Off shore drilling passes U.S. House

The U.S. House of Representatives passed a compromise bill Tuesday that lifts the Federal off shore drilling ban. The next step is for a similar bill in the works to pass in the Senate, and after that a conference committee must iron out the differences and then it goes to the White House for a signature.

Drill, baby, drill

I watched the GOP convention speeches last night. This part where Michael Steele enjoins Americans to "Drill Baby Drill" -- likening our thirst for cheap energy to the uncontrollable, hedonistic, libertine, self-destructive frenzy of a disco inferno -- was just freaky, but there's no denying that this gesture resonates with many many voters.



Even George W Bush said in his State of the Nation speech that America is addicted to oil. And here's T. Boone Pickens explaining why we can't drill our way out of the current (and perpetual) energy crisis.

Georgia on my mind

Let's talk about Russia's invasion of Georgia.

I generally pay attention to what's going on internationally, but this one caught me by surprise. It also apparently caught the U.S. administration by surprise. U.S. Secretary of State Condoleezza Rice was a professor at Stanford University and a recognized expert in the Soviet Union, but she was on vacation when Russia moved into Georgia.

Perhaps we shouldn't have been surprised. Russia has been seething at U.S. support of Georgia for years. Michael Hirsh writes for Newsweek, "The seeds of Russia's aggression lie in the sense of humiliation that Moscow's proud power elites have felt at the hands of the West going back to the Clinton administration's unceasing efforts to bring what used to be the Soviet bloc—and post-Soviet Russia itself—into the West's sphere of influence."

In the meantime, Georgia president Mikheil Saakashvili apparently thought U.S. approval of his politics meant he had a free hand to reign in the breakaway South Ossetia. This attack by Georgia, which has a large ethnically Russian population and many residents that Russia claims as citizens, gave Russia exactly the justification it wanted to move in on Georgian soil. It's a way for Russia to strike at the United States and Western Europe.

Some, though, believe Russia's invasion is yet another oil war. Until 2006, Russia had exclusive control over oil flowing from the Caspian region to the West. President Clinton sponsored the construction of a new pipeline across Georgia specifically to reduce Russia's influence on regional oil supplies. Georgian President Saakashvili and his predecessor, Eduard Shevardnadze, both saw this BTC Pipeline as crucial to the survival of Georgia as an independent state. The South Caucasus, previously seen as Russia's backyard, is now a region of great strategic significance to other great powers because of the flow of oil through this region. The U.S. and other Western nations have consequently become much more closely involved in the affairs of the three nations through which oil will flow.

The BTC pipeline, which opened in 2006, passes near politically volatile regions such as South Ossetia. Presidents Clinton and Bush provided hundreds of millions of dollars in military aid to help Georgia protect this pipeline. Western Europe is also working to develop more pipelines across Georgia, though this war is calling those plans into question.

Russia, for their part, has gone past securing South Ossetia and invaded into uncontested Georgian territory, seizing the port city of Poti, an oil terminal and headquarters of the Georgia Navy.

What are your thoughts on Russia's invasion of Georgia? Is this yet another oil war?

Oh, and to get on topic for a cycling blog, apparently the BTC pipeline easement is apparently an excellent mountain biking trail. The photo below are members of the Baku Bicycle Club in Azerbaijan riding along the BTC pipeline, which is buried along most of its length. See Robert Thomson's Azerbaijan photos for more. Published here with his permission.

Paris Hilton's energy policy

Paris Hilton proposes a hybrid of McCain's proposed energy policy (off shore drilling) and Obama's (incentives for alternative fuels) -- limited off shore drilling that are heavily taxed to support alternative fuel development and incentives.

21.6% inflation

The U.S. Labor Department reports that whiolesale prices jumped 1.8 percent in June. I expect the increase to level out a little, but if you maintained 1.8 over an entire year that annualizes to an inflation rate of nearly 22%. Most of this increase is due to the large jump in the price of fuel and food, in case you haven't noticed.

The "core inflation" rate went up a more reasonable 0.2%. This is the price increase of things at the retail level and excludes food and fuel. This means that manufacturers and retailers are really eating their cost increases right now.

Some predictions from me:

• I think off shore drilling is inevitable.
  
• Alaska, too.
  
• California voters will approve funding for the LA to SF high speed rail line.
  
