Wednesday, October 15, 2014

The Failure of Conservatives on Global Warming.

Conservatives have allowed and seemingly even wanted Liberal
Ideology to Hijack the Global Warming/Climate Change Debate.

As a Pew Opinion Poll reflects, Global Warming has become yet another chapter in the ongoing U.S. Culture Wars between Liberals and Conservatives. This gulf in beliefs is especially wide with people who identify with the Tea Party movement (very anti "Big Government") -- where 41% surveyed were "Deniers", believing that Global Warming just isn't happening.

Where the News and Public Media emphasizes the extreme polarization and conflict, rarely is it conveyed what most climate scientists can actually agree on.

Agreement on the Basic Science: Global Warming Theory is based on Nobel Prize winning science1 -- which is clearly not "Junk Science". One basic concept area that everyone can relate to is Rayleigh scattering -- of why the the sky is blue. Applications
of the fundamental chemistry and physics of Global Warming theory are used in aircraft design, missile defense systems, and the space program.
1 This includes: Rayleigh scattering and distillation, van der Waals (equations of state), Wien's law, Planck's constant (central to radiation theory).

Probably 99% of Climate Scientists can agree on a core of basic beliefs that does represent "a consensus on settled science":

  1. CO2 is a Greenhouse Gas;
  2. Adding CO2 will have a warming effect on the Planet;
  3. CO2 levels have risen dramatically during the Industrial Age;2 3
  4. In the past ~200 years, the Earth has warmed.
  5. For the past 60 years, the bulk of this warming is human driven.4

2 NOAA data for 650 million years; NOAA data for past 1,000 years; IPCC AR5.
3 The level of CO2 is now 42% above pre Industrial Revolution levels.
4 Views on what "bulk" means -- a percentage of maybe ~50% (Curry) to 100% (Schmidt).

CO2 Levels:
Temperature Levels:

Science Uncertainty: But understanding Climate Science/Change is much more than just this "basic science". Called a "Wicked Problem", this involves extremely complex issues of our Planet's natural variability (wind and ocean currents), geological events (e.g., volcanoes) and feedback loops.

Where Climate Scientists can and do sharply disagree is how much and how quickly human driven greenhouse gases will effect global temperatures and regional climates through:

  1. Feedback Loops (e.g., cloud formation);
  2. Impacts on Natural Variability (climate oscillations, e.g., El Nino).
  3. The predictive ability of Forecasting Models (e.g., the "Pause").

In describing "Wicked Problems", perhaps the best analogy ever coined was by U.S. Secretary of State, Donald Rumsfeld of knowns and unknowns -- where applied to Climate Change there are:

  1. Known Knowns (the Basic Science);
  2. Known Unknowns (natural variability and feedback loops).
  3. Unknown Unknowns (things we don't even know that we don't know).

The Rhetoric of Uncertainty: But it's important to understand that the current unknowns do not disprove a scientific consensus in the above "core beliefs". A good example of this is the current Global Warming "Pause" -- where for the past ~15 years there have been:

  1. No statistically significant increases in Earth's land temperature,
  2. Even though CO2 levels continue to significantly increase.5

5 Although the Earth's average surface temperature rose sharply by 0.9 degree Fahrenheit during the last quarter of the 20th century, it has increased much more slowly for the past 16 years, even as the human contribution to atmospheric carbon dioxide has risen by ~25%.

Deniers or extreme Skeptics/Contrarians saying or implying this "Pause" disproves a core of "Basic Science Beliefs" is a classic application of anti-science. One can try to poke all the gotcha holes they want in "Theory X", but doing so doesn't prove an alternative "Theory Y" (e.g., a tactic used by Biblical Literalists that their attempts to cherry-pick enough holes in the theory of evolution proves Creationism beliefs).

Ideological Hard-liners can also create all the ubiquitous "conspiracy theories" (i.e., Climategate) they want -- but this still won't change the above 99% Consensus either.

In Public Opinion Wars, the terms "settled science and consensus"
are a reaction to the incendiary statements of many Republicans.

Conversely, Advocates need to do a much better job in their communication of uncertainty -- especially their defensiveness. A good start would be a well versed "consensus" recognition that Climate Scientists don't yet adequately understand the sensitivities of this "Wicked Problem" -- especially the ability of current Climate Models to predict near term decadal impacts.6


6 Called Transient Climate Response or TCR.

Clearly, CO2 parts per million levels and temperatures have not responded in a linear cause and effect fashion in the short-term (as many initially believed). Maybe the long-term progression of Global Warming is a stair-step function (with pauses of decades or more). Maybe its a exponential log function when some thresholds are broken through until equilibrium. Maybe, its a combination of these functions with warming interacting and compounding natural variabilities on things we currently just don't even know about (unknown, unknowns).

We do know this -- if anything does happen with severe consequences, we won't be able to fix it as changes in atmospheric CO2 concentration levels can persist for centuries. With a trajectory to double the Earth's CO2 levels, mankind is conducting the biggest science experiment of all time involving very deep uncertainties.

Reaching a Consensus: A TED presentation provides a good perspective of how to be effective when taking on difficult, wicked problems. The lecture uses a example of Dr. Alice Stewart, who in the 1950’s thought she had found a solid statistical link between expectant Mothers who had received x-rays and childhood cancers. But while Dr. Stewart was eventually shown to be correct, it took the medical science community over 25 years to achieve a consensus in proving and accepting this linkage.

For over two decades within the medical and public policy arena, Dr. Stewart was labeled an Alarmist in her Catastrophic warnings.

