In this chapter, Jerome Corsi details the early days of what is now called “renewable energy.” Several expensive large windfarms and solar projects proved a failure during the Obama administration’s “green energy” drive, and thirty years of biofuel policy proved a disaster for the world’s poorest.
Mixing ethanol with petrol and diesel to reduce the volume of oil required drives food prices higher and leads to a global shortage of food. The use of ethanol as a fuel affects key food items, such as corn and soyabeans.
In 2012, when ‘The Great Oil Conspiracy’ was first published, economists estimated that the number of food-insecure people in the world would rise by over sixteen million for every percentage point in the real prices of staple foods, with a projected increase of up to 1.2 billion people being chronically hungry by 2025.
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The Great Oil Conspiracy: How the US Government Hid the Nazi Discovery of Abiotic Oil from the American People by Jerome R. Corsi, 2014 edition
Please note: The following has been summarised by an AI programme. AI programmes are prone to inaccuracies and “hallucinations.” We advise readers to refer to the original book to check the accuracy of information. A copy of the book can be downloaded HERE and you can listen to the audiobook HERE.
Chapter 5: “Julian Simon Says” – Toward a Comprehensive Energy Policy
Table of Contents
- Peak Production Theory and Resource Depletion Debates
- The Hubbert Curve and Its Limitations
- Julian Simon's Counterarguments
- Obama Administration's Energy Policy and Offshore Wind Initiatives
- The Cape Wind Project and Offshore Wind Development
- T. Boone Pickens' Wind Farm Venture and the Pickens Plan
- Deere & Co.'s Wind Energy Venture and Industry Challenges
- Ethanol as an Alternative Fuel and Its Economic Impacts
- The Solyndra Bankruptcy and Green Economy Challenges
- Investment Risks in Green Energy: The Quercus Trust Example
- Spatial and Practical Challenges of Renewable Energy
- Limitations of Wind Power and Comparative Analysis
- The Obama Administration's Energy Policy and Its Consequences
Peak Production Theory and Resource Depletion Debates
Chapter 5 discusses the concept of “peak production” and the idea that the world is running out of oil, citing the work of William Stanley Jevons, who in 1865 wrote “The Coal Question” and argued that England would soon exhaust its coal resources, leading to the collapse of its industrial enterprise.
Jevons’ work is compared to that of M. King Hubbert, who in 1956 drew a bell-shaped curve predicting that US oil production would peak in the 1970s and decline thereafter, with his theory being expanded to predict a worldwide depletion of oil.
However, Julian L. Simon, a professor at the University of Maryland, challenged these ideas in his 1996 book “The Ultimate Resource 2”, arguing that perceived future needs and potential profits drive innovation and discovery, leading to the finding of new resources and more efficient extraction methods.
Simon documented a series of predictions dating back to 1885, all warning that the United States would soon run out of oil, including predictions from the US Geological Survey, the US Bureau of Mines, and the Department of the Interior, all of which were proven incorrect.
The Hubbert Curve and Its Limitations
Despite these predictions, Simon argued that the world would never run out of oil, citing the fact that proven oil reserves have increased over time, with 1.28 trillion barrels of oil in proven reserves today, more than ever in recorded human history.
Simon’s ideas are presented as a counterpoint to the “peak production” theory, with critics of Hubbert’s theory, including oil and gas analyst Michael C, also questioning the idea that the world is running out of oil.
The concept of the Hubbert curve, which is used to estimate petroleum resources, was initially simplistic and not rigorously scientific, as argued by Michael Lynch, President and Director of Global Petroleum Service, Strategic Energy & Economic Research Inc.
Lynch notes that the Hubbert curve was later seen as explanatory in itself, with the idea that geology requires production to follow such a curve, although Hubbert himself did not publish equations for deriving the curve and initially used rough estimations.
