Is there a silver lining in this non-sequitir?

Michael Giberson

The Washington Post reports growing consumer interest in automobile fuel economy as gasoline prices increase. Not exactly an earth-shattering development, is it, when consumers respond to price changes?

Almost as reliable as consumer responses to price changes is the “I told you so” chorus from alternative-energy advocates.

[S]upporters of hybrids, electric vehicles, hydrogen fuel-cells, bio-diesel fuels and other alternatives that promise lower gas consumption say the hurricane could be a painful wake-up call.

“If there is a silver lining in this awful cloud, it’s that it’s reminded Americans how vulnerable we are and why we have to end our dangerous addiction to foreign oil,” said David Goldstein, who has been president of the Electric Vehicle Association of Greater Washington for 25 years.

How it that, again? If we were more reliant on domestic oil, then we would have been better off? How? Many of our domestic oil resources are in the Gulf region. Even the wells that remain in production may find their output constrained by the loss of refining capacity in the region. Meanwhile, foreign oil tankers steaming toward Gulf ports can be more readily diverted to locations with refineries undamaged by the storm.

The broad economic effects of Katrina do reveal the vulnerability that arises from the high concentration of energy production, processing and distribution assets in a relatively small area. That concentration of assets emerged from a combination of natural factors (distribution of natural oil resources) and network economies (access to transportation systems including ports, railroads, and pipelines).

Presumably refiners, distributors, and other resource owners not damaged by Katrina are temporarily capturing economic rents. Is the possibility of such rents sufficient to enable a desirable amount of diversity in energy assets? Could public policy induce a better result?


6 thoughts on “Is there a silver lining in this non-sequitir?

  1. A far higher percentage of our RESERVES reside in the Gulf Coast area than the percentage of our RESOURCES located there. However, large portions of our potential resource base (~40%) are currently off limits to E&P activity as the result of federal and state mandates. These resources include oil and gas fields off the east and west coasts and off the west coast of Florida, as well as in the front range of the Rocky Mountains.

    The response to the possibility of temporary “rent seeking” will likely be a congressional investigation and an attempt to confiscate the “rents” (whether or not they were actually collected) and “punish” the “rent seekers”, whether or not they are guilty.

    “Could public policy induce a better result?” Perhaps it would be better to ask whether the elimination of much bad public policy would permit the markets to produce a better result.

    Politicians arguably understand politics. They demonstrably do not understand markets. They approve public policy initiatives without understanding the potential consequences; or, in knowing disregard of the potential consequences. However, they have been unwilling or unable to repeal the law of unintended consequences, despite their apparent surety that such a repeal is within their power.

    There has been very little commentary in the past week about our very limited ability to refine the crude withdrawn from the SPR, because of damage to some refineries and the total absence of underutilized refinery capacity in the US. There has also been very limited commentary about our constrained ability to import additional finished gasoline because of the proliferation of “boutique” gasoline blends which are available only from US refineries.

    Government at all levels is extremely competent at viewing itself as the “solution to the problem”; it seems totally incapable of viewing itself as part of the “problem”.

  2. Until recently, the only supply discontinuities we’ve had were for foreign oil; it’s understandable that the rhetoric is lagging behind the facts of Katrina and the GOM.

    Public policy could have induced a better result long ago.  The California Air Resources Board wrote its over-reaching ZEV mandate in 1990; that mandate could have had a PZEV (GO-HEV) allowance, but it did not.  Vehicles which can operate partially on electricity would allow us to switch seamlessly to coal without coal-to-liquids plants, or to solar, or to hydropower.

    New York and California have a combined population of about 52 million, or more than 1/6 of the whole nation.  They’re covered by the same vehicle emissions mandates.  Had those included PZEV’s since 1995, we’d probably have several million of them on the roads today and on-going production.  But policy passed over the practical in pursuit of the ideal, and the opportunity was lost.

  3. Until recently, the only supply discontinuities we’ve had were for foreign oil; it’s understandable that the rhetoric is lagging behind the facts of Katrina and the GOM.

    Public policy could have induced a better result long ago.  The California Air Resources Board wrote its over-reaching ZEV mandate in 1990; that mandate could have had a PZEV (GO-HEV) allowance, but it did not.  Vehicles which can operate partially on electricity would allow us to switch seamlessly to coal without coal-to-liquids plants, or to solar, or to hydropower.

    New York and California have a combined population of about 52 million, or more than 1/6 of the whole nation.  They’re covered by the same vehicle emissions mandates.  Had those included PZEV’s since 1995, we’d probably have several million of them on the roads today and on-going production.  But policy passed over the practical in pursuit of the ideal, and the opportunity was lost.

  4. Florida will not allow drilling. There are people who were fighting for 50 years to use or be compensated for leases they hold. Tourism is more important, I guess.

  5. ZEV, with or without modifiers, is a misnomer. They are remote emission vehicles (REVs), since the emissions (which do occur) are remote from the vehicles; and, in many cases, remote from the region as well.

    I can’t imagine the advocates of “ZEVs” being supportive of “plug hybrids” which would be fueled by coal combustion, even remotely. While CA might be OK with coal-fueled electricity from the four corners region, NY might be very unhappy about coal-fueled electricity from OH & PA. (Some remote emissions are obviously more acceptable than others, depending on whether you are upwind or downwind.)

    You are absoultely correct that the “ideal” has been functioning as the enemy of the “good”. ZEVs are a case in point. Fuel cell vehicles are another, until someone asks where and how the hydrogen is produced.

  6. GO-HEV’s or EV’s would allow regions to choose what they wanted their vehicle power to come from.  In the case of California, I expect they’d go solar.  The 800 million vehicle-miles/day driven in CA would require about 200 million kWh/day, or about 33 GW over the duration of a 6-hour generating day.  33 GW of solar would fit on California’s roofs and parking lots with ease.

Comments are closed.