The House is scheduled to vote today on their latest incarnation of an energy bill:
Energy bill vote pushed to today amid opposition
WASHINGTON — Congressional Democratic leaders pushed back a vote on an energy bill with a historic increase in fuel economy standards until today, in the face of growing opposition from Senate Republicans, President George W. Bush and even some Democrats.
As outlined by House Speaker Nancy Pelosi, the bill would include new requirements for renewable fuels, the elimination of $21 billion tax breaks to oil companies and other sources of revenue, and require electric utilities to generate 15% of their energy from renewable sources by 2020.
The key points, per the AP:
Car Mileage: Requires automakers to increase the fuel economy of cars and small trucks, including SUVs, by 40 percent to an industry average of 35 miles per gallon by 2020.
Renewable motor fuels: Requires a sevenfold increase in the use of ethanol as a motor fuel to 36 billion gallons a year by 2022, with two-thirds to be cellulosic ethanol from such feedstock as prairie grass and wood chips. Has tax incentives for renewable fuels plants.
Taxes: Includes a $21 billion tax package, including a rollback of $13.5 billion in tax breaks for the five largest oil companies. The revenue is to be used for tax incentives to promote renewable fuels and energy efficiency.
Electricity: Requires electric utilities to produce 15 percent of their power from renewable energy such as wind, solar or biomass. Some of the mandate could be satisfied by utilities promoting efficiency or buying renewable energy credits.
Energy efficiency: Requires increased energy efficient appliances and improvements in energy efficiency of federal and commercial buildings. Also requires faster approval of federal energy efficiency standards.
Hybrid cars: Creates tax incentives to develop plug-in hybrid electric cars and establishes tax credits for buying the vehicles.
There are pieces I like, and pieces I don’t. I like the hybrid incentive, but I think the renewable fuels mandate is a joke. And if you are wondering exactly what the rollback of tax breaks involves, here is the interpretation according to one site:
(i) Denies the oil industry a $10 billion tax break over the next decade. This subsidy came as a result of 2004 legislation that created a sweeping new deduction for domestic manufacturing. As a result, for the first time, oil and natural gas production was classified as a manufactured good, treating it the same as domestically produced cars or other items made in a factory. This legislation would repeal the deduction for all large, integrated oil companies, while still retaining the 6 percent deduction for smaller ones.
(ii) Extends from five to seven years the period of time over which oil companies can claim a tax deduction for geological and geophysical expenses. Deducting the expenses more slowly will save Americans $100 million over the next decade. This alters the tax break granted to Big Oil in the 2005 energy bill.
(iii) Limits the ability of oil companies drilling in foreign countries to manipulate their drilling income in ways to reduce U.S. tax liability. Closing this loophole will save Americans $3.2 billion over the next 10 years.
(iv) Extends from 15 to 20 years the period of time over which owners of natural gas distribution lines can deduct the depreciation of their pipelines. Deducting the expenses more slowly will save Americans $500 million over the next decade.
The problem, as I have said before, is that we have no consistent, long-term energy policy. If we are going to get a new energy bill every other year – in which tax breaks are granted and then repealed – it makes it difficult to execute long-term projects. Imagine that two years ago you started in on a five-year project, you based the project economics on the rules in place at that time, and then half way through the project the rules are changed on you. This creates a climate that discourages investment in the U.S., because the rules are apt to change at any time.
Whats really bad about this bill is that they are trying to tackle ‘global warming hysteria’ and ‘oil dependency’ in the same bill. They are completely different issues. I like the plug in hybrid tax breaks (as I am a huge PIH fan), and the requirements to improve MPE, but a lot of the other stuff, like solar/wind/biomass power requirement is a joke. Going to cost consumers a fortune to force something the market doesnt need.
The problem of expanding and shrinking fiscal terms is not unique to the US. Foreign countries also like to increase their take once the projects start to generate handsome returns. I would remind you of the recent experience in Venezuela, the creeping nationalization of Norway, and the rumblings coming from Nigeria.