Julian Simon’s Counterarguments
Julian Simon argued that gloomy predictions about running out of oil or other energy resources are typically wrong due to several reasons, including the fact that energy resources exist in quantities much larger than initially estimated, advances in technology make exploration and recovery more efficient, and improvements in productivity lead to more efficient use of energy resources.
Simon also believed that alternative sources of energy will be found, and previously dominant energy resources will become less dominant as more efficient resources are understood and utilized, with nuclear energy being the final inexhaustible energy resource.
According to Simon, nuclear power can replace coal and oil entirely, and countries like France have successfully implemented nuclear power, with approximately 80 percent of France’s electricity being generated by nuclear plants.
Simon conceded that just because previous predictions of oil depletion were wrong, it does not mean that every gloomy forecast about oil will be wrong, but history shows that expert forecasts about running out of hydrocarbon fuels have typically been far too pessimistic.
The use of nuclear power, as seen in the US Navy’s ships and France’s nuclear power plants, demonstrates its potential to replace traditional energy sources, and Simon predicted that nuclear batteries will be used to run automobiles long before oil runs out.
Simon cautioned against allowing energy scarcity predictions to scare us, explaining that people tend to view energy resources as finite, a concept rooted in Malthus’ ideas, but instead, he believed it made more sense to see energy as a fixed resource, not a finite one.
The history of hydrocarbon fuels supports Simon’s viewpoint, as if Jevons and Hubbert had been correct, we would have run out of coal and gasoline long ago, but instead, these resources have continued to be available.
Obama Administration’s Energy Policy and Offshore Wind Initiatives
The Obama administration, under the leadership of Interior Secretary Ken Salazar, implemented a seven-year moratorium on offshore oil exploration in the eastern Gulf of Mexico and along the Atlantic Coast, citing the need for caution and stricter regulations after the Deepwater Horizon disaster.
This moratorium was expected to have significant economic costs, with Dr. Joseph Mason, a well-known economist, estimating that it would result in the loss of 8,000 jobs and $500 million in lost wages in the first six months, potentially being more costly than the oil spill itself.
In contrast, President Obama directed his Interior Department to facilitate leases for offshore wind turbines, just days before the moratorium went into effect, demonstrating the administration’s preference for green energy technologies, despite concerns about their ability to deliver a robust energy supply.
Julian Simon, an expert in the field, argued that the concept of finite resources is a staple of human thinking, but it does not accurately reflect the reality of energy production, and he emphasized the need for a comprehensive energy policy that takes into account the complexities of energy production and consumption.
The Obama administration’s actions, including the creation of a new regulatory agency to oversee oil rig inspections and enforcement of environmental and safety rules, were intended to provide a more stringent regulatory framework, but they also had significant economic implications for the Gulf Coast region.
The US Department of the Interior, under the leadership of Salazar, announced a revised OCS leasing program, which included a plan to simplify and speed up the process of applying for and obtaining offshore leases for wind energy, as part of the “Smart from the Start” wind energy initiative for the Atlantic Outer Continental Shelf.
The “Smart from the Start” initiative was designed to facilitate the siting, leasing, and construction of new wind energy projects, with the goal of spurring the rapid and responsible development of this abundant resource, and was a follow-up to the Cape Wind project announced two months earlier.
The Cape Wind Project and Offshore Wind Development
The Cape Wind project, which was the nation’s first lease for commercial wind energy development, involved the construction of 130 wind turbines, each with a hub height of 285 feet, in a 24-square-mile area of the Outer Continental Shelf in the Nantucket Sound off the shores of Massachusetts.
The Cape Wind project was expected to generate enough energy to power approximately 420,000 homes, and could meet 75 percent of the electricity demand for Cape Cod, Martha’s Vineyard, and Nantucket Island combined, with the Interior Department noting that one-fifth of the offshore wind energy potential is located off the New England coast.
