Environmental Economics

Picture of the Day: Redefining POOR or IRONIC?

Saw this on my way home yesterday and got a chuckle (at a stop light in case you think I was violating Ohio's driving laws by taking a picture with a handheld device while moving).  The bumper sticker reads "TOO POOR TO BE A REPUBLICAN."  The car is a Lexus CT200H which U.S. News ranks in the Upscale Small Car category, and starts at $32,050.  In defense of the drive...it is a hybrid and Kelley Blue Book says you can get a 2011 (first model year) starting around $25,000.

And I blacked out the license plate just because it made me feel like a real journalist.

Why would you name your pipeline after a winged horse?

What sort of divine stallion would spill its guts all over your lawn?

Exxon Mobil Corp. (XOM) has offered to buy the homes of residents of a Mayflower, Ark., neighborhood where a pipeline ruptured last month spilling thousands of barrels of oil.

The offer is part of a compensation package that includes a $10,000 payment for each household to cover "disruption and inconvenience," as well as payment of cleaning and landscaping costs, moving expenses and rent.

The move is part of Exxon's response to the rupture of the Pegasus pipeline, which on March 29 spilled an estimated 5,000 barrels of oil into streets and yards of this tranquil community. Crews were still at work this week cleaning some areas and the Arkansas Department of Health said Wednesday that none of the residents of 22 evacuated homes have yet returned.

Under the deal put forward by Exxon Tuesday, owners of the 11 homes "directly impacted" by the spill can sell their property to Exxon within the next three years at prices determined by appraisers approved by the U.S. Department of Housing and Urban Development. The company also agreed to buy other homes in the neighborhood if no buyers come forward or of the spill affects the sale price.

For residents who decide to stay in the neighborhood, Exxon said it would make a one-time payment for any reduction in property value in the next three years.

via www.foxbusiness.com

At least the gods realize when they screw up.

Pew wee

E2 Wire blog:

Two-thirds of U.S. residents support construction of the proposed Keystone XL oil sands pipeline, including an apparent majority of Democrats, new Pew Research Center polling shows.

The same poll released Tuesday also shows increasing belief in global warming in recent years, but a dip from 2012 in the share of people who consider it a “very serious problem.” ...

On Keystone, 66 percent of respondents back construction of TransCanada Corp.’s proposed pipeline to bring oil from Canadian oil sands projects to Gulf Coast refineries, while 23 percent oppose it.

Fifty-four percent of Democrats support construction of Keystone, a project under Obama administration review, while 82 percent of Republicans want the project built, according to polling conducted in mid-March. ...

On climate change, 69 percent see “solid evidence” of global warming in Pew’s poll, which is up from the 57-59 percent range a few years ago, but well below the 77 percent range around 2006. ...

Among the 69 percent overall who see solid evidence of global warming, 42 percent attribute it to human activity, 23 percent to natural patterns, and the balance are unsure.

Here is the climate graph:

I'm thinking this might put a kink in the Keystone pipeline debate

Oops.

Interactive Energy Map of the Day

Here's a fun little map from NBCNews.com that shows where different types of energy are produced in the U.S. 

Nothing more. Nothing less.

That's all.

A highly technical illustration of Hotelling's Rule for depletable resource extraction with backstop technologies

They said it couldn’t be done. They tried to tell us that renewable energy could only survive if it were propped up with government subsidies. Never mind that our whole system of economic development, beginning with the patent office, is predicated on the idea that fledgling, underfunded industries need special protection for a limited time until they are strong enough to go it alone. Never mind that the fossil fuel industry, which can hardly be considered fledgling or underfunded, is still receiving billions in taxpayer subsidies.

But like the little engine that could, or the middle aged rock star that, after twenty years of struggling in sleazy dives has suddenly become an overnight sensation, solar power, having now surpassed the 100 GW threshold, has finally arrived and is good to go, in many places, without subsidies.

via www.enn.com

Here's a picture to help you understand the complex economics underlying the story:

Daily Demand and Supply: Everything you could ever want in one example

Decreasing supply of an input (corn ethanol credits are an input to gas production for refineries),  increasing exports due to relative price decreases in importing countries, decreasing supply of refined gas, inelastic demand for gas...what more intrigue could you want?

Congressional committees are taking note of a massive spike in the price of corn ethanol credits that refiners use to meet the Environmental Protection Agency’s renewable fuels mandate — amid concern it could increase gasoline prices.

