Banning Gasoline and Diesel: It’s Happening
As part of a movement that appears to be sweeping the developed world, France has announced that it will ban the sale of all automobiles that run on gasoline and diesel by 2040. Two remarks:
• How long before all this starts to affect investors’ appetite for the oil companies’ stocks and bonds? Yes, I know that 2040 is 23 years from now, and Wall Street generally doesn’t care about anything even remotely long-term, but it looks like the Netherlands is going to make this happen by 2025. Do investors really want to run the risk of being left holding the bag?
• Making a policy decision to phase out fossil fuels is something every civilized nation should do. Conversely, a statement, even an implicit one, to the effect that “we plan to use fossil fuels in perpetuity” is really saying either, “We don’t understand and respect science,” or “We get the science, but all we care about is making our rich people richer; the rest of you can go to hell.”
That doesn’t sound like a very nice place to live, does it?
It would be nice if we had real forward thinking again.
When JFK announced that we would go to the moon, we did not have the technology to do so, nor did we know how we were going to get there from the point of the announcement.
But he said “we will do this”, then we as a country FUNDED a massive R&D project that attempted to make it so.
If the U.S. were to say “we will eliminate all coal usage by 2040.”, and immediately began pouring resources into nuclear, renewables, fracking expansion, and efficiency technology while introduction a slate of carrot and stick taxes and subsidies that would gradually set in over the next 23 years… We might be able to pull it off. It would be REALLY cool if we could pull it off, and the worst case if we failed was that we would have drastically improved our infrastructure and radically reduced our pollution levels.
I was and am a huge fan of Obama, and I consider him to be one of the nation’s top 10 presidents (probably around #8)… but this was one unfortunate failing of his (shared by every other president since Reagan): He refused to really take a chance on something far reaching and world changing. It would be nice if the U.S. did that.
Not with EV’s, that would be silly… but I’d love to see us try something like that with coal.
Glenn,
When president Kennedy came into office the US was the richest nation on earth. The US economy was expanding at an unprecedented pace, with huge surpluses and a small National Debt, mostly accumulated in long term infrastructure investments.
Private debt was low, the nation was fully employed and the US economically strode the world as a colossal super power. (Nearly 40% of the world GDP).
The US had no trade rivals. A nation with vast accumulated national treasure and assets. US Presidents could afford to lead the world. For many years in the late 40’s to late ’60’s the US balanced the world economy on its own domestic budget surplus.
The US could afford anything !
The illusion of this situation lasted until the last years of the Obama administration. Obama maintained the illusion, but by smoke and mirrors.
The US of President Trump is a very different place.
Although Kennedy’s 180 million population has only risen to 320 million the national debt has ballooned from $176 billion, to $23 trillion.
Private debt is at an unprecedented level. Even more alarming is the national debt isn’t invested in infrastructure but finance more debt.
The US is being beaten by powerful new trade rivals, the economy shrinks while US infrastructure decays. The US is a nation in steep decline. Worse, the national economy is now deeply fragmented with a least 1/3rd of the population in deep denial.
President Trump’s speech in Poland this month was both historic and sad. He’s the first US President forced to manage a US in retreat.
To a lessor extent, this is true of the whole Western World.
The US is broke, it’s living on credit cards.
Obama didn’t want to believe the US economy could no longer afford grand romantic projects so he avoided reality and pretended the nation could continue to afford investing borrowed money into grandiose ‘symbolic’ gestures.
In 2017, Coal will produce 32.6% Natural gas = 31.4% and Nuclear = 19.7% of all US electricity. Allowing for a realistic growth in technology and storage, alternate power sources may reach as much as 25% by 2040, but these technologies are reaching the limits of development, only in the energy storage is at an early stage.
The US just can’t afford to turn it’s back on coal. The best the US can do is try to develop clean methods of coal production and generation as possible.
What’s really scary is the US has transferred or exported nearly all it’s biggest power consumers abroad creating an illusion of a drop in emissions.
“The Arsenal of Democracy’ has become a service nation, selling hamburgers to each other over the internet.
Like the President, I have no miracle cure. However, like the UK’s Boris Johnston, I know when things are headed in the wrong direction.
While the US is floundering, racked by internal internecine discord, the rivals are at the gates. The US hasn’t got four more years to waste fighting itself.