As the TED lecture explains, science is most often messy and laborious. In resolving challenges, the Right Kind of both Advocate and Skeptic is needed in an environment of some basic trust -- not driven by tribalism and hard-line ideologies of political, religious, economic, and even academic special interests or egos.

Conservative Hot Buttons:
In recent years, negative ideological "values" messaging from Conservative Think Tanks, Media Sources, and Religious Groups have associated and demonized environmental policy initiatives as big-government, socialism, anti-free markets, job loss, and even with Faith (worshiping the Green Dragon).
Global Warming is framed to hit all the hot
buttons of Conservatives to create a perfect storm.

The effectiveness of this negative messaging is absolutely evident in national polling, where partisan divides on environmental issues are greater than on major issues like the budget deficit, health care, and Social Security.

Widest Partisan Differences Over Issues
(% rating each a top priority)
Issue:
Rep
Dem
Ind
Diff
Protecting the Environment:
28%
65%
48%
-37%
Problems of Poor & Needy:
32%
64%
48%
-32%
Reducing U.S. Budget Deficit:
80%
49%
66%
-31%
Dealing with Global Warming:
14%
42%
27%
-28%

Clearly, environmental issues have become a "hot button" among many Conservatives -- a litmus test in defining one's personal values:

"Global warming is a religion of a secular left that rejects the God of creation in favor of worship of creation. . . Any of those involved in the science of global warming oppose capitalism in general and America in particular. They are maladjusted, Al Gore type angry people in need of prayer." (Erick Erickson of RedState.com)

History of Republican Environmental Leadership: The current adversarial and combative attitude toward environmental issues hasn't always been the case. The Republican Party has a rich history in leadership and bi-partisan cooperation to address numerous serious environmental issues.

Two vivid examples are ozone depletion (President Reagan) and air quality (under both Bush Administrations) -- where significant improvements have been achieved without destroying the economy, advancing socialism, or worshiping a supposed Mother Earth.

Air Quality
Click To See Improvement
Ozone Hole
Click To See Improvement

When past Republican EPA Administrators7 serving under every Republican President thinks Anthropogenic (emissions from human activity) Global Warming is a real and serious threat, this should mean something to Conservatives -- no matter what Al Gore believes.


7 Ruckelshaus (Nixon), Thomas (Reagan), Reilly (Bush), Whitman (Bush).

Where Have the Conservative Thinkers Gone?: By reducing Global Warming/Climate Change to Culture Warfare, Conservatives have and continue to fail miserably. The Problem isn't "Junk Science" of liberal scientists, its the "Junk Thinking" by Conservatives. They are forgetting the very core principles of conservatism, and how these principles should be applied to any policy issue.

Fundamental Ideological Differences Between Liberal Vs. Conservatism

The "True Problem" for Conservatives is that from the get-go, the issue of Global Warming was hi-jacked by Liberal Ideology policy proposals. Conservatives have never developed meaningful and consistent policy alternatives based on their principles to pro-actively tackle this issue.

By arguing that no or little actions are warranted, Conservatives are choosing to play a very dangerous and high stakes "winner take all" game. No person on this Planet knows how the science or politics of Global Warming will eventually play out. Two things can absolutely happen: (1) Breakthroughs in science confirming the theory where the timing and consequences are unquestionably serious; (2) The occurrence of extreme weather events which overwhelms public opinion (correct or not) to demand immediate major policy actions.

Waiting to develop, taking a pro-active leadership position, and establishing credibility on conservative policy alternatives is a non-starter. If swings in public opinion do occur to take action, it will be too late. Liberal policies (e.g., carbon taxes) will be too entrenched and Conservatives' credibility will be shot (labeled as obstructionists).

Liberal Vs. Conservative Approaches to Global Warming Policy
In their policy approaches to Global Warming, Liberals never really address:
  1. No matter how a U.S. Carbon Tax is packaged, it will still be a regressive tax -- disproportionately impacting the poor.
  2. Impact of a Carbon Tax on U.S. Manufacturing competitiveness. Will it result in increased imports, just outsourcing carbon emissions?
  3. Any Cap & Trade System would be a new Wall St. toy. Remember how these financial derivatives wrecked the World's economies?
  4. A Federal Renewable Energy Portfolio Standard would take Decision Making out of the hands of our Engineers and place it with Politicians.
A Conservative Path : By bashing Liberals less and studying science more, there just might be a way out of this mess. Using an approach advocated by Dr. Ramanathan called "Fast Mitigation", a sound-science foundation for "no regrets" climate policies can be developed -- reflecting
and consistent with the Republican Party's history of environmental leadership and commitment on hard issues (e.g., ozone depletion, air quality).

Fast Mitigation (basically targeted to improving air quality) coupled with policies to spur high economic growth using international trade just might provide the ticket needed. With pro-active "smart and creative" conservative leadership, meaningful and immediate reductions in the "Global" trajectory path of greenhouse gas emissions could be achieved.

Fast Mitigation: While CO2 is about 77% of total greenhouse gas emissions, it is not the only thing that contributes to global warming. Other potent warming agents include three short-lived gases and dark soot particles -- called short-lived climate pollutants:
  1. Methane
  2. Ground-level Ozone (smog)
  3. Hydrofluorocarbons (HFC)
  4. Dark Soot Particles
The warming effect of these short-lived climate and air quality pollutants (which stay in the atmosphere for several days to about a decade) delivers a very big punch. Methane is over 20 times more powerful than carbon dioxide in causing warming. Some HFCs can have a warming potential 11,000 times greater than CO2.

