The "Foreign Oil" vs "Domestic Oil" Fallacy

President Obama may have thought he was appealing to patriotic instincts, but his speech at Georgetown University sent the wrong message by promoting the fallacy that we can save our economy by driling for more "domestic oil" to reduce our dependence on "foreign oil."

Webster's defines a "fallacy" as "an often plausible argument using false or invalid inference." That is exactly what our elected officials are selling us. President Obama's argument that we can reduce our dependence on foreign oil by drilling in the the Gulf is plausible, as is Republican Senator Mitch McConnell's retort that even more oil could be produced by drilling in Alaska. The false inference is that drilling for more domestic oil will somehow end the cycles of energy crises that have triggered economic recessions since the 1970's.

Here are the facts:

More domestic crude oil will not shield us from higher and more erratic oil prices in global markets. Most of our imported oil comes from Canada and Mexico. We do not import any meaningful quantities from Tunisia, Egypt or Libya. Yet, the oil we buy from Canada and Mexico also costs more than $100 per barrel, just like the oil from countries in turmoil. Because oil prices are set by a global market. Even if we drill for more oil in the US, the price of all our oil will be determined by OPEC, increasing demand from China and other developing countries, and instability in the Middle East. [After this post first appeared, some readers pointed out that reducing foreign oil imports will help reduce the balance of trade deficit. True, but getting there by producing more domestic crude is not the solution, for reasons explained below.]

More domestic crude oil will not decrease environmental harms. Whether we burn domestic or foreign oil, the impact on the environment is the same. Indeed, more drilling in the US will result in more environmental harms, not less. Remember that the BP Deepwater Horizon and the Exxon Valdez catastrophes were the direct result of domestic oil production. Expect even more of these types of disasters as domestic oil production expands into environmentally sensitive areas, especially when the multinational oil industry wraps itself in our flag and argues for more lenient regulations in the name of reducing our dependence on "foreign" oil.

More domestic crude oil will not increase the supply of domestic gasoline, diesel, or other refined products. Our US refineries have been operating at 85% to 90% capacity throughout the Great Recession. This is very close to full capacity because refineries must shut down periodically for maintenance and safety reasons. That is why nearly 25% of our oil imports are in the form of refined products. We do not have the capacity in the US to refine more crude oil into useful products. Even if we produce more oil from domestic sources to replace "foreign oil," that will not result in more refined products in the US market. As the economy recovers and demand increases, we will need to import even more refined products from foreign countries.

More domestic crude oil will not make us more competitive with China, India, and Europe. Markets in the rest of the world are shifting to sustainable energy. Germany is getting almost 20% of its energy from renewable sources right now. GE just bought a French technology company and anticipates creating large numbers of renewable energy jobs in Europe where government policies favor sustainable energy. China is outpacing us in sustainable energy investments. In the short run, these countries are creating new jobs in new industries. In the long run, they will have less expensive sources of energy.

President Obama's embrace of more domestic oil production as the solution to "foreign oil" is tragic on many levels. It resulted in news headlines that distracted citizens from many other initiatives that he has promoted to wean the US from oil, domestic or foreign. It weakened him politically by damping the enthusiasm of environmentalists and others on the left who are his natural base, while emboldening those who support dirty fuels. At the same time, he sent a confusing message to vast numbers of independent voters by suggesting that the dirty energy advocates have a legitimate argument when they say that drilling for more domestic oil is a solution. That lets his critics avoid the very tough question of how we will wean ourselves from dirty fuels.

Most tragically, the President's willingness to promote domestic oil as a solution to "foreign oil" appears to represent an abandonment of the one thing that will ultimately help us move to a more sustainable energy infrastructure -- using government policy to change the economics of energy. If we really want to build a sustainable energy infrastructure, we should start by: (a) phasing out all direct and indirect government subsidies for dirty fuels over a seven-year period; and (b) including the cost of pollution and related harms to human health in the price of dirty fuels. Not only would that spur investment in clean energy technologies, but it would also reduce the government deficit and the trade deficit.

John Howley
Woodbridge, New Jersey

A Grandmother's Rant About the Good, Green Ol' Days

My mother, the grandmother of eight grandchildren, periodically includes me when she sends around emails to her friends. Her latest missive is about an unknown grandmother accused of not living a green and sustainable life. If you can look beyond the sarcasm and hyperbole, you'll find some thought-provoking kernels of truth. Here it is:

A Grandmother's Rant About the Good, Green Ol' Days

In the line at the store, the cashier told the older woman that she should bring her own grocery bag because plastic bags weren't good for the environment. The woman apologized to him and explained, "We didn't have the green thing back in my day."

