The Trump - Russian Narrative Fails Basic Logic Test

“It is very easy: If you can put Russia in the equation you win your argument,” - George Epurescu, Romanian Anti Fracking Group

In 2014, many media outlets such as the New York Times, The Guardian, and Financial Times were reporting that Russia may have been financing anti fracking protest groups around Europe. Their source was the then head of NATO, Anders Rasmussen. According to Wikileaks, even Hillary Clinton was privately worried about Russian influence in anti fracking movements in the US. Bloomberg recently reported that since US overtook Russia in gas production, the Russian TV Network, RT has :

"regularly published articles and aired segments that appear to oppose fracking, the fossil-fuel extraction technique that has made the U.S. an energy superpower again. One "exclusive" interview about the extraction technique features the opening question: "There are a lot of studies that say fracking is dangerous, so why do you think some countries and companies think it’s worth the risk?" 

This tends to support the initial claims made in 2014 by the head of NATO. There is of course a clear motive for Russia to get involved in anti fracking movements and to provide a platform for anti fracking propaganda on RT - to keep gas prices high and reduce competition. 

The logical next step then is for Russia to have backed an anti fracking party in America like the Greens or indeed a candidate like Bernie Sanders but certainly not someone like Donald Trump who is a strong advocate for US gas, coal and oil. Russia exports about $8 billion in petroleum products to the US each year. Even if the claims in 2014 about Russian influence in anti fracking movements are false, there is still no clear motive as to why Russia would back Trump. 

As George Epurescu says, "Russia" is now an argument and a counter argument to almost everything. You can dispense with the inconvenient need for basic logic and reason to support your arguments and just claim "Russia" which elicits the necessary emotional response required to make it look like you actually have an argument. 

Tax hikes on petrol on the way ?

But that's good news for us, the consumers who benefit from cheaper oil, so bring it on - David McWillams, Irish Economist, February 2016 [Sunday Business Post].

When the Socialist Portuguese government submitted their budget to the EU last week, they were told they had breached EU rules. They then put new measures together including tax hikes on petrol products which were accepted by the EU. The hike was justified "to counteract the environmental impact of low oil prices resulting from increased consumption".

One can see a mainstream Irish government lapping this one up - what a lovely way to raise taxes by telling people higher taxes will be good for them. Of course, most economists know that petrol and diesel are relatively inelastic products - consumption will not be affected much by changes in price. Instead, during times of low oil prices, consumers find they have more in their pocket to spend on other goods and so it should be. People deserve a break and it's good for local economies. But this will end once the watchful eye of the Government focuses on such "easy pickings". 

This could well be the hidden General Election issue here in Ireland - none of the Parties nor the media are mentioning it, but after water charges and property taxes, one can easily see an Irish government paying for auction type politics (with cuts in income tax and USC being promised by most of the parties) by putting more taxes on low petrol prices. Fiscal space means more green taxes. It's easier than confronting Apple and Google.

It's also worth noting that petrol is an allowable vouched expense for politicians so they won't be impacted by tax hikes on petrol. 

So now you know what to ask candidates when they arrive at your door.  

Energy Untruths : The 6 Billion Euro Question

Imagine if a newspaper printed the following :

If we invest enough money in our rugby pitches we will improve our soccer team

This claim is obviously and self-evidently false. However, the equivalent of this claim in energy terms was made in today's Irish Times :

A lot of the energy from renewables would come from the western fringes, where the national grid has been weakest, necessitating an investment of €3 billion to upgrade. (Against that, imported fuels cost more than €6 billion a year.)

This is suggesting that the investment in the grid upgrade is worthwhile because it will help reduce our fuel imports bill. But, according to the SEAI, 75% of our fuel bill comes from oil which makes up less than 1% of the fuel used in electricity generation. So that means that about € 4.5 billion of the € 6 billion fuel import bill has nothing whatsoever got to do with electricity generation.

So the €3 billion grid upgrade can only impact on circa € 1.5 billion of fuel imports, not €6 billion as suggested by the Irish Times.  

Fuel Import Bill has risen

So what are we doing installing all these wind farms and interconnectors ? Well, part of the reason is to reduce our dependency on fuel imports :

Reducing our dependency on fossil fuel imports, ensuring investment in the networks and delivering investor certainty through predictable responsive regulatory and policy frameworks are key drivers for energy policy. In line with both EU and international energy policy direction, the development of renewable energy and sustained ambition in energy efficiency are cornerstones of this Government’s energy policy objectives - Previous Energy Minister, Pat Rabbitte 2012.

But what has actually happened ? Well, believe it or not, our fuel bill has actually risen from circa € 6 billion in 2011 to € 6.7 billion in 2013 :

http://www.seai.ie/Publications/Statistics_Publications/Energy_in_Ireland/Energy-in-Ireland-1990-2013-report.pdf


But in the same period we installed almost 300MW of additional wind energy at a cost of around
€ 600 million (€2m per MW) or 0.6 of a billion euros. Just ask yourself - is this bang for your buck ?