Global Warming Potential of CO2 & Short Lived Climate Pollutants 8

Greenhouse Gas:
Global Warming
Potential Factor
Warming Time
Potential
Carbon Dioxide:
1
Up to 1,000 years
Methane:
21
12 years
Hydrofluorocarbons9:
1,300
14 years
Smog (O3):
.25
hours/days

9 Based on the most commonly used auto refrigerant (HFC-134a). A new refrigerant (HFO-1234yf) with a GWP that is just 4 times that of CO2 and exists for only 11 days is scheduled to become the new standard for automakers in the U.S., Europe, and Japan.

According to Dr. Ramanathan, the warming effect of these pollutants is currently about 80% of the amount that CO2 causes.

Changes in Radiative Forcing from Human Activity Emissions
Since the Industrial Revolution of 1750 (in W/m2)

Decision Making Under "No Regrets": Often the words "no regrets" are used as code "to kick the can down the road" by just calling for more research. Used in a correct context, "No or Low Regrets" should be a process of best efforts to make good decisions, especially under deep uncertainties.

With the U.S. Supreme Court upholding the authority to regulate CO2 under the Clean Air Act (CAA)10 and EPA now promulgating Regs, Conservatives can try to:

  1. Overturn the law by re-writing the CAA (through the election of a GOP President & majorities in Congress).
  2. Further fight the law in the Courts (e.g., current EPA Lawsuit).11
  3. Conduct Guerrilla Warfare (defunding EPA's Budget to enforce Regs).
  4. Make the law better (or less onerous) through Bi-partisan cooperation.

10 Defined as a pollutant agent under the CAA effecting weather or climate.
11 Both of the first two paths involve deep uncertainties. For example, to overturn EPA Regulations would likely require a super majority (60 votes) in the U.S. Senate. Also, based on other CAA legal precedents, overturning EPA authority is highly questionable.

What Conservatives should be very concerned about are the potential consequences if policy opposition is unsuccessful. By not developing pro-active alternatives, a huge void is created. If public opinion does ever demand immediate action (e.g., from catastrophic weather events) -- it will almost certainly be a liberal top/down approach based on command/control:

  1. Carbon Taxes
  2. Cap and Trade
  3. Federal Energy Mandates (Renewable Energy Portfolio Standard).
Attributes of a Conservative Plan: A pro-active approach to Global Warming based on Fast Mitigation and economic growth (through international trade) fills this current Policy void -- and directly addresses what many consider catastrophic messaging that liberal policy actions must be taken immediately (e.g., carbon taxes, etc).

Buying Time: While Fast Mitigation to reduce short lived carbon pollutants is not a long term cure-all to Global Warming, it could have a dramatic and immediate effect in decreasing the growth rate (trajectory) in global atmospheric greenhouse gas levels.

Trajectory of Global Greenhouse Gases Since 1850
In Policy decision making, Fast Mitigation can buy some time (perhaps several decades according to Dr. Ramanathan) for our scientists and engineers to hopefully figure out this "Wicked Problem" and how to best address it:
  1. Sensitivities of global temperatures and climate to increase CO2.
  2. Technology Breakthroughs (solar, natural gas fracking, nuclear, etc).
Improving Air Quality: In forming public opinion, a picture can be worth a thousand words. For many Americans, connecting with the need to reduce CO2 emissions (a colorless, odorless gas) can be difficult. Fast Mitigation targets known air quality pollutants (such as heavy truck diesel exhaust) that everyone can connect with for cleaner air.

Also, applied on a regional and local basis, Fast Mitigation can be tailored to reflect conservative principles of flexibility and de-centralized bottom-up approaches (compared to one-size-fits-all) targeted to where air quality issues are of higher concern.

Building Low Carbon Global Markets through Economic Growth: Using international trade to address concerns of Global Warming/Climate Change is a perfect example of applying conservative principles of bottom-up, de-centralized, flexible, and reward based no-regrets policy actions.

If reducing the trajectory path in green-house gases is to be truly treated as serious on a global stage, pragmatic lessons must be drawn from international trade -- where reciprocity reigns supreme. No country eliminates or reduces its trade barriers without reciprocal and meaningful concessions from trading partners.

As discussed in previous blogs (including criticism of the Obama Administration on coal use), the template of building low carbon markets is pretty straight forward:

  1. Developing countries would commit (with verifiable standards) to building low carbon intensity economies by purchasing high technology/energy efficient American products.
  2. In exchange, the U.S. would give Developing Countries unpreceded access into U.S. markets for their products.
  3. Simply stated, this Policy approach accentuates stuff we're good at (high technology products) and stuff that Developing Countries are good at (low labor cost products) -- a Win/Win.

An example of this would be current U.S. efforts to create a large free-trade zone encompassing 11 other Pacific Rim countries (excluding China) -- called the Trans-Pacific Partnership. A good first-step would be for the U.S. to create some global "Enterprise Zones" with friendly developing nations (e.g., India, Philippines) to test the effectiveness of using trade to reduce greenhouse gas emissions:

  1. Specific Industries would be targeted to develop and implement "Low Carbon Standards" (LCS) using U.S. high energy efficient technology.
  2. In return, the U.S. would give special access into U.S. markets for these LCS products.