• Earlier I would have said Obama will win in November, but right now I think McCain is saying the things that most voters now want to hear. That is, "drill, drill, drill."
  
• Interbike will be huge this year.
  
• Voters will increase calls for mass transit and bike facilities.
  
• Unprecedented job losses, either this year or the next.
  
• More bicycling all around. More golf carts and other electric mobility devices -- scooters and e-bikes and so forth, too.

Don't forget the contest!

Benefits of higher gasoline prices

Like Brian says, always look at the bright side of life.

With public transit use nationally at a 50-year high, traffic dropped 2.1% in the first four months of this year across the country. That mileage reduction -- along with people driving smaller cars, and more slowly, to save gas -- could mean that 12,000 fewer people will die in traffic accidents this year, according to a study by professors Michael Morrisey at the University of Alabama at Birmingham and David C. Grabowski at Harvard Medical School. Air pollution has been reduced enough, according to UC Davis economics professor J. Paul Leigh, to prevent 2,200 respiratory-related deaths over the last year. Less eating out and more walking and biking could mean a 10% reduction in obesity, according to Charles Courtemanche, an assistant economics professor at the University of North Carolina at Greensboro. And, apparently, higher gas prices also keep econ professors employed.

Read more in the Los Angeles Times: "The Joy of $8 gas."

Meanwhile, the Wall Street Journal takes another look at the old national 55 mph speed limit. While Pelosi asks Bush to open up the Strategic Petroleum Reserve and Democratic lawmakers are now joining Republicans writing up bills to open up drilling in Alaska and offshore, Senator John Warner (R-Va) sent a letter to the U.S. Department of Energy and the GAO asking them to look at dropping the speed limit as part of the debate on an energy policy. The WSJ also looks at other impacts of speeding besides energy costs: a $40.4 billion cost to society (way more than those bicycling scofflaws who run lights and ride without helmets!) and 13,000 fatalities, according to the NHTSA.

Back to Los Angeles: the importance of reporting road harassment to the police.

As usual, thanks to Jack for the WSJ article!

T. Boone Pickens plan to reduce oil use

Link from Jack.

I'm 80 years old and I've been an oilman for almost 60 years. I've drilled more dry holes and also found more oil than just about anyone in the industry. With all my experience, I've never been as worried about our energy security as I am now. Like many of us, I ignored what was happening. Now our country faces what I believe is the most serious situation since World War II.

If we don't do anything about this problem, over the next 10 years we will spend around $10 trillion importing foreign oil. That is $10 trillion leaving the U.S. and going to foreign nations, making it what I certainly believe will be the single largest transfer of wealth in human history.

Read more In the Wall Street Journal.

Pickens believes the United States can cut oil imports by a third within a decade with wholesale construction of wind turbines across the Great Plains. The electricity produced can then be used to shut down natural gas power plants so we can use natural gas for transportation, though I'm surprised to see Pickens claim that natural gas in the United States is "abundant" and "cheap" since U.S. gas production peaked last year and prices are at record levels.

Locally, more and more people are taking public transportation to reduce their reliance on imported oil. Here's what Caltrain looked like this week during my commutes.


Murph attended the San Francisco Bicycle Coalition Bikes On Board subcommittee meeting, where they discussed SFBC's response to Caltrain's Bicycle Master Plan. I plan to attend the Silicon Valley Bicycle Coalition meeting tomorrow night in Mountain View, where we'll discuss the same thing.

On a related note, bikes on board the Highway 17 Express service is on the agenda for this Friday's meeting of the Santa Cruz Metro Board of Directors. I spoke with Board Vice Chair Dene Bustichi this week about the issue -- he didn't commit to anything but I hope I was able to convey the importance of bikes on board the bus.

Mexico gas tourism

I was flipping through the New York Times this morning and saw a couple of interesting articles:

• "Rethinking life in Denver's far suburbs" discusses the impact that higher commute and heating costs are having on housing prices in the far suburbs around Denver, Colorado. Denver's city center, in the meantime, is seeing a revival of shiny new condos and restaurants around LoDo and along the Cherry Creek River. I used to ride my bicycle in that area and it's indeed become a very nice area over the past 10 years.
  
