Conclusion

Over the course of this blog, I explored some challenges with fossil fuel and some of the alternative opportunities that our economy is now exploring; Wind Power, Wave Power, Solar Energy, Biofuel/Biodiesel & Hybrid Technology. This alternative sources reduce the total amount of emissions that are part of the cause for global warming.

The way the oil giants are behaving, especially ExxonMobil (it being the one most against investing in alternative fuels), on what they are doing to help mitigate the high gas prices and global warming.

Price fixing was explored for both corporations as well as the influence of OPEC. While some may still argue that price fixing is occurring others say that it is the free market deciding.

Many people are involved in all of these controversies including but not limited to:

• Individuals like you and I;
• Corporations (Some like Toyota and Honda have a large stake with their Hybrid Technology);
• Power companies (they buy some energy from renewable sources);
• Oil companies (ie. ExxonMobil, ChevronTexaco, BP);
• Local, State & Federal Governments (ie. Investigations & tax breaks);
• Scientists (paid by various parties on both sides of the issues);
• OPEC; and
• Activist groups.

These are only some of the examples of those that act upon each other to further their beliefs. While many people can form their own opinions, many times it is flawed as they are using information provided by a group that expresses some bias. In order to create a completely unbiased opinion, one would have to perform their own tests and monitor the experiments themselves which are (1) too costly, (2) lack of education or technical training makes it difficult and (3) absence of proper equipment prevent some experiments.

Overall, the issues of our world concerning green house gasses and energy, be it fossil fuels or alternative energy, will never go away. As long as there are profits to be made by big oil companies and countries, and the thinking of many people on the earth about driving, our world's energy will be at the center of our focus for many years or decades to come.

OPEC! A major influence...

One group that I have not mentioned that is very instrumental in all of this is OPEC (Organization of the Petrolium Exporting Countries).

One of OPEC's goals is to stabilize oil prices, which they claim creates "an efficient, economic & regular supply of petroleum to consumers, a steady income to producers & a fair return on capital to those investing in the petroleum industry. " This has caused many companies, advocacy groups and individuals to question OPEC's actions of whether they are for the better or for the worse.

OPEC can cut supply of oil exports if they feel (1) that the prices are too low (2) or the inventory levels are at a level in which will force the price to retreat. "This measure was aimed at arresting the declining prices of crude oil in the international market." (Business Day Online, October 30, 2006)

With OPEC controlling the output and export of oil from it's governed countries, it could cause further development into countries not tied to OPEC or for increased investments into alternative energy. "High oil prices may mean opportunities for oil and gas investment in more difficult operational environments. It may also point to opportunities in non-OPEC countries or in the field of alternative energy or conservation technologies." (Smith Brandon International Online)

While OPEC helps its' governed countries, it can hurt the general economy of many others as people are forced to pay more for gasoline and other sources of fossil fuels. This will reduce how much money is pumped into the general economy thus stemming growth until prices retreat.

Even as of late, with oil prices in the mid $60 range, OPEC stated that there is an adequate supply of oil in the market and will not increase output ahead of its' next meeting in September. World Business News In fact, The Standard reported on June 11, 2007 that due to an increase demand for gasoline and tropical storm threats could push oil prices to $80 a barrel this summer. This would definitely cause even more backlash from consumers as the oil companies and countries would continue to fuel their financial coffers with profits while the consumers have to either invest in alternative energy or reduce their discretionary spending.

Coming up next: Conclusion on the parties who are in play and their role. To be posted tomorrow, June 13, 2007.

Price Fixing on Oil?

I wanted to talk a little bit about the continuous investigations about alleged price fixing in the energy sector. The alleged price fixing has been a hot topic for decades and the recent events are causing it to steam up again. It is also a reason for the huge push to alternative energies since the cost of crude oil and gasoline is getting so expensive. Now who really controls the price of barrels of light sweet crude and other fuels?

