The Professor's Notes

I have written a few times about the theory of petroleum/crude oil production.  Specifically, I have been interested in the argument that says essentially that we are not running on liquefied dinosaurs, but rather on a purely chemical process.  This is called the “abiogenesis” theory of petroleum creation (not to be confused with the more theological discussion my brother has been having on his blog about that OTHER Genesis.)

While this research had been dismissed by many (including my Daughter’s petrogeology professor) the work continues.  In a recent article in Science Daily titled “Fossils From Animals And Plants Are Not Necessary For Crude Oil And Natural Gas, Swedish Researchers Find” the argument is once again made.  Reading from the article:

According to Vladimir Kutcherov, the findings are a clear indication that the oil supply is not about to end, which researchers and experts in the field have long feared.

He adds that there is no way that fossil oil, with the help of gravity or other forces, could have seeped down to a depth of 10.5 kilometers in the state of Texas, for example, which is rich in oil deposits. As Vladimir Kutcherov sees it, this is further proof, alongside his own research findings, of the genesis of these energy sources – that they can be created in other ways than via fossils. This has long been a matter of lively discussion among scientists.

“There is no doubt that our research proves that crude oil and natural gas are generated without the involvement of fossils. All types of bedrock can serve as reservoirs of oil,” says Vladimir Kutcherov, who adds that this is true of land areas that have not yet been prospected for these energy sources.

Some of this is rather disconcerting.  For those that abhor the ICE (Internal Combustion Engine) the thought that we might someday run out of petroleum was at least some small solace. Alas, we apparently now won’t.

One of the more interesting points about their research is that they believe they can now more precisely pinpoint where to find petroleum deposits based not on where they believe dinosaurs and other prehistoric life existed but rather based on the geologic fissures.  Using this approach they believe they can improve the accuracy of drilling from 20 to 70%.

I do  have one small gripe: I don’t think they can say (as they do in the article) that the findings are revolutionary.  The findings support theories that have been around for quite a while.  Perhaps these finding will have the effect of moving abiogenesis from being the “Rodney Dangerfield” of geologic science, and start to get real “Respect.”

A “Tipping Point” perhaps?

nb: I find this arena to be quite interesting from a “philosophy of science” perspective, as the “conventional” science has long dismissed this alternative view as “crack-pot” science.  Much of our understanding of energy consumption has been based on this being a “non-renewable” resource.  Perhaps that assumption is mistaken? Thomas Kuhn’s paradigm shift “in the wild?”

I was listening to our local public radio station this morning, and they were discussing the reduction in revenues to fix PA highways and bridges because (as they said)  the price of gasoline is so low.  Of course, they correctly pointed out that the real reason for lower revenues was the reduction in consumption that was driven by a poor economy and high gas prices over the summer.

Many callers talked about how we need to raise the gas taxes, not only to provide funds to repair the highways, but to get people to learn to conserve, and to support alternative fuels. In fact several callers felt we needed a tax “floor” implemented immediately.  A “tax floor” would mean that if the price of gas dropped below a threshold (most said $3/gallon) then the price would stay at $3, and the government would scarf up the difference.  In that way, the government would reap the “windfall profits” of low prices (instead of the consumer).  (see my past discussions regarding windfall profits here.)

Interestingly, if the price rises and falls in part due to fluctuations in demand (and demand changes relative to price) would the price charged ever get much below three, if the gas stations knew they would have to just “give” that to the government?

So I want to know, what is YOUR opinion about gas taxes?  Are you in favor of a higher gas tax?

Look forward to your answers.

I have really enjoyed most of the commercials during this year’s Olympics in Beijing.  Creative, touching, and informative.

Take the GE commercials, for instance.  They have laid out clearly, in several commercials, how they are actively engaged in alternative energy projects.  GM touting their lower consumption and hybrid and electric vehicles.  Boeing and their lighter and less fuel consuming aircraft.  The list goes on.

As I see it, they are telling us the things that are already going on. Steps that are being done today, based on research and development conducted for at least the past 8 years (and more likely 20-30 years.)  Clearly, we are seeing today the fruits of labor and investments made in the past decades.

On the other hand, we have Obama’s commercial.  In his commercial (hey, he approved it!) he points out that the hands that do many every day things can also things to put in place alternative energy programs.  Like wind power. Alternative fuel cars.  Solar power. All noble thoughts.  And he is right, our hands can do those things.  In fact, as evidenced by not just the other ads, but our own experience (and the fact that the video used shows locations already doing these things).

