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Economic Security

January 20, 2010

President Obama’s First Year Clean Energy Progress Report: 3 E’s and an A?

I am hope you heard the following statement several times during the 2008 presidential campaign.

America has always risen to great challenges, and our dependence on oil is one of the greatest we have ever faced. It’s a threat to our national security, our planet and our economy. For decades, Washington has failed to solve this problem because of partisanship, the undue influence of special interests, and politicians who would rather propose gimmicks to get them through an election instead of long‐term solutions that will get America closer to energy independence -- Barack Obama and Joe Biden: New Energy for America

This campaign was the first time Economic, Environmental, and Energy/national security (the three EEE’s) were connected as one issue -- and the connection was continued to make clean energy and alternative transportation fuels real solutions.  I believe voters were able to make this connection and vocalize that these issues were on the top of their agenda too.

This evolution was also a first for environmentalists. This was the first time environmental organizations were officially embracing clean energy and alternative transportation fuels as solutions and publically recognizing that lowering fossil fuel use was the way they could achieve their air pollution and climate change goals.  People in the environmental community even started having the word “energy” included in new titles on their business cards.  But, in just seven short months the honeymoon was over as -- Disillusioned Environmentalists Turn on Obama as Compromiser. So I started to keep track of headlines so after the environmentalist honeymoon I could see where the Administration stood on connecting the dots on the three EEE’s -- Economic, Environmental and Energy/national security.  Are the dots still being connected?   Is the Obama Administration on the right path?  The  compilation of headlines and stories below are from July 2009 to January 20, 2010.

Economic security is one of the E’s that was often missed by the environmental community – but that may be changing.  Without economic stimulation attached to environmental security, national surveys show fewer consumers will care, and fewer policy makers will vote with only their environmental heart in hand.  We are somewhat lucky that it is highly unlikely that aside from clean energy and renewable alternative transportation fuel technologies – there are very few other choices that can generate the magnitude of wealth our economy needs to sustain its quest for environmental protection, economic stimulation – and defeat our reliance on foreign sources of oil, which is holding our international diplomacy hostage.

New Report Shows Recovery Act Supported 63,000 Clean Energy Jobs Last Quarter:
Sierra Club, January 13, 2010

The White House Council of Economic Advisers has released a new quarterly report highlighting the success of the American Recovery & Reinvestment Act at creating jobs and fueling economic growth. The report, which includes analysis from outside economists, shows that the Recovery Act has saved or created  1.5 to 2 million jobs through last quarter. 63,000 clean energy jobs were created by the $5 billion (out of approximately $90 billion total) in clean energy investments spent under the Recovery Act so far. The report estimates that, in total, the Recovery Act's clean energy investments will create 719,600 job-years (one person employed for one year) through 2012.

And then...

In an effort to move 31 renewable energy and transmission projects into high gear, the Obama administration has put them on a fast track permitting process. But such deals, which would take place on federal lands, have some opposition -- and it's coming from those in green corners, who say that certain ones should be relocated.

Everyone still needs to work on connecting the energy security dot to national security.  If the goals for energy security do not become as important and reverent as the goals for national security, the environmental effects from the 3rd Persian Gulf War and resulting scale up of nuclear weapons in the Middle East may make the effects from Climate Change appear distant and miniscule.

Now it's time for President Obama’s first year progress report.  The parade of positive headlines say – nice first year – keep up the good work! The President should get three E’s for helping the United States get closer to achieving Economic, Environmental, and Energy Security and an A for effort.  And ethanol and next generation biofuels should get an A too for the sum of their parts E+E+E.

Survey Finds That Support for Cap-and-Trade Hinges on Economy

Investors Representing $13 Trillion Call for Climate Action Now

Obama Administration Awards $2.3 Billion for New Clean Technology Manufacturing JobsLabor Department Awards $155 Million to Support Green Jobs

Treasury, Energy Announce More Than $2 Billion in Recovery Act Tax Credits for Energy Manufacturers, Tax Credit Program Will Increase Economic Development, Promote Manufacturing of Clean Energy Equipment

U.S. Department of Labor Announces $100 Million in Green Jobs Training Grants Through Recovery Act

Michigan's climate action plan could result in 129,000 jobs

U.S. Labor Secretary Expects More Green Job Hiring

"Cash for Clunkers" Program Will Create or Save 42,000 Jobs in Second Half of Year

Obama Wants Worldwide End of Fossil Fuel Subsidies

Agriculture Secretary Vilsack Announces $62.5 Million for Renewable Energy and Energy Efficiency Loans and Grants

Obama Administration Delivers More than $106 Million for Energy Efficiency and Conservation Projects in Nine States

Obama implores Senate to pass climate bill

And the seven month accomplishment list goes on and on below, but in the end...by other standards....