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Additional News Stories:
Simple Explanation of Infrared Radiation
Basics on Global Warming Theory (Nobel prize winner, Dr. Molina)
Climate Etc. Blog thread on the Pause.
Wall St. Journal on Environmental Concerns since 1976.
Global Warming Potentials of Greenhouse Gases (GWP)
Climate Models -- (N.Y. Times)
Fast Mitigation in India -- (Washington Post)
U.S. Policy on Methane emissions -- (N.Y. Times)
U.S. Methane emissions -- (Slate Magazine)
CO2 Equivalents -- (Wikipedia)
Social Cost of Carbon -- (U.S. EPA)
Black Carbon and Arctic Sea Ice -- (What's Up With That Blog)
Estimated Impact of CO2 Power Plant Regs by State -- (Bloomburg News)
Comments on Fast Mitigation by Dr. Curry of Georgia Tech -- (Climate Etc.)
Comments on Black Carbon by Dr. Curry -- (Climate Etc.)
EPA Looking at New Regs on Methane Emissions -- (Fuel Fix).
Political Polarization and the Media -- (Pew Research).
Religion Vs. Evolution (Pew Research).
Who Wants What from the EU 2030 Climate Framework -- (Carbon Brief)
Global Carbon Trading -- (The Independent)
EPA Says U.S. Smog Rules Should be Tightened
True Conservative -- The American Conservative
Republicans Supporting a Carbon Tax? (Weekly Standard).
A Lesson that Carbon Tax Proponents Should Learn from Maryland.
Global Warming Blog/Twitter Wars -- How Much and How Fast.
Investors Support to Reduce Methane Emissions
Obama Readies Sweeping List of Executive Actions -- (Politico).
U.S. and China Reach Climate Deal -- (N.Y. Times).
Americans Trust Obama More Than Republicans on the Environment -- (Pew Research).
Air Pollution & Global Warming -- (Nature Magazine).
New Carbon Tax Bill Introduced in U.S. Senate.
Methane Reductions in Oil & Gas Industry.
GOP and Industry Will Fight EPA Proposed Reg on Smog -- (Politico).

Wednesday, July 16, 2014

The Untold Story on U.S. Foreign Oil Dependency.

Background Points for Today's Blog:

(1) In discussing U.S. foreign oil dependency, two measures are used:

  • Gross Imports % -- Total Imports/Total Petroleum Used.
  • Net Imports % -- (Imports minus Exports)/Total Petroleum Used.

  • (2) Under laws imposed after the Arab oil embargo of the 1970s, U.S. companies can export refined fuel such as gasoline and diesel but not crude oil itself.

    Typically when U.S. foreign oil dependency is being discussed in the Media, it will be the net imports number that is cited. Using this benchmark, the EIA states "In 2012, about 40% of the petroleum used by the United States was imported from foreign countries -- the lowest level since 1991". For 2013 (using non-finalized data from the EIA), estimated net imports were 33% -- the lowest level since 1986.

    Of the total petroleum used in 2013, an estimated 52% came from foreign countries (gross imports); 19% was exported (in refined products such as gasoline); with resulting net imports of 33% (52% minus 19%).

    1 The above 2013 values are not official. In 2012 per the EIA, about 57% of the crude oil processed in U.S. refineries was imported.

    Historical Perspective: The significance between gross versus net imports is a relatively recent development. For decades prior to the current boom in domestic oil production, yearly U.S. petroleum exports were very constant at approximately 5% of total supply. However, during the past 7 years, two things have dramatically changed:

  • U.S. field production of oil and other petroleum liquids has more than doubled from 5.5 million bpd (2006) to 11.3 million bpd (April 2014).
  • Petroleum exports (e.g., refined products of gasoline, diesel) have increased almost 400%.

  • bpd -- barrels per day.

    Percentage of U.S. Petroleum Exports
    Thus, while it may be technically correct that U.S. dependence on foreign oil (defined using the benchmark of net imports) is at the lowest level in almost 30 years, the composition of this benchmark measure is very different between 2013 and 1986. Using a gross imports benchmark, the U.S. is much more dependent today on foreign oil.
    1986
    2013
    Change
    Gross Imports:
    38%
    52%
    +14%
    Exports
    05%
    19%
    +14%
    Net Imports
    33%
    33%
    -

    In a world where all oil was the same (type and price), use of net imports would be totally appropriate. After all, this would be an example of American refining technology ingenuity where we import oil, refine and then export it into world markets better (lower costs) than anybody else. However, this isn't what's happening. Not all oil is the same type (light versus heavy crude) or priced the same (U.S. versus World oil prices).

    Understanding Some Oil Basics 101: In long-term forecasts through 2040, the Department of Energy projects that U.S. dependency on imported oil (net imports) will stubbornly be above +30%.

    Historical and Projections of U.S.
    Oil Production & Consumption:
    So with the U.S. oil boom, why are we importing so much foreign oil? The answer is found in the fact that not all crude oil is created the same. It can be heavy or light, sour (high sulfur content) or sweet.

    With the exceptional increase in U.S. oil production from tight shale formations/fracking (e.g., North Dakota, Texas, etc.) there is good and bad news. Most of this oil is high quality light crude, relatively easy to refine in refineries that are not terribly complex. The bad news is many U.S. refineries (especially on the West Coast and Atlantic Seaboard) can not use this lighter oil. Prior to the shale boom, U.S. refiners spent billions of dollars to configure their plants for heavier and sour foreign oils (from Canada and OPEC countries of Venezuela, Saudi Arabia, and Iraq).

    The below chart from the EIA illustrates this above point. While U.S. imports of light crudes have been reduced dramatically in recent years (displaced by new oil production from North Dakota, Texas, etc.), imports of heavy crudes have remained constant.

