Wednesday, December 19, 2007

Energy Bill: Higher Costs, Lower Return

The President has said he will sign the new energy bill today. We have needed a new energy policy for years and we're finally getting one...what's not to like? Three things: 1. Increasing food costs with no reduction in fuel costs, 2. Continued foreign oil dependence, and 3. a failure to pursue nuclear technologies.

1. The bill requires additional spending on ethanol which has spiked the demand for corn in the past two years. Simple supply and demand then requires that supply must increase to meet demand. If the supply doesn't increase at the same rate, the mechanism that market uses to level out the disparity is price. Higher priced corn = higher priced food = higher grocery bill. In addition, opportunity cost comes into play here. The farmers have gone all out in producing corn because that is where the money is. What are they not producing now because they switched over to corn. This reduces supply of a particular commodity, thereby increasing price.

2. Continued foreign oil dependence. The omnibus bill passed by both houses last night

prohibits funding for oil shale commercial regulations which makes commercial production of the United States’ 2 trillion barrels of oil shale resources is impossible.
3. Failure to pursue nuclear technologies. Not a word. This is the surest path to energy independence and it is rarely even discussed.

Oh, and grandaddy federal government is telling us we can't use 100 watt bulbs any more...

1 comment:

markymark said...

#3. In 2001/02 was a software safety engineer for Framatome ANP (now Areva) I was one of several engineers that was tasked with a major upgrade of the code for the safety systems in every single Duke Energy Corp reactor. One the issues that struck me with Duke Energy (and the US) is this: every single reactor was custom built.

In France there are two basic designs. Thats it. As an engineer I can walk into any French facility and understand the safety system layout within 10 mins. In the US: 2-3 weeks. In some cases 2 months.

Their entire nuclear energy system is close to a perfect model. Even their use of breeder reactors to process spent fuel rods is 10+ yrs ahead of anything used in the US.

Alas this will not bring about energy independence. As long as American consumers insist on driving SUVs/cars/vans that average 20mpg we will never achieve energy independence.

The saddest fact of all is the technology to achieve an avg 50+mpg across an entire product line is already possible. Even a simple reprogramming of your cars' ECU will give you 4-10mpg increase and still meet all emission standards.
The article that was linked stated it will cost consumers $15,000 to meet the new CAFE standards is a flat out lie.
$200 for a modified ECU in any car manufactured after 1985. Minimum 4-10 mpg increase. You sacrifice horsepower for fuel efficiency.

In the lab I work at, we tested a European Ford minivan in 2005. It was a turbo-diesel: 48 mpg. You will never see it in the US because US consumers quite honestly do not care about energy independence. They would rather have a minivan tail gate that lifts by itself and rear seats that fold flat at the touch of button, a GPS that tells them where to go, or DVD players to entertain their children.

Fuel efficiency? Not even on the US consumer's radar. If it had been, the car companies would have voluntarily released more fuel efficient cars in the US, instead they release them in Europe and Asia..where the consumers demand more efficient cars.