Sunday, August 19, 2007

Energy Independence: Update...

As the pushback from ethanol mandates becomes fiercer, the winning argument seems to be wrapping the biofuel industry in the Stars 'n Stripes under the guise freeing us from dependence on "furrin orl". This seemed unlikely last year, and even more so today.

While this is all fashionably xenophobic, not only is there no evidence to suggest we are decreasing our oil imports from bad people by making more ethanol, it would seem we are doing THE OPPOSITE.

Crude Oil Imports (Top 15 Countries)
(Thousand Barrels per Day)
Country May-07 Apr-07 YTD 2007 May-06 Jan - May 2006

CANADA
SAUDI ARABIA
MEXICO
VENEZUELA
NIGERIA
ANGOLA
ALGERIA
IRAQ
RUSSIA
ECUADOR
UNITED KINGDOM
KUWAIT
BRAZIL
NORWAY
COLOMBIA
[More]

Please compare the last column with the third. If we lump Saudi Arabia, Iraq, Algeria, and Venezuela (I forget - is Russia on our side now or not?) together as "nasty oil" then we are importing 3.458 million BPD now compared to 3.400 million BPD during the same period last year.
Other interesting notes:
  • we are getting less from Iraq than in 2006
  • we are getting more from Russia
  • we are getting more from Algeria
  • Saudi Arabia has replaced Mexico as #2
  • Mexican production is slumping seriously.
And finally, all this happened while we were massively ramping up ethanol production. My take on this is simple. Ethanol will not deliver anything close to US energy independence. Domestic production increases won't either. Using much less energy may be the only way.

Other observers with more intellectual heft than this minor-leaguer are drawing similar conclusions.
This is nonsense. As my colleague Robert J. Samuelson demonstrated this week, biofuels will barely keep up with the increase in gasoline demand over time. They are a huge government bet with goals and mandates and subsidies that will not cure our oil dependence or even make a significant dent in it.

Even worse, the happy talk displaces any discussion about here-and-now measures that would have a rapid and revolutionary effect on oil consumption and dependence. No one talks about them because they have unhidden costs. Politicians hate unhidden costs.

There are three serious things we can do now: Tax gas. Drill in the Arctic. Go nuclear. [More]

The numbers may not matter in the short run. Ethanol seems like it should reduce our need for imports, so if we keep saying it long and loud enough, maybe a miracle will happen. But every year as we re-examine our oil import numbers, the illusion will be harder to support.

For producers, the key to maintaining support for mandates could be to install a large and powerful political base in as many states as possible and to keep the costs hidden.

That's pretty much a mirror of our farm program political strategy. And it is hard to argue with the success of that political effort.

Hence my cash rent bids.

17 comments:

Anonymous said...

John:
With demand for gas increasing as fast as it has, it's not surprising that ethanol has not made up the difference yet, but do you quit making ethanol because of that or do you make more to increase the supply of gas? Oil company execs themselves have said they will use ethanol to increase the supply of gas instead of building more refineries. Now tell me what is wrong with that? It almost makes me think you're sore that you haven't invested in an ethanol plant.

Anonymous said...

Or are you sore that your State didn't invest in a refinery that would be used by indepenpant oil producers so they could blend and create hobby or expermental fuels to try to decrease polution while increaseing milage. While the Big oil companies still produce the hogs share to keep America from having a shortage and keep the rest of the world moving? Thus taking the load off Big Oil so they can produce more of the same old blend that we're still using without new cars.

John Phipps said...

Anon:

The "hog's share" doesn't even touch it. My point was to look at the numbers. A 100M gal ethanol plant will produce about 4 hours of US fuel usage every year. Ethanol's impact has a long way to go to contribute significantly to our energy demand.

Most of the responses I get when I write about ethanol are similar to your objections: "What is my problem?" Nobody seems to have another explanation for the numbers I post.

I am not totally opposed to ethanol promotion. In fact, on my way up to Ft. Dodge today I was trying to calculate in my head what level of carbon tax I would levy on gasoline to level the externalities of fossil fuels. (I'm thinking at least 75 cents.) Then our ethanol investments would seem wonderfully forethoughtful and stand without subsidy.

What I do object to is the patently false claim of solving a foreign policy problem (our involvement in the Mideast) by producing ethanol. The veiled call to patriotism is IMHO, both uncalled for and unsubstantiated.

Patriotism to me is enlisting or encouraging your child to consider enlisting. It is not lobbying for a mandate.

I am also not a supporter of "Big" anything language. Farming is starting to throw that label around in our own industry and the results could be seen in the Senate farm bill soon. "Big X" labels assigns a moral value to size - not actions, and foments unnecessary conspiracy fears.

As for being sore about anything, I am sorry you got that impression. The ethanol tidal surge is lifting all our boats.

Brian said...
This comment has been removed by the author.
Brian said...

John,

I think these are daily well to reservoir pumping totals. Not import totals. I doubt the house of Saud would need to import crude.

John Phipps said...

Brian:

These are import totals to the US by country. Please click the link.

Brian said...

John,

I can see the reason for your nightmares!
(Incorrect data!) Number 1. The link to Senator Obama, quotes two known terrorists trying to scare the peewaudin out of you! Fortunately they are not able to comment due to negative health conditions.
Number 2. Did you read the disclaimer at the bottom of the second chart? (Anon!)

John Phipps said...

Brian:

The "disclaimer" points out only that small protectorates and non-state territories (Guam, Solomon Islands, etc.) are excluded - not any part of the official US.

The quote from Obama was a typical "national security" linkage statement being made to ethanol.

My point is ethanol will not reduce reliance on Mideast oil, and the numbers so far back that up.

Brian said...

John;

I would be interested in seeing these totals again for July & August 2007, because July 18 at around 3:00pm EDT is when Iran had their nuclear incident with at least 5 shockwaves and massive nuclear fallout that has circled the world.

Brian said...

John;

UBL has been dead since before we went into Falueja. He was killed in Western Iran. Zarqaui was killed 13 times because there were 13 men in his family that looked enough like him to all pass for him.

Anonymous said...

No doubt your glass is half empty!

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