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By Andrew Holland on May 2, 2013 with 3 responses

Why Oil Prices Will Remain High Despite the U.S. Oil Boom

oil-drillingThe U.S. is experiencing a boom in the production of oil. Only since the beginning of 2011, oil production in the U.S. has gone up by 30%, from 5.5 million barrels per day (mbd) to 7.2 mbd. Just this week, the U.S. Geological Survey announced that the amount of technically recoverable oil in North Dakota was tripled from a previous estimate – so this boom is unlikely to fall away in the short term.

At the same time, U.S. and European demand for petroleum products are declining. The economic troubles in the Euro zone have dampened economic activity (and petroleum demand), while in America, economic growth has returned, but the consumption of petroleum products are down as consumers change habits and lifestyles to drive less. At the same time, the low price of natural gas, particularly in the United States due to the boom in shale gas production, has some analysts predicting that gas will increasingly act as a substitute for oil whenever possible.

Given all this – an increase in production of oil coupled with a decline in demand – an elementary Economics 101 class would say that prices should be in a steep decline. Over the past several months, there have been a slew of articles predicting that oil prices are bound to drop.

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By Andrew Holland on Apr 25, 2013 with 1 response

U.S. – China Agreement on Climate Shows Promise

Kerry-China

Joint Statement on ‘Dangers’ of Climate Change

A few weeks ago, Secretary of State John Kerry went to Beijing to meet with the leadership of the Chinese government. This meeting was mostly noted in the press as an effort to defuse tensions in the ongoing crisis over North Korea – and clearly that was important; there has been a notable ratcheting down of tensions since then.

However, over the long term, there was an agreement that came out of the meeting that could be much more important to the world’s future stability and security – a joint U.S. – China Statement on Climate Change. It was so overlooked in the press, that I missed it for the last two weeks. The statement indicated that the U.S. and China recognize the “dangers presented by climate change” and that a “more focused and urgent initiative” is needed.

(Related: International Action on Climate Change for Obama’s 2nd Term)

This statement is invariably true – and these two countries are in a position to have an impact. Together, China and the United States are the largest emitters of greenhouse gases in the world, with 29% and 16% of global emissions, respectively. Like Willie Sutton and the Banks, if you want to affect greenhouse gas emissions, start where the emissions actually are.

Mutual Concern About Present Day Impacts

Importantly, the statement notes that the reasons for each country’s mutual concerns about climate change come from the impacts that are already being seen. The statement lists ocean acidification, Arctic sea ice loss, and the “striking incidence of extreme weather events” as reasons for concern about climate. Climate change has moved from being a hypothetical worry in world politics (this will harm us) to an actual threat (this is harming us).

This agreement is important because it will catalyze action by each country at the national level, it will open up areas of cooperation between the two, and it could act as a signal to international negotiations, leading to an ambitious UN agreement.

Formally, the agreement will create a new Climate Change Working Group in the annual U.S. – China Strategic and Economic Dialogue (S&ED). The S&ED was the brainchild of then-Secretary of the Treasury Hank Paulson, with the first one taking place in September, 2006. Over the last six years, the S&EDs have successfully brought together the highest levels of both governments to meet and discuss important areas of the bilateral relationship. Mostly, however, the discussions have focused on economic and trade issues.

Creating a Climate Change Working Group will ensure that the highest levels of government are forced to deal with the problems of climate change.

Forcing Entrenched Bureaucracies to Collaborate

One of the key reasons why this agreement is important is not even the potential areas of cooperation between the countries – it is the action it will generate within each country’s government. In the United States government (I can’t speak with any familiarity about the Chinese government), it will force entrenched bureaucracies to deal with one another on climate and environmental issues. There is often a tendency in government for issues to become ‘stovepiped’ – and on climate, which is pegged as an environmental issue, but is actually a cross-cutting issue of energy, trade, economics, national security, and more, the stovepipes have not worked.

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By Andrew Holland on Apr 18, 2013 with 10 responses

Why I’m Done Talking About Energy Security

Meaningless Buzzword

I work on energy policy for a national security think tank, so I am often asked to talk about energy security. Last week, I participated in a conference in which we were asked to comment on “U.S. Energy Security: How Do We Get There?” As I listened to the presenters at the conference, I realized that how you viewed the problem of ‘Energy Security’ depends on how you identify it. We all seem to have determined that energy security is a problem, but we each had different understandings of what the term ‘energy security’ actually means! Of course, that means there were very different prescriptions for how to ‘solve’ the problems of ‘energy security.’

