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Category Archives: Energy

Warning! Danger! Oil prices falling!

The majority of Americans are now supportive of the concept of US Energy Independence. It is one of the few topics that all of the candidates are in general agreement. The various methods and strategies to achieve that independence differ, but everyone realizes that we have to stop the massive transfer of wealth from our country to that of countries that are run by non-democratic dictatorships.

What is the current biggest risk in our ability to reach that goal in the next ten years? Falling oil prices. Seriously, that is our biggest risk. If oil prices fall, consumers will quickly forget the pain, investors will stop pouring money into alternative energy, car companies will crank up the SUV assembly lines, and politicians will start talking about the next new “crisis”. You say that can’t happen? Check your history books, as that is exactly what happened after the late 70’s oil crisis. The oil cartels felt the reduction in oil demand; they saw the new investment into solar and got scared. OPEC’s back was broken, new supplies came online in the North Sea and Alaska, and cheap oil returned.

We cannot allow that to happen again. With oil prices dipping to close to $100 a barrel, Congress should immediately call for a price floor on foreign imported oil. Any oil purchased over-seas at less than $100 a barrel would receive a tariff that made up the difference. Any oil that was produced in the US would remain tariff free, enabling US oil companies to invest in new fields, knowing that their oil could always be sold for a stable price. That price would never be undercut if OPEC and other oil-exporting companies suddenly increased supply.

The government could announce that, as part of a comprehensive energy strategy, it will henceforth not allow the price of foreign purchased oil to fall below $100 per barrel. If high oil prices continue, the proposal would have little impact and cost nothing, either politically or financially. If prices fell below that level, the added tariff would be sent to Washington to help fund alternative energy investment, tax refunds for hybrids, etc.

If consumers and industry knew that the price of a barrel of oil would never again fall below $100 a barrel, they could make long-term investment and consumption decisions with the knowledge that vastly lower oil cost will not under-cut those decisions. Americans will not buy fuel-efficient automobiles, create distribution networks for alternative fuels, or invest in technologies such as hydrogen fuel cells, flex-fuel vehicles or wind power unless they know that a future sharp fall in oil prices will not undercut them.

Would you support a price floor? If not, why?

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Why the European Union also needs to be Energy Independent

In the US, we have been talking about our current energy crisis, and our need to become energy independent.  The general population certainly is becoming aware of this need, $4 a gallon gas helps to get people focused on an issue.  Hopefully our political leaders will start to put action behind their rhetoric. However, the US is not the only country that needs to be concerned about energy independence.   With the recent crisis in Georgia, it is clear that this conflict has a large impact on the energy situation in Europe.

As we discussed last week, Russia currently has a stranglehold on the EU’s energy supply.  The Russians now supply about 25 percent of the European Union’s crude oil needs and half of its natural gas.  If the European Union has not figured out the strategic importance of this fact, the Russians obviously have.  Just as OPEC held the West hostage in the 70’s, Russia now has the ability to wield the same control over Europe.  Their first step was invading Georgia and daring NATO to do anything about it.  So far, Europe has once again shown their leadership in the fine art of appeasement.   And the US, which is busy fighting multiple battles, does not have the stomach to get involved. 

There are three basic reasons why the US, EU, and others such as China, India, and Japan need to become energy independent.

1) Stop sending Trillions of dollars to non-democratic countries that are usually unstable dictators, or hostile regimes.  This money transfer is unhealthy to the global economy.  It allows a small group of people in these petro-kingdoms to hold their own people hostage.  Is it any surprise that almost no country who’s main export is oil is a free democracy that values human rights?

2) Our reliance on carbon based energy sources is a contributor to global warming.  In addition, the extraction of oil from areas such as the Middle East, Nigeria, and South America creates huge environmental issues.  These countries do not have strong environmental regulations like we have in the West.

3) New energy technology will drive our economy over the coming decades.  Instead of sending petro-dollars overseas, that money should be invested in our economy, and on new technology that will help make the world a safer and cleaner place to live.

