Archive for May, 2010

From the “Where on Earth Did This Come From?” Department

Thursday, May 20th, 2010

Earlier this week I attended a Brookings conference,  “Energy and Climate Change 2010: Back to the Future.”  I’ve seen better, seen worse.

One of the speakers said that the electric industry needs federal pre-emption. It’s hard to disagree with this, insofar as we are speaking of efficient interstate transmission, even though it’s not likely to happen anytime soon.  FERC has some authority in this area, but the political power of state regulatory bodies and politicians limit this authority.  Even the big power companies will not support this idea… perhaps because they fear retaliation from their state regulators.  Or perhaps because they like the Balkanization.

The speaker then said the natural gas pipeline industry also needs federal pre-emption?  Huh?  Where did this come from?  There is a very efficient interstate pipeline network delivering gas to local distribution companies.  FERC policy since the mid-1990’s has been benign neglect as far as pipeline rates are concerned, but it does not prevent pipelines from being built and I have not heard of any cases of state regulators preventing interstate gas pipelines from being built. I do not think many people would want FERC determining LDC’s rates to the final consumer, or helping to determine the efficient path for intrastate pipelines  and distribution companies, nor do I see any advantage whatsoever in it. In fact, most states have no gas systems that only transport gas to LDC’s.  Generally LDC’s take gas from interstate pipelines for distribution to end users.

The moderator had an agenda and left only enough time for two questions to be asked from the audience.  I did not get a chance to ask where this speaker came up with the notion that there is not an efficient interstate gas pipeline grid.

HEK

http://econpolicy.com

Why We Hate the Oil Companies: Straight Talk from an Energy Insider

Sunday, May 16th, 2010

Click here to  visitPowell's Books!

is the title of a new book by former president of Shell Oil Company president John Hofmeister.  The book will be released on May 25, but a summary article is available from strategy + business (http://www.strategy-business.com/article/10207?gko=d0e17).  Mr. Hofmeister blames the oil industry for lack of concern about customers who buy its products at the pump, lack of transparency, adhering to a bunker mentality and aligning itself with one political party instead of walking down the middle. His insights come a little late for BP executives, but will give them something to read over the coming months as they take political heat.
HEK
http://econpolicy.com

Weighing In on the BP Disaster

Saturday, May 15th, 2010

What a switch!  From “drill, baby, drill!” as a substitute for sound energy policy when gasoline is $4/gallon to let’s substitute windmills for oil wells when there is a potential environmental disaster on the Gulf Coast. I guess many interest groups got their coffers filled and some got their 15 minutes of fame.

The American Petroleum Institute “warns” us that increasing the federal oil spill trust fund’s liability limit from $75 million to $10 billion would force many independent producers out of the Gulf  (http://www.ogj.com/index/article-display/1360009641/articles/oil-gas-journal/general-interest-2/2010/05/api_-_10_billion_liability/QP129867/cmpid=EnlDailyMay142010.html).  But do we really want Ma & Pa Kettle out there in that environment? And so what if it does increase the cost of drilling?  There are many people who depend on fisheries and tourism for a living.  Should they be told to go pound sand because drilling is more important?

The environmentalists rush in to tell us we should halt offshore drilling.  But there is no halt to energy demand, although it has slackened since 2008 and the world is awash in crude.  Energy independence is not in the cards no matter what we do. But somebody somewhere is taking an environmental risk to drill our oil.  Is it better to ruin another country’s coast for our oil supplies?

Oil is a transportation fuel.  Currently available, but limited, substitutes are ethanol and vegetable oil.  We are not far enough down the path towards cars that run on electricity to call wind and sun a substitute for oil. I do not believe we will ever be able to produce energy without some environmental degradation.  Milton Friedman told us that there are no free lunches. But that does not seem to impede our search for them or the propaganda machines from all sides of the issue from pretending that they exist if we would just follow the correct policy… correct for them, that is.

HEK

http://econpolicy.com