Energy Conservation in Transportation
and the Bush Speech on High Gas Prices
by Dennis Silverman
Department of Physics and Astronomy
U. C. Irvine
• President Bush’s
Speech was Given to
the Renewable Fuel
Association
• April 25,2006
Excess or Windfall Profits?
• Oil industry profits were $100 billion last year.
• President Bush always used words of investigating
“market manipulation”, which is illegal and includes price
fixing, but never used the words “excess profits” as being
something he would stop or tax.
• Repeatedly used the words “high cash flow” rather than
high profits.
• Only once at the end did he say the words “price
gouging”.
• In a capitalist economy, in a non-regulated industry, does
“excess profits” have any meaning?
• Perhaps consumers just have to lower demand to the
supply to stabilize or bring down prices.
Corn or Other Crops?
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The President praised corn innumerable times.
Once mentioned other crops might be better.
Once mentioned sugar in Hawaii.
Once mentioned corn husks, straw grass.
Said corn also needed for food and for feedstock.
Talked about 10% ethanol, 85% ethanol, 100% ethanol.
Current 4 billion gallons of ethanol a year is 100 million
barrels of ethanol, or about 11 days of US consumption.
Since ethanol is in short supply but is a mandated
additive and also needed in the switch from MTBE, it
may be one cause of high gas prices.
In waiving such a requirement, is the President telling
the farmers: I came to praise Corn, and to bury it.
Farm income last year was $83 billion, with $23 billion in
subsidies.
Ethanol is subsidized at 50-60¢ per gallon.
Bush solution to high gas prices
• Stop filling strategic reserve (only save 70,000 barrels a
day out of 20 million barrels a day oil consumption).
• Drilling ANWR would have lowered price 50¢ a barrel,
(which is only 1¢ a gallon, and is at least 10 years off).
• (Actually a refinery shortage as a few percent still down
from Katrina, and a few percent being maintained after
being on to make up for Katrina.)
• Waive anti-pollution additives since ethanol in short
supply and states dropping mtbe. (We may not
appreciate the added smog as LA, Long Beach, and
Riverside highest in particulates in the nation.)
• Get governors to use fewer boutique blends, (so can
transport gas between states, but California is isolated).
• Build more refineries (long time scale).
• (We should use some of the reserve of 688 million
barrels to process more gas in the winter and build up
stores.)
Vehicles as Part of the Solution?
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8 cylinder vehicles are 25% of the market.
6 cylinder are 41%.
4 cylinder are only 30%.
Hybrids are 1%, expected to grow to 4% in 6 years.
Bush urged more people to buy hybrids.
Even better, he urged plug-in hybrids which can do 40 mile trips on
electricity alone, but without saying where extra electricity will come
from.
– They cost $2,000 more than a regular hybrid.
– But their usage is equivalent to paying $1.00 to $1.50 per gallon of gas.
• (Cylinder-shutdown engines that change 8 to 4 cylinders when
cruising, can save 10-20% on gas mileage.)
• He touted hydrogen, without discussing where it comes from, or the
inefficiencies involved in producing it.
• Bush is raising SUV and pickup gas standards by 2 miles per gallon
from 2008 to 2011. Congress can raise car standards which have
remained the same since 1985.
Automotive conservation solutions
• Could ask people to:
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Drive less aggressively on the gas pedal
Drive at the speed limit
Plan trips for less total driving
Use their higher gas mileage vehicle more
• Could promote car pooling
• Could promote taking public transportation
• These actions would actually have an immediate effect
on lowering consumption and bringing down the price of
gas.
• In the longer term, people can buy new cars with fewer
cylinders than their past cars, even without getting into
hybrids.
Q. Who’s Driving Up Prices?
• A. We are!
• Our pension and investment companies have been
buying up oil futures in the hope that the price will still
get higher in the future.
• Our government has been pressuring Iran on building
nuclear weapons and delivery systems causing Iranian
threats of disrupting their and Persian Gulf oil which is
20% of world’s supply.
• We continue buying more poor mileage vehicles with no
increase in gas supplies.
• Despite increased prices, we do not respond by driving
less.
• We lavishly reward gas company execs and fund
managers based on profits that they achieve.
What about a windfall profits tax?
• Oil company profits were $100 billion last year.
• Exxon had $36 billion profit on sales of $359 billion in 2005.