  
• "Low Mexican gas prices draw Americans" reports that many Americans in border towns cross into Mexico to buy discounted gasoline and diesel. Gasoline in Ciudad Juarez is only $2.66 per gallon, the result of subsidies that costs the government of Mexico over $20 billion this year. Trucking companies fuel their fleets in Mexico. Meanwhile, gas stations in El Paso, TX are empty and pushed to the edge of bankruptcy. Seee the video report for more.
  
  
• A similar article on gas tourism in the Wall Street Journal looks at San Diego and Tijuana, where individuals are installing extra large fuel tanks on pickup trucks and other work vehicles so they can buy subsidized Mexican fuel for resale to friends in the USA.

Export Land Model

The Wall Street Journal does a good job covering the big reason that oil prices have risen so dramatically over the past year: exports fell 2.5% last year in spite of a 57% increase in prices. The conventional wisdom is that higher prices always lead to technological improvements and more investment. This drop in exports "defies traditional market logic," according to the article.

One of the big factors in decreased exports mentioned in the WSJ article is what geologist Jeffrey Brown calls the "Export Land Model." Picture an oil producing country -- "ExportLand" -- that produces two millions barrels of oil per day. It keeps one million for domestic use and exports the remaining one million to the United States at $50 per barrel. As prices rise to $100 per barrel and more, all of that American cash flowing in to ExportLand leads to more consumption, bigger houses, more roads, more SUVs to drive on those roads, suburbs, big box outlet stores, yachts and private jets. This results in more domestic consumption in Exportland, which in turn results in a drop off in exports.

ExportLand has a finite quantity of oil, so that two million barrels per day production is declining over time. In the real world example of Mexico, production dropped a dramatic 15% from 2006 to 2007 while domestic consumption increased. Similar things are happening in Norway, Russian, Saudi Arabia and throughout the Middle East.

Another real world example is the United Kingdom, which went from a major supplier to a net importer in only six years. One time exporter Indonesia became a net importer. Mexico is expected to become a net importer within five years. Even Iran -- the world's fourth largest oil producer -- is expected to become a net importer in a few years.

The question to ask yourself: When all of the large oil exporters become oil importers, who will they import the oil from?

"The sense in the market is that peak oil is here and that things will only get worse," says Lehman Brothers oil analyst Adam Robinson. He continues, "the verdict is still out on that," because of ultra deep water drilling planned off the coasts of Brazil, Australia, West Africa and the Gulf of Mexico. Going for the difficult oil that's only profitable when oil is above $100 per barrel is, of course, part of the very definition of Peak Oil -- when the easy stuff is gone, you must spend more time, effort, resources and money in squeezing the last little bit that's left in the sponge.

Read more in the WSJ. The article explains things fairly well, IMO. Thanks to Jack in STL for the heads up on this.

Rockefellers: Change crucial for future of Exxon

Members of the Rockefeller family, descendants of the man who founded ExxonMobil forerunner Standard Oil, are calling for changes in governance and is urging the company to cut greenhouse gas emissions and look into renewable fuels in shareholder resolutions sponsored by the family. Exxon management opposes the resolutions.

The family "are concerned Exxon's senior management has tunnel vision and is too absorbed with the challenges of daily management of multibillion dollar oil and natural-gas projects to ask hard questions about the future of fossil fuels. Mr. Tillerson and other Exxon executives have said they believe oil and gas will represent the vast majority of energy consumption for decades," according to The Wall Street Journal.

Although the family does not own a controlling share of ExxonMobil, the Rockefellers symbolic introduction of these resolutions has gotten the attention of management and hope other shareholders will join them.

Read more at wsj.com. The London Times Online also discusses the challenges faced by ExxonMobil as they move into they future:

While the Rockefellers beat their breasts, most shareholders will continue to love the fat Exxon dividend.

Yet underlying the protest from the trust fund Rockers is a big problem for oil companies - their ever-increasing reliance on the support of governments and regulators.

Exxon's riposte to the climate change and peak oil lobbies is that technology rather than regulation will provide answers to our energy problems.

It is a disingenuous argument because the energy industry is at the governments' knees begging for help - big dollops of taxpayer cash to build experimental power stations.

Tip of the hat to Jack for this article.

Drop the Federal gas tax and watch Big Oil profits GROW

The Federal gas tax is currently at 18.4 cents per gallon. John McCain proposes a national holiday of this gas tax between Memorial Day and Labor Day this summer. Let's say his proposal passes through both houses of Congress and President Bush signs it into law. What happens?

