| Competing for Energy Resources - Part 2 | ||||
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This article is the second of a two part series.
Solar Thermal generation would also benefit from this same phenomenon.
If the environmental community was willing to recognize these factors they might re-think their opposition to a major interstate transmission system. Railroads and local IOUs will not be satisfied by this logic but the rate paying public would enjoy the benefits of reasonably priced electricity across the nation.
The development of wind, solar, geothermal and hydro-electric electricity would significantly reduce the need for natural gas generation. The development of mine mouth coal or nuclear electricity would reduce the need for natural gas base load generation.
The results of these changes in the electricity supply industry would reduce natural gas demand to a level that might re-balance the supply and demand equation for natural gas without the construction of LNG terminals.
In addition to the elimination of the need for LNG ports, the construction of a major transmission system would create many thousands of U.S. jobs and would reduce the overall cost of electricity to both individuals and companies.
3. Outsourcing energy jobs:
It is simple to conclude that purchasing oil from the middle east is not
outsourcing, but that over simplification can be argued. Oil is simply a form of
energy that can be displaced by other energy sources. Specifically, ethanol and
bio-diesel are direct substitutes for imported oil.
Therefore, any oil that is imported that could be provided through the production of either ethanol or bio-diesel is a form of outsourcing of potential U.S. jobs.
It is estimated that the U.S. could annually produce more than 10 billion gallons of ethanol and as much as 5 billion gallons of bio-diesel. This production would create jobs across the U.S. that would displace negative balance of trade monies that are being sent off-shore.
Since these figures represent less than 10% of the gasoline and diesel fuel being currently consumed they are not significant to oil industry profitability. On the other hand, this energy capacity reduces the need for expanding U.S. refinery capacity and for importing additional fuel as demand continues to grow.
The question also should be answered concerning actually reducing demand for gasoline and diesel fuel. The major consumers of gasoline are the nation’s automobiles. The production of Hybrid vehicles by U.S. manufacturers would, over time, either reduce or keep the gasoline consumption constant. U.S. manufacturers of automobiles have been slow to move into the manufacture of Hybrid automobiles and trucks, but with gasoline prices at all time high levels, it is possible that they may finally get started.
This development would allow the U.S. consumer’s appetite for large automobiles and SUV to be satisfied while improving fuel economy to reduce the demand for gasoline and diesel fuels. Re-tooling the auto industry will create new job opportunities and may provide a way for U.S. car manufacturers to re-emerge as the world’s premier manufacturers of automobiles. Replacing the existing fleet of cars and trucks with Hybrid vehicles will generate more vehicle sales in a shorter time than any other market development plan the auto industry could imagine – again, more jobs, and let’s not forget, more income for the strained social programs of Social Security, Medicaid and Medicare.
4. Solving the Social Security, Medicare and Medicaid problems:
It has been estimated that Medicare, Medicaid and Social Security will require
funding levels exceeding $5 trillion dollars/year by 2040. This level of
expenditure will only be possible if the number of U.S. jobs is maintained at a
level of approximately 4.25 contributors for each recipient of “social
contract” funds.
This will mean that the number of jobs in the U.S. must increase from 130 million in 2004 to more than 260 million in 2040 to fund the social systems as they currently exist. Obviously doubling the employment in 36 years will require an average of as much as 400,000 new jobs to be created each month.
Clearly, the energy sector alone cannot provide this level of job creation, but it is a basic industry that creates a significant multiplier effect when expanded. It is normally estimated that for each basic industry job that is created at least four other service or supply jobs are created. Therefore, if the energy industry can create 35,000 direct jobs/month for the period, it will have created the required economic expansion to account for one-half of the new jobs that are required to meet the Nation’s social contract for Social Security, Medicare and Medicaid.
Maximizing the production of corn for ethanol production along with various oil seed crops for the production of bio-diesel will produce large number of basic industry jobs that will displace imported oil and enhance the U.S. economy while providing funds into the SS/M/M system.
Development of additional domestic oil and natural gas resources will create additional domestic jobs that will reduce trade deficits.
Expansion of the transmission system and potential expansion of coal and nuclear generation will keep U.S. energy prices competitive in the world and create additional domestic jobs.
Expansion of the renewable fuels potential in the form of wind, solar, geothermal and hydro-electric capacity in conjunction with a national grid will not only create many jobs but potentially will reduce the overall cost of electricity.
5. The Federal Solution vs. individual State based solutions:
It is becoming increasingly clear that the Federal Government in this election
year is not looking for long-term solutions to anything. The two parties are
unwilling to agree on anything positive that might provide a greater advantage
to one party over the other. Unfortunately, the Social
Security/Medicare/Medicaid problems will not sit by and wait for people to
agree. These problems will become extremely acute within the next four years.
The liquid fuel and energy problems at the Federal level are also immediate in
their impacts and cannot wait for reasonable men to find reasonable solutions.
Therefore, the only possible solutions that might be available are at the
individual State levels.
California, Nevada and Arizona provide a specific example of ways that individual States may be able to at least partially accomplish what the Federal Government is either unwilling or incapable of doing.
