Chet Culver, Chairman of the Governors Wind energy Coalition is leading the charge to push Congress towards minimum wind energy requirements.

An assembly of 29 governors is urging Washington to enact Federal legislation that would mandate electric companies to obtain a minimum of 10 percent of the power they provide through renewable energy within two years.  The proposal, allegedly designed to stimulate job creation as well as climate reform, was presented today by letters to the White House and to Congress from the Governors’ Wind Energy Coalition.

“Right now, this is about jobs,” said Rhode Island Gov. Donald Carcieri (R).

“We don’t want these things to get caught up in the broader debate and discussion [i.e. global warming] that will only slow us down,” added Iowa Gov. Chet Culver (D), chairman of the bipartisan Coalition, which includes the governors of 29 states.

With national attention focused on health reform proposals, the group is concerned that the Federal government has become sidetracked from the agenda of getting Americans back to work.

“Congressional action on the energy bill seems to have stalled,” said Carcieri in a statement. “It is our hope that these recommendations — and the national bipartisan consensus they represent — will advance the energy deliberations now under way in Congress.”

Other recommendations by the governors include:

• Developing new interstate electric transmission system infrastructure to facilitate access to these resources nationwide.
• Greater federal support for coastal and off-shore wind farms; and
• Extending the Treasury Department’s financing program that offers cash up front instead of the Investment Tax Credit, as well as a renewable energy production tax credit.

Senator Chuck Grassley, Iowa (R), thinks the Governors' joint proposal sets unrealistic objectives.

“People want more renewable energy. Congress can’t ask for a clearer signal for what works politically than what’s working at the state level.” says Reid Detchon, executive director of the Energy Future Coalition, told the Christian Science Monitor.  ”These governors coming forward like this is just one more indicator of public sentiment in favor of stronger requirements for renewable energy.”

Congress does not unanimously subscribe to the notion that the Coalition’s mandate presents realistic objectives. Indeed, Culver has not convinced his own State’s senior senator that the mandate can be reached by 2012.

While Iowan Senator Chuck Grassley (R) claims to have supported renewable energy portfolios in the past, he believes the Coalition has bitten off more than can be chewed.  “Probably not ten-percent by 2012,” Grassley says, “I don’t think that that’s possible but I surely think 15% by 2020 is possible.”

Washington, D.C. — An innovative coal-drying technology that will extract more energy from high moisture coal at less cost and simultaneously reduce potentially harmful emissions is ready for commercial use after successful testing at a Minnesota electric utility. The DryFining™ technology was developed with funding from the first round of the U.S. Department of Energy’s Clean Coal Power Initiative (CCPI).

The United States has about 280 power stations burning high-moisture coal, generating more than 100 gigawatts of electricity, which equates to about one-third of the electric power generated by coal in the country.

Great River Energy of Maple Grove, Minn., has selected the WorleyParsons Group to exclusively distribute licenses for the technology, which essentially uses waste heat from a power plant to reduce moisture content in lignite coal. Great American Energy, a 50-50 joint venture of Great River Energy and the North American Coal Corporation, will also market the technology, whose first user will be the utility’s Spiritwood Station under construction near Jamestown, N.D.

In addition to using power plant waste heat to reduce moisture, DryFining also segregates particles by density. This means a significant amount of higher density compounds containing sulfur and mercury can be sorted out and returned to the mine rather than oxidized in the boiler. The end result is more energy can be extracted from the coal while simultaneously reducing emissions of mercury, sulfur dioxide, and nitrogen oxides, major potential pollutants that result from coal-based combustion.

As part its CCPI-funded project, Great River Energy tested a 115-ton prototype dryer in the company’s 546-megawatt Coal Creek Station Unit 2 in Underwood N.D. Following a successful increase in boiler efficiency and reduction of emissions, Great River Energy expanded the project by building full-scale dryer modules for the entire Coal Creek Station. The Office of Fossil Energy’s National Energy Technology Laboratory manages the CCPI program.

Lignite is one of four major coal types produced in the United States, accounting for about 7 percent of annual production, and is an important energy source for electricity generation. In general, lignite has a higher moisture and ash content, resulting in a lower power efficiency and higher rate of emissions than coals with less moisture. Great River Energy’s innovative technology reduces the cost of drying coal by using the waste heat and segregating particles by density, thereby generating energy with less coal while reducing emissions and emission-control costs.

