More on Oil Company Subsidies

I wrote recently that the US government should eliminate oil company subsidies as suggested by Pres. Obama, but not for the same expressed reasons.
   

    I have received a comment from one of my associates as follows:
        

"I almost agree.

       

 We need an energy plan that:

            1. guarantees and puts us in an immediate position of complete energy independence, and does not continue to send all of our money to our enemies.

            2. provides a long-term solution to continue that independence (with alternative energy sources) for the long-term foreseeable future, at least 50-100 years ahead (sufficient lead-time for new energy technology to develop)

            3. is directed and controlled by big-picture and multi-source interests and wisdom (a republic); rather than by a small, closed, small thinking, self-absorbed aristocracy (presidential dictatorship); or by a selfish, short and small-thinking big group (pure democracy, like the one that voted Obama into power)".

    I replied as follows:
        

" We will accomplish your objectives by removing subsidies and restrictions from oil companies, which will force them to maintain profits and high stock values by increased production.
    

There is a potential end to the supply of oil and gas, but that is unknown and it is many years down the road. We should not be looking at it as an emergency that needs immediate action. The last phases of oil and gas availability will eventually be obvious, with an associated increase in prices. This will occur over several years, which will be ample time for increased development of the most economically favorable renewable energy sources.
    

Oil and gas companies are in the energy business. When they see that supplies of gas and oil are terminable, they will switch to supplying other forms of energy. Some have already started this, but unfortunately have been artificially encouraged to do so by government taxpayer grants. Government should not be meddling in this area. Free-market needs will take care of product availability, pricing and competition. The only function that government should have is to restrict the formation of monopolies, which would work to the disadvantage of the American public. We have antitrust laws to do this, and the Justice Department has a requirement to follow this and prosecute where necessary".

Remove Subsidies to Oil Companies

Pres. Obama is calling for the elimination of subsidies to oil companies. He wants to apply those funds to subsidies for renewable energy companies.
    
Wikipedia says, "A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributed as subventions in an industry to prevent the decline of that industry". Since the oil industry is well established and essentially nobody foresees an imminent decline in the need for oil, Pres. Obama is on solid ground. He is also theoretically correct on a need for subsidies for nonexistent or fledgling companies in the industry of renewable energy. I say "theoretically", because there are other pragmatic considerations. Subsidies to renewable energy have already reached a tremendous level, and yet renewable energy now only contributes 3% to our total energy use. The essence of this is that renewable energy is not worth subsidization, or at least is much ahead of its time.
    
Another way to look at it is that a subsidy to an existing profitable company or industry decreases that company's or industry's incentive to produce more goods or services. It easily retains its profitability through acceptance of the subsidy. The net result is that subsidies to oil companies tend to reduce the availability of oil. Such shortage with respect to market demands, increases prices.
    
Another example is agricultural subsidies. Subsidies to growers are made to reduce agricultural production in order to avoid product gluts, and maintain high prices. The political justification for such subsidies is to "keep the growers in business, in case we need them in the future". This is a weak argument. Agricultural subsidies should also be eliminated, which would bring down the cost of food products. Some weak producers will go out of business, but the strong will survive, and will have continued incentive to produce more products to increase total profit.
    
However, the essence of this discussion is subsidies to oil companies. They should immediately be eliminated. There should also be no subsidies to any segments of the renewable energy industry, since renewable energy products are not be able to compete economically with oil produced by non-subsidized companies.

Steven Chu Continues to Blow Taxpayer Money

We are all familiar with shows, such as the Home Show, Boat Show, and Automobile Show. They basically consist of demonstration of various companies products within the designated category (e.g. homes and appliances) and are open to the general public. They are a form of advertisement, with intention to increase sales of the demonstrated products.
   
Steven Chu's Department of Energy had a "conference" a few weeks ago to promote advanced energy research. It was not open to the general public, but 2600 scientists, engineers, investors, and business executives, and others attended. It appears that there were actually no products for sale. Why then the large attendance? The obvious answer is that Chu gives away taxpayer money, in the form of grants. Likely most of the attendees were there to determine how they could obtain a share of the free money.
   