What I don’t care for is the populism coming from the Democrat Party on oil company tax incentives. Energy companies pay a greater share of their profits in taxes than do most other industries. The tax incentives were to attract investment in the deepwater Gulf of Mexico. Without the incentives that capital would have been spent in other parts of the world. Even at reduced taxes and royalties, the US taxpayer is better off with SOME revenue as opposed to NO revenue.
Yeah, I have always thought that attempting to penalize the oil companies is much like cutting off your nose to spite your face. Best way to handle the oil companies is to aggressively promote alternatives with development money/tax incentives… Our laws add extra cost and risk to bringing things to market that could come sooner without those barriers. We need to remove those barriers.
Car Mileage: 35mpg by 2020? Should be much more aggressive IMO.
Renewable motor fuels: 36 billion gallons of biofuels – yeah right that’s gonna happen; next they’re gonna repeal the law of gravity.
Taxes: agreed that they can’t keep yanking the chains of companies that need to make long-term plans. I wonder if oil companies will be excluded from getting any of the new tax credits e.g. for green diesel?
Electricity: 15 percent of their power from renewable energy such as wind, solar or biomass – by what time frame? I presume hydro isn’t included. What about GT? and of course, nothing about nuclear.
Energy efficiency: all good but we are well down this road already IMO, not much more to be had here.
Hybrid cars: I guess even a blind squirrel finds a nut every now and then.
This bill is kind of ridiculous and shows just how little people seem to care about the issue. Legislators still treat this as a “villian” issue — i.e. the oil companies or the auto manufacturers are at fault, in this case so we need to eliminate tax breaks or raise CAFE standards. To this date, there has been nothing on the agenda whatsoever aimed at taxing consumption of oil nor anything to promote conservation.
I certainly do not fault the legislators — the last person to advocate conservation was Jimmy Carter — and look where he ended up! It just seems a simple fact that the American people are not yet ready to bear the cost of a policy that would seriously impact consumption or reliance on foreign oil. In fact, I am not sure many people even realize just how much that would cost.
And as an aside — check out this link concerning energy efficiency vs. energy consumption — does increased energy effieicency, such as higher CAFE standards, really conserve energy? Its hard to say…..
http://research.cibcwm.com/economic_public/download/feature1.pdf
Don’t forget banning the 100 watt incandescent light bulb! I believe the bill calls for the ban by 2012, unless they become three times more efficient.
Robert,
Do you know if the 36 billion gallons is specified as renewable fuel or as ethanol? Unfortunately, our clueless leaders do not seem to understand the difference.
I wonder if oil companies will be excluded from getting any of the new tax credits e.g. for green diesel?
Last I heard they were working on putting a cap on the $1/gal subsidy – something like the first X gal a year. Which is of course a great way to limit the implementation of green diesel. But don’t expect Nancy to care.
Energy efficiency: all good but we are well down this road already IMO, not much more to be had here.
How did you figure that? Americans use twice as much energy as Europeans!
“… does increased energy effieicency, such as higher CAFE standards, really conserve energy? Its hard to say…..”
Goes back to cta’s comments on an earlier thread about Jevons’ Paradox. The answer is — of course not. Money circulates. If we conserve & spend less on A, we spend the money saved on B instead and end up using approximately the same total amount of energy.
Energy is a supply-side issue, not a demand-side issue. Just think about the several billion human beings who are scraping by today on next to nothing. As their living standards increase (as we all hope they will), they will use a lot more energy.
We (globally, not just the US) need supply-side oriented energy policies. That means encouraging genuine innovation and removing excessive regulatory barriers.
35 mpg for SUVs? Seriously?
(On Jevons … it’s always important to remember that the tendency toward re-expansion is always there in the abstract, it may or may not appear in the actual market. Other factors, such as resource depletion may weigh more heavily.)