In the absence of a definition, everyone defines energy security differently –both speakers and listeners. It is something like the late Margaret Thatcher said about the politics of consensus: “it is something in which no one believes and to which no one objects.” Along those lines, I believe that ‘energy security’ has devolved into simply a buzzword: a phrase that everyone favors, but defines differently. Pundits, politicians, lobbyists, industry, and campaigners from across the political spectrum cry ‘energy security’ because it polls better than their preferred policies. I have done it as well. Listeners, then, are misled because, really, who could actually be against ‘energy security?’ It is like being against mom, America, and apple pie.
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By Andrew Holland on Feb 13, 2013 with 1 response

Arguments About Coal Exports to Europe Miss the Point

Europe’s Emissions Cap

coal-terminalRecently, there have been a spate of articles in the press saying that Europe’s increasing imports of coal undermines  their leadership on climate and their ‘green’ credentials.

This shows a fundamental misunderstanding of the European Emissions Trading Scheme (ETS) in particular, and the nature of a market-based emissions cap (AKA cap-and-trade) system in general.

Granted, the ETS is an imperfect cap because it only covers about 45% of total emissions in the EU – most notably it does not include emissions from home heating or automobile transportation. Importantly, though, it does cover major industrial emitters and utility-scale electricity production, which are the major users of coal.

(Read More: Global Carbon Dioxide Emissions — Facts and Figures)

However, the articles continually say things like this, in Friday’s Washington Post: “Green-friendly Europe has a dirty secret: It is burning a lot more coal.” The schadenfreude exhibited in these articles is unrelated to Europe’s actual record on climate policy.

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By Andrew Holland on Feb 7, 2013 with no responses

International Action on Climate Change for Obama’s 2nd Term

What Can Obama Do?

The President has begun his second term in office by saying that he will act on climate change, stating in his inaugural address: “We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.”

However, the question now becomes: what can President Obama do about climate change? He made action on climate change a central argument during his 2008 campaign and early in his first term, but failed in the effort to pass major emissions reduction legislation through Congress. While the stimulus had many important clean energy sections, it is unclear whether these will result in lasting changes in our economy.

Market-Based Actions Are Most Effective

Having tried and failed to pass major climate legislation through Congress in 2009 and 2010, and knowing that a polarized Congress is unlikely to address this again in the next few years, I believe that the Administration will move towards a two-pronged approach that uses regulation at home, but prioritizes action on climate as a tool of international relations.

(Read More: Why Climate Change is a Matter of National Security)

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By Andrew Holland on Jan 16, 2013 with 2 responses

One Year On From the Keystone Pipeline Rejection

Background

A year ago, President Obama, under pressure from a deadline set by House Republicans, rejected the application of TransCanada for the Keystone XL pipeline that would pump Canadian crude from Alberta to the American gulf coast.

With a new decision on the Keystone XL pipeline due in the first quarter of 2013, according to the State Department — a  date that may slip according to some observers — it is useful to assess the actual effects of not building the Keystone pipeline on Canadian oil production and North American energy markets.

(Read More:  Obama Under Increasing Pressure to Make Keystone XL Decision)

Stopping the Keystone XL pipeline was touted as a big win for environmentalists, who had set their sights on Keystone XL as a big target. As Bill McKibben often quotes NASA scientist James Hansen, using the entire resources of Canada’s oil sands would mean “game over for the climate.” Once complete, Keystone XL would have a capacity of up to 1.1 million barrels of diluted bitumen per day – 54% of Canada’s total bitumen production (note: bitumen is the crude product from production in the oil sands).  So, for groups like McKibben’s 350.org, the goal of stopping the pipeline was to slow and eventually stop the exploitation of Canada’s tar sands. The thought was that if environmentalists could stop the building of the Keystone pipeline, they could prevent Canada from having a market for their oil, and thereby production would slow and eventually stop.
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By Andrew Holland on Nov 14, 2012 with 1 response

Why Are Permits Needed for LNG Export Terminals?

Liquefied Natural Gas (LNG) Export Terminal Approval

Last year, the Department of Energy (DOE) granted Cheniere Energy a permit to export liquefied natural gas (LNG) from a terminal at Sabine Pass in Louisiana. The terminal is currently used as an LNG import terminal, but the company has plans to convert it into an export terminal, with exports beginning by 2015. The permit has been challenged by the Sierra Club, but is expected to be approved.

However, there are about 15 total other permit applications outstanding, with only the one permit accepted. After approving exports from the Sabine Pass terminal, the Obama administration put a hold on further approvals until a Department of Energy study on the economic implications of exports is completed. That study was originally due out in March, then the DOE said it would be released by the end of the summer, now the study is expected before the end of the year. (Read more: Investment Opportunities in Natural Gas)

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By Andrew Holland on Oct 22, 2012 with 17 responses

Why Nuclear Fusion is Worthy of Further Research and Government Investment

Last week, I spent two days at the International Atomic Energy Agency’s 2012 Fusion Energy Conference in San Diego. The conference, sponsored by the U.S. Department of Energy’s Office of Science and General Atomics, brought together about 1000 fusion scientists from around the world to meet and discuss the state of the art in scientific research to develop fusion energy.

Fusion is a technology that holds great promise in meeting our energy needs. By fusing together two hydrogen isotopes – deuterium and tritium – enormous amounts of energy can be produced, as predicted by Einstein’s equation, E=MC2. The heat from this reaction creates steam to spin a generator just like any other electricity power plant. Since deuterium comes from ocean water, and tritium can be bred from lithium, fusion holds the promise of providing a nearly inexhaustible supply of energy, with no pollutants, no greenhouse gases, and no radioactive waste. There is no threat of a nuclear meltdown like there is with the nuclear fission reactors of today.

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By Andrew Holland on Oct 17, 2012 with 4 responses

Wind Tax Credits and the State of Solar: A Discussion With Admiral Dennis McGinn

Vice Admiral (Ret.) Dennis V. McGinn, the President and CEO of the American Council on Renewable Energy (ACORE).

Recently, I sat down to speak with Vice Admiral (Ret.) Denny McGinn, the President and CEO of the American Council on Renewable Energy (ACORE). Adm. McGinn  served for 35 years in the Navy as a naval aviator and test pilot, rising to command an Aircraft Carrier, and ultimately the 3rd Fleet. His final position on active duty was as Deputy Chief of Naval Operations for Warfare Requirements and Programs at the Pentagon, which helps scope and develop the Navy’s capabilities for the future.

State of the Solar Industry

We had a wide ranging discussion on renewable energy issues, touching on issues that will be familiar to regular readers of my blog column, including the rapid growth of solar power and the challenge of Chinese competition, wind power, the military’s transition to clean energy, and the politics of renewable energy. I’ve divided the interview into two blog posts. In this one I will talk about wind and solar, while I will focus on the military in the next.

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By Andrew Holland on Sep 27, 2012 with 15 responses

High Cost Prevents Electric Cars From Penetrating the Market

We see this week news that Tesla is having trouble meeting it’s loan repayment schedule, and faces a need to raise more money on the markets. Combined with this week’s pronouncement from the chief of Toyota against electric cars and lackluster sales of GM’s Volt that have forced the company to reduce production, it seems there are more troubles ahead for electric-driven cars.

I believe this shows that pure electric cars are not yet ready for the consumer market. They are both too expensive, and they don’t meet the needs of consumers for range and performance.

Tesla and Fisker, in particular face consumer challenges that the traditional car makers do not face. As a start-up, they have to convince customers that they can both make a reliable car, and their small dealer network will be able to maintain the cars when they need servicing and repair. (See more: CBO: Electric Cars Will Flop, Despite $7.5 Billion in Subsidies)

The US government provides a tax credit of up to $7500 for purchasers of electric or plug-in hybrid cars. But, for cars that range in price from about $35,000 for the Leaf, to $45,000 for the Volt, to $57,000 for the baseline Tesla Model S, that does not drive the price down to a place where it would be competitive with high efficiency traditional gasoline-driven cars, or even hybrids, which are probably the source of the most competition.

The problem, in short, is that the battery-only cars (Leaf, Tesla, Fisker) are inferior cars at a higher price point.

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