Cars, Corn, Carbon, and Controversy
IS THERE anything that makes the case for curbing government influence better than the energy issue? The decades pass, the presidents come and go, but one thing remains the same: America’s appetite for oil is far bigger than her stomach.
Our energy crisis is stealthy, like termites slowly destroying a house from the inside. Unfortunately, we’re about to step through one of the decaying floorboards. 2008’s skyrocketing oil prices showed us just how vulnerable we are, but lost in the shock over four-dollar gas was what caused the crisis . . .
Nothing.
There was no Arab oil embargo, no Middle East war, no massive destruction of refineries from hurricanes or earthquakes—just a marketplace realizing that demand was increasing dramatically while supply was slowly, but inevitably, running out.
We’ve been told for years that the answer to our problems lies in green energy. Unfortunately, the facts tell a different story.
In 1981, renewable energy was responsible for about seven percent of America’s total energy use. After 27 years of broken promises and billions of dollars poured into developing alternative technologies, renewable energy now accounts for a whopping 6.7 percent of our total. That’s quite an achievement!
If green energy is as good, cheap, and clean as its supporters say it is, then market forces should automatically be making it a growing part of the equation. Instead, the opposite is happening.
Why?
One reason might be that many of the green lobby’s leaders are not as interested in promoting new sources of energy as they are in getting rid of the old ones. While this movement may have started with good intentions, it’s now been hijacked by those who see it as a vehicle to drive us back to the Stone Age or, at a minimum, to move us closer to government ownership and control of our energy supply.
The effort by those who use green energy to further their real agenda is sometimes called “the Watermelon Effect.” It’s a green rind of “pro-environment” policies hiding a core of wealth-redistribution policies that are as red as Marx’s blood. This charade only prolongs America’s oil addiction and keeps us slaves to nasty foreign governments. (We imported just over a third of our oil in 1981 . . . we import 70 percent now.)
Unfortunately, that seems to be exactly what some people want. After all, the less control we have over our own energy supply, the more control others have over us. So, instead of constructively looking for solutions, you’ll often hear those people launch now-familiar attacks, using idiotic arguments like . . .
“[It is] a $2 billion project that depends on significant taxpayer subsidies while potentially doubling power costs for the region.”
—Congressman Bill Delahunt (D-MA), denouncing Massachusetts’ Cape Wind project, which could reduce carbon emissions by 734,000 tons every year.
Okay, first, let’s acknowledge the obvious: Big Oil made a lot of money in 2008.
Exxon made a $45.2 billion profit, shattering the record for profit by a U.S. company (a record they set themselves just a year earlier). Go, capitalism! Chevron also set a company record with a $23.9 billion profit.
Saying that the oil industry had a good year in 2008 is like saying that Babe Ruth was a decent hitter. It wasn’t a good year, it was a historic year. So why are people so angry?
On the surface, sure, those profits sound big. Okay, they sound massive. Okay, they are massive. But so what? Are we really a country that no longer celebrates legitimate success stories or admires profits won on the battlefield of the free market?
Not surprisingly, the green lobby has been quick to latch on to this red herring. They paint the oil industry as an evil cabal that meets in shadowy, cigar-smoke-filled back rooms, scheming ways to jack up gas prices and hoodwink the average American family.
But when you look deeper into the issue and examine pesky things like numbers, facts, and economic principles, it becomes much less nefarious: From 1986 to 2006, the average price of crude was $25.95 per barrel. In 2007, the average price skyrocketed to $72.30 and, in July 2008, oil hit an all-time high of $147.27 per barrel.
Higher oil prices result in higher oil profits. If that’s sinister, then so is every other principle taught in Economics 101.
Now, maybe you still believe that the oil companies are evil because they drove the price up to line their own pockets. Maybe some Oil Council of Doom, consisting of mustachioed tycoons, sat in a smoky boardroom and spun a wheel that landed on “$150/barrel.” If that’s what you think, I probably can’t help you. But, if you’re rational, you probably already understand what really happened: Prices rose because of a rise in global demand.
China, India, and other developing nations are emerging as huge economies that require massive amounts of oil to operate. Brazil’s oil consumption increased seven percent from 2006 to 2007; China’s consumption increased by 12 percent; and India’s appetite for oil has increased 27 straight years—from 643,000 barrels per day in 1980 to 2.72 million a day in 2007.
As the global demand for oil spiked like never before, prices also spiked like never before. So unless you’re against the world developing, it’s hard to be against the rise in oil prices.
Once prices are high (and, let’s be careful, “high” is a relative term . . . we may look back at $150/barrel as a bargain), oil companies—which have a responsibility to their shareholders—naturally want to sell more of their product. Why would they restrict supply in times when demand is highest? That would be like shutting down your ice-cream shop for the summer.
From 1986 to 2006, the average global output of oil was about 72.4 million barrels per day. The most recent numbers show that global average increased to 84.8 million barrels per day in 2007—an increase of over 17 percent. When profit potential is higher, businesses produce more—that’s the way a free market works.
“Climate change is the greatest threat facing mankind . . . We must act now. Future generations are depending on it.”
—Prince Charles recently used a luxury airliner to transport himself, his wife, and a 14-person entourage on a 16,400-mile “environmental tour” of Chile, Brazil, and Ecuador. The plane was a 134-seat Airbus A319 retrofitted into a private jet seating just 29. In total, 322 tons of CO2 were emitted.
Profit potential is also why you see a company like Apple cranking out product after product right now. They’re not doing it because they love working hundred-hour weeks. They’re doing it because their products are in high demand and they see an opportunity to grab huge profits.
Even after my stirring defense of supply and demand, you still want to focus on that giant profit number, don’t you? Fine, but those profits are meaningless unless you compare them to profit rates of other big companies.
Exxon and Chevron each have a profit margin of roughly nine percent. That’s less than Microsoft, Apple, Google, Johnson & Johnson, Coca-Cola, Nike, and many other beloved American corporations. Crazy, but you never hear outrage directed at those evil no-tears-shampoo-peddling tyrants from Johnson & Johnson or those nefarious techno-hippies at Apple.