At the Coal Creek Station, the technology increased the energy content of the lignite from 6,200 to 7,100 Btus per pound, thereby reducing fuel input into the boilers by 14 percent. At the same time, sulfur dioxide and mercury emissions were reduced by more than 40 percent, nitrogen oxide by more than 20 percent, and carbon dioxide by 4 percent.

These results are important to energy consumers because the United States has about 280 power stations burning high-moisture coal, generating more than 100 gigawatts of electricity, which equates to about one-third of the electric power generated by coal in the country.

Release: National Energy Technology Laboratory

This is probably your last chance to buy into oil before it starts to plunder the economy again.

Five of the many reports cluttering up my desk this morning claim to be pertinent to the price of gas this summer.

As regular readers may recall, I track these things closely for two reasons. First, there is the effect gas prices have on the economy. Inflation may be the disease, but gasoline is one of that disease’s chief vectors, the agent that carries it deep into our economic body – and our wallet.

The second reason I track oil and gas is to make as much profit off the damn stuff as I possibly can. Just think of it as getting a little of our own back.

Red Sky in the Morning?

The first report comes to us from AccuWeather’s Joe Bastardi, who apprises us that his outfit’s slide-rule types are looking for the Atlantic and Gulf of Mexico to enjoy an unusually active hurricane season this year, both in terms of quantity and ferocity of storms.

In 2009, we saw the weakest season in a decade, nine named storms that never actually came on shore here in the U.S. In 2010 we are told to expect an above-average season, some 16 to 18 storms with at least two or three gob-smacking the homeland.

They credit this to “a weakening El Niño in the Pacific.” Apparently, this cyclic Pacific warming cycle protected us last year, and may fail to do so this year.

Or Not

Meteorology may very well be the oldest true science (I’ve always had a hunch that some of those scratch marks on the Lascaux cave walls were simply counting how many damn days in a row it had rained). But it still has a hard time with stuff like whether or not we will get three inches or three feet of snow here at Seven Oaks Farm.

Still, Colorado State University’s Tropical Meteorology Project has also called for 16 named storms, WSI is calling for 13 storms, with eight slated to hit Category 3 or higher on the Safir-Simpson Scale, Commodity Weather Group is calling 11 storms all told with five hitting hurricane strength, and most in the trade suspect that the May report out of the Fed’s Climate Prediction Center will fall in line as well.

This whole guessing game is germane to energy prices in that some 27% of our crude oil and 15% of our natural gas come out of the very shallow Gulf of Mexico. Should any of these storms rip through the Gulf, we could expect to see said supplies cut off with an attendant price increase. Heck, just the treat of same is enough to start a speculative frenzy in downtown New York.

China Wants Your Gasoline

Next up, we have a slightly more concrete issue brewing in China. It seems that the world’s fastest-growing economy has passed a critical threshold in February, when its demand exceeded internal supply, and it became a net importer of oil and associated product.

If these numbers are to be trusted (and that is always an issue when dealing with Beijing – and Washington too for that matter!), it appears that Chinese demand is up 58% year over year, with China purchasing some 1.8 million more barrels a day.

Now even here we see some rather odd caveats: JPMorgan Chase’s Brynjar Eirik Bustnes claims that some of this may be linked to low refinery utilization during the month of the Lunar New Year.

Still, one can easily imagine how this too is whetting speculators’ appetites.

OPEC Upgrades Demand – Again

Again we go to the pile on my desk, and find that OPEC is expecting to pump 880,000 more barrels per day (roughly 1.04%) this year than it did in 2009, if it has any hope at all in keeping up with burgeoning demand from both China and recovering Western economies.

The caveat here? This current call has been upgraded by some 80,000 barrels over last month’s prediction, and may yet be upgraded again in a similar manner. OPEC’s most recent statement warns that “questions remain as to how long governments will be able to support their economies.”

Which brings to the furor brewing in Washington over the Fed’s commitment to an “extended period of low rates.” It seems that a vocal minority of voting board governors feel that this pledge is boxing them in a bit.