Bill Gates was pushing use of depleted uranium for "advanced" nuclear energy. Bill Clinton had a contradictory program of reducing greenhouse gases and simultaneously promoting oil and gas development. But, most of the conference focused on emerging technologies, such as energy storage, electrical grid expansion, and renewable energy.
   
These are all good subjects and worthy for consideration, but Steven Chu has no business in this type of promotion using taxpayer funds not only for the promotion, but for using grants as bait to obtain the 2600 attendees.
   
We have many private companies involved in all aspects of energy production, storage, and use. There is no doubt that these companies are willing and able to develop sellable products in this field and an Energy Show could be easily justified on the same basis as other commercial Shows. Dumping large amounts of taxpayer money into" pie-in-the-sky" energy conferences has already proven to yield little or no practical value. Conversely, when private enterprise spends a dollar, its pretty sure that it will obtain a reasonable return in a practical period of time. More importantly, any risk involved is on their dollar, not mine.

Wind-power Sailing Ships

Pres. Obama recently ridiculed persons opposed to his program of depending upon wind energy. He likened those opponents to believers in a flat earth until Columbus discovered America.
    
I point out that when Columbus discovered America he used three wind-powered sailing ships. Wind-powered sailing ships no longer have commercial value. Wind power is used on sailboats for recreational purposes. Essentially all commercial sea transport now uses oil. This is come about through a transition from wind to coal to oil. The reason for the change was to reduce transportation costs.

    
It appears that Pres. Obama doesn't understand this.

Bakken Available Oil Reserves

ADDENDUM 3/7/12

The previous communication placed the Bakken recoverable oil reserves at 3.7 billion barrels, according to the 2008 US Geological survey

    

A year ago (Feb, 2011), Continental Resources increased that estimate to 24 billion barrels (a 5-fold increase) (http://www.ogj.com/articles/2011/02/continental--bakken.html).

    

Continental Resources is the second largest independent oil exploration and production company in the US, with a market capitalization of $16 billion.

    

We don't know the basis of the new Continental Resources estimate, but will assume it is reasonably correct, because there has been continued technological drilling and production improvement since the US Geologic Survey in 2008.

     

This changes the picture somewhat. Instead of Bakken reserves of available oil covering about a year and a half of net imports, the available Bakken reserves will cover about 8.6 years of net imports (24/2.8).

    

A key point is that if we have within the time span of 3 years such a radical increase in estimated US oil availability from only one region, how silly it is to assume that the world is rapidly running out of oil to justify the program of spending billions of taxpayer dollars now to develop new sources of energy.

 
ORIGINAL 3/6/12

The Bakken is a rock formation in the northern corners of North Dakota, Montana, and extending into Canada. It contains a substantial amount of oil. Some of the oil is "free", which means it is easily accessible. but most of it is bound in the rock, which made it unavailable.

    

The US Geologic Survey, which is part of the Department of Interior, estimated in 1995 that the Bakken contained 151 million barrels of recoverable oil using technology available at that time. In 2008, the estimate was increased 25 times to 3.7 billion barrels, because of  advances in drilling technology (http://www.usgs.gov/newsroom/article.asp?ID=1911).

    

The new technology involves drilling to a depth of 2 miles followed by horizontal drilling to follow productive layers(http://en.wikipedia.org/wiki/Bakken_formation.

    

The US imports 10,9 million barrels of oil per day, which is 4.0 billion barrels per year (ftp://ftp.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html). The US exports 3.2 million barrels per day, which is 1.2 billion barrels per year (http://www.indexmundi.com/united_states/oil_exports.html). Net imports are 2.8 billion barrels per year.

    

While Bakken reserves are substantial. it appears that recoverable oil (3.7 billion barrels), using present technology of deep and horizontal drilling combined with rock fracturing techniques would only cover a little more than a year's net imports (2.8 billion barrels).

