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The Saudis and oil prices — the diminishing value of conspiracy theories

saudi_1880139cEveryone likes hidden conspiracies, either fact or fiction. Covert conspiracies are the stuff of great and not-so-great novels. Whether true or false, when believed, they often cause tectonic policy shifts, wars, terrorism and ugly behavior by groups and individuals. They are part of being human and sometimes reflect the inhumanity of men and women toward their fellow human beings.

I have been following the recent media attention on conspiracies concerning oil, gasoline and Saudi Arabia. They are all over the place. If foolish consistency is the “hobgoblin of little minds” (Ralph Waldo Emerson), then the reporters and editorial writers are supportive stringers for inconsistency. Let me briefly summarize the thoughts and counter thoughts of some of the reported conspiracy theorists and practitioners:

  1. The Saudis are refusing to limit production and raise the price of oil because they want to severely weaken the economy of Iran. The tension between the two nations has increased and, to some extent, is now being framed both by real politics (concerning who’s going to carry the big stick in the region) and by sectarianism. Iran’s oil remains under sanction and the Saudis hope (and may even be working with Israel, at least in a back-office way) to keep it that way.
  2. No, you’re wrong. The Saudis are now after market penetration and are lowering the price of oil to impede U.S. development and production of oil from shale. Right now, they are not worrying so much about oil from Iran-given sanctions…but they probably will, if there is a nuclear deal between the West and Iran.
  3. You both are nuts. The Saudis and the U.S. government are working together to blunt Russian oil sales and its economy. The U.S. and Saudis can withstand low oil prices, but the Russians are, and will be, significantly hurt economically. If it hurts Iran so much, the better! But the Cold War is back and the reset is a failure.
  4. Everyone is missing the boat. The Saudis don’t really control prices or production to the extent that they did in the past. Neither does OPEC. Don’t look for conspiracies, except perhaps within the Kingdom itself. The most powerful members of the Saudi royal family understand that if they limit production to raise prices per barrel, it probably wouldn’t work in a major way. The U.S. has become a behemoth concerning oil from shale. If a nuclear deal goes through, Iran will have sanctions lessoned or removed relatively soon. Should the Russian and West reach some sort of cold peace in Ukraine, Russia will become a player again. When you add Canada, Iraq, Libya and the Gulf States to the mix, lower global demand, and increase the value of the dollar, you get an uncertain oil future. The Saudis, led by their new king, are buying time and casing out their oil future.

To me, the Saudi decisions and the subsequent OPEC decisions were muddled through. Yet, it appears reasonably rational. Saudi leaders feared rising prices and less oil production. Their opportunity costing, likely, went something like this: “If we raise prices, and reduce production, we will lose global market share and maybe, in the current market, even dollar or riyal value. Our production costs are relatively low, compared to shale development in the U.S. While costs may go higher in the future, particularly once drilling on flat desert land becomes more difficult in light of geology, we can make a profit at the present time, even at $30-40 a barrel. Conversely, we believe that for the time being, U.S. shale developers cannot make a profit going below $40-50. Maybe we are wrong, but if we are, our cost/profit equation is not wrong by much. By doing what we are doing, we will undercut American production. Sure, other exporting countries, including our allies in the Gulf will be hurt temporarily, but, in the long run, they and we will be better off. Further, restricting production and assumedly securing higher prices is not a compelling approach. It could cause political and social tension in the country. We rely on oil sales, cash flow and profit as well as reserves to, in effect, buy at least short-term civic peace from our citizens. Oil revenue helps support social services and basic infrastructure. We’ve got to keep it coming.”

The Kingdom understands that it can no longer control prices through production — influence, yes, but, with the rise of U.S. oil development, it cannot control production. Conspiracy theories or assumed practices don’t add much to the analysis of Saudi behavior concerning their cherished oil resources. Like a steamy novel, they fill our reading time, and sometimes lead to a rise in personal adrenaline. Often, at different moments, they define the bad guys vs. the good guys, or Taylor Swift vs. Madonna.

No single nation will probably have the power once held by OPEC and the Saudis. While human and institutional frailties and desires for wealth and power suggest there always will be conspiratorial practices aimed at influencing international prices of oil and international power relationships, their relevance and impact will diminish significantly. Their net effect will become apparent, mostly with respect to regional and local environments, like Yemen and ISIS in Syria and Iraq.

Recently, I asked a Special Forces officer, “Why is the U.S. fighting in Iraq?” I expected him to recite the speeches of politicians — you know, the ones about democracy, freedom and a better life for the citizens of Iraq. But he articulated none of these. He said one word, “Oil”! All the rest is B.S. I think he was and remains mostly right. His answer might help us understand part of the reason for the strange alliance between the Saudis and U.S. military efforts in or near Yemen at the present time. Beyond religious hatred and regional power struggles, it might also help us comprehend at least part of the reasons for Iran’s support of the U.S.-led war against ISIS — a war that also involves other “democratic” friends of the U.S. such as the Saudis and the Gulf States.

The alliances involve bitter enemies. On the surface, they seem somewhat mystifying. Sure, complex sectarian and power issues are involved, and the enemies of my enemies can sometimes become, in these two cases, less than transparent friends. But you know, these two conflicts — Yemen and ISIS — I believe, also reflect the combatant’s interest in oil and keeping oil-shipping routes open.

President Obama has argued that we should use alternative energy sources to fuel America’s economy and he has stated that we need to wean the U.S. off of oil and gasoline. Doing both, if successful, would be good for the environment, and limit the need to send our military to protect oil lifelines. Similarly, opening up U.S. fuel markets to alternative fuels and competition would mute the U.S. military intervention gene, while curing us, to a large degree, of mistakenly granting conspiracy advocates much respectability. Oh, I forgot to indicate that the oil companies continue their secret meetings. Their agenda is to frustrate the evolution of open fuel markets and consumer choices concerning fuel at the pump. Back to the conspiracy drawing boards! Nothing is what it seems, is it?