Here’s another way to look at it: In 2007, the oil industry made just nine cents in profit for every dollar of revenue. The average for companies in the S&P 500 index was 13 cents, meaning oil companies made less money per dollar of revenue than the average large U.S. public company.
I understand that an evil, greedy conservative defending the profits of the evil, greedy oil companies isn’t all that compelling . . . so let me try a different angle. Not only is Big Oil not trying to screw over average American families, they are actively helping them—and not just because they do the work that allows us all to get to work.
Take Exxon Mobil, for instance. It’s easy to drag their executives in front of Congress for their annual tongue-lashing—but those guys own less than one percent of the company. The vast majority of Exxon Mobil is owned by people like you and me.
Mutual funds, 401(k)s, and pension funds account for about 52 percent of Exxon’s shares. The rest is owned by about two million individual investors—regular Americans looking to better their lives by investing in growing companies. If Exxon is evil, then I guess that means all of the senior citizens who pay for their prescription drugs and utility bills with profits from Exxon-invested pensions are evil, too.
It’s funny how much Big Oil is vilified in the media when you look at where the industry actually ranks in terms of net profit margin.
As of this writing, Evil Big Oil comes in ranked in 56th place with a 9.5-percent margin. That puts them behind such industries as Evil Mutual Funds, Evil Publishers, Evil Long-Distance Carriers, Evil Software, Evil Shipping, Evil Silver, Evil Copper, Evil Gold, Evil Drug Manufacturers, Evil Regional Banks, Evil Railroads, Evil Medical Supplies, Evil General Entertainment, Evil Footwear, Evil Resorts and Casinos, and Evil Education Services.
But oil profits don’t just enrich investors, they enrich our government also. While giant corporations free-fall, only to be saved by billion-dollar taxpayer parachutes, Big Oil is paying the government hundreds of billions in taxes. In other words, Big Oil is giving money directly back to the people (instead of stealing it from them, which other corporations find so trendy these days).
In 2006, the oil industry paid $81 billion in income taxes. If you look at Exxon alone, you find that, from 2003 to 2007, their earnings increased by 89 percent while their income taxes skyrocketed 170 percent. Over the three-year period from 2006 to 2008, Exxon paid a total of $94.2 billion—an amount approximately equal to the annual GDP of Ecuador and Guatemala . . . combined.
But that’s just their income tax. Exxon Mobil’s total taxes in 2008 reached $116.2 billion—more than twice its net profit. That’s about $318 million in taxes per day. If anyone is benefiting from these so-called windfall profits, it’s our government.
Exxon’s taxes over those three years would also be enough to pay for about half of the government’s AIG bailout.
CONGRESSIONAL CIRCUS
Behold the amazing Chest-Puffing Congressman! Sightings are rare, they come out only when oil prices are high or executives receive large bonuses. In the presence of oil chiefs, the Chest-Puffing Congressman spews hellishly hot air as a defense mechanism—only to later return to hibernation for months or years at a time.
“On April Fool’s Day, the biggest joke of all is being
played on American families by Big Oil.”
—Rep. Edward Markey (D-MA)
“Gentlemen, to all of you, I hope I can give you
a bit of a reality check. Working people struggle
with high gas prices and your sacrifice, gentlemen,
appears to be nothing.”
—Sen. Barbara Boxer (D-CA)
“Americans are now concerned whether they should
be paying so much more for energy when our
energy companies are recording record profits.”
—Sen. Ted Stevens (R-AK)
“I think Mr. Hill wants to know how all of you can
justify such exorbitant profits on the backs of the
middle class and hard-working families.”
—Sen. Patrick Leahy (D-VT)
Treasury Secretary Tim Geithner once said that additional taxes on oil companies could “be absorbed” because they are so small compared to their large revenues. Last year, Senator Dick Durbin, an Illinois Democrat, went a step further, saying, “Oil companies need to know that there is a limit on how much profit they can take in this economy.”
Using the tax code as a weapon? Caps on profits? Karl Marx would be proud.
President Obama has backed off his promise to institute a windfall-profits tax, but it’s not like he’s suddenly turned into a Texas oilman. He still intends to rake in an additional $31.5 billion from the oil sector by raising royalty rates and implementing new taxes. The budget he proposed in early 2009 would levy a 13-percent tax on oil and gas from the Gulf of Mexico, raising about $5 billion over the next decade. He would also institute a fee on energy leases in the Gulf that are “nonproducing”—also known as “exploratory.” That fee would raise another $1.2 billion over the coming decade.
“It seems kind of silly to have a solar project [there].”
—Jeff Morgan, chairman of the Sierra Club group in the Coachella Valley, on a proposed solar farm in Blythe, California
While all of that may sound appetizing to those of us who don’t go oil drilling on weekends, two things happen when you raise taxes on oil companies—neither of them good. First, capital moves to more favorable tax environments, meaning that U.S. companies will flock to foreign sources of oil to get cheaper prices. Second, taxing an activity discourages people from doing it. (Of course, the inverse is also true, which is why so many states have occasional “tax holidays” to promote spending.)
The tax on Gulf oil is essentially an oil sin tax that will lead companies to produce less oil from that region. That, in turn, will reduce supply, which will inevitably cause prices to rise, thereby bringing the incredible chest-puffing politicians out of hibernation once again.
Obama has also proposed raising revenue through a carbon-emission cap-and-trade system that would force companies to buy permits allowing them to pollute. This program would pull in an estimated $112 billion by 2012 and would generate $50–300 billion per year by 2020. As a side “benefit,” it would also essentially redistribute the wealth of our most productive companies to the least productive bureaucracy in the world—our government (and eventually to governments of developing countries around the globe).
It doesn’t take a degree in economics to understand that hundreds of billions of new tax dollars have to come from somewhere. In this case, they’ll come from higher prices on all kinds of products and services—something that will be terrible for the economy (not to mention those “working families” we always hear about in the stump speeches). The real reason this program is called “cap and trade” is that it puts a cap on success and trades prosperity for poverty. By penalizing companies for simply operating and producing, cap-and-trade schemes will reduce manufacturing output (pro: fewer emissions; con: fewer jobs), and that, in turn, will reduce America’s GDP (pro: lower carbon output; con: a lower standard of living).