We’ve been here before. Back in the 1970s congress tried to solve the oil crisis with excessive regulations. They slapped on a “windfall profits tax” and set price ceilings and production quotas so that the big bad oil companies wouldn’t benefit. Much like the current legislation the intent was to punish the winners with taxation and changing the rules in the middle of the game.
I was reminded of this speech by our Greatest American.
1986 Radio Address
Democracy is ugly; but it is better than the next best alternative. Yes, our system has minor corruption in it.
Hey, the Energy Bill is a blunderbuss step in the right direction.
Meanwhile, oil is sinking, and may not stop until it hits $40 a barrel.
At least the Congress is trying to make some sort of energy program. We have had zilcho from the White House for nearly seven straight years.
Meanwhile, oil is sinking, and may not stop until it hits $40 a barrel.
Then again, the slide may already have stopped. Did I hear $90? $90.53, I believe…
At least the Congress is trying to make some sort of energy program.
Human beings progressed from naked apes shivering in caves to a species which commands enough energy to throw men at the moon — and our ancestors did it all without the benefit of an “energy policy”.
So what has changed? Why do we suddenly need an official energy policy?
And if we do need one, why would we trust the kind of people who brought us the British National Health Service and the US Ponzi Social Security Scheme to take care of your energy needs? Seriously, is there anyone with an IQ above room temperature who believes that the latest US Congressional product is worth the paper it is written on?
There is a role for government. Sometimes that role is not to get in the way.
Groundbreaking Study Finds that Certain Ethanol Blends can Provide Better Fuel Economy than Gasoline
“Optimal Blend” Is Likely E20 or E30;
http://www.ethanol.org/news/index.php?newsid=25
Robert, any thoughts?!?
Doug: …all good but we are well down this road already IMO, not much more to be had here.
Optimist: How did you figure that? Americans use twice as much energy as Europeans!
You’re correct, but you have to break that down into excess consumption for transport, which is addressed elsewhere, excess consumption for McMansions, about which this does nothing, and the particulars of this bullet point which reads:
“Requires increased energy efficient appliances and improvements in energy efficiency of federal and commercial buildings.”
My statement was w.r.t. to efficient appliances and building efficiency, from what I can see a lot has been done on both fronts in the past 30 years, how much more are we gonna get there?
Kinua:
The free market and price mechanism are very good for many problems and opportunities. In the case of oil, we import gobs from instable regions. The free market does not anticipate disasters very well. Or the actions of governments and people who are not free. The free market fails the pollution test — it is cheapest to put a tailpipe in the air.
So, we need an energy policy for energy independence, and pollution.
But I agree it still should use the price mechanism nore than anything else.
The best-of-breed appliances are very efficient, but the worst-of-breed are still bad. It may be that all this does is wash out the worst of the worst.
(When I was buying my 440 kWh/yr refrigerator at Sears, another guy was buying a 800+ kWh/yr “beer fridge” for his garage. It kept things no cooler, but it had the “diamond stamp” finish.)
Oh, my new pc (an eee pc) used 0.07 kWh in the first 6 hours of use. Kind of small for a primary pc, but nice as a ultra-portable surfing appliance.
I’m kind of surprised by the negative vibe here. I thought we’d agreed that a gas tax would be good? We obviously don’t have guts for that, and so we look for some weasly way to get something similar.
This is not perfect (perfect would be a gas tax starting today, for reasons of national security and global warming), but what else is remotely possible?
I guess I’m disappointed by the fact that this bill perpetuates several energy myths that desparately need to be dispelled, namely that we can grow our fuel if we just subsidise it enough, and that we can meet our electric power needs without nuclear energy if we just cut back enough and build enough windmills and solar panels (and please pay no attention to that CO2-belching coal plant behind the curtain). It’s carefully tailored to keep the agri-business lobby and green lobby placated while using the oil industry as a whipping boy. How is this bill not going to lead to continued reliance on coal for baseload and increased use of natural gas both for biofuel production and as a quick fix to power shortages? I’ll believe our leaders are serious when they start promoting unpopular but necessary measures like carbon taxes and nuclear power, and stand up to vocal lobbying groups even within their own parties. No pain, no gain.
