I cannot believe I missed this in January, but according to The Onion, Judge Orders God to Break Up Into Smaller Deities. Apparently God has a monopoly, and the Justice Department brought a lawsuit to remedy this blatantly anti-competitive market. Hah-larious. Thanks to my Northwestern colleague Mark Witte for sending it to me.
According to Bloomberg News, OPEC may boost its quota by as much as 750,000 barrels per day. Even with all of the Iraq talk, Nymex crude closed at only 58 cents higher than Wednesday, at $28.92. Remind me again why people think that markets are unpredictable … ? Even when folks like OPEC try to mess with them, we adjust our expectations.
My Reason colleague Ron Bailey has an article from Johannesburg on the topic of renewable energy and its treatment at the UN summit. Ron points out that some of the mental energy of the participants is going toward quibbling over their different definitions of “renewable” (i.e., depends on what your definition of the word “renewable” is). In an article on Tech Central Station, James Shikwati asks a related question: “the reduction in fossil fuels in order to utilize more “renewable energy” also will make the underdeveloped stagnate. Why is the developed world keen on preventing the underdeveloped from making use of natural resources that they themselves used to develop?” Shikwati is from Kenya, and asks what I think is an even more poignant question:
A delegate from Sweden pointed out that “the poor should not be allowed to make the same mistakes the developed made leading to pollution, the poor should leap-frog in order to attain sustainable development.” But what gives the developed nations the right to make choices for the poor?
I’d like to hear how the delegates would answer that question. My suspicion is that many would say “learn from our mistakes.” But our mistakes were made in our context, with our opportunities, our choices, our priorities. How do you know that today’s developing countries would benefit from “learning from our mistakes” when they are in a different context, with different opportunities and priorities? How do you know? Or, when I’m feeling particularly snarky, I ask the knowledge problem question this way: how arrogant are you to think that you should make decisions for others?
Feelin’ whimsical today, so I’ve added a Weather Pixie at the bottom of the page. I’m one of those folks who is fascinated by the weather, and I can watch the Weather Channel ad nauseam (much to the frustration of my husband, although he likes the cool jazz during local on the 8s). More substance later, after I get some writing out of the way.
Technology news from Hawaii — “A Big Island company will be the exclusive seller of a new bladeless-turbine technology the manufacturer says will drastically reduce costs for electrical power generation and hydrogen fuel production for use in fuel cells and automobiles,” according to the Pacific Business News. If you read the article, you’ll see something that occurs over and over and over in the history of technological change — the inventor stumbled on this innovation by accident, in the course of doing some other research. That’s precisely why efforts that dirigiste control-freak folks think are duplicative and wasteful are very much NOT wasteful. It’s the knowledge problem — how do you know? How do you know what might arise from that effort?
The Hawaii company marketing this invention thinks this technology has great prospects for reducing energy costs of renewable resources, including hydrogen:
The breakthrough could one day be seen as being as important a discovery as the cotton gin, says Jack Dean, president of Hilo-based T.H.R.E.E.
“In much the same way … people could look back and say, wow, what a revolutionary new idea that allows us to move to a totally different level of self-generation,” said Dean, a former executive for Puna Geothermal.
Because the bladeless turbine is ne-tenth the cost of a traditional turbine, it’s able to provide better efficiencies in cogeneration applications such as heating water or running chillers for air conditioners and bring the cost of producing hydrogen down to where it is equal to or below the cost of gasoline, Johnson says.
“To use the electrolysis process to generate hydrogen required for a fuel cell is about three times more than gasoline, probably more than that,” Johnson said. “We can make hydrogen, we estimate, at least at the price of gasoline and possibly closer to the price of natural gas.”
Aaaaaah, the perennial gale of creative destruction!
Even with the threat of military action in the Persian Gulf and the upcoming Labor Day holiday weekend, both crude oil and gasoline prices are pretty darn stable (although oil prices, especially, are high; more on that in a second). On gasoline, this Reuters article summarizes the results of the regular Lundberg survey of gasoline stations. In the most recent survey, gasoline prices were very stable, at levels sustained over 20 weeks! How often does that happen in the summer? Not very! This price stability is at least in part a result of the production substitution of gasoline for other distillate products such as diesel and jet fuel, which are less in demand because of economic slowness and the fact that many of us won’t set foot on a plane unless we absolutely have to. So enough supply has been out there to meet demand without price having to adjust abruptly. Isn’t economics beautiful?