The clerk responded, "That's our problem today. The former generation did not care enough to save our environment." He was right, that generation didn't have the green thing in its day. Back then, they returned their milk bottles, soda bottles and beer bottles to the store. The store sent them back to the plant to be washed and sterilized and refilled, so it could use the same bottles over and over. So they really were recycled. But they didn't have the green thing back in that customer's day.

In her day, they walked up stairs, because they didn't have an escalator in every store and office building. They walked to the grocery store and didn't climb into a 300-horsepower machine every time they had to go two blocks. But she was right. They didn't have the green thing in her day.

Back then, they washed the baby's diapers because they didn't have the throw-away kind. They dried clothes on a line, not in an energy gobbling machine burning up 220 volts -- wind and solar power really did dry the clothes. Kids got hand-me-down clothes from their brothers or sisters, not always brand-new clothing. But that old lady is right; they didn't have the green thing back in her day.

Back then, they had one TV, or radio, in the house -- not a TV in every room. And the TV had a small screen the size of a handkerchief, not a screen the size of the state of Montana. In the kitchen, they blended and stirred by hand because they didn't have electric machines to do everything for you.

When they packaged a fragile item to send in the mail, they used a wadded up old newspaper to cushion it, not Styrofoam or plastic bubble wrap. Back then, they didn't fire up an engine and burn gasoline just to cut the lawn. They used a push mower that ran on human power. They exercised by -- this is the Honest-to-God Truth! -- working so they didn't need to go to a health club to run on treadmills that operate on electricity. But she's right; they didn't have the green thing back then.

They drank from a fountain when they were thirsty instead of using a cup or a plastic bottle every time they had a drink of water. They refilled their writing pens with ink instead of buying a new pen, and they replaced the razor blades in a razor instead of throwing away the whole razor just because the blade got dull. But they didn't have the green thing back then.

Back then, people took the streetcar or a bus and kids rode their bikes to school or rode the school bus instead of turning their moms into a 24-hour taxi service. They had one electrical outlet in a room, not an entire bank of sockets to power a dozen appliances. And they didn't need a computerized gadget to receive a signal beamed from satellites 2,000 miles out in space in order to find the nearest pizza joint.

But isn't it sad? The current generation laments how wasteful the old folks were just because they didn't have the green thing back then?

(If anyone knows the author, please let me know so I can give them appropriate recognition.)

John Howley
www.john-howley.com

Jasmine Revolutions: How Long Will Oil Supplies Be At Risk?

Today's Jasmine Revolutions are taking place on the 25th anniversary of the People Power Revolution that ousted the Marcos dictatorship in the Philippines. The aftermath of the Philippine revolution suggests that, in hindsight, ousting the old leaders in the Middle East will seem like the easy part. Building a new society and new institutions will likely result in at least a decade of uncertainty, power struggles, and dramatic changes in economic and strategic relationships.

To those who say that the Philippines presents a much different situation than the Middle East, I agree. The Philippines was far better prepared for a transition away from dictatorship and crony capitalism. The differences raise a real concern that the Middle East is in for a long period of uncertainty and instability. This is not a good time for the US economy to be dependent on petroleum.

Who's In Charge?

Long before Marcos left the Philippines, a large and well-organized opposition had developed both inside and outside the country. A new leader, Corazon Aquino, was elected before Marcos was overthrown, and she was able to assume power literally on the day the dictator left. She enjoyed widespread support from the masses and elites, including the full support of the Catholic Church and key business organizations. She also was recognized immediately by the international community as the legitimate leader of the country.

This did not stop powerful factions from attempting to overthrow her new government. President Aquino faced six coup attempts during her first 18 months in office. She continued to fight off coup attempts during her entire six-year term, including one in 1989 (her third year in office) when a faction within the armed forces seized control of 22 high-rise buildings in the central business district and five major military bases throughout the country.