Most fuels are traded on the open market in futures. These futures are something that helped Southwest Airlines post massive profits while most other carriers were losing billions of dollars annually and even forced some into Bankruptcy Court (United, US Airways, Delta, Northwest & Aloha). Southwest was able to buy futures in heating oil (as it's the closest cost match to aviation fuel) and purchase it for a cheaper price. As prices began to increase after 9/11, they still had the contracts for the cheaper fuel thus reducing their overall expense.

Many people still believe that the oil companies set the price and that the open futures market does not. Evidence of Price Fixing by Oil Companies? By Guy Cramer
Now this report may not be scientifically conclusive as it only suggests that by the trends (of the price for futures) that there is price fixing going on.

Another reason that has fueled more speculation and that has got the involvement of many government agencies is the overall profit that the oil companies are posting. ExxonMobil even posted that largest profit ever to be reported by a US publicly traded company ever:


With profits for the four largest energy companies reaching nearly $100B annually as of 2006, it makes people wonder if price fixing is happening.

In 2005, the Bush Administration was asked by eight (8) state leaders to investigate oil pricing in the aftermath of Hurricane Katrina as oil spiked to over $90 a barrel which had been hovering around $65 a barrel prior to the catastrophic event. CBS News


In February of 2006, the Supreme Court ruled against the gas distributors who filed a class-action lawsuit against ChevronTexaco & Shell Oil Co saying that their partnership, while appearing to be anti-competitive in setting prices, was not illegal. Ruling

So as we can see, this has been a huge topic that has many people, from individual citizens to government agencies, acting on the potential threat of price fixing for our world's necessary fossil fuels. All in part driving the development and use of alternative fuels to help reduce the out of pocket expense and reduce emissions.

More to come...

ExxonMobil and Green Energy...

Are major oil companies investing in green? Some of them are. Should they? That is hotly debated!

Some of the world's largest oil companies are ExxonMobil, ChevronTexaco, ConocoPhillips and BP. These oil companies control some of the most lucrative drilling rights in the world and have the profits to invest in virtually anything that they see fit. With all the oil companies recording record profits, the government has called the executives to testify on Capital Hill about why prices are so high. Transcript from CNN.com

The government is urging the oil companies to produce more fuel, lower costs (even thought the investment markets set prices by purchasing energy futures) and invest in alternative fuels. While most of the oil companies are investing in alternative energy sources and striving to clean up the way that they extract and refine fossil fuels, there is one company that says that investing in such alternatives in not for them. ExxonMobil!

(Disclaimer: I am a shareholder of ExxonMobil and do not have a bias against them.)

In a recent article in Fortune magazine, Rex Tillerson, Chairman and CEO of ExxonMobil, sat down with Geoff Colvin, Fortune senior editor-at-large, to discuss alternative fuels and ExxonMobil.

Tillerson explains that ExxonMobil is in the business to earn a return on its' shareholders investments first and foremost. (Isn't that why businesses exist?) If they do not believe that an investment can make the proper return that the company believes is adequate, it just won't invest in it. "What are we going to bring to this area to create value for our shareholders that's differentiating?" asks Tillerson. "Because to just go in and invest like everybody else - well, why would a shareholder want to own Exxon Mobil?" (Fortune, source is linked) They have been around so long and have rights to some of the oldest and richest oil reserves, they can pump oil for less than $1 a barrel. To harness alternative fuels, it would cost significantly more and they would not be able to invest new technology to the harnessing and refining of such energy that would create value.

They are a leader in technology and innovation for fossil fuels and can arguably produce oil for cheaper than another company pumping from the same well. Gheit, who worked for Mobil long before the companies merged, recalls being mystified by Exxon's X factor. "We [Mobil] could be pumping oil from the same platform, and they'd make more money on it than us," he says. "It was like taking the same train to work, but they got to the office first." (Fortune, source is linked)

While activist and environmental groups oppose ExxonMobil and the government is trying to keep their nose in things, ExxonMobil pays outside scientists and groups to justify their reasoning on alternative energy sources. ExxonMobil contends that alternative energy sources will never be large enough for the world's most valuable company (based on market value) to be investing in. Their payments to outsiders helps support their rationale to all of those who oppose them.

