USD28.5bn from Big Oil: Good. USD7.5bn to Big Coal: Bad

News today that the (US) Senate Finance Committee has cooked up a USD28.5bn love-letter for coal and renewable resources. Most of this comes from taxes demanded, and concession withheld, from the oil industry.

What shits me is the kick-back carved out for coal – specifically, ‘clean coal’. I’ve mentioned previously I don’t believe there is such a thing. Don’t believe me? Find an old copy of Vanity Fair.

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Or try google. What does that have to do with economics? Little, if anything, it just demonstrates that ‘clean’ is obviously a matter of perspective. In this case, ‘clean coal’ exists when ‘clean’ only applies – loosely – to one end. I’m sure the Appalachian people use a different definition to seeing mountaintops blown away and dumped in the valleys. It makes for rather an Uncommon Treasury.

But back to the story:

“The provisions of this bill constitute the most comprehensive set of incentives for the production of clean, alternative energy ever contemplated by Congress,” Sen. Jeff Bingaman, D-N.M., chairman of the committee’s energy sub-panel said.

Finance Committee Chairman Max Baucus, D-Mont., said that the package was necessary given that gasoline prices are over $3 a gallon, crude is north of $60 a barrel and there is concern over mounting global warming.

I expel my coffee – when was the last time the Chairman of the Finance Committee picked up a newspaper? North of USD60 per barrel? The news is excited that the oil finally went (barely) below USD69 per barrel. That’s rather more than “North”, I should think. I suppose distance is also a matter of perspective. I still cannot find what the Congressional Budget Office had been using as their estimates for the budget figures. There are too many bloody Acts they’ve ‘costed’, but I feel certain it was not USD69 per barrel.

I’ve seen stories about Norway re-doing its numbers last year, but that’s about it. And why wouldn’t it, with the highest gas prices in the world?

And how popular is the bill with the party of goddamn lunatics who think there isn’t a problem?

Although ranking member Chuck Grassley, R-Iowa, whose state will benefit from the biofuels provisions, supported the chairman’s legislation, other Republicans were staunchly opposed to the bill.

“This is the biggest tax and spend bill that we’ve seen…and is bad spending policy and bad tax policy,” said Sen. Jon Kyl, R-Ariz.

Kyl and Sen. Jim Bunning, R-Ky., primarily expressed concern over the $21 billion in additional taxes for big oil companies.

You’ll forgive me if I don’t join them in sympathy for USD10bn-per-quarter profit oil companies. They’re welcome to leave any time they like – as long as the business is profitable, someone will do it.

Back to the story of the prices, it isn’t all that glorious. Prices fell upon news that stocks were unexpectedly high – but they aren’t that high, and neither is production.

“We had an unusual amount of maintenance that had to be done on refineries this year,” said Lynn Westfall, senior vice president and chief economist at San Antonio-based Tesoro Corp., the largest oil refiner in the U.S. West. “A lot of normal maintenance that would have been done last year had to be put off until this year.”

The nation’s refineries haven’t operated above 93.8 percent of capacity since September 2005 after hurricanes Katrina and Rita roared through the Gulf Coast region, causing power outages, flooding and wind damage affecting more than a third of U.S. refining capacity. Refiners delayed maintenance last year because of lingering closures caused by the storms.

I don’t recall any models suggesting cyclones were going away – unless they’re moving oil refining out of the Gulf Coast region altogether, I’d bet this was a characteristic of US oil refinement and supply, now.

”We require imports and we have for about the last 10 years,” Westfall said. “Now every time demand goes up, we have to go into the world market and bid up the price.”

This is US refining of oil. There is also the matter of supply: Nigeria faces strikes, Venezuela is still sorting out ownership, post-takeovers, and the Middle East is, well …politeness forbids one, really.

What worries me is the standard line pushed by Jim Kunstler for a long time now. Oil prices shoot up – we cast about desperately for something else. We call coal ‘clean’, we say nuclear energy is complete safe and cheap, we talk about oil shale and switchgrass, of all things, but the simple fact remains: it doesn’t matter what we find to fuel Happy Motoring – there isn’t enough of it.

And nothing we do will achieve anything more than ever shorter postponement of dealing with that simple fact. Even the economics of trying to beat it, and what happens when we fail, are uninteresting.


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