It’s carefully tailored to keep the agri-business lobby and green lobby placated while using the oil industry as a whipping boy.
With a quarter of the Senate coming from farming/corn states, this (and the dismaying staying power of corn ethanol, despite it being the bad idea that everybody here knows it to be) shouldn’t really be a surprise, should it?
I agree with the agri-business angle, if you step over to Gristmill, you’ll find the green folks are pretty down on food->fuels.
Groundbreaking Study Finds that Certain Ethanol Blends can Provide Better Fuel Economy than Gasoline
Robert, any thoughts?!?
I think that’s garbage, as do a lot of others. The study was done by the ethanol lobby, and they don’t make much sense. After all, the blend clearly has less energy, so how is it going to push a car farther without doing something like cranking up the compression ratio? I have gotten several e-mails about this. Here’s one:
The supporting paper (attached) is based on a short-term experimental protocol for evaluation of emissions. It was prepared for the American Coalition for Ethanol
The authors cherry-picked the high points from the graphs of fuel-mix sub-sets. Figures 10, 12, and 13 illustrate the practice.
I suspect that the authors were sincere, but unfamiliar with the analysis of complex data sets.
These claims will spread rapidly through the “blogosphere” and encourage those who believe that miracles will save us from our fossil-hydrocarbon consumption profligacy.
Fuel ethanol has also been supported by absurd assumptions and fake energy balances. Not all of these actions have been accidental.
Big Oil’s Negative Drumbeat Falling on Deaf Ears
Consumers Still Seeking Alternatives to U.S. Dependence on Foreign Oil, Survey Finds
Last update: 7:00 a.m. EST Dec. 7, 2007
OMAHA, Neb., Dec 07, 2007 /PRNewswire via COMTEX/ — Despite reports of a well-publicized and well-funded anti-ethanol misinformation campaign, an overwhelming majority of consumers still believe the U.S. is too dependent on foreign sources of oil.
http://www.renewablefuelsnow.org/
Wow, talk about your leading questions. From that ethanol survey “It is important that the government requires cleaner and more efficient energy sources.” LOL! Who would say no to that? Yet a yes vote was counted as a pro-ethanol vote. That survey reeks of desperate measures from the ethanol lobby.
Benny wrote:
“The free market does not anticipate disasters very well. … So, we need an energy policy for energy independence, and pollution.”
Seems like human beings have had a successful free market in anticipating disasters (via insurance) since the 1500s or earlier. If we look to the future of fossil fuels, are you seriously suggesting that British Petroleum is not paying attention to the long term, or that Japan’s Toyota is not planning on how to stay in business? And if they are not, we can be sure that others are looking for ways to exploit the market opportunity thereby presented.
On the other hand, the “non free market” approach of government intervention has a long track record of failures. (Check: Soviet Union, for example). Not surprising, since government intervention means that some politician or bureaucrat makes a decision for everyone else. How do we know that the bureaucrat will get it right, especially when the track record suggests otherwise?
Michael Crichton made an interesting suggestion in an appendix to his novel “State of Fear”. Basically, he suggests that we should use a well-funded adversarial process to evaluate science on which public policy is to be based — analogous to the adversarial process used in the Court system. It would be interesting to see how well ethanol as a vehicle fuel (for example) would stand up to genuine court-style scrutiny.
If we used some process like that, it might be possible to have more confidence in a political “energy policy” which annoints technical (and economic) winners.
With current technology, the only way to really reduce reduce dependence on foreign oil (i.e., reduce imports), is to increase the domestic supply. That means letting Shell Oil go ahead on shale oil, and allowing more exploration within US territory.
