Sunday, April 4, 2010

Sending An Energy Message

I'm trying really hard to get upset about the Obama Administration’s announcement that it would open up coastal areas to oil exploration. Obviously I think it’s a terrible idea, for all of the usual reasons. But I just don't think this plan is serious. Maybe I'm in denial.

Most media folks seem to have bought the “we need to drill here drill now pay less” line the Administration is selling. From the New York Times:
The proposal is intended to reduce dependence on oil imports, generate revenue from the sale of offshore leases and help win political support for comprehensive energy and climate legislation.

Let me be the first to call bullshit on that line of thinking. No, that’s not what the proposal is intended to do because it so clearly won’t do any of that. For one thing, oil companies are sitting on more offshore oil leases than they know what to do with. So don’t expect to see any oil platforms off the coast of Virginia any time soon; indeed, there will be windmills off the coast of Rhode Island long before Virginians need to worry about ExxonMobil drilling off their beaches. Aw heck, Virginians will see coastal wind farms long before they see oil platforms.

No one ever mentions this but that oil is too expensive to even think about pulling out of the ground until oil surpasses $100/barrel. That is, in fact, why it’s still there. For another, gas has been so cheap that the oil companies have been and continue to cut back on refinery production. I first wrote about the cut in refinery production to maximize profits last year; now, these cuts look to be permanent:

Energy companies are suffering huge losses from refining because of slumping gasoline use – a product of the economic downturn and changing consumer habits and preferences. Energy experts say refining cutbacks have already begun and will accelerate as corporations strive for profits.

Major refiners have been circumspect about their plans, saying they are considering options that could include closing refineries, selling parts of their operations, laying off workers or slashing spending.

“Refineries will have to be closed,” said Fadel Gheit, senior energy analyst with Oppenheimer & Co. “Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable.”
Apparently the nation’s appetite for gasoline and diesel have peaked. Cutting refinery capacity pretty much ensures that trend will continue, because it’s keeping prices high.

Meanwhile, gasoline is one of those commodities where what you pay at the pump is affected by more than just traditional supply-and-demand mechanisms. Speculation is rampant in the oil markets, unrest in the Middle East affects prices (though most of our oil imports come from Canada)--even hurricanes in the Gulf have caused gas prices to soar.

Opening up more offshore oil leases doesn't change any of that, and everyone knows it. I happen to think it's just more Kabuki Theater. While my in-box floods with alarming pleas for action (and donations) from MoveOn, Repower America, Firedog Lake, etc. about this oil drilling thing, I just can’t believe anyone thinks this is serious.

Most media outlets have suggested that the President’s drilling plan is also an effort to woo Republicans on cap-and-trade. Let me again call bullshit: Republicans have made clear they plan to sit on their hands until the midterm elections, and I don’t think Obama or his advisors are so dumb as to think opening the coast to oil platforms will change partisan politics in Washington.

No, I think this whole thing was planned to send a message to our “friends” in the Middle East, Venezuela, at OPEC, etc. I think we're putting the world on notice that America won't be pushed around from an energy perspective. It's an energy declaration of independence, if you will.

Consider: while everyone was busy haranguing about the new healthcare law (heads up, folks! It’s not a bill anymore!) and its aftermath, the National Highway Traffic Safety Administration and EPA have quietly implemented new vehicle fuel and admissions standards.

Such a thing has been long, long overdue. The new standards, summarized here, take into account new technology, like electric vehicles:
The most intriguing part of the whole thing? Fuel efficiency isn't king--it's all about greenhouse gas reductions. This is probably the EPA's attempt at preparing for a future where most vehicles aren't just juiced up by gasoline. Carmakers shouldn't necessarily get off scot-free if their EVs are ultimately powered by coal-fired electricity plants, after all.

That’s certainly ingenious, and casts a far wider net than previous government fuel efficiency standards ever did. Coupled with the offshore oil announcement, the message this sends is that a) we are serious about conservation, and b) we can, will and are finding our own oil supplies, which we will tap if needed.

Of course, all of this comes as oil prices are rising, but note:

So far, though, consumption of gasoline, diesel fuel, heating oil and jet fuel remains sluggish and markets are well supplied. The biggest sign of strength is from manufacturers using growing amounts of crude to restart the nation's factories.

How cool would it be if our nation’s factories were able to reboot using energy-saving technologies and conservation mechanisms, enabling us to recover the billions of dollars we throw away each year on energy waste? Our manufacturing sector needs to get on board -- and it is.

One of the hopiest-changeiest things I've seen in the past few years is the surge in renewable energy development. The economy is transitioning away from fossil fuels, not because the government is making us do it or because we're facing an apocalyptic Mad-Max-style future without "the juice" or because people drank Al Gore's Kool-Aid but because it makes economic sense. It's where the money is. Eight years of Bush-Cheney and their oil minions couldn't stop this train because the reality is that it is too expensive not to move away from the dead energy source that fueled our previous economic growth.

The future is green, not black. Everyone knows it, certainly our corporate overlords know it, and Newt Gingrich and Koch Industries stamping their widdew feet won't change it. This is positive news, excellent news, because it means we aren't doomed after all, and it means things like opening the Atlantic coast to offshore oil exploration when nobody seems to want or need the oil leases is just so much political theater.