 

Photo credit: http://blogs.telegraph.co.uk/finance/

Hummer

Car buyers go shopping for better mileage

With the price of oil down from about $115 to $63 since last June, the impression has been created that the auto world is once again in the hands of the oil industry, and that the gasoline engine is here to stay.

But this week at the Bloomberg New Energy Finance Conference, there was the distinct impression that alternatives to the gasoline engine are moving up so fast that within another five years we may see big changes. Bloomberg Business wrote that the result is “Future transport is likely to look a lot different than what the major oil companies are fueling now. Instead of biofuels such as ethanol and green diesel making the internal-combustion engine fit into a world with greenhouse gas limits, wholesale new solutions are coming fast.”

“Where we are is in an age of plenty,” Michael Liebreich, BNEF’s founder, told Bloomberg. “We have cheap oil, cheap gas, cheap renewables. You do have an abundance of supply in a way you haven’t had for decades. We also are in an age of competition.”

The biggest piece of news is that gasoline consumption has leveled off over the last decade and now is lower than it was in 2006. This is a remarkable development that no one knows quite how to explain. Part of it may be the lingering recession. Fleet mileage improvement has definitely made a difference, improving from 24.5 in 2001 to 31.6 today, a dramatic surge of 29 percent in 13 years. The Age of the Hummer is over, and people are being more selective in shopping for better mileage, even as the vehicles improve.

But Bloomberg Energy sees alternatively fueled vehicles also making headway in a way that is just becoming visible. Electric car sales have quintupled over the last four years, although they did start at a very low base. But battery prices are coming down as rapidly as solar-panel prices, which means that they soon will be in a range where the average American can afford them. Tesla’s 2017 debut of the Model 3, priced in the $35,000 range, is going to be a real turning point, if everything goes right.

Also coming along rapidly is the hydrogen car, which the Japanese auto industry has chosen as its alternative to gasoline. Toyota and Honda are just beginning to market their models in Japan, and BNEF anticipates there will be 4,200 on the road in Japan by 2018. But California is another big potential market, and sales are scheduled to begin there sometime late this year. The California Legislature has responded by expanding the Hydrogen Highway initiated by former government Arnold Schwarzenegger, making it easier for drivers to refuel.

Of course, all these predictions are taking place on a world scale, and there the progress may be even more rapid than in the United States. One thing Tesla discovered in its relatively abortive attempt to crack the Chinese market is that China already has a thriving electric-car industry. The cars, moreover, are not scaled-down versions of powerful sports cars but slow-moving vehicles that have been designed from the ground up.

In an article in Forbes last week, Jack Perkowski outlined what he called “China’s other electric vehicle industry:”

While the global automotive giants struggle to find a winning formula for electric vehicles, approximately 100 manufacturers in China have already identified a large potential market undiscovered by the traditional players. The common problems faced by EV automakers — high cost, driving range, and the availability of charging stations — are not issues for these manufacturers because their target customers are satisfied with low-speed and limited range EVs, as long as they provide affordable transportation. In 2014, 400,000 so-called ‘low-speed’ EVs were sold in China, compared to only 84,000 conventional all electric and hybrid electric vehicles.

To get a glimpse of the size of China’s potential market, consider this: China is already the world’s largest vehicle market, accounting for 25 percent of all vehicles manufactured globally. Yet there is only 1 vehicle per 10 people in China, whereas in the United States there are 8 for every 10 – more than one vehicle for every person of driving age. China also has another huge market for other electric vehicles. It has sold 90 million motorcycles and 120 million electric bicycles.

Estimates are that China now has a million such low-speed EVs on the road now and might reach 3 million by 2020. These cars can do about 48 miles per hour and are used for short runs around town in smaller cities, so range is not a problem. They are doing wonders for air pollution. Manufacture only began in 2006, and already some provincial governments are starting to write requirements that they be preferred to the older gasoline types.
Surprisingly, the only government entity that has been slow to embrace the low-speed EVs is the national government in Beijing. The Central Government has not counted these EVs is their official automotive statistics and is only now starting to write regulations on how crash-worthy they must be and on what roads they will be allowed to travel.

Perkowski concludes: “Low-speed EVs may not fit the stereotype of today’s modern passenger car, but in China, where incomes remain low for a large part of the country’s population, affordability often trumps those values held dear in more developed countries.”

Could China’s low-speed EVs find a market in the United States? It’s certainly possible. In any case, the anti-gasoline revolution may be coming in ways we did not anticipate.

flexfuel badge_green

Simple antidote to Earth Day guilt: Use more ethanol

It’s Earth Day. Fuel Freedom is here to absolve you of your feelings of guilt.

Forty-five years ago today, on April 22, 1970, the first Earth Day was observed, in what is generally considered the birth of the modern U.S. environmental movement.

Earth Day-NYT2Even though there were plenty of other causes to occupy the minds of activists, 20 million people turned out at various gatherings around the country. Check out The New York Times front page from the next day:

No offense meant to contemporary agitators, but today many Americans just don’t have the sense of urgency commensurate with the enormity of the threat. As John Robinson, associate provost of sustainability at the University of British Columbia, notes, the goal of activists “is to get to a point where we don’t need special occasions” to raise awareness.