Talk, Talk, Talk

They don’t actually want to change rates, mind you. When pressed, they concede that “the U.S. jobs market remains weak, with unemployment rate near 10% and job openings scarce.” But they would like that “extended period” phrase that was used in the last four FOMC reports changed to “some time” in the next statement. This way, investors will understand that the Fed will “not refrain from raising rates well beyond what is prudent.”

And we believe them, because the Fed has such a strong track record of fiscal prudence, right?

Your Nightmare Is a Speculator’s Dream Come True

Let’s string the dots together one more time: flood of cheap dollars (and yes, they will start getting cheaper again, now that that whole euro funk is passing) chases limited supply of oil… oil goes up… everything that travels by truck train or plane gets more expensive… inflation!

Oh, and here’s one last item of the heap: It seems that the supply of oil stateside is declining substantially faster than “the experts” were expecting. The call was for pretty much no change this week, with an even balance between imports into the plenums and use by refiners. Instead we see a 2.96 million barrel drop in the plenums.

This shortfall delighted the aforementioned speculators, who responded by jacking July crude futures to $84/bbl.

There is only one minor difference between my prediction for the economy and some of my dour compadrés’: they are calling for a double-dip recession to take down oil. I figure that oil will take the economy down into the next recession.

Both ideas stink. But mine offers a shot at some cool gains along the way.

This article was republished with permission from Taipan Publishing Group.

Daniel Yergin considers fracking natural gas from shale rock as the most effective means for reducing Americas dependence on oil.

With the advent of gas shales, North America is blessed with three times as much potential natural gas supply as they were in 2007, according to a study released Wednesday by IHS-Cambridge Research associates.

But the question remains whether America is willing to tap its potential.

“This is simply the most significant energy innovation so far this century,” said Daniel Yergin, author of the Pulitzer Prize-winning book The Prize: The Epic Quest for Oil, Money & Power and chairman of IHS-Cambridge Energy Research Associates.

The trick is to convince the public that recently discovered surpluses of natural gas should be relied upon to offset dependence on oil.

The innovation is somewhat hollow unless gas producers can convince Washington and the American public to embrace “fracking for gas”.  Despite recognition that natural gas burns more cleanly than oil, leftward leaning partisans have concerns about possible groundwater contamination resulting from extracting fuel from gas shales.  Accordingly, they would prefer to advance wind and solar energy as the wave of the future.

Natural gas advocates consider talk of renewable energy on a national scale as complete hot air.  “In dealing with climate change, I’m constantly surprised by the tendency to focus on the most complex and expensive measures,” said Helge Lund, CEO of Norway’s Statoil. Lund added that natural gas is abundant, affordable and relatively clean compared to the fossil fuels predominating the market today.

The ramification of America’s capability of using shale to provide its own natural gas has had a significant impact on the international economy.  Russian gas titan Gazprom has stalled in developing its Arctic shipping lines due in large part to growing concerns that the U.S. demand for international natural gas may be a lot lower in the forthcoming years than was expected as recently as three years ago.

In 2000 only 1% of America’s natural gas was harnessed from shale rock.  Today it’s 20% and by 2035 it could be 50% according to the new IHS CERA report, titled “Fueling North America’s Energy Future: The Unconventional Natural Gas Revolution and the Carbon Agenda.”

In other words, next year the oil companies will be required to buy 12.6 billion gallons of conventional corn ethanol, but because tax payers are giving them $5.85 billion they’ll consume 1.4 billion more than required. That works out to $4.18 per extra gallon.

As I’ve written before, having the tax credit on top of the RFS is like paying drivers to obey the speed limit. (Tip of the hat to Rapier for the analogy.) Some in the industry may be inclined to point to the additional 1.5 billion gallons as a justification for the tax credit, but the price tag should make that argument just silly. Taxpayers have been subsidizing the corn ethanol industry far too long at the expense of developing cleaner, more renewable biofuels.

Plus the FAPRI study also points out that the tax credit is leading to higher prices for corn and other grains–$0.18 per bushel of corn, $0.28 for soy, and $0.15 for wheat. And lest anyone argue that the tax credit is a good way of supporting farmer income, think about this: if we gave farmers an extra $0.15, $0.28, and $015 per bushel for every single one of the corn, soy, and wheat bushels they’ll grow next year, it would cost just $3.56 billion. And we’d still have enough of the tax credit money left over to subsidies the extra 1.4 billion gallons to the tune of $1.64.