The Bureau of Ocean Energy Management, Regulation and Enforcement was expected to begin issuing new offshore leases for wind turbine power by the end of 2011, under the streamlined process, and the Interior Department was considering offshore wind energy leases along the Outer Continental Shelf of several states, including Maryland, Delaware, New Jersey, Virginia, and Rhode Island, in addition to Massachusetts.
The Cape Wind project was not without controversy, as the late Massachusetts Democratic Senator Ted Kennedy had rigorously objected to the project for years, citing concerns that the wind turbines would damage the scenery of Cape Cod and outweigh the value of obtaining the wind-turbine green energy.
The “Smart from the Start” initiative and the Cape Wind project were part of a broader effort by the US Department of the Interior to promote the development of offshore wind energy, with Salazar signing the nation’s first lease for commercial wind energy development with Cape Wind Associates, LLC, a subsidiary of Energy Management, Inc, on October 6, 2010.
The Cape Wind project, a wind power facility off Nantucket Island, was expected to begin construction in 2013, after selecting three private contractors, despite facing fierce community debate due to concerns about the impact on scenic beauty and potential price increases, with estimates suggesting it would add $1.08 to the monthly bill of the average residential customer in Massachusetts.
The project’s expected high costs, compared to generating electricity through hydrocarbon fuels, raise questions about the commercial viability of wind turbine energy, as evidenced by the decision of oilman T. Boone Pickens to abandon his proposed billion-dollar wind farm in Pampa, Texas.
T. Boone Pickens’ Wind Farm Venture and the Pickens Plan
T. Boone Pickens’ failed wind farm venture, which involved ordering 687 wind turbines from GE at a cost of about $2 billion, was intended to expand to four thousand megawatts by 2012, but ultimately did not come to fruition, despite his enthusiastic promotion of wind power as a renewable energy solution to reduce US dependence on foreign oil.
Pickens spent $58 million promoting his “Pickens Plan” through television commercials and appearances on cable news, arguing that wind power could save America from energy dependence on foreign oil, and also advocated for converting commercial trucks to run on natural gas and embracing electric batteries as the ultimate solution for automobiles.
The failure of Pickens’ wind farm project and the high costs associated with the Cape Wind project suggest that wind turbine energy may not yet be a commercially viable large-scale energy technology, highlighting the challenges and limitations of transitioning to alternative energy sources.
The Pickens Plan, proposed by T. Boone Pickens, aimed to create a new generation of liquid gas-driven, battery-powered cars and modernize electric grids throughout the country, but it would require billions of dollars to be spent on infrastructure development, including the modification of long-haul trucks and the creation of a natural gas infrastructure of service stations.
The pillars of the Pickens Plan included creating millions of new jobs by building out the capacity to generate up to twenty-two percent of the country’s electricity from wind, adding solar capacity, building a twenty-first century backbone electrical grid, providing incentives for homeowners and commercial building owners to upgrade their insulation and energy savings options, and using America’s natural gas to replace imported oil as a transportation fuel.
Despite his efforts, Pickens failed to convince the federal government or the state of Texas to spend the necessary funds to connect his wind farm to the electrical grid in Dallas, resulting in a significant loss, estimated to be around $2 billion, and the abandonment of plans to build the largest wind farm in Pampa, Texas, in July 2009.
Pickens attempted to cut his losses by negotiating with GE to reduce his order for wind turbines by more than half, and although he initially shelved his plans, he later announced in April 2012 that he would proceed with building a smaller 377-megawatt wind farm in Texas, after a joint venture company agreed to build a transmission line to carry the power to utility providers in the state.
Deere & Co.’s Wind Energy Venture and Industry Challenges
Another company, Deere & Co., also abandoned its wind energy project in 2010, selling its wind energy business to a subsidiary of Exelon for $900 million, after investing over $1 billion in the venture, which was initially seen as an extension of its agricultural work in rural areas, providing further evidence that wind turbine energy may have limited commercial potential.
The Deere company sold its wind energy business to Exelon for $900 million in 2010, with the sold business including thirty-six completed plants in eight states, having an operational capacity of 735 megawatts, which is enough to power nearly 184,000 homes, according to Exelon estimates.