In 1988, President Reagan ended a windfall-profits tax on oil companies instituted by Jimmy Carter that was expected to net the government $390 billion from 1980 to 1990. In its first eight years it actually generated just over 20 percent of that, or $80 billion. Anyone think the current “cap-and-trade” revenue estimates might be just as inflated?
It’s a paradox that those who want to keep Alaska off-limits will never admit to, but the more we’re prevented from tapping our own oil resources, the more the environment is put at risk. When we can’t produce enough oil, we import it. The countries we import it from have to explore and drill to meet our needs. Countries like Venezuela, Russia, Saudi Arabia, and Iran. Those are countries that barely care about people . . . so how much do you really think they worry about hurting green alligators and long-necked geese, some humpty-backed camels or some chimpanzees?
Most people think about green energy as a replacement for oil. While that may very well be, it’s a loooooong way off. Instead of thinking about solar, wind, and hydro replacing oil, start thinking about those alternative sources supplementing oil. If we can gradually increase our reliance on clean sources of energy that are both economical and efficient, then, believe me, the free markets will do the rest. Our reliance on oil will fall on its own, with absolutely no need for government subsidies or taxes that attempt to “influence” the right decision but inevitably usher in the wrong one. Corn ethanol, anyone? (More on that later.)
If you realized that that list of animals is actually from a popular Irish drinking song, then you’re either (a) an alcoholic, (b) a recovering alcoholic, or (c) friendless. Considering that I actually used those lyrics in this book (from memory) I’d say that I’m both (b) and (c).
“Our position is that none of this is needed.”
—Jim Harvey, cofounder of Alliance for Responsible Energy Policy, on solar farms proposed for the California desert.
Yes, I understand that relying on the “free markets” to make the right choice in the future is dangerous. Not because the markets might be wrong—they almost never are over the long term—but because they might not exist.
In the meantime, our green energy prospects depend on our ability to use more of our own oil—and the most obvious place to get it is from the Arctic National Wildlife Refuge (ANWR) in Alaska.
Estimates of the amount of recoverable oil in ANWR range from 2 billion to 16 billion barrels, meaning that one small area could produce anywhere from 500,000 to 1.5 million barrels per day, thereby saving us $135 billion to $327 billion in oil imports.
In addition to creating an estimated 60,000 to 130,000 jobs, ANWR drilling would also allow the government to stuff its own coffers. Companies must bid for the right to explore for energy on federal land, such as ANWR, and the revenue from those “bonus bids” goes straight to the federal government. Think of it as eBay for Uncle Sam.
The government also collects 12.5 percent in royalties when federal land is used for energy production. If ANWR were producing oil, our government could rake in an additional $38 billion, while the Alaskan government would pull in at least $700 million a year in royalties.
It’s illegal to pump your own gas in New Jersey and Oregon; a law hailed by lazy people and petroleum transfer engineers.
“But all to the detriment of the cuddly polar bears!” you scream from your parents’ basement. Not so much. ANWR technically encompasses 19 million acres, but, thanks to a congressional amendment, drilling would disturb only 2,000 of them—about the size of the University of Florida campus. Plus, wildlife has already been shown to be largely unaffected by oil development elsewhere in Alaska. The caribou herd that migrates through the Prudhoe Bay oil fields has grown from 3,000 to 32,000. Brown bear, fox, and bird populations are just as healthy as those in surrounding areas.
In 1996, we had a chance to drill in ANWR, but President Clinton vetoed it. If he hadn’t, we’d be swimming in that oil now instead of still talking about how it’s a decade away. It’s kind of like dieting. Instead of saying, “But it’ll take a year to lose 25 pounds!” and continuing to eat your way through the Waffle House menu, you could actually start on the diet.
The same idea holds true for offshore drilling. President Bush planned to open hundreds of millions of acres off the U.S. coasts to oil and gas drilling, but President Obama has put that idea on hold for further review. The Interior Department estimates 18 billion barrels of oil (even more than ANWR’s estimated capacity) and 76 trillion cubic feet of natural gas would have been tapped under the plan.
What the environmentalists don’t tell you is that a whopping 47 percent of total petroleum leaked into marine environments is actually from natural seepage, meaning that Mother Nature has some seriously overactive pores. Only four percent of total petroleum seepage comes from offshore oil and gas development.
Guess where a big chunk of the remaining oil leakage comes from? Tankers and barges. There’s a reason that when you hear “oil spill” you think of giant tanker disasters like the Exxon Valdez and not offshore rigs. Between 1971 and 2000, tankers and barges were responsible for 61 percent of all oil spilled in U.S. waters.
Hmm, now let me think out loud for a second here. How could we possibly reduce the amount of oil spilling from tankers and barges into U.S. waters? Oh, I know! We could drill for our own and transport it through pipelines, which accounted for a mere two percent of the total oil spillage in U.S. waters during that same timeframe.
“Crude-oil seeps are natural phenomena over which humankind has little direct control, although oil production probably has reduced oil-seepage rates.”
—U.S. Geological Survey, 2003.
In other words, because man safely extracts oil offshore, Mother Nature has less to pollute herself with.
In other words, if we stop relying on drunk tanker captains to get our oil from across the globe, both the environ-mentalists and consumers would win.
I’m trying, but some of the biggest opponents of alternative energy happen to be members of the green movement. Maybe they should get their house in order before they start inviting guests over for dinner.
The latest trend is for environmentalists to whine about the very wind and solar energy they supposedly support. Yes, they still drool over these sources like a 12-year-old boy walking past Victoria’s Secret—but only when they’re developed, installed, and used exactly the way they suggest.