The FAPRI study’s analysis of how the tax credit effects commodity crop prices also confirms the underlying economic truth of indirect land-use change. Higher prices for commodities mean that farmers here in the US and around the world will want to grow more. In those parts of the world where its cheaper to increase production by bringing new land into cultivation than increasing yields on existing lands, that’s going to lead to land-use change. Not surprisingly, EPA’s analysis, which uses the FAPRI model, finds that the emissions from this land-use change is one of the largest sources of emissions associated with corn ethanol.

Yesterday, Growth Energy had the audacity to argue that the tax credit lowers the price of gasoline. It’s a cynical, shell-game claim, meant to earn support from drivers who are actually subsidizing this well established industry every April 15.

The simple fact of the matter is the current corn ethanol tax credit is a huge waste of money. We don’t need an additional 1.4 billion gallons of corn ethanol, or the higher prices for grains and more deforestation that come with it. And we sure as heck don’t need to be spending $4.18 per gallon to get it. The corn ethanol tax credit (and the biodiesel tax credit too) needs to end!

We have to be smarter about how we use our tax dollars. NRDC has proposed a greener biofuel tax credit that encourage competition among the technologies and only pay for real performance. It’s time to transition from corn ethanol’s pollution and pork to a new generation of more sustainable biofuels that brings us closer to real energy independence.

One of the triumphs of modern life is our ability to distance ourselves from the simple facts of our own existence. – Jeff Goodell

Big Coal by Jeff Goodell is a book I have had on my reading list for a long time, but I only got around to reading it during my recent trip to Europe. It has taken me a very long time to finish this review for a number of reasons, but one is that I had a hard time deciding what to write. Normally, when I read a book I will dog-ear the pages that I want to revisit either because 1). There was something significant that I did not know; or 2). I want to reference a particular point in the book review. By the time I finished reading this book, I probably had 50 pages dog-eared.

My introduction to Jeff Goodell came a couple of years ago when he was writing an article for Rolling Stone about ethanol. He contacted me and we talked a few times, I got to know him a bit, and he published a pretty scathing article during the early days of the ethanol euphoria. For more on that episode, see Rolling Stone Article, Jeff Goodell Debates the Rolling Stone Article on CNBC, or Bob Dinneen Responds to Rolling Stone.

I wish I could write like Goodell. I really enjoy his writing style. I sometimes disagree with particular points, but in Big Coal he makes a very compelling argument that we don’t come close to paying the societal costs of coal usage when we pay our electric bill.

Even though we don’t often see it, coal is a part of daily life for most of us. It produces a great deal of our electricity. But we don’t spend a lot of time thinking about the implications. As Goodell notes on the first page, “We love our hamburgers, but we’ve never seen the inside of a slaughterhouse.” Isn’t that the truth? I have always imagined the number of people who would become vegetarians if they ever saw the inner workings of a slaughterhouse.

When we fuel up our cars, we don’t think (much) about the ramifications of our oil dependence. When we flip a light switch, we do not associate that with the coal-driven mountaintop removals in West Virginia. In this book, Goodell thrusts those associations right in your face.

The book is divided into three parts: Extraction, conversion to power, and the resulting emissions. He covers the history of the industry, tells the stories of the people in and around the business, and while most of the book is based on U.S.-happenings, he does spend a chapter on China.

I would imagine the coal industry was none too pleased with Big Coal, because it paints a really ugly picture of the industry.  Goodell contrasts the coal industry with the individuals whose lives have been negatively impacted by coal in one way or another. He details corruption and politics that allowed the industry to delay implementation of pollution control equipment. And on a big picture level, he argues that continued usage of coal poses a serious threat to the earth’s climate.

This book will leave you shaking your head, wondering why we use coal at all if the overall picture is as troublesome as Goodell suggests. I found myself wondering as well, which was actually what led to my post on the cost of various energy sources. There at the top of the list for the cheapest source of energy was Powder River Basin coal, which is why we continue to heavily use coal despite the issues Goodell spells out.

We humans aren’t very good at willingly making sacrifices today in order to potentially improve the situation a few years down the line. We want instant gratification and coal fits the bill. (I would argue this is also why the U.S. is so deeply in debt and our personal savings rate is so low.)