Earth Day as an annual event also might have the unintended consequence of overwhelming the casual observer — someone who wants to protect the planet but views the task as impossibly huge. Robinson says:

When you’re guilt tripped, it often leads to denial or apathy – and neither of those is a good basis for action. Denial means that you resist the whole message. A lot of climate change skepticism is of that nature – people feel beaten over the head with this stick of bad behavior. And so they just deny that anything is happening. Or they throw up their hands and say this is intractable – “what can I do, as a single individual, about this global problem?”

At Fuel Freedom, we’ve stayed out of the hitting-over-the-head business. Our message is simple: fuel choice for vehicles can bring a long list of benefits, from reduced overall costs for fuel; to greater stability for the overall economy; strengthened national security; and of course less impact on air, water and health.

Using more ethanol-blended fuel would achieve all these objectives: It’s a cleaner fuel than gasoline, and so there are fewer heat-trapping emissions (like carbon dioxide) produced. Because the nation’s gasoline supply contains 10 percent ethanol, last year the equivalent of 39.6 million metric tons of CO2 didn’t go into the atmosphere. That’s like removing 8.4 million cars from the road for a year.

If you’re concerned about the environmental impact of using corn for ethanol, which accounts for virtually all ethanol produced today, you should know that most corn ethanol is made from inedible, starchy varieties of the plant, and a co-product of the process is feed for livestock. Also, ethanol doesn’t have to be made from just corn: Natural gas, and a range of inedible plants, serve as “feedstocks.” A lot of this info is in our new documentary, PUMP, which you should check out, since it’s now on Netflix.

If saving the planet still seems like too Herculean a task, focus only on the issues we can see, smell and taste: Displacing more oil with ethanol would reduce harmful tailpipe emissions, like particulate matter, ground-level ozone and nitrogen oxide. This pollution has a devastating effect on health, worsening problems like asthma and heart disease. The American Lung Association says 47 percent of Americans live in places “where pollution levels are too often dangerous to breathe.”

Ethanol works, and there are about 17 million flex-fuel vehicles on the road, ready to take blends up to E85 (which is actually 51 percent to 83 percent ethanol). It doesn’t damage engines, it’s often much cheaper, vehicles run with more power on it, and it’s available if you go looking. In fact, new stations are opening all the time.

So all you Chevy Tahoe and GMC Yukon soccer moms out there, and you tough-guy pickup drivers. Everyone with a flex-fuel vehicle. You can make a difference, today.

And every day will be Earth Day for you.

Adam Smith is dead! Will moving his body help secure absent competition in fuel markets?

Former Gov. Richard Lamm of Colorado and I once led a group of CEOs on a trip to London. It was focused on what Colorado could learn from the British healthcare system. During the trip we visited St. Elizabeth Hospital. There in the lobby was a stuffed, mummified body of Sir Jeremy Bentham, so I took a picture with him. He was not very talkative.

But the resulting photograph brings back memories, perhaps apropos to the oil industry. Seeing Bentham looking so well and remembering how much he meant to my life — both the pain and joy — I propose we bring back Adam Smith, and place him in the lobbies of the big oil companies. Why? Easy: they seem to have forgotten about the value of free markets, competition and capitalism. A little dose of recall and guilt every morning when they go to work and when they leave their offices every evening wouldn’t hurt. Over time, maybe there would be substance behind their luncheon or dinner speeches concerning free markets and capitalism. Maybe they would remember Smith’s warning that, “People of the same trade [in this case, the oil industry] seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Right on, Adam! You are not my favorite economist or ethicist, but your quotation appears to fit the behavior of the oil industry. Sen. Dianne Feinstein, during California’s increase in gas prices a couple of years ago, suggested that oil companies and investors might have tried to set prices and blur their actions by casting blame on the refinery fires for gas price spikes. Her view was that market variations alone did not explain the high prices consumers were paying at the pump. Her comments implied some sort of collusion or manipulation.

E85 and E10 PricesThe general behavior of the big five oil companies concerning competition from E85 lends credence to Feinstein’s suspicions. Listen, my reader, and you shall hear some examples of big oil’s apparent, sometimes seemingly coordinated, efforts to restrict the growth of E85 sales here (sorry, Longfellow), even though E85, at the time, posed no real immediate competitive threat to overall gasoline sales. Of the just over 150,000 retail fuel or gas stations in the nation, only 2.5 percent offer E85 and less than one half of one percent of the major brands provide E85 under their branded canopy. How nice of them! Read a franchise agreement from Exxon or Texaco, and see if you can find a provision for an E85 pump…maybe there are words suggesting a location in the back of the station, near the men’s or ladies’ room or in front of the station, clearly off center and not under the canopy.

Look hard at the language and the decisions of nationally branded retail stations. Franchisees are generally limited as to price, fuels, location of pumps and marketing strategies. Maybe these restrictions are legal and from a monetary and profit point of view, understandable. But from a consumer perspective, they limit choice and often frustrate competition.

Some have charged oil companies with price fixing or collaboration in setting prices (a nicer way to say fixing). “No, not in America,” you say? Adam Smith would turn over in his grave! According to a report by AJW company in 2014, “Since RIN prices began to rise in 2013, the nationwide average discount for E85 vs. E10 at independent stations has been 14 percent or greater for all but one month. During the same period, the nationwide average discount for E85 at major branded stations reached 14percent only once. This discount is only a price comparison and does not factor in relative energy content of the fuels. As long as there is limited availability and unattractive pricing at major branded stations, low E85 demand likely will persist among consumers using those stations.”

Generally, I am not a fan of special-interest group research or funded research. I prefer to rely on, at least, relatively independent think tanks, universities and scholars. Yet, recently gifts of money for research blurs the line between the interest of funders and the integrity of the word independent. Caveat emptor!

A 2014 case study by the Renewable Fuels Association (RFA), an advocacy group funded, in part, by self-interested donors, tracked the per gallon fuel costs of all nine retail stations selling E85 in St. Louis during the summer of 2014. Each station had the brand names of one of the five largest oil companies.