The rest of the technologies can’t make enough difference. Note that oil makes maybe 2% of our electrical generation capacity, it’s transportation that is the sticky point. Only when PHEV or EV are ready for mass replacement of the transportation fleet, will increased electrical generation help in reducing oil imports.
My statement was w.r.t. to efficient appliances and building efficiency, from what I can see a lot has been done on both fronts in the past 30 years, how much more are we gonna get there?
On appliances, what Odo said about best vs. worst of breed.
With regards to buildings, I can assure you that they are still horrible, godawful energy wasters. The solution is better design, and better equipment/technology in that order of priority.
Generally, focusing on design is cheaper than just throwing technology at the problem. Really good design will save capital/construction costs as well as energy, by eliminating unnecessary equipment. But design fees are incurred up front, and owners are loathe to pay more than they have to, sooner than they have to. So they get what they pay for, which is the thoughtless output of engineers who are either lazy or busy (or both) and can’t be bothered to really think things through.
So, yeah, there’s ALOT more savings to be had there. is calling for 50% reduction in carbon intensity now, and carbon neutral buildings by 2030, and he’s won the support of the AIA, the USGBC, and the Council of Mayors. It’s at the bare edge of what’s technically possible, IMO. It’s probably more ambitious than what can be achieved due to economic and cultural constraints, but it’s a good target to shoot for. It is, in the words of Randy Hayes, a vision consummate to the scale of the problem.
Larry,
I consider PIH a technology of today. We will see it sooner than any real oil shale production. I think the PIH is the primary transportation solution of our current energy ‘crisis’, and considering GM is investing heavily in it should make a pretty big statement. They are pushing the Volt HARD. Its not going to take a huge change in our consumption levels to add to our excess capacity margin, which is the big real oil started jumping to begin with.
With current technology, the only way to really reduce reduce dependence on foreign oil (i.e., reduce imports), is to increase the domestic supply.
Think outside the box, Larry, of such personal virtues as conservation.
Despite reports of a well-publicized and well-funded anti-ethanol misinformation campaign, an overwhelming majority of consumers still believe the U.S. is too dependent on foreign sources of oil.
I cannot help but notice the utter lack of references to the reports of a well-publicized and well-funded anti-ethanol misinformation campaign.
The fact is that corn ethanol needs no outside help (or funds) to look bad. It just needs reporters to wake up and smell the coffee.
“I consider PIH a technology of today. We will see it sooner than any real oil shale production.”
An editoral plea — if we mean Plug-In Hybrid, let’s say Plug-In Hybrid, at least the first time it is mentioned. Otherwise, these discussions sound like the yammering of those nerds at the back of the class who could never get a date.
Let’s do a thought experiment — let’s suppose that Plug-In Hybrid (PIH) vehicles are the answer. Let’s ignore all the real-world questions about the vast amount of energy required at the front end to mine the exotic minerals, the energy investment required for large-scale manufacturing of PIH vehicles, the time to replace a significant portion of the vehicle parc, the investments to bolster electrical infrastructure, etc. Let’s just solve all the real-world issues with a wave of the magic wand & assume that because of the success of PIH vehicles, the demand for oil world-wide begins to decline. Then what happens?
Optimistic scenario — the real Big Oil reacts (i.e., state-owned oil companies; it is time to get with the 21st Century — Exxon and BP are bit players in today’s international oil markets). Those massive well-funded national organizations (countries, really)cut the price of oil to maintain market shares. PIH manufacturers go bust. Price of oil eventually goes back up. US Congress holds hearings, and the broken men who headed the PIH industry go to jail.
Pessimistic scenario. As above, except that western countries put additional taxes on imported oil to keep Big PIH in business. Riots in the west, as ordinary people react against political elites who want to keep them poor. Russia (with good justification) treats the tax hikes as an Act of War, bombs EU headuarters in Brussels. Iran then nukes Germany. France nukes Iran in retaliation. Britain tries to curry favor with Muslims by nuking France (never liked them anyway). Etc.