Both California and Nevada have passed laws mandating a certain percentage of their electricity be produced using renewable resources. Other states have also passed this type of legislation but their renewable levels are significantly below those of these two States. Both California and Nevada were looking forward to favorable Federal legislation that would improve the economic environment for wind, solar and geothermal projects. Unfortunately the Federal Government is not capable of producing this legislation.
California, Nevada and Arizona are currently faced with a different problem, however with the potential for liquid fuel shortages looming within the next two years. Gasoline and diesel prices have risen to all time high levels and are unlikely to decline in the near future. There are only 12 operating refineries in California and these are operating at near capacity. Therefore, the combination of high crude oil prices and limited refinery capacity have created the high retail pricing levels.
California is very unlikely to allow any new refinery construction, therefore they and Nevada are looking for other more creative solutions to the supply problems. California has banned MTBE as an oxygenation fuel additive suggesting that ethanol is a reasonable substitute. The demand for ethanol in California could reach one billion gallons per year by 2007. This demand could be partially satisfied by the development of ethanol production facilities in California. These facilities could utilize some corn grown in California but would derive most of its feedstock from Midwestern corn suppliers. The by-products from the ethanol production may find a ready market in California and the surrounding States. Obviously, one billion gallons of ethanol production would ease the refinery issue and reduce the need for additional imports of crude oil.
Nevada is also dependent on the refineries in California for almost all of its gasoline. Since California is likely to take a protective position for its consumers, Nevada may actually have a more severe problem relating to supplies. It has been estimated that it may be possible to construct ethanol production facilities in Nevada, primarily using corn brought in from the Midwest and augmented with locally produced corn. Producing 250 million gallons/year of ethanol in Nevada would provide 10% of its annual consumption of gasoline. The positive economic impact on Nevada would be significant and the easing of the pressure on the California refineries would be critical.
If this type of initiative was coupled with some sort of incentive program to encourage the purchase of hybrid automobiles and trucks, the liquid fuels problems could be delayed for many years in the future.
Conclusions: (It is time to do the right thing!)
Clearly, if both the Federal Government and the individual States took action to either increase domestically produced fuels and electricity, upgrade to a national CD electric grid, as well as reducing the demand for imported liquid fuels, the nation’s economy would benefit significantly.
a. Construction of new refining capacity is unlikely to provide any real pricing relief for gasoline and diesel.
b. The World’s demand for gasoline and diesel oil is increasing at a rate that will continue to drive pricing upward.
c. The best position for the U.S. is one that places it in a competitive energy position.
d. Producing additional oil from domestic resources along with producing as much ethanol and bio-diesel as possible will provide a long-term energy advantage for the U.S.
a. Accelerating the production of Hybrid vehicles in the U.S. has the potential for actually reducing the U.S. demand for gasoline.
b. If U.S. automobile manufacturers devote sufficient time and energy into the development and distribution of Hybrid automobiles they could create a significant export market to other oil consuming nations.
c. The only way to drive down the price of oil will be to bring supply and demand into balance. The developed nations could reduce the short term demand and extend the viability of liquid fuel supplies by committing to the production of Hybrid automobiles.
a. The overall energy efficiency in the U.S. could be significantly enhanced by the development of a major “Electricity Highway” that would allow more economical transfer of energy across the Nation.
b. It would be possible to develop lower cost energy supplies if an adequate transmission system were available.
c. A major transmission system would provide sufficient diversity to make wind, solar and hydro-electric projects valuable producers in the marketplace.
d. If the wind, solar and hydro-electric assets are developed, they will largely displace the need for using “premium” natural gas as an electricity production fuel.
a. The framers of PURPA were correct when they prohibited the use of Natural Gas as a base load electricity production fuel. This activity has created an imbalance between supply and demand that has driven cost up for all of the users.
b. Constructing LNG ports to bring in more natural gas simply increases the negative balance of trade and increases the stress on the U.S. economy.
c. The issue of safety associated with LNG terminals has not been addressed when terrorist activities are considered.
d. The natural gas problems should be solved domestically by additional exploration along with substitution of renewable energy projects for natural gas using projects.
a. The Nation has needed an Energy Bill for more than 10 years. A combination of “Special Interests” and “Party Politics” has kept any meaningful or comprehensive legislation from becoming law. The continuation of this “business as usual” status is absolutely unacceptable.
b. If the energy situation is not properly addressed within the next four years the U.S. economy will be stalled.
c. The Nation needs to address the funding needs for Social Security/Medicare and Medicaid within the next four years.
d. Job creation is the only viable medium term solution to funding social programs. The Energy and Agricultural Sectors of the economy can provide for an important part of a solution to the funding problems that are looming in the very near future.
e. If the Federal Government is unable to address these issues, it will fall to the individual States to address them. The creation of Renewable Portfolio Standards, the development of Ethanol and Bio-diesel standards in fuel along with providing incentives for the purchase of Hybrid automobiles can begin at the State level but must ultimately be augmented by Federal programs.
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