Deere decided to concentrate on making farm equipment after selling the wind turbine business, anticipating a $25 million loss in the fourth quarter of 2010, while Exelon, the largest operator in the United States, was entering the wind turbine business at the time of the sale.
Ethanol as an Alternative Fuel and Its Economic Impacts
The Environmental Protection Agency (EPA) gave approval for cars and light trucks manufactured in 2007 and later to begin using 15 percent ethanol, known as E15, in gasoline on April 2, 2012, which allowed a 50 percent increase from the current permitted limit of 10 percent ethanol in gasoline.
The EPA decision regarding E15 was made in response to a request in March 2009 by Growth Energy, a coalition of US ethanol supporters, and fifty-four ethanol manufacturers who had applied for a waiver to increase the allowable amount of ethanol in gasoline from E10 to E15.
Tom Buis, the chief executive officer of Growth Energy, stated that the use of E15 will reduce the nation’s dependence on foreign oil, keep gas prices down, and help to end the extreme fluctuations in gas prices caused by reliance on fuel from unstable parts of the world.
However, critics like Robert Bryce, a writer on ethanol for Energy Tribune, argue that the Obama administration’s mandates for the use of ethanol are “immoral” because they drive food prices higher and lead to a global shortage of food, with Bryce stating that “we are burning food to make motor fuel at a time when there’s a growing global shortage of food and no shortage of motor fuel”.
The production of ethanol has also been linked to the deaths of poor people in Third World countries, such as Africa, who are dying of famine due to the Obama administration’s political agenda to produce ethanol as a renewable fuel substitute for gasoline.
The 2009 report by the Congressional Budget Office (CBO) found that the increasing demand for corn to produce ethanol contributed to a 10 to 15 percent increase in food prices from April 2007 to April 2008, as measured by the Consumer Price Index, with the production of ethanol raising the prices of a wide variety of foods, including corn syrup sweeteners, meat, dairy, and poultry products.
An assessment by the International Monetary Fund (IMF) was even more pessimistic, with John Lipsky, the First Deputy Managing Director of the IMF, stating that biofuels policies in advanced economies were driving up the prices of key food items, such as corn and soybeans, with IMF estimates suggesting that increased demand for biofuels accounted for 70 percent of the increase in corn prices and 40 percent of the increase in soybean prices.
Economists C. Ford Runge and Benjamin Senauer concluded in an article published in the Council on Foreign Relations’ Foreign Affairs magazine that if the prices of staple foods increased due to the demand for biofuels, the number of food-insecure people in the world would rise by over sixteen million for every percentage point in the real prices of staple foods, with a projected increase of up to 1.2 billion people being chronically hungry by 2025.
Despite heavy government subsidies, the ethanol industry in the United States has a history of unprofitability, with even major producers going bankrupt, such as White Energy, the largest ethanol producer in Texas, which filed for Chapter 11 bankruptcy in May 2009, adding to a string of ethanol industry bankruptcies that have called into question the economic viability of biofuel.
A Congressional Budget Office report issued in April 2009 found that the “break-even ratio” of the price per gallon of retail gasoline to the price per bushel of corn was currently about 0.9, meaning that unless the price of gasoline was more than 90 percent of the price of a bushel of corn, it was not profitable to produce ethanol, even with government subsidies, with the report concluding that gasoline would have to cost about $5.20 a gallon for the production of ethanol to be profitable when corn traded at about $5.78 a bushel.
The US Congress adjourned on January 3, 2012, without extending the multi-billion dollar subsidy for ethanol, which had been in place for over thirty years, resulting in the expiration of the subsidy that had totaled over $20 billion during that period.
Despite the significant subsidies, no viable commercial ethanol energy has emerged in the United States, and many ethanol companies have gone bankrupt, highlighting the fact that biofuels are not necessarily energy efficient.