ADDENDUM 3/7/12

 

The previous communication placed the Bakken recoverable oil reserves at 3.7 billion barrels, according to the 2008 US Geological survey

    

A year ago (Feb, 2011), Continental Resources increased that estimate to 24 billion barrels (a 5-fold increase) (http://www.ogj.com/articles/2011/02/continental--bakken.html).

    

Continental Resources is the second largest independent oil exploration and production company in the US, with a market capitalization of $16 billion.

     

We don't know the basis of the new Continental Resources estimate, but will assume it is reasonably correct, because there has been continued technological drilling and production improvement since the US Geologic Survey in 2008.

     

This changes the picture somewhat. Instead of Bakken reserves of available oil covering about a year and a half of net imports, the available Bakken reserves will cover about 8.6 years of net imports (24/2.8).

    

A key point is that if we have within the time span of 3 years such a radical increase in estimated US oil availability from only one region, how silly it is to assume that the world is rapidly running out of oil to justify the program of spending billions of taxpayer dollars now to develop new sources of energy.

 

ORIGINAL 3/6/12

    

The Bakken is a rock formation in the northern corners of North Dakota, Montana, and extending into Canada. It contains a substantial amount of oil. Some of the oil is "free", which means it is easily accessible. but most of it is bound in the rock, which made it unavailable.

    

The US Geologic Survey, which is part of the Department of Interior, estimated in 1995 that the Bakken contained 151 million barrels of recoverable oil using technology available at that time. In 2008, the estimate was increased 25 times to 3.7 billion barrels, because of  advances in drilling technology (http://www.usgs.gov/newsroom/article.asp?ID=1911).

    

The new technology involves drilling to a depth of 2 miles followed by horizontal drilling to follow productive layers(http://en.wikipedia.org/wiki/Bakken_formation.

    

The US imports 10,9 million barrels of oil per day, which is 4.0 billion barrels per year (ftp://ftp.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html). The US exports 3.2 million barrels per day, which is 1.2 billion barrels per year (http://www.indexmundi.com/united_states/oil_exports.html). Net imports are 2.8 billion barrels per year.

    

While Bakken reserves are substantial. it appears that recoverable oil (3.7 billion barrels), using present technology of deep and horizontal drilling combined with rock fracturing techniques would only cover a little more than a year's net imports (2.8 billion barrels).

Last on the Chevy Volt

I previously said that Snopes did not dispute Eric Bollings operation data on the Chevy Volt. I was wrong. I had neglected to read the last part of Snopes' article.

    

Snopes presents data, which are more credible to me than Eric Bollings. The net result is that it appears the Volt has an operating efficiency comparable to standard gasoline powered vehicles. The last part of Snopes analytical statement is questionable, but it is not significant to the total, and we will not quibble.

    

It now appears that all dissenters are on one wavelength. The Volt doesn't sell in quantity, because it is too expensive compared to suitable gasoline vehicles, and in spite of taxpayer subsidy.

 -----Original Message----- 

From: Arthur Sucsy [mailto:asucsy@suddenlink.net]
Sent: Monday, March 05, 2012 5:27 PM
Subject: More on the Chevy Volt

    I have had another criticism of using ridiculous information in my claim that the market may not be ready for an electric car, because it cannot compete with gasoline./Diesel powered cars on a cost/performance basis. I was referred to Snopes for the facts.  http://www.snopes.com/politics/business/chevyvolt.asp

    Snopes starts out by saying that the claim of the Volt costing 7 times as much to run and 3 times longer to drive across country is "False". It then goes on to repeat Eric Bollings' data and apparently finds no fault with it. Snopes then explains their "False" judgment is based not on Eric Bollings' facts, but rather that the Volt was never intended to compete directly with gasoline /Diesel powered vehicles. The Volt is an "extended" coverage vehicle. which means that one can get more performance than from the usual electric car. This is accomplished by including a gasoline engine in its construction.