– $18 billion was reinvested in the business.
– $16 billion went to purchases to reduce shares outstanding, which will
increase the value of remaining shares
– $ 7 billion was distributed in dividends
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Dividends are taxed to stockholders at up to 33%.
When sold, capital gains on increased value is taxed at 15%.
Exxon paid out $72 billion in taxes and duties in 2005.
So gasoline now has a 50¢ a gallon tax, shareholder profits are
taxed at 15-33%, and the money to buy the gas was already taxed
as customer income tax. The oil companies paid tax or royalty to
the countries of origin.
• Is a 2% windfall profits tax really of any use?
• Some of the basic cost per barrel does go abroad to the producing
countries, and may not be reinvested in the US economy.
Comparative World CO2 Emissions
Q. Who Does Bush and Other
Americans Blame it On?
• A. China, as usual (and India).
• Facts: China and US have increased CO2 emission the
same amount in the last 12 years, so its us too.
• But, China has 4 times our population.
• Their gas mileage is 50% better than ours.
• They have abundant public transportation.
• They are limiting their population to one child per family.
• Some of their energy is being used to produce and ship
products to the US.
• They have completed a dam that will provide renewable
hydroelectric power equivalent to three nuclear reactors.
• They are planning 20-30 nuclear reactors, and may build
many more.
Fuel Economy
Is the price rise a good thing in disguise?
• Some would argue that it will slow down consumption of a finite
resource.
• It certainly should lead to steps for greater fuel efficiency.
• It may take time to do this, since petroleum use only declined 0.6%
last year despite the price rise.
• The longer the higher price continues, the more effect it has on the
consumer’s total budget.
• From the 2001 census, there were 191 million vehicles, with about
14 million per model year for the previous 12 years. So it takes
about 14 years to replace the auto fleet, and buying better mileage
cars will take a long time to have a significant effect. They could be
effective in offsetting increased usage from the population growth.
• It is important to realize that in the timescale of a decade or two, the
price of petroleum will rise a lot due to its eventual depletion anyway,
and we need to start preparing for that now.
Gas Price and Global Warming
• If the refinery and supply shortage is due to Katrina’s
effect,
• if Katrina’s excess strength was due to higher water
temperature,
• and if the higher water temperature was due to global
warming,
• then the higher gas price is a feedback of global
warming trying to slow itself down.
• The flooding of New Orleans wasn’t expected for a
century from global warming. The effect on Gulf oil
sources and refineries was not foreseen. Nor the
feedback loop through the gas shortage and price rise.
• Nature often works in catastrophic and unforeseen ways.
• UC Irvine Earth System Science is hiring three
professors in abrupt climate change.
Conservation
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Limiting world population
Limiting population of largest CO2 producing countries
Mass transit: Riding a bus or train uses ¼ the gas of a car.
Transit Villages built around transportation lines
In Europe, per capita gas usage is 286 liters/year compared to 1,624
liters/year in the U. S.
• Fuel economy improvements: CO2 emissions from new European
cars fell by 12 percent from 1995 to 2003, and manufacturers have
voluntarily pledged to reduce them by a further 14 per cent by 2008
• Hybrid and Electric cars, cylinder shut down engines
• Transportation decreases
– internet and communications for business
– telecommuting
– urban structuring
• Traffic improvement, 93 hours a year lost in traffic jams.
• Energy cost increases will drive conservation: however, this sends
the increased profits to OPEC.
• CO2 production taxes and increased fuel taxes keeps the added
price and payments to slow demand at home for use in conversion.
Cost of Gasoline and Taxes
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The cost of gas is around $6/gallon in Britain.
60% of the cost of gas in Europe goes to taxes.
Gas taxes per gallon in various countries:
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Great Britain $3.40
Italy
$2.53
Germany
$2.56
Japan
$2.04
US Federal Excise Tax per gallon is $0.18
– California Excise Tax is $0.18
• Wisconsin is $0.31, Alaska is $0.08
– California State and Local Taxes are $0.14
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Total tax in California is $0.50/gallon
One way to look at a problem of a true lasting shortage, is that the price has
to rise until consumption equal supply. Rather than all the extra money
going to profits or overseas countries, we could raise the tax the amount
needed, as Europe and Japan do, and keep the extra profit for alternate
energy investments, or balancing the budget.