League of Conservation Voters Awards President Obama a B+ for First Year in Office

The House narrowly passed a major climate bill

Biofuels Could Cut Global Emissions by 80%:

New Study Shows Cars Running on Cellulosic E85 Have Lowest Carbon Emissions

President Obama Establishes Biofuels Interagency Working Group

U.S. Departments of Energy and Treasury Now Accepting Applications for Funding For Renewable Energy Projects

USDA's Farm Service Agency to Begin Accepting Applications for New Biomass Crop Assistance Program

Federal Funds for Energy Efficiency Set to Rise!

Obama Administration Announces Billions in Lending Authority for Renewable Energy Projects and to Modernize the Grid

U.S. Department of Energy Announces Awards for Up to $11 Million for New Solar Energy Grid Integration Systems

President Obama Declares October National Energy Awareness Month

Funding Up 3 Percent to $2.24 Billion for Renewables & Energy Efficiency in Fiscal Year 2010

Obama Presses Case for Renewable Energy

Novozymes Receives $28.4 Million Advanced Energy Tax Credit to Advance Biofuels Production and Create Jobs Read more

DOE Awards Nearly $80 Million for Advanced Biofuels Research and Fueling Infrastructure Read more

DOE Grants Donald Danforth Plant Science Center and Partners $44 Million to Develop Algal Biofuels Read more

Army Corps of Engineers Grants Coventa Energy Corp. $1.5 Million to Develop Technology for Conversion of MSW to Diesel Fuel for Military Use Read more

USDA Undersecretary Tonsager to Address 4th Annual Iowa Renewable Fuels Summit on Biofuels Interagency Working Group

DOE to Award $187 Million to Improve Car and Truck Fuel Efficiency

DOE to Award $47 Million to Boost IT and Telecom Energy Efficiency

DOE Announces Additional Energy Efficiency Enforcement Action to Protect Consumers

DOE to Support Clean Energy Projects in Costa Rica and the Caribbean

President Obama Says 'Insulation Is Sexy'

EIA Energy Outlook Projects Moderate Growth in U.S. Energy Consumption, Greater Use of Renewables, and Reduced Oil and Natural Gas Imports

Energy Secretary Chu Pledges $350 Million Clean Technology Fund to Sweeten Deal at Copenhagen

Energy Secretary Chu Announces $100 Million for Advanced Research Projects:

Nine Swing Senate Democrats Lay Out Climate Goals for Obama

Obama Administration Announces More Than $600 Million Investment in 19 Advanced Biorefinery Projects - Private Company Investment Brings Total to Nearly $1.3 Billion:

Energy Secretary Chu Announces $620 Million for Smart Grid Demonstration and Energy Storage Projects

U.S. Department of Energy to Invest $18 Million in Small Business Clean Energy Innovation Projects

U.S. Department of Energy Signs Agreement for New Hydrogen Power Plant

Remarks by President Obama New National Fuel Efficiency Standards

Obama Administration Announces More than $38 Million for Energy Efficiency and Conservation Projects in Alaska, Kansas, Utah and West Virginia

National Outdoor Lighting Improvements Would Save $5.1 Billion Annually

New Economic Data Released on Clean Energy Legislation

Treasury, Energy Surpass $1 Billion Milestone in Recovery Act Awards for Clean Energy Projects

U.S. Energy Secretary Chu Announces $528 Million Loan for Advanced Vehicle Technology for Fisker Automotive

Secretary Chu Announces $144 Million in Recovery Act Funding to Transition to the Smart Grid

White House Clears Greenhouse Gas Reporting Rule

House OKs Green Vehicle Research Bill

$100 Million in Recovery Act Funds Go to 43 Transit Projects Chosen to Reduce Energy Consumption and Greenhouse Gas Emissions

DOE Awards Up to $14.6 Million to Support Development of Advanced Water Power Technologies

DOE Launches New "H-Prize" Offers $1 Million for Improved Hydrogen Storage

Report Says Strong Copenhagen Deal Means Jobs, Jobs, Jobs

Interior Department Launches Response Strategy to Addresses Climate Change Impacts on U.S. Lands and Oceans:

DOE to Fund up to $454 Million for Retrofit Ramp-Ups in Energy Efficiency Projects for Businesses and Homeowners

White House, Oil, Gas Industry Spar Over Taxes

On Energy, Obama Finds Broad Support - Poll Shows Backing for Reform Efforts, But Cap-and-Trade Bill Is Harder Sell

U.S. Department of Energy Selects Biofuels Projects to Receive up to $21 Million in Funding

Agriculture Secretary Vilsack Announces Missouri Conversion Facility First with Biomass Crop Assistance Program Producer Payments