    Depending on one's interpretation of "extended coverage", one can either assume the Volt has a long range and high speed, similar to a gasoline/ Diesel powered vehicle, or its performance on those two specs is somewhat better than an all-electric car. If one assumes the former, the Volt is a loser. If one assumes the latter, the Volt is a winner.

    Going back to the matter of "ridiculous information or claims", I don't agree. Snopes is not disputing Eric Bollings' data. But, even if the running cost is only 2 times as much, rather than 7 times, and the cross country driving time is only 2 times, rather than 3 times straight gasoline, it's still uncompetitive for the mass market and Bollings has made his point. As I have said before, GM has been forced to shut down Volt production, because of low sales, and in spite of heavy advertising promotion.

    The question still remains as to whether there is a place for electric vehicles. The answer is a resounding "yes", and I hope this is not interpreted as a ridiculous claim. Electric powered fork-lift trucks, in-plant trucks  and in-plant cars (think Hollywood set or large oil refinery) are already in use. Other American and Japanese auto makers also have electric vehicles for sale, but the market is small. It will likely remain small for many years to come, until the world runs out of gasoline. Even then syngas or other technologies will likely be perfected to supply synthetic gasoline for another 100 years or so, (exaggerated claim?). The basic question is whether it was necessary for the Obama Administration to have dumped and continue to dump many billions of taxpayer dollars into electric car and auxiliary promotion.

More on the Chevy Volt

I have had another criticism of using ridiculous information in my claim that the market may not be ready for an electric car, because it cannot compete with gasoline./Diesel powered cars on a cost/performance basis. I was referred to Snopes for the facts.  http://www.snopes.com/politics/business/chevyvolt.asp

    

Snopes starts out by saying that the claim of the Volt costing 7 times as much to run and 3 times longer to drive across country is "False". It then goes on to repeat Eric Bollings' data and apparently finds no fault with it. Snopes then explains their "False" judgment is based not on Eric Bollings' facts, but rather that the Volt was never intended to compete directly with gasoline /Diesel powered vehicles. The Volt is an "extended" coverage vehicle. which means that one can get more performance than from the usual electric car. This is accomplished by including a gasoline engine in its construction.

    

Depending on one's interpretation of "extended coverage", one can either assume the Volt has a long range and high speed, similar to a gasoline/ Diesel powered vehicle, or its performance on those two specs is somewhat better than an all-electric car. If one assumes the former, the Volt is a loser. If one assumes the latter, the Volt is a winner.

     

Going back to the matter of "ridiculous information or claims", I don't agree. Snopes is not disputing Eric Bollings' data. But, even if the running cost is only 2 times as much, rather than 7 times, and the cross country driving time is only 2 times, rather than 3 times straight gasoline, it's still uncompetitive for the mass market and Bollings has made his point. As I have said before, GM has been forced to shut down Volt production, because of low sales, and in spite of heavy advertising promotion.

     

The question still remains as to whether there is a place for electric vehicles. The answer is a resounding "yes", and I hope this is not interpreted as a ridiculous claim. Electric powered fork-lift trucks, in-plant trucks  and in-plant cars (think Hollywood set or large oil refinery) are already in use. Other American and Japanese auto makers also have electric vehicles for sale, but the market is small. It will likely remain small for many years to come, until the world runs out of gasoline. Even then, syngas or other technologies will likely be perfected to supply synthetic gasoline for another 100 years or so (exaggerated claim?). The basic question is whether it was necessary for the Obama Administration to have dumped and continue to dump many billions of taxpayer dollars into electric car and auxiliary promotion.

Electruc Cars Now?

I previously issued an e-mail, blog and Twitter concerning GM's electric car, known as the Volt. In those documents, I included information from a friend, which was said to be based on communications from a Stanford U. engineering person, and considerable detail from a Fox Business News analyst named Eric Bolling.

    I then received, from a close associate, a vigorous denunciation of having used incorrect data in the original communications. Here is my reply to my associate:

    

"I'm sorry. My only excuse was that the "inaccuracies" were not obvious enough to me that they required my independent research. 

From your point of view, I was duped by a friend, an engineering person at Stanford, Fox Business News, and an analyst named Eric Bolling. You may be correct in that assumption. 

However, you and I start from different perspectives. I believe you take the same position as the Obama Administration, which is that there is a finite quantity of petroleum in the world. Therefore, we should now be working hard on developing alternative sources of energy, which are most obviously wind and solar.

While I do not disagree with the finite nature of petroleum availability, I take the attitude that we do not know how much is available nor how long it will last. I also believe it is unwise to restrict its public use by denying availability through government edict, such as denying drilling permits on "government" land, which should not be government owned in the first place, and imposing various restrictions on its production, refining, and use. 

The second violation of logic is promoting electric cars now, when the above paragraph opines that it is not necessary. The extenuating damage is the expenditure for actual building and promotion of electric cars and ancillaries by huge taxpayer subsidies and loan guarantees at a time when total government expenditures versus income places our government on a road to bankruptcy.

We are human and always slant things in a manner favorable to our preconceived opinions. You like electric cars and don't want to hear anything negative about them. I also like electric cars, but within the limitations of appropriate economic, time, and petroleum resource life cycles."

Thinking About Buying a Chevy Volt?

     I heard on the TV News that GM has stopped producing the Chevy Volt. However, TV advertising for it still continues. Apparently, they are trying to work off inventory.

     The following is from a friend:

Subject:Thinking about buying a Volt?

How patriotic
 

From one of my engineering friends at  Stanford....
 

CHEVY VOLT CAR COST TO RUN
 

Eric Bolling (Fox  Business Channel's Follow the Money) test drove the Chevy Volt at the  invitation of General Motors.
 

For four days in a row, the fully charged  battery lasted only 25 miles before the Volt switched to the reserve gasoline  engine.
Eric calculated the car got 30 mpg including the 25 miles it ran on  the battery.
 

So, the range including the 9 gallon gas tank and the 16 kwh
battery is approximately 270 miles.
 

It will take you 4 1/2 hours to drive  270 miles at 60 mph.
Then add 10 hours to charge the battery and you have a  total trip time of 14.5 hours.
 

In a typical road trip your average speed  (including charging
time) would be 20 mph.
 

According to General  Motors, the Volt battery holds 16 kwh of electricity.  It takes a full 10  hours to charge a drained battery.
 

The cost for the electricity to charge  the Volt is never
mentioned so I looked up what I pay for  electricity.
 

I pay approximately (it varies with amount used and the  seasons) $1.16 per kwh. 16 kwh x $1.16 per kwh = $18.56 to charge the  battery.
$18.56 per charge divided by 25 miles = $0.74 per mile to  operate the Volt using the battery. Compare this to a similar size car  with a  gasoline engine only that gets 32 mpg.
$3.19 per gallon divided  by 32 mpg = $0.10 per mile.
 

The gasoline powered car cost about $15,000  while the Volt costs $46,000.  So Obama wants us to pay 3 times as much  for a car that costs  more than 7 times as much to run and takes 3 times as  long to drive  across country.
 

REALLY?

Mass Exodus of US Oil Refiners

This comes from a friend. Note that it has references to support claims. 