Humor aside, the point is — energy matters are not simple, there are no magic solutions. If we are going to have an “energy policy” in the US (or anywhere else), it has to consider the interests of all the countries involved, suppliers as well as consumers. Otherwise, it could easily make things worse.
Those massive well-funded national organizations (countries, really)cut the price of oil to maintain market shares.
Talk about waving a magic wand. Just how on earth are they going to do that? Why haven’t they done it yet?
More than that: Why would they do that? Loose money on the short term to hurt someone else’s business? What if someone else does not go away? What if they can’t afford to cut prices in the short term? Think Hugo Chavez can afford to cut his oil revenue in half? The house of Saud? The mullahs of Iran?
I see only one thing that will bring oil prices down: a recession somewhere in the world economy. And that will likely bring more pain to everybody than the minor benefit of low oil prices.
“Those massive well-funded national organizations (countries, really) cut the price of oil to maintain market shares.”
“Talk about waving a magic wand. Just how on earth are they going to do that? Why haven’t they done it yet?”
Get with the program! The hypothetical scenario was discussing what would happen if “because of the success of PIH vehicles, the demand for oil world-wide begins to decline”.
All that Saudi Aramco & its ilk would have to do to drive the price of oil down in the face of declining demand would be to keep on producing as they are. Simple economics — supply exceeds demand.
The history of OPEC tells us that they are not equipped to divide up a shrinking demand pie (see mid 1980s). The temptation for each producer to sell an extra barrel today is too high when all producers are stuck with excess capacity. Hence the producers compete for market share, leading to over-supply and price collapse — with collateral damage for expensive alternate energies.
Situation over the last decade has been that only Saudi Arabia has has had significant unused production capacity, and Saudi has chosen to act as the swing (or balancing) producer instead of producing flat out and letting the oil price collapse. But remember, that is a political decision which the leaders of Saudi can change any time they choose.
Back to the point — if the US Congress (or anyone else) is going to come up with an “energy policy”, they need to consider the effects of that policy on everyone involved. By that standard, Congress’s new so-called “energy policy” is a total failure.
IMPLICATIONS OF 15 BILLION GALLONS OF CORN ETHANOL
It remains dubious if Congress thought through the potentially serious repercussions of producing 15 billion gallons of ethanol from corn.
How much corn would be consumed by 15 billion gallons of ethanol?
15 billion/2.65 gallons per bushel = 5.66 billion bushels of corn!
How does this compare with yearly production in the US?
from: National Agricultural Statistics Service
http://www.nass.usda.gov/QuickStats/index2.jsp
Year Acres YLD Production
2007 93,616,000 153 13.2 billion bu.
2006 78,327,000 149 10.5 billion bu.
2005 81,779,000 148 11.1 billion bu.
2004 80,929,000 160 11.8 billion bu.
2003 78,603,000 142 10.1 billion bu.
2002 78,894,000 129 9.0 billion bu.
As you can see 5.66 billion bushels exceeds over 50% of US corn production in four out of the last
six years and over 40% of the 2007 crop!
You can also see that in 2007 corn acreage increased significantly. How long can this increased production be sustained and at what cost?
What are the market and economic implications of adding such a large demand from ethanol on the US and world economies and food supplies?
