-30% less efficient than gasoline, it takes 450 pounds of corn to fill one SUV (that would feed one person for a year) and takes 1700 gallons of water to produce one gallon of ethanol which also adds a corrosion element into the equation. On top of all this, corn must be grown, fertilized, harvested & shipped using as much fossil fuels as the process produces. (Unconfirmed) With the ethanol producers consuming a large amount of the corn crop, what do you think this has done to the food supplies as well as the price of many of our foods?

Withh the emergence of the economies of China and India the world knew the demand for oil was going to exceed the supply so basic economics tell us the price goes up. What has the President or Congress done to affect this foreseen problem? US oil companies are very small in their industry. They must buy 90% of the crude they refine from foreign companies or governments, usually hostile. It is estimated the US sitting on some of the largest fossil fuel reserves in the world and yet the federal government will not allow US oil companies to tap into these natural resources for “environmental” reasons. If they were able they could be a much larger player in the market and actually influence price.

The largest reserves are in Alaska in the Arctic National Wildlife Refuge (ANWR). ANWR is roughly 19 million acres and it would take approximately 2,000 acres to drill for this oil & natural gas. The portion of ANWR where they want to drill is in the Coastal Plains region on the northern part of the refuge. The “environment” in the area is tundra, a virtual vast wasteland.

It has been said that it will take years for ANWR’s oil to make a difference in the price at the price but that the effect would almost be immediate. The price of oil is not determined by supply and demand of the oil but for the demand of oil futures. So as soon as the US government allows oil companies to drill in currently prohibited areas the speculators would change the price the price of the oil. The problem is that speculators are a small part of the market so their affect is minimal.

We are told we need to develope "alternative" energy sources yet the alternatives are blocked from being developed. France derives 75% of its electrical energy from nuclear energy. Over decades of improvements have made this form of energy safe yet, once again, many in Congress block any new nuclear power plants from being built. When a wind farm was proposed on the windy island of Cape Cod, Senator Edward Kennedy effectively blocked the project to protect the view from his Nantucket home.

The President as well as Republican nominee John McCain proposed drilling while the Democrats are blocking all efforts as well as other sources of energy. I can only speculate the Democrats reasoning and that I will. First, I believe they are puppets to the environmentalist lobbyists. They are paying off a debt, plain and simple. Second, these are just political issues they can use to make the President look bad. Just keep the American public complaining so they will elect a President from their party. Third, I believe this goes to the overall desire to get the US off a dependency for fossil fuels. An artificial high price for gasoline is the only way Americans will change their habits and reduce their dependency on oil. This may be a national security issue, it may be a future economy issue or it may be ozone issue… It all goes back to the Global Warming debate and today’s America is paying for future generations.

I will address the candidate’s plans for energy in future posts.