The production of ethanol may burn up more hydrocarbon fuel than it saves, as it requires various uses of hydrocarbon fuels to convert corn into ethanol, including planting, growing, harvesting, transporting, and converting corn through a chemical process.
An analysis conducted by David Pimentel, a professor of ecology and agriculture at Cornell University, and Tad Patzek, a professor of civil and environmental engineering at the University of California, Berkeley, found that corn requires 29 percent more hydrocarbon energy than the fuel produced, while switch grass requires 45 percent more, and wood biomass requires 57 percent more.
The same analysis also found that soybean plants used to produce biodiesel fuel require 27 percent more hydrocarbon fuel used than produced, and sunflower plants require 118 percent more hydrocarbon fuel used, without factoring in the additional costs of federal and state subsidies passed on to consumers in the form of taxes.
The Solyndra Bankruptcy and Green Economy Challenges
The Solyndra bankruptcy is cited as an example of a “green economy” venture that went bust, despite receiving $535 million in a Department of Energy loan guarantee in 2009, and being touted by President Obama and other high-profile figures as a future leader in the US economy.
Solyndra claimed that cheaper foreign competition from China was the reason for its bankruptcy, but industry experts had a different explanation, and the company’s collapse was seen as an example of the challenges faced by the “green economy” sector.
The supply of photovoltaic panels was expected to triple the level of demand in 2011, according to Axiom Capital Management’s solar power analyst, Gordon Johnson, which would lead to a significant decrease in prices and potentially disastrous consequences for the industry.
The bankruptcy of Solyndra, a solar panel manufacturer, revealed a pattern of the Obama administration providing financial benefits to Obama campaign contributors who invested in green energy businesses, with top Obama fundraiser George Kaiser of Tulsa, Oklahoma, being a major backer of Solyndra.
A Treasury Department report in April 2012 found that the Department of Energy had rushed the consultation process for Solyndra’s loan guarantee, ignoring advice from Treasury officials and limiting their opportunity to review the high-risk financing, leading to accusations of corruption and undue influence.
The FBI and the Energy Department’s inspector general’s office executed a search warrant at Solyndra’s headquarters in September 2011, seizing the company’s records and computers, just two days after the company declared Chapter 11 bankruptcy.
The solar panel industry faced significant challenges due to the entry of low-cost Chinese manufacturers, which undercut US and EU manufacturers, leading to a wave of bankruptcies and insolvencies, with at least seven solar panel manufacturers filing for bankruptcy or declaring insolvency in addition to Solyndra.
Investment Risks in Green Energy: The Quercus Trust Example
David Gelbaum, a major donor to the Sierra Club, the American Civil Liberties Union, and the Democratic National Party, suffered significant financial losses due to his investments in alternative-energy firms, with his investment fund, the Quercus Trust, losing almost 57 percent of its value over an 18-month period from 2008 to 2009.
Gelbaum’s experience served as an example of the risks and challenges associated with investing in green energy, highlighting the difficulties faced by investors and companies in the industry, particularly in the face of intense competition from low-cost manufacturers.
The Quercus Trust, funded by Gelbaum, invested in thirty-four green technology companies as of November 2008, and this number increased to forty-seven companies by January 2009, with Gelbaum taking a long-term and holistic view of the market and being patient with his investments.
Entrepreneurs who received funding from the Quercus Trust stated that Gelbaum was not investing in these companies as a way to promote green energy or as a form of charity, but rather as a legitimate investment opportunity.
Gelbaum’s fortune was significantly diminished due to his investments in green technology start-up companies, with USA Today reporting that he had donated $450 million to environmental causes and invested $500 million in clean technology, but had lost or was at risk of losing hundreds of millions of dollars due to poorly performing investments.
The expansion of wind and solar power has been hindered by the NIMBY syndrome, with many people objecting to the installation of wind turbines and solar panels in their local areas, despite expressing support for alternative energy sources in principle.