    Digging Deeper into the Data: Contradictory to what is reported in the Media, OPEC (not Canada) remains the largest oil importer to the U.S. While statements that Canada is the largest crude oil importer is not a "pants on fire" misrepresentation -- it is "Spin Doctors" at work. Although it is again technically correct that Canada is the largest single country importer, this fails to recognize that OPEC (comprised of 12 countries) is a cartel and operates as a single entity.

    U.S. Petroleum Imports
    (2013)
    OPEC is the largest
    Importer to the U.S.
    U.S. Petroleum Exports
    (2013)
    U.S. is becoming the
    Oil Refiner for the World.

    In addition to gasoline exports, a major growth market for U.S. refiners is diesel fuel (especially Europe and South America). A large number of European refining plants have closed, as they can not compete with U.S. produced diesel.

    U.S. Petroleum Exports: As discussed in prior blogs, a major reason in the unprecedented surge in U.S. petroleum exports is the price difference between U.S. and Internationally traded crude oil.

    Current Oil Prices:
    U.S. (WTI) Versus International (Brent)

    During the current U.S. oil boom, the benchmark price for domestic oil (West Texas Intermediate -- WTI) has been below the international benchmark for crude (Brent). As a result, many U.S. refineries have been using lower cost WTI priced oil, refining it (e.g., gasoline, diesel), and then pricing the refined products into international markets (where competing foreign refiners must pay the higher cost Brent price for crude oil).

    Since it is legal for refined oil products to be exported, a refiner's access to lower cost domestic oil does not necessarily translate to cheaper gas for the U.S. driver and consumer. A U.S. refiner could as easily sell their product to the international market if that would maximize their profit. This explains why even with dramatic increases in domestic crude oil production (especially in the last 3 years), U.S. gasoline prices have basically remained unchanged.

    Yearly Average of U.S. Gas Prices
    Putting the Pieces Parts Together: While Politicians and Talking Heads make environmental issues (e.g., Keystone Pipeline, Global Warming, ethanol use2) the center of the U.S. Oil Policy debate -- here is what's really going on:
    2 As this Blog continues to point out, the current blending of ~10% ethanol in gasoline achieves well established health science benefits (lead removal, oxygenate for cleaner air).

    Drivers Of U.S. "Net Imports" Oil Dependence

    Note: Notice that there are no major oil pipelines to the West Coast or Atlantic Seaboard.

    Foreign Oil Imports: Using 20/20 hindsight, the crystal ball of many U.S. refiners (on the West Coast and Atlantic Seaboard) was not very good. They did not foresee the magnitude of the current domestic oil boom coming -- investing billions to configure their refineries to use foreign heavy oil. These refineries are simply not going to walk away from this capital investment and re-configure their plants yet again to use domestic light crude in making gasoline.

    Refined Products Exports: Many U.S. Refiners (along the Gulf Coast) use lower cost domestic oil (WTI), but price their products (gasoline, diesel) into an international gasoline and diesel market based heavily on more expensive Brent. The cheaper WTI becomes in relation to Brent, U.S. refiners make more profits and increase world market share.

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    Related News Stories:
    U.S. Oil Boom Drives Gasoline & Diesel Exports -- (Fox Business News).
    Impact of Lifting Ban on U.S. Crude Oil Exports -- (Wall St. Journal).
    World Refinery Margins -- (BP Energy Outlook).

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    Sunday, March 30, 2014

    Lessons that Greens should Learn from Keystone (Part 2 of Series)

    Today we build on Part 1 of this series: How conflict over environmental issues (e.g., Global Warming) is being used to divert the Public's attention from energy policy objectives of Special Interests -- such as exporting U.S. oil.

    The Court of Public Opinion: In a just released Washington Post Poll, Americans approve of building the Keystone XL pipeline by a margin of 3 to 1 -- concluding that economic benefits far outweigh environmental risks.

    While support for Keystone from Republicans (and Independents) would be expected, polling data also reflects that ~50% of Democrats support the project (with wide division by income levels).
    Looking at other national polling, this reaction shouldn't come as a surprise to Environmental Interests. In the latest Pew and Gallup research, "Strengthening the Economy" is the top priority -- with "Global Warming" almost dead last in importance.
    By making Global Warming the focal point of the Keystone XL debate, Environmental Interests never connected with the American Public (including ~50% of Democrats) on pocketbook issues they consider most important. Even though reputable independent sources say that Keystone will create only about 35 permanent jobs, what most Americans are hearing and believing is very different. Clearly, public opinion is tuning out environmental messaging.

    At the risk of becoming irrelevant outside their Base, Environmental Interests need to use Keystone as a wake up call to: (1) Connect better on key economic issues; (2) Hold Republicans much more accountable for their "double-speak" messaging; (3) Do some soul-searching for pragmatic solutions in the real world.

    Inconsistency in Republican Values: In past messaging of why Keystone XL is needed, proponents used three core building blocks. But in current efforts to end the +40 year ban on exporting U.S. oil, Republicans are now making a 180° about-face from the very "core principles and values" they originally made why Keystone is important:

    Republican Messaging:
    Need for Keystone
    Republican Messaging:
    Need to Export U.S. Oil
    Objective of Special
    Interests All Along
    :
    If "core values" of independence from Mid-East oil, lower gasoline prices, and job creation are important to Keystone XL, these same underlying values should also apply equally to any other national energy policy issue.

