Maine Owl

Ms. Owl: But wind energy doesn't make the Republicans wet their pants.

She's got that right. This is why it's hard to imagine how a Republican president would be worse than Obama on energy.

Obama Nuclear Plant: President To Announce Loan Guarantee For More Than $8 Billion

With the nuclear industry poised to begin construction of at least a half dozen plants over the next decade, President Barack Obama announced the first loan guarantees Tuesday, casting them as both economically essential and politically attractive. He called nuclear power a key part of comprehensive energy legislation that assigns a cost to the carbon pollution of fossil fuels, giving utility companies more incentive to turn to cleaner nuclear fuel.

"This is only the beginning," Obama said in designating the new federal financial backing for a pair of reactors in Burke County, Ga., to be built by Atlanta-based Southern Co. Obama's budget would triple – to $54.5 billion – loan guarantees available for new nuclear construction.

The federal guarantees, authorized by Congress in 2005, are seen as essential for construction of any new reactor because of the huge expense involved. Critics call the guarantees a form of subsidy and say taxpayers will assume a huge risk, given the industry's record of cost overruns and loan defaults. Reports by Congressional Budget Office and Government Accountability Office have estimated that the risk of default for new nuclear reactors could be as high as 50 percent.

Two gigawatts of wind turbines probably would cost half that, using a guideline of $1.5 million to $2.0 million per megawatt for wind. And the taxpayer would not be responsible for nuclear waste.

Here in Iowa we have a couple of thousand wind turbines now, about the size of a couple of nukes. I'll take wind any day of the week.

Obama is leading a boondoggle. Shame.

Perhaps the worst moment in the State of the Union speech given by President Obama ten days ago was this statement

President Obama: But to create more of these clean energy jobs, we need more production, more efficiency, more incentives. That means building a new generation of safe, clean nuclear power plants in this country. [emphasis added]

What else irritates me about this is an attitude found in many quarters of the physics community that nuclear power is an obvious solution to our energy problems. For example, this just came in the "What's New" email post from from Bob Park:

ALTERNATIVE ENERGY: THE PRESIDENT'S CALL RAISES SERIOUS CONCERNS. Last week in his State of the Union address the president called for increased generation of nuclear power and offshore drilling for oil and gas. Who could argue?

Park's "concerns" actually are important ones, namely that making fuel from food crops will be unsustainable given the size of the human population when surplus turns to shortage.

But to address Park's question--Who could argue?--here is Arjun Makhijani of the Institute for Energy and Environmental Research (IEER). Makhijani explains how Obama has abandoned campaign rhetoric about reducing nuclear power use over time, and how he failed to explain how nuclear power is an economic loser:

Further, while expressing concerns about deficits, the Obama administration is opening the spigot for more loan guarantees for new nuclear power plants because Wall Street won’t finance them. They are just too risky. A single project is often more costly than the entire net worth of many electricity generating companies. They don’t want to bet their companies on nuclear. But they are OK with betting taxpayer dollars. Given that the underlying relationship between energy demand and economic growth is changing (quite apart from the recession), many nuclear projects are likely to be abandoned. Some already have been. This would be "déja vu all over again." Every nuclear power plant ordered after the first energy crisis in 1973 was abandoned, leaving ratepayers and bondholders on the hook. This time it will be the taxpayers.

Nuclear power is a long-term disaster for the environment and it never will build out enough to be our energy savior. It makes no economic sense as it requires boatloads of taxpayer money and crazy levels of protective public policy for the nuclear industry even to exist.

HERE is an audio program from the archives where Dr. Makhijani laid it all out about nuclear power a couple of years ago at the University of Maine. IEER is a leader in showing how wind and solar could be a sufficient energy source for the future--if we make the right decisions now. Unfortunately with Obama in charge, there is no sense we are going to do anything other than repeat the mistakes of the past.

Obama: "clean, safe nuclear power"

I think he forgot to mention "too cheap to meter."

And I didn't realize that a vote for Obama was a vote for Republican "drill baby drill." The truth is that offshore drilling is merely a distraction from the massive wind & solar program that is called for but peddled ever so softly by Obama.

It's so damn disheartening. He's not even as progressive as Bush.

This is very significant:

Pemex Output Fell 7.8% in July as Cantarell Plunged

Aug. 21 (Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, said oil output in July fell 7.8 percent to 2.561 million barrels a day as production from its Cantarell field kept sinking.

A year earlier, daily production was 2.778 million barrels, Mexico City-based Pemex, as the company is known, said today on its Web site. ...

As I've mentioned before, with all the stories about drug wars and immigration associated with Mexico, you almost never hear the most important economic story--oil collapse.