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The Russian Bear is Awake – Hold onto your Wallet

Moscow, with its recent attack on its former Georgian republic has caused concern across the world.  Russia is feeling strong, and is showing that it is no longer going to sit idly by as their former client states forge stronger relationships with the EU and the West.  This new found strength has been gained by becoming one of the world’s largest energy producers. The Russians now supply about 25 percent of the European Union’s crude oil needs and half of its natural gas.  But now Black Sea oil tankers that normally would be filling up with Baku crude, are anchored 15 miles offshore the Georgian port of Batumi, waiting for a cessation of hostilities.

Russia has demonstrated that its military is a force to reckon with, that it can defeat a Western-trained force, and that the West and NATO will not act to intervene.  Like during the Cold War, the West has limited ability to blunt Russia’s military agression.  Both sides know that an armed conflict between NATO and Russia is never going to happen.

After the fall of Communism, both Washington and the EU invested heavily in Russian energy production.  The result has been a network of oil and natural gas pipelines, ports, and tankers that can feed a million barrels a day to the world market. Washington has helped to expand and link that network directly to Europe, where Russia is currently the dominant supplier.  The multi-billion-dollar Baku-Tbilisi-Ceyhan pipeline that runs across Georgia is run by an international consortium, including American oil-giants Chevron and Conoco-Phillips.

Now, US taxpayers are about to get a double whammy.  Two government agencies, the Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation (OPIC), have made large investments in the Baku-Tbilisi-Ceyhan pipeline, lending money to private companies involved in the construction of the pipeline. Ex-Im Bank gave $160 million in loans, and OPIC has provided $100 million in “political risk insurance”.  If the pipeline is damaged or destroyed, these companies will be forced to write off these loans, and US taxpayers will be left to pickup the pieces.  That is a potential quarter of a Billion dollar bill that may come due soon.

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Please Make Sure You Inflate Your Tires This Weekend!

As presumed Presidential nominee Barrack Obama taught us this week, it is vitally important for everyone to inflate their tires this weekend, and on a regular basis as well.  In addition, if you can also schedule a tune-up, that would be swell.  As Obama pointed out, “There are things you can do individually, though, to save energy.  Making sure your tires are properly inflated – simple thing.  But we could save all the oil that they’re talking about getting off drilling – if everybody was just inflating their tires?  And getting regular tune-ups? You’d actually save just as much!”

Now I am not sure exactly what his definition is of “all the oil that they’re talking about getting off drilling”, but that sure sounds like a lot.   The Energy Information Administration estimates that we could extract approximately 10 billion barrels of oil from ANWR alone, about 600 million barrels a year.  This is equal to just less than 10% of our total oil use in the US on a yearly basis. 

The federal government estimates the nation’s outer continental shelf might hold 85.9 billion barrels of crude, including 10.13 billion barrels off California.    Let’s call that another 600 million barrels a year just to make our numbers easy, it could be 4 or 5 times that number.

Just from those two sources, we could decrease our reliance on foreign oil by 15-20%.  If making sure your tires are inflated is equal to that amount, between the Republican solution (drilling), and the Democrat solution (inflating tires), we could lower our dependence on foreign oil by 30%-40% in 5-10 years.  That is great progress!  Way to go political leaders!

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Average Americans Display PHEV Spirit

Today is Good News Tuesday.  After weeks and weeks of political squabbling about our current energy crisis, regular Americans are showing why our country is great.  American ingenuity and work ethic will drive our nation toward alternative energy sources and the goal of US energy independence, regardless of how hard the politicians try to get in the way. 

The Spirit of DC is a Plug-in Hybrid Electric Vehicle that is currently travelling all around America.  Called PHEV3A (PHEV All Around America), the goal of their country-wide tour is to show the nation that plug-in hybrids and electric vehicles are truly practical and are possible now, we do not need to wait for new technology to be developed.   The converted 2005 Toyota Prius has a battery pack that was added to the rear of the vehicle, allowing it to be charged from a regular electrical outlet.  This allows the Prius to run on all-electric power for a greater percentage of time, resulting in 100+ MPG. 

Imagine what a fleet of PHEV’s getting 100+MPG would do to our dependence on foreign oil.  Urge your elected officials to support tax credits for PHEV ownership, and ask them to help encourage our auto companies to quickly bring new PHEV’s to market.   Ask them to spend some of the existing $35 Billion in taxes that ExxonMobile paid last quarter on supporting alternative energy sources.  Toyota and Honda currently lead the field in electric hybrids, and if our auto industry truly does not want to become irrelevant, they need to quickly bring more hybrids and PHEVs into production immediately.