The data indicated that there is some support for the notion that gasoline producers/suppliers and their franchised retailers in at least St. Louis purposely employed pricing strategies to discourage E85 consumption. They, apparently, wanted to negatively influence the consumer perceptions about the fuel.

Oil companies appeared to control key price behavior at the nine stations and, to some extent, worked together to set prices, either formally or informally. RFA argues that it’s hard to believe that the price similarities at stations in St. Louis happened by chance. For example, the average E10 retail prices were $3.45 dollars per gallon while the average E85 retail price was $3.47 dollars per gallon. Wholesale prices of E85 were an average of $2.58 per gallon, while E10 averaged $2.93 per gallon. “Based on prices for locally available ethanol, hydrocarbon blend stock, RFS RIN credits and a typical markup, E85 could have been offered at retail for $2.44-2.55 dollars per gallon.” There probably are many reasons why average E85 prices were more expensive than E10 and almost one dollar larger than their wholesale price….like someone from outer space tampered with the pumps or consumer demand for E85 overwhelmed supply and the stations responding to market pressures raised the E85 price to mute interest from buyers. Neither, of course, was true!

Oil companies and their retailers appeared to set the price of ethanol to steer E85 and fuel-agnostic buyers to gasoline. They also wanted to keep the loyalty of gasoline buyers. The similarity of prices could have occurred by chance. Sometimes, I wear a blue shirt in the morning and so does my colleague. We never discussed what we would wear. But our color schemes are coordinated. What the study doesn’t answer is why other St. Louis stations, independent from national brands, did not see an opportunity to come in below the prices of majors and sell E85. Personally, I would have liked the analysis better if other cities were included as cases for comparison and if the time period went beyond the summer. But it was an interesting provocative report and you can’t have everything.

Anecdotes and studies based on the relatively recent California methanol fuel experience and Colorado’s effort to build E85 sales seem to support the RFA study. They suggest that the fear of competition from alternative fuels among oil companies and or retailors led to, at best, begrudging support for both methanol and ethanol. They often located pumps (if they agreed to have them at all) in unfavorable positions in their or their franchisee’s retail stations. Marketing strategies were marginal at best, and non-existent at worst. Stories from some astute observers suggest that relatively high methanol and E85 prices were put in place to detour customers to gasoline. Among other factors leading to problems with each state’s initiatives, there was a lack of sustained interest by major oil companies in building and sustaining sales of both alternative fuels with competitive pricing.

Maybe things will change. The present downturn in oil and gasoline prices has led some oil company leaders to think more charitably about alternative fuels —natural gas, ethanol, methanol, biofuels — particularly in light of the development of more flex-fuel cars coming from Detroit, and from consumers who convert their older cars to be flex-fuel vehicles. They have begun to view alternative fuels more favorably as part of their future business and strategic plans. If they go further, they will have to face questions, which include: whether they integrate gasoline and alternative fuels under one organization and canopy or separate both, perhaps, as different brands. Real competition, probably, will require Congress to consider some variations on a theme of open fuels legislation. Success in building competition at the pump would make Adam Smith happy, were he alive, and be good for the environment, the economy and consumers.

E85: Can it break through as an alternative fuel?

Harry_S._TrumanPresident Harry S. Truman once said, “A pessimist is one who makes difficulties of his opportunities and an optimist is one who makes opportunities of his difficulties.” Over the past few weeks, my colleagues at Fuel Freedom Foundation and I have spoken with and read about several optimistic owners of E85 fuel stations.

Our selection wasn’t random. We focused on chains or fuel stations that apparently overcame literature-defined problems in marketing E85 and, according to their owners or senior managers, were on their way to success in securing profitable market penetration. Frankly, we wanted to find sufficient cases that testify to the fact that E85 can compete successfully with gasoline. Succinctly, we wanted to respond to a question that’s frequently asked of us, which goes something like this: “Assuming no major policy and feedstock changes (at least in the near term), can E85, in light of the current price of gasoline, provide consumers and the nation with a real competitive choice of alternative fuels that are safer, environmentally better and cheaper than gasoline?”

Future articles will provide mini case studies of some of E85 retailers. But for the present, based on many phone calls and Google descriptions, we found at least four or five stations (relatively quickly) with prices ranging from 60 cents to just over a $1 below the price of gasoline, despite the current, relatively low gas prices. The lowest price described was below $1.50 a gallon. All stations seemed committed to the continued sale of E85, and each one expressed conviction that they have sufficient price flexibility to build a vehicular fuel market able to meet cash flow and profit expectations. Their optimism was based on their present sales and future forecasts of sales.

Clearly, we need to know more. But what we heard deflated (at least partially) conventional wisdom suggesting that while a large pool of newer FFVs s and older vehicles that can be converted to FFV status exists, increased sales of E85 is unlikely because of the decline in the price of gasoline.

The E85 retailers we talked to and reviewed online appear to be using some of the following strategies to take on gasoline successfully in the market place. They are paraphrased and summarized from direct quotes for brevity:

Loosen Ties with Brand Names: Loosening ties with major brand-name franchisers provides the ability to sell E85 and permits more flexibility to set prices based on market perceptions.

Share Value of RINs: RINs are tradable and are valuable, particularly when their value is high. The ability to secure RINs from members of the supply chain is an incentive. Producers and blenders have a stake in retailer success; retailers have a stake in feedstock. The RINs help make the price right at the pump.

Amend Supply Chain: By incorporating blending as a function, retailers are able to manage costs and, indeed, lower costs. By avoiding the need to contract for transferring E85 from terminal to station and doing it themselves, retailers are able to also better manage costs.