None of the countries in the Middle East will begin its post-revolution period with leaders who have the type of legitimacy and support that President Aquino enjoyed in the Philippines. In some Middle Eastern countries, there is no clear leadership of the revolution. In others, factions will fight among themselves for control or question whether new leaders have enough distance from the old regimes. It will take time before new leaders are selected and establish their legitimacy. This leaves countries in the Middle East at a much greater risk of factional infighting and counter-revolutions. Risks that could disrupt oil production and/or exports.

The Power of Nationalism

Leaders of the Philippine revolution had extraordinarily good and close relations with the U.S. President Aquino attended high school in Philadelphia and college in New York. Fidel Ramos, her critical supporter among the military and her successor as President, studied at West Point and maintained lifelong friendships with many U.S. leaders including his West Point classmate, former U.S. Secretary of State Alexander Haig. Important leaders in the Philippine business community and legal profession studied at U.S. universities. When the People Power Revolution took place, every Filipino over the age of 50 had personal recollections of U.S. soldiers liberating their country from the brutal Japanese occupation during World War II. Some Filipino leaders knew General Douglas MacArthur personally.

Nationalism, however, is a powerful force. Especially when combined with memories of U.S. support for the Marcos dictatorship and perceptions that U.S. businesses had unfairly exploited Philippine resources. A new Philippine constitution prohibited foreign involvement in key industries such as mining and gave preference to Filipinos in all matters of "the national economy and patrimony." The new Philippine Senate refused to renew leases on U.S. military bases and effectively kicked the U.S. military out of the country.

If this is what happened with one of America's closest of friends and allies, we can only guess what might happen in Middle Eastern countries without such close ties or warm feelings towards Americans. Nationalism and less than favorable perceptions of the U.S. could result in very significant changes in economic and strategic relationships.

The Power of Generational Shifts

The Philippines in 1986 and the countries going through Jasmine Revolutions today have one striking similarity. Their revolutions occurred at times of shifting generations. In 1986, more than half of all Filipinos were under the age of 30. Unlike their parents and grandparents who viewed the U.S. and other Western nations with admiration and respect, these young people knew the U.S. mostly as the country that provided money and arms to support the Marcos dictatorship. They saw the U.S. leave Vietnam and the British leave Hong Kong. They saw Singapore, Vietnam, Thailand, China and other neighbors growing economically. Telling the U.S. military to leave the Philippines and reserving economic opportunities for Filipinos was a natural extension of the trends they saw personally in the region.

A similar generational shift is happening now in the countries undergoing Jasmine Revolutions. More than half the people in Tunisia and Bahrain are under the age of 30. In Egypt, Libya and Oman, more than half the people are under the age of 24. In Yemen, more than half the people are under the age of 18. The greatest economic development story in these young people's lives is the rise of China, India, and Brazil to the status of major players in the global economy. In contrast, they have seen the U.S. suffer from severe economic and terrorist shocks. They have also seen the U.S. invade Iraq. Their countries' economic and strategic relationships will form against this backdrop.

Lessons Learned

The Philippines experience suggests that we will see at least a decade of uncertainty, power struggles, and dramatic changes in economic and strategic relationships in the Middle East. There may be sudden disruptions of oil production and/or exports as factions struggle to control the wealth of these nations and chart a new course. Consistent supplies of petroleum cannot be assured.

John Howley
Woodbridge, New Jersey

Jasmine Revolutions: How Much Oil is at Risk?

How much oil is at risk in the countries undergoing Jasmine Revolutions? Not much in total volumes, but more than enough to have a very significant impact on prices. To put this in perspective, let's look at how much oil the US needs on a daily basis.

The US consumes about 18.7 million barrels of oil per day (bbl/day). US domestic oil production averages about 9 million bbl/day, resulting in a deficit of about 9.7 million bbl/day. Because of a number of factors, including the need to match oil grades with refinery capacity and end uses, however, the US imports about 11.7 million bbl/day.

In other words, the US imports more than 50% of the oil it consumes.

Now we could start breaking down our imports into reliable and less reliable suppliers Canda and Mexio, for example, supply about 30% of US oil imports. That sounds relatively safe. But that would miss the point. Once you start importing oil, you are in a global oil market where changes in supply and/or demand in even one country can have an impact on the price Americans must pay for oil imports.

The country that is causing the most concern about oil prices right now is Libya. Ranked 18th in world oil production, Libya produces about 1.79 million bbl/day and exports about 1.5 million bbl/day.

