The Myth of the American Energy Crisis

The flier containing information about an upcoming presentation was titled Myth of the American Energy Crisis. I thought to myself this is a catchy title for sure and it includes the word “energy,” so I had better clear that date on my calendar so I could check out what I was hoping would be a brilliant presentation on energy and politics by Mark Chapin Johnson, PhD at the Center Club in Orange County, California on September 12, 2012. It turned out that I was not disappointed.
The bottom line according to Dr. Johnson is that virtually everything we know and think about the merits of ethanol is actually the opposite of reality, and “politics” is the reason this is so. There certainly was no shortage of data from the extremely well prepared Dr. Johnson. You are welcome to read the accompanying six hundred and thirty six page research paper he wrote on the matter by selecting the links at the end of this post, an Assessment of United States Ethanol Policy (had to split the paper into three parts due to size); however if you are short on time, I would recommend you select the PDF version of the presentation linked to below, The Myth of the American Energy Crisis.
When I showed up at the event, I was pleasantly surprised that the presenter was the Dr. Mark Johnson I knew several years ago from the time I spent involved in and learning about politics. I knew that his background and understanding of politics was much deeper than that of a reasonably well informed voter since Johnson had worked behind the scenes for a great many years in various elections and on political measures. As I was then listening, I knew there was probably more truth to his presentation than most might believe.

Dr. Mark Chapin Johnson Presentation at Center Club

You may have noticed at the gas pump the stickers that say ten percent of the fuel you are pumping into your car is from ethanol. If you think about it, if ten percent of the fuel we pump into our cars is ethanol, then that’s a lot of ethanol. If you throw in the idea that ethanol is wasteful as can be, then we have a huge problem on our hands. This reminds me a bit of the speech our IEA senior website editor, Jessica Murphy, pitched at the 2012 Sino-American Juvenile International Energy Alliance Environment Conference that took place in China last June. One of Murphy’s main points was, do not be so fast to embrace every form of renewable energy that comes forth since some actually create more problems than they cure. 
A fascinating fact from the presentation is that ethanol is only two thirds as efficient as gasoline. In other words, from ethanol, we only get two thirds the amount of energy we get from gasoline. This of course means that since ten percent of a gallon of gas is ethanol, we get fewer miles from a gallon of gas. In fact, as far as overall inefficiency goes, Johnson’s research shows that the amount of energy required to produce an amount of ethanol is greater than the energy output of that amount of ethanol. It takes oil to prepare the fields, oil to plant the corn, oil to harvest the corn, oil for the ethanol production process, and oil to transport ethanol. Johnson also pointed out that part of the environmental impact of producing ethanol is that it releases into the atmosphere harmful nitrous oxide greenhouse gas that is three hundred times more potent than carbon dioxide gas, and it has helped to create the Gulf of Mexico “dead zone.”

IEA Chairman Andrew Hunter with Dr. Johnson after presentation

Johnson maintains that the United States has vast supplies of oil in our country and offshore, and there are great shale oil reserves in Canada –and yet we are paying huge sums of money to buy our oil from far away foreign countries. In his presentation, he speculates that if the U.S. began to tap into its great oil reserves, that within three years, the U.S. could change from being a debtor nation to being a creditor nation.

I decided to research into Johnson’s oil theory a little bit on my own. Please follow the Los Angeles Times link and select from the tabs at the top of this flash driven tool to see who supplied what amount of oil to the world and to the United States in 2010, who is using the oil of the world, and where are known world oil reserves. This flash tool provides are rather refreshing display of information. You can play around with it some and then draw your own conclusion.
Here’s what we have on Johnson’s background: Chairman of the Mark Chapin Johnson Foundation, Trustee at Chapman University, and Overseer at The Hoover Institution. You may also visit Mark Chapin Johnson Foundation for more information on Dr. Johnson. 
Please feel free to comment on this post. If you comment on the post or the attached papers from Johnson, I can try to see if we can get a response from him on your comments. 

The All Important U.S. Quest for Energy

In his most recent book, “The Quest: Energy, Security, and the Remaking of the Modern World,” (Sept 20, 2011) Pulitzer Prize author Daniel Yergin makes a strong case that energy forms the backbone of the economic system in the United States. Yergin’s position is that since we have a fast paced growing world economy, if the United States is to grow globally, it has to focus on all forms of energy –and in particular, renewable energy.

Here at the International Energy Alliance, our position on renewable energy sources is that there is and will be no one single solution to our global energy problems for a variety of reasons, including environmental, economic, availability, and cost effectiveness. Yergin suggests something similar –where will our energy come from in the future, and what will the mixture be? He believes the solution needs to be and will be affordable, abundant, reliable, and environmentally sound.  Much of Yergin’s writing focuses on renewable energy sources such as wind, solar, hydro, and biofuel. Of particular interest is his discussion of the possibility of “disruptive technologies,” and unforeseen, new energy sources which can end up changing everything.

A Marshall Scholar and Ph.D. graduate from Cambridge University, Yergin went on to established himself as an expert on energy, geopolitics and economics. In 1991 he earned the Pulitzer for “The Prize: The Epic Quest for Oil, Money, and Power,” and he has maintained his reputation in those areas ever since. Not convinced yet? Then consider the incredible growth in renewable energy and that venture capitalists are and have been throwing large amounts of money into financing renewable energy sources. So if you are sitting at home fretting about the economy, wondering when and how a golden opportunity will present itself to you, I am here to tell you that when you read this book you will find that opportunity. But at a total of eight hundred and sixteen pages, plus the hard cover, this book is about as thick as an encyclopedia, so please think about downloading an e-copy, saving trees and energy. 



One Bold Vision

The latest edition of the Wharton Magazine features one of the boldest books I’ve seen in a long time. In “Sustainability: The Future of Value”, Wharton MBA Eric Lowitt takes on a brutal uphill battle, arguing that sustainability is actually critical to the success of a firm. While many firms commit resources to “appearing” sustainable and focused on the environment, few actually pursue this mission with heart and even fewer truly believe sustainability is a critical element of future success. As financial professionals and business schools have long taught the sole objective of the CEO is to maximize shareholder value through increasing net income as much as possible, it is no wonder this is the case. Can you see how investing in sustainability can increase the bottom line? It is sure hard to imagine but Lowitt makes a great case. Check it out: