Our Gas-Guzzling Days Over?

You could chalk it up to heavy job loss during the Great Recession or simply higher prices for gasoline, but America’s gas-guzzling days are now in the rear-view mirror, experts say.

Looking down the road to 2030, Americans will burn at least 20 percent less gasoline than today, experts say, even as millions more cars hit the highways.

After seven decades of growth, U.S. gasoline demand is at the start of a long-term decline, the Associated Press reports. America is No. 1 now in gasoline consumption followed by China.

Our thirst for gasoline is shrinking as cars and trucks become more fuel-efficient, the U.S. government mandates the use of more ethanol, and consumers drive less.

“A combination of demographic change and policy change means the heady days of gasoline growing in the U.S. are over,” says Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and author of a Pulitzer Prize-winning history of the oil industry.

This isn't the first time in U.S. history that gasoline demand has fallen, at least temporarily. Drivers typically cut back during recessions, then hit the road again when the economy improves.

The Great Recession – December 2007 to June 2009 – was the main reason demand fell sharply in 2008. Today, with gasoline prices averaging more than $3.15 per gallon for regular, many drivers are rethinking their habits and trips to save money.

History and habits aside, the future of U.S. gas consumption looks vastly different, with government and industry officials insisting gasoline demand has peaked for good.

It has declined four years in a row and will not reach the 2006 level again even when the economy fully recovers (which some experts, including U.S. Federal Reserve Chairman Ben Bernanke, say may be years away). The decrease was on the horizon long before the recession.

The 2001 terrorist attacks, the war in Iraq, Hurricane Katrina, and pump prices rising to a nationwide average of $3 a gallon for the first time in a generation reignited public debates about the political and economic effects of oil imports and climate changes.

Also, the popularity of gas-guzzling sport utility vehicles began to wane, and the government started requiring refiners to blend corn-based ethanol into every gallon of gasoline.

Why We’re Pumped

We, at WMB, see this dramatic decrease in gasoline demand by U.S. consumers as a positive sign that Americans whatever the reason – conserving personal finances, helping the environment, increasing telecommuting options – are finding usage alternatives.

While America's diminishing demand will temper global use, it will be more than offset by rapidly growing demand in China, India, the Middle East and Africa, experts say.

As a result, declining U.S. gasoline demand will not bring lower pump prices for consumers, according to the AP.

Still, we have known since the gasoline shortages and station lines of the early 1970s that America’s dependence and growing appetite for foreign oil would ultimately lead to a dead end.

By continuing to cut our gas demand, we can move forward – financially and environmentally – even if we’re no longer king of the road.

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Sunny Outlook For Solar Power

The best things in life are free and that’s certainly true when it comes to solar energy and the potential benefits it offers to the world, in particular the United States, one of the largest energy consumers on the planet.

President Obama’s recent announcement that the government will award $2 billion for new solar plants comes as much-needed welcome news amid all the political uproar about out-of-control government spending. If this particular spending of taxpayer money works as planned, it will create thousands of new jobs and increase the use of renewable energy sources.

Two companies will receive money from the president's $862 billion economic stimulus. Abengoa Solar will build one of the world's largest solar plants in Arizona and create 1,600 construction jobs; Abound Solar is building plants in Colorado and Indiana.

The Obama administration says those projects will create more than 2,000 construction jobs and 1,500 permanent jobs, according to the Associated Press.

Our politicians have jawed about ending our dependence on foreign oil since 1973-74, when the OPEC (Organization of Petroleum Exporting Countries) embargo jacked prices and created a shortage that led, among other things, to gasoline rationing at the pumps. Some folks may remember the odd/even license plate system for vehicle refueling?

While technology in all areas, including solar, has continued to evolve since the 1970s, our attitudes remain locked in the thinking of the previous century when it comes to the use of fossil fuels. That’s dangerous for America because many of our enemies sit on the largest oil supplies.

The growing interest in electric hybrid cars and windmill farms are good transitional steps that can be complemented by our country’s investment in widespread development of solar power. Individually, these things are a drop in the bucket but combined they could really reduce our use of oil (and minimize the need for more offshore drilling rigs?).

Abound Solar, a manufacturer of low-cost, cadmium telluride, thin-film photovoltaic solar modules, said in a news release that it would use the U.S. Department of Energy’s conditional commitment to the company for a $400 million, seven-year loan guarantee to expand its solar module manufacturing capabilities.

Colorado-based Abound Solar will use the DOE funds to increase production of its thin-film photovoltaic modules at an existing manufacturing plant and to establish a second manufacturing plant that will create more than 1,200 high-tech jobs in Colorado and Indiana, while “driving down the cost of solar power for its United States and international customers,” company officials say.

Abound Solar, which has raised about $200 million in venture capital and private equity since its founding in 2007, built its first production line in Longmont, Colo., and began commercial operations. Abound anticipates using $100 million of the U.S. loan proceeds to increase the capacity of its existing Longmont facility to 200 megawatts per year by the end of 2011.

The company plans to invest the balance of the guaranteed loan to support construction of a larger manufacturing facility in Tipton, Ind. When both plants are complete, Abound Solar will be able to produce more than 840 megawatts of solar modules annually.

“The DOE loan guarantee program is essential to helping companies like Abound Solar scale-up innovations in photovoltaic manufacturing that are critical to reducing the cost of alternative energy,” says Tom Tiller, Abound Solar president and CEO. “When Abound opened its first manufacturing plant in 2009, we committed to providing high-performing, lower-cost modules to our customers; DOE is helping us keep that promise. The proceeds of this loan will build on the momentum we have already established and confidently expand our operations,’’ Tiller says.

The DOE has offered a conditional commitment for a $1.45 billion loan guarantee to Abengoa Solar, headquartered in Denver. The loan will support the construction and start-up of Solana, a 250-net megawatt concentrating solar power plant in Arizona, a facility the company claims to be the largest of its type in the world.

Santiago Seage, CEO of Abengoa Solar, says “this conditional guarantee could allow us to start construction of Solana this year.”

Vice President Kate Maracas says “the building of Solana will also create between 1,600-1,700 new construction jobs, and operation of the plant will add another 85 permanent jobs. These construction and operating jobs will create a few thousand additional indirect jobs. Taken together, 98% of the jobs created by Solana will be American jobs – primarily from Arizona, and a smaller portion from neighboring states.”

There’s no doubt solar energy projects are, pardon the pun, basking in the sun these days. Take for example SolarWorld’s pitch by Larry Hagman, who played Texas oil tycoon J.R. Ewing in the hit 1970s shows Dallas and also starred in I Dream of Jeannie in the 1960s.

Hagman is calling for people to embrace solar technology as part of a new "Shine, Baby, Shine" ad campaign for the Oregon-based solar panel manufacturer which employs 2,700.

"In the past, it was always about the oil. The oil was flowing and so was money. I quit years ago but I'm still in the energy business. There's always a better alternative. Shine, baby, shine!" Hagman, 78, says in a commercial posted on the SolarWorld website, before cackling happily.

The ad shows him looking at a portrait of himself as Ewing, exiting his hillside estate in Ojai, Calif., where he lives with wife Maj, and looking up at a red roof containing a solar panel.

Hagman is a longtime advocate of renewable energy and owns one of the largest U.S. residential solar panel systems, which cost him $750,000 when he bought it in 2003. He says they reduced his annual power bill from $37,000 to $13 (no typo).

Commercials aside, solar energy offers U.S. consumers and businesses a reliable, cost-effective alternative to fossil fuels. Saving the planet and sparing your wallet: what a powerful combination!

As for me, I practice what I preach at writenowworks.com.

Seeds For New U.S. Civil War?

The Obama administration’s decision to file a lawsuit blocking Arizona’s tough new immigration law may be the first shot in a new civil war, not with gun-toting armies but with economic weapons.

The inability (or unwillingness?) of the U.S. government to sufficiently protect Arizona in its battle with illegal immigrants and effectively help Gulf Coast states fight the BP oil disaster serves as a run-up to a new confrontation between the states and the feds.

Arizona, via enforcement of its new immigration law, is trying to stop illegals from pouring across its border with Mexico. Ultimately, illegals find work (thanks to unethical employers) and raise their kids here in America, at U.S. taxpayer expense, as WMB previously blogged.

In the Gulf Coast states, officials and residents are fighting for their lives, jobs and homes as the oil gushing from the exploded BP rig pollutes the Gulf of Mexico and fouls the beaches of Alabama, Mississippi, Florida and Louisiana. State and local officials are ready to attack the biggest oil spill in U.S. history directly because they know what’s at stake.