A projection produced by University of IL ag economists last spring is quite revealing. I am excerpting some relevant passages from their study but I encourage you to read the entire report:
2007 U.S CORN PRODUCTION RISKS: WHAT DOES HISTORY TEACH US?
http://www.farmdoc.uiuc.edu/marketing/mobr/mobr_07-01/mob …
“A crop 20 percent smaller than expected would magnify the need for rationing outlined under the previous scenario. A crop of 9.832 billion bushels and year ending stocks of 414 million (4 percent of use) would allow consumption of only 10.37 billion bushels, 17.4 percent (2.18 billion bushels) less than consumption with a crop of 12.29 billion bushels. Compared to the scenario of expected production, use by category is forecast to decline as follows:
Feed——down 22.6 percent
Exports–down 20 percent
Ethanol—down 10 percent
Other —–down 10 percent
As in the previous scenario, consumption by category could deviate substantially from these projections, but total consumption would be limited by available supplies. A period of extremely high prices would be required in order to force such a large reduction in use. To reduce corn use for ethanol production, for example, corn prices would have to be high enough so that the most inefficient plants were unable to recoup variable costs of ethanol production. With ethanol prices near $2.20 per gallon, that price could be near $6.00. The average farm price for the year would likely exceed $5.00 per bushel and is forecast at $5.25. The high prices would force a substantial reduction in livestock numbers, increasing meat supplies in the short run, but resulting in much smaller supplies after that. Meat production could eventually decline 10 to 15 percent, resulting in escalating retail meat prices. The high prices would have significant negative financial implications for livestock producers, forcing some to discontinue production entirely.
The historical pattern of the difference between actual and expected production suggests that the odds of a shortfall of 10 percent or more is not trivial. Shortfalls exceeding 10 percent occurred, on average, about once in five years since 1970. Shortfalls exceeding 20 percent of expected production would require significant rationing and very high prices, with potentially very negative implications for some users of corn. Shortfalls of that magnitude have occurred, on average, about once in 12 years since 1970.
An important public policy question, then, is, with an extreme shortfall in production, would the market be allowed to allocate the crop among users or would such a shortfall in corn production induce government intervention? The norm from past experience with rationing has been to allow the market to allocate the crop, with the largest adjustments taking place in the livestock sector. However, there has been one exception. Short supplies and high soybean prices in 1973 resulted in an embargo on U.S. exports. Such an embargo on corn exports might be considered following a large shortfall in production, but the potential negative impact on longer-term trade relationships would make an embargo a very unpopular alternative. The financial implications of high corn prices for livestock producers might evoke intervention in the allocation of supplies between domestic livestock producers and processors of corn.
The current situation in the corn market may have other policy implications. Corn prices are expected to remain generally high and extremely volatile for an extended period of time. The combination of a low level of stocks and an increasing portion of corn consumption occurring in the ethanol sector, where demand is relatively price insensitive, suggests that prices will be extremely responsive to small changes in U.S. and world production prospects or changes in demand for corn in any other sector. Prices of other commodities will also be influenced as the market attempts to allocate production resources, primarily land, among the various crops. Provisions of the new “farm bill” are expected to reflect this changing environment of high and volatile crop prices. In addition, careful consideration of potential market impact should be given to policies encouraging additional bio-fuels production. Other considerations might include provision for a corn reserve in years of large production to provide a buffer for a future shortfall in production.”
The questions remain:
Do all the potential risks involved in ramping up corn ethanol production outweigh the projected marginal reductions in oil usage?
And are our policy makers in Washington using biofuels to substitute for the really meaningful things we need to be doing to reduce our total oil consumption?
Lou
Get with the program! The hypothetical scenario was discussing what would happen if “because of the success of PIH vehicles, the demand for oil world-wide begins to decline”.
OK – [getting with the program]. Let me take a step back and say this: oil prices will only collapse (due to low demand) if there is a significant recession somewhere in the global economy. Afterall, that’s part of what happened in the early 80s.
PIH (or any other technology including biofuels) will not, by themselves cause a collapse of oil prices (assuming we see little price manipulation or other governmental interference): the oil price would move gradually. As PIHs (or whatever) become more widespread, the oil price would stabilize and perhaps drop a bit. That would encourage the die-hards (seen any of those?) to keep burning oil as usual.
Economics 101 – the only threat is well meaning politicians doing something that interferes with the invisible hand…