Category — Energy Security

Today and tomorrow, the House Energy and Commerce Committee will mark up H.R. 3548, the “North American Energy Access Act,” Rep. Lee Terry’s (R-Neb.) bill to nullify President Obama’s rejection of the Keystone XL Pipeline. The bill requires the Federal Energy Regulatory Commission (FERC) to issue a permit for the pipeline within 30 days of receiving an application. If FERC fails to act on the application within the 30-day period, the bill deems the permit to have been granted.

Waxman and Markey: From Cap-and-Trade to Ban-the-Trade

Committee Democrats lack the votes to defeat the bill, but they hope to use the markup to turn the rhetorical tables on Republicans, who claim Keystone XL will enhance U.S. energy security by reducing our dependence on Middle East oil.

Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) will offer an amendment barring exports from the USA of any Canadian oil shipped via the pipeline and requiring all petroleum products made from Keystone crude to be sold in U.S. domestic markets.

Waxman and Markey know full well that such restrictions would impair the profitability and competitiveness of U.S. refiners, potentially causing them to back out of the long-term sales contracts they negotiated with pipeline builder-operator TransCanada Corp. They know, in other words, that the amendment could scuttle the Keystone XL project and, therefore, that Republicans will vote against it.

But that’s the point. By forcing Republicans to vote no, Waxman and Markey hope to ”expose” Keystone XL as an “export pipeline” and, thus, supposedly, as an energy security “scam.” The question they’re likely to pose again and again: If you Republicans really believe the pipeline will reduce U.S. oil imports from unstable, undemocratic, or unfriendly countries, then why won’t you guarantee in law what you say is going to happen anyway? [Read more →]

Hadrian, the third of the “five good emperors” of Rome, ruled from 117 to 138 in a time of consolidation of the Roman Empire.  Best known for building Hadrian’s Wall, which marked the northern most reach of the Roman Empire, his policy focus was securing the Empire by leveraging its strengths rather than overextending its reach. Hadrian had a disciplined attention to detail and focused on the infrastructure needed not only to defend the Empire’s territory but leverage its resource potential and revenue growth. 

Today’s economy is marked by uncertainty and volatility at home and abroad. This uncertainty is causing businesses to hoard cash—at last estimate about $1.4 trillion worth.

We have a huge federal deficit, a broken housing situation, and looming costs for unsustainable entitlement programs promised for generations by spend-now, pay-later politicians. Incrementalism is becoming unsustainable in the face of these mega-problems.

Most Americans want their president to succeed, but Obama’s policies seem out of touch with our economic realities, his style too partisan, and his poor performance leaving “Yes We Can” blowing in the wind. Next year’s election portend a sharp break from the more-rather-than-less government status quo of President Obama.

America Is Not Alone

Emerging markets around the world—including China, Brazil, and India—face daunting economic problems. That adds to uncertainty because faster emerging-market growth was expected to help developed-world countries recover.  Instead they face rising inflation, rising wages, falling exports as prices rise and thus slower growth and weakening economic fundamentals.

The MSCI Emerging Market equity index fell 0.6% year to date after rising 16.4% in 2010 and 74.5% in 2009. Brazil’s and India’s government yield curves are inverting with short-term rates higher than long term yields screaming “recession ahead,” as investors take lower long-term rates anticipating declining yields in the economic contraction. [Read more →]

In the last few weeks, rhetoric about America’s oil addiction has resurfaced, years after being pushed by former President George W. Bush.  It is meant to explain the inability of Americans to become energy independent or at least to significantly reduce consumption.  The implication is that consumers are either foolish or brainwashed, and that the government is a slave to the oil industry’s lobby. 

I submit that this claim reveals an ideological bias, as well as a degree of energy illiteracy.  

Such illiteracy is not new and is often battled by economists.  For example, when I was at MIT, one class was taught by an engineer who believed that oil was underpriced because it cost less than mineral water.  I didn’t have the heart to tell him that this is a common misconception:  the prices of the two are completely unrelated.  

Now there is a new litmus test for energy illiteracy, namely the claim that America is ‘addicted to oil.’ Those stating this are either being less than honest (politicians and special interests) or have failed to comprehend either addiction or economics.  For example, why say Americans are addicted to oil, but not food, housing and clothing?  Or cement or steel?  It is easy to compare the traditional types of addiction with the reliance on these substances to see where oil falls on the spectrum.

What is ‘Addiction’? 

Addictive substances typically cause changes in brain behavior, create a sense of euphoria but also reduce productive activity, making citizens less capable and/or less interested in being productive.  They serve primarily to stimulate pleasure and often distort mental processes, creating biochemical dependencies to the point where those consuming the substances sacrifice their careers, livelihoods, families and everything they hold dear to acquire it on a continual basis.  While there are many functioning addicts, there are also huge numbers whose lives have been ruined by their addictions.  (Just watch “Behind the Music” on VH1.) [Read more →]

The U.S. Chamber of Commerce’s Institute for 21^st Century Energy recently unveiled the “first-of-its-kind” Index of U.S. Energy Security Risk.  The U.S. Chamber in general does a lot of good work. I am a big fan of them than when they push for free-market capitalism instead of political capitalism, which is not always the case. But this report is disappointing to say the least. A thorough start-over should be considered.

The report, in its own words, provides “the first quantifiable measurement of energy security based on 37 individual metrics.” But herein resides a major problem. With so many inputs for  calculation, a definition of security is required.

But there is no such definition. We learn that the Index “addresses the need for an overarching framework with which to measure energy security in all its facets” (page 14). Shortly afterward we find that it “is designed to convey the notion of risk” (page 16). A “notion” is akin to what musicians say about “soul”: if you have to define it you can’t possibly understand it. But scholarship about energy security ain’t about soul.

Rotisserie Energy Security

The index is a weighted average of the 37 pieces of data, normalized to range from zero to 100. Even if you don’t know what’s in it you can learn a lot just by looking at the numbers. [Read more →]