Yet, in Arizona and in the Gulf region, the U.S. government – despite its vast taxpayer-funded resources – has been unable to enforce federal immigration law in the former and remove red tape to speed much-needed environmental help in the latter. To borrow from Ronald Reagan, government is definitely the problem.

You don’t live or work in the Southwest or Gulf Coast regions, so it doesn’t really matter to you? Geography aside, it matters to your wallet and mine, and the future of the United States of America. States’ rights vs. federal supremacy has deep roots in the founding of this country.

It unites and divides us all the time, and the trick for 234 years has been making the glue stick. In 1861, the glue finally came apart and nearly destroyed us. Several of my ancestors fought for the Union; one lost his life at age 22. If and when the U.S. Supreme Court gets to decide the immigration lawsuit, the central issue before the top court will be the right of the U.S. government to keep states from enacting laws that usurp federal authority.

How ironic: Arizona’s law was modeled after federal law, which the U.S. government has chosen not enforce, either by incompetence or neglect, or both. Instead of following Arizona’s lead, the Obama administration is trying to reinvent the wheel with the lawsuit and spend taxpayer money doing it.

The suit filed in Phoenix federal court spells out why the U.S. government believes immigration laws passed by Congress and enforced by a range of federal agencies must take precedence to any passed by a state Legislature.

The Arizona law requires officers, while enforcing other laws, to question a person's immigration status if there's a reasonable suspicion that they are here illegally, such as speaking poor English, traveling in an overcrowded vehicle or hanging out in an area where illegal immigrants typically congregate, according to the Associated Press.

The law also makes it a state crime for legal immigrants to not carry their immigration documents. Don’t we all have to carry ID these days? What’s the big deal? Unless, you want to assume all authorities are out to profile you?

The arguments by the Obama administration will focus on a core constitutional concern — balancing power between the states and the federal government. The issue centers on the long-running "pre-emption" legal argument that says federal law trumps state law, according to the AP.

Essentially, the U.S. Justice Department wants to discourage other states from following Arizona's lead. Unfortunately, that misguided logic misses the point: If the U.S. government was doing its job policing illegals, then it's likely Arizona would not have taken any action on immigration.

Kris Kobach (left), the University of Missouri-Kansas City law professor who helped draft the Arizona law, says the state law is only prohibiting conduct already illegal under federal law. And Harvard Law School professor Gerald Neuman believes Arizona could make a compelling legal argument that it has overlapping authority to protect its residents.

As for the Gulf Coast states, the images and stories reported by CNN point to serious flaws in the way the U.S. government is overseeing the plugging and cleanup efforts. State and local officials are pleading for the feds to allow them to be directly involved.

Why not? These folks in the Gulf Coast states have the most to lose but, more important, they know things about where they live, work and play. Did it ever occur to the D.C. bureaucrats that locals might have some better and innovative ideas to battle the oil spill? Let’s put these people and unemployed folks to work right now!

This is the same country that put a man on the moon in 1969, yet we can’t figure out how to pour our best resources (all resources) into the Gulf Coast region, right in our own backyard? What does this say about the effectiveness of the U.S. government?

Our first Civil War basically was about states’ rights with slavery as the flash point issue – the South believed it was fighting for its economic survival and way of life. Fortunately, the Union was preserved, the slaves freed and the nation eventually emerged a stronger and better place (a work still in progress).

But a new civil war, an economic one, could be brewing with Arizona and the Gulf Coast states providing the seeds of discontent. Our Founding Fathers were divided about states’ rights vs. those of a big federal government. The U.S. Constitution aimed to strike a balance, which seems now to be off, especially in preserving our borders.

Talk isn’t always cheap, as these issues illustrate. Instead of letting lawyers run the show, at taxpayers’ expense, how about action that gets the job done in timely fashion. America leads by example!

As for me, I practice what I preach at writenowworks.com.

Electric Cars May Move Us

With the continuing oil disaster in the Gulf of Mexico, many may wonder if we can wean ourselves off of fossil fuel. Part of the solution obviously resides in green technology and certainly electric vehicles are driving interest as a probable alternative to gasoline powered cars.

Three companies – General Motors, Nissan and Toyota – are gaining traction in the marketplace. GM’s Chevrolet Volt is able to travel up to 40 miles on a single battery charge through a conventional household outlet. This automobile is scheduled for sale to consumers later this year. Nissan is touting a car called the Leaf (top) that has a projected range of up to 100 miles. And Toyota has a plug-in version of the Prius which is nearing public announcement.