The U.S. peaked in 1970


"Drill baby drill" all you want, at best it slightly will slow the decline

The post referred to (click graph) develops the entire current world oil production and economic situation. Here's the money quote:

The reason we need a growing economy for the debt system to work is the fact that a person can borrow from tomorrow, only if tomorrow is better than today. (This is especially the case if loans require the payment of interest.) But if tomorrow is worse than today, borrowing from the future doesn't work. Even if tomorrow is the same as today, the system doesn't work, if loans need to be paid back with interest.

The problem is that the economy cannot grow unless oil production is truly rising. This lack of growth in world oil production since 2005 is what is causing the debt collapse we are now seeing. This debt collapse is in turn giving rise to the demand destruction we are seeing currently. Since oil production cannot rise in the future, it seems to me that we are going to see a continuing unwind of the credit bubble that was made possible by rising oil production. Without credit, people will be unable to buy cars and houses. Businesses will be unable to finance new investment, and we will see greater and greater demand destruction.

It's a grim assessment--borrowing against the future is no longer possible because limit on essential liquid fuel energy constrains the growth required to pay those debts.

Yikes. See also HERE and HERE for more. The first link (by the same author ref. above) lists countries with their year-to-year change in oil production rate. Very few are in the "growing" camp.

The second is a penetrating analysis on futures markets and quantification of finite resources with fiat money. This gets straight to the heart of the matter about why the bubble-inflation style of finance capitalism U.S. elites insist on preserving has as its Achilles Heel the erosion of cheap sources of energy resource commodities. It's very useful for understanding the long-term global economic context.

The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America. --President Jimmy Carter, July 1979

Oil price speculation captures Maine senator's imagination





A Friday McClatchy story printed today in the Bangor Daily News today under a somewhat fawning headline, "Collins 'gets it,' taking on Street oil speculators," makes Senator Susan Collins out to be some sort of brilliant analyst and critic of oil markets.

Why a Maine GOP senator is taking on oil speculators
David Lightman and Kevin G. Hall | McClatchy Newspapers | Fri. June 12

WASHINGTON — Oil prices shot past $72 a barrel this week, and a growing number of experts point to Wall Street speculators as a key reason why Americans are suddenly paying a lot more for oil and gasoline.

Although soaring oil prices threaten the fragile economic recovery, most Capitol Hill lawmakers have remained silent about them, but not Sen. Susan Collins. The Maine Republican pumps her own gas and heats her Bangor home with oil, and on trips home, she gets an earful from angry consumers, who, like her, blame speculators.

"Constituents get it," she said. "They don't see the reason for it. They don't see (supply) shortages. They don't see (the Organization of Petroleum Exporting Countries) greatly reducing production or other reasons prices are going up so much."

Collins has been one of the few on Capitol Hill and even fewer Republicans who blame the rising oil prices in part on Wall Street investors. She and her allies, mostly Democrats, are trying to limit speculative investments in oil and other commodities, but they say they need more support from President Barack Obama. [emphasis added]

Damn! Now I know! She's just like us at the gas pump! And she thinks just like us as we blame those dastardly traders for the gasoline and heating oil prices going through the roof. And later in the article, more on the "ordinary" Collins: "She returns home every weekend. Asked if she knows the current price, she quickly shot back, 'You bet I do!'"

Beyond the unnecessary stroking of Collins, I'm not going to disagree with the suggestion in the article that "investors" now are seeing opportunity in oil, given a situation where "a weaker dollar and bullish views on a global economic recovery are driving speculators back into the oil market, prompting a new wave of speculative investment from non-commercial traders — those who don't actually use the product — into contracts for future delivery of oil."

But I also believe the Collins analysis promoted by the article ignores the important underlying issue of world oil depletion, is basically wrong that mere financial speculation is the driver behind oil prices, and leaves key questions unanswered. According to a quote in the article, current oil prices are "divorced from the underlying fundamentals of weak demand, ample supply, and high inventories." True, due to economic meltdown, we have an oil market where potential supplies are well above present fundamental physical consumption. But why the divorce from reality? Why doesn't the market correct itself? Can "non-commercial" trades, as Collins believes, explain everything?

I guess the place isn't just one big bottomless tank of oil.

Nawar Alsaadi (Iraqi expat oil expert): Iraq's oil ministry has a goal of producing 6 million barrels/day of oil over the medium term. However, six years after the fall of Baghdad, the country is nowhere close to producing 6 million barrels a day. As a matter of fact, the country is still not producing at the same level it did before the war (2.2m bpd vs 2.5m bpd before the war). It is worth noting that the pre-war level was achieved despite years of war and crippling economic sanctions. Yet despite current access to capital and technology, the country could not yield better results than oil production under the Saddam regime in the midst of war and sanctions.

Now they're worrying production will go under 2 million barrels per day, "What is more worrisome after several years of miss-management is that Iraqi oil production is on the verge of witnessing a sharp decline in production to possibly under 2 million barrels a day, as indicated from recent news reports."