That's another reason Exxon isn't investing in alternative energy sources: They don't look big enough. For a company Exxon's size - No. 2 on the Fortune 500 - businesses of less than mammoth scale don't merit troubling with because they can't nudge the bottom line. (Fortune, source is linked)

Exxon's most stinging critics, such as Greenpeace and the Union of Concerned Scientists, have charged for years that the company has funded a range of global-warming doubters and deniers, and it's true. Public documents show that Exxon has long given money to organizations that publish papers, run websites, and write letters contending that global warming isn't happening, or isn't proven, or isn't connected to human activity. The company recently stopped funding some of those outfits - "about a half-dozen," says Cohen - though it may still be financing others. (Fortune, source is linked)

While ExxonMobil believes this way and does not agree with the opposition, other companies are making strides to appease both the activist groups and their shareholders. Stay tuned to find out who and how...

51 to 60 MPG!!!!!

How does driving a vehicle that gets 60 mpg's in the city and 51 mpg's on the freeway sound?

With gas prices hovering in the mid $3 range, many people are exploring vehicles that are powered by the hybrid technology. Toyota was a fore runner with the Toyota Prius around 2001 and has followed suit with a Camry Hybrid and an SUV, the Highlander Hybrid. Toyota Prius

Most other car makers have now followed suit with their own hybrid models of their popular gasoline vehicles such as the Honda Civic, Accord, Lexus GS (Sedan), RX (SUV), Saturn Vue, & Ford Escape to name a few.

These vehicles utilize the electric motor more when the car is at lower speeds, which is most likely to occur in a city setting with many stops and starts. At the lower speeds, an all gas engine consumes the most gasoline, thus the hybrid technology helps conserve such fuel. At higher speeds, the hybrid switches to utilize the gas portion more as it provides the power and it is when the engine generally requires less gas as there are fewer starts and stops.

The hybrid vehicles do not have to be plugged in as they have a battery pack that is constantly being charged to a level that is optimal for the longest life. While the hybrid's generally have fewer horsepower's as their gasoline counterparts, it is both eco and financially friendly.

As an additional financial incentive, the IRS offers a tax credit to individuals who purchase a hybrid vehicle and many states offer a similar tax credit. For example, in Oregon, if an individual purchases a qualifying hybrid vehicle, the are eligible to receive up to $1,500 in state income tax credits. OR Hybrid Tax Credit For the federal hybrid tax credit, an individual can claim anywhere from $250 to $3,400 depending on the model. Federal Hybrid Tax Credit

The car manufacturers, the government, many celebrities, environmentalists and activist(s) are all encouraging the purchase and use of hybrid technology as it reduces the reliance on fossil fuels and reduces emissions that cause smog and green house gasses. Oil companies remain mixed as they still have to purchase gasoline for hybrid vehicles but there may become a time that more people are driving hybrids that the overall consumption of gasoline would be lower than it is today, but we are many years, if not decades away from such a time.

How the oil companies are investing in "Green" is coming up next!

An Emission-less Energy! WIND!

Wind is something that has been harnessed in the last 10-20 years to produce power for cities and/or individual businesses and residents. A wind farm can produce enough power to support a suburb or small town while businesses and residents can purchase smaller wind turbines to mount on their property or roof tops in an effort to reduce their energy costs.

In Lee County, IL, the Mendota Hills Wind Farm can supply enough power to supply approximately 15,000 homes with 125 million kilowatt hours produced annually. Mendota Hills Wind Farm It has 63 wind turbines that are each 213 feet tall with a rotor diameter of 171 feet.

Although wind is a free source of energy to harness, a huge investment must be undertaken to purchase, install and upkeep the turbines, land, infrastructure and staff.