These cars may not even require gasoline and can represent a dramatic cutback in exhaust emissions; it's the kind of automotive breakthrough that clean energy advocates have been trying to reach for decades.

The timing couldn’t be better since manufacturers have powerful advocates in government and industry. For instance, the Obama administration is offering generous subsidies to manufacturers which produce electric vehicles and consumers who purchase them. As a result, many automakers are gearing up for electric vehicle production, and venture capitalists are willing to invest in new designs.

Still, the big question is whether consumers will embrace electric vehicles in large enough numbers to make the whole dynamic work.

Gasoline is now less than $3.00 per gallon in most areas of the country. Initial electric-powered cars will cost much more than conventional technology vehicles, even with government subsidies. Current hybrids average about 30 mpg, but until gasoline prices increase significantly more, electric cars may have to wait for consumer attitudes to catch up.

Since electric cars run purely on electrical power, mile for mile these cars will operate at significantly lower costs, given current kilowatt power rates.

GM has designed the Volt (right) with a 40-mile range on a single charge with the capability to be recharged from a 120-volt household outlet. Once the battery runs low, a gasoline- powered motor engages and charges a generator which can result in another 300 miles of driving distance.

The electric Toyota Prius (left) has a range of about 10 to 15 miles and in a similar manner to the Volt, and the Prius can produce about 300 miles. But the Nissan Leaf is slated to be a “pure electric” car able to travel about 100 miles on a single charge. On the downside, the Leaf does not have a secondary power source and that may result in what the industry calls “range anxiety.”

The potential gasoline savings for the new technology is enormous. Currently, the Toyota Prius Hybrid gets about 50 mpg. On the other hand, GM’s Volt is projected to get about 230 mpg, and the Leaf would result in an equivalent 300 mpg. This is no match for conventional gasoline cars.

Electric vehicles vs. conventional cars

One example of a high-end electric vehicle is the Tesla Roadster. It consumes about 110 watt-hours per kilometer and is able to travel about 244 miles on a single charge. The full charge takes about 3.5 hours. Analysts estimate the Roadster ranges from 135 to 400 mpg, depending on how the equivalency between gasoline and electricity is computed. As a sidebar, it should be noted that the Telsa Roadster accelerates to 60 mph in 3.9 seconds; almost instant torque is available with electric cars.

GM Volt Product Manager Tony Posawatz (right) says 100 miles of battery-powered travel will require about $2.75 worth of electricity. This means up to 3 cents per mile based on average electricity rates of about 11 cents per kilowatt hour. If drivers charge their Volt overnight, when off-peak electricity rates are lower, the cost could be as little as 1 cent per mile. Posawatz says at these rates the annual cost-savings on fuel could easily be more than $1,000 for typical driving.

There are potential problems on the horizon with electric vehicles because they require entirely new sets of hardware and software.

Lithium-ion batteries have been used in cell phones and computers for years. However, there is still uncertainty surrounding scale-up and performance requirements. There also are the issues of disposal and repair. Electric car technology will require new training and infrastructure.

The initial cost of electric vehicles also is high, especially for early adapters. Most analysts predict that, at $3.00 per gallon, it takes nearly 15 years to amortize the initial investment. That’s why some manufacturers are willing to absorb some of this cost. Even with government rebates and incentives, many consumers may be reluctant to take the early risks associated with a product without a proven track record and resale history.

Still, the possible emergence of electric vehicles as a dominant product may be just one silver lining in the gulf oil crisis. There are obvious risks associated with fossil fuel drilling. Many lives are at risk and careers are in jeopardy as a result – just some of the lessons learned while BP and the U.S. government continue to grapple with the spreading spill from the exploded rig.

This environmental calamity, with its impact for years to come, may serve to put our lifestyle in perspective … how overly dependent we still are on fossil fuels. Cheaper and greener electric car technology may be the answer for consumers, now and in the future.

This post is from TechMan, WMB co-author who blogs about trends, issues and ideas affecting business, industry, technology and consumers.

Drill And Spill Equals Disaster

The oil spill in the Gulf of Mexico caused by the worst rig explosion in decades is likely to have devastating economic and environmental impacts, perhaps surpassing that of the Exxon Valdez in Prince William Sound, Alaska, in 1989.

