Crisis, What Crisis?

Let's take a look at the growing energy crisis and how the BushCo Gang is handling it (here's a clue--there's no cardigan sweater in sight). Here's a summary of the high points from Tuesday's speech by the President via the SFChronic(le):

In his speech, Bush gave regulators the ability to order a temporary easing of environmental restrictions on refineries and stopped scheduled summertime purchases for the federal Strategic Petroleum Reserve, which already holds 687.5 million barrels of oil.
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In the longer term, Bush proposed ending $2 billion of tax breaks for oil companies over 10 years, speeding approval for refineries to be built or expanded, cutting the number of so-called boutique fuel blends across the country, broadening the federal tax break for buyers of hybrid or alternative-fuel vehicles, expanding production of ethanol and biodiesel and fostering hydrogen fuel, which he said eventually could free the country from its dependence on oil.

The president also renewed his long-stalled proposal to open a slice of the Arctic National Wildlife Refuge to oil drilling.

All those proposals would require congressional approval.

Some of the tax breaks Bush wants to end were part of energy legislation he signed last year. One was a $3,400 tax credit for purchasers of some hybrid and clean-fuel vehicles that Bush now wants to expand to all vehicles in those categories.

So, will this have any effect?

[A]s a practical matter, experts said the short-term steps Bush took Tuesday will have little effect on the price at the pump.

The Strategic Petroleum Reserve is nearly full, holding almost as much as it did before hurricanes Katrina and Rita forced the federal government to lend oil to refineries.

Deferring purchases for the reserve won't free much oil for the market and won't substantially lower the price, said Ted Harper, energy analyst at Frost National Bank in Houston.

"For the most part, that's just more posturing," he said. "The big concern in Washington is to look like, one, you care, and two, you're doing something constructive. And unfortunately, that tends to result in really bad policy."

The waiver of some environmental rules on gasoline could have more of an impact, although it's hard to gauge how much.

Many states that use special gasoline blends to control air pollution are switching formulas this year, removing the chemical MTBE from their fuel and replacing it with ethanol. That change has helped drive up gas prices as refiners scramble to lock up ethanol supplies. Even states that replaced MTBE years ago, including California, have been affected.

Here's some more on the MTBE angle from CNN (HT to Environmental Economics):

The shortages are not because refiners are not making enough gasoline, or because of a recent rupture on the key Plantation Pipeline that carries supplies from the Gulf Coast to the East Coast, industry officials said.

Rather, the oil industry is rapidly eliminating a gasoline additive called MTBE, banned in several states for polluting ground water, and replacing it with ethanol, a renewable fuel that can't be shipped by pipeline because it absorbs water.

"There's not a shortage of supply," said John Eichberger, a spokesman for the group. "It's a transitional issue."

Because ethanol is a solvent, it will strip corrosion and impurities that build up inside gasoline storage tanks, allowing them to mingle with gasoline supplies.

That means terminal operators must drain giant tanks that hold gasoline stocks and scrub out the impurities before they can be refilled with ethanol-enriched gasoline, he said.

Andrew Leonard over at the How The World Works blog (within the confines of Salon's subscription land, which can be accessed by viewing an ad) sees a balance to the up and down sides of this crisis:

The great irony is that a very good case can be made for the argument that high gas and oil prices are the best possible thing that could be happening to the United States, and the world. High gas and oil prices encourage investment in renewable energy technologies and discourage consumer spending on gas guzzlers. Gas gouging at the pump is an ideal kick in the ass for motivating Americans to prepare for a world of increasingly scarce fossil fuels and increasingly devastating climate change.

Of course there are some downsides. High gas prices are a regressive tax that punishes working people far more than the rich. High oil prices also make turning to environmentally destructive energy sources such as coal and Canada's oil sands much more attractive. It is also annoying almost beyond comprehension that a company such as ExxonMobil, which vigorously obfuscates the science of climate change, ridicules the potential of renewable energy, and pooh-poohs the threat of peak oil, is raking in record profits on the back of consumer pain.

It would have been far better to have achieved the gas prices we currently have by levying a hefty tax on every gallon of gasoline sold in the U.S. and then using that money to fund research into renewable energy technologies, instead of the curren absurdity in which the working class suffers and Big Oil wallows in riches. But that's not the world we live in.

One can only hope that voters listening to Bush's energy pandering now see it for what it really is: hypocritical desperation. But nothing is more frustrating than hearing Bush conjure up his latest bogus boogeyman -- the vexing conundrum of "boutique fuels." In his speech Tuesday to the Renewable Fuels Association (which, despite its green-sounding name, is basically just a trade group for corn-based ethanol agribusinesses) Bush said, "We also need to confront the larger problem of too many localized fuel blends, which are called 'boutique fuels' ... The number of boutique fuels has expanded rapidly over the years, and America now has an uncoordinated and overly complex set of fuel rules. And when you have an uncoordinated, overly complex set of fuel rules, it tends to cause the price to go up."

And finally, on the heels of this rather inane proposal by Congress to offer $100 gas rebate checks to the American public comes a very serious call to action by the editors of the illustrious Oil Drum blog:

The editors of The Oil Drum are ideologically diverse. Over the last year, we have created a forum at www.theoildrum.com to encourage an open, rational, and fact-based discussion of energy issues. While individual editors frequently express an opinion on a subject, we have never felt it necessary to take a unified position on any specific issue. That is, until today.

We strongly feel that the leaders of both political parties are not only headed in the wrong direction with respect to gas prices, but we also worry that they fundamentally misunderstand the factors behind the current situation at gasoline stations around the US. Public statements by political figures over the past several days would seem to suggest that oil companies and their record profits are the sole factor determining the price of gasoline. Not only is this untrue, but it is dangerous to give the American people the impression that only oil companies are to blame. The American people need to understand that the phenomenon of high gas prices cannot be attributed to a single source. They also need to understand that no one political party will be able to fix our current woes.

The factors the OD editors site include declining output due to peak oil (a central focus of the Oil Drum), increasing demand from China and India, supply and demand as fluctuated by the crude oil futures market, and volatile geopolitical situations in Nigeria and Iran. They offer the following recommendations as starting points:

1. It is nonsensical for political leaders of both parties to eliminate the gas tax temporarily or permanently as this will only worsen our dependence on oil by disincentivizing the innovation of oil alternatives and oil conservation efforts.
   
   
2. Both mainstream American political parties are doing their country a disservice by accusing convenient scapegoats of price gouging or price fixing instead of educating the public about how the price of gas is actually set.
   
   
3. Right now, governments should be focused on helping us cure our "addiction to oil." The answer does not lie in lowering gas prices, which will only encourage people to drive more and further waste our valuable resources. As the Department of Energy funded Hirsch Report on Peak Oil laid out, the consequences of not taking steps to transition away from oil could be dramatic to our economic system. Appropriate solutions include large-scale research, development, and implementation programs to improve the scalability of alternative sources of energy, other projects geared towards improving mass transit and carpooling programs across the country, providing incentives to buy smaller and more fuel efficient vehicles, and promoting a campaign to increase awareness about conservation.