Tuesday, 20 December 2011 16:31

Carbon Ideologists - Hiking Crude Prices

About a century ago, Lenin made a great case with the advances of electrifying early Soviet Russia. In fact, history proved that the Soviet spell brought millions and millions of Russians to death, layered famine over Ukraine, eventually leading to cannibalism and other horrendous disasters, and eventually destroyed a healthy economy by brutally killing the "production forces" -- as Marxists call working people and their tools. 

Economic disasters are not emerging because of market forces. On the contrary, they are planned ahead in chunks of five years. The planned economy of the Soviet Block (which derived from the electrifying plan of Lenin's) proved criminal and inefficient. As an insider, Putin knew that, and this explains the red capitalism of the modern crude oil exporter Russia. They don't give a dime about climate change and carbon caps. Thus they are strengthening their economy, to the detriment of Europe... 

Natural resources-starved Europe must import crude from the North Sea or Libya, and natural gas from Russia. Energy is pricey in Europe as the bureaucrats transfer the cost down the food chain, to the taxpayer and individual consumer. Blue socialist measures, though milder than those of the Soviet-era, enslave free market into some sort of state-controlled economy (another historical name coming to mind is fascism). Small businesses and the middle class are the first victims while grand corporations team with the state, or the Brussels Kommissars. Within a volatile Euro-zone and an economy running 9/1 on debt, the lines between private and public property are blurred. 

On this sordid stage, Eurocrats play the carbon caps card as a hedge on the international energy markets. Aiming for an artificial taxing procedure on Russia and America, Europe tries to limit its crude oil and natural gas costs not by lowering prices inside, but by exerting pressure to raise them outside. Even if not so honorable, at least Europe has a plan.

But how about the Obama Administration? The United States and Canada harbor gargantuan sand and shale oil reserves, capable to cover their domestic energy consumption and --above and beyond-- capable to turn North America into a prime global oil exporter. However, Obama stubbornly postpones the inauguration of the Keystone XL pipeline project. This sabotage goes on par with the early Soviet times when Russia's economy was systematically ruined in the name of an ideological driven future advances. Then it was the not-so-needed electrical current for the kulaks, now Obama (the American Lenin) claims that, in the name of the green experimental energy, the American consumer, and taxpayer, has to pay the high price for energy, maybe on par with the European citizen, subject to socialism and scarcity. 

What casual observers of the Keystone XL debate don’t realize is that opposition to the pipeline is only one front in a broader anti-oil sands campaign. At the heart of the oil sands opponents’ position is their contention that the carbon content of the oil sands is higher than other crude oils. The NRDC refers to the Alberta oil sands as “dirtier and more corrosive” than other oil supplies. Tar Sands Action referred to Keystone XL as “the fuse to North America’s biggest carbon bomb.” Indeed, these advocates have routinely circulated the alarmist claim that development of the oil sands means “game over” for the climate.

Another major front in the anti-oil sands campaign is an effort to implement Low Carbon Fuel Standards (LCFS). An LCFS is, in a nutshell, a cap-and-trade program for transportation fuels that forces consumers to ditch affordable fuels like gasoline and diesel and replace them with alternative and renewable fuels and technologies that are not fully developed yet, like electric cars and cellulosic biofuels. Ironically, the NRDC even admits that the advanced biofuels necessary to achieve the mandate “have yet to be produced on a large scale.” 

Fortunately, the American public has not embraced the LCFS concept. According to polls by CNN and Rasmussen, 51% of Americans oppose carbon credit trading and energy mandates called for under LCFS. Even larger majorities of Americans oppose paying more in taxes and higher energy costs to artificially prop-up renewable energy. This explains why Congress failed to enact an LCFS mandate even when the Democrats had massive majorities in both the House and the Senate.

Realizing that they’re arguing against public opinion, environmental groups have shifted their strategy to the state level. As a result of intense lobbying by environmental activists, California – which has proven itself more than willing to sacrifice its economy in the pursuit of ideological goals – has adopted an LCFS that calls for a ten percent carbon intensity reduction in the state’s transportation fuel pool over 10 years.

Anti-oil sands activists hope that California’s LCFS will serve as a model for a national LCFS. However, a recent study by Charles River Associates finds that such a mandate would increase the costs transportation fuels by up to 170 percent over ten years, reduce household purchasing power by between $1,400 and $2,400 annually and kill up to 4.5 million jobs nationwide. 

Environmental activist claims that enacting low carbon fuel standards or killing the Keystone XL pipeline will reduce demand for oil in the United States also fly in the face of government projections that we will continue to rely on gasoline, diesel and jet fuel for decades.

Similarly, claiming that blocking imports of oil sands to the U.S. will stop the Canadians from developing them ignores the fact that Asian markets will gladly take the oil. In fact blocking imports of oil sands into the U.S. – either by killing the Keystone XL pipeline or enacting low carbon fuel standards – would actually result in higher carbon emissions due to what’s known as “crude shuffling.” Instead of obtaining crude oil from a geographic neighbor through a pipeline – the safest and most efficient form of transport – America would instead import more oil via ocean tankers from places like Saudi Arabia, Nigeria, and Venezuela (countries also not exactly known for ‘green’ policies). Meanwhile, the Canadian crude originally destined for the United States would go to Asia on bunker fuel-burning tankers. According to a 2010 study by Barr Engineering, this crude shuffle could result in a nearly three-fold increase in global GHG emissions from crude oil transport.

Blocking imports of Canadian oil into the United States is a terrible policy goal. In addition to increasing carbon emissions, it would drive up transportation and home heating prices, kill jobs and reduce household spending power.

Our economy is already a disaster. Do we really want to make it worse by following California off an anti-oil sands cliff? 

California Dreams and Low Carbon Fuels