As huge amounts of oil gush into the rough gulf waters, critical questions are being raised about safety procedures and environmental response. Both British Petroleum and participating subcontractors (responsible for drilling this well) need to provide some honest answers.

Halliburton Co., headquartered out of Houston, is in the cross hairs of many environmental groups and government officials. The company is responsible for the rigging equipment, and investigators are looking at the company’s role in cementing the deep water drill hole. BP owns the rights to the oil, but Halliburton and Transocean Ltd., which leased the drilling rig to BP, face tough questioning by Congress.

Halliburton was called upon by two members of Congress to provide all documents by tomorrow, May 7, relating to “the possibility or risk of an explosion or blowout at the Deepwater Horizon rig and the status, adequacy, quality, monitoring, and inspection of the cementing work,” the Associated Press reports. U.S. Reps. Henry A. Waxman, D-Calif., (left), and Bart Stupak, D-Mich., (right) made the requests.

Halliburton CEO David Lesar (left) is scheduled to testify in front of Waxman’s Energy and Commerce Committee on May 12. Other executives expected to testify at the hearing include Lamar McKay (right) of BP and Steve Newman of Transocean.

A representative from Halliburton said last week that “it is premature and irresponsible to speculate on any specific issues (involving the rig) … The cement slurry design was consistent with that utilized in other similar applications … (and) tests demonstrating the integrity of the production casing string were completed.”

Transocean, owner of the Deepwater Horizon which exploded April 20, says it will lose more than a half-billion dollars in revenue, and its finances will be hampered by hefty fees from a growing pile of lawsuits.

The world's largest offshore drilling contractor added that it's bracing for negative publicity and new regulations because of the incident, the AP reports. Eleven people died following the explosion -- nine of them Transocean employees -- on the rig. The well the rig was drilling also ruptured and has been gushing an estimated 210,000 gallons of oil each day. The oil slick is reported to be near the Louisiana shoreline.

Founded in 1919, Halliburton is one of the world's largest providers of products and services to the energy industry. With more than 50,000 employees in about 70 countries, the company serves the upstream oil and gas industry throughout the life cycle of the reservoir -- from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

After a well is drilled, cement slurry is pumped through a steel pipe or casing and out through a check valve at the bottom of the casing. Then it travels up the outside of the pipe, sheathing the part of the pipe surrounded by the oil and gas zone.

After the cement hardens, it is designed to prevent oil or gas from leaking into adjacent zones along the pipe. Once the cement cures, the check valve at the end of the casing prevents any material from flowing back up the pipe. The zone is thus isolated until the workers are ready to start production.

The process, however, is not without risk. The U.S. Minerals Management Service study found that cementing was the single most important factor in half of all oil well blowouts in the Gulf of Mexico over a 14-year period.


Halliburton has been accused of performing a poor cement job in the case of a major blowout in the Timor Sea off the coast of Australia. This incident also is under investigation.

The company replied in a statement, saying, “Halliburton originated oilfield cementing and leads the world in effective, efficient delivery of zonal isolation and engineering for the life of the well, conducting thousands of successful well-cementing jobs each year.”

It’s clear there are some major issues that need to be addressed. It’s inconceivable that with a near 50-percent failure rate, off-shore drilling is allowed. How absurd.

The Valdez incident serves as a stark reminder of what happens when human error and negligence come together.

The Exxon Valdez oil spill occurred in Prince William Sound, Alaska, on March 24, 1989, when the oil tanker bound for Long Beach, Calif., hit Prince William Sound's Bligh Reef and spilled an estimated minimum 10.8 million gallons of crude oil, according to Wikipedia. It is considered to be one of the most devastating human-caused environmental disasters to occur in history. About 26,000 gallons of Valdez crude oil still remain in Alaska's sand and soil, according to the National Oceanic and Atmospheric Administration.

In an already fragile economy after the housing bubble, and especially after hurricane Katrina ravaged the Gulf Coast, we now face, in all-probability, the single-most environmental catastrophe of all time! Thousands of humans and their livelihoods will be adversely affected. The ecosystem throughout the entire Gulf Coast -- Texas to Florida -- will likely be damaged permanently.

When will this country wake up and realize that greed and money are the source of most of our problems? The risks are simply not worth the paybacks. Just as we are beginning to emerge in one of the most tenuous periods of financial meltdown, we are now faced with another major blow. Will big business ever learn? Or are we going to finally learn when it’s too late?