The private sector is jumping at the opportunity to expand alternative energy—just as the greenies seem to be turning away from it. Former oil man T. Boone Pickens has mounted a $58 million campaign to promote his wind-farm idea—something that you’d have to be a hermit to not know about at this point. Similarly, Cape Wind is preparing to build America’s first offshore wind farm in the waters off Cape Cod, Massachusetts, but their plans are being slowed by—wait for it—green-energy supporters.
Cape Wind’s farm would occupy 25 square miles of water in Nantucket Sound—a plan that would make America only the sixth country in the world to harness offshore wind power. Supporters estimate the farm would reduce greenhouse gas emissions at a level equivalent to taking 175,000 cars off the road per year. Cape Wind says its 130 towers would meet 75 percent of the region’s electricity needs and reduce carbon emissions by about 734,000 tons annually.
“Cape Wind . . . would adversely impact well over 1,000 historic sites around Nantucket Sound . . . [including] desecrating ancient American Native burial sites.”
—Glenn Wattley, president and chief executive of the Alliance to Protect Nantucket Sound
So, what’s the problem? Well, it turns out that Senator Ted Kennedy, one of the original crusaders for action on global warming, was opposed to the project. Why? Presumably because it would’ve ruined the view from his Hyannis Port vacation home. Yes, that’s right, NIMBY (“Not in My Backyard”) has, at least for the rich and famous, turned into NIMOV (“Not in My Ocean View”).
In 2006, Kennedy inserted an undebated amendment into a Coast Guard bill that would have killed Cape Wind. Thankfully, the public caught wind of it (thanks, I’ll be here all week, try the veal) and the backlash forced him to do a one-eighty.
But the eyesore argument isn’t the only reason why the green lobby is turning against both onshore and offshore wind farms. They also claim that the turbines harm property values, they’re dangerous, their output is spotty (turns out, you need the wind to be blowing—who knew?), they could harm birds, and they’re expensive.
I don’t know if these green lobbyists have noticed, but you know what else is dangerous and expensive? Foreign oil.
Solar farms are facing similar opposition from so-called environmentalists. A mini gold rush is happening with solar projects in the California desert due to the plentiful sunshine, high altitude, level ground, and, well, the general lack of any other possible way to use a ridiculously hot, sand-covered barren desert for anything productive.
Pacific Gas and Electric is buying enough solar-generated electricity to power 239,000 California homes. That may not sound like much, but this deal would nearly double the nation’s total solar capacity. I say “would” because, once again, a plan to actually turn blueprints into green energy is facing resistance from the very people who should be supporting it.
It turns out that the locations of most proposed solar farms are also home to the Mojave ground squirrel, the desert tortoise, and the burrowing owl. Apparently none of those animals would be able to live with some mirrors scattered along the ground—so environmentalists want the solar project stopped.
California Governor Arnold Schwarzenegger and I may not agree on everything, but he echoed my thoughts on this story perfectly when he said: “If we cannot put solar power plants in the Mojave Desert, I don’t know where the hell we can put it.”
“[Global warming] is a very valid issue . . . I’m wondering if we need to think about other planets and dome cities.”
—John Travolta, who owns a fleet of five private jets, as well as his very own runway. In one year alone he logged more than 30,000 miles—producing an estimated 800 tons of carbon emissions.
“Why would you want to sail in a forest of windmills?”
—Bill Koch, a Cape Cod resident who spent $1.5 million of his own money fighting the Cape Wind project. The ironic part is that Koch only has a beautiful ocean view that could be affected by the turbines because he was formerly the founder of the Oxbow Group. According to Forbes, Oxbow “once made a mint off eco-friendly power plants by using laws that required power companies to buy Koch’s power for above-market rates. He sold [Oxbow] for $660 million in 2000.”
One big problem that environ-mentalists have with solar and wind farms is that they require transmission lines to get the energy from the source all the way back to power plants and homes. For instance, California approved the Sunrise Powerlink to connect San Diego to solar, wind, and geothermal energy being harnessed in the Imperial Valley. The transmission line has very tight environmental standards—it would circumvent a state park, an Indian reservation, and a forest, and builders are not allowed to disturb burrowing owls and rattlesnakes—but, of course, none of that is good enough for groups like the Sierra Club, which is opposing the project and taking its case to the state Supreme Court.
I guess the bottom line is that clean energy might be all right so long as it doesn’t have to be transferred to places where it can actually be used.
What about the elusive hippy drifters squatting in the desert? Are we truly willing to disturb their pristine habitat brimming with empty beer cans, discarded joints, and rusty VW vans?
In March 2008, when going to the gas station was becoming cruel and unusual punishment, Americans drove 11 billion miles less than the previous March. It was the steepest decrease in driving since they began keeping records during World War II. Gas consumption was also down from the previous year, and public transportation ridership was at a 50-year high. There was no government decree mandating those changes; people altered their behavior because of two things we’re now trying very hard to eliminate: market forces and common sense.
When the government actually does try to influence energy behavior, it’s usually with disastrous results. Take corn ethanol, for example. Completely smitten with the stuff (gee, could the $5.5 million the corn lobby gave to politicians from 2005 to 2008 have anything to do with that?), the government subsidized corn for ethanol production to the tune of $56.1 billion from 1995 to 2006. What did we get in return? In short, really expensive corn flakes.
Where’s that flying car I’ve been promised since I was a kid? Are you telling me that we have the capability to clone animals, spray cheese out of a can, and airbrush Susan Sarandon into something resembling a human being, but we can’t make a freaking car hover? Something doesn’t add up here. Who killed the flying car?
Here’s what was supposed to happen: Subsidies would lower the cost of corn, which would in turn be used to create cheap fuel. Everyone would then love their cheap fuel so much that they’d demand more cars be built to utilize it. Carmakers would take advantage of the opportunity and, in a few years, we’d all be driving around in cars powered by a crop grown right here in America.
ETHANOL PR
Maybe what ethanol really needs is a public relations boost. After all, plenty of crappy products have been successful simply because of good marketing or PR. And for that, what better place to turn than General Electric, a company that seems to slowly be turning into an official government agency anyway.
