This seems apropos to consider as world economies stumble, energy stocks dwindle, and politicians propose nothing of broad lasting value:

"We will find neither national purpose nor personal satisfaction in a mere continuation of economic progress, in an endless amassing of worldly goods. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product. For the Gross National Product includes air pollution, and ambulances to clear our highways from carnage. It counts special locks for our doors and jails for the people who break them. The Gross National Product includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missles and nuclear warheads.... It includes... the broadcasting of television programs which glorify violence to sell goods to our children. "And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials... the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America -- except whether we are proud to be Americans." -Robert F. Kennedy

Hat tip: TheOilDrum.com

• Its extremely inefficient to produce – the amount of energy returned from processing plant material is relatively low, and comes at a significant environmental cost (greenhouse gasses, pollution created, during the growing and manufacturing stages).
• Inefficiencies mean that we can’t grow enough to make a real dent in our energy supply; but governments love to tout such measures as “making progress”, or our latest government says “getting the job done”. The agriculture sector loves the policy – they are the recipients of massive subsidies. But in the end, the investment won’t solve the issue at hand – climate change – and can’t solve a future energy crunch either.
• Politically ethanol is a winner, because an uninformed public believes its positive because they are told so by government and lobby groups. In Canada we now have a series of commercials with an actor playing an on-the-street interviewer dispensing ethanol factoids. The public is being primed to love ethanol. The government will take advantage of that to hide the nature of ag-subsidies – its a vote buying grab and nothing more.
• Ethanol subsidies and the politicians driving this foolish policy are going to result in a swift re-deployment of agricultural resources away from food production to fuel production, regardless of how inefficient it is. This will hit us all in the pocket book, not at your local PetroCanada station, but at your grocery store, as prices on everything from cereal to meat will head higher and at a fairly rapid rate.

Light reading material:

Biofuels Boom Raises Tough Questions Over Environmental Benefits of
Corn-Based Ethanol

For all the environmental and economic troubles it causes, gasoline turns out to be a remarkably efficient automobile fuel. The energy required to pump crude out of the ground, refine it and transport it from oil well to gas tank is about 6 percent of the energy in the gasoline itself. [ed: remember, 6 percent

Ethanol is much less efficient, especially when it is made from corn. Just growing corn requires expending energy—plowing, planting, fertilizing and harvesting all require machinery that burns fossil fuel. Modern agriculture relies on large amounts of fertilizer and pesticides, both of which are produced by methods that consume fossil fuels. Then there’s the cost of transporting the corn to an ethanol plant, where the fermentation and distillation processes consume yet more energy. Finally, there’s the cost of transporting the fuel to filling stations. And because ethanol is more corrosive than gasoline, it can’t be pumped through relatively efficient pipelines, but must be transported by rail or tanker truck.

In the end, even the most generous analysts estimate that it takes the energy equivalent of three gallons of ethanol to make four gallons of the stuff. Some even argue that it takes more energy to produce ethanol from corn than you get out of it, but most agricultural economists think that’s a stretch. [ed: that’s 75 percent, compared to 6% for gasoline from oil]

America’s appetite for corn is enormous. But Americans consume so much gasoline that all the corn in the world couldn’t make enough ethanol to slake the nation’s lust for transportation fuels. Last year ethanol production used 12 percent of the U.S. corn harvest, but it replaced only 2.8 percent of the nation’s gasoline consumption.

From SmartMoney.com There Are Big Problems With Ethanol, Namely Corn Supply

The end result is that corn, traditionally America’s most abundant natural resource, has turned into the focus of a scarcity scare, with futures prices nearly doubling, in just eight months. So taxpayers end up subsidizing this folly thrice: Once in federal payments to corn producers that totaled almost $9 billion last year, again in a tax credit of 51 cents per gallon for ethanol producers and a third time in the supermarket checkout line.

According to U.S. inflation data, consumer prices for the food consumed at home rose 1.2% in January, more than in the previous 11 months combined. Whether that’s a blip or not remains to be seen. But poultry and pork producers are already squealing about the increases in feed costs.