Maybe Trump isn’t the best President, but he’s the only President, and at least he’s got the pragmatism to understand the US predicament.
Obama was a much more cultured and sophisticated individual, but his Presidency was an economic illusion. He got lucky with fracking and other oil technology creating a domestic energy boom. He promptly wasted this bonanza on grand gestures, pandering to the affluent new economy while papering over the decay and stagnation of the old economy.
His commitment to “globalization” and high sounding moral symbolism reduced the US to near impotence.
Perhaps, like Craig, living in an affluent suburb, you can afford to keep living an illusion, but ask the folks in Detroit, or those forgotten 35% of Americans living near or below the poverty line. Ask the other 30% just getting by day to day on credit, one pay cheque away from poverty, Ask them how they feel !
There’s just no money left for “grand gestures”. Today even the once mighty US economy must exercise prudence.
Better start learning to make the most of what you have, and the improvement you can afford.
Marcopolo.
I realize that there are times when you are not just trolling. You are a professional and have legitimate concerns and a knowledge base, and you just have a different perspective than I.
When you try to make honest and reasonable perspectives, I want to reply in kind. I feel it’s good for everyone to tone it down.
But I must say this: It’s incredibly hard to take anyone seriously when they use “nominal” figures to compare monetary situations that are separated by 50 years of fiat currency expansion. Economic analysis on that level is so absurd it’s just impossible to take seriously.
You have a point considering the lack of trade rivals. But trade is not a zero sum game. We are spending money on stuff, and receiving stuff. We therefore are not experiencing a net LOSS of ~40 billion per month. We’re buying a net total of 40 billion per month more than we’re spending. That’s not the same.
As for the debt and deficit. Obama inherited a deficit of 9.8% of GDP, and over the course of 8 years reduced that deficit to ~3% GDP (it bottomed out at 2.5% in 2016). A deficit of 3% GDP is sustainable, but it should – logically – be reduced further to near zero percent or even (gasp) negative.. because we are in a boom economy. The idea behind debt financing is that you are supposed to reduce deficits, and eventually debts, while the economy is booming. This gives spare credit and more flexibility to ramp up the debt when the economy contracts.
Obama was sworn in during the second greatest economic contraction in history. Yes deficits were high, but as the economy began to get back on its feet those deficits shrank at a record pace.
There is absolutely nothing in Trump’s budget and tax policy that speaks to an administration seeking to further reduce the deficit. If he gets what he wants, the deficits will soar. Your point is wholly invalid.
2016 wasn’t “smoke and mirrors”. We were the stongest economy in the world, by far, and we were growing faster than all other industrialized economies, while reducing our deficits faster than all other industrialized economies, and increasing our real household income and real median wage at a near record pace.
Concerning electricity. 2016 had total coal generation equaling 30.3% of all electricity generated in the U.S, and a lower percentage of all electricity consumed (we import quite a few TWh from Canada’s hydropower generation). 2016 also had 33.8% of the electricity generated by natural gas, and 19.7% from nuclear (you were right on that one).
In 2015, the stats were 33.1% coal, 32.7% natural gas, and 19.5% nuclear. In a single year, coal dropped 2.8% as a portion of our power grid, and you claim that it is unthinkable for coal to diminish further to 0% within 23 years?
No.
The first 4 months of 2016 saw 8.5% of U.S. generation from “renewable excluding hydropower”, and the first 4 months of 2017 saw that increase to 9.6%. We’re gaining nearly 1% per year just in non-hydropower renewables. Once continued natural gas expansion and final completion of all the new nuclear reactors that began construction in the past decade are factored in, getting rid of the remaining 30% of our energy that comes from coal is DOable. Pretending otherwise is folly.
But I will acknowledge that getting rid of all of the rest of the coal in only 23 years will be very hard, and will take leadership that is trying to help the country… which is the opposite of what we have now.
Glenn,
I think if you look carefully are your figures you will see the real difference is Natural Gas replacing coal.
Natural gas production, like oil is currently booming, but Gas is also increasingly in demand because of low prices. As demand increases and production slows, coal will become more competitive.
The idea that because in any individual year a percentage increase will continue multiplying isn’t logical.
However, I agree advanced nuclear technology, especially thorium mini-reactors, have the potential to make coal uneconomic.
Marcopolo,
Who is denying that coal is mostly eroding due to competition from natural gas? That’s your straw man. I didn’t deny that nor contest that even once.