The other countries in the midst of Jasmine Revolutions are even smaller producers. Oman is ranked 25th with production of 816,000 bbl/day. Egypt is ranked 29th with 680,000 bbl/day. Yemen is ranked 37th with 288,000 bbl/day. Tunisia is ranked 54th with 91,000 bbl/day. Bahrain is ranked 63rd with 49,000 bbl/day.

The US imports only about 79,000 bbl/day from Libya, less than a rounding error when you consider how much oil the US imports every day, so you might be tempted to think problems in Libya won't have much of an impact on US prices. But you would be wrong. If Libyan oil exports to Europe were disrupted, the Europeans would have to find oil someplace else. That would drive up the price of the 11.7 million bbl/day that the US must import from world markets.

We also have to consider the particular grade of oil. Libyan oil is known as sweet crude because of its low sulfur content. This is, in layman's terms, a premium product because you get much more gasoline, diesel, and kerosene from sweet crude than from sour crude. A loss of sweet crude simply cannot be made up with an equal amount of sour crude.

There is some good news. Libya requires revenues from oil exports to function. Oil exports account for about 45% of Libya's Gross Domestic Product (GDP). In the long run, regardless of who runs that country, they will have a very big incentive to keep the oil flowing. In the short run, OPEC probably has enough spare capacity to get us through any short-term disruptions. At least as long as the global economy continues to recover from a recession. But if demand picks up shar

How much will OPEC allow the price to rise? Tough to say with any precision. We know what happens if oil goes into the $140 per barrel range. The last time that happened, it triggered the Great Recession. We also know that the economy seems to tolerate prices at $90 to $100 per barrel without going into a tailspin. The consensus view among analysts seems to be that prices at or above $100 per barrel may be the new normal. With the very real possibility of prices at the $120 per barrel level if OPEC sees a need to tamp down demand or if markets get jittery in response to events in Libya or elsewhere.

So how much oil is at risk? The answer is: More than enough that we should be concerned.

John Howley
Woodbridge, New Jersey

Carbon Regulation is Already Here

Most people talk about carbon taxes, cap and trade, and other carbon-related costs and regulations as if they were something new and unusual. In fact, most companies already face a very complex environmental and Greenhouse Gas (GHG) regulatory system that includes both private standards and government laws and regulations.

The private and public restraints on GHG emissions range from the Walmart Sustainability Index that requires 100,000 Walmart suppliers to disclose their carbon footprints and sustainability initiatives, to regional GHG cap and trade programs that require power plants to reduce their emissions or purchase allowances in an open auction. And, of course, the 1990 Clean Air Act Amendments instituted a cap and trade program for acid rain that achieved 100% compliance in reducing sulfur dioxide emissions during the 1990's.

The most prominent GHG cap and trade program today is the Regional Greenhouse Gas Initiative (RGGI). The ten Northeastern and Mid-Atlantic states that comprise RGGI have agreed to a mandatory, market-based effort to reduce greenhouse gas emissions. The member states have capped CO2 emissions from the power sector with the goal of reducing those emissions by 10% by 2018. States sell nearly all emission allowances through auctions and invest proceeds in consumer benefits: energy efficiency, renewable energy, and other clean energy technologies.

Similarly, the Western Climate Initiative (WCI) is a collaboration of seven western US states and three Canadian provinces working together to identify, evaluate, and implement policies to reduce greenhouse gas emissions, spur investment in clean-energy technologies that create green jobs, and reduce dependence on imported oil. WCI has announced plans to implement a cap-and-trade system in January 2012 that will provide financial incentives to reduce carbon emissions. The program will start with power plants, then extend to large industrial producers and transportation.

These GHG cap and trade programs, however, are only the highly visible tip of the iceberg. Almost every company in the US faces a complex web of private standards and public laws that regulate their GHG emissions, other environmental impacts, and overall sustainability. CERCLA, RCRA, NEPA, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Ocean Dumping Act, and the Endangered Species Act are just a few of the US laws regulating the environmental impacts of companies and individuals in the US. Companies that export to Europe must also be aware of the specific regulatory, green labeling, and other environmental requirements in the European Union and locally.

My good friend Stan Alpert believes that smart companies can use their compliance with environmental regulations as a competitive advantage and ultimately to reduce costs. Stan should know. In addition to working for many years as the Chief Environmental Prosecutor in the U.S. Attorney's Office that covers parts of New York City and all of Long Island, Stan has extensive experience as a lawyer in private practice advising green and sustainable businesses.