I noted in my book review of Crude World that Peter Maass didn’t present a balanced picture of the oil industry; it was all bad. His book was intended to highlight the negative aspect of our oil dependency. Big Coal is the same in that respect. It is hard to argue that coal hasn’t improved the lives of a great many people around the world, and I know a number of people who would argue that these improvements outweigh the negatives. Further, it is fair to say that the coal industry has come a long way in cleaning up their emission profile over the past few decades.

But it is clear which side of that argument Goodell would come down on. To be honest, I come down on that side as well. I would like to see us limit our coal consumption and boost electricity generation from other resources. I know a great number of people who feel this way, but coal is like oil in that replacing it will likely entail economic sacrifices that individuals don’t like to make. Coal produces half of the electricity in the U.S., and I would have a hard time arguing that anything – outside of nuclear power – can scale up and take on the role that coal currently plays.

The realist in me thinks that we will eventually use up all of our coal, as will China, Australia, India, and all of the other major coal producers. This is primarily why I sit out the debates on climate change; I can’t realistically envision anything that will get the world to collectively NOT burn up all the coal. In an energy-constrained future, prices will rise and people who feel morally opposed to coal will suddenly find their moral fiber weakening as high energy prices bite into their budgets.

I don’t discount that renewable energy can eventually make a bigger impact (I hope so, because that’s what I am doing for a living), but it is starting from a very small basis compared to electricity generated from coal. While coal produces about half of the electricity in the U.S., renewables other than hydropower account for only about 3.5% (per the EIA).

So I think Big Coal will continue to be a very big part of our lives for many years to come – although with a strong political commitment the nuclear option could put a dent in our coal dependence.

Wind turbines may spin on American soil but many of them carry the "Made in China" label.

Washington D.C. – The war between members of the U.S. Senate and wind energy investors rages on as lawmakers try to suspend government appropriations earmarked for privately operated wind-energy projects. The complaint, raised by the Committee for Energy and Natural Resources, is that investors are funneling an overwhelming percentage of government funding toward Asian manufacturers, rather than using American companies.

With nearly $2 billion already spent on wind farm projects, several senators are leading the charge against stimulus funds that are suspected of being used for manufacturing wind mills in China that will eventually be used in the U.S. The purpose of the wind stimulus project, proposed by the Obama administration in early 2009, was to help expand the United States goal of producing wind generated energy, as well as create jobs across the country. Now, committee members are investigating the exact nature of the spending so far.

According to a report conducted by Investigative Reporting Workshop, 73 percent of the $1.9 billion in stimulus money that has distributed since Sept. 1, 2009 has been invested in foreign companies.

One particular project, a wind farm in west Texas slated to receive $450 million in government funds, has become the focal point of the debate. Sen. Charles Schumer (D-NY), has been outspoken in his skepticism of the project since its inception last year. Schumer claims that US Renewable Energy Group (US-REG), Texas-based Cielo Wind Power and Chinese Shenyang Power Group, all responsible for financing the venture, so far have not relied on U.S. manufacturing. Instead Schumer claims the investment will provide 3,000 jobs for Shenyang and 330 for Americans -300 of those U.S. jobs being temporary.

Senator Charles Schumer (D-NY) has hostile words for American companies using government grants to manufacture products abroad.

“It is a no-brainer that stimulus funds should only go to projects that create jobs in the United States rather than overseas,” Schumer’s office said in a statement. “These wind projects have a lot of merit, but the manufacturing should be happening here, not in China.”

In a statement released by US-REG, managing partner Cappy McGarr countered the charges by stating that his company intends to manufacture a minimum of 70 percent of the wind turbines for the $1.5 billion project domestically.  McGarr said that it is incorrect to assume that hundreds of additional jobs created aside from the direct construction and operation of the Texas plant would be outside the U.S.

The U.S. Energy Department released a statement saying that they do not support blocking stimulus payments and if projects that use foreign-manufactured turbines are cut off, even temporarily, the result could be immediate layoffs for American workers.

The current American Recovery and Reinvestment Act requires government run and financed stimulus projects to rely on American manufactured goods. Where the bill lacks coverage for protecting American jobs is in regards to privately operated projects, like the US-REG venture, that do not fall under the same guidelines.

Senate Committee members are pushing for new legislation that would require private project venturers to create jobs in the United States if they are taking advantage of federal grants. Under current law, the government has no jurisdiction to intercede by withholding grants even if the companies relying on government incentives perform all of the manufacturing abroad.