Now, I’m sure you’re thinking that I overstate the price stability of crude oil. Perhaps, but prices are not fluctuating as much as you might expect given that we are going into the fall/winter heating season and are talking about what to do in Iraq. According to this Bloomberg Energy article from Monday, oil prices have risen 49 percent during 2002, but they have been stable over the past month. This stability is at least in part due to changes in expectations — even though talk of taking on Iraq continues, oil market participants have become less convinced that such action would lead to oil supply disruptions. Those changed expectations have brought some stability to oil markets.
Stable, yes, but at a pretty high price, toying with $30 a barrel. Today Forbes reported that oil prices are rising today, toying again with $30 a barrel. What’s so magical about $30? Once prices go above $30, OPEC begins to consider raising its output, as the two articles linked above point out. OPEC continues to struggle with balancing the incentive to reduce output to raise prices with calls from some member states, such as Nigeria, to raise their quotas so they can raise some money. Combine these dueling incentives with the slow economic growth that we are currently experiencing, and you have OPEC caught between Scylla and Charybdis. That’s why Bloomberg Energy reports today that OPEC will probably discuss increasing production next month. Fascinating.
Amity Shlaes has a good Financial Times column on forest policy and trying to control, plan, and manage “sustainable development.” Here’s a teaser to entice you to read the whole thing:
One way we know the fires are partly the result of federal policy, says Roger Sedjo, a forest expert at Resources for the Future, an environmental think-tank, is because so many fires are on public land. The older trees there (public lands are less logged) are simply more susceptible to fire. Private land, where logging is often less restricted, have seen fewer disastrous blazes. So has the Manitou Experimental Forest in Colorado, which was selectively logged to test the “thinning” hypothesis.
By now the problem of overzealous conservation has been generally acknowledged; many players in the forest fire debate now advocate some form of “thinning”. But environmental lobbies still oppose cutting to such a degree that they are even stopping thinning. A consortium of public and private entities recently wrote a plan for thinning in the area around Flagstaff, Arizona. But legal appeals by environmental groups have so far blocked the plan; and the area is now highly vulnerable to wildfire.
The burning skies of America’s west are not visible in Johannesburg. But they are worth calling to mind as planners consider the future development landscape. Sometimes it is not the development but the sustaining that is the problem.
There’s a lot of cheery news today about retail electric competition in the U.S. and how the black eye that California and Enron have given electricity restructuring have not been fatal. This Pittsburgh Post-Gazette article reports on a study showing that Pennsylvania’s retail electricity rates in 2001 were 20 percent lower than in 1996, on average. Nationally, retail rates were 14 percent lower for residential consumers, 13 percent lower for commercial consumers, and 5 percent lower for industrial consumers. The article correctly points out that states with retail competition have seen green power providers come in and serve the market demand for renewable energy. What the article fails to point out, though, is that it’s unclear how much of those rates decreases has come from real competition and how much has come from mandated rate freezes. Pennsylvania, for example, has frozen its rates over a 10-year phase-out period. Ten years? The interaction of this continuing relic of regulation with other regulatory hangovers, like standard offer prices or “price to beat”, and provider of last resort at discounted rates, stifle potential entry and lengthen the timeframe over which consumers and innovative suppliers actually reap benefits from retail competition. Here’s another story on the report.
Another study, this one by the energy consulting firm Xenergy, shows that retail electricity restructuring is proceeding, according to this article. Xenergy estimates that 36,000 megawatts of energy are now being competitively supplied, a 140 percent increase on the 15,000 megawatts supplied competitively in 2001. Texas accounts for 11,000 megawatts, and Illinois, Ohio, New York, and … California account for over 3,000 megawatts each. California? Must read the study …
And our neighbors to the north, in the Canadian province of Alberta, want to remove Calgary’s and Edmonton’s ability to set retail electricity rates. Alberta has been a shining star in electricity restructuring in North America, and according to the Center for Advancement of Energy Markets, Alberta has done the best job of retail electricity deregulation on the continent. Now it’s challenging the municipally-owned electric utilities.
These are all good things.
Unless something exciting happens today, I am incommunicado — we have a monstrous storm system moving through Chicago, and the pressure drop has triggered a nasty migraine.