1. The 18.4 cent Federal gas tax is no longer charged.

2. The price at the pump drops, say, 15 cents per gallon.

3. People buy more gasoline because it's cheaper! Hurray!

4. Uh oh, the supply of gasoline hasn't actually gone up. The price at the pump creeps back up to $4 to regulate demand as gasoline follows the law of supply and demand.

5. Big Oil pockets the 18.4 cent difference and makes even more money because they don't have this federal tax expense! Hurray for them and their stockholders! Hurray also for the foreign oil companies from whom the U.S. imports over half it oil.

John McCain says "The effect of this 'gas tax holiday' will be an immediate economic stimulus" -- and he's right. It will be an immediate economic stimulus to the Big Oil Companies who are already making record profits. The proposed Federal gas tax holiday will provide zero benefit to the everyday driver, commuter and consumer. John McCain's proposed tax holiday benefits Saudi Aramco, the National Iranian Oil Company, Petróleos de Venezuela, Lukoil, Royal Dutch Shell, Petroleos Mexicano, Petrobras, ExxonMobil, Imperial Oil and all the rest while leaving America with no long term energy strategy.

Energy Wasting Day viral video

It's easy to waste energy, especially with the tips provided by EnergyWastingDay.com. You can even win Dan Power's undercrackers.

Via Carlton.

Gasoline elasticity

It turns out the gasoline demand does have some elasticity, even outside of the context of large natural disasters. In California, gasoline is now about 50 cents more expensive than a year ago, and gasoline consumption has dropped 4% over the past year in California. That never happens outside of natural disasters, but it looks like Californians are adjusting to some degree.


That matches the expectation in this Wall Street Journal article. In the United States, gasoline consumption has dropped 1.1% from the previous year, but over the long term consumption is forecast to drop 4% for every 10% increase in gas prices as consumers make decisions about their transportation choices and where they live. Part of the reason gas prices are hitting Americans so hard right now is because of choices we made a decade ago about transportation and housing development, when resources were cheap.

This Grist article has more on the topic, including some mockery of Daniel Yergin (and why isn't Yergin completely discredited yet?), and a hat tip for those already finding solutions to high gas prices:

Anne Heedt, of Clovis, Calif., has been moving toward a more fuel-efficient lifestyle for the past few years. She owns a Toyota Prius hybrid but takes her bike on errands when weather permits.

"We're not always going to have the same accessibility to gasoline that we've had in past decades, so we do have to start thinking about what we're going to do over the next 50 years," said the 31-year-old Ms. Heedt, who used to work at a medical office but is between jobs.

Meanwhile, Terrapass asks Copenhagen Cycleliciousness guy for his expertise in how to get more people on bikes. It's a multipart interview, but the first installment suggests we can get there by opening more commuter-oriented bike shops in America:

Here in Copenhagen there are bike shops on almost every main street and they sell primarily bikes that you call “commuter bikes” in the States.

Which reminds me that I have a followup from the North American Handmade Bicycle Show about this topic -- Amy Walker of Canada's Momentum Magazine led a panel discussion on City Bikes at the show. I took notes, I've talked with Natalie Ramsland and Mike Flanigan, now I just need to organize the notes and post them.

In the meantime, Carlton in the UK asked me to get the word about this meeting on peak oil and cycling policy in Scotland:

Spokes Spring Public Meeting - Climate Change, Peak Oil and Scottish Cycling Policy. Weds 19 March, 7.30 [doors open 6.45 for coffee, stall, mixing]. At Augustine United Church George IV Bridge, Edinburgh.

Speakers:

• David Somervell, Energy and Sustainability Manager, University of Edinburgh - speaking on climate change.
  
• Dr Mandy Meikle, Depletion Scotland - speaking on energy supply and peak oil.
  
• Kirsty Lewin, head of the Scottish Government's Sustainable Transport Team - speaking on government cycling policy in the light of the above challenges.

Fat Boy Biking has his thoughts on how more expensive gasoline is changing the driving habits of Americans.

Sheyrl Crow - Gasoline

Sheryl Crow sees a Mad Max future in "Gasoline."