So just what will Obama bring to the table? How will he enable our hands? Hmmm?

It seems to me that the Democrats are the ones playing off the fears of the American public.  Not the fear of terrorists, but fear of energy failures.  And they are promising…. um… wait, I had the memo right here…

Oh, yeah. Change.

Now, if we could just hear what that change is, and how it will be different.

I’m still waiting.

I have written previously about the energy policies of the candidates, and I specifically wrote about the proposals from Obama and Clinton to create a “windfall profits” tax.  At the time I pointed out that, when attempted previously, windfall profit taxes failed to achieve their stated goals.

One more thing:  the last time this was done, under Carter, the expected revenues just didn’t materialize.  According to the report published in 2006 by the Congressional Research Service (CRS), “The $80 billion in gross revenues generated by the WPT between 1980 and 1988 was significantly less than the $393 billion projected. Due to the deductibility of the WPT against the income tax, cumulative net WPT revenues were about $38 billion, significantly less than the $175 billion projected.”

That got me thinking.  What people are really saying is not that they want to tax “windfall profits” (defined at the Financial Dictionary as “A sudden unexpected profit uncontrolled by the profiting party.”) but rather people are upset that the oil companies are making money by charging the consumer a higher price than they used to. Yup.  It apparently is unfair to charge a price that the market will bear.

Hillary Clinton, on May 1st is quoted as saying “The oil companies have made out like bandits, and there is no basis for them to have these huge profits.”

That said, I started to look around and see what other companies are earning these sort of “obscene” profits, during what has been described by Obama as “a recession, or worse.” So, first, I looked at the percentage profits earned by Exxon the most-oft used target of opportunity by the left.  For that past three years, Exxon has earned between 9 and 10 % profits (computed by dividing their “net income” into “total Revenue”–all data from http://finance.yahoo.com the hotlinks on the company names will take you to those pages)

Exxon
Net Income    Total Revenue    ”% Profit”
2005 36130              370680           9.75%
2006 39500              377635         10.46%
2007 40610              404552         10.04%

So, that doesn’t seem unreasonable to me, but perhaps I missed something.  Perhaps that 10% return in unmatched by any other company.  So, I decided to look at another company.  Yes, I had a biased selection.  I chose Apple, Inc, for two reasons.  First, Apple has had strong success making in-roads into several markets (computers, cell-phones, music), and secondly, because it seems Apple tends to be the computer platform of choice by those on the left.  Read the rest of this entry »

I have added a page to the site  that provides the lowest gasoline prices here in the Mechanicsburg, PA area.  (see left-hand sidebar)  I would encourage you to do three things:

1. Visit here regularly if you are from around Mechanicsburg to check the lowest prices
2. Visit the gasbuddy.com site and search for lowest prices in your area
3. Join their site and provide updates to the prices for the stations you pass every day
4. If you have a blog, add a listing for your local area

The way I see it, McCain has a strategy that when taken as a whole will hopefully remove “energy” from our worry list. (see my entries here, and here) But… that doesn’t mean we shouldn’t be doing things to help each other out in the meantime.  By updating the gasbuddy.com site as we see changing gas prices, we help our neighbors save a little, and hopefully reward those stations that have the lower prices, encouraging more downward pressure on prices (Of course, economics being what it is, the increased volume at those lower-priced stations may be seen as an increase in demand that should result in an increase in prices at the micro level.  Who knows…)

So, what are your thoughts on how we can help our neighbors lessen the impact of higher gasoline prices? (and might I suggest that telling them to drive less, or buy a new car, isn’t very helpful…)

The US News and World Report has written today that Obama has come out against another energy plan.  Big surprise here, eh?

In an appearance in the battleground state of Nevada yesterday, Sen. Barack Obama mocked Sen. John McCain’s energy policies, particularly his call for more nuclear plants. The AP reports that Obama said in Las Vegas “that he would not take nuclear power ‘off the table’ as a possible energy option, but blasted John McCain’s proposal to build dozens of new reactors in the U.S.” Obama “said he supports increased research into nuclear waste storage and recycling, but could not endorse construction of new reactors until those concerns are resolved.” The Las Vegas Review-Journal reports that an underlying theme of Obama’s attacks on McCain were the status of the federal government’s Yucca Mountain nuclear waste facility, which is opposed by Obama and most of Nevada’s leaders, but backed by McCain.