EPA to Declare CO2 a Dangerous Pollutant

U.S. Department of Transportation Awards Contract to Prototype Solar Road Panels

Energy Secretary Chu Announces Completion of Critical Energy Conservation Appliance Standards

Agriculture Secretary Vilsack Announces More Than $13 Million to Help Meet Country's Renewable Energy Needs

EPA Raises the Bar for Energy Star Televisions

Poll Shows Support for Energy Bill
 
Vice President Biden Announces Finalized $535 Million Loan Guarantee for Solar

Secretary Chu Announces Nearly $300 Million in Clean Cities Grants to Support Clean Fuels, Vehicles, and Infrastructure Development

U.S. Department of Energy Announces $6.4 Million for Solid-State Lighting Research

Agriculture Secretary Vilsack Awards More Than $4.2 Million for Woody Biomass Utilization Projects

U.S. Department of Energy Sets Awards To Evaluate CO2 Storage Technology While U.S. EPA Seeks Comments on New Information About Sequestration

Obama Administration Delivers More than $101 Million for Weatherization Programs in Guam and Pennsylvania 

Obama Administration Awards More than $51 Million for State Energy Programs in Alaska, Guam and New Jersey 

U.S. Government Seeks to Limit Federal Energy Use

President Barack Obama's Grandmother Joins the 'Solar Generation' in Kenya

U.S. Department of Energy Announces $37 Million for Small Business Clean Energy Research and Technology

Clean Energy Patent Growth Reaches Record High

Companies Secure Nearly $200 Million for Projects in Advanced Clean Transportation Technologies

President Obama Announces $2.4 Billion in Grants to Accelerate the Manufacturing and Deployment of the Next Generation of U.S. Batteries and Electric Vehicles
 
U.S. Department of Energy Announces Recovery Act Funding of up to $5.5 million for Ethanol Blends Infrastructure and Outreach

DOE Secretary Chu Announces Up to $30 Billion in Loan Guarantees for Renewable Energy, Transmission Grid, and Advanced Biofuels Projects

Obama Administration Awards More than $162 Million for State Energy Programs in Colorado, Delaware, Indiana, Louisiana, Massachusetts, Pennsylvania, and Puerto Rico

Agriculture Secretary Vilsack Announces Funding Available For Bioenergy Development And Production: 

Energy Secretary Chu Announces More Than $47 Million in Recovery Act Funding to Advance Smart Grid Development

Federal Energy Regulatory Commission Policy Statement Seeks to Accelerate Deployment of Smart Grid Technology

U.S. Department of Energy Announces up to $52.5 Million for Concentrating Solar Power Research and Development
Geothermal Lease Sale Generates More Than $9 Million

U.S. Department of Energy Secretary Announces Nearly $300 Million Rebate Program to Encourage Purchases of Energy Efficient Appliances

U.S. Department of Energy Announces Nearly $14 Million to Go to 28 New Wind Energy Projects - New DOE Study Shows U.S. Leads the World in Wind Energy Capacity

States Awash in Stimulus Money to Weatherize Homes

Recovery Act Announcement: Secretary Chu Announces More than $37 Million for Next Generation Lighting

 

 

 

September 08, 2008

Economic Security: Will the Third Oil Shock be the Charm?

Your Energy and Economic Independence: What You Really Pay for Oil.

The cost to the U.S. economy over the past 25 years of over reliance on OPEC oil, including the cost of price shocks, is estimated at $4 trillion, and a price shock in 2005 would cost the U.S. economy half a trillion dollars. Oak Ridge National Laboratory, October 2, 1996

Labor Day 2008 gave me some time to reflect on our country's economic independence. On July 4th we had just celebrated how our country won its quest for economic independence and personal freedoms. Do we really have economic independence today and what freedoms are we losing in trade for our dependence on oil?  Should we change the message in the quest for energy independence back to our original capitalist and free market war for economic security? It appears everyone clearly understood what that battle was about.

Ethanol critics often say (as they appear to be speaking on behalf of everyone) consumers are not willing to pay more for alternative fuels through government tax incentives or directly at the pump.  Somehow those critics forget to include all the external costs of gasoline and do not address the real economic impacts that increasing crude oil imports have on our economy -- as if the trillions of dollars escaping our economy for oil related costs came from 3 magic beans.

The price shock modeled by the Oak Ridge National Laboratory (ORNL) report, "The Outlook for U.S. Oil Dependence," simulated the impact of a two-year supply shock similar to those that occurred in 1973-74 and 1979-80, but starting in 2005 and ending in 2006. The model predicted that the shock would cause oil prices to jump from $20/bbl in 2004 to $50/bbl in 2005, costing the U.S. economy an estimated half a trillion dollars.