Meanwhile, the U.S. Department of Agriculture expects ethanol’s claim on the corn crop to increase by 50% this year, sucking up more than a quarter of the national output. Legislation passed in 2005 requires the use of “renewable fuels” to rise by more than 50% from current levels by 2012.

Get ready for higher food prices – everything from cereal to lunch meat to anything sweetened or fortified with corn by-products. Harper’s following the same foolish plan.

Instead, we should be focussing on conservation. The AP article neatly sums up the math:

“If we were to adopt automobile fuel efficiency standards to increase efficiency by 20 percent, that would contribute as much as converting the entire U.S. grain harvest into ethanol,” Brown said.

Dealing with the root problem – over consumption in an energy-constrained world – is what really needs to happen but that would take real leadership of the sort that we are most unlikely to see from the leaders of either of our major national political parties, and certainly not from the folks in Victoria who are hell bent on implementing Emerson’s gateway pipe dream, building new roads and bridges and port facilities so that China can produce even more greenhouse gasses and even more pollution as it manufactures even more cheap goods that we ought to be buying far less of in the first place.

The spokesmen for the hydrogen hoax claim that hydrogen will be manufactured from water via electrolysis. It is certainly possible to make hydrogen this way, but it is very expensive—so much so, that only four percent of all hydrogen currently produced in the United States is produced in this manner. The rest is made by breaking down hydrocarbons, through processes like pyrolysis of natural gas or steam reforming of coal.

Neither type of hydrogen is even remotely economical as fuel. The wholesale cost of commercial grade liquid hydrogen (made the cheap way, from hydrocarbons) shipped to large customers in the United States is about $6 per kilogram. High purity hydrogen made from electrolysis for scientific applications costs considerably more. Dispensed in compressed gas cylinders to retail customers, the current price of commercial grade hydrogen is about $100 per kilogram. For comparison, a kilogram of hydrogen contains about the same amount of energy as a gallon of gasoline. This means that even if hydrogen cars were available and hydrogen stations existed to fuel them, no one with the power to choose otherwise would ever buy such vehicles. This fact alone makes the hydrogen economy a non-starter in a free society.

And even if you are among those willing to sacrifice freedom and economic rationality for the sake of the environment, and therefore prefer hydrogen for its advertised benefit of reduced carbon dioxide emissions, think again. Because hydrogen is actually made by reforming hydrocarbons, its use as fuel would not reduce greenhouse gas emissions at all. In fact, it would greatly increase them. (hat tip: The Oil Drum)

The following chart shows the last 10 years of price movement for Ballard Power, the largest producer of Hydrogen fuel cells in the world (80% market share), and illustrates that the smart money (not the government to be sure) is not sold on Hydrogen – they’ve done their homework. Yet certain governments pour billions into this area of research annually, wasting taxpayer’s funds on pipe dreams that will never be realizable.

Ethanol isn’t going to keep our butts in cars either, by the way. Canada under Harper is joining George W. Bush in paying for votes from the agricultural areas of Canada by pimping ethanol as the next big thing. Subsidized ethanol doesn’t solve energy or greenhouse gas problems – its a shell game of another sort worthy of a post on its own – but what it does do is give a government a tool to literally buy votes.

Report: Oil and water do not mix in a warming world (PDF)

In the first five days of december of this year, total prodcution from Cantarell complex was 2.008 millons of barrels per day, representing a 59% of national (mexican) production.

The estimation from our models… indicates that the production levels in the Cantarell complex will be aprox 1.905 millons of barrels per day by 2006. This magnitude is 6 % less than 2005 production of 2.032 mbd, and it is consistent with previous projections showed by PEMEX. For 2007 and 2008 estimated productions are 1.683 and 1.430 mbd, respectively.”

FYI Canada, Mexico, Venezuela and Saudi Arabia are the largest exporters of crude oil and refined products to the United States. Increased demand and lower production (Mexico and the US itself) mean that the demand on countries with spare capacity (Canada and Saudi Arabia) will only increase.