The Department of Energy has made a couple of unprecedented moves on efficiency in the last few months that have gone unnoticed by all but the most die-hard efficiency advocates.

First, as my colleague Noah Long explained, DOE has begun to actually enforce mandatory minimum appliance standards!  Crazy, right? First they announced about $3 million in fines on shower head manufacturers for failure to submit certification reports.  These are the first ever fines levied under the federal standards program, and further evidence of the new attitude about enforcement at DOE.  They then followed up by fining an air conditioner manufacturer $1.2 million for failing to certify.  I am guessing these and other manufacturers will pay a bit more attention to compliance and certification from now on.

Second, DOE issued its annual report to Congress recently, and the big news is that DOE has officially put development of national TV energy efficiency standards on its schedule.  We had been expecting this development, since DOE announced last fall that it would begin a TV proceeding “soon” in its notice repealing the outdated federal test method.

Standards for TV sets are long overdue. Congress gave DOE authority to consider TV standards in 1989, but this is the first time they’ve been considered federally.  Of course, it’s doubtful the feds would even be looking at TV standards absent the California Energy Commission (CEC) standards enacted last year and heroic efforts to develop and support those standards by the Commissioners and CEC staff through support led by NRDC’s Noah Horowitz, Pacific Gas & Electric and the rest of the CA investor owned utilities.

The federal schedule calls for completion of the federal rulemaking in June 2013.  Assuming that Consumer Electronics Association is not successful at derailing the federal process — you can bet they will try — that means federal standards would take effect in May 2016, at the earliest.  In the 3.5 years between the state standards implementation date and the earliest potential federal implementation date, about 20 million TV sets will be sold that will last 7 to 10 years.  Even if the feds do all we would want, there is still much value in staying the course in the states.

I think this DOE means business, don’t you?

The primary reason this happens is due to a seasonal switch in gasoline blends. There are two key (although not the only) specifications that refiners must meet for gasoline. The gasoline must have the proper octane, and it must have the proper Reid vapor pressure (RVP). While the octane specification of a particular grade is constant throughout the year, the RVP specification changes with the seasons. (See Refining 101: Winter Gasoline for a more detailed explanation of gasoline blends).

The RVP is based on a test that measures vapor pressure of the gasoline blend at 100 degrees F. Normal atmospheric pressure varies, but is usually around 14.7 lbs per square inch (psi). Atmospheric pressure is caused by the weight of the air over our heads. If a liquid has a vapor pressure of greater than atmospheric pressure, that liquid boils. For example, when you heat a pan of water the vapor pressure increases until it reaches atmospheric pressure. At that point the water begins to boil.

In the summer, when temperatures can exceed 100 degrees F in many locations, it is important that the RVP of gasoline is well below 14.7 psi. Otherwise, it can pressure up your gas tanks and gas cans, and it can boil in open containers. Gas that is vaporized ends up in the atmosphere, and contributes to air pollution. Therefore, the Environmental Protection Agency (EPA) has declared that summer gasoline blends may not exceed 7.8 psi in some locations, and 9.0 psi in others. The particulars vary, but key considerations are the altitude and motor vehicle density of a specific location.

The EPA publishes a schedule for the RVP transition:

Guide on Federal and State Summer RVP Standards for Conventional Gasoline Only

The schedule varies somewhat from region to region, but in general is as follows. After allowing vapor pressures as high as 15 psi in the winter, the limit drops starting on May 1st:

May: 9.0 psi
June – Sept. 15: 7/7.8 psi

More congested areas and hotter areas will tend to have a limit of 7.0 psi, while cooler climates generally opt for 7.8 psi. Some cooler climates maintain a 9.0 psi limit throughout the summer. One of the disadvantages of having different requirements for different areas is that summer gasoline is less fungible. This can cause price imbalances in different areas, and sometimes prevents product from flowing from one area into another to ease the shortage.

Refiners will start to pull down their inventory of winter gasoline well in advance of the May 1st deadline. On that date, all gasoline in the system has to meet the stricter requirements, and this “summer blend” is costlier to produce because it contains less butane.