Intuitive Marketing: Choosing an easily accessible location within which there is a high density of FFVs, along with recognition that price matters, are threshold needs to penetrate the fuel market. Smaller fuel stations often make their locational decision, in part, based on intuition and not on expensive market studies. Some might do a study…but those who did appeared to keep the costs low. They saw the possibilities in diverse locations by talking to the market and marketing folks and checking available data concerning FFVs in the area, as well as watching traffic patterns. They also had a feel for the area.

Anecdotes and small samples should not generate formulaic or prescriptive “one size fits all” market or marketing strategies. Maybe we were lucky in our calls! Maybe we were fortunate to quickly find the right articles or presentations. One of my colleagues fortuitously drove by a fuel station on his way to the airport and saw a sign touting a very low E85 cost per gallon. Clearly, economic, social, environmental, political and cultural variables are different in different areas of the country, and could very well negatively affect predictability of retail success, particularly concerning location, price and consumer acceptance. Just as clearly, supply-chain differences between and among retailers in different parts of the nation could well impede or facilitate success. What is important at this stage is to recognize that there are individuals and groups out there who own or manage fuel stations, and whose early market achievements should generate a positive bet concerning their intermediate and long-term success. Borrowing from Harry Truman, they appear, at least at first glance, to be making opportunities out of what others perceive as difficulties. If they succeed and generate copycats or variations on a theme, it will be good for the nation, its communities and consumers.

Does the man doth protest too much? The impact of attacks on coal by oil and gas

BHP-Billiton-Middelburg-1Did you read about Andrew Mackenzie, CEO of BHP Billiton, and his plea to his colleagues in the oil and gas industry? He asked them to stop publicly asserting that natural gas and oil produce fewer carbon emissions than coal. Interpreting, liberally: You guys (a euphemism for men and women) are hurting BHP and its mining and resource development businesses, as well as the entire sector.

Mackenzie said it nicely. He suggested that they lay off the criticism. Because we live in a peaceful, collaborative, problem-solving era (you’re supposed to laugh at this point), his solution, sort of Isaiah-like, was, “Come, let us now reason together.” On behalf of BHP, a conglomerate and the biggest mining company (dollar capitalization) in the world — a company that also has big stakes in oil and gas — Mackenzie asked that fossil fuel companies break bread together and find mutually beneficial solutions to the carbon problem — assumedly consistent with their respective bottom lines. Put another more interpretive way, why should his colleagues in the industry undercut each other by demeaning each other’s products? Paraphrasing a common phrase today, Mackenzie seems to believe that we are all BHP; we are all Exxon; and we are all Texaco. We all have carbon issues and face government emission regulations.

Mackenzie called for the industry to develop carbon capture and storage solutions. His proposals can be construed as relatively company-friendly in that they start off seemingly focused on protecting the diverse resource production menu of each company, particularly, but not only, coal. They also may help each company avoid (at least initially) caps, taxes and fixed emission or production targets.

We shouldn’t be cynical. Carbon capture and storage have been, and continue to be, supported by some respected environmentalists and scientists. Both are endorsed in their many papers, speeches and media.

By his proposal, Mackenzie suggests that the resource-development industry is stronger when the companies that are in it work together. Accordingly, they should not be at each other’s throats and denigrate products of their competitors. We should have peace rather than war! The calls from oil and gas companies to switch from coal to gas, as a strategy to reduce GHG emissions, Mackenzie indicates, is a “very western, rich country solution.” People in many developing countries have easier access to coal than gas. To get out of poverty, they will need to “burn coal cleanly.” He said: “I think there is a marketing ploy, which is ‘give up coal and burn more gas.’ ” Very insightful! Wow! When did he discover this?

The transition to natural gas from coal among utilities has led to a visible reduction of GHG emissions. Natural-gas-based ethanol promises the same kind of reduction in transportation. Don’t knock competition or abort it unless his desired industry collaboration can result in something better and cheaper!

Whether Mackenzie’s thoughts generate from the public interest or the bottom line, from expiation of guilt or inner wisdom, it doesn’t really matter. The industry, as a whole, has been laggard in coming up with and carrying out proposals concerning GHG or criteria pollutants. Maybe we need an Australian-based firm to energize it to ultimately play or pay! But maybe not!

Mackenzie said: “I still accept the drift from coal to gas is a good thing, but these things happen gradually. We need the power of the whole oil and gas industry and the whole mining industry, together aligned on this agenda to move the needle.” What needle, and where is it being moved? Doing good while making money? Perhaps. But his language doesn’t quite go that far. Sounds more like making money by doing as much good as we have to do. From a business standpoint, both are consistent with the view of those that the business of business is business.

It’s hard to know, from a policy perspective, exactly what to do with Mackenzie’s industry-wide collaboration idea or his proposals. It’s not a case of like them or leave them. But caveat emptor!

Sequestration, the fancy name for what he opines as a solution to GHG emissions, is expensive, uses lots of energy, takes a lot of time to initiate, and is unsafe in some areas, depending on geology. Contrary to his words, it may not be relevant to poor nations or poor areas. Yet, on the other hand, it’s worthy of consideration by both the public and private sector because its strategic use can reduce emissions. We need to weigh relative benefits and costs of emissions-reduction strategies. Further, and most important, if public funds are sought, the opportunity costing analyses must be transparent and convincing before moving toward scale-up possibilities.

Elimination of competition within the industry could end up muting the value of alternative fuels and alternate power sources. It could be very costly to the public. Most experts indicate there is no such thing as “clean” coal. There is cleaner coal, but it’s still dirty, and oil remains a major GHG emitter and criteria pollutant. Reliance on both coal and oil, when we have access to cleaner alcohol-based transitional fuels for power, industrial plants and transportation is problematic, at best, and bad policy concerning GHG and other pollutants, at worst.