If you think you might be a potential sponsor you can contact PHEV3A’s Co-Chairs, Joseph Lado, at the virtual PHEV3A operations Center (Poc) by emailing joelado@yahoo.comand “on the Road” PHEV3A driver “EVJerry” Asher at EVisionA2Z@usa.net.  You can keep up to date on their progress at their blog.

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Electrifying Hoedown Spurs Shocking Powers

This September a human-powered sustainable dance club, called Club Watt by its owners, opens its doors in Rotterdam, Netherlands.  Club Watt proposes to power the club through human power.  This ultra-green dance club is deadly serious about taking themselves off-grid.

They create their energy through a high-tech floor that captures the movements of the dancers above and produces electricity down below.  Heavy duty coils and magnets provide the means of turning the moving floor into power.  The electricity is than stored in heavy-duty batteries and used as needed to power the Clubs’s sound system, lights, etc.  However, even with the high-tech floor, human power will only provide ~30% of the Club’s required energy.  The shortfall will be made up with solar power and a wind turbine.

What the company’s press release does not explain is that the average human only generates about one kilowatt-hour (kWh) per day.  At that rate, tapping into human energy to generate power proves to not be very efficient.  In the US, one kWH costs about a Quarter.  Obviously human energy will not be the US’s long-term solution for energy independence.

Human Power turns out be a great marketing tool for trendy companies that want to appear to look green, but in economic terms, it really does not make any sense.

If you think that this is shocking, read this.

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ExxonMobil pays World Record $32 Billion in Taxes during Q2

Exxon Mobil Corporation (NYSE:XOM) released yesterday that they paid an astonishing $32 Billion in taxes during the second quarter of 2008.   Apparently the federal and state governments have made out like bandits, cashing in on the rising price of crude oil. 

These new taxes outstripped the oil giant’s tax bill in the first quarter of this year. Given current oil market conditions, analysts said, that puts Exxon Mobil on track to break the record $100 billion in taxes it paid last year.

Meanwhile, Presidential candidate Obama sought to show that he was responding to calls for action in the face of rising gasoline prices.  Campaign officials said later, however, that they didn’t know when or how the candidate would use his future authority to increase taxes further.  Various Congressional committees and individual lawmakers scrambled to offer no relief to the already heavily taxed company.

Newsmakers were quick to point out that the amount of taxes that ExxonMobil paid works out to $4,114 in taxes per second.  And, every American would have had to pay an extra $100 last quarter if ExxonMobil did not pay their fair share of taxes.   

Due to the high level of taxation, capital and exploration project spending only increased to $7 billion in the second quarter.  Given the heavy tax burden, the company stock price slumped another 2.7%, causing losses in millions of 401K owners portfolios.   Over $10 Billion in value was wiped out of stock investor’s holdings after this announcement.  Individual investors are calling for tighter regulations on Big Government, demanding new WindFall Tax protection.

EXXON MOBIL CORPORATION
  SECOND QUARTER 2008
  (millions of dollars, unless noted)
                   
      Second Quarter   First Half
      2008   2007   2008   2007
  Earnings / Earnings Per Share                
                   
  Total revenues and other income   138,072   98,350   254,926   185,573
  Total costs and other deductions   115,866   80,422   212,528   151,581
  Income before income taxes   22,206   17,928   42,398   33,992
  Income taxes   10,526   7,668   19,828   14,452
  Net income (U.S. GAAP)   11,680   10,260   22,570   19,540
                   
  Net income per common share (dollars)   2.25   1.85   4.30   3.49
                   
 

Net income per common share – assuming dilution (dollars)

  2.22   1.83   4.25   3.45
                   
  Other Financial Data                
                   
  Dividends on common stock                
  Total   2,098   1,961   3,977   3,786
  Per common share (dollars)   0.40   0.35   0.75   0.67
                   
  Millions of common shares outstanding                
  At June 30           5,194   5,546
  Average – assuming dilution   5,261   5,620   5,311   5,665
                   
  Shareholders’ equity at June 30           124,826   116,350
  Capital employed at June 30           136,749   126,520
                   
  Income taxes   10,526   7,668   19,828   14,452
  Sales-based taxes   9,538   7,810   17,970   15,094
  All other taxes   12,297   10,665   23,904   21,073
  Total taxes   32,361   26,143   61,702   50,619
             
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Why is your Electric Company Stealing your Money?