    Independence from Mid-East Oil: As discussed in Part 1 of this blog series, Keystone is crucial in expanding the existing north/south pipeline capacity to move U.S. and Canadian oil to both Gulf Coast refineries and ports (for potential foreign market
    exports of crude and refined products such as gasoline). However, Keystone XL does not address two major issues with America's current or future dependence on Middle-East oil: (1) The lack of East/West pipelines to move oil to major markets in California and the Atlantic Seaboard which are heavily dependent on foreign oil; (2) The Jones Act.(1)
    (1) The Jones Act is a ~100 year old maritime U.S. shipping law which explains how importing oil from Middle East countries can be cheaper than transporting oil via tanker from the U.S. Gulf Coast area to East and West Coast markets.

    Republican bravado that Keystone XL would achieve U.S. energy security from Mid-East oil if not a "pants on fire" statement, is pretty darn close to it. But even if the "energy security" aspects of Keystone are simply a matter of overselling potential benefits (which happens all the time on both sides of political theater), a deeper trust problem exists as to exactly what are the Republican core values and principles?

    Republican Double-Speak on the Importance
    of Independence from Middle-East Oil

    In arguments to end the +40 year U.S. oil export ban, current Republican messaging emphasizes the importance of America standing for "free and open market international trade". But in making this free trade argument, what happened to the "core value" of oil independence? Per the Energy Information Agency's long-range forecast through 2040, U.S. foreign oil dependency (currently at ~40%) is expected to remain above +30%.

    Historical and Projections of U.S.
    Oil Production & Consumption:
    The Cato Institute (a leading Conservative/Republican Think Tank) has a guiding policy paper which explains why free-trade must always be the underlying core value and that actions to achieve U.S. oil independence have been, and always will be bad policy. Under this view of conservative principles, the international market should always be the driver.

    But the point in today's blog is not about the pro's or con's of international trade. It's about "trust", and how this is broken when "doublespeak" occurs on core principles. Is independence from Middle-East oil important or not? In supporting Keystone XL, it's important -- but in exporting U.S. oil, it isn't.

    "Oh What a Tangled Web We Weave When First We Practice to Deceive". -- Old English Proverb.
    A key to Republican success in achieving public opinion support for Keystone XL is the simplicity of their messaging. After all, it's just common sense that if oil supplies increase (by removing "big-government" barriers) that gasoline prices will decrease. This is just basic economics -- Right?
    Well, not exactly. Since 2008, total U.S. oil production has now increased 50% as a result of amazing technology breakthroughs in fracking and horizontal drilling. So with this record growth (especially during the past three years), what's happened to gasoline prices? While pump prices have decreased slightly, they sure haven't returned to $2 levels as promised by many prominent Republican leaders.

    Yearly Average of U.S. Gas Prices
    In messaging on gasoline prices, Republican trust problems are two-fold: (1) What can be called an "Original Sin"; (2) Yet another 180° about-face on core values.

    The Original Sin: An inconvenient fact with "Drill, Baby, Drill" is the very high cost of extracting oil from fracking/horizontal drilling -- which is 4 to 6 times higher than from conventional oil fields in the Middle East. According to Oil Analysts, the average cost of new oil production from U.S. tight oil and shale gas regions is ~$70 a barrel, with marginal costs (the last barrels produced) as high as $114 a barrel in 2012.1, 2, 3

    In order to achieve a return to $2 gasoline would require a precipitous price drop to ~$40 a barrel (bbl) -- a market price significantly below the costs to extract oil using fracking/horizontal or deep-sea drilling. Thus, without a continuance of high market prices (currently over $100/bbl) much of this unconventional U.S. oil would be uneconomic to extract.

    Republican leaders have always known these facts of high drilling costs and the non-reality of dramatically lower U.S. gasoline prices, but continue to present a story that people "want" to hear.

    More Inconsistencies in Stated Republican Core Values: "Drill, Baby, Drill" can have numerous benefits within the economy (e.g., job creation, reduced U.S. trade deficit) and even the environment. While Environmentalists are absolutely correct that fracking must be safe, this engineering advancement also has the potential to dramatically reduce man-made (anthropogenic) Global Warming (AGW). In using safe fracking practices to extract needed and high value crude oil, a resulting by-product is low cost and lower carbon emission natural gas (displacing coal in electricity generation, oil in transportation fuels).

    Where there is wide disagreement with "Drill, Baby, Drill" is its impact on oil prices. Democrats commonly argue that increased production (especially through high cost fracking) wouldn't make much difference, with a belief that oil prices are determined by international markets. Republican pro-drilling proponents adamantly disagree. So, who is right?

    In almost all oil transactions, the price that producers receive is derived from a market benchmark value of crude oil. In the U.S., this is West Texas Intermediate (WTI). Internationally, the benchmark is Brent. The two crude oils are of similar quality and historically have been priced very close to each other (the Democrats argument).

    However beginning in 2011, prices began to differ between the two crudes. The record growth in U.S. oil production caused a buildup of crude oil inventories at Cushing, Oklahoma, where WTI is priced. This created a supply and demand imbalance at the hub, causing WTI (the U.S. benchmark) to trade lower than the international Brent benchmark.


    Note -- Most Current Oil Commodity Prices:

    But instead of declaring "Victory" that increased oil production can indeed reduce prices -- Republicans are now contradicting their very own stated core values. In current efforts to end the +40 year old U.S. ban on exporting crude oil, Republicans argue that U.S. oil producers need higher prices.

    In order to achieve this Special Interests' objective of higher crude prices for oil producers, the XL and other spurs of the massive Keystone pipeline project play critical roles.

    First, Keystone will provide pipeline capacity around Cushing, Oklahoma that will eliminate the bottleneck of oil flow (that currently results in oversupply and depresses U.S. prices) at this critical Hub where WTI benchmark is priced.