I have been hearing now for weeks about all the “gimmicks” that McCain is proposing.  The gas tax holiday is a gimmick, since it only saves the average American $30 (see my previous posts here and here for why that analysis is flawed.)  In addition, any proposal for increasing domestic production is met not only with cries that it is harmful to the environment, but that it is not a near term solution–that “do (sic) not provide immediate relief.”  And yet, this same solution is chastised for not being a long term solution either!

In addition, Obama’s attacks McCain’s proposal to offer a $300M prize for battery development

“to improve battery technology for full commercial development of plug-in hybrid and fully electric automobiles” to leapfrog currently available batteries and would have to build “more than one” advanced battery at 30 percent of current costs.

(In fact, in that same article Michigan Sen. Debbie Stabenow, D-Lansing, is quoted as saying “We don’t need a game show,” which, while making a great sound bite, seems to ignore the tremendous innovation currently seen through the use of prizes even at government expense, such as the X-Prize.  See here, here, here, and here.)

In several other stories we see the McCain has proposed immediate, near, mid and long term solutions.  Generally speaking, what Obama is calling gimmicks, we call a strategy.  He is working to alleviate (or at least reduce) the immediate pain at the pump, while seeking to ameliorate the overall energy situation through investing, and rewarding, innovation.

Obama’s plan?  Well, he really doesn’t seem to have a targeted one.  He supports a second round of stimulus tax rebates.  He also supports taxing “big oil” for making their record profits (which, by the way, are a far lower percentage of revenue than the much beloved Apple Inc.  If you don’t trust me, just challenge me.  I did the math…)  He also has called for higher fuel efficiency standards to double fuel economy by 2027!  (is that a near term solution?) And he supports alternative sources, such as solar, wind, and biofuels.

So does this add up to a coherent strategic plan that addresses the immediate needs, as well as the mid- to long-term needs?  What does Obama himself have to say about this:

Obama admitted that his own plan will not immediately affect gas prices but said his proposal for a second stimulus package will offer overall financial relief. “I wish I could wave a magic wand and make gas prices go down, but I can’t,” he said. “What I can do – and what I will do – is push for a second stimulus package that will send out another round of rebate checks to the American people.”

So, what is Obama’s plan for today?  He and McCain seem to agree on the long-term.  And the need for change.  But Senator Obama, do we really have 10 to 20 years to wait?

So, readers, I ask this.  If you were putting together a comprehensive strategy, what would be your:

• immediate term solution for lowering the price at the pumps today
• near/mid term solution for keeping costs down
• long term solution for weaning Americans off a dependence not just on foreign oil, but oil.

By now everyone has heard Obama’s plan

“I’ll make oil companies like Exxon pay a tax on their windfall profits, and we’ll use the money to help families pay for their skyrocketing energy costs and other bills,” the Illinois senator said.

He of course hasn’t stated at what point profits become “windfall profits.” So off to the definer place I went (you know, a dictionary!) According to The Free Dictionary, windfall profits is: “profit that occurs unexpectedly as a consequence of some event not controlled by those who profit from it”

This has me wondering what (or who else) has profited unexpectedly and therefore should be taxed on th eir “windfall.” I have a few thoughts: Read the rest of this entry »

I last wrote about the numbers being a bit “off” on the gas tax. I stand by the “general” analysis, since the discussions in the media centered around the “average American” but I wanted to discuss a bit more in depth, some other confounding variables.

Of course, the first is the diesel tax. Most Americans don’t drive diesel cars. But virtually all tractor-trailer rigs run on diesel. And the tax on diesel is higher than on gasoline. And, of course, trucks put more miles on the road than general use automobiles. This does mean a larger share of the $10 billion in tax revenue comes from trucking than from automobiles, both in miles driven and cost per gallon. Read the rest of this entry »

Far be it for me to attack Obama. Hey, he’s the one Democratic candidate I have liked so far. But I have to go after what is quite honestly either the sloppiest math I have seen, or the most disingenuous campaign rhetoric to cross through this campaign cycle.

I was reading the blog over at “Imperfect Mommy” where I read, and at first accepted without questioning her comment “I read yesterday that suspending the gas tax would save the average American $30 over the course of the summer. $30.” Of course, then I felt rather guilty for not questioning the number. Not because I don’t trust her, but because it just seemed a bit “off.” At first I just figured “well, with almost 5 drivers in the family we are certainly not ‘average’” but then I realized–no one is.

My first thoughts, as a good researcher where: Read the rest of this entry »