Way back in the year of 2017
The sun was growing hotter
And oil was way beyond its peak
When crazy Hector Johnson broke into a refinery
And the black gold started flowing
Just like Boston tea

It was the summer of the riots
And London sat in sweltering heat
And the gangs of Mini Coopers
Took the battle to the streets
But when the creed was handed down
For no more trucks and no more cars
They threw cans of petrol through the windows at Scotland Yard

Full lyrics at Sheryl Crow discussion board. Via The Drum Beat.

Dan Yergin fan club

People who know about Peak Oil know the name Daniel Yergin. Yergin founded the Cambridge Energy Research Energy Associates (CERA) to provide analysis and research on energy issues. Every major oil company, most minor ones, and almost any government and private agency with energy planning needs purchases research from CERA.

Apparently, CERA and Yergin are apparently an inside joke among oil experts who seemingly take his numbers and predictions with a grain of salt. Yergin consistently forecasts lower oil prices and consistently gets it wrong. Last June, for example, CERA predicted $60 oil by the beginning of 2008 because that's what the "fundamentals" support. As everybody knows, we're at $100 with no hurricanes or other large disasters affecting our supply. Yergin and CERA consistently promote the fantastic idea that oil companies can producers 110 million barrels per day within the next decade.

In spite of CERA's dismal track record, the media consistently turns to CERA as a "highly respected" expert on oil prices and oil futures, with Yergin cited as "one of the world's foremost experts on energy." There doesn't seem to be a sense of history or accountability for journalists who accept Yergin's credentials (a PhD and a Pulitzer) without checking his history. He's undoubtedly a brilliant guy, but the facts are clear that the numbers from CERA just don't add up.

---

Inspiring Green Leadership

Speaking of Peak Oil, I met Andre Angelantoni yesterday at the Eco Summit yesterday in Santa Clara. Andre is the founder of Inspiring Green Leadership, which seeks to encourage individuals and businesses to make the changes that will be required in a world that is increasingly resource constrained. Andre introduced the idea of Peak Oil to the program participants.

Angelantoni encourages everybody with an interest in sustainability to become leaders during this time of coming change. He encourages these leaders to help create communities that are self sustaining, with roles in transportation, food production, power use reduction, and health care. Besides his own website, he pointed conference participants to The Oil Drum, Relocalize and Oil Depletion Protocol.

$100 per barrel

NYMEX benchmark light sweet crude for January delivery broke through $100 per barrel for the first time ever today.

That is all.

Economist says 'Don't worry, be happy'

Dr.Thomas Palley is a Yale educated published economist. I'm just a guy who blogs about bikes. He's evidently a smart guy, but I think Palley misses the point in his essay in Foreign Policy in which he reassures investors that the U.S. dollar will remain the reserve currency of choice around the world. In spite of a growing chorus of doubt around the world on the value of the dollar, Palley tells us that the falling dollar is merely a correction rather than a symptom of something fundamental about the world economy. Here's what he writes:

• "With an annual GDP of more than $13 trillion and with efficient, liquid capital markets, the U.S. economy operates on a scale and with a vitality that is unmatched." The U.S. economy runs on oil. With fossil fuel in permanent decline around the world, U.S. productivity will fall dramatically in the near future.
  
  
• "Many countries can’t generate enough domestic consumption to spur growth and full employment, forcing them to rely on exports [to the United States]." Our market economy is an economy of excess. We buy TVs from Malaysia and bikes from Taiwan because we have so much extra left over for consumer "stuff." Again, this excess is driven completely by cheap energy inputs into our economy. Conservation and innovation may mitigate the damage (which is why I'm so gung ho about limiting inefficient transportation modes), but the fact is that our economy will stagnate. Permanently.
  
  
• I think Palley also ignores the fundamental fact that the US dollar is a fiat currency -- the US Federal Reserve prints as much as it needs, and its value is underpinned by the requirement that almost all international oil sales are denominated in U.S. dollars. If enough oil producing nations are willing to sell their oil in euros or yuan or pesos, then that will be the end of the American dollar. Palley's "buyer of last resort" theory won't hold water when U.S. consumers can no longer afford to buy plasma TVs and plastic knick knacks.

I think every nation that depends heavily on imported oil has significant economic challenges, and these challenges are coming sooner rather than later. The mother of all paradigm shifts will soon be on us, but with increased awareness of our reliance on a scarce resource I'm hopeful we can rise to the challenge to soften the landing.