Of course, this story is not new. The Houston Chronicle carried THIS story in February 2004: "Ex-oil minister warns Iraq fields being ruined." I'd blogged it at the time. It really says a lot that the Cheney-led U.S.-invasion-sponsored oil program and its local quislings have screwed things up even more than what happened under Saddam.

From Etopia News Now out of Los Angeles (!) comes an interview with legislator, historian, and my old neighbor from Portland, Herb Adams


Herb Adams, Maine State Representative (D-119th), talks about feed-in tariff bill LD 1450 (HP 1006). "An Act To Establish the Renewable Energy Resources Program," now pending in the Maine Legislature, recorded from Augusta, Maine, on April 10, 2009.

Another old friend, recently laid off from National Semiconductor in South Portland, is a strong proponent of this bill from a very personal point of view, "This may be the single biggest thing that you can do to help me get a job in renewable energy. I really appreciate your help," he writes.

Now this is important: My friend writes,

The legislation ... will go before the Maine joint standing committee on Utility and Energy on TUESDAY, APRIL 14. The legislation is HP1006, LD 1450.

PLEASE WRITE AN EMAIL TO ONE OR MORE MEMBERS OF THE UTILITY AND ENERGY COMMITTEE ASAP! AFTER TUESDAY IT MAY BE TOO LATE. ...

Here is a listing of the members...

He recommends reading more about it HERE (also where I found the Herb Adams audio).

Midcoast Green Collaborative
The MAINE RENEWABLE ENERGY SOURCES ACT: a feed-in law for Maine

WHAT IT IS
The Maine Renewable Energy Resources Program (LD 1450) is designed to encourage the development of distributed, renewable energy-based power generation, jobs creation and economic development.

LD 1450 is a market based alternative to tax-financed incentives. At its core, it consists of market-rate payments per kilowatt-hour for electricity generated by a renewable resource, enshrined in long term contracts between grid operators and qualified generators. It has a built-in efficiency-incentive because, unlike with grants and tax credits, its beneficiaries are paid only for the power they actually deliver to the grid.

With LD 1450 in force,

• utilities pay a set price for renewably generated power, regardless of the amount of power they generate
• the price is locked in by long term contract
• the price is reduced with each new starting year providing an incentive to act sooner rather than later
• the price is set independently from the retail rate, on the basis of what power from a typical renewably powered generator would cost: (cost of system/probable output)
• to turn a profit, the citizen-producer only has to make sure the system performs well

WHAT IT DOES
LD 1450

• introduces a market-based incentive which will phase out when no longer needed
• does not depend on tax dollars
• creates a large number of non-exportable jobs
• offers a predictable rate of return on investment, making possible bank financing for virtually anyone with sufficient equity in a house
• increases the share of distributed power generation
• provides a strong incentive for performance and efficiency
• will be evaluated and adjusted every two years

I've really gotta hand it to my old friend (to Herb too) for agitating on this and I thank him for bringing it to my attention. He's using his new-found time very wisely. I'm with him 100%. If we had this kind of financing mechanism, I'd go whole hog here at the offices of Maine Owl, plus I'd probably be able to find a decent technical job myself so that we can continue to afford to live in this great place. It's about time that the thousands of empty rooftops I see everyday begin to blossom with the panels of beauty that could greatly help our energy/economic situation.

I've always considered the notion that the U.S. could maintain it's current oil use intensity thirty-eight plus years past domestic peak yet one day soon achieve independence from foreign oil completely nonsensical. But every politician from Bush to Kerry to Obama declares the intention to do just that. The notion is as crazy as it is politically appealing. See archive posts HERE and HERE.

Last year Mother Jones magazine covered this ground in a provocative article by Paul Roberts. Highly recommended.

"Two years on, anyone who's been to a gas station or a grocery store knows the prince had very little to worry about. Despite supposedly bold initiatives such as last year's Energy Independence and Security Act, America is no freer from foreign oil: Since 2006, imports have remained steady at about 13 million barrels every day ..." --Paul Roberts

Highly recommended listening

Thanks to a tip from the excellent website The Oil Drum, about a week-and-a-half ago I heard THIS program from KZYX&Z in Mendocino County, California, "Reality Report: Natural Gas Cliff and Credit Situation."

Basically, Nate Hagens suggests we should not get too comfortable with low oil prices. Also, natural gas is in a lot more trouble than Boone Pickens would have us believe.

There are additional good links and comments at The Oil Drum HERE.

Lock in was a bad deal:

Buyer’s Remorse Chills New Englanders Who Locked in Oil Prices
By Tom Moroney and Brian K. Sullivan - Nov. 26 (Bloomberg)

Buyer's remorse is afflicting tens of thousands of customers in New England, where heating oil is used more than in any other U.S. region. Their eagerness to nail down a guaranteed rate backfired when oil prices fell.