Spatial and Practical Challenges of Renewable Energy
The production of significant amounts of renewable energy requires vast amounts of space, with California’s proposal to produce a third of its electricity from renewable sources by 2020 requiring the construction of large solar energy plants in the Mojave Desert, which has been met with resistance from environmentalists.
A study by National Geographic examined the amount of space required for windmill technology to generate 60 percent of New York City’s electricity needs, highlighting the significant land requirements for renewable energy production.
Reporter Jeffrey Ball noted in the Wall Street Journal that the backlash against renewable energy projects is fueled by concerns over the large amounts of land required for these projects, as well as the need for thousands of miles of transmission lines to carry the energy to market.
The Quercus Trust’s investments and Gelbaum’s philanthropic efforts have been documented by various sources, including GreenTechMedia.com, the Wall Street Journal, and USA Today, providing insight into the challenges and complexities of investing in and promoting renewable energy.
The installation of 6,800 turbine windmills, each generating 1.5 megawatts of electricity, would be required to cover an area of 10.6 square miles, which is larger than southern Manhattan, in order to produce a significant amount of electricity.
To deliver the same amount of electricity using solar power, an area of seventy-four square miles would be needed, which would involve the installation of over 145 million solar panels, each delivering 175 watts of power.
In comparison, four nuclear reactors, each capable of delivering one thousand megawatts, would be required to produce the same amount of electricity, with each plant taking up about two square miles.
Limitations of Wind Power and Comparative Analysis
Windmill technology is not effective when the wind is not blowing, and a modern giant windmill can only generate about two megawatts of electricity when the wind is blowing at full capacity, but hardly produces any electricity when the wind is blowing moderately.
According to experts, it would require 1,500 giant windmills operating at full capacity to produce as much energy as one nuclear reactor of 1,500 megawatts, which would be significantly smaller in size.
A 2007 study titled “Calculating the Real Cost of Industrial Wind Power” found that industrial wind projects are becoming unacceptable due to their high costs, and that Denmark, which has a high concentration of wind turbines, is forced to sell its excess wind energy to neighboring countries at a low price.
The study also found that Denmark has the highest consumer electricity charges in Europe, with households paying 100 percent more for their electricity than other European customers, despite having a high amount of installed wind energy.
The Obama Administration’s Energy Policy and Its Consequences
The Obama administration’s national energy policy has favored green energy technologies, such as wind turbine and solar power, despite their limitations and high costs, and has led to the shutdown of coal plants, which has significant implications for the country’s energy landscape.
The failure of renewable energies such as wind turbine and solar power to provide a reliable and efficient source of energy has significant implications for the development of a comprehensive energy policy, and highlights the need for a more balanced approach that takes into account the limitations and costs of different energy sources.
The thirty-year experience with ethanol in the nation has shown that government regulations and subsidies are not enough to make problematic energy technologies into commercially viable realities, as evidenced by scandals such as Solyndra, which demonstrate that corruption is a more likely result when ideology dictates energy policy rather than practical energy realities.
The EPA plans to implement new rules to curb pollution from coal-fired power plants through 2013, which experts estimate will cost utilities up to $129 billion and force the retirement of up to 20 percent of the nation’s coal capacity, resulting in the closure of possibly dozens of electric plants and higher electric bills.
The new EPA regulations highlight the Obama administration’s prioritization of ideology over economic efficiency in dictating the nation’s energy policy, as coal currently powers approximately 45 percent of US electric power.
The Obama administration’s decision to block the Keystone XL pipeline, which would have brought oil from Canadian tar sands to Texas, demonstrates a hostility to hydrocarbon fuels and a return to energy policy being driven by the politics of the environmental movement.
The Obama administration’s energy policy has already cost US taxpayers countless billions in wasted loan guarantees, pointless subsidies, and political corruption, with experts such as Shell Oil’s Hubbert having initially failed to anticipate technological innovations like oil production from Canadian tar sands or US oil shale.
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