Tag Archives: oil revenues

Nuclear revival in the US?

Yesterday, the NY Times had an article about US funding for 2 new nuclear plants in Georgia (the state, not the country).  I am cautiously optimistic about this project, while at the same time dreading it.  I have long been a supporter of nuclear energy, since the science behind radiation is much more well understood than the interactions related to climate change.  However, I believe that supporters need to be clear in what nuclear energy is, and is not.

In so much as it is used to replace or prevent construction of coal burning (or probably natural gas as well) power plants, this is a good idea.  However, nuclear energy is not emissions free.  Concrete is associated with large quantities of CO2 emissions, and uranium mining has its own environmental drawbacks based on how it is performed.  More importantly, there is no federal repository for nuclear waste.  Instead it is collecting at the individual nuclear power plant sites across the US.

Regarding overall CO2 emissions, I am a fan of nuclear because it can provide low emissions baseload power.  That is, they can run essentially 24/7.  They are highly reliable as well, and are not intermittent (nor do they have the associated problems with intermittent).  Perhaps one day, in a few decades, other alternatives might be cost effective and reliable, such as storage, but until then, we need something that can reduce baseload emissions in a (fairly) clean manner.  And, I believe, that nuclear power is the best way forward…. for now.

Sarah Palin, Cap and Trade, and Environmental Taxation

Sarah Palin had an op-ed in the Washington Post today, “The ‘Cap And Tax’ Dead End“.  I do not believe that she is at all qualified to be making ANY statement on energy, despite her touting what Alaska is doing.  Her actions in Alaska are far different than her words, she is not an economist, and her knowledge on the impacts of climate change in the far north is woefully inadequate.

First, the areas she is correct about:

1) A Cap and Trade or Carbon Tax would cost jobs by making energy more expensive.  However, the detrimental impacts of environmental taxation have almost always been overstated, and the benefits understated. 

2) Energy prices will rise.  However, energy prices have been rising steadily for the last few years, due to slowing growth, expense in transportation, ongoing unrest or war in the Middle East.  By raising prices, consumption (to a certain minimum necessary level) will fall, reducing the cost impact.  Also, under a tax or auctioned trade system, the neediest families could receive credits for their energy bills, reducing the detrimental effects upon their income and quality of life. 

3) Alaska is building a big pipeline, and there is a lot of coal in the US.  However, despite what she says about tapping into just a small segment of ANWR, the way the proposed legislation has been written, hundreds of miles of pipelines could be used to connect very small blocks used for active drilling.

Now, on to the numerous areas where Gov. Palin’s op-ed piece is filled with fallacy, lies, and contractions.

1) A higher price on goods will decrease reliance on what she calls “outsource[ing] [energy production] to China, Russia and Saudi Arabia”, through decreasing, or slowing demand growth.  Assuming that energy consumption has any long-term price elasticity (basically, demand will decrease at a reasonable rate as price increases) then higher prices through cap and trade or an environmental tax will reduce overall energy reliance, including foreign production.

2) Gov. Palin claims that “particularly in Alaska, we understand the inherent link between energy and prosperity, energy and opportunity, and energy and security.”  Which is precisely why, in 2008, as Governor of Alaska, she signed into law (while the GOP in Washington managed to get federal legislation canned) an oil windfall profit taxfor energy companies in Alaska.  “Palin’s administration last week gained legislative approval for a special $1,200 payment to every Alaskan to help cope with gas prices, which are among the highest in the country.”(1)  Amazingly enough, even with this windfall tax, the pipeline project Gov. Palin has been developing is still occurring.

3) The environmental consequences of climate change, natural resource extraction, and the benefits of reduced pollutant emissions are not touched upon.  Regardless of whether or not you believe in climate change, there are well known costs paid in the forms of health bills and deaths due to asthma, damage from acid rain, and damage to the environment from energy extraction and transportation.

In many cases, the polluter pays principle is not applied.  Instead we, as Americans and as inhabitants of Earth, end up paying the bill.  Shortened lifespans, chronic health problems, property damage from environmental devastation, and reliance on foreign, non-democratic regimes for oil, are the price we have so far generally been willing to pay for cheap oil and gas.  Energy which is more expensive in Europe, yet their economies still run. 

It also fascinates me, that Alaska, which will see the greatest disruptions from climate change (regardless of naturally occurring or done by man), has such a spokesperson who does not see the link between warmer temperatures and the threat to the very infrastructure which provides so much wealth to Alaska.  As temperatures increase, the permafrost is in danger of melting – causing potentially catastrophic damage to the pipeline networks and infrastructure connecting remote oil and gas fields with their markets in southern Alaska and the US.

I will close with some advice to Gov. Palin, since her stated goal is “let me make clear what is foremost on my mind and where my focus will be: I am deeply concerned about President Obama’s cap-and-trade energy plan, and I believe it is an enormous threat to our economy. It would undermine our recovery over the short term and would inflict permanent damage.”

Study and focus on the issue from all angles.  Read articles and sources you might not presently believe in, and read them for their scientific merit.  Focus on the long-term, and not the short term.  What does America need to do, rather than want to do?  What does science and logic tell us?  Assess the threat posed by climate change, by reliance on a finite natural resource, and focus your energies on that. 

Once you have done that, and only then, come back and tell us what your focus is, based on reasoned fact, presenting both sides of the argument, and then let your conclusions rest on those merits, rather than fear-mongering about theoretical damages to the economy, which have not been proven out in other developed economies who have placed environmental taxes on harmful actions.

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Iraq, Oil and Gas Auctions, and Oil Revenues

Iraq recently held its oil and gas auctions. Despite persistent belief to the contrary, and despite the fact that the energy companies threatened to not participate, or asked for higher revenues, guess what happened? They bid in, an accepted the government rates in many cases.

A few areas are still too hot for the companies to enter. Too many attacks, too risky, too expensive. But the calmer areas still received bids, even if it was only a single bidder.

My advice to the Iraqi’s? Hold out.

Norway did it in the 1960s. They wanted vastly higher prices than most analysts and companies considered realistic, in an area that was considered too environmentally hostile to drill.

Guess where the Norwegians are today – one of the richest countries (both per capita and in gross wealth) in the world, with plenty of oil still left, with areas farther north considered for exploration. By wise management and ensuring that Iraqi objectives are met for what they want to do with their oil revenues, Iraq could truly transform the country into something amazing. However, if typical petro- politics and economics are allowed to prevail, they will lose out big compared to what they could have.

Iraq owns precious resources that are in high demand. As such they can extract a high price, but wise management is needed to balance the economy between oil revenues and economic transformation.