According to my calculations (from $50 to $150 per barrel) the actual rise in crude oil prices were three times the ORNL estimate, or add another $1.5 trillion log to the fire.

Americans Spent Ten Times as Much on Oil Imports in June Than Was Invested in All New U.S. Ethanol Producing Capacity Last Year. U.S. Senator Richard Lugar, August 12, 2008

Economic Security: Did Anyone Order Dominoes?

A quick spin on the radio dial this summer sounded something like this "oil prices hit another historic high... gasoline prices are up and the stock market is down...General Motors stocks hit a historic low... Circuit City stock loses 85% of its value since January... consumers are driving less and paying more... American Airlines lays off more workers due to flights restrictions because of higher fuel prices... and one Chrysler working being interviewed after a plant closing said he is heading directly from the unemployment line to the mortgage crisis line...  Did any order dominoes?  You are paying a lot more for gasoline than you see on the pump.

One out of ten jobs in the United States is auto manufacturing related -- Alliance of Automobile Manufacturers.

Sky-High Oil Will Make U.S. Go Broke: Stratospheric crude oil prices precipitated by speculation are wreaking havoc on the U.S. economy. The U.S. consumes 21 million barrels of per day. For every $60 per barrel increase in the price of oil, the U.S. spends an additional $450 billion annually, or $38 billion per month, on oil. At $135 per barrel, the U.S. spends $1.0 trillion per year on oil, which is equal to 15% of the $6.8 trillion in take-home pay of everyone who pays taxes. Charles Biderman, Forbes, June 23, 2008

Oil Imports Account for Over Half of the Nation's Trade Deficit

In the last 10 years, the total of U.S. trade deficits has exceeded $1 trillion. This persistent pattern has contributed significantly to declining real wages and to increasing job insecurity. Most of its victims are middle-income working people. It is estimated that the manufactured goods trade deficit represents a loss of some three million American jobs. AFL-CIO Executive Council.

Why high oil prices make it hurt so bad: As for the price of oil, when it goes up and stays up, it has a negative effect on the entire economy because oil goes into making virtually everything, including steel, aluminum, plastics, rubber, fabrics, transportation … and food. People don't generally associate food and petroleum, but petroleum is used to make fertilizers and run the vehicles used for planting and harvesting, storage and processing, and the trip to market and for the final sale from the freezer in the store to the freezer in a home. And food prices affect everyone around the world. Bob Lutz, General Motors' vice chairman, global product development, Newsweek

The Perfect Crude Oil Import Storm: Your 401K and Savings Account, Your House Value, The War Tax, Deficits, Trade, the Economy, and Your Job!

Your Oil Tax is On the Rise

All of the pollsters this election season are pointing to the economy and all of the economists and economic indicators are pointing to crude oil prices and imports. The interconnection of energy oil dependent polices and the negative impacts they have on the economy intersect at your wallet. Rising oil prices act like a tax on consumers. Money spent by consumers on higher oil prices is not spent on other goods and services. So, profits and sales in many other businesses are squeezed.  The lack of competition in the fuel market is taxing the taxpayer and the economy.

America is in a hole and it's getting deeper every day. We import 70% of our oil at a cost of $700 billion a year - four times the annual cost of the Iraq war. I've been an oil man all my life, but this is one emergency we can't drill our way out of. But if we create a new renewable energy network, we can break our addiction to foreign oil. It is the biggest transfer of wealth in history; Americans alone import 3.6 billion barrels of oil a year. In 2003, the tab for all that goo was only about $70 billion. At today's oil price, it is pushing half a trillion. Boone Pickens.  The Pickens Plan (it will cost you your email address).

The price of oil rising from $80 to $100 a barrel is like adding $150 billion in taxes - Kenneth Rogoff, Harvard economist.

Meanwhile, the surging oil prices are acting like a tax increase—except the proceeds don't go to our friendly governments but to big energy companies and overseas producers. And there is lots of money involved. When gasoline was selling for closer to $1 at the start of the decade, American households were spending some $300 billion each year to drive their cars and heat and cool their homes. They are now spending some $700 billion a year on energy. Household gasoline bills in the coming year will rise about $100 billion—even if national gas prices stay near $4 a gallon through 2008. Mark Zandi, chief economist of Moody's Economy.com

Households will spend about $90 billion more this year on gasoline if fuel prices remain at current levels, according to a forecast by economists at Credit Suisse Holdings in New York. That will consume about 80 percent of the more than $110 billion in rebate checks the government is sending out.

Your Cost of the Iraq War: How Much Do you Attribute to Oil?