Stan has put together a free online webinar entitled Sustainability is Smart Business: A Legal Perspective. The seminar covers the triple bottom line, carbon regulation in the US and internationally, and toxin reduction in the product and waste streams. Businesspeople can view the webinar by clicking here. US lawyers who wish to receive free Continuing Legal Education (CLE) credits for watching the webinar can view it by clicking here.

John Howley
Woodbridge, New Jersey

Could This Be The Year for the All-Electric Car?

The stars are finally aligning for what might be the year of the electric car. Demand will be there as gasoline prices are expected to hit $4 per gallon this summer. Consumers will be able to test drive all-electric vehicles at car rental agencies such as Hertz, and a number of different manufacturers will offer a range of models to choose from. The infrastructure -- a network of electric recharging stations -- is starting to fall into place. There's even an iPhone app that will tell you where the nearest charging station is located.

Let's begin with demand for all-electric vehicles. As noted in yesterday's post, most experts expect oil prices to exceed $100 per barrel this year. That means gasoline prices above $4 per gallon this summer. And high prices are most likely here to stay. While most analysts expect that OPEC will try to keep prices in the $100 to $150 range, Morgan Stanley and others question whether they have enough capacity to keep up with increasing demand from China and other emerging economies. If not, then $200 per barrel oil is within the range of possibilities. John Hofmeister, former president of Shell Oil and author of "Why We Hate The Oil Companies," points out that this could mean gasoline at $5 per gallon by 2012.

Gasoline at $4 to $5 per gallon will start people thinking about alternatives. Can all-electric cars meet their needs?

Car makers and car rental companies are betting that consumers will fall in love with electric cars once they drive them, and so far the reviews have been great. Jim Motavalli, writing in Forbes.com, describes the Nissan Leaf as "impressive, quiet, comfortable, sophisticated, and bristling with high-tech aids to help with charging and plug-in connectivity." He also says that it "handles excellently." In addition to the Nissan Leaf and the Chevy Volt, new all-electric cars are expected this year from BMW, Ford, Mercedes, Mitsubishi, Renault, Subaru, and Toyota in a variety of price ranges. At the top end of the price range, you can even get the very sleek, powerful, and fast all-electric Aston Martin pictured above. A number of other manufacturers are also preparing to enter the market with all-electric vehicles, including China's BYD (backed by Warren Buffett), which is building an all-electric 5-passenger sedan.

OK, so the supply of all-electric vehicles and the demand for them might show up this year, but what about the infrastructure needed to recharge them? Turns out that charging stations are already in place, and more can come on line very quickly in response to demand. For example, utilities around the nation are installing recharging stations for electric cars. Hertz has installed charging stations in Manhattan, and will soon be installing more charging stations at select Starwood Hotels. Walmart has been planning to deploy recharging stations in its parking lots across the country, and if that happens it won't be long before Target, Walgreens, CVS, and other national chains follow the lead.

The constraint this year may be whether supply of all-electric vehicles can keep up with demand. When the Prius first came out, many prospective buyers found themselves on waiting lists to get one of the now iconic hybrids. The same could happen this year, especially with a federal tax credit of up to $7,500 for electric vehicles plus additional credits from states such as California, Georgia and Tennessee.

The longer term, and more troubling issue is whether the electric grid will be "smart" enough to handle the new type of demand for electricity. It is not simply a capacity issue. Existing generation capacity could probably handle tens of thousands of electric cars being recharged during off-peak hours, such as overnight. The problem arises if large numbers of electric cars are being charged during peak demand periods. Ideally, electric cars would act as back-up storage sending electricity back to the grid during peak demand hours and recharging during off-peak hours. But the grid is not yet capable of handling that or billing for it. Building a smarter grid, more than anything else, is the biggest barrier to a future of electric vehicles.

John Howley
Woodbridge, New Jersey

No Recession for Oil

Despite the worst economic conditions in half a century, the price of oil doubled over the past two years from a low of about $45 per barrel in 2008 to a high of $92 per barrel on the last day of trading in 2010. This doubling of oil prices occurred as supplies increased by about 1.2 million barrels per day during the past year. Yes, that's right, the price of oil more than doubled during very weak economic conditions and increasing supply.

