Exxon Stops Drilling

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Bill Georgevich reporting

After posting the largest corporate profit in the recorded history of mankind, Exxon has decided to halt drilling and development of existing oil leases - despite Sarah Palin's campaign to the contrary. In a move to make the perfect storm for another oil crisis, this decision to use profits to buy back Exxon stock, rather than "Drill Baby Drill", proves that the world’s largest corporation is continuing to control the world’s economy to suit themselves.

Some folks may think that high oil and gas prices will hasten the renewable green economy. And to some extent that is true. But why not have both during this time of world recession?

Lower gas prices translate into a savings of about $200/month for the average American family of 4. That's essentially a $2400/year cash injection stimulus check!

Why not embrace the Obama and Gore green initiatives and require the oil companies to keep prices down by keeping supply up? The oil lobby begged Bush for more areas to drill in 2008 during the oil crisis they completely made up, and now they aren't drilling on the leases they already have?

This ranks along with AIG as one of the greatest scandals of the 21st century. We need low fuel prices to sustain a recovery and buy us the time to convert our energy economy to a renewable world.

General Motors Kills 2 Electric Cars

Bill Georgevich reporting

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Electric car killer General Motors, after showcasing their new electric car, the Chevy Volt, shut down the plant producing it in January 09, despite showcasing the hybrid with much fanfare at the Detroit Auto Show after receiving billions from taxpayers. The car company that sued California rather than produce a zero-emission vehicle now find itself in the cross-hairs of President Obama and just 60 days from bankruptcy.

We thought that flying to Washington in separate corporate jets asking for bailout money was the height of chutzpah and hubris. But this takes the cake: after finally receiving their federal billions, they shut down production of the only 100 mpg vehicle they had in development -- 4 days after showcasing the car with a flurry of press and ballyhoo at the January 09 Detroit Auto show.

Experts agree that the high cost of petrol in the summer of 08 caught the Big 3 by surprise when consumers were looking for gas sippers. Yet the next big closure GM announced in January was their Saturn plant, the one that makes small GM cars with mpg's of more than 30. Both The Volt and the Saturn plants closed because management deemed them "unprofitable". Tell that to Toyota, who makes the Prius Hybrid.

Oil Prices Down, Gas Prices Up

Bill Georgevich reporting

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Last year on The Renewable Minute we asked, How can oil prices plummet after being so high? The answer: SPECULATION, and the speculators were fleeing the market. Now gas prices are creeping up, even as oil prices continue to fall. How? Oil refineries are reducing the supply to increase demand and pump up the price. Guess Exxon-Mobile doesn’t want a world recession to interfere with windfall profits for 2009.

And speaking of deja vu from late 2008: Have you noticed those Exxon ads are starting to show up everywhere as they did when gas was $4 a gallon? About 2 weeks before gas prices started creeping up again, Exxon was back in my Yahoo inbox, this time with a kinder, gentler message about renewable energy research, a politically more correct position in line with the Obama-Chu-Al Gore cultural creatives who currently rule the roost.

Our next program will be dedicated to the unveiling of the renewable energy provisions Obama's Stimulus Package. We’ll be visiting the new government website Recovery.gov, which promises total transparency, to look into a curious 3+ billion dollar line item for "fossil fuel renewable energy research." Join us next time to find out what that means.

What's Really Behind That Changing Price of Gasoline?

Bill Georgevich reporting

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In October of 08 we reported that the Saudi’s believed the wild fluctuation in oil prices was based on commodity market speculators. This week, “60 Minutes” reports that the same investment bank that got billions in bailout money also used commodity trader techniques from Enron to hyper-inflate the price of oil last summer when supply was high and demand was actually diminishing.

