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Posts Tagged ‘Oil’

There is no question that our country needs a comprehensive energy plan, but how much of it should be government controlled is the true problem we face. So far, we have done alright while mired in regulation after regulation, wild price swings caused by fiscal policy and flaky Arabs, and various attempts merely poking around the edges of an energy policy by various Presidents and congressional busybodies.

Obama is taking a different approach. Some will say “finally.” But then they really haven’t connected all the dots. Il Duce plans on completely starving this country for energy. There is no other alternative explanation. It goes way beyond drilling or Cap and Trade. So let’s take a look at everything so far.

First, he agrees with Congress on preventing drilling for oil. The Continental Shelf is still closed to the best fields, and what was opened in the last administration will soon become closed again. He has directed Ken Salazar to void leases in Utah, and the Department of Interior has begun a review of oil and gas leases sold under the Bush Administration. To add insult to injury, Congress is going to place another 2 Million acres off limits as nature preserves, many of which have known supplies of oil, gas, and oil shale.

The E.P.A.’s Lisa Jackson has begun the process of canceling mountaintop coal mining permits claiming concerns over the environmental impact. So there goes the most efficient way to extract coal. More than 200 current projects have been affected throughout Appalachia as well as thousands of jobs.

Well, what about nuclear? The President just de-funded the Yucca Mountain nuclear waste storage project, which has burned through almost $8 Billion dollars in it’s 22 years under construction. It would have provided a much safer place to store waste as the facility is over 1000 feet underground and more than 90 miles from civilization. While this might make Harry Reid and some NIMBY Nevada residents happy, it effectively kills additional nuclear reactors being built.

I’ve already posted about attempts to kill several renewable energy projects. Solar and wind farms are under attack as well as transmission lines necessary to carry electricity to population centers. It seems even solar power suffers from NIMBY syndrome.

That brings us to Cap and Trade, effectively the final blow to America’s dependence upon energy. This sinister piece of legislation not only taxes carbon-based fuels in our own country, it also places high import tariffs on imported fuels. Coincidentally, Canada is now looking at Asia as a much preferable market just to get away from our regulatory and tax induced mess. In fact, there will hardly be a country that would want to sell us coal, natural gas, and oil when this system goes into effect. Ethanol might help some at first, but at the expense of food prices. Eventually though, even ethanol won’t save us, and all we’ll have to show for the experiment is a far thinner waistline.

Of course, price will overcome opposition, that’s the law of supply and demand. The prices are going to go through the roof as our population grows and demands more energy. Eventually, rationing will occur, next, only the super-rich will be able to fuel their cars or light their homes. Unless someone invents a small, home-sized fusion generator, I’m afraid we are in for many dark nights.

Oh, someone in the back just asked a question about hydrogen. Hydrogen is a complete non-starter. It has been a way to provide hope, while wasting billions of dollars on an element which cannot supply energy, merely carry it. We might as well hang our hopes on Flubber. Some have written books on the subject, so I’ll suffice it to say that any competent physicist, chemist, or engineer should be able to put this one to rest in a few minutes. If you want to ask about it, I’ll be more than happy to answer questions.

Well, I’d better get to work building my basement methanol production facility so I can keep blogging. Unfortunately, there won’t be anyone who can read it. At least the stars will be easier to see again.

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The Federal Reserve announced yesterday that it was going to pump $1.2 Trillion dollars into the economy by purchasing long-term Treasury Bonds and mortgage securities. Oil prices, which had been hovering around $40 per barrel after bounding off its December 19th low of $32.40, have now increased about 60% from that low and over 20% above the recent average. While many economists do not believe that this new higher price can be sustained in view of the recession induced lower demand, I do not agree.

The Fed’s purchase of bonds and securities represents $1.2 Trillion worth of new dollars into our economy. More dollars competing for the same number of goods is inflationary, as evidenced by the dollar falling yesterday and today against a slew of world currencies. This, coupled with OPEC’s lowered production rates, should keep oil above the $50 mark for quite some time. When our economy begins to recover, that increase in demand should push oil up even further. Since gasoline prices follow oil, but with some delay due to our overabundant supply, expect price averages around $2.50 per gallon in late Spring, with further price surges this Summer to $3.00 – $3.25 per gallon.

When that happens, I’m sure we will see Congress going nuts, and again dragging the oil executives before a committee demanding to know what they are doing about the rising prices in the face of a still weak economy. Calls will emanate to tax their “windfall profits,” and this time they just might succeed. If they do, you can bet the farm that gas will once again hit $4.00 per gallon. Of course, if Obama is able to enact Cap-and-Trade, all energy prices should increase by a minimum of 35% after it takes effect.

No crystal ball, just basic economics. It is just a shame that no one in Congress paid attention in class.

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