This is blog entry is not intended to question the value of or need for the war in Iraq. This is simply information about the cost of the war.  Most analysts agree the War in Iraq has cost the United States somewhere between one to three trillion dollars. While some people will not agree the war is all about oil, the vast majority of Americans would now agree this war has something to do with oil. Therefore, consumers should attribute some portion of their tax bill and their gasoline bill to paying for the free flow of the world's oil.  Protecting oil supplies is critically important, but ignoring the cost of that protection and not attributing some portion to the price of gasoline is misleading.

Considering an estimate of $500 billion for the War in Iraq, here is your personal economic impact: $4,681 per household, or $1,721 per person, or a cost to the U.S. of $341.4 million per day.

The flow of blood may be ebbing, but the flood of money into the Iraq war is steadily rising, new analysis show. In 2008, its sixth year, the war will cost approximately $12 billion a month, triple the "burn" rate of its earliest years, Nobel Prize-winning economist Joseph E. Stiglitz and co-author Linda J. Bilmes report in a new book. Beyond 2008, working with "best-case" and "realistic-moderate" scenarios, they project the Iraq and Afghan wars, including long-term U.S. military occupations of those countries, will cost the U.S. budget between $1.7 trillion and $2.7 trillion or more by 2017. Associated Press Sunday March 9, 2008.

A Liberal Cost Estimate of the Taxpayer's Bill for the Iraq War

Enroll 58,000 children in Head Start.
Put 8,900 police officers on the street.
Provide health insurance to 329,200 low-income children.
Hire 10,700 Border Patrol agents.
Give Pell Grants to 163,700 college students.
Provide foreclosure prevention counseling to 260,000 families.

"Another worry: This war has been particularly hard on the economy because it led to a spike in oil prices. Before the 2003 invasion, oil cost less than $25 a barrel and futures markets expected it to remain around there. (Yes, China and India were growing by leaps and bounds, but cheap supplies from the Middle East were expected to meet their demands.) The war changed that equation, and oil prices recently topped $100 per barrel.-- The Iraq War Will Cost Us $3 Trillion, and Much More, Linda J. Bilmes and Joseph E. Stiglitz, Washington Post Sunday, March 9, 2008; Page B01

The Cost of Oil & Your 401K and Savings Plan

Impact of Oil Prices on the Stock Market, By Omar L. Caban

Impact of oil prices on the stock market is inversely proportional. A shoot in oil prices leads to a nose dive in the stock market. And a decrease in oil price on an average leads to a higher stock market return. So, the effect of oil prices becomes predictable in the stock market. The effect is profound when the oil prices increase in the magnitude of 50% to 100% annually. The reasons being:

1. Any movement in the oil prices results in uncertainty in the stock market.

2. Higher the oil prices, higher the transportation, production and heating costs.

Say, a decrease in the oil prices by 10% in US will result in the expected return to double up on the stock market in the following month. The waves of the impact on the world market index will make its presence felt significantly. Though the stock market moves in the opposite direction with respect to oil prices, it is basically a one way traffic. The stock market returns has no impact on the crude oil prices. The entire stock market does not get equally or at the same time affected by the fluctuation in the oil prices. It is rather subtle.

The US industrial sectors that get most affected with rise in oil prices are:

1. The cyclical Services sector gets most negatively influenced. They constitute the general retailers, support services, media, entertainment, leisure, hotels and transport.

2. The sector which follows next in order is Cyclical Consumer goods. These include household goods, textiles, automobiles and parts.

3. The next negatively influenced sector is the Financials. They comprise of investment companies, banks, life, assurance, insurance, real estate, specialty and other finance.

Oil up, stocks down. Oil down, stocks up...

Oil and the Stock Markets, by John Brasher, CallWriter Publisher

As mentioned earlier, the general rule has been that increased oil prices drive the stock markets down. This is the conventional wisdom. But is it true? (Yes...) I want to point out a very interesting paper entitled Striking Oil: Another Puzzle, issued in November of 2003 by the Rotterdam School of Economics. The Striking Oil paper set out to address the question whether oil prices might forecast future stock market returns. Basing their conclusions on stock market data of 48 countries, a world market index and price series of several types of oil, the authors concluded that oil prices do indeed forecast stock market returns, stating that,

"We find that changes in oil prices strongly predict future stock market returns in many countries in the world... The impact of this predictability on stock returns tends to be large." The authors also noted that "Stock returns tend to be lower after oil price increases and higher if the oil price falls in the previous month." For the developed markets the study found that the change in oil price significantly predicts future market returns in 12 of the 18 developed markets. In all countries the effect is negative.

In other words, the stock market tends to move in the opposite direction to oil prices. Oil up, stocks down. Oil down, stocks up. This is a one-way street, however; stock market returns do not drive crude oil prices. So you can expect oil to be the primary force driving the stock markets until further notice. But the effects of oil prices are more subtle than that. All sectors are not affected equally, or at the same time. Here is what the authors found as to U.S. sectors when oil prices rise:

Most negatively influenced: Cyclical Services.
Next most negatively influenced: Cyclical Consumer Goods.
Third most negatively influenced: Financials.