From a climate change perspective, coal is ~twice as bad as natural gas, and from a “destruction of ecosystem”, fracking leaves a few thousand small holes in the ground while coal is harvested by blowing up mountains and polluting rivers with millions of tons of ash. Coal also has thousandsfold more heavy metal emissions, hundredsfold more PAH emissions, dozensfold more soot and black carbon emissions, severalfold greater NOx and Sulfate emissions, and billionsfold more radioactive isotope emissions.
Switching from coal to natural gas and nuclear is a good thing. Further switching from natural gas to nuclear and renewables is also a good thing, but that fruit is often higher in the trees, as it were… yielding less benefit per cost. It’s important, but not as important as the immediate goal of scrapping the entire coal industry.
Glenn,
I’m glad to see you support fracking.
I think the fundamental difference between us when you demand something like abolishing US coal production you don’t ask yourself three questions.
1) Can the US economically replace 30 % of energy production without suffering severe economic consequences ?
2) Will Natural Gas resources remain sufficiently low priced and plentiful ?
3) Is it more economic to develop and employ emerging “clean(er)” coal technologies.
For myself, I prefer to be cautious and explore all the options, rather than recklessly insist on the abolition of an industry, the consequences of which are very likely to cause irreparable economic misery and disaster.
Glenn,
My comparison of 50 years was to illustrate the difference you drew between the US in the late fifties and sixties and today.
The difference is very stark. In the 1950’s the US was an immensely rich, optimistic, expansionist nation with with no economic rivals and immense optimism.
Today’s America is very different. The economy has shrunk while it’s rivals have grown exponentially to occupy the place America once enjoyed. The US is now a debt ridden nation in retreat.
My point is the US can’t afford to waste resources on grand gestures. The remaining available credit, capital and resources must be invested in domestic reform and restructure to equip the whole US economy, (and people) to meet the challenge and competition of the 21st century.
Of course, what I’ve just written is a generalization. It’s intended as a broad answer to a very broad proposition.
In time the problem of coal resource exploitation will resolve itself by scarcity and the development of more economically viable technology. The only way to finance the development of such technology is from the coal’s contribution to economic US prosperity in the interim.
India, and other nations are racing ahead with successful new technologies, including coal sequestration, while the US is burying itself with endless and poorly conceived political/ideological internecine warfare.
I would invite you to consider some examples;
1) The byzantine labyrinth of regulations to develop advanced nuclear technology.
2) The opposition to pipelines (even though natural gas is the currently the most viable alternative to coal) . Check out an exciting new development in environmental pipeline technology at [ http://www.longpipes. com.au ]
3)Total opposition to fracking. Despite endorsement from the US EPA, and the technology underpinning the US economy, the campaign against fracking continues.
I’m just a little puzzled by your concept that “buying stuff is not the same as spending” ?
I think you mean what you buy remains an asset, therefore is not just a loss ?
Regrettably, that’s not the case. Very little of US incoming trade is spent on asset building or infrastructure. Most imports are simply consumer goods that put US enterprises out of business, increase US dependency on foreign imports, and increase debt with little tangible benefit.
Nor is President Obama solely to blame. He came at a time when the cancer had been growing for several decades. He did his best, but, like so many Americans, failed or simply didn’t want to understand the changed circumstances the US is now experiencing.
A glance at [http://www.usdebtclock.org/] should terrify all US legislators, and every American.
As I also said, although President Trump seems to understand the predicament, he appears to lack the ability to do anything about it.
This assessment maybe unfair to to the President and his administration, who are very inexperienced and meeting an incredible level of outrage and opposition.
The world still needs a strong US. But, President Trump’s right one thing at least, those countries who expect the US to continue propping up the global economy at the expense of the US, are in for rude awakening.
Marcopolo,
I won’t bother going through this further because you’ve switched back to trolling. But suffice it to say that I had no problem with you comparing 1961 and 2017, I had a problem with you doing so using nominal numbers.
I suspect that you have sufficient sophistication here to know what I’m talking about… so your protestations are just distractions in a desperate attempt to keep selling what you know to be bullshit. If I’m wrong, and you really don’t know what you are talking about… then my apologies.
