The one small silver lining in $100/barrel oil and other stories of energy, economy, and policy

Michael Giberson

A few scattered stories:

In testimony to the US House and Senate Joint Economic Committee on Wednesday, Fed chief Ben Bernanke said, “the one small silver lining” in $100/barrel oil is that “a lot of alternatives become economically feasible.” In fact, well before $200/barrel, biking to work would become feasible for a lot of Americans, and so would staying home for Thanksgiving instead of taking that trip down I-95 to see grandma, and chopping down trees in the neighborhood to stay warm in winter. I think this is a “cart before the horse” conclusion that comes from spending too much time in Washington policy circles.

EnergyBiz Insider on the U.S. effects of the Asian energy boom: “In 2006, China built 90,000 megawatts of coal-fired power plants, which exceeds the entire generation capacity of the United Kingdom by 13,000 megawatts… India built 22,000 megawatts of new electricity plants in the last five years… [Stanford researcher Jeremy] Carl says that Asia’s electricity boom is causing them several problems. ‘China has vacuumed up the technology and personnel needed to implement these power plants,’ he says. Hence, domestic utilities are having problems with ‘equipment availability, getting construction equipment on time, and obtaining the necessary number of engineers,’ he says.”

At Grist, Ryan Avent says transit is “the forgotten solution.” He asserts that “our best hope for near-term reductions in emissions is a significant increase in transit investment.” Interesting, but I don’t think so. I’d like to see the analysis that underlies such a bold claim.

The Baltimore Sun reported on April 1: No collusion found in Maryland power auctions:

Steven B. Larsen, chairman of the Public Service Commission, told state lawmakers yesterday that the regulatory body found no evidence of collusion in the 2005-2006 wholesale power auctions that caused a 72 percent price increase for households buying power from Baltimore Gas and Electric Co., which is a subsidiary of Constellation….

O’Malley, a Democrat, asked Larsen to look into the auctions last year after the Illinois attorney general filed a complaint alleging price manipulation by energy suppliers that helped lead to a $1 billion rate rebate for customers there. O’Malley had campaigned on a pledge to roll back steep BGE rate increases.

But after O’Malley took office, the PSC concluded that it had no cause to deny rate increases sought by BGE, finding that Constellation followed the auction procedures set up by previous PSC members.


7 thoughts on “The one small silver lining in $100/barrel oil and other stories of energy, economy, and policy

  1. In fact, well before $200/barrel, biking to work would become feasible for a lot of Americans, and so would staying home for Thanksgiving instead of taking that trip down I-95 to see grandma, and chopping down trees in the neighborhood to stay warm in winter. I think this is a “cart before the horse” conclusion that comes from spending too much time in Washington policy circles.

    I think that you’re being too hard on the man.

    First off, he’s right. Would the Canadaian tar sands be coming on line if oil were still $10 a barrel?

    Second, the things you bring up were things people did in the ’70s to adapt to the energy crisis. People started riding bikes. Wood stoves made a huge comeback. People bought crappy little Hondas and Toyotas, and drove absolute crap like the Oldsmobile and VW diesels (VW rabbit diesel had 50 hp. 50!).

    I just don’t see people resorting to that kind of change. Okay, light truck sales were less than car sales last quarter, for the first time in a long time, so some change is evident.

    But wood stoves? Diesels? Biking? Maybe they’re happening, but I don’t see it.

    I traded my SUV in for a compact, but I have buyers remorse. The mileage isn’t that good! Should have gotten the Prius, I guess.

    I have been topping off the tank with E85. See my blog about that here. I’m lucky to have an E85 pump very close to my house.

  2. He asserts that “our best hope for near-term reductions in emissions is a significant increase in transit investment.” Interesting, but I don’t think so. I’d like to see the analysis that underlies such a bold claim.

    Well, you first: why would it just so happen that the one technology that Eisenhower decided on in the 1950s is still a great idea in its current form? If you’re a libertarian, why do you believe that the government should leave markets to work for themselves, EXCEPT in the case of transportation, which is the primary determinant of location, which put together account for A LOT of our energy use and subsequent polluting emissions? Automobile travel is made cheaper by the almost-free use of roads – the only things that users pay directly are the occasional (very occasional) toll, and the gas tax. Given that the gas tax doesn’t cover anywhere near the full cost of the roads and their maintenance, the system is highly subsidized and lacks anything like a market allocation mechanism. Not to mention the fact that even if private mass transit was economically viable even in the face of immense auto/road subsidies, it could never actually work, considering zoning laws limit density, which is a very necessary prerequisite for a profitable private mass transit system.

    So, you first – why are you so sure that the government has it right? Especially in light of the fact that before the automobile, even though the market for energy/transportation was regulated and meddled with to some extent by government, the vast majority of urban commutes were made on mass transit (private, not public).

  3. Mike,

    The addition of 90 gW of coal-fired generation in China in 2006 should be all the data necessary to put a “torpedo” into the Kyoto Accords. That 90 gW is about 10% of current total US generating capacity; and, thus, about 20% of US coal-fired generating capacity. China alone is adding CO2 emissions faster than the rest of the globe’s nations could reasonably reduce CO2 emissions.

    Global “problems” require global solutions, no matter how “pure” the intentions of those who “believe” otherwise. Even if the US reduced its CO2 emissions to ZERO by 2020, it would not offset the increases anticipated from China.

    I am not a climate scientist. I have never played one on TV. I did not stay in a Holiday Inn Express last night. However, I can add, subtract, multiply and divide; and, that is the extent of the math skills required to successfully analyze this situation, even if that still leaves the analysis beyond the capabilities of our elected representatives.

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