Tag Archives: energy

Close the Strait of Hormuz?

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Iran’s government now is threatening to close the Strait of Hormuz if the US joins its war on Israel on Israel’s side, among other things by bombing Fordow and Natanz with MOPs.

Iran certainly could, but for how long? My prediction is for a few hours to a few days, at the end of which Iran would have left no navy worthy of the name and no Arabian Gulf or Arabian Sea ports of any use to the remnants of its navy or to its commercial shipping—including is ghost tanker fleet with which it ships embargoed oil.

The reasons center on Iran’s own incapacity. It has no air assets with which to close or to keep closed the strait; it has only a supply of cruise missiles which it would have to divert from its attacks on Israel to close and keep closed the Strait, and its small navy with which to sail the strait.

That navy and the ports from which it would sally are nothing more than targets for the US Navy, which has been expanding in the region, and it would be a campaign of a matter of hours or a few days to sink the Iranian navy and destroy those ports. A few destroyers would serve to protect commercial shipping in the strait, and in the Gulf, come to that, against those cruise missiles, just as those destroyers and cruisers have done in the Gulf of Aden.

There would be sequelae to an Iranian attempt to close the strait. At the end of the campaign to reopen the strait, Iran would have limited capability to get its oil onto tankers (it would be useful for the reopening campaign also to sink such ghost tankers as happen to be in the Gulf or the nearby Arabian Sea, which would further restrict Iran’s ability to ship its embargoed oil). That would hurt the People’s Republic of China’s economy, which has been importing lots of price-discounted Iranian oil (discounts the PRC can demand since it takes 90% of Iran’s oil exports and so can demand the discounts).

Another consequence would be further reductions in Iranian (re)supplies to the Houthis.

There would be a spike in oil prices from a closure of the Strait of Hormuz, but that would be temporary, and the closure would lead, nearly inevitably, to those follow-on sequelae, which would be to the net good of the larger world.

Resist

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That’s what the tech industry honchoes are doing vis-à-vis Republican moves to cut or eliminate altogether clean energy tax credits. They want to maintain their handouts.

The Data Center Coalition, a group that includes Microsoft, Alphabet’s Google, Amazon.com and Meta Platforms, recently made its pitch in a letter to Senate Majority Leader John Thune (R, SD), according to a copy viewed by The Wall Street Journal. The group asked him to preserve tax credits and loan funding that would be aggressively phased out in the version of the bill passed by the House of Representatives last month.
The bill is fueling industry concerns about rising prices and power shortages if planned investments don’t materialize.

There’s this, too:

The House bill would require solar, wind, and other projects to begin construction within 60 days of the measure’s enactment to receive tax credits. It would also require the projects to come online by 2028, setting a hard cutoff for any projects placed in service after that year. Under current law, the tax credits phase out over four years, starting in either 2032 or when the US power sector’s greenhouse-gas emissions fall to a quarter of their 2022 levels—whichever comes later.

Here’s the thing, though. This isn’t so much a rescission of the tax credits or removal of “loan funding” as it is a requirement that recipients not dilly-dally about their performance. To get/keep the credits and funding, they actually have to start doing the things—begin construction, for instance—required to “earn” the handouts. Then they have to stop slow-walking their performance, pocketing the money money without anything to show, and instead complete their promised project and bring their “clean-energy” facility on line by a date certain.

Their worry about rising prices and power shortages is a valid concern, but that’s not effectively addressed with tax credits or government loans for their projects. That’s effectively addressed by getting government regulations out of the way of fossil fuel-sourced energy. Natural gas is about as clean as it gets, even counting the fiction that atmospheric CO2—plant food—is a pollutant. Oil-based energy production is nearly as clean, as is modern coal-based energy. The actual pollutants from burning coal have long been cleaned up be well-established technologies.

Fossil fuel-sourced energy is lower priced in no small part because it’s utterly reliable, producing energy whether or not the sun is shining or the wind is blowing, and those fossil fuel facilities need no expensive, themselves polluting from mining through disposal, battery storage that lasts only a very few hours into a long-term weather or night-time outage.