Instead of “Drill, Baby, Drill,” it should be “Oil, Oil Go Away.” It’s time to transition our dependency away from oil as much as possible. Now we need renewable fuel sources more than ever; we only hope it’s not too late!

This post is courtesy of TechMan who writes about trends, issues and ideas affecting business, industry and technology.

U.S. Banks On Black Gold

President Obama’s plans to open a huge section of East Coast waters and other protected areas in Alaska and the Gulf of Mexico has fueled a politically explosive debate over the hunt for more domestic production of oil and gas.

The president’s initiative, which would reverse 20 years of federal policy, allows exploration from Delaware to central Florida as well as the northern waters of Alaska, according to the Associated Press. Drilling could begin 50 miles off the coast of Virginia by 2012. Obama also has proposed that Congress lift a drilling ban in the oil-rich eastern Gulf of Mexico, only 125 miles from pristine Florida beaches. The entire Pacific seaboard will still be untapped as well as Alaska’s Bristol Bay area. Conservationists have defined these areas as national treasures for wildlife.

We believe this recent decision will have far-reaching economic and national security implications for the United States. The outcome will affect where and how U.S. consumers purchase oil for an ever-increasing oil-dependent nation.

While some think Obama is trying to divert attention away from the recent health care reform controversy, others believe his aggressive and somewhat practical policies are necessary.

Obama’s exploration announcement, coupled with his push to provide cleaner energy and efficient cars, is seen by some as a way to help stimulate the U.S. economy and create jobs. At a news conference last week, the president said “that the answer is not drilling everywhere all the time. But the answer is not, also, for us to ignore the fact”.

Some Washington insiders view Obama’s decision as a ploy to win Republican support for a comprehensive climate change bill. They suggest that if the Democratic president is to propel the renewable energy industry forward, he knows he will need support to limit carbon emissions.

On the other side, environmentalists are criticizing Obama and comparing him to GOP vice presidential nominee Sarah Palin, whose call for changes in the nation's energy policy at the 2008 Republican National Convention raised chants of “drill, baby, drill!” Urging more nuclear plants and increased drilling, warning about the threat of an Iran or terrorists holding U.S. energy supplies hostage, the former Alaska governor, as noted by the Los Angeles Times, said: "We Americans need to produce more of our own oil and gas. And take it from a gal who knows the North Slope of Alaska: We've got lots of both."

It comes as no surprise that Obama’s policy is drawing fire between environmentalists and oil industry supporters. For example, the conversation group Oceana declared that the president is “unleashing a wholesale assault on the oceans.” Oceana, founded in 2001, calls itself the largest international organization focused solely on ocean conservation.

America will increase oil production of 5.31 million barrels of crude per day to 6.13 million barrels of crude per day over the next 10 years, according to the U.S. Energy Information Administration. This represents an increase of 820,000 barrels per day through this period. The EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.

It’s clear we need to step up domestic production from a consumption standpoint. But it’s also apparent the president has a political agenda; he’s trying to show the opposition party that he is willing to compromise with the GOP in some areas. He has already done so in nuclear energy, but winning a broad environmental and energy bill likely will be daunting.

Some Republicans see this initiative as a positive sign, but others argue that too many exploratory areas are off limits.
Senate Republican leader Mitch McConnell of Kentucky, calling Obama’s initiative a step in the right direction, questioned whether the administration would actually open new areas for oil production.

Access to oil and gas in the South Atlantic waters likely will meet stiff resistance unless Congress enacts a plan to share the billions of dollars in potential revenue from the lease sales and oil and gas development. Other senators argue that proceeds from oil and gas resources should be paid to the U.S. Treasury Department.

Obama also said he will release new requirements mandating automakers build more fuel-efficient cars and trucks. The standards include first-ever rules on vehicle gas emissions since they have been blamed for boosting carbon dioxide levels. As usual, it’s easy to see the president’s measures will affect individual industries with varying degrees. For instance, what may be negative for the automakers in the United States may prove to be a boon for oil companies and “green” start-ups vying for untapped business.

We believe that anything we can do as a nation to become more independent is in our best interest. This will force our country to develop necessary renewable energy resources while minimizing terrorist threats to our economic system.

This post is courtesy of TechMan who reports on trends, issues and ideas across industry, business and technology.

Food For Thought Drives Markets

Everyone eats food to survive; billions of people around the globe work in agriculture and its related industries. Food prices are important for everyone and, in some cases, they’re a matter of life and death.