Food prices up by one third

I've told a few friends that I expect double digit inflation on food prices for 2008, but according to the Economist, we're already there this year. The Economist's food price index rose by a third over the last year and is at its highest level since they began the index in 1845.

Increased affluence around the world means more people eat meat, but the Economist notes also that the sudden push for ethanol means about a third of the corn crop is devoted to ethanol production. More acreage devoted to ethanol production also means less acreage for wheat, soy, and other crops. Corn is also the primary feed for cattle and chickens, so increased feed costs means we pay more for steak and chicken.

The Economist in seems to predict the exploitation of remote wilderness areas as investors pay to plow them under and build roads to access these new agricultural frontiers. We're already seeing this in Malaysia, Thailand and Indonesia, where millions of acres of rain forest have been replaced with palm oil plantations.

Some predict that rural economies in the developing world will benefit from increased demand for biofuel crops from the west. The reality, though, seems to be different: food crops that used to sold locally are now no longer available, as farmers find it more lucrative to export their crops to the western world than to feed the local population.

This stuff is impossible to predict accurately -- we know farmers are abandoning set asides, for example, and planting record acreage to cash in on the ag bonanza. If there's a boom crop, perhaps there will be enough left over to sell to Mexican tortilla factories and the occasional food aid shipment.

It used to be that I was a little discouraged at my own attempts at conservation -- I realized that imy own cutbacks only enabled somebody else to burn that much more. Now that we're entering an era of real shortages, however, perhaps my savings will allow somebody who's truly in need to use that resource, and I'm a little more hopeful that my example will encourage others to sacrifice a little bit of their comfortable lifestyles to enable the poor to live.


Related stories:

• Who wins, who whines when corn prices rise takes a look at the farm economy.
  
• Ethanol to fill an SUV can feed a person for a year.
  
• Feed the Greed.
  
• Global food crisis looms.
  
• Victory Garden delivered by trike in San Francisco.

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Okay, enough of beating on that horse: A couple of fun links from A Boy on a Bicycle:

• Researchers find link between self esteem and materialism.
  
• Nice comic suggesting that Hummer owners might be compensating for something.
  
• Speaking of that "something," for Heidi Klum, it was love at first site of Seal in his bike shorts. I'm told, however, that the usual reaction from women is "ooooh, gross!" so your mileage may vary.

Photo: "Manila Three Wheeler" by Jeff Youngstrom.

Robert Hurst on Peak Oil

Robert Hurst, author of the popular Art of Cycling book, added a footnote in his second edition about a troubling societal dilemma looming in the near future: the growing inability of of global energy supply to meet global energy supply. In his latest blog entry, Robert takes a look at the current situation, taking input from industry analysts and reviewing what the mass media is now saying about the specter of Peak Oil.

If you haven't yet heard of Peak Oil, Robert's essay is a good introduction. You can read it here on his blog. He also points to a couple of my daily reads: The Oil Drum and oil engineer Robert Rapier's R Squared Blog.

$4+ gasoline in San Mateo, California!

San Mateo is on the San Francisco Peninsula, just north of where I work. The AP published a photo of the price at the pump at a Shell station, along with a suggested solution to the problem. (Hint: It has two wheels and no gasoline motor). Via Jym.

Other random stuff:

• I saw a really cool children's book last night: Mike and the Bike by Mike Ward with a forward by Lance Armstrong and audio CD of the text of the bike by Mr. Phil Liggett himself. There's even a Mike and the Bike blog.
  
  
• The Hybrid Debate Among the debates: Would drive more if our cars had a lower environment impact? Sponsored by Lexus.
  
  
• Bicycle Design reports on the bikes in China. He also includes a link to the Crazy Bicycles Design site, where you can vote on what you think of as the weirdest bike design.
  
  
• Patrik Sinkewitz banned until July 2008 for his confessed doping.
  
  
• I think most of you have seen the news of the "real bike shop" at a Walmart concept store in Highland Village, Texas.
  
  
• Because it's that time of year: ICEBIKE, Bike Winter Chicago, Winter cycling forum, Winter Cycling page.

I've been laid up in bed for the past two days with a horrible head cold. I hope the rest of you all have a great weekend!