Energy Explained to Governments – Part 1

Categories : Financial, News
March 19, 2021

Beverly Hills High School produced a lot of crude oil for over 20 years. Wait, did you say, “Beverly Hills High School?” Yes, I did. For about 22 years, a large oil derrick on the campus of BHHS pumped hundreds of thousands of barrels from a very rich oil reserve under Los Angeles County. The BHHS derrick was wood-covered and brightly painted, and flaunted the moniker “Tower of Hope.” The well was closed in 2018 due to pressure from environmentalists.

Los Angeles County sits on a massive oil reserve, which was discovered in 1893. As recently as 2019, California produced 442,000 barrels of crude oil daily. That number is down from 1,079,000 barrels per day in 1985. At $60/barrel, oil brings into the State’s economy more than $26 Million daily (oil production is a process industry, meaning it operates 24/7/365).

For an interesting look at the history of oil production in LA, I suggest the website, for its excellent pictures and brief, but informative, narrative.

Today, California seemingly detests oil. A large segment of Californians would abolish oil and gas production immediately. A significant percentage would also cease oil and gas consumption as well. Recent experience in Texas demonstrates just what a tragic idea this represents.

Texas produces oil, gas, nuclear power, and “renewables,” which include wind and solar. The State has resources sufficient to keep Texans supplied with energy, with enough surplus to export. Usually. Recent events displayed an unexpected exception to “business as usual.” A rare intense winter storm rendered production of several forms of energy inoperable for days and left hundreds of thousands of Texans without heat, lights, and potable water.

Nationwide, only natural gas and renewables are increasing in market share. Coal and oil consumption are being driven down by record-low market prices of natural gas. So long as gas remains plentiful and inexpensive, we expect the changeover to proceed. However, it should be left to market forces, rather than political pressures, to dictate the rate of replacement.

Political trends have been veering away from coal, oil, nuclear, and even natural gas, in favor of renewables. This utopian (“green”) view has failed to consider the consequences of real-life conditions affecting real people, as recently seen in Texas. Accelerating implementation of renewables, in the absence of contingency plans, can lead to unnecessary death and destruction.

The bottom line seems very clear. For every 1% of renewable energy consumption in today’s market, we need to have 1% traditional energy available in reserve. Fossil fuels are latent energy until needed, whereas wind and solar currently must be consumed within seconds of production. Worse yet, they cannot always be produced. Nuclear energy is the cleanest and safest of all and is available as required. However, nuclear power is hated by environmentalists, most of whom have no concept of nuclear power’s safety and efficiency.

Consequences of ignoring the realities of energy were on display recently in Texas. It was not a pretty sight. We cannot let it happen again. State and Local Governments, and especially the Federal Government, take heed.

Van Wie Financial is fee-only. For a reason.