It doesn't take a genius to figure out what will happen as the economy recovers. Demand for oil will increase and the price will trend even higher. Most experts predict oil prices above $100 per barrel in 2011. Lloyd's of London issued a report earlier this year predicting prices as high as $200 per barrel by 2013 and warning of “catastrophic consequences” for businesses that fail to prepare.


Some analysts say that the Organization of Petroleum Exporting Countries will step in to increase supply temporarily and cool off markets once oil hits about $150 per barrel. Think about that for a moment. Remember what happened to our economy when oil prices hit $147 per barrel two years ago? Well, that is the best case scenario for the next few years.

I don't know about you, but I'm not really comfortable relying on OPEC to keep oil prices from going over $150 per barrel. What if they decide that a price of $175 per barrel will let them maximize profits without losing too much market share to alternative energy sources? What if prices go even higher because of conflicts in the middle east, a major supply disruption, and/or a significant weakening of the U.S. dollar? What if they ask us to ease off the pressure to root out terrorists in their countries in return for lower or more stable oil prices?

We can change this scenario without undermining our quality of life. For example, we have reduced our use of oil to generate electricity significantly since the 1970's -- without sacrificing dependability or affordability of supply. We have used more efficient designs to lower fuel consumption per square foot for buildings and per mile driven for vehicles -- without sacrificing comfort or safety.

We can do even more by diversifying our energy sources throughout our economy. Yes, it will take significant up front investments. But think about the medium- and long-term benefits. Brazil has completely eliminated its dependence on foreign oil by building the largest biofuels industry in the world. New vehicles powered by electricity generated with a mix of natural gas, wind, and solar could similarly help us re-gain our energy and economic independence. Best of all, the wind farm or solar farm that is built today will have zero fuel costs 5 years, 10 years, and even 20 years from now. Let OPEC compete with that.

John Howley
Woodbridge, New Jersey

Green Resolutions for a Happy New Year

2010 was the best of times and the worst of times for green energy. Here are a few resolutions to help us make 2011 a Greener and Happier New Year.

Resolution #1: Keep The Faith

It is easy to get discouraged during a year when the media and Congress ignored an urgent warning from the National Academy of Sciences that Strong Evidence on Climate Change Underscores the Need for Actions to Reduce Emissions.

But do not despair. We did make progress this year. Walmart launched a Sustainability Index requiring 100,000 of its suppliers to disclose their energy and water consumption, carbon footprint, waste management practices, and what they are doing to become more green and sustainable. President Obama ordered federal agencies to reduce the federal government's carbon emissions by 28% by the year 2020. Both of these actions are having ripple effects as evidenced by Deloitte LLP acquiring three of the largest carbon consulting firms in the world. Deloitte, IBM, Accenture, McKinsey, and all the other consulting firms are building sustainability practices because their clients know that being profitable in the 21st century means finding ways to reduce waste and becoming more sustainable.

So resolve to keep the faith in 2011. We are making progress.

Resolution #2: Share the News

Edward R. Murrow, Walter Cronkite, and other low-key, professional newscasters have been replaced with jesters and snake-oil salesmen. Traditional media are desperately trying to get our attention because we no longer rely exclusively on them for news. Most of us get our news from many different sources including, most importantly, our social networks. Think about how many times you have found a story or a video because a friend sent it to you via email or posted it on your favorite social networking site.

That, my friends, is how we will continue to build upon the growing consensus in support of green and sustainable energy. When you see an interesting article / video / podcast on green energy or climate change or sustainable business practices, post it and share it with your friends. Some of them will share it with their friends. Sometimes it will even go viral.

So resolve to share the news. We can change the world by sharing.

Resolution #3: Think and Choose Green

Many of us have made greener choices when buying cars based on their fuel efficiency rating or when buying appliances based on their EnergyStar rating. This makes sense because a single decision will save energy, save money, and reduce environmental impacts for many years. There is another choice that we should be making and that has only become available in the past 5 years or so. That is choosing where our electricity comes from.

In many states, you have the right to tell your utility to get your electricity from green and sustainable sources. It does not cost any more than you pay now, and it often costs less to choose greener energy. I've done this for my own home. We now get greener energy for 12.4% less than we were paying before. You can click here to find out how you can choose greener energy at an affordable price for your home or business. It's free, it's easy, it will help the environment, and it could save you money. And it will increase the demand for sustainable energy.

So resolve to think and choose green whenever you can. We can make a difference.

Happy New Year!

