January 13, 2011

One last, excellent wordabout the Frances Beinecke Commission before it fades into obscurity.Washington Examiner. It wasn’thard to predict the sort of recommendations to expect from the seven-memberNational Commission on the BP Deepwater Horizon Oil Spill and Offshore Drillingwhen President Obama appointed Natural Resources Defense Council PresidentFrances Beinecke, Union of Concerned Scientists board member Fran Ulmer andfive other Democratic donors to the panel. All seven oppose offshore oil andgas activity and are environmental movement stalwarts. For example, just beforeObama appointed her, Beinecke said, "We can blame BP for the disaster, andwe should. We can blame lack of adequate government oversight for the disaster,and we should." True to form, the commissionmade its findings public Tuesday. They can be summarized in one sentence: It’sall the energy industry’s fault and the only acceptable solution is moregovernment regulation and jobs for Big Green environmentalists.

Wonder What a Double Dip RecessionLooks Like?Reuters. Oil rose onWednesday after production shutdowns, falling U.S. inventories and growingdemand sent Brent crude toward $100 a barrel for the first time since 2008.U.S.government data showing U.S. crude stocks falling for a sixth straight weekhelped extend this week’s gains. Disruptions from Alaska and Norway stokedsupply concerns and cold weather in the U.S. Northeast fed demand for heatingoil. [EIA/S] Oil’s climb back toward $100 a barrel — last touched in October2008 — has raised concerns about the impact of higher fuel costs on thetenuous economic recovery. "Back in 2008, (U.S.) crude oil only tradedabove $100 a barrel for about six months before the world economy collapsedinto the worst crisis since the 1930s," warned Sabine Schels, commoditystrategist for Merrill Lynch. Crude’s rise on Wednesday was part of wider gainsacross commodities, with metals rising and soybean and corn futures touching30-month highs that further stoked economic worries. London Brent oil LCOc1,benchmark for European, Middle East, and African crudes, rose 51 cents tosettle at $98.12 a barrel, after touching $98.85 a barrel earlier, the highestlevel since Oct. 1, 2008.

Are yousure about this double dip thing? Yep. Fortunately, Bill Reilly and BobGraham are here to help. The Fiscal Times. Someobservers have suggested that the recent financial crisis had its roots in ajump in oil prices. James Hamilton of UC San Diego produced a report in2009 saying that higher oil prices in 2007-2008 impacteddomestic spending and auto purchases to such an extent that “in the absence ofthose declines, it is unlikely that we would have characterized the period2007:Q4 to 2008:Q3 as one of economic recession for the U.S.” In other words,the Great Recession may have stemmed from a sharp jump in the average cost ofimported oil, which rose from $59.05 per barrel in 2006 to $92.57 in 2008– and not from a collapse in the value of subprime mortgages. Since the1960s consumer outlays on gasoline and heating fuel have ranged from a littlebelow 5% in the late 1990s to nearly 10% in the early 1980s. When this ratiostarts moving towards the higher end of the range, as it did in the mid- 2000s,the consumer   cuts back on other spending, precipitating an economicdownturn.

Again,Please Thank the Bush Administration for the Ethanol Program, Now About to HelpFoment Social Unrest Across the Planet. Wall Street Journal. Evidence of tightening global food supplies grew as theU.S. Agriculture Department cut its estimates for global harvests of key cropsand raised some demand forecasts, adding to worries about rising food prices. Prices of corn and soybeansleapt 4% Wednesday and wheat gained 1%, continuing the broad rally in commodityprices that began in June. With yesterday’s gains, prices of corn futurescontracts are now up 94% from their June lows; soybeans are up 51% and wheat isup 80%. The USDA’s revisions reflect the impact of dry weather in South Americaand floods in Australia, which have compounded supply constraints that firststarted to emerge in the middle of last year, when a drought in Russia ravagedthat country’s wheat fields. The agency also cut estimates for U.S. harvests ofcorn and soybeans. At the same time, demand is increasing. The USDA saidethanol producers likely will increase their use of corn, and consumption byemerging market countries continues to be strong. Prices of many agriculturalcommodities are still below the levels that sparked food riots in poorcountries around the world in 2008. But economists see few signs that pricesfor grain, livestock and cotton will cool significantly anytime soon, signalingpotential headaches for consumers and food companies. "The markets arevery, very tight," said Joseph Glauber, the USDA’s chief economist."There is concern, no doubt."

