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08 Oct 07 | Commentary

There are a couple of developments in the renewable energy world that are fairly exciting. First off, $100.00 per barrel oil seems inevitable. From the Cleantech blog:

Last week, as reported on Yahoo!, the chief economist of the investment bank CIBC went on record that “We’re in a world of triple digit oil prices for the foreseeable future,” beginning by the end of 2008.

Increasingly, I’ve been hearing through the grapevine prognostications of $100/barrel oil. I put a lot more weight on CIBC’s view than on Hugo Chavez’s. Why? Based in Canada, CIBC prides itself on being a banker of note to the huge Canadian oil and natural resources industry. Besides, Canadians in general seem less prone to hyperbole than we Americans (or Venezuelans). As a result, I expect that a firm such as CIBC doesn’t put out such statements very lightly.

What does $100 oil mean? By my calculations, each additional $10/barrel increase in oil prices, translates to about $0.40/gallon in gasoline prices — assuming no changes in oil transportation costs, oil refinery economics and oil taxation. So, if we’re seeing gasoline close to $3.00/gallon today with oil at $80/barrel, I would expect almost $4.00/gallon at $100 oil.

This is good, I say. I would welcome $5.00 per gallon of gas if only the oil companies were not getting filthy rich from it.

Then, it appears that Congress has received the message. They are currently working on the renewable energy portfolio, fixing some access issues from the interconnection rules, etc. From renewable energy access.com:

While the renewable energy industries have been focused on extending or expanding the investment and production tax credits, adopting a renewable energy portfolio standard (which passed the House of Representatives), and addressing access issues from interconnection rules to accelerating clean energy projects on federal lands and facilities — Congressional leaders are stepping out to define their own vision.

Two seasoned legislative leaders have introduced important bills that deserve attention, and are already creating talk on Capitol Hill.
Now such actions had started earlier in the year, when solar, small wind and fuel cell advocates were surprised that the House Ways and Means Committee was not moving the Section 25 residential investment tax credits in the energy section of the new Energy Bill. In fact, Congressional Democrats had adopted an approach on their own for long term government loans.

For some Congressional supporters, residential tax credits were only useful to the upper middle class with tax liabilities, while tax credits were less useful to the lower middle class homeowner that had lower tax liabilities and had little cash to even consider the solar option.

Now, it appears both options are destined for passage, with loans as part of the Energy Bill deliberations in November and December, and residential credits either leveraged into the Energy Bill by the Senate or considered as part of a separate expiring tax credit package the House will move before adjournment this year.

That is exciting stuff. Now the question is, will they have enough votes for any presidential veto override?

The released proposal (not yet introduced as a formal bill) establishes: 1) a 50-cent-a-gallon tax on gasoline and jet fuel, phased in over five years, on top of existing taxes, 2) tax on carbon, at $50 a ton, released from burning coal, petroleum or natural gas, 3) Phaseout of the interest tax deduction on home mortgages for homes over 3,000 square feet. Owners would keep most of the deduction for homes at the lower end of the scale, but it would be eliminated entirely for homes of 4,200 feet or more which estimates that would affect 10 percent of homeowners.

Dingell says “it’s only fair” to tax those who buy large suburban houses and create urban sprawl. Historic and farm houses would be exempted. The Bill also designates some of the revenue would be used to reduce payroll taxes, but most would go elsewhere including for highway construction, mass transit, paying for Social Security and health programs and to help the poor pay energy bills.

That is an interesting twist, phase out tax deductions on interest for large houses. I am not sure how I feel on this one, surely large houses do use a lot of energy, but it seems sort of anti-American to increase the tax burden on the average McMansion owner.

Finally, there is this bit of good news about peak oil from the Peak Oil Review:

In peak oil circles, the likelihood that world oil exports will peak and then decline faster than world oil production has been discussed, tracked, and generally accepted for some time now. Last week the notion that peak exports may well be near at hand hit the mainstream when Jeffrey Rubin, the chief economist of the Canadian investment bank CIBC, released a report on declining oil exports and began briefing Wall Street groups about his findings.

We live in interesting times.

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08 Oct 07 | Commentary
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