FWIW, in 1960 we had a debt of something like 53%. Today it’s around 78%. That’s higher, but that doesn’t preclude us from spending 1% of our GDP towards a major national effort (We wouldn’t even need the 94% top marginal tax rate from 1960). If we did spend that much, we’d see generation from nuclear and renewables increase by more than 1.5 PWh within the next 23 years.
Glenn,
Setting aside all the gratuitous abuse, you seem to be insisting that the US in 2017, is a richer, more optimistic nation than in 1960.
In 1960 the US had no economic rivals. US debt was easily managed within a fast expanding economy where public debt was largely invested in building national infrastructure.
The US was a completely self-sufficient nation. It only needed to buy from other nations to provide export opportunities to cope with over production in the US.
Despite the economic burden of the Vietnam war Nixon lowed national debt to 245 of GDP in 1973.
According to the Congressional budget office “debt held by the public was approximately $13.84 trillion or about 76% of GDP. Intra-governmental holdings stood at $5.35 trillion, giving a combined total public debt of $19.19 trillion.
U.S. GDP for the previous 12 months was approximately $18.15 trillion, creating a total debt to GDP ratio of approximately 106% “.
(Maybe the CBO is “trolling”!)
But the most significant difference between 1960 and 2017, is who owns US debt.
In 1960, almost all US national debt was owned by US institutions.
In 2017 the US national debt is 48.7 % overtly owned by foreign nations or institutions. ( in particular the PRC,(28%)) Japan 6% etc.
Another 16% of National Debt is owned by institutions of international ownership.
The US has a shrinking tax base. Although the US oil industry remains the largest taxpayer, contributions from the “new economy” are minimal. (Chevron pays more tax than than all Silicone Valley corporations).
The claim the national debt has been created by buying imported consumer goods at the expense of US industry is an exaggeration, but doesn’t lack truth.
The Government Accountability Office warns the long ignored unfunded liabilities (things like Medicare, Medicaid and Social Security) will start to impact the US economy within 5 years.
$7.7 trillion relating to Social Security, and $38.2 trillion for Medicare and Medicaid, will add tho the national debt within the term of the current administration.
The US taxpayer burden of $8000 per capita, will increase to $ 17,000.
The cost of interest payments will greatly increase, since unlike 1960, the majority of those payments will be remitted to foreigners, causing the American economy to futrther deteriorate.
The US can’t spend 2% of it’s GDP on anything ! There are no surplus funds !The US is, and has been for some time, living on it’s credit card.
Without the current domestic oil and gas boom, the US would already be experiencing severe economic collapse.
It’s painful for Americans to accept, but the glory day’s of financing grandiose projects are over.
Taxing the rich, no longer works. It doesn’t work in a globalized economy with internationalized fast movements of money, and would only result in discouraging investment and a further deterioration of the US economy.
The US must capitalize on it’s energy boom to become less dependent on imports while increasing exports.
On the other hand, the rest of the world can’t afford an US collapse. So the US and it’s creditors are locked in a macabre dance of economic gamble.
Craig,
” How long before all this starts to affect investors’ appetite for the oil companies’ stocks and bonds? ”
Hopefully never ! The least profitable product produced by oil companies is gasoline and diesel. Petro-chemicals are far more profitable and fertilizer is a future product of far greater potential than transport fuel.
The oil industry produces approximately 350,000 products, from paint to medicine. Originally, gasoline was a waste product of oil production. Between 1978 and 1987 refining technology underwent a revolution. Today the refining process from crude to petro-chemical base produces less than 2% waste.
Did you realize that nearly 30% of Tesla model S components are products of the oil industry ?
So yeah, Oil companies will be around a long time !
Also, you shouldn’t take media headlines so literally. The Netherlands has announced it’s intention to ban the sale of new ICE vehicles by 2025. That’s sound great, until you realize the Netherlands isn’t banning the sale of gasoline/diesel and being a member of the EU citizens of the Netherlands can simply buy a car in Belgium or Germany.
The Netherlands is a tiny country and any “banning’ will be largely symbolic.
Just recently the PRC-Geeley owned Swedish car maker Volvo, announced proudly it was going to produce only Electric vehicles. Causing headlines such as “Volvo plans to build only electric and hybrid vehicles starting in 2019 ”
Again, sounds great ! But before you get too excited, a closer examination reveals that the Volvo definition of “Hybrid” means installing a 48 volt instead of a 12 volt battery system.
Lot’s of ‘Symbolism” but little substance.