Our monopolized electric utilities are one of the major sources of energy waste in our country.  There is a built-in system that allows them to build larger and larger power plants, passing along those costs to the consumer.  Because most utilities make a fixed percentage on their total revenue, as mandated by local state utility commissions, the only way to make additional profit is to sell you more energy!  These utilities have no built-in incentives to help consumers lower their overall energy use, as that would clearly take away from their profits.

Like many energy and pollution related matters, California has been leading the way at solving these issues.  Often derided as wacky, California has provided much needed leadership in re-thinking the energy monopoly that the utilities control.  Some measures have failed, everyone remembers the rolling blackouts earlier in the decade, however in other areas they have had very positive results.

Specific new regulations allowed utility company profits to no longer be tied to how much electricity they sell.  This is often called “decoupling”, and allows utilities to take a share of any energy savings they help consumers and businesses achieve.  Now California utilities make money when their customers save money.

So why is this a big deal?  Now the utility can make investments in increasing energy efficiency, and make a profit on the long term energy savings.   For example if the utility spends $5 million to replace all state traffic lights with new high efficient LED traffic lights, they than can profit in the $10 million yearly savings, not only in the first year, but in future years as well.  This causes energy-efficiency investments to become just as important to the utility as building a new power plant.

Sound like a good idea?  Some experts are saying that the US could reduce our overall electrical usage by almost half if adopted nationwide.  This is a realistic, and actionable, way that we can move towards energy independence.  If you agree, call or write your elected officials today and tell them that you want the public service commission in every state to allow utilities to receive the same profits on energy efficiency as they are allowed to receive on generation.

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Bye, Bye, Nancy. Hello General David Petraeus

Time to push Nancy’s picture down the page. 

First off, I have the utmost respect for General David Petraeus, and I truly appreciate his service to our country.  We need more individuals with the strength and courage to fight for our country.   But….

Yesterday the General said “If you could reduce these sensational attacks further, I think you are almost approaching a level of normal or latent violence”.  Somehow using the word normal after 56 people are killed, hundreds injured, all due to four woman suicide bombers just does not seem appropriate.  Are we in a world where 4 people blowing themselves up is normal?  Are we in a world where 56 people killed in a bomb blast is normal?

I guess some folks would argue yes, however I personally feel that it was an unwise choice of words.   If we really want to get back to normal, we need to stop sending 800 billion dollars a year to the Middle East as payment for their oil.  Let’s become energy independent, and reduce our dependency on a group of people that hate us.

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Weekend with Nancy

Nancy Pelosi

Nancy Pelosi

Our Congressional leaders sure wanted us to know that they were working hard this weekend.   In scanning just some of the headlines in various publications, they kept using the phrase, “the Senate in a rare weekend session”.  Are they trying to make us think they are actually working hard for us?  Or do they feel sorry for themselves?

It all reminds me of co-workers who send email messages to the CEO at 2AM to “impress” him with how hard they work.  Give me a break…  Our elected representatives need to be working harder for us, they need to spend less time worrying about getting re-elected, and more time worrying about our nation’s problems.  And in my opinion, the issue everyone should be focused on is energy independence.

So what was Nancy Pelosi working on this weekend?  Uh, making sure that Congress does NOT vote… Instead of dealing with the issue of offshore drilling, House Speaker Nancy Pelosi (D-Calif.), a staunch opponent of well, everything, has simply decreed that she will not allow an offshore drilling vote to take place on the House floor.   So, why will she not allow a simple vote?

“What the president would like to do is to have validation for his failed policy,” said Nancy yesterday when asked that very question. “What we’re saying is, ‘Exhaust other remedies, Mr. President.’ . . .

We can debate if offshore drilling will solve our issues, but at least bring the topic up for vote.  Ignoring the problem, and hoping that other remedies just show up, is short-sighted, and anti-democratic.

Share your views here.

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