    Spurs of Keystone Pipeline Project
    Second, by achieving an unobstructed flow of oil to Gulf of Mexico ports coupled with eliminating the current ban on exporting oil, U.S. oil prices would be forced upward to align with the higher Brent benchmark as Producers would now have a choice to sell into domestic or international markets.

    Every once in a while just the "perfect" quote comes along that makes it crystal clear where corporations loyalties are: "I don’t make decisions based on what’s good for the U.S.” -- (Exxon CEO).

    What's Up Next: In our next blog, we will continue this series by looking at (1) The job creation claims used to justify Keystone; (2) Some needed soul-searching by Environmental Interests.

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    Current Oil Prices: U.S. (WTI) Versus International (Brent):

    Additional News Stories:
    Will Keystone Reduce U.S. Gasoline Prices? (Christian Science Monitor)
    Exporting U.S. Oil (N.Y. Times)
    Calls to Lift U.S. Export Ban to Punish Russia (Business Week).
    Approve Keystone XL to keep Russia in Check (New York Post).
    Percent of Oil Demand that U.S. Imports (EIA)
    Production Cost of Oil Sands in Canada
    Testimony by Senator Markey on Oil Exports and Keystone
    Conservatives Can Be Green
    Prediction: Obama Will Reject Keystone (Rolling Stone)
    Keystone XL Already Becoming Obsolete (Business Insider).

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    Tuesday, February 18, 2014

    The Real Republican Agenda with Keystone -- Selling U.S. Oil Overseas

    With the Keystone pipeline, Republican Strategists are using conflict over environmental issues to divert public attention from their real policy objective -- exporting U.S. oil.

    In today's toxic political landscape of Red versus Blue States, almost any policy issue pinned with a label of "environmental" not only automatically invokes extreme partisanship. This division also closes people's minds, eliminating the need to question whether a proposed policy is in the best interests for all average Americans - regardless of environmental issues.

    In trying to shape public opinion, it's always much easier to demonize an environmental label like Global Warming in a 30 second soundbite, rather than to explain and justify something complicated like trade policy.

    Extreme Partisanship Over the Environment: For years, negative ideological "values" messaging from Conservative Think Tanks, Media Sources, and Religious Groups have associated and demonized environmental policy initiatives as big-government, socialism, anti-free markets, job loss, and even with Faith (worshiping the Green Dragon).

    The effectiveness of this negative messaging is absolutely evident in national polling, where partisan divides on environmental issues are greater than on major issues like the budget deficit, health care, and Social Security.

    Widest Partisan Differences Over Issues
    (% rating each a top priority)
    Issue:
    Rep
    Dem
    Ind
    Diff
    Protecting the Environment:
    28%
    65%
    48%
    -37%
    Problems of Poor & Needy:
    32%
    64%
    48%
    -32%
    Reducing U.S. Budget Deficit:
    80%
    49%
    66%
    -31%
    Dealing with Global Warming:
    14%
    42%
    27%
    -28%

    The Keystone XL pipeline project illustrates this strategy of diversion at work, where current Republican actions are now revealing what Keystone was really always about:

    "With record growth in U.S. oil production, Republican and Oil State politicians, big business leaders, and oil lobbyists are all calling to end a nearly 40 year ban on U.S. crude oil exports. The ban was put into place after the 1973 OPEC Oil Embargo." (The Hill)

    With a Keystone debate defined by the highly partisan environmental issue of Global Warming, there has been little discussion how Keystone is
    intrinsically linked to the policy issue of exporting oil -- as the TransCanda and other north to south pipeline projects provide the critical infrastructure to move U.S. (and Canadian) oil to potential foreign markets.

    The Issue of Trust: During the coming year, there will be much debate over whether lifting the U.S. oil export ban is good policy. Maybe its a good idea, maybe not. But the point in today's blog is not really about policy issues. It's about the bedrock of "Trust" to the American Public in addressing issues that have nothing to do with Global Warming.

    In the 2012 Presidential Campaign, Keystone was the "Poster Child" of conflict between Environmentalists and Republicans over energy issues -- where Global Warming/Climate Change was (and still is) the epicenter of debate. Less than a year ago in the debt ceiling debacle in Congress, Republicans threatened to shut the Federal Government down unless President Obama approved Keystone XL.

    But in current messaging to end the +40 year U.S. Oil Export Ban, Republicans are now refuting the very "principles and values" they have made of why Keystone is critically needed.

    Republican Messaging:
    Need for Keystone
    Republican Messaging:
    Need to Export U.S. Oil
    Actual Republican
    Objective All Along
    :
    Today, we will look at the first of three key building blocks of past Republican messaging of why Keystone was needed -- and how ending the oil export ban is a 180° about-face to the original Keystone arguments made to the American Public. Let's try and be clear though -- it's not the Republican "ideological values" that are in question here,
    such as the principle of free market trade.

    The problem is the inconsistency in the Republican double-speak messaging and the lack of public dialogue/debate of what ideological arguments like free market trade actually mean (e.g., potential of higher gasoline prices to U.S. consumers).

    Foreign Oil Dependence: Spin Doctors are in over-drive giving the American Public the impression that the U.S. has or is on the cusp of attaining Energy Independence -- and that most of the remaining oil we do import is from Canada.

    But per U.S. Department of Energy information, the U.S. currently imports ~40% of its oil requirements -- where the single largest importer is from the OPEC Cartel. As we've previously shown, every time you fill up your tank, you are sending 36¢ per gallon to OPEC countries.