And it gets worse. 60 Minutes’ Steve Kroft points the finger at Morgan Stanley, claiming that the same company that needed billions in US government bail-out funds also took advantage of deregulation pushed through the Bush Administration’s first term by lobbyists from Enron. Remember Enron, the largest contributor to the Bush 2000 campaign, the oil and gas company that created artificial rolling blackouts in California to successfully raise electricity rates? It’s the same corporation that created fake companies to boost its stock price. Well, according to the CBS news story, those loopholes for oil commodities trades still exist and those techniques used by Enron in California were used to buy and sell oil contracts for a company, Morgan Stanley, that is not in the oil business.

Connect the dots and you have a scenario in which one of the greatest contributors to the global financial meltdown also made the strongest contribution to the world recession by artificially boosting oil prices during a time of increased oil supply and lagging demand.

And what does the Bush administration do? Send them to jail like Ken Lay? No, they receive a $20 billion bailout from the US government.

Petrol Cheaper Than Ethanol?

Bill Georgevich reporting

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Yes, it’s true. The corn-sourced distilled ethanol that is mixed with gasoline is now more expensive than plain old gasoline. Gasoline blenders have always used more ethanol than required because it was cheaper than gasoline. Not any more. With today’s lower oil prices, ethanol will be blended with gasoline by decree from Congress for cleaner air, another finger pointed at a misguided national strategy for alternative fuel.

On a purely voluntary basis, gasoline blenders have always used more ethanol than the required minimum because increasingly high oil prices made ethanol an attractive fuel in its own right. This month with oil under $50/bbl and wholesale gasoline under $1/gal and ethanol at $1.60/gal it makes no economic sense to blend ethanol with gasoline. The national blending requirement will become binding for the first time in 2009. Gasoline blenders will have to use 11.1 billion gallons of ethanol because that is what the law tells them, not because it makes economic sense.

In our last program I shared what it cost the Saudis to extract 1 barrel of oil - $2/barrel or less 4 cents/gallon. Well, I stand corrected. The oil minister of Saudi Arabia was just interviewed by 60 Minutes' Leslie Stahl ,and he told her on Dec. 7 of 2008 that it cost LESS than $2/ gallon.

This means that with US current laws, gasoline will be more expensive because of the mandatory blending with ethanol than by itself! This would be inconceivable in the summer of 08 and I don't think Americans have really taken it all in yet. As we talked about on several programs, oil commodity speculators poured billions into futures contracts that artificially raised the price of oil for years finally resulting in the $4+/gallon fiasco of the summer of 2008. When money left the stock market it fled the commodity markets as well forcing oil and gas prices to get closer to their actual Fair Market Value.

The other fear that drove prices up artificially was the notion that the Saudis had somehow reached peak oil production. They have consistently heartily denied this and demonstrated to 60 minutes in Dec. 08 how they intend to actually double their output at least for the next decade.

Today drivers are relieved to get was is essentially a $200/month economic stimulus package but they're also outraged that the stories about India, China, and the rest of the "increased demand" for oil really was only increased demand by speculators!

We also promised on our last program some insight as to what this means for renewables. The magic number for renewables to be competitive is for oil to sell at $35/barrel. It hasn't got there yet so the question we will explore next time is what happens now that gasoline is cheaper and how best to take advantage of it for clean energy. In the meantime, all those who told us that the era of cheap oil is over will have to eat those words at least for now.

Are you driving 75% less? If not, then why is gasoline so cheap?

Bill Georgevich reporting

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We want to know why no one is investigating the relationship between oil prices and oil demand. Unless the world is using 75% less petroleum, it appears that the sky rocket in prices this summer was driven purely by speculation in the energy stock markets. If that’s so, what is the real cost of oil?

We know that it costs about $2/barrel or 4 cents a gallon to pump pure crude oil out of an existing oil well. There also are relatively small transportation and refining costs involved in turning that oil into consumer gasoline.

We know that in America a new oil refinery has not been built in 30 years. And we know that 30 years ago those refineries were producing gasoline that sold for less than 75 cents/gallon. Add to that the fact that in some countries like Iraq, Iran, and Venezuela, gasoline sells for less than 40 cents a gallon right now.