"There was a belief that heating oil could rise to $6 or $7 a gallon," based partly on predictions by Goldman Sachs Group Inc. and billionaire oilman T. Boone Pickens, said Matt Cota, executive director of the 120-member Vermont Fuel Dealers Association in Montpelier.

"Some dealers had lines out the door," Cota said. "People were coming in with their checkbooks to sign contracts. There was a palpable panic in the cold-weather states."

The term "suckered" is used by people who lost this bet.

Along about June, time comes to decide about oil price lock in. Yes, we heat the Maine Owl residence with no. 2 fuel oil. This year caused a bit of a panic because the price had skyrocketed to about $4.70/gal by June. In April we had filled at the astonishing price of $4.05/gal, causing a surprise $600 budget shortfall. Should we now lock in $4.80 in anticipation of $6 or $7 prices by heating season?

My strategy was not to lock. I told the oil dealer to stop automatic fills and that I would be buying oil on the open market from the cheapest dealer at the cash price when I choose to fill. This was precisely the right call this year. Coupled with strong conservation measures, I'm now forecasting that we will end up buying about 575 gallons at $2.50 or less per gallon. The bill for this year will be more like $1400, rather than the $3000 it might have been under a lock.

Since 2003, I've made this call six times and only locked once for 2005-6. That was a good call, saving about $300. Last year, I did not lock and that was the wrong call. That $600 could have been saved. Other years I have not analyzed but my sense is locking would have been a wash to costing slightly more.

I'd like to say I foresaw the early-fall financial crash. But this is not the case. It was more a sense that with all the fuel switching going on in the spring and summer, demand would be suppressed, and it would be hard for prices to maintain. My break point was like $4, at or below which I probably would have locked. When the crash came, the floor on the oil price was pulled out and lock in became moot.

Crazy weeks. More frequent posts will resume soon. Meanwhile, please read about the IEA 2008 World Energy Outlook HERE, HERE, and HERE.

Also, Maine has entered state budget meltdown mode while a worldwide "uproar" has ensued over a local wingnut's Obama assassination pool.

Talk amongst yourselves, all zeroone of you...

On Saturday, I looked at a nice pellet stove at the Broadway Hardware store in Bangor, 50,000 btu/hr, $1700. Can I have that delivered with 3 tons of pellets? No, the guy has no pellets.

Here's a story from the Bangor Daily News today:

Wood pellet supply fails to meet demand
Sellers tell consumers: No reason to panic
By Eric Russell - BDN Staff

Wood pellet manufacturers and suppliers in Maine are urging consumers to be patient and let supply catch up to demand as the winter heating season approaches.

In the last several weeks, a number of pellet fuel distributors in Greater Bangor have been running out of pellets within a day or two of shipments. Many have been simply catching up on pre-sale orders that were made earlier this summer from customers looking to buy in bulk.

This stockpiling of pellets — heating fuel made from wood waste and sawdust that is pressurized into compact pieces — has created a unique bubble in the market, pellet experts said.

"The analogy I've been using is that if everybody who uses oil had [an empty 275-gallon oil tank] and wanted to take their entire full supply in July, there wouldn't be any oil left either," said George Soffron, CEO of Corinth Wood Pellets LLC, the state’s largest pellet manufacturer. "People need to hang on."

No evidence is offered in the article about total seasonal supply-demand balance so that we could evaluate if there really will be enough pellets this season. However, I am confident there will be plenty of $4 oil.

"Predator-prey dynamics"

I've been wanting to study the demand/production vs. price curves in recent behavior of the oil markets. It's just too big a project for me to even think about. Today there is a great contribution in this area posted at The Oil Drum:

Predator-Prey Dynamics in Demand Destruction and Oil Prices
Posted by jeffvail on August 26, 2008 - 11:01am

One of the classic ecological modeling problems is the oscillating populations of predators and their prey in an ecosystem--as prey population rises, predator population follows suit until prey population begins to fall off, resulting in a subsequent drop in predator population (illustrated below). The same dynamic also applies, to some degree, to the relationship between oil price (prey) and marginal production/demand destruction/energy policy (predator). This post will explore that relationship and its ability to help us avoid poor energy policy choices.

In our current tight supply situation, because of inability of world production to continue to grow without limit in support of economic growth, the price will try to scale a vertical wall. When demand pulls back a little in response, the price can fall back rather quickly. That is exactly the condition we have now. (Harry Shearer had a good item on the demand pull-back a couple of weeks ago, HERE.)

I'll try to examine this dynamic in more detail in subsequent posts. Meanwhile, no one should relax because we have a temporary climb-down of the gas price.

Wind turbine on the move


Major operation: turning off of I-35

We have been seeing these massive trailer rigs that are used to carry huge wind machines up and down I-35 in Minnesota. We got caught behind one here, trying to make a turn from I-35 onto MN 95 in North Branch.