    Oil Sources of Current U.S. Gasoline Supply1
    (Compared by barrels of oil produced)
    (1) While it is technically correct that Canada is the largest "single country" oil importer, in a context of "energy security" this is misleading. OPEC currently imports far more oil to the U.S.

    Understanding Some Oil Basics 101: Even in long-term forecasts through 2040, the Department of Energy projects that U.S. dependency on imported oil will stubbornly be above +30%. So with this likelihood, why would policymakers even consider lifting the U.S. oil export ban? The answer is found in the fact that not all crude oil is created the same. It can be heavy or light, sour (high sulfur content) or sweet.

    With the exceptional increase in U.S. oil production from tight shale formations/fracking (e.g., North Dakota, Texas, etc.) there is good and bad news. Most of this oil is high quality light crude, relatively easy to refine in refineries that are not terribly complex. The bad news is many U.S. refineries can not use this lighter oil. Prior to the shale boom, U.S. refiners spent billions of dollars to configure their plants for heavier and sour foreign oils (Canada, Venezuela, and Saudi Arabia).

    The below chart from the EIA illustrates this above point. While U.S. imports of light crudes have been reduced dramatically in recent years (displaced by new oil production from North Dakota, Texas, etc.), imports of heavy crudes have remained constant.

    U.S. Oil Dependency & Security: The OPEC Oil Cartel (which largely influences international oil prices) is comprised of countries in the Middle East, Africa, and South America. Currently, OPEC is the largest foreign oil supplier to the U.S. with imports primarily consisting of heavy oil from Saudi Arabia and Venezuela (the 2nd and 3rd largest individual country oil importers to the U.S.).
    OPEC Imports to U.S.

    When the issue of U.S. foreign oil dependency and security are raised, it's important to understand several key points: (1) Where oil refineries are located; (2) Ports of entry for OPEC oil; (3) The oil pipeline infrastructure; (4) A Federal maritime law called the Jones Act.

    While most Venezuelan oil goes to U.S. Gulf Coast refineries, ports of entry for Saudi heavy crude are much more diverse -- not just to refineries on the Gulf (where Saudi Arabia owns three major refineries), but to U.S. East and West Coasts as well.

    Location of U.S. Oil Refineries
    The significance of Saudi and other Middle East OPEC countries oil imports to the U.S. can be illustrated by California -- where foreign imports (with Saudi Arabia being by far the largest importer) make up 50% of Refiners' oil sources (with very little Canadian imports).

    There are two major reasons for this high OPEC and Middle East dependency on both the U.S. East and West Coasts: (1) The U.S. oil pipeline system; (2) The Jones Act.

    Oil Sources for California Refineries
    The U.S. oil pipeline infrastructure is primarily a North to South system, moving oil in America's heartland. While the Keystone XL pipeline project enhances this existing distribution System -- it really doesn't address major deficiencies in moving oil East or West to refineries on U.S. Coasts (e.g., Northeast and California).

    Major U.S. Oil Pipelines & High OPEC Imports
    There are three transportation ways to move oil, via: (1) Pipeline (least costly), (2) Maritime shipping; and (3) Rail (the most expensive and as recently seen, the most dangerous).

    Shipping between U.S. ports costs significantly more than international voyages. This is largely because of a 94-year-old federal law (Jones Act) which requires domestic cargoes to travel on U.S.built, owned and crewed vessels. A qualifying U.S. tanker currently commands rates about 10 times more than a non U.S. tanker of the same size.(2)

    The Jones Act explains how importing oil from half way around the world (Middle East OPEC countries of Saudi Arabia, Iraq, etc.) can be cheaper than transporting oil via tanker from the U.S. Gulf Coast area to East and West Coast markets. Also, the Jones Act combined with the lack of East/West U.S. oil pipeline capacity can explain why the Department of Energy's long-range forecast (through 2040) expects U.S. foreign oil dependency to remain stubbornly above +30%.

    A Needed Change in Approach: When Environmentalists allow (and embrace) any policy issue to be solely defined by an environmental label, they are taking a "bait" that Republicans want. In achieving this "Framing", Republicans are given a free pass (or certainly less public questioning) on whether proposed policies are in the best interests of all average Americans regardless of environmental issues and even if these policies truly "walk the talk" on conservative or libertarian values.

    To be more effective, Environmentalists must improve in engaging Republicans on two fronts: (1) Questioning the validity of their message; and perhaps even more importantly, (2) Questioning whether their Messengers can be trusted on any policy issue that could have environmental consequences.

    Keystone XL was never about U.S. oil security. At best, the heavy oils from the Canadian tar sands would displace Venezuelan and Mexican heavy oil imports to Gulf refineries. Republican bravado that Keystone XL would achieve U.S. oil security from Mid-Eastern oil if not a "pants on fire" statement, is pretty darn close to it.

    (Note: Our next Blog will discuss the Republican double-speak on two other key claims of Keystone XL -- (1) Reduction in gasoline prices; (2) Net Job Creation.)

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    Additional News Stories:
    U.S. Ruling Loosens Four-Decade Ban On Oil Exports (Wall St. Journal)
    U.S. Refiners Don't Care if Keystone Gets Built (Wall St. Journal).
    The Psychology of Why Environmentalists Need to be More Specific.
    Pew Research Poll on Keystone Pipeline
    On a Decade Left in U.S. Shale Boom?
    U.S. Light Crude under price pressure without lifting oil export ban
    Washington Post Poll Shows 65% of Americans Approve of Keystone

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