To put the fuel bill in perspective, €6.7 billion is equal to the annual fuel bill for German airline, Lufthansa. Yet nobody is arguing that airline's should be reducing their fuel bills . Indeed, according to the Irish Times article, Air transport makes up about 15-16% of our fuel bill, slightly more than our reliance on fuel for private cars. Do you hear calls for airlines to begin making radical changes to cope with future uncertainties and "peak oil" ? 

As Peter Hitchens, the English journalist said recently - if a principle given to support a policy is not applied universally, then there must be another reason behind a policy - or something to that effect. This is reminiscent of the quote by JP Morgan :

A man always has two reasons for doing anything: a good reason and the real reason. - J. P. Morgan 

While we are on the subject of airlines and "peak oil", what are the oil reserves like at the moment ? Well, according to the International Energy Statistics, we are at a new high :

Graph taken from peakoilbarrel.com http://peakoilbarrel.com/eia-cc-reportm-plus-jeanlaherrere/

So what is the real reason for the current energy policy ? - well take a look at your 

electricity bill.

Do the Maths !

In the same Irish Times article above, Dick Ahlstrom, made the following claim :

The highest energy peak yet to occur on our national grid topped out at just over five billion watts of electricity (5GW). A single lake covering, say, two square kilometres had the potential to produce 100GW of electricity, more than we would use over 20 years.

Francis Clauson has contacted me to explain the simple maths error made here :

5GWhrs is what is required to meet 1 hour of peak demand, not 5GW. So correct maths is :

100GWhrs / 5GWhrs = 20GWhrs

i.e. The lake referred to above will provide enough power for 20 hours, NOT 20 years !!!!

PSO Levy set to soar this year

As pressure mounts on Energy suppliers to cut bills (some cuts have this week been announced), consumers will be expecting to see some extra change in their pocket in the coming months as some of the reductions in gas and oil wholesale prices are passed on. But there will be a sting in the tail come July.  Each July, the Energy Regulator (CER) calculates the PSO Levy required for the coming year, which begins in October. The PSO Levy recovers some of the costs for wind, peat and idle gas plants. Last year saw a rise in the PSO Levy of over € 100 million, mainly due to lower gas prices.

The PSO levy of €335.4 million for 2014/15 compares with €210.9 million allowed for the current 2013/14 PSO period. The biggest drivers for the year-on-year increase are as follows : 

Lower wholesale electricity prices. The estimated average wholesale electricity price in the all-island Single Electricity Market (SEM) for the 2014/15 period is €57.17/MWh. This is down circa 11% on the €64.28/MWh used to determine the levy for the current PSO period. A lower wholesale price for next year results in the PSO plants needing more PSO money to cover their allowed costs, to offset the lower money they are predicted to receive from the market. This applies across-the-board for renewables, peat and security of supply plants supported by the PSO. It is the biggest single driver of the rise in the levy. The lower estimated wholesale price for next year is reflective of a trend in recent months in the SEM of lower spot and forward contracting prices, related to lower gas prices; [extract from CER PSO Decision Paper  2014/2015]

And the trend since July was one of even lower gas and oil prices, that nobody, let alone the CER, could have foreseen. While we dont use much oil in electricity generation, oil is used in the extraction and transportation of gas so it does have a knock on effect on gas prices. So the CER will have no choice but to increase the € 335 million PSO levy even further next winter completely reversing and most likely exceeding the measly price cuts introduced by energy suppliers. The suppliers of course, it goes without saying, will pass the PSO Levy hike on to consumers, while at the same time, their power generating arms will pocket most of the portion of the PSO Levy relating to wind (most wind farms in the State are owned by the big Energy suppliers such as Energia, ESB, Bord Gais, Airtricity etc. Bord na Mona own the peat plants).

The current energy policy really resembles something from the Communist Soviet Union with the final electricity product incapable of reflecting market realities, rather shareholder interests.

Oil - To invest or not to invest ?

Meanwhile, Eddie O'Connor, CEO of Mainstream Renewables, recently stated in a blog

The fall in oil prices over the past few months has brought a huge measure of reality to energy investors. If production costs are higher than USD70 per barrel then their investment is wasted. Assets which can’t be sold for cost reasons are stranded and the companies which made the investments are in deep trouble. The investors who backed the companies could potentially lose everything.

 But back in 2009 he was warning about the impact of "peak oil" :

How much worse will the panic be when the truth is eventually accepted and we stare down the barrel of a gun at prices of US$200 – US$300 per barrel of oil and all other energies follow in price.

It looks like Prophet Eddie's predictions are about as reliable as his wind turbines.......