Copyright by John T. Reed
We have a quadrennial ritual and tradition in America since 1973—the first year people had to wait in lines to get gasoline.
The tradition is candidates from the party that is out of power allege that the incumbents have, “no energy policy” and that “we have to end our dependence on foreign oil.” And, of course, they further claim that they have the correct energy policy that’s finally going to end our dependence on foreign oil.
The out-of-power candidates said that in 1976, 1980, 1984, 1988, 1992, 1996, 2000, 2004, and now again in 2008. They will be saying it in 2012, 2016, 2020, and so on as well.
What bullshit!
The correct government energy policy is no energy policy. We are a democracy. If you want to buy foreign oil. Enjoy. If you want to install solar collectors on your roof. Enjoy. Buy a Prius or Hummer. This is America.
It’s none of the government’s business. More importantly, if the government gets involved in any way, it will make things worse. The market does the best job. The public is rarely thrilled with what the market does. But that same public is guaranteed to be less happy with what the government does.
In 1973 and 1979, we had gas lines all over the U.S. Politicians and ignoramuses blamed the oil companies. There were Congressional investigations. The findings? The gas lines, which did not exist at the same time in countries like Germany and Japan, were caused by the government’s allocation system, not by oil company misbehavior. The gas lines ended overnight when Energy czar William Simon decreed the government allocation system was over.
For those too young to remember, an organization called Organization of Petroleum Exporting Countries (OPEC) was dominated by Arab countries. Angered over Western support for Israel, they refused to produce the normal amount of oil, called the Oil Embargo. They also refused to sell to the major Western countries, although that is meaningless because once the oil leaves their borders, it’s in the international market and the highest bidder can buy it.
At that time, the biggest oil producer in the world was the United States. Germany and Japan were targets of the Oil Embargo. They produced zero oil. Yet they had no gas lines while every American sat in gas lines. Why? The Germans and Japanese let the market decide the prices and allocations of gasoline. Ultimately, the gas lines ended in the U.S. when Energy czar Bill Simon remembered that we were a capitalist country and let the market decide the prices and allocation of gasoline.
To paraphrase Winston Churchill,
The market is the worst way to set energy policy, except for all the others.
Politicians and the ignoramuses to whom they pander want to switch to “alternative” energy sources.
Whenever you hear the word “alternative,” head for the exits and hang on to your wallet. For example, “alternative” life style is a euphemism for hippy.
“Alternative energy” refers to wind, solar, geothermal, bio fuels, ethanol. Based on the actual definition of the word, you would think nuclear power would be an alternative fuel, but it’s not because, politically, liberals hate nuclear. I don’t know why. Seems like they would love it. The French do and liberals love the French. But some commissar decreed that liberals must hate nuclear, so they do.
Alternative energy sources have also been defined as those that do not consume natural resources like oil, coal, or wood.
The best definition of the word “alternative” when it comes to energy is “really expensive.”
The left would have you believe that various energy sources are six of one and a half dozen of the other, that we can power our cars with gasoline or electricity and we only choose gasoline because we are stupid.
No. We choose gasoline because we are NOT stupid.
Take wind. We could, and some have, used sails to power land wheeled vehicles. Wind, people say, is free. Unfortunately, sails are not. Furthermore, wind tends to blow in one direction, which often is not the direction you want to go. Also, sometimes wind blows too hard like hurricanes or tornadoes. Other times, it blows too soft or not at all. In other words, it’s unreliable.
What about using windmills to generate electricity? It’s being tried. It only makes economic sense where there is lots of wind and public utility lines are too far away to run wires to the site in question. There are a bunch of windmills in the Altamont Pass which is near where I live. They generate electricity which I use in my home, but they have to be subsidized by the taxpayers because wind energy costs too much. Here is a statement from the Wikipedia article on Wind Power:
Cost per unit of energy produced was estimated in 2006 to be comparable to the cost of new generating capacity in the United States for coal and natural gas: wind cost was estimated at $55.80 per MWh, coal at $53.10/MWh and natural gas at $52.50. [emphasis added]
Wind advocates claim the cost is coming down and it will be competitive to coal and gas soon especially if the machinery is mass produced. Maybe so. But there is still the fact that how competitive wind is depends on how windy the locations of the windmills are. There are limited windy locations and they are not always close enough to populated areas. Transmitting electricity long distances costs money, too.
In other words, at best, wind can only provide a small percentage of America’s electricity needs. And that cannot happen until wind becomes competitive with alternatives, if you’ll pardon the expression, like gas, oil, and coal.