Lots of questions: Is Mackenzie an enlightened business leader or a leader mainly interested in preserving the value of his coal reserves? Is sequestration in its various forms a viable option that would allow the use of coal, and other portfolio resources, without major GHG impacts? Are there better alternatives? Since market segmentation is external and will likely result in increased sensitivity by CEOs to criticism concerning the public harm caused by multiple energy related products, will collaboration among them generate controlled energy markets and ultimately minimize efforts to reduce GHG emissions and provide a cleaner, healthier environment? Remember that the industry, particularly the companies in it that produce lots of oil, has been and remains against open fuel markets and increasing the number of flex-fuel vehicles. There are no easy answers.

Mark Twain, a great oil and gas man, once said, “It takes your enemy and your friend, working together, to hurt you to the heart: the one to slander you and the other to get the news to you.” Finally, borrowing and amending Shakespeare, maybe Mackenzie doth protest too much!

Photo Credit: africagreenmedia.co.za

Fake and real news: Links between GHG reduction and alternative fuels

FT-emissions-graphicTurn on your local news every night and you’ll need a sleeping pill to get some rest. The format and content is the same around the country: a lot of tragic crime — ranging from sexual harassment, robbery and shootings — for about ten minutes; local sports for about 5 minutes; what seems like ten minutes of intermittent advertising; silly banter between two or more anchors for two minutes; and a human-interest story to supposedly lighten up your day at the very end of the show — likely about a dog and cat who have learned to dance together or a two-year-old child who already knows how to play Mozart. You get the picture!

Local news, as presently structured, is not about to send you to sleep feeling good about humanity, never mind your community or nation. National news is really only marginally better. Again, the first ten minutes, more often than not, are about environmental disasters in the nation or the world — hurricanes, volcanoes, cyclones and tornadoes. The second ten minutes includes maybe one or two tragically laced stories, more often than not, about fleeing refugees, suicide bombings, dope and dopes and conflict. Finally, at the end of the program, for less than a minute or two, there is generally a positive portrayal of a 95-year-old marathon runner or a self-made millionaire who is now single-handedly funding vaccinations for kids in Transylvania after inventing a three-wheeled car that will never need refueling and can seat twenty-five people.

Maybe this is how the world is! We certainly need to think about the problems and dangers faced by our communities, the nation and its citizens. Every now and then, Americans complain about the media’s emphasis on bad news. But their complaints are rarely recorded precisely in surveys of viewership. We criticize the primary emphasis on bad news, but seem to watch it more than good news. Somewhat like football, we know it causes emotional and physical injuries to players, but support it with the highest TV ratings and attendance numbers.

Jimmy Fallon, responding to the visible (but likely surface) cry for more good news, has added a section to The Tonight Show. He delivers fake, humorous news, which is, at times, an antidote to typical TV or cable news shows. Perhaps John Oliver, a rising comedian on HBO, does it even better. He takes real, serious news about human and institutional behavior that hurts the commonweal and makes us laugh. In the process, we gain insight.

This week’s news about carbon dioxide emissions “stalling” in 2014 for the first time in 40 years appeared in most newspapers (I am a newspaper junkie) led by The New York Times and the Financial Times. It seemed like good news! Heck, while the numbers don’t reflect a decline in carbon emissions, neither do they illustrate an increase. Let’s be thankful for what we got over a two-year period (in the words of scientists — stability, or 32.3bn tons a year).

But don’t submit the carbon stability numbers to Jimmy Fallon just yet. It’s much too early for a proposed new segment on The Tonight Show called “Real as Opposed to Fake, Good News.” Too much hype could convince supporters of efforts to slow down climate change that real progress is being made. We don’t know yet. Recent numbers only reflect no carbon growth from the previous year over a 12-month period. The numbers might be only temporary. They shouldnt lessen the pressure to define a meaningful fair and efficient strategy to lower GHG. If this occurs, yesterday’s good news will become a real policy and environmental problem for the U.S. and the world for many, many tomorrows.

I am concerned that the stability shown in the carbon figures may be related to factors that might be short lived. Economists and the media have attributed the 2014 plateau to decreases in the rate of growth of China’s energy consumption and new government policies, as well as regulations on economic growth in many nations (e.g., requirements for more energy-efficient buildings and the production of more fuel-efficient vehicles), the growth of the renewable energy sector and a shift to natural gas by utilities.

Truth be told, no one appears to have completed a solid factor analysis just yet. We don’t really know whether what occurred is the beginning of a continuous GHG emission slowdown and a possible important annual decrease.

Many expert commentators hailed the IEA’s finding, including its soon-to-be new director, Dr. Fatih Birol. He indicated that this is “a very welcome surprise…for the first time, greenhouse gas emissions are decoupling from economic growth.”

Yet, most expert commentators suggest we should be careful. They noted that the data, while positive, is insufficient to put all our money on a bet concerning future trends. For example, Hal Harvey, head of Energy Innovation, indicated, “one year does not a trend make.”

Many articles responding to the publication of the “carbon stall” story, either implicitly or explicitly, suggested that to sustain stability and move toward a significant downward trend requires a national, comprehensive strategy that includes the transportation sector. It accounts for approximately 17 percent of all emissions, probably higher, since other categories such as energy use, agriculture and land use have murky boundaries with respect to content. Indeed, a growing number of respected environmental leaders and policy analysts now include vehicle emissions as well as emissions from gasoline production and distribution as a “must lower” part of a needed comprehensive national, state and local set of emission reduction initiatives, particularly,if the nation is to meet temperature targets. Further, there is an admission that is becoming almost pervasive: that renewable fuels and renewable fuel powered vehicles, while supported by most of us, are not yet ready for prime time.