I don’t know this for sure, but I bet that if the government throws a little stimulus money their way, GE would be more than happy to ask their PR wing (aka “MSNBC”) to do a few pro-ethanol segments. Maybe they could even convince NBC and MSNBC to turn their logos green for a week to get everyone thinking about how cool it is to “go green.”
Wait, what’d you say? They already do that?
Here’s what actually happened: Subsidies incentivized farmers to chase the money and use their crops for ethanol production instead of food production. That led to a full one-quarter of America’s corn crop being used for ethanol, which meant there wasn’t enough corn left over for food. That led to increased prices on a slew of things that rely on corn (like beef, which comes from cows that eat, yes, corn feed). It drove the price of other crops higher as well because farmers began to plant as much corn as possible, at the expense of soybeans, wheat, and other grains.
But all of those problems cover only the subsidy side of corn ethanol—the functionality of it is what really makes this experiment a historic debacle.
“This issue of global warming is going to impact every single person. It’s not a political issue, it’s a moral issue . . . Global warming is happening right now, and . . . we are causing it. We are impacting the climate. Humans have become a force of nature themselves, and the impacts are going to be horrific if we don’t do something about it.”
—Laurie David, global-warming activist and producer of An Inconvenient Truth, flew on a private jet to Texas A&M campus in order to give a speech focusing on the importance of changing individual behavior to fight global warming. She also flies privately between her home in Los Angeles and her 25,000-square-foot home in Martha’s Vineyard, a home in which she was issued a “notice of apparent violations” for building a 26-foot-long barbecue station, stone-and-concrete bonfire pit, and outdoor theater on an environmentally sensitive patch of property . . . without the proper permits.
Corn ethanol is 30 percent less efficient than gasoline and far less efficient than its sugar-based ethanol cousin. Translation: It takes more energy to make corn ethanol than other fuels. Looking at it another way, one hectare (2.471 acres) of sugarcane yields 7,500 liters of ethanol, while the same acreage of corn yields about half as much fuel.
But forget about hectares and efficiency, the worst thing about corn-based ethanol is that it’s not even clean. A recent University of Minnesota study found that corn ethanol is actually worse for the environment than regular gas.
So corn ethanol is not only inefficient and expensive, but it also makes the problem we’re trying to solve even worse. Genius! I can see why Washington threw $3 billion at it in 2007, an amount that represented 76 percent of all renewable-energy tax credits.
Let’s play a game. Behind one curtain is $3,000. Behind the other curtain is absolutely nothing. To make it easy, I’ll even tell you in advance which curtain has the cash behind it. You can’t lose! Do you want to play?
If so, you’re in the minority. This game, which is called “Buy a Hybrid and Get a Tax Credit of Up to $3,400,” is being offered by our government to all Americans—yet only two percent of car buyers are signing up to play. Imagine that—after all of the media attention, celebrity harassment, and expensive government incentives—hybrids still make up only about two percent of the market.
Still, the dedication to the hybrid doctrine is at a near-religious level. For example, take a look at the govern-ment’s “cash for clunkers” program, which is meant to encourage you to turn in your old “clunker” of a car and replace it with a more fuel-efficient one, thereby allegedly saving the environment. Sounds great, except for one small problem: as much as 28 percent of a vehicle’s carbon dioxide emissions come from manufacturing it and transporting it to a dealer. Even environmentalists admit that, unless you’re trading in a tank for a solar scooter, the best thing you can do for the environment is run your current car into the ground.
I don’t mean the current cafeteria-catholic “church only on Christmas” kind of religion, I mean the old school, 1400s, burn-everyone-at-the-stake-who-doesn’t-agree-with-you kind.
Despite the evidence that they’re not particularly helpful (either for the environment, or for sales), cash incentives for hybrids continue to flow from the government to consumers who, by and large, don’t need the money.
Consider this: The purchase of a new hybrid is a better indicator of household wealth than a doctorate degree. The average hybrid-buying household earns $113,400 a year—more than twice the median household income in America.
Isn’t that exactly the sort of thing liberals are supposed to be infuriated by? We’re giving hundreds of millions of dollars in tax credits to households that earn more than six times the poverty line! Yet, instead of outrage, the silence is deafening. Apparently the environment has leapfrogged the poor on the liberal food chain of victimhood.
As Barack Obama was defining his new job as car company CEO, he said, “If the Japanese can design an affordable, well-designed hybrid, then, doggone it, the American people should be able to do the same . . . So my job is to ask the auto industry: Why is it you guys can’t do this?”
I remember everyone making fun of Sarah Palin for saying things like “doggone it” during the campaign. I must have missed the same treatment for President Obama. I should watch the news more.
But, do the Japanese really even do what the president suggested? Is anyone really doing it? And is going green really the best way to bring in the green, as so many people seem to think?
Conservative columnist George Will was attacked by left-leaning blogs for saying the Prius is “affordable because Toyota sells it at a loss, and it can afford to sell it at a loss because it is selling twice as many gasguzzling pickup trucks of the sort our president detests.” As evidence against Will, these blogs point to the fact that Toyota has said the Prius is finally profitable . . . which I believe may be the first time liberal bloggers have ever actually believed a company about anything.
The Toyota Prius is far and away the most successful hybrid of all time. Yet, even after a decade and over a million cars sold, the Prius is, according to the Washington Post, “still widely believed by analysts to be losing money on each one sold.”
But even if the Prius is slightly profitable for Toyota, it’s the exception, not the rule. Consider what other automakers have said about the world of hybrids. Nissan admitted: “Hybrids today are not a very viable economic proposition.” Ford is finally hoping to see the light at the end of the tunnel after years of having to “subsidize the price of the hybrid technology.” Despite having more hybrid models than any other manufacturer, GM reportedly still has “years of bleeding red ink ahead.” And the outlook on GM’s next-generation all-electric Chevy Volt? “We won’t make a dime on this car for years.”
In fact, of all carmakers, Honda is probably the most optimistic: “If we were making money on the Civic hybrid,” a Honda spokesman said, “we weren’t making a lot.”