Which sector is your job in?

Roughly $7 trillion has been wiped from world stock markets since the beginning of the year amid fears of a severe US economic recession and financial institutions reporting more mega losses. The market crisis will preoccupy us well into 2008.  German Finance Minister Peer Steinbrueck on February 15, 2008.

Your House, Mortgage and the Cost of Oil: Some saw it coming

The price of imported oil in the US doubled between summer 2003 and summer 2005, reducing consumer's purchasing power by more than 1 per cent of gross domestic product. Nevertheless, the economic slowdown that was widely expected never occurred. Consumers kept spending and businesses kept investing. ... The continued strong growth contrasts sharply with the economic weakness that occurred after almost every previous significant rise in the oil price. How do we explain this remarkable difference?

The key to the economy's strength in 2004 and 2005 was that household saving declined dramatically while the price of oil rose....The primary cause of this dramatic shift was the fall in interest rates and the resulting rise in mortgage refinancing. Homeowners who refinanced their mortgages took out cash and reduced their monthly payments at the same time. Much of the cash obtained by refinancing was spent on consumer durables, home improvements and the like. 

The powerful effect of mortgage refinancing on consumer spending was a very happy coincidence for the American economy at a time when oil prices were depressing consumer's real incomes. If oil prices were to rise again in 2006 or 2007, the adverse effect on consumer's real incomes would not be offset by increased mortgage refinancing. Mortgage refinancing has now peaked and is declining. The Federal Reserve is raising interest rates again to counter the inflationary pressures that remain from the rise in energy costs. And individuals no longer have the large amounts of household equity against which to borrow. Harvard professor Martin Feldstein

The Lost Economic Opportunity is Even Worse

The Energy Independence and Security Act of 2007 and the renewable fuel standard set the foundation in place to reverse this national and personal economic security threat.  If the goals of this legislation are accomplished we can begin to return to our roots of economic freedom and choice in a free marketplace. Think of your economic security and marketplace freedoms when considering purchasing an FFV and using E85. There is a lot more value than just the price you see on the pump.

Iowa's ethanol and biodiesel industries pump $12.7 billion a year into the state's economy

What would you have done with the few trillion dollars lost to our reliance on crude oil and gasoline and the other few trillions of dollars the nation lost that could have been realized by economic stimulation generated from the production of new domestic renewable transportation fuels like ethanol and biofuels?

Please Note: We could never agree with everything in it's entirety in the research we provide through the information and links provided in the Clean Fuels Blog. Our goal is to find information that provides you with some new context and perspectives with regard to the nation's energy situation and it's impact on you. Our intent is to help your research efforts so you can make a more informed decision about your vehicle and fuel choices.

 

February 27, 2008

The U.S. Exxon-omic Stimulus Package

Like two ships passing in the night, or better yet two graph lines crossing on a oil company profit chart (PDF), the U.S. economic stimulus package once again seems to be slipping back into the hands of those with record setting profits and record-setting oil prices.

Let’s look at the math.

  • The Government is going to give $168 billion back to taxpayers .  Maybe we can consider this a simple gasoline rebate?
  • Most taxpayers will receive a check of up to $600 for individuals and $1,200 for couples, with an additional $300 for each child. People earning too little to pay taxes but at least $3,000 — including elderly people whose only income is from Social Security and veterans who live on disability payments — will get $300 if single, or $600 if a couple.
  • Crude oil prices just passed $100 per barrel, and the average price at the pump is $3.13 for a gallon of regular gasoline, almost 75 cents higher than a year ago.  The average taxpayer gets about 20 MPG and buys 592 gallons of fuel per year. That gasoline usage plus the price increase would equal $444 per individual. This will get much closer to $600 rebate if projections of $4.00 per gallon come to fruition this spring.

That’s one way to look at it.  But the oil companies do not get all of it.  The Department of Energy’s Oak Ridge National Laboratory had another view:

“Higher prices for petroleum mean increased expenditures on motor fuel and a direct transfer of wealth from U.S. household, business and governments to oil exporting economies.  The average U.S. household purchases approximately 1,000 gallons of gasoline each year to power its cars and light trucks for 21,000 miles (Davis and Diegel, 2007, Table 8.7).  Because vehicle use is relatively unresponsive to fuel prices (CBO, 2008), households are now spending $3,000 instead of $1,500 per year on fuel [there goes the rebate].  Because almost 60% of the petroleum we consume is imported, roughly $900 of the increased cost of gasoline is a transfer of wealth from American consumers to oil exporting countries.”