Sun light may be free but solar ain’t. As with wind, it only makes economic sense where there is lots of sunlight and it’s a long way from utility lines. In California, the utilities actually install solar in remote homes that are far from existing power lines. There may be some government subsidy involved but it makes the point that solar only makes sense where it is very expensive to use traditional power lines. Other sensible applications are buoys, satellites in space, and small highway devices like this-is-your-speed signs and emergency telephones.
Here is a list of comparable electricity costs per kilowatt hour from the http://www.solarbuzz.com/StatsCosts.htm photovoltaic cells Web site.
| gas | 3 to 5¢/KWH |
| wind | 4 to 7¢ |
| biomass | 7 to 9¢ |
| small diesel generator | 20 to 40¢ |
| solar photovoltaic central plant | 20 to 30¢ |
| solar photovoltaic on house | 20 to 50¢ |
In other words, photovoltaic solar would raise your electric bill by about seven to ten times. If you pay, say $200 a month, your bill would go up to $1,400 to $2,000 per month. Tell me again how we should use solar because sunlight is free, and it never runs out. Solar may not ever run out, but your bank account will run out if you power your home with “free” sunlight.
Passive solar (windows, concrete floors, and such) can make sense in cold, sunny climates, but it is unreliable and must be supplemented by traditional energy sources. I am a quasi-engineer (West Point graduate). When we had our house built, I ran the numbers on whether passive solar would make economic sense for us. It did not because there are large trees behind our property and in our neighbors’ yard and because the winter climate is mild where we live in Northern California 30 miles from San Francisco Bay.
Semi-passive solar like running water through solar panels to heat it up or pre-heat it can make sense in some climates. In Vietnam, we did not heat our shower water. We just put it in 55-gallon drums on the roof. The sun made sure it was always pleasantly warm. (Vietnam, on the other hand, was stinking hot.) Our guide in St. Lucia, a caribbean island said they did the same. But this again only would replace a tiny amount of energy currently obtained from fossil fuels and only in a few areas of the U.S.
We can grow corn, so why not burn ethanol in our cars instead of Arab oil? First, we do not burn Arab oil. We burn U.S., Mexican, and Canadian oil mostly. Although that’s a technicality. It has to do with transportation costs. Europeans burn Arab oil.
A Wikipedia article on ethanol says,
It is disputed whether ethanol as an automotive fuel results in a net energy gain or loss. As reported in "The Energy Balance of Corn Ethanol: an Update," the energy returned on energy invested (EROEI) for ethanol made from corn in the U.S. is 1.34 (it yields 34% more energy than it takes to produce it). Input energy includes natural gas based fertilizers, farm equipment, transformation from corn or other materials, and transportation. However, other researchers report that the production of ethanol consumes more energy than it yields.
Environmentalists, livestock farmers, and opponents of subsidies say that increased ethanol production won't meet energy goals and may damage the environment, while at the same time causing worldwide food prices to soar.
Among the problems of ethanol are that it takes more energy to produce it than it saves so the nation is worse off energy wise if we burn ethanol. Again quoting Wikipedia,
Oil has historically had a much higher EROEI than agriculturally produced ethanol, according to some.
EROEI stands for Energy Returned on Energy Invested.
I was not able to find the figures immediately, but I have read that without subsidies, and taking into account that you need more gallons of ethanol to go a given distance in your car than gasoline, ethanol costs the equivalent of eighteen dollars per gallon.
Time cover story
The 4/7/08 Time cover story said corn-based ethanol drives up food prices and makes global warming worse. I think global warming is a hoax, but if you believe in the global warming religion, you have to be outraged at the use of corn-based ethanol for motor vehicle fuel. If you are not outraged, you are an ignoramus or a hypocrite.
Like I said, the phrase “alternative energy” means really expensive energy.
French officials said they wanted to diminish their reliance on foreign oil and they did—by going nuclear. France now gets 75% of its electricity from nuclear power and is the world’s largest exporter of electric power. The French also have the lowest electricity cost in Europe. Since the rest of their juice comes mainly from hydroelectric power, they produce near zero CO2 emissions from electricity generation for those of you who suffer from global warming derangement syndrome.
This was a French government initiative that began in 1974 right after the first Arab Oil Embargo.
I do not like government initiatives like this. Top government bureaucrats arguably should all be incarcerated to atone for the mind-boggling waste, fraud, and abuse they continually commit or tolerate. The last thing we need to is put them in charge of energy and give them billions more to waste not to mention exercising lousy judgment or substituting political consideration for the scientific judgment they are supposed to exercise.
But what I would like to see in the U.S. is lifting restrictions against building nuclear power plants that are not truly necessary for safety. Apparently, nuclear power is viable as France and American nuclear powered submarines and surface ships have shown. When nuclear electric plants were first invented, there was talk of eliminating electric meters and just charging everyone a low flat fee per month. That promise was destroyed by liberal hysteria including movies like China Syndrome and Silkwood by accidents at Chernobyl and Three-Mile-Island.