But even with nearly nonexistent profits, car companies still have a tough time moving hybrids that aren’t named “Prius.” For example, the Toyota Camry and Honda Civic were the second and third best-selling hybrids in 2008, yet their combined sales were less than half those of the Prius. The Prius sold at more than eight times the rate of the Toyota Highlander and Ford Escape/Mercury Mariner SUV hybrids and it outsold the Nissan Altima hybrid 18 to 1.
So, how has the Prius bucked the hybrid sales trend? By becoming a rolling status symbol. The number-one reason people give for buying a Toyota Prius isn’t higher fuel economy, lower emissions, or love of new technology, it’s that it “makes a statement about me.”
Of all the reasons why people buy a Prius, “lower emissions” finished second to last, actually coming in behind “distinctive styling.” Ouch.
The point is that the Prius was like catching lightning in a bottle, you don’t just come up with another one easily, dog-gone it. Yet that’s exactly what the president’s strategy is. He is essentially telling American automakers to solve their problems by simply inventing the next “ultra-trendy-low-profit-highly-subsidized-status-symbol-for-the-rich.” Sounds like a reliable business strategy.
In other words, solve your problems by finding a way to stroke people’s greego. (That’s a new term I’m testing: Green + Ego = Greego.) It’s a tough task for automakers, especially considering that it’s mostly rich (probably white!) people buying hybrids anyway. Ahhhh, the greego of a gringo.
THE WORST CAR REVIEW IN HISTORY?
Honda makes a lot of good cars but, according to Jeremy Clarkson of The Times of London, the Honda Insight hybrid is not one of them.
“It’s terrible. Biblically terrible. Possibly the worst new car money can buy. It’s the first car I’ve ever considered crashing into a tree, on purpose, so I didn’t have to drive it anymore. . . . [it] makes a noise worse than someone else’s crying baby on an airliner. It’s worse than the sound of your parachute failing to open. Really, to get an idea of how awful it is, you’d have to sit a dog on a ham slicer.
“So you’re sitting there with the engine screaming its head off, and your ears bleeding, and you’re doing only 23 mph because that’s about the top speed . . . [it] feels as if it’s been made from steel so thin, you could read through it. And the seats . . . are designed specifically, it seems, to ruin your skeleton . . . the idiotic dashboard, which shows leaves growing on a tree when you ease off the throttle . . . built out of rice paper . . . poor ride, the woeful performance, the awful noise and the spine-bending seats.
“Acceleration 0–62 mph: 12.5 seconds. One star (out of five) . . . Good only for parting the smug from their money.”
Yes, we want fuel efficiency. We just don’t want it at the expense of almost anything else. We like to fancy ourselves driving fuel-efficient cars, but, like dropping those last twenty pounds, “saying” and “doing” are two entirely different things.
Americans can be so rude sometimes—it’s like they don’t even consider Al Gore’s feelings when making what is generally their second-biggest purchase in life.
Despite all of the green hype, the best-selling vehicles of 2008 were the Ford F-150 and the Chevrolet Silverado. Neither one is powered with celery, eco-juice, or environmental magic powder. They’re big trucks with big engines that haul big things.
Half of the top ten cars sold in 2008, including the top two spots on the list, were American vehicles. I’m sorry, but haven’t we been told that the Big Three were making vehicles that no one wanted to buy?
The Honda Civic attracts a similar customer and also has a hybrid that looks exactly the same as the gas-powered version. Only 9 percent of buyers chose the hybrid.
One car you won’t find on the 2008 automotive best-seller list is the vaunted Toyota Prius. Even with gas at record levels and the media and politicians never more pretentious and persistent, the Prius didn’t even make the top ten. The Ford Focus, a serviceable car for sure—but far from a worldwide celebrity and media phenomenon—finished tenth, and still outsold the Prius by 16 percent.
Sure, there were plenty of car buyers who wanted sensibly priced sedans that get decent gas mileage and cost around $20,000. And an awful lot of those buyers even walked into a Toyota dealership to buy a car. But that’s when the rubber hit the road. Faced with the choice between the hybrid Prius and the gas-powered Toyota Camry, 71 percent of those buyers drove off the lot in the Camry.
“But Glenn! Maybe their vision stopped them from buying a Prius because of its hideous styling!” Ooh . . . sorry, try again. The Camry also has a hybrid version that looks exactly the same as its evil earth-killing counterpart, yet 89 of every 100 people who bought a Camry chose the gas-powered planet murderer. They must all have been bribed by Big Oil.
“I’m a strong supporter of renewable energy and clean technology—but it is critical that these projects are built on suitable lands.”
—Sen. Dianne Feinstein (D-CA) on her campaign to block hundreds of thousands of acres of California desert from being used for solar farms by designating the land a “national monument.”
The worst news of all for hybrid zombies is that even the Prius may finally be losing its luster. Sales actually fell by 12 percent from 2007 to 2008 and, through the first five months of 2009, they’re down 45 percent compared to the same period in the previous year.
Those drops are, of course, partially due to the well-publicized rough patch for automakers, but, as the crisis worsened, hybrid sales actually plummeted faster than their gas-powered competition.
Meanwhile, as hybrid sales were crashing, Ford announced the addition of a third shift to its Dearborn, Michigan, plant. Why? To make more F-150s. That extra shift, by the way, will employ 1,000 people, and annoy 1,000,000 environmentalists.
Why haven’t Americans rushed to dealer showrooms to fully embrace hybrids? Well, because, unlike many of our politicians, they find that the potential glory of their peers lauding them as “green” doesn’t shut down the math part of their brains.
In 2007, the Department of Health and Human Services sent out a newsletter that instructed its 67,000 employees to make fuel efficiency their top priority when buying new cars. It specifically mentioned the Camry hybrid and the Nissan Altima hybrid as two options. Unfortunately for our government, people don’t just blindly listen to them. Yes, the Altima hybrid is more fuel efficient than the gas version, but it also costs a lot more.
This A.D.D. moment is really for you. I know you need time to sit back and consider how incredibly stupid it is for our own government to be encouraging its employees to buy foreign cars and then later beg for billions of taxpayer dollars to bail out American carmakers. Are you ready to continue reading yet? I’ll wait . . .