– Dr. David L. Greene, Corporate Fellow, Engineering Science and Technology Division, Oak Ridge National Laboratory, Feb. 14, 2008, in Testimony to the U.S. House of Representatives Committee on Appropriations.

Now for the other side of the ledger.

  • To pay for the rebates — which are estimated to cost about $117 billion (it appears $51 billion is already missing) over the next two years — the government will have to borrow more money, enlarging the budget deficit. This number is amazingly similar to the profits of the top five oil companies in 2007 (PDF).
  • In 2006 alone, the 27 largest energy companies earned $219 billion in pre-tax income, according to the U.S. Energy Information Administration.  If they pay my tax rate – we would be about even and not have to borrow any money.

Exxon, the world's largest publicly traded oil company, said fourth-quarter net income rose 14% to $11.66 billion, or $2.13 per share. That's up from $10.25 billion, or $1.76 per share, in the year-ago period.  That tops Exxon's previous quarterly profit record of $10.7 billion , set in the fourth quarter of 2005, which also was a record for any U.S. corporation.

While some recent oil and gas industry radio advertisements are touting “30% of Americans own oil and gas stocks” – 70% do not.

According to a Bloomberg October 2007 report:

"There's a steady liquidation of the world oil industry... Exxon is buying back about $30 billion of its shares each year. If that continues, Exxon will have repurchased all its stock by about 2024."

According to a Rice University November 2007 report:

“The handwriting is on the wall. The oil majors used 56% of their cash flow on share repurchases… they are not replacing reserves. It’s as if they’re slowing liquidating their long-term asset base.”

Based on the supply/demand charts and record oil prices I would have to bet they are not investing in new oil production either.

What are you going to invest in with your gasoline rebate check?  Put a down payment on a flexible fuel vehicle, purchase some E85, or put it back in your gas tank?  Some in Congress are asking citizens to do just that -- invest their rebates in renewable energy and energy efficiency.

A resolution recently introduced by Congressman Baird in the U.S. House of Representatives calls on Americans to use their tax rebate checks to purchase renewable energy and energy-efficiency products and services.

The resolution, H. Res. 987, cosponsored by Reps. Jay Inslee (WA-01), Earl Blumenauer (OR-3), Greg Walden (OR-02), and eighteen other House members, also urges retailers and service providers to offer promotions that will encourage Americans to purchase products and services that will help conserve energy and reduce greenhouse gas emissions.

“When the Administration and Congress first proposed the stimulus package, I urged them to take this opportunity to address the link between our current economic situation and our energy crisis by investing immediately in conservation and renewable energy initiatives,” said Congressman Baird. “With the cost of gasoline, electricity, and home heating oil rising dramatically in recent years, it’s time for Americans to think outside of the box and reduce their energy use. If consumers choose to invest in energy conservation, they’ll experience a win-win-win situation by saving on energy bills, helping to lower energy costs, and joining in the effort to help our country reduce greenhouse gas emissions.”

“I hope Americans make their rebate checks go green by investing in energy-efficiency upgrades or clean-energy technologies that will help them save on energy costs in the long run,” added a co-sponsor of the resolution, U.S. Rep. Jay Inslee (D-Wash.), who serves on the House Energy and Commerce Committee and the Select Committee on Energy Independence and Global Warming.

“The price of oil has doubled since President Bush took office, exacerbating the stress on Americans’ already stretched wallets,” said Congressman Blumenauer. “Last week Congress passed an economic stimulus package that will boost our troubled economy, and it is my hope that we can begin making personal decisions to spend these checks on energy efficient products. By investing in renewable energy and energy-efficient goods, consumers can reduce their electricity bills and spur new innovation in a sector that is vital as we confront a warming planet, rising oil costs and new security concerns.”

“Consumers in the Pacific Northwest have long made a commitment toward renewable energy, recycling and conservation.  Here’s a chance to do even more by investing the rebate check into more efficient energy uses, such as replacing incandescent light bulbs with fluorescent bulbs, or further weatherizing around doors and windows.  Reducing energy consumption saves money and helps the environment, too,” said Walden, who serves on the Committee on Energy and Commerce and the Select Committee on Energy Independence and Global Warming.

Additional cosponsors of the resolution include Co-chairs of the House Renewable Energy and Energy Efficiency Caucus, Reps. Mark Udall (CO-02) and Zach Wamp (TN-03), along with Reps. Rick Larsen (WA-02), Adam Smith (WA-09), Bart Gordon (TN-06), Patrick Murphy (PA-08), Diane DeGette (CO-01), Chris Murphy (CT-05), Vernon Ehlers (MI-03), Chris Van Hollen (MD-08), Joe Crowley (NY-07), Bob Etheridge (NC-2), Carolyn Maloney (NY-14), Allyson Schwartz (PA- 13), Fred Upton (MI-6).