What kind of world isthis, where an overpriced, unreliable, unwanted product that relies almostcompletely on government mandates and subsidies can’t make a go of it? By theway, and I hate to beat this drum too emphatically, but our friends at theInstitute for Energy Research were ringing this bell about two years ago.Reuters.In 2010 the fast-growing industry logged its biggest sales year ever, yetshares of solar panel makers lagged the broader market significantly. TheWilderHill Clean Energy Index, which includes solar and otheralternative-energy stocks, fell 5.3 percent last year, compared with a 12.8percent rise in the Standard & Poor’s 500 index, due to investor fears thatdeclining government incentives for solar power would hurt demand asmanufacturers ramp up production. This year, those worries are coming home toroost. The world’s top solar market, Germany,is preparing for further cuts to its solar subsidies, while growing supplies ofphotovoltaic panels are expected to outstrip demand, putting pressure on pricesand producers’ profits. A weak euro only makes matters worse for Chinese andU.S. panel makers who sell most of their products in Europe. . . .

Governmentsincluding Germany, the United States, Spain and Japanhave been willing to subsidize clean energy as they look to curb greenhousegases, but the resulting rapid growth in solar installations has also burdenedthem with additional costs at a time when the global economy remains weak. Lastyear, Germany, Spain, France, Italyand Czech Republic all trimmed their solar subsidies. This year, further cutsare expected in Germany and France in the first half of the year and in Italyin the second half. Those three markets account for about 70 percent of theglobal market, according to Bank of America Merrill Lynch.

See, there’s only one problem withthis: at their annual meeting last week, the utility CEOs couldn’t agree on aposition. Which means Tom is just making this up as he goes along. E&E News. "The EEIpolicy came out and said on global climate change we felt that it would behelpful to have legislation rather than regulation, number one," Kuhn toldreporters after speaking at a U.S. Energy Association event in Washington, D.C."And secondly, we said if greenhouse gas emissions are going to be a veryimportant issue … we think there should be a price on carbon that isreasonable and protects the customers." He added, "I think that isstill our policy." While it is not clear when Congress might passlegislation putting a price on carbon or what framework would be approved, hesaid, "I think all of our CEOs, in terms of their … long-term decisions… are factoring that there may well be a price on carbon in the future."

Forget the top; it’slonely at the bottom. Sad, sick California acknowledges that it is the onlyState in the West misguided enough to bankrupt itself.E&ENews. New Mexico is no longer expected to link intothe Western Climate Initiative’s regional trading structure following theinauguration of Gov. Susana Martinez (R), who intends to reverse planned cutsto carbon emissions in the state, a senior California official said today. KevinKennedy, assistant executive officer in charge of the Office of Climate Changeat the California Air Resources Board, told lawyers during a forum sponsored byLaw Seminars International that the election results likely mean New Mexicowill not participate in the fledgling WCI, at least at the outset of the marketstarting Jan. 1, 2012. "The change in administration probably takes NewMexico out of the situation," Kennedy said.

Inoffice since Jan. 1, Martinez has already tried to freeze two rules adopted bythe state Environmental Improvement Board late last year that would cut stateemissions by 3 percent annually and authorize participation in the WCI. Therules, which cannot take effect until published officially, have been suspendedfollowing an executive order by Martinez, issued hours after her inauguration,that halts all new regulations for 90 days. Environmental groups say they willsue to block Martinez, and some expect the matter to soon end up before thestate Supreme Court. The state cap would have required large stationary sourcesto cut emissions 3 percent annually below 2010 levels, starting in 2013 (ClimateWire,Jan. 10).

Kennedyadded that a cap-and-trade regulation passed by California regulators inDecember is going forward with or without New Mexico’s participation. But healso acknowledged that no other U.S. states will be part of WCI when it goeslive in 2012, with three Canadian provinces — British Columbia, Quebec andOntario — still expected to participate in trading.

Yoda was right: to adark place this line of thought will take us. Not surprisingly, EPA’s ongoinggame of Twister on GHG regulations takes an expected, but unfortunate turn.Wonder what else is going to be exempted? Greenwire. The use of biomasswill be exempt from the Obama administration’s new greenhouse gas regulationsfor three years, U.S. EPA announced today, giving the agency more time toaddress concerns that permitting requirements could chill investment in anemerging form of renewable energy. The decision responds to criticism from thebiomass industry, which has claimed that the energy source is not contributingto climate change because it is part of a natural, carbon-neutral cycle. Whennew plants are grown, the argument goes, they absorb the same amount of carbondioxide that the other plants had released when they were burned. In a statementtoday, EPA Administrator Lisa Jackson gave a nod to biomass as a form of"clean energy." The sentiment was echoed by Agriculture Secretary TomVilsack, who said the decision would create jobs and promote energyindependence. "We are working to find a way forward that is scientificallysound and manageable for both producers and consumers of biomass energy,"Jackson said. "In the coming years we will develop a common-sense approachthat protects our environment and encourages the use of clean energy.Renewable, homegrown power sources are essential to our energy future, and animportant step to cutting the pollution responsible for climate change." Today’sdecision will require changes to EPA’s "tailoring" rule, which laysout which types of new facilities will need to get greenhouse gas permits underthe Clean Air Act.