“Keeping crude oil below $70 is all very well, but in political terms it is a useless achievement if you cannot also keep gasoline below $100,” said Barclays Capital. “There is an energy crisis, and it is likely to get worse before it gets better.”

He has destroyed the Venezuelan economy, and he’s going to make that a launching pad for communist infiltration and Muslim extremism all over the continent. I don’t know about this doctrine of assassination, but if he thinks we’re trying to assassinate him, I think we really ought to go ahead and do it. It’s a whole lot cheaper than starting a war, and I don’t think any oil shipments will stop. But this man is a terrific danger, and this is in our sphere of influence, so we can’t let this happen.—Pat Robertson on his 700 Club television show, Monday August 22

Meanwhile, Venezuela presses forward with its Petrocaribe plan, and signs up Jamaica with a preferentially priced oil supply deal. That’s 22,000 bbl/day which won’t be available in the future to the US, and while its not much out of the 3.1 M bbl/day output of the country, expect the rhetoric to increase as more deals are done.

U.S. Official Says Venezuela Destabilizing Neighbors “The administration has found mounting evidence that Venezuela is actively using its oil wealth to destabilize its democratic neighbors in the Americas by funding anti-democratic groups in Bolivia, Ecuador and elsewhere,’’ Matthew Reynolds, the State Department’s acting assistant secretary for legislative affairs, stated in a letter to a congresswoman.

Reynolds’s comments were in a letter July 27 to Representative Ileana Ros-Lehtinen, a Florida Republican on the House International Relations Committee. Reynolds was responding to a letter Ros-Lehtinen sent to President George W. Bush asking him to pay attention to “the troubling axis’’ between Chavez and Cuba’s Fidel Castro, Chavez’s support “for Colombian terrorist organizations,’’ and Venezuelan arms’ purchases.

These comments from US lawmakers and bureaucrats have a deja vu ring to them. Will we be looking at Contra II in Venezuela in years to come? Iraq II?

Its certainly true that Chavez is trying to use his country’s resource wealth to gain influence in the region. Currently Venezuela is a major exporter of oil to the US; but the US doesn’t like Venezuela’s president much. That Chavez is shopping around for other customers for a product which the entire world wants should not surprise us at all.

In fact in a globalized-world where the free-market reigns, we should expect Chavez to seek diversification.

Yet in the light of a world potentially facing “peak oil”, this picture takes on a different hue. There are many net-importers of oil in the region Venezeula is geographically near. A number of these nations are already suffering due to the lack of less-expensive energy, so just imagine how much influence a major producer like Venezuela could have on the region when peak oil becomes an apparent reality…

An agreement between Venezuela and Caribbean countries, dubbed Petrocaribe, has been in the works for over a year and was ratified this past July.

Even among countries that did not sign on, such Trinidad and Tobago, there are voices within who are supportive of the development:

It is not simply about Venezuela increasing its influence in the region. As far as I am concerned the region could do with a bit more of Chavez-type thinking as an influence. It is a matter of whether increased Venezuelan influence can benefit us as a whole region. (Trinidad and Tobago News)

That nation’s prime minister, Patrick Manning, is not supportive of the Petrocaribe agreement. Energy politics may be playing a reverse role here – Trinidad and Tobago are the largest exporters of Liquified Natural Gas to the US bar none. With Natural Gas use in the US expected to far outstrip domestic production, LNG imports figure prominently in the US energy future.

In a world now dealing with a tight energy supply-demand balance, one that is will as a matter of course get tigher still provided world economic growth continues to head higher, it seems inevitable that the next world-shaking conflict will flare up over oil supplies.

Its a chicken and egg problem of global proportions – staving off the peak requires investment world wide; yet political instability is not condusive to the massive multi-year / multi-decade investments required to bring on major new fields or even bring significant upgrades to existing fields and production facilities.

Matthew Simmons, author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy,” participated today in an on-line discussion hosted by the Washington Post. Its worthwhile spending the time reading the questions and comments.