February 01, 2008

Ethanol’s Economic Stimulus Package: Show US the money!

When compared to the urgency of the Presidential Stimulus Package, the downturn in the stock market and the upturn in unemployment, hard to swallow gasoline prices and "softer consumer spending" – the $40 billion in economic activity generated from ethanol production should be some long over due good news for the nation.

A new report, sponsored by the Clean Fuels Development Coalition (CFDC) and released by the Ethanol Across America Education Campaign, illustrates how US ethanol production facilities are generating hundreds of millions of dollars to local, state, and federal governments through direct and indirect economic generation -- and saving billions in US taxes.

"When indirect and induced jobs are considered, along with capital spending and investment, the ethanol industry is adding more than $40 billion of gross output to the US economy," said US Senator Ben Nelson (D-NE), Senate Agriculture Committee and Co-Chairman of the Ethanol Across America education campaign. Download a PDF copy of the Economic Impacts of Ethanol Production report here.

The media is full of articles discussing how consumers will be spending then sending their presidential/congressional stimulus check -- overseas.  Clothes from Taiwan, toys from China, and of course gasoline from OPEC.  Show the US the money!  With all the recent debate about the ethanol tariff, I can assure you, if you buy ethanol or E85 the majority of your money is going to stay in the US.

Let’s see where your money would be going if you invested in some ethanol/gasoline blends or E85:

  • Your money is going to help ethanol plants buy corn from US farmers. US farmers stand to gain $1.4 billion in net farm income resulting from the recently passed Energy Independence and Security Act of 2007. This new demand for ethanol was also responsible for saving you and the federal deficit $6 billion by lowering farm support program payments – just last year. Farmer…OPEC…Taxes…you finally get to choose.
  • The corn will be processed into ethanol at one of the 134 US ethanol plants that are located across 26 states. Many of those companies are also listed on the US stock exchange.
  • Those US ethanol plants were likely financed by a US bank (Economic Impacts of Ethanol Production, page 8) or other public US financial institutions.
  • Those US ethanol plants employ about 200,000 US workers, based on the projected production of 9 billion gallons per year of ethanol production expected in 2008. (Economic Impacts of Ethanol Production, page 10)
  • The ethanol would be blended at 10% levels and sold at thousands of US gasoline stations across 46 states.
  • If you buy some E85, there is a 99% chance you are driving an American made in the US (Chrysler, Ford, General Motors) Flexible Fuel Vehicle (FFV). You may have one and not know it – you should find out  -- the job you save may be your own. The E85 you purchased would have been sold by the 1,400 US gasoline station owners that have mad the investment to bring Americans what they say the want (more renewable fuels, and yet another choice).  Don’t forget to get some made in the US of A Twinkies.

And Wait – There’s MORE !!

With that entire ethanol economic stimulus package, you get some additional items – included with your ethanol purchase.

The Economic Multiplier

Don’t Forget to Support the US Troops!!

“Energy security and the related economic and environmental issues should be the most important topic of the 2008 presidential election.  Whoever is sworn in as president in 2009 must elevate energy security to the status of a core national goal and must directly engage the American people in the solution. If the next president addresses energy through the same old ideological prism, the chance to strengthen US national security and economic prosperity will be lost.” -- US Senator Richard Lugar (R-IN) The Hill, 1.22.08, Ranking Member, US Senate Commitee on Foreign Relations Committee, and co-chairman of the Ethanol Across America education campaign,

Who's in your wallet?

A Rebate from OPEC?
According to one statistic in the study, OPEC got their raise. Since 9/11 the rise in crude oil prices from $25/barrel to “$70/barrel” (the market price of oil when the quoted study was completed) OPEC revenues have increased from $70 billion per quarter to $280 billion per quarter from 2004 to 2006 -- costing the US $2.25 TRILLION since 9/11.(Economic Impacts of Ethanol Production, page 4)

“And these benefits are not limited to the cornfield states – ethanol projects are being developed from California to New York, and we are on the verge of technologies breakthroughs that can truly reduce our dependence on oil.  As a member of the Senate Energy Committee, I am acutely aware of the perils of this dependence and it is critical that we stem the flow of hard-earned American dollars being used to buy foreign energy. – US Senator Tim Johnson (D-SD), Senate Energy Committee, and co-chairman of the Ethanol Across America education campaign (Economic Impacts of Ethanol Production, page 2), www.ethanolacrossamerica.net

With the last staple or our old economy finally showing signs of a slow down (e.g., McDonalds Hamburgers), its time for US to invest in the new energy economy of the future?

Which economy are you going to stimulate?

Burl Haigwood
CFDC