Clean energy facilities don’t need the tax credits or artificial government loans any more than do fossil fuel facilities. When they’re ready for market, the market will call for them without taxpayer money being donated to them. The proper resistance is a pushback and retention of the tax credit cuts and rescissions.

Backwards

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Interior Secretary Doug Burgum thinks he has a deal with New York’s Progressive-Democratic Governor Kathy Hochul: he’ll lift the pause on an off-shore windmill project she wants if she’ll unblock a couple of natural gas pipelines that ex-Progressive-Democrat Governor Andrew Cuomo blocked. The pipelines would vastly lower energy costs for New York and for the northeastern States on the other side of New York from Pennsylvania, where the pipelines would have originated.

Burgum lifted the pause on the wind farm, and then—and only then—Hochul said she’d work with the Trump Administration and companies on “new energy projects.”

This is backwards, and it foolishly trusts a Progressive-Democratic Party politician to follow through in any serious fashion.

It’s easy enough for Burgum to lift the pause on the wind farm; he can do it with the stroke of his pen. It’ll take a while for Hochul to lift the ban on the pipelines—if she does it at all rather than just engaging in stalling rhetoric, empty words like work with…on “new energy projects.” The correct order for execution of this agreement would have been for Hochul to lift the ban and get construction started. Then lift the pause.

No, It Isn’t

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Clean Energy Is Under Attack Even Where It’s Booming goes the Wall Street Journal headline. There’s a hint regarding that buried in the middle of the article:

The hit to the power sector could prove significant. More than three-fourths of the proposed solar projects and more than one-third of the wind farms in long queues to connect to the power grid needed tax incentives to be economically viable as of January, said Corianna Mah, analyst at Enverus Intelligence Research.

No, clean energy is not under attack. Market-distorting, vote-buying subsidies and tax credits are under attack—as they should be. Clean energy will do fine when the market—us consumers—want it. If clean energy projects cannot succeed without those handouts, they aren’t economically—or technologically—viable.

See, for instance, natural gas. Oil, even cleaned-up coal, too, once the costs of regulatory impediments designed as actual attacks on hydrocarbon energy are subtracted off. But wait—oil subsidies…. Those are a tiny fraction of all those clean energy subsidies and tax credits. But yes, oil subsidies need to go away, also.

Two Responses

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The headline tells the tale.

California is winning the war on ‘Big Oil,’ but experts say victory will bring higher gas prices

California’s “victory” has resulted in this:

Valero Energy Corporation has announced it will idle or close its Benicia Refinery in California—just the latest in the exodus of fossil fuel companies from the state.
Six months ago, Phillips 66 announced the closure of its Los Angeles-area refinery by the end of this year—it’s since bumped the date up to October—and a few months before that, Chevron announced it would be moving its headquarters from San Ramon, California, to Houston.
After the two refineries close, it’s not clear exactly where California will find more gasoline and other finished petroleum products, such as jet fuel, to satisfy demand.

And this:

Newsom blamed oil companies for high gasoline prices and promised further regulation of the industry would solve the problem for residents.

Here are two responses, should the management teams of the companies involved (finally) find the backbone to implement them. One is for oil and natural gas companies outside California decline to sell any of their products into California. They easily can make the case that it’s not sound economically or business-wise to produce products that meet California’s enormously stringent requirements and still be able to sell into the rest of our nation at market prices.

The other is for car and truck companies to decline to sell their vehicles into California. They easily can make the same economic and business argument: it’s not feasible to produce vehicles solely for the California market, and making those California-compliant vehicles for nation-wide sales only drives the costs of those vehicles far above the market prices that otherwise would obtain.

Those moves also would satisfactorily answer Newsom’s problem. With no further oil and gas flowing into California from outside, there would be no gasoline for which to abuse gasoline prices. With no further vehicles being sold into California, there would be reduced demand for gasoline at any price, a demand that would fall to zero as existing ICE vehicles age out.

Winners all around.