With gas prices just under two dollars a gallon, you would have to drive the Altima hybrid over 350,000 miles just to make your money back. Even with gas at its peak of $4.11 a gallon, you’d still have to drive the hybrid 159,000 miles to break even.
But it gets even worse. As the Associated Press noted, “Driving 15,000 miles a year with a commute that keeps you on the freeway, you’d have to drive the car until 2057 to save enough gas to make the hybrid cost-effective, even at . . . record gas prices.” I hate to say it, but even that analysis is optimistic because they don’t include the extra money you’d spend on financing the car, or the interest you’d make on your money by investing the cash you would’ve saved by sticking with that evil gasoline.
In other words, our government is stupid. Surprise, surprise.
I understand the argument: I’d like a fountain of cheddar cheese in my office to be the answer to my double-chin epidemic, but that doesn’t mean it would be. Likewise, the fact that so many people want hybrids to be a simple answer to lowering carbon-dioxide emissions doesn’t mean they are. And if you’re going to tell me what I can and cannot drive, you’d better be solving a lot of big problems. Instead, they’re creating new ones.
The National Highway Traffic Safety Administration ran the numbers on what an increased focus on fuel efficiency would mean for the climate. In a 939-page report (which, by the way, generally supported such a move, claiming that it “addressed climate change”) they found that, if successful, new regulations would shave one part per million from the carbon dioxide in the atmosphere by the year 2100. To give that some perspective, the doomsday scenario from the U.N. Intergovernmental Panel on Climate Change (IPCC) that is constantly recited by the media is 970 parts per million.
But that’s just scientific jargon to most people. Global warming is about temperature, right? Well, the new regulations would result in an estimated total decrease of 0.004 degrees Celsius (0.0072 degrees Fahrenheit) by 2100. In other words, it would save us 1/1,600th of the doomsday-level global warming we’re constantly told to be so petrified of. In fact, the potential decrease is so insignificant that it’s equal to only 1/45th of the margin of error in the past century’s temperature change.
“We must make concrete changes in our lifestyles to help solve this energy crisis and now is the time to do it . . . [turn your thermostats up to] 78 degrees when you’re home and 85 degrees when you’re out . . . and try to line-dry [your clothes] as much as possible.”
—Barbra Streisand’s seaside estate includes five homes and a 12,000-square-foot air-conditioned barn, as well as a lawn sprinkling system that uses $22,000 a year in water. Her most recent tour rider included the following demands:
“Please arrange parking for the following vehicles . . . • Thirteen (13) 53-foot semi-tractor trailers (plus one for merchandising) • Four (4) rental vans • Fourteen (14) crew and band buses • One (1) limousine (artist)”
When asked about her apparent hypocrisy, Streisand’s spokesman said, “She never meant that [those concrete changes in our lifestyles] necessarily applied to her.”
1 There are so many A.D.D. thoughts in my head right now, I don’t even know where to start. First, remember that these completely insignificant decreases aren’t the result of one town making changes in fuel efficiency, it’s our entire country, aka “the largest economy in the world.”
2 All of those wonderful benefits are depending on the science of global warming being correctly “settled.” We went into much more detail on that science in my #1 New York Times bestseller An Inconvenient Book. The consensus is that you should read it. Or at least buy it.
3 Ever notice how the only time that conservatives ever blindly trust The New York Times is when their names appear at the top of their bestseller list?
Want a way to make this even easier to relate to? Try this: Put your thumb and finger about one centimeter apart. For those of you who understand the superiority of the good old English system, that’s about 40 percent of an inch. Now, cut that distance in half. Now, cut it in half again. Now, again. Again. One more time. The remaining space between your thumb and finger is about how much the proposed efficiency standards would decrease the allegedly forthcoming sea-level rise. The grand total is 0.04 centimeters by 2100, which is equivalent to 1/15,240th of the sea-level rise Al Gore warned about in An Inconvenient Truth.
Focusing on increasing fuel efficiency might be worthwhile to keep America from having to bow before slimy dictators, but government mandates aren’t the way to accomplish that. And if your goal is combating global warming, you’re completely wasting your time.
A study for the journal Energy Policy by experts at Monash University in Australia laid out what changes would really be necessary if the politicians of the green revolution get their way. “Our calculations show that not even the best combination of fuel efficiency, hybrid and electric cars, alternative fuels and car pooling could provide the reductions needed to meet the 2050 targets for avoiding dangerous climatic change.” These changes would require a “near-total shift from the private car to public transport.”
Their bottom line on the automobile is of particular significance as our government claims to be able to save the planet and the auto industry simultaneously: “The car,” they said, “is doomed.”
With predictions like that, it’s hard to figure out whether to laugh or asphyxiate yourself with a fossil-fuel-created plastic bag and a little exhaled CO2.
If there is an upside, it’s very difficult to find. But that’s not going to stop our government from trying anyway. After all, they have political points to win, and they’re not going to allow a few pesky facts to get in the way of collecting them.
So, in addition to putting pressure on the consumer side with massive incentives and tax credits, they pressure the automaker side as well. No, they don’t tell the companies what cars they can make; they’d never do something like that. But they do have a tool that’s not nearly as obvious and just as effective: CAFE standards.
CAFE stands for “Corporate Average Fuel Economy” and the standards were implemented in reaction to the Arab oil embargo of 1973–74. Without boring you with the details, CAFE forces each car company to hit a minimum average fuel economy across their entire fleet, with differing standards for cars and light trucks. Politicians love the standards and, depending on the poll, between 78 and 92 percent of Americans are in favor of CAFE standards being raised because, really, who doesn’t support higher gas mileage?
We should know by now that instituting new standards, regulations, or legislation in reaction to anything is usually a pretty bad idea.
By the way, that’s the same “rising sun” that has nothing to do with global warming.