There are many variables and conditions affecting food prices. Patrick Westhoff recently published a book: The Economics of Food: How Feeding And Fueling The Planet Affects Food Prices.


He explains in the book many of the complex factors influencing food prices.

Westhoff notes the prices we pay at the supermarket depend on everything from the weather to the cost of oil and the types of fuel we put in our cars. Population explosion in regions of the world, such as Africa, China and India, also affect prices we pay here in the United States. He believes these dynamics should be used by our legislators and food producers to set prices and determine how best to feed the planet.

For years, food prices did not get much attention. From 1991 to 2006, U.S. consumer prices increased 2.5 percent per year, slightly less than half the inflation rate, according to government reports. Crop and livestock prices also varied but without real change.

Things changed in 2007 and 2008, when food prices took center stage. Front page headlines and published reports offered gloom-and-doom and the end of cheap food as we knew it. The Economist published “The End of Cheap Food” as one of its cover stories.

The U.S. Consumer Price Index rose 4 percent in 2007, the largest increase since 1990. In 2008, the food inflation rate increased a whopping 5.5 percent, according to the U.S. Food and Drug Administration.
The surge in basic crops, such as corn and wheat, soared and was even more dramatic. Corn prices more than tripled between late 2005 and 2008. Prices for wheat, rice, soybeans, and many other foods also spiked.

This rise in food prices was a concern in the United States but a crisis for many Third World developing countries. The average family of four spent $8,671 for food in 2007, according to the U.S. Bureau of Labor Statistics. Rising food prices made it harder for families to make ends meet.

Average families in poorer countries may spend more than half of their disposable income on food. This forced many families to choose between eating less healthy foods or sacrificing other necessities.
The Food and Agriculture Organization of the United Nations estimates that millions of people were added to the hunger rolls between 2007 and 2008, leaving 915 million people malnourished around the world. Current economic conditions surely pushed that number to over a billion people by the end of 2009.

Just as many people began fretting about higher food prices and the possibility of permanence, prices moved downward. Hedge funds and speculation had a lot to do with this sudden drop. Traders from around the world used futures to make or hedge bets about future food prices and other commodities.

Wheat future price reached a peak by March 2008, corn in June, and soybeans in July. By October 2008, wheat and corn futures had declined by 50 percent, and soybeans had dropped nearly the same amount, according to the FDA. After peaking in June 2008, the price index fell by a third within the next six months, according to officials.

So what happened? After years of stagnation, why did food prices explode and then suddenly collapse? Was this a short-lived crisis or would higher food prices and their consequences be the norm of the future?

Journalists, politicians, and economists have tried to explain these rapid changes in food prices. Some have produced well-reasoned analysis that carefully identify and weigh contributing factors involved in this complex model. Others have tried to reduce the situation to a small sound-bite, often to make a biased or political point. A lot of information is available, but it’s not easy to sort it out and be objective.

Part of the reason is that increasing amounts of corn, sugar, vegetable oils, and animal fats are used to make biofuels which can be used to power automobiles and trucks. The role of biofuels as a contributor to increasing food prices has been highly controversial.

Some have laid some or most of the blame for higher food prices on the growth of biofuel production. The more grain, vegetable, and animal products used to produce biofuels, the less is available to feed people. This phenomenon has often been quoted by World Food Bank economists who suggested biofuel production accounted for between 70 percent and 75 percent of food price increases.

On the other side of the argument, biofuel defenders point out that rising cost of foods is not related or minimal. They note the percentage of crops to produce fuels is very small, and farmers can easily increase production to make up the difference.

Former U.S. Secretary of Agriculture Ed Schafer noted that increased corn-based ethanol production only
accounted for about 3 percent in the increase in global food prices. The actual impact of biofuels on food prices was almost certainly higher than biofuel proponents would like to acknowledge, but less than biofuel opponents claim.

There’s no getting around the fact that food production in this country and around the world, for that matter, is controlled by big business, lobbyists, and government. The extent to which external factors, like weather and even oil production, affect food pricing remains highly debated.

But one point is certain: The United States is the bread basket of the world.

We believe our government officials and farmers should take whatever steps are necessary to reduce our dependency on oil. In the long run, we believe increasing agricultural production will help improve our geopolitical position and economic standing.

This post is courtesy of TechMan who tracks trends and issues across many areas affecting business, industry and technology.