What does it all mean? Certainly this points to the fact that there is no relationship between “demand” and the market price of oil anymore than the value of a company is represented by it’s stock value. Companies can be over- or under-valued in the stock market….So too in commodity markets.

Without speculation inflation, oil would sell these days for between $10 and $20 per barrel with the retail cost of gasoline under a dollar per gallon. Keep in mind that oil sold for $45/barrel in early December 2008, even though OPEC had lowered production by 60 million barrels/month in a vain attempt to create a $50/barrel floor through which prices would not drop. Short term predictions point to even lower oil prices. What does this mean for the consumer and for renewable energy? Stay tuned, we’ll talk about low fossil fuel prices and its effect on renewables in our next program…

Should US Tax Payers Bailout the Electric Car Killer?

Bill Georgevich reporting

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While the US Treasury and Congress debate whether to save the Big 3 carmakers, environmentalists and renewable energy activists ponder whether General Motors, the Detroit auto manufacturing giant that killed their electric car 10 years ago, should be given a second chance. Some say that the 100 mile-per-gallon Chevy Volt promised in 2010 is too little, too late.

Tax payers are faced with a real dilemma. Should we support bailing out the Big 3 in Detroit? After all, investment banks got federal money to cover credit default swaps, which are unsecured side-bets on imaginary financial instruments. GM, Ford, and Chrysler are real brick-and-mortar companies that build real goods and employ millions of Americans. The news pundits warn that the challenged economy can't tolerate a shut down this large in the Midwest. Imagine hundreds of thousands of auto workers marching on Washington, with the fierceness and fury of Martin Luther King, demanding that Uncle Sam save the most powerful symbol of American manufacturing from extinction and mass layoff of over a million people.

Patriotism aside, how did GM and the rest get themselves in this mess? We may be quick to assume that like the Dow, Detroit is going down with the sinking ship the banking and mortgage crisis. The timing of the sudden run on government bailouts may suggest that the Big 3 are just another victim of the financial fiasco of Oct 08. No, it's just odd timing. Detroit's demise, if it comes to that, is by it's own doing – decades of poor decisions, culminating in it's most recent choice to continue making low mpg cars and trucks, even as gas prices hit $4+. Folks couldn't unload their SUV's and find enough high mpg cars to replace their daily driver. When they did, most of them were made in Asia.

GM made big cars because their ad consultants told them that big cars made drivers feel powerful. When city folks I know, who only drive in the city, purchased SUV's, their excuse to me was always that in a crash, big cars are safer. Physics would support that until every American seemed to be driving bigger and bigger cars.

Instead of making advances in hybrids and eletric vehicles, GM not only discontinued their only electric car after making only 1100, they decided that even less than a thousand on the road offered too much of a challenge to their gas-guzzing hegemony and actually had them towed away from their clinging lessees -- who offered GM millions just to keep the cars -- and crushed them!

Should we really have sympathy for car company that decided it was better to sue the State of California and overturn it's 10% zero-emission law rather manufacture a constantly improving electric car?

And what about this Volt? This hybrid sounds promising: You plug it in to power the first 40 miles, after which a gasoline powered generator makes just enough electricity to keep you going. 100 mpg or more is predicted for the car. Though GM would have you think it's breakthrough technology, it isn't, really. Every diesel locomotive ever made operates on the same principle: generate electricity to power the electric motors pulling the train. They are the most fuel efficient system in the world. When were they invented? 1920. So the Volt, we discover, is an old technology that GM finally decided the American driver was ready for.

The conclusion we come away with is that there is some kind of collusion between oil companies and domestic Detroit Iron. And somehow the wild and wacky speculation in oil futures (which was solely responsible for the dramatic gasoline price hike earlier this year), threw things out of control and drivers got spooked.

The car companies have known about the threat of high gas prices and shortages since the mid 1970's, but to hear the CEO's of these companies talk today, you would think that this problem suddenly occurred in the last few weeks. In a separate story we will talk about the real purpose of GM's introduction of the Chevy Volt - and it's not about getting good gas mileage or lowering our carbon footprint. Stay tuned.