A problem that developers have to overcome are NIMBY's (Not In My Back Yard). These are residents that support something (be it a wind farm, an airport, oil drilling, etc.) but do not want it anywhere that it could be seen, heard or have an impact on their surroundings. NIMBY's support the wind farms but oppose it being close to their city which brings added costs to a developer to create the infrastructure to transport the produced energy to the city it's trying to support. A benefit of these challenges is that land outside the city limits can be significantly cheaper and there exists the possibility of installing wind turbines on farmland without displacing a large portion of crops.

There are several initiatives created by the government to help support Wind farms and private wind turbines through the Production Tax Credit (PTC) Extension, Renewables Portfolio Standard (RPS) and Small Wind Systems Tax Credit. The PTC Extension allows an income tax credit of 2 cents/kilowatt-hour of electricity produced. The RPS is an initiative that 22 states and the District of Columbia have adopted which helps create economic activity, spurs jobs and helps reduce the reliance on conventional energy sources. The last one, the Small Wind Systems Tax Credit, is included bill S. 673 that would create credits for individuals who want to invest in wind energy for their residence. This Credit differs from the PTC as the PTC is only for large utility scale wind projects while this one is for individual properties. AWEA Legislation Overview

Anti-Wind Energy Section of H.R. 2337 introduced by Rep. Nick Rahall (D-WV) would make it illegal to place a wind turbine on private property unless an approval from the head of the US Fish & Wildlife Service and other bureaucrats. The punishment would include imprisonment and a $50,000 fine for a violation. This is a step to restrict private farms because it is thought to negatively harm the surrounding wildlife and protect larger developments who have the money and resources to jump through all the hoops the government imposes.

A major benefit to Wind Farms, other than that wind is free to capture (see above), is that it produces no emissions of CO2 (carbon dioxide), SO2 (sulfur oxide) or NO2 (nitrogen oxide). These elements are the precursors to green house gasses, acid rain and smog, respectively. American Wind Energy Association These are huge improvements over conventional energy methods of coal, natural gas and oil.

Next Up, Hybrid Technology.

Cleaner Alternative Fuel & Energy Sources!

Some of the newer cleaner fuels that our society is now harnessing are
Wind Power, Wave Power, Solar Energy, Biofuel/Biodiesel & Hybrid Technology for Vehicles. These are energy sources that are renewable, unlike fossil fuels, and are extremely clean compared to current fuel sources.

The auto industry has embraced hybrid technology with Toyota being a leader and innovator. For biofuel/biodiesel, it's supporters have came from thousands if not millions of consumers that have adapted their car to burn biofuel which is made primarily from recycled vegetable oil. Unfortunately the aviation community is hesitant to embrace such technology as of yet. Sir Richard Branson, founder or CEO of the Virgin group, is working with aircraft manufacturers as well as jet engine makers to test and analyze the results of uses biofuel to power aircraft in an effort to save money and CO2 emissions. Virgin Group & Biofuel

The government has put in place various tax credits in order to make consumers and companies more proactive in the consumption of fuel. For consumers who purchase a hybrid vehicle, not only does their fuel costs see a dramatic decrease but they can claim a decent sized tax credit on state (Oregon) and federal tax refunds.

In the next two to three posts I will be analyzing the pros and cons of each fuel/energy source and who are the active parties both for and against them.

Climate Change caused by Energy?

I think one of the major issues about energy consumption in today's society would have to be about the Climate Change, also known as Global Warming. Many environmental groups protest that it is caused by the burning of fossil fuels and the release of CO2 into the Earth's atmosphere. Some claim that the effects of Global Warming are part of the reasons for the increase in hurricane intensity in the recent years. Union of Concerned Scientists

Whether or not it is true or false, the U.S. Department of Energy is overseeing a program called "Climate VISION" to examine ways to reduce greenhouse gasses in a cost effective way. USDOE Climate Change

There are many types of alternative fuels that show signs of reduced greenhouse gas emissions, but often those fuels are expensive thus preventing major investments in such projects. Later this week, hopefully Friday, May 18, 2007, I will post about some of the alternative fuels with both the support and opposition to such fuels to illustrate how these controversies are somewhat played out.