While ethanol, methanol and biofuels are not without criticism as fuels, they and other alternative fuels are better than gasoline with respect to emissions. For example, the GREET Model used by the federal government indicates that ethanol (E85) emits 22.4 percent less GHG emissions (grams per mile) when compared to gasoline (E10). The calculation is based on life-cycle data. Other independent studies show similar results, some a higher, others a lower percent in reductions. But the important point is that there is increased awareness that alternative fuels can play a role in the effort to tamp down GHG.

So why, at times, are some environmentalists and advocates of alternative fuels at loggerheads. I suspect that it relates to the difference between perfectibility and perfection. Apart from those in the oil industry who have a profit at stake in oil and welcome their almost-monopoly status concerning retail sales of gasoline, those who fear alternatives fuels point to the fact that they still generate GHG emissions and the assumption, that, if they become competitive, there will be less investment in research and development of renewables. Yes! Alternative fuels are not 100 percent free of emissions. No! Investment in renewables will remain significant, assuming that the American history of innovation and investment in transportation is a precursor of the future.

Putting America on the path to significant emission reduction demands a strong coalition between environmentalists and alternative fuel advocates. Commitments need to be made by public, private and nonprofit sectors to work together to implement a realistic comprehensive fuel policy; one that views alternative fuels as a transitional and replacement fuel for vehicles and that encompasses both alternative fuels and renewables. Two side of the same policy and behavior coin. President Franklin Roosevelt, speaking about the travails of the depression, once said, “All we have to fear is fear itself.” His words fit supporters of both alternative fuels and renewables. Let’s make love, not war!

Bryce (NY Times) and ethanol: The whole truth and nothing but the truth

E85 pumpWhat’s up with the Manhattan Institute for Policy Research? While I often don’t agree with the scholars who write for it, I find its articles and books thoughtful and provocative.

My question concerning the Institute derives from a desire to build a now absent civil dialogue concerning policy issues affecting the U.S. The Institute, when a reasonably informed national dialogue on policy existed, was an important participant. Now, that it has been lost, the Institute’s agenda and body of work offers hope that it can be resurrected someday soon. In this context Robert Bryce’s article in today’s New York Times, “End the Ethanol Rip-Off” concerns me. His article is filled with factual and interpretative errors that skew his conclusions concerning the Renewable Fuel Standard (RFS).

Bryce asserts that corn ethanol is responsible for significant environmental problems particularly related to land use, harvesting and processing fuel. He also states that it generates higher food costs, and that it damages small engines. Finally, according to the author, ethanol’s price has been and is generally higher, much higher, than gasoline. The only thing he left out is that ethanol is the cause of global warming, the Israeli-Palestinian conflict, unemployment, the trial and tribulations of Miss America contests and bouffant hairstyles in Texas.

No fuel used now in America is perfect. Certainly, the DNA of gasoline, which Bryce seems to champion, is much more harmful to the environment, and the nation’s need to reduce GHG emissions. Gasoline use also reflects significantly more public health problems and continues the nation’s dependence on imported fuels.

Let me try to summarize some of the facts that Bryce overlooks or does not seem to know:

  1. Although a cleaner burning fuel, E10 (10 percent ethanol) blended with gasoline does result in a small energy content gap that requires a purchase of additional E10 gasoline to secure mileage equivalency. But, up until recently, the lower price of E10, compared to gasoline, has more than made up for mileage differentials and slowed down the upward trend of the price of gasoline and put downward pressure on prices.
  2. E85, which the author does not mention, has been approved by the EPA for certain vehicle classes. Like E10, its use does result in lower mileage per gallon when compared to gasoline and also results in more mileage per BTU. The mileage gap is lower than the gap that Bryce indicates in his article. Again, before the decline of gas prices , the gap was more than made up by the lower costs of ethanol and its’ increased efficiency.
  3. There is no real consensus on the food vs. fuel debate. The World Bank has changed its position on this globally over the years and the Congressional Budget Office (CBO) has suggested that if there is a negative effect on food, it is very minor. Indeed, while the food vs. fuel argument has not yet been settled, most experts agree that increased oil prices contribute to increased food prices. The food vs. fuel argument has reflected an “on the one hand, on the other hand” dialogue. Perhaps more relevant, particularly with respect to corn, there are land use and processing techniques now being introduced that would mitigate possible problems. Certainly, corn is not in short supply and the price of corn to the consumer has not spiraled up significantly.
  4. The author also neglects the fact that natural gas- and cellulosic-based ethanol (as well as other feedstocks) maybe on the horizon. Investors have delayed involvement, primarily because of uncertainty concerning the market and gasoline prices. Its advent will likely lessen food vs. fuel issues and help lesson environmental concerns.
  5. Bryce suggests that ethanol, (again, he refers to E10 in his article), has a negative effect on engines. Most of the independent analysis of the impact of ethanol on engines, E10 as well as E15 and E85, suggest differently. The EPA has approved the sale of each blend with certain vehicular limitations with respect to E 15 and E 85.

Bryce spends much time talking about the cost to the consumer of ethanol and the so-called ethanol tax. Curiously, given his location in the Manhattan Institute, he neglects to mention the significant cost to the consumer of the failure of oil companies to open up the gasoline market to alternative fuels like ethanol. Try going to a “gas” station to buy E85 or to charge your electric vehicle. Good luck finding one near your home or easily on a long trip. Through tough franchise agreements, oil companies eliminate competition around the nation. I suspect the imputed tax caused by the oil companies’ monopoly or almost-monopoly position is quite higher, much higher, than the tax that Bryce suggests results from ethanol use. The Institute should pay for a copy of Adam Smith and give it to the author.