As Christmas 2007 approached, President George W. Bush saw an opportunity to appear bipartisan, so he signed the first major hike of CAFE standards since 1975 into law. (I’m sure the polling data didn’t have anything to do with it.) As a result of the new legislation, automakers would be forced to raise their overall fuel efficiency by about 40 percent by 2020 to a fleet-wide average of 35 miles per gallon. Environmentalists cheered, politicians posed, and logic wept in the corner.
“The idea that we’re going to sacrifice critical pieces of our environment to protect other pieces of our environment seems a little ironic...That’s an irony I cannot accept. We have to find a way to do both.”
—Elizabeth Goldstein, president of the California Parks Foundation, on her apparent “no compromise” policy toward environmentalism.
As you may have noticed, one thing that the auto industry did not need was an expensive new mandate forcing them to create more unprofitable cars that buyers don’t want. The changes were so disliked by automakers that they were even fought by Toyota, the enviro-angels from the land of the rising sun.
At the time the new CAFE standards were announced, the EPA had rated 1,153 different vehicle models for gas mileage. Guess how many hit the newly proposed efficiency standards in both the city and highway categories. Half? Maybe 100? How about 20? Nope.
Two.
The Toyota Prius and the Honda Civic hybrid. That’s it.
A few other models hit 35 mpg on the highway or in the city—but not both, and all of those were compacts or subcompacts. Exactly zero SUVs qualified, including the hybrid models. In other words, these new standards would cost automakers around the world a lot of money to meet.
But new leadership and new circumstances bring new ideas. After all, elections have consequences! So, under President Obama, and with auto companies in a slow-motion, very public collapse, these new onerous restrictions would surely be loosened, delayed, or canceled . . . right?
Of course not. As a matter of policy, the Obama administration is seemingly dismantling everything the Bush administration did well and doubling down on everything they did terribly. Within a few months of taking office, not only did Obama show unwavering support for the new CAFE standards, he also presented a plan to force the auto companies to meet even tougher standards four years earlier.
The new CAFE standards increase will add about $1,300 to the price of every new car, according to that extreme right-wing organization . . . the Obama administration. You won’t be surprised to learn that some outside observers find that estimate to be optimistic. For example, Bob Lutz, former vice chairman of General Motors, estimated the additional cost of the less restrictive Bush standards at $6,000 per vehicle.
The higher CAFE standards have other consequences as well, like eliminating thousands of auto industry jobs that the government claims to care so much about. The Bush plan would have cost over 11,000 jobs by 2015, while the plan most similar to Obama’s ups that number to almost 49,000 lost jobs.
I guess Obama isn’t doubling down on Bush’s bad ideas; he’s more like quadrupling down.
Hmm, you mean like safety?
Killing auto companies is one thing. Killing people is another. When car companies get hit with higher mileage standards they have to try their best to make cars that people still want to buy, while also complying with the government. They typically don’t do that by inventing magical new super-fuels, especially when the timeline is tight and the standards are so difficult to reach. They do it by making their cars lighter because, to state the obvious, lighter cars get better gas mileage.
Unfortunately, when lighter cars get into accidents, more people die. The National Academy of Sciences estimated that CAFE standards kill about 2,000 people every year, along with between 13,000 and 26,000 additional incapacitating injuries and 97,000 to 195,000 additional overall injuries.
An analysis done by USA Today found that CAFE killed an additional 46,000 people (and that was only through 1999.) That is approximately the combined death toll of 9/11 and Hurricane Katrina . . . times ten.
Between 97,000 and 195,000? Could they have been a tad more specific? Why not say “We estimate CAFE caused between . . . like . . . 1,000 . . . and 3,000,000,000,000 additional injuries. Somewhere in there.”?
Another study, by economists Robert Crandall of the Brookings Institution and John Graham of the Harvard School of Public Health, also found that CAFE was likely responsible for tens of thousands of deaths. They reported: “The negative relationship between weight and occupant fatality risk is one of the most secure findings in the safety literature.”
Graham also said, “To the best of my knowledge, these findings have never been disputed in the peer-reviewed scientific literature.” I’ll have to check my Al Gore playbook, but does that mean we should end this section now because the debate is over?
Let’s think this out for a second: When you add $1,300 in pointless regulation to the cost of a car, what do you think the consumer can afford less of? Things like quality and engineering.
The supposed evidence behind this claim is a clumsy reference to a 2007 study from the Insurance Institute for Highway Safety that found the Mini Cooper is safer than the Ford Excursion. While the Mini Cooper does perform slightly better than the average automobile, it’s the only small, two-door car that did. The study showed that that category has a fatality rate about two and a half times as high as large/very large SUVs. Additionally, it showed that you have about three times the chance of dying in a light car than you do in a heavy one. And this is the study they want you to look at?
Could we continue talking about tragedy and death on the roadways like we’re a 1960s classroom driving-safety video? Sure. But let’s leave our road trip through the infuriating intersection of environmentalists, government, and automobiles on a positive note.
Remember those incredibly ugly station wagons with wood paneling on their sides? Most people believed they went away because they were incredibly ugly and had wood paneling on the sides. But, actually, CAFE standards killed them off. (Okay, CAFE and the fact that they were unbelievably ugly with wood paneling on the sides.) The station wagons weren’t fuel-efficient enough to hit the new standards and car companies had little choice but to make them extinct (which probably would have happened anyway because they had, well, incredibly ugly wood paneling on the sides).
“Remote solar arrays destroy all native resources on site, and have indirect and irreversible impacts on surrounding wildernesses.”
—Terry Frewin, chairman of the Sierra Club’s California/Nevada desert committee.
But people still had families. They still had to go to the store and pick up furniture or groceries. They still needed a way to carry around half of the Little League team and all of its equipment. So automakers shifted their focus and worked toward creating a vehicle to meet this demand in the “light truck” category with a less-restrictive efficiency standard. What was their most successful solution?
The “sport-utility vehicle.”
Anyone who says that environmentalists have never brought us anything good isn’t being fair, because we can all thank the green movement for the creation of the SUV. I’ll make sure to think of that the next time my giant Escalade is crushing a Smart Car like a monster truck.