With reasonable restrictions, the market would cause more nuclear power plants to be built in the U.S. and that would probably be a good thing. It is at least a real way to reduce America’s dependence on foreign oil as opposed to the quadrennial lies the politicians spout.
It almost goes without saying that our current policy of not allowing oil companies to extract oil from the Arctic National Wildlife Reserve or in most as yet unexplored regions of the U.S. coastal waters is mindless.
The U.S. has not built an oil refinery in 33 years. This is ridiculous. The U.S. population went up 100 million people in that time.
If a political party is responsible for how screwed America is oil wise, it is undoubtedly the Democrats. They oppose nuclear power, drilling for oil, and refinery construction. If Republicans had the power to implement their solutions to the energy problem, they would be receptive to all of those common-sense steps.
Leftists are only in favor of the stuff that does not work, namely, so-called “alternative energy,” and they oppose the stuff that does work or is far more likely to work, namely, building nuclear plants, searching for oil in the U.S. and its territorial waters, and building new refineries.
Leftists also like conservation measures. I write books and a newsletter for real estate investors. I used to own apartment complexes. As an apartment owner and as a writer for rental property owners, I and my readers are quite interested in conservation measures that actually work. Leftists, on the other hand, are suckers for any cockamamie conservation idea including many that do not work cost-effectively, like electric cars.
Here’s the deal. I recommend any energy conservation measure that has a payback period of three years or less. That is, the amount you save per year multiplied by three years will equal or exceed the cost of the conservation device.
Generally, the energy conservation devices that ought to be used are already being used by competent managers. The reason is it is their job to minimize expenses. Same is true for owners of rental properties and other businesses. They implement conservation measures if they are cost-effective and increase the bottom line, not because the leftists or the government say to. You still see more obsolete stuff at government buildings like schools—which are run by the do-as-we-say-not-as-we-do leftists.
At a PTA meeting, the principal of my son’s school asked the audience for suggestions on how to save money. I raised my hand and said, “I am an expert on building management and wrote a book about it. I noticed you have screw-in incadescent light bulbs all over your exterior. They should be replaced by screw-in fluorescents. They use 2/3 less electricity.” He told me I had to call some bureaucrat in charge of bulding supplies or some such. “Why don’t you tell him?” “It’s not my job.” I was there months later and noticed they had not changed the bulbs. And I’ll bet that principal is a really vocal, big booster of alternative energy.
Real price changes sometimes cause conservation measures that were not previously cost effective to become cost-effective. But note the word “real.” It means after adjustment for inflation. Manys the time when gasoline or other energy prices go up and the public screams like a stuck pig. Then the media reports that, actually, after you adjust for inflation, energy prices are still lower than they were back in whatever year. In order to tell if energy prices have really gone up, use the cost-of-living index calculator at http://minneapolisfed.org/Research/data/us/calc/.
Also, the advent of new technologies or a drop in cost of existing technologies can also move a conservation measure that previously was not cost-effective into the cost-effective category. Screw-in fluorescent light bulbs are an excellent case in point. When they first came out, I heard they cut electricity consumption by 2/3. I bought some to test them at my Fort Worth apartment complex. At that complex, the exterior flood lights on each building had their own meter with no other electric users. They worked exactly as advertised and I told the readers of my newsletter Real Estate Investor’s Monthly and my book How to Manage Residential Property For Maximum Cash Flow and Resale Value to get screw-in fluorescents. As they have become more popular, screw-in fluorescents have come down in cost so they are now even more cost-effective.
Reportedly, LED type lights are coming and they promise to be even more cost-effective. Fine. Test them. If they work as advertised, replace your existing lights with LEDs.
But you need to be far more skeptical than most people are about purported conservation measures. Test them to make sure they actually save enough money to be cost-effective. Over time, either because of real increases in energy prices or because of new technology or real decreases in the cost conservation devices, additional conservation measures will become cost-effective. Some that often are not cost-effective include insulation, double-pane windows in moderate climate areas, fans that blow hot air out of attics, and so forth. (Do not write to me that I am wrong about those because you have one and you couldn’t possibly be wrong. The issue is decided by arithmetic, not religious debates. As I said, I am a quasi engineer. I ran the numbers. I have zero interest in any religious debates about the value of attic exhaust fans or skylights or other common forms of energy stupidity.)
Obama says he is going to spend $150 billion of taxpayer’s money on clean alternative energy research thereby producing energy independence and good-paying jobs. He fails to admit that the federal government arleady spent $57.5 billion doing just that from 1978 to the present. It all failed. (See Forbes 11/24/08) The money was wasted.
I appreciate informed, well-thought-out constructive criticism and suggestions.
John T. Reed