John Howley
Woodbridge, New Jersey

Breakthrough in Genetically Modified Plants for Renewable Energy

Scientists at The Samuel Roberts Noble Foundation in Ardmore, Oklahoma, have uncovered a gene that could revolutionize the biofuels industry in the United States. The gene is responsible for controlling the density of plant material. By removing the gene, farmers can grow denser plants that produce more biomass from the same acreage. In short, more energy from the same amount of land and less conflict with land needed to grow food.

Huanzhong Wang, Ph.D., a postdoctoral fellow at the foundation, found a gene that controls the production of lignin in the central portions of the stems of Arabidopsis and Medicago truncatula, species commonly used as models for the study of plant genetic processes. Lignin is a compound that helps provide strength to plant cell walls, basically giving the plant the ability to stand upright. When the newly discovered gene is removed, there is a dramatic increase in the production of biomass, including lignin, throughout the stem.

Increasing lignin in non-food crops, such as switchgrass, may increase the density of the biomass and produce more feedstock per plant. Compared to corn- or soybean-based biofuels, switchgrass and other low-input grassland perrenials can provide more usuable energy, greater greenhouse gas reductions, and less agricultural pollution per acre. In addition, many of the grass varieties can be grown on agriculturally degraded land, are drought and salt tolerant, and therefore can be grown on land that is not used for food production. Perrenial grasses also offer an excellent habitat for a wide variety of birds and small mammals.

"In switchgrass, as the plant matures, the stem becomes hollow like bamboo," said Dr. Richard Dixon, director of the Noble Foundation's Plant Biology Division. "Imagine if you use this discovery to fill that hollow portion with lignin. The potential increase in biomass in these new plants could be dramatic. This technology could make plants better suited to serve as renewable energy sources or as renewable feedstocks to produce advanced composite materials that consumers depend on every day."

Collaboration with scientists at the University of Georgia revealed that removing the gene also increases the production of carbohydrate-rich cellulose and hemicellulose material in portions of the plant stem. These are the components of a plant that are converted to sugars to create advanced biofuels, such as cellulosic-derived ethanol or butanol. More celluloses and hemicelluloses mean more sugars to use for carbohydrate-based energy production.

Biofuels have already shown that they can help even a large nation wean itself from foreign oil. Brazil has eliminated its dependence on foreign oil by using ethanol from sugar cane to meet most of its fuel needs. Increased lignin production in switchgrass and other perennial grasses could help the US reach energy independence as well.

John Howley
Woodbridge, New Jersey

Kurdistan Attracts Billions for Oil Exploration

Investors are betting billions of dollars that oil will flow freely from wells being drilled in Kurdistan. The Financial Times reports that one small oil exploration company, Gulf Keystone Petroleum, already has a market capitalization of $1.9 billion, which would put it on the FTSE 250 index if it gets listed on the London Stock Exchange. Not bad for a company that has no proven reserves, has never earned any money for its investors, and has run operating losses every year of its existence.

Of course, Kurdistan is a pretty dangerous and unstable place. Just because you find oil today doesn't mean you will get to profit from it in the future.

So why does this company have a market capitalization of almost two billion dollars? Analysts say it is because investors are very confident that there are large oil reserves in the parts of Kurdistan where Gulf Keystone has been drilling. In fact, Gulf Keystone hit oil with its first well drilled in August 2009.

Ok. I can understand that line of thought. But this oil is in Kurdistan, a place that has been in almost continual violent conflict with Iraq since it was first recognized as an autonomous region in 1970. What about the very significant risks of violence, war, or even just political instability? How can a company afford all the security and insurance that must be necessary to cover those risks.

This is where we start to understand how the oil industry benefits from costs assumed by others. The ability to drill for oil in Kurdistan is a direct result of the hundreds of billions of dollars our governments have spent on the Iraq war and the ensuing seven years of efforts to stabilize that country. The door was opened, and it remains open, because of huge government investments and the personal sacrifices of hundreds of thousands of American, British, and other troops, including almost 5,000 Americans who lost their lives and more than 30,000 who were seriously wounded.

Next time we fill up our cars with relatively inexpensive gasoline, let's remember the hidden costs that are not reflected in the price. And let's also keep those costs in mind when we consider government investments in sustainable alternatives.

John Howley
Woodbridge, New Jersey
www.HowleyGreenEnergy.com