House and Senate energy panels are eyeing the price of ethanol renewable identification numbers, or RINs, which have skyrocketed from pennies a gallon to more than $1 per gallon in recent weeks. That could cost the refining industry $7 billion this year, according to a Barclays analyst as cited by the Financial Times.

“We’ve talked about how they’ve been skyrocketing,” House Energy and Power Subcommittee Chairman Ed Whitfield (R-Ky.) said last week, though he was unsure what action his panel would take.

Refiners and the ethanol industry disagree about the cause of the price spike.

A spokesman for Valero, the largest independent U.S. refiner, said refiners can do only three things about the spike in the short term: Increase gasoline exports to countries that do not have the added RIN cost, decrease the amount of gasoline refined or shift the costs to gasoline consumers. “I suspect a combination of all three things happening with refiners,” said the spokesman, Bill Day.

That could further restrict domestic supply and raise gasoline prices, which typically rise anyway around the summer driving season.

via www.politico.com

What ever happened to peak oil?

In the old days we would post on peak oil all the time (the peak oil trolls really wore Tim out). But I can't find a peak oil post that is more recent than September 2011, and that one was asking the same question as this headline. It sounds like the industry isn't worried:

BP CEO Robert Dudley said booming oil-and-gas production from sources including onshore shale formations and deepwater regions has defeated arguments that global oil production will soon peak and go into an irreversible decline.

Dudley, in a speech, noted projections of overall global demand energy growing by over a third by 2030, including the need for around 16 million more barrels per day at that time.

But he said that the ability produce from oil-and-gas reservoirs that were once out-of-reach will enable supply to keep up. ...

He said that at current consumption rates, data suggests that the world has 54 years’ worth of proven oil reserves and 64 years worth of proven gas reserves, adding, “more will be found.”

via thehill.com

In 54 years I'll be 104 years old and probably still driving a 2052 model Mustang convertible. 

 

What makes 'smart' gas price coverage?

Yesterday, I posted this.  Last night I got this:

Hi Tim,

I read with interest this item on the Environmental Economics website…Would like to get your thoughts on what would constitute “smart” gas price coverage…

We struggle with how best to cover gas prices each and every time prices spike!

Regards, Greg Agvent, Director of Planning, CNN

My thoughts on what would constitute 'smart' gas price coverage?

1. Interview me (I didn't send this). 
2. (I sent this) In short, the issue of gas price coverage comes down to one about the 'need to do something' about gas prices. In many cases, gas price fluctuations are the result of natural market forces (it might be changes in world supply, or changes in demand).  Because gas consumption is viewed as a necessity by many, the immediate reaction to rising prices tends to be "do something."  But prices, when adjusting due to market forces, create signals for consumers to make better decisions. For example, if gas prices are kept artificially low, consumption will be kept artificially high.  The problem with doing something about high gas prices is that doing something interferes with the signals that markets are sending.
   
   To get more to your question of what constitutes 'smart' coverage, smart coverage will recognize the differing roles of market forces and policy forces.  Policies to remedy uncomfortable, but natural, market conditions represent bad economics.  Policies to remedy market misallocations are good economics. Politicians 'doing something' to make people complain less, well...

I wonder if I'll hear back?

 

God Bless America

U.S. oil and gas production is evolving so rapidly — and demand is dropping so quickly — that in just five years the U.S. could no longer need to buy oil from any source but Canada, according to Citigroup's global head of commodities research.

Citigroup's Edward Morse, in a new report, projects a dramatic reshaping of the global energy industry, where the U.S., in a matter of years, becomes an exporter of energy, instead of one of the biggest importers.

The shift could sharply reduce the price of oil, and therefore limit the revenues of the producing nations of OPEC, as well as Russia and West Africa. Those nations face new challenges: Not only are the U.S. and Canada increasing output, but Iraq increasingly is realizing its potential as an oil producer, adding 600,000 barrels a day of production annually for the next several years.

"OPEC will find it challenging to survive another 60 years, let alone another decade," the report by Morse and other Citi analysts said. "But not all of the consequences are positive, for when it comes to the geopolitics of energy, the likely outcomes are asymmetric, with clear cut winner and losers."

The U.S. is a winner in many ways. Its super power status* could be prolonged because of this new growth in oil and shale gas production, made possible by "fracking" and other non-conventional drilling technologies.

via www.nbcnews.com

And as long as I'm on the winning side, I really don't care about the equity of the outcome.

*I've always wanted my own superpower.  Flying always seemed cool, but I think invisibility is more practical.