 Subject: Mass Exodus of US Oil Refineries

This comes from a retired oil executive who spent over 40 years in the industry. The Closure Of The U.S. Oil Refinery Industry In The Past 2 Years... In 2010, there were 149 operable U.S. refineries with a combined capacity of 17.6 million barrels (2,800,000 m3) per day. Something odd started happening in late 2010-early 2011. The US oil refinery industry quielty announced the closure of numerous US oil refineries. Many are completely unaware the US ships oil overseas to be processed. We do so as we do not have enough refineries to process the vast amounts here, and we are barred from building anymore refineries. All refineries perform three basic steps: separation, conversion, and treatment. Pretty simple. Several reasons include technical and economic factors as to why we ship it overseas to be processed. 1. The crude petroleum is sold to the highest bidder, NOT the nearest bidder. 2. There are different kinds of crude oil, such as sweet/light and dark/heavy. They have different applications and uses. 3. Different kinds of refining processes are needed to make different products from the crude oil. Petroleum is processed to make lots of products other than gasoline, like plastics and asphalt. 4. Politics, unions and the "enviornmentalists" How many of you are aware Sunoco, ConocoPhillips and The HESS Corp are all closing US oil refineries? Not many, as the media refuses to give this HUGE story coverage. My guess is that if Americans understood the complete truth to how we are being sold out, and enslaved there just might be the much needed revolution to turn this country around. Last September, both Sunoco & CP announced plant closing, effecting thousands of workers. Sunoco announced they are completely getting out of the oil industry. Closing up shop. They are done with the US oil industry. Sunoco is closing it's 2 oil refineries in July 2012 in Philadelphia and Marcus Hook, Pa. Those 2 facilities alone process over 500,000 barrels a day. http://abclocal.go.com/wpvi/story?section=news/local&id=8343372 Also announced last year, ConocoPhillips announcd 2 plant closing for sure in Trainer, PA and Bayway, NJ., the other 3 plants are undecided as of today. http://stillwaterassociates.com/index.php?option=com_content&view=article&id=139:us-east-coast-refinery-for-sale-whos-buying&catid=40:white-papers&Itemid=155 Conoco also announced they were closing their Alaskan refining facility: http://www.delcotimes.com/articles/2011/09/28/news/doc4e828f2ba723a246763254.txt Just a week ago, the US 3rd largest oil refinery owned and operated by The HESS Corp just announced it's permanent closure. Costing over 2,000 jobs, and effecting 950 contractors: http://www.tucsonnewsnow.com/story/16543753/major-oil-refinery-to-close-in-us-virgin-islands Refineries on the East Coast of the US supply 40% of the gasoline sales and 60% of the diesel and other fuel oils. Of that, HALF that comes from the Sunoco & ConocoPhillps plant closures. When ConocoPhillips announced that it was closing the Trainer refinery, Willie Chiang, then ConocoPhillips' Senior Vice President of Refining, Marketing, Transportation and Commercial, noted that their decision to sell, like Sunoco's, was based on unfavorable economics caused by a competitive and difficult market environment characterized by "...product imports, weakness in motor fuel demand, and costly regulatory requirements." They are ALL closing up shop due to government regulations, union demands and excessive operating costs brought on by the government regulations. Then you have the unions, led by Barry's buddy Leo Gerard saying they will close ALL US oil refineries starting from the east coast to west coast today. http://www.reuters.com/article/2011/09/23/usa-oil-refinery-labor-idUSS1E78M0T620110923 The unions are shutting down ports, rail and air across the pond right now......the SAME EXACT thing they plan on doing here. When the ships stop importing, the rails & air stop delivering....how much is everything you consume going to cost? Remember...we are a CONSUMING country, no longer a producing one. http://www.hellenicshippingnews.com/News.aspx?ElementId=37873cee-2b75-4aa0-86ac-5336e56a4c04 The excessive and costly gov regulations on the US oil refinery market has forced companies to re-evaluate the cost of doing business here in the US . Why have operations in the US where you bleed money via regulations & demands, when you can have refineries built in Columbia, Mexico or Brazil for pennies on the dollar, and less regulations? It's all business America ...nothing personal. Besides.....your government is giving BILLIONS to Columbia and Brazil to build refineries to process all that oil the US is losing. We are building up every country on earth, while destroying our own....all in the name of redistribution of wealth. I covered some of these "deals" Barry inked in my previous note: https://www.facebook.com/profile.php?id=100003192895784&sk=notes#!/note.php?note_id=145148522268243 You do the math. When the US oil refineries finally close up shop, who will process all that oil....and how much do YOU think that oil will cost when it's ALL processed over seas? Think gas and energy costs are high right now.......wait 6 months. You haven't seen anything yet. How can anyone expect any company to do business with an anti-American, hostile gov out of control? You can't. That is why we are seeing a mass exodus, across the board in every industry in the US LEAVING.