Butane, which has an RVP of 52 psi, can be blended into gasoline in higher proportions in the winter because the vapor pressure allowance is higher. There are two advantages in doing this. First, butane is a cheaper blending component than most of the other ingredients. That makes fall and winter gasoline cheaper to produce.

But butane also adds to the total gasoline pool, so that means that gasoline supplies increase in the winter as more butane is added to the mix. Not only that, but this takes place after summer driving season, when demand typically falls off. These factors normally combine each year to reduce gasoline prices in the fall (even in non-election years). The RVP is stepped back down to summer levels starting in the spring, and this usually causes prices to increase.

One misconception some have is that they can save money by buying cheap gasoline in the winter and storing it for the summer. Remember that winter gasoline will pressure up as the weather heats up, and the contained butane will start to vaporize out of the mix. You will end up with less gasoline than you paid for, and that would also contribute to the air pollution problem that summer gasoline was designed to avoid.

If, on the other hand, you were to buy summer gasoline and try to store it until winter, you might find yourself having problems getting the fuel to ignite, due to the lower vapor pressure. This would be like putting a little bit of diesel in your gasoline – not very good for your car.

So how high might gasoline prices climb this spring? The EIA’s gasoline inventory database can provide some guidance. In the spring of 2007 gasoline prices spiked above $3.00 a gallon for the first time. But that year gasoline inventories also dropped sharply. Rapidly falling gasoline inventories are a good predictor of sharply higher gasoline prices. In the fall of 2005, Hurricane Katrica also caused a sharp drop in gasoline stocks, leading to an atypical fall price increase.

So far in 2010, gasoline inventories have been at very healthy levels. While some inventory draw down can be expected during the transition to summer gasoline, it is a pretty safe bet that the current high level of gasoline stocks will prevent a rapid escalation of prices this spring. I would expect no more than a mild price increase between now and summer, and at the current inventory levels it would not be surprising to see prices start to decline from present levels.

However if oil prices escalate, that could trump high gasoline inventory levels. This is why gasoline is presently about $1 more than it was last year at this time; oil prices were $30-$40 lower than they are now. But that’s a topic for a future essay.

During his trip to Savannah, Obama shared a lunch with a few of the locals.

Savannah, Ga. – Willing homeowners across America may soon be eligible for rebates for making energy efficient improvements to their houses, according to President Barack Obama. Standing in front of the student body and faculty at Savannah Technical College, Obama laid out the general groundwork for implementing his $6 billion HOMESTAR program, commonly referred to as the “Cash for Caulkers” program.

Obama said the plan is focused on providing rebates for consumers that purchase energy saving, home improvement upgrades such as insulation and water heaters. Under the program, vendors ranging from small independent contractors to nationwide home improvement chain stores will offer the on-the-spot rebates that will range between $1000 and $1500. The federal government will then reimburse the vendor for the rebate.

This program would also reward homeowners who have energy audits conducted and then follow through with the necessary improvements to reduce their energy consumption. Audited homes that are improved by cutting their energy costs by at least 20 percent can receive up to $3000 with the possibility of a larger rebate for any reduction over 20 percent.

Obama praised the Savannah Tech’s initiative called the YouthBuild program, geared toward pursuing energy efficient business practices through their specialized classes and training. He also drew parallels between the school’s energy education program and the White House’s current goals.

“In terms of energy usage, 40 percent of it goes into our homes and our building,” Obama said during the speech. “So as we’re looking for additional initiatives to spur hiring, I think we ought to embrace what’s happening on this campus. I think we ought to embrace the incredible potential that awaits us across America in clean energy.”

Cutting residential energy consumption and providing relief to homeowners who would partake in the plan, was not the only item on the agenda. The other task at hand for the White House, according to Obama, is attempting to provide jobs for American’s who will assist in weatherizing these houses.

Obama referred to manufacturers and contractors being ready to work and take on the possible increase in demand for labor, and even joked at one point in his speech about outsourcing.

“It turns out that energy-efficient windows or insulation, those things are products that are almost exclusively manufactured right here in the United States of America. It’s very hard to ship windows from China,” Obama said. “So that creates work for small businesses and contractors like some of the folks who are here today. And obviously construction work that’s been as hard hit as anything during this recession, so you’ve got a lot of skilled contractors ready to go.”

The White House has yet to propose the plan to Congress and several details are yet to be determined, such as its duration and costs.