Wednesday, February 22, 2012

NIMBYs are Killing America

  Let me first clarify that I am not a Glenn Beck-style doomster; I don't actually think any one thing will "kill" America. It is a large and prosperous country that is undergoing some economic difficulties, true, but it will not "die".
   Some of what Americans hold dearest, however, will "die". Cheap gasoline, for one. Right now all over the country there are news headlines decrying the price of gasoline. Friends ask me how they can help stop oil speculation: Can they write their congressmen? Can they start a campaign? Republicans blame President Obama. CNN and network anchors shake their heads but offer little explanation apart from noting that Iran has stopped exports to British and French oil companies. Speculation is blamed, as usual. 
   But the speculation is based on the perception of higher prices in future, because of a lack of supply and a surfeit of demand.   As Ian Taylor, CEO of oil trading firm Vitol, said: “The supply side of the market is a mess." Taylor, speaking at IP Week in London, noted: “Demand, even if not great, continues to grow. So it's difficult to see much price downside from current levels.”
   The supply side is a mess for many reasons, most of them political. The crude oil dilemma is not the one that should worry people, though. On balance, there is plenty of crude oil and other refinery feedstocks. Natural gas and shale gas (from hydraulic fracturing or fracking) are plentiful, as is the mucky crude squeezed from oil sands (mainly in Canada). The problem is there is little infrastructure to support the shipping and refining of these feedstocks.
   Enter the NIMBYs. The Not In My Back Yard syndrome seems counter to what Americans actually want, which is cheap oil. Most recently the Keystone pipeline, designed to carry oil from Alberta to be refined in multiple places in the U.S., was delayed because no one wanted it to run through their backyards. Plants designed to liquefy natural gas, thereby making it moveable on tankers, are being turned down all over the country. Fears over terrorist attacks on the plants or the tankers are cited, but the real reason? NIMBY. The same NIMBY spirit has scuppered wind and solar farms, waste-to-energy projects, waste-to-fuel plans and hundreds of other ways in which the US could provide more of its own energy.
   One of the biggest problems in the US is the shortage of refinery capacity. There has not been a new refinery of any decent size built in the United States since 1977. Why? NIMBY. If anything, refineries are disappearing. I have written about this before, I know, but it bears repeating. We have lost 500,000 barrels per day of refining capacity on the U.S. East Coast in the past year. These provided nearly 3% of daily U.S. refined products consumed. Most recently the St. Croix Hovensa refinery, operated by Hess and PDVSA, the Venezuelan state-owned oil company, closed removing 350,000 b/d and about 13% of the East Coast's gasoline. It is true that many of these closed due to lousy profit margins. But selling them was not a viable option because any company that bought them would bear unlimited liability for any environmental problems - past or present - that arose. And refineries can be dangerous (explosions are not uncommon) and polluting (ditto spills). NIMBY, thanks very much. 
   But then I won't complain about the price of gasoline - because I think it is too cheap. Gasoline has been too cheap in the United States for a very long time. The low cost of gasoline led to the production of giant SUVs and pickup trucks that can carry a baby elephant and haul its mother on a trailer (the over-reliance in Detroit on producing and selling these relics nearly destroyed their industry altogether). Cheap gasoline gave us roads where there were once railroad tracks; roads which are now crying out for improvement and expansion to handle even more cars. It led to vast, soulless suburbs from which you cannot commute or shop without cars.
   So I say "good" to higher gasoline prices. To the government I say build us some railroads and let us put up waste-to-energy incinerators (cleaner emissions than burning natural gas, believe it or not); to the car companies I say give us smaller, fuel-efficient cars. To home builders I say make the cities more liveable and affordable and let the suburbs die. But the NIMBYs will win, as always. And they will HATE $5.00 gasoline.

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