Congress Allowing Renewable Energy Incentives to Expire

The incentives for wind and solar, which industry analysts say are providing a healthy kick to the market, are up for renewal and stalled in congress.  This is not the first time that congress is haggling over the tax credits.  Republicans, it seems, are trying to stop the bill unless it includes a provision for expanding offshore oil driling.  This is the same drilling that will impact gas prices never, and come into the supply in ten years.  What it will do is make some old rich white guys more rich.

No one actually expects the energy credits to expire.  But much of the industrial capital investment in the sector is planned years in advance, and amounts to billions of dollars.  By toying with the credits like they do, congress is making the investment atmosphere exceedingly difficult for those trying to find some consistency in the market.  A more permenant and stable regulatory atmosphere, one way or another, would calm a lot of nerves about the short to medium-term future of renewables in this country.

I hate to beat a dead horse, but….

Can it be any more obvious that the way to reduce oil consumption and greenhouse gas emissions is to raise taxes on the stuff?

Industry Rule #4080 – Peak Oil

In case you haven’t seen the commercials, Daimler A.G. (a.k.a. Chrysler LLC, a.k.a. DaimlerChrysler prior to the Cerberus group purchase last year) has recently launched a promotional campaign in which, in exchange for buying or leasing a new car (see Marc’s earlier post for the environmental cost of doing so), Chrysler promises to pay the difference in price if gas exceeds $2.99 per gallon. 

I think it’s fairly obvious why I tie this marketing scheme to the exploitation of ‘peak oil’ fears.  Such a promotion treats the peak oil theory as a foregone conclusion, with Chrysler as the consumer’s saviour in a world where oil prices inevitably rise.  So what’s the problem here?

See this report from Wednesday on how peak oil fears are driving up the price of long-term oil futures contracts.  While there are substantial differences between the oil market and the collapse of the subprime market, a parallel exists:  investors are betting on price inflation, long-term in the case of the oil market, as a means of enhancing today’s portfolios.  This may be the point of the futures market, but it needs to be highlighted that the benefit of a substantially lower price of oil becomes nil to all but the biggest risk-takers (who are betting against the trend) in such a scenario.  The short-term prospects are, of course, pretty much the same.  In other words, Chrysler and most investors are banking on the price of oil not dropping below $2.99 a gallon.  If the price does fall, those futures contracts become unsound.  The price may actually be above or below $140, but $140 is indeed the standard.       

The question follows:  how is the price of oil kept up?  Dave Emory, while not contending the basic peak oil thesis, is pretty obsessed with the idea that peak oil exploitation, like most other economic winds, has ties to the Underground Reich and the Bormann capital network, mainly based on an 1929 agreement between I.G. Farben and Standard Oil in which the rights to a synthetic oil process were divided.  This is basically the “They have the solution, but will keep milking the oil cow” argument, but it’s fascinating to see how far back peak oil exploitation goes and how the fears keep getting recycled.  A quote from an article from Liberty:

“In 1920, the United States Geological Survey officially estimated that the U.S. had just 6.7 billion barrels of oil left, including undiscovered oil fields. Eighty-two years later, the U.S. had produced 180 billion barrels of oil and still had 22 billion barrels of proven reserves. The USGS’s 1920 estimate was off by a mere 2900%.”

And, of course, there’s always flat-out lying done by ‘independent’ NGOs that are financially backed by the Bush administration to pursue an anti-Chavez agenda.    

Mainly, the confusion itself generated by the peak oil theory basically turns it into a self-fulfilling prophecy.  Do we have enough?  Have we hit it?  This is the line of reasoning that Chrysler’s ad campaign buys into, and it benefits no one but the oil industry. 

On that note, check out this Dilbert cartoon:

Some Basic Iraq War Math

Some will still argue about whether or not the Iraq was was really about oil. But look around the globe, and notice that we haven’t invaded Sudan or Zimbabwe. We haven’t invaded North Korea or Myanmar or the Congo or Somalia[caveat]. All those countries have political situations similar in severity to, or worse than, Iraq before the US invasion.

Now let’s run a few numbers.

Oil is necessary to the world economy, and having reliable sources of oil is, for the moment, absolutely vital. The US consumes in the vicinity of 150 billion gallons of gasoline a year, or 411 million gallons per day. That has a current market value of around $550 billion at current gas prices, which it should be noted are significantly higher than at the start of the Iraq war.

So far, the US has spent about $520 billion on the war in Iraq, and estimates show the cost will likely exceed $1 trillion, and possibly much higher. This does not include the cost of life. 4073 US soldiers have been killed in Iraq, and 29,978 have been wounded as of the end of April 2008. The value of life at a personal level is infinite, but researchers can come up with a society-wide number, and for military age people it is about $7 million per life. That puts the value of the soldiers’ lives at $28.5 billion. The army also makes payments to injured servicemen and women which average to about $75,000 per person. That puts the value of the soldiers’ injuries at about $2.25 billion (although this figure may be included in the estimate at the beginning of the paragraph).  This equates to a rough estimated cost of about $550 billion.

Instead of fighting a war over oil, the US government could have subsidized free oil for every car, truck, train, airplane, factory, house, office, school, and moped in the country for an entire year at current war-inflated prices.

In such a case, we would also have spared the lives, injuries and psychological damage of our soldiers abroad.

There are innumerable other factors as well, from very complicated financial ones such as the war’s impact on the deficit, interest rates, and cost of credit, to humanitarian ones like how the national guard was ineffective during hurricane Katrina, to simpler ones like lost (wasted) political time in dealing with the war.  We have also utterly soiled our international reputation as a nation.  I could never take them all into account, but it is always an interesting thought experiment.