November 3, 2011....Bob Brinker's Moneytalk: Summary of Latest Guest-Speaker

 November 3, 2011....Guest blog writer, pen-name FrankJ, has a real treat for us this week. He has written a summary of the third hour of Bob Brinker's  Moneytalk from last Sunday...............................................................................(comments)

FrankJ wrote:

Bob’s guest on Sunday, Oct. 31 was John Hofmeister, author of a book called “Why We Hate the Oil Companies.”   John is the former president of Shell Oil Co. and is the founder of a non-profit, non-partisan organization, Citizens for Affordable Energy, a group devoted to holding politicians accountable for energy policy.

Hofmeister’s opening statement, in response to BB’s question as to why he wrote the book was that, while it is the oil companies that consumers hold responsible for high prices, they should “look through” the oil companies to see the federal government standing behind them, preventing increases in the domestic oil supply.

BB asked why we seem to have made a conscious decision over the past decades to buy oil from people like Hugo Chavez and the Saudi royal family.

JH answered that in the 1960s and 1970s, few barriers to domestic production existed, but after the Santa Barbara oil spill in 1969, and the Exxon Valdez spill,  a shift in politics caused us to “export the environmental risk.”  Congress reacted to Santa Barbara by putting a moratorium on off shore drilling.   The result of this policy was we exported dollars and did not create domestic energy jobs.

BB asked John if the Gulf of Mexico spill gave energy and motivation to the anti-drilling groups? 

JH said, the Gulf spill added to their motivation, and pointed out that the Santa Barbara and Exxon Valdez names never went away among arguments against domestic production.  JH pointed out that the political response to the Gulf event was to shut down drilling, and while this change took place immediately, only one-third of rigs are back in production, due to the difficulty in getting permits.  JH said we pay more than ever before for gas thanks to government’s unwillingness to produce domestic resources.

BB made the statement familiar to regular listeners that we would be much better off in terms of balance of payments and a strong dollar if we did not have to buy foreign oil.  JH agreed and said that dependence on foreign oil “saps the strength” of the domestic oil industry.

JH went on to blame oil companies for not doing a better job of telling their story to the American people and suggested that fear of retaliation from the federal gov’t might be the reason – it is the gov’t that grants exploration and drilling permits. 

BB then brought up the topic of natural gas and asked another question familiar to listeners as to why there has been no action on the part of the government to issue an executive order to convert the federal vehicle fleet to natural gas?  

JH said politicians are “actors” who act on a 2 year cycle, and used the term “political time” and said that elected officials can’t look beyond Nov 2012, whereas, the benefit of natural gas use in vehicles might take 5-10 years before there is a material impact on the economy.  He mentioned his non-profit group and said the American people need reminding that they are being victimized. 

After the break, BB brought up Wind and Solar, asking the guest, “Why do they get all the face time in Washington, D.C?”

JH answered that it is a matter or political popularity.  Politicians will support whatever brings in better polling numbers, and they like to get political contributions from groups and individuals who support wind and solar.    

Wind and solar are not, in fact, about green jobs because they are largely self-operating.  He said wind towers will not last as long as predicted because they are out in the weather.  He said we need to stop throwing money at projects that require tax subsidies in order to produce electricity at prices consumers will pay. 

Editorial Comment:  Consumers often don’t have a choice because some states have passed legislation REQUIRING electric utilities to purchase a percentage of their power from renewable sources. 

BB asked John if he has seen the large wind farm along Interstate 40, near Weatherford, OK and is this business model economically viable?

JH said he had not, but he has seen wind farms out west.   JH does not think it is economically viable.  Instead of “dozens and dozens” of towers, there need to be “hundreds and hundreds” of towers.   He said, the amount of energy produced by existing wind farms is, “paltry.”  The scale needed would require “billions” in investment and people would not go for that.

JH cited the negatives:

·       Projects require incentives in the form of tax write-offs. 

·       Utilities are required to buy the more expensive electricity and they simply pass the higher costs on to consumers. 

·       Getting the electricity from remote areas to where it is used, is inefficient:  transmission lines lose 3% of the energy per mile.

·       Ratepayers pay for the new transmission lines.

·       Ratepayers pay for backup energy sources needed (often natural gas plants).

 JH said we are “…paying through the nose for a very small benefit so politicians can say – look what we are doing for green energy.”

A caller criticized Americans for buying gas guzzlers.  Before the caller could launch into a full-blown filibuster, BB cut him off and asked JH about the smaller cars in Europe.

JH answered that European cities built in the 15^th-16^th century have narrow streets and cannot accommodate large vehicles like SUVs.   Editorial Comment:  OK, that was weak.  He went on with a little better explanation:

Parking is expensive because land is limited.  Getting better.

Europeans have had to make do with less because Europe does not have the natural resources the United States does.    Getting better.

We (in the US) are used to having choices.   That’s the ticket.

EC:   High taxes on fuel mean people want cars that get high mileage and that means small cars, a pretty obvious reason for the prevalence of small cars in Europe.

BB asked John’s views on conservation. 

JH said 30 years ago we put the burden of conservation on the consumer.  We were told we needed to be colder in the winter and hotter in the summer to save energy.  Instead, we need to design conservation into the products we use and suggested that it is time (over the next 30 years) to say good bye to the inefficient internal combustion engine and replace it with batteries, hydrogen fuel cells and mass transit. 

A caller asked about over-the-road trucks being converted to natural gas as an alternative fuel.  JH seemed to agree with this concept and went into a discussion of Methanol for use in engines.  Methanol can be produced from natural gas, or other sources in bio-refineries, but this will take a political framework.  Advantages would be domestic drilling jobs and jobs in bio-refineries.

In closing, BB asked if John would end the government subsidies for ethanol?

JH said we need a larger plan for the use of ethanol, methanol, butanol, and compressed natural gas.  We need an open fuel standard predicated on domestic energy production and suggested that natural gas could be used to produce methanol without subsidies, making it competitive with ethanol."

 Honey here: Thanks again, FrankJ. That was a great summary of an interesting subject! 

The Hofmeister interview is available at KGO810 radio until Sunday. It is archived in the 3-4pm hour and can be downloaded for free. 

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