Bryce’s article does not really contribute to a needed transparent debate over Renewable Fuel Standards or the wisdom of alternative fuels. It mixes up concepts and facts concerning energy content, car performance and efficiency. It sweeps over serious issues with respect to food vs. fuel and the environment with a broken brush or broom. Its conclusion concerning ethanol and implicitly other alternative fuels is inconsistent with his assumed anti-regulatory position and belief in the market place. We need such a debate, one that reflects a comparison between alternative fuels such as ethanol and gasoline as well as one that accommodates a needed transitional strategy between alternate and renewable fuels.

 

Photo Credit: East TN Clean Fuels Coalition

Ich bin ein Norwegian and Swedish — expanding open fuel markets

artI have been intensely involved in urban policy issues since the early sixties — that’s the 1960s, for those who are young. Once, I was at a conference with the late and wonderful mayor of Minneapolis, Art Naftalin. He was a dear and valued friend and colleague. I asked him why the Minneapolis St. Paul Metropolitan Metro area had given rise to more urban policy innovations than most other areas of the nation (including metropolitan delivery of services, tax-base sharing, etc.).

I expected the mayor to respond with something like, “Well we have good leaders,” or, “Our citizens care,” or, “We really do have a solid institutional structure,” or “The politics are ripe.” Without batting an eye, however, Mayor Naftalin— “Art” — looked at me and indicated, “It’s because we have more Scandinavians here.”

What an interesting answer! I queried the mayor on his response. He said, “It’s because folks who emigrated from Norway and Sweden came to the area with a strong sense of community and social conscience.” He added, laughingly, that the weather often “was so cold, and the environment in Scandinavia so tough, that [they] began life at an early age, assuming shared responsibility for taking in someone else’s wash, children, and caring for the community’s public good.”

I think that Mayor Naftalin’s comments about the impact of demography and community consciousness were interesting and, for Minneapolis St. Paul in the sixties, probably reasonable. Jumping to 2015, and the present political polarization of Washington and many states and communities, I have some “fabulistic” ideas. First, why not create an innovative Avis-Rent-a-Scandinavian program to encourage Scandinavian emigration. Involved immigrants would receive fast pathways to citizenship as long as they show strong involvement in community life and leadership. Second, why not organize Scandinavian leaders in communities in the U.S. that illustrate a vibrant, strong Swedish or Norwegian demographic? They could make wonderful facilitators and spread the word about community building. Third, why not grant subsidies to surrogate mothers who agree to bear a Scandinavian child for parents desiring Norwegian or Swedish children? All right, this one is only presented to wake you up! It will take too long a time to make a difference in population numbers. No genetic engineering here. (As an aside, the idea is akin to relying only or even primarily on renewable fuels at the present time to significantly reduce GHG and other pollutants, given the number of existing internal combustion vehicles.)

Again, this discourse seems to be right out of Peter Pan’s Neverland. But, bottom line, there is wisdom in Mayor Naftalin’s comments, particularly with respect to developing strong concepts of the public good to secure support for polices to increase use of alternative fuels, FFVs and open fuel markets.

Because of the media’s wall-to-wall coverage of what was, until two weeks ago, focused on declining prices of gasoline and often real-dollar savings to low- and moderate-income households, an opportunity to create a nonpartisan constituency for sustained lower-fuel costs probably now exists among America’s population, particularly among less-than-affluent folks and their advocates. So, let’s make everyone a bit Swedish or Norwegian.

But human memories are often short lived and if gasoline continues to rise over the next few months, our memory of nearly $2 dollar a gallon gasoline will likely be lost. How many remember when gas was only twenty-five cents a gallon? I do. Only because I ran out of money when I was 16 several times and had to cash in bottles to secure gasoline.

Seriously, a brief window exists to create a broad community or public interest coalition (e.g., government, business, environmental groups, national, state and community groups interested in helping low- and moderate-income people, etc.) to sustain lower fuel prices. The coalition’s agenda, if successful, would open up gas markets to competition from safe, lower-priced, environmentally better alternative fuels — natural gas, ethanol, methanol, electricity and other renewables. They are not perfect fuels, but they are better than gasoline. Let gasoline compete on an even playing field instead of being protected by franchise agreements between stations and oil producers as well as the present absence of equitable and efficient public policies. I bet by trolling computerized Yellow Pages, the coalition could find Swedes and Norwegians — or their counterparts throughout the population — to provide strategic local, state and, indeed, national leadership and support for alternative fuels. Or, better yet, we all could become, in Mayor Naftalin’s terms, Scandinavian. Paraphrasing President Kennedy, “Ich bin ein Norwegian, Swedish.” Yes, we can! Instead of “drill baby drill”, let’s substitute “alternative fuels grownups alternative fuels!”

Should we use ethical thinking to respond to harm caused by oil’s boom and bust periods?

Many years ago, I wrote a piece for the Denver Post. At the time, I was the dean of the Graduate School of Public Affairs at the University of Colorado. The column appeared just after the earthquake that devastated part of the Marina in San Francisco and was preceded, I believe, by a series of tornadoes in Tornado Alley in the Midwest. At the time, I expressed my concern that Congress was rushing to approve legislation that would aid individuals and communities that were negatively affected by both traumas. While I was in favor of helping them, I wondered out loud in the piece, “Why is it so easy for our leaders to immediately respond to people and communities where there is a reasonable probability that terrible events like earthquakes, tornadoes, hurricanes, flooding will occur relatively frequently or with some certainty over time?” Put another way, community development and home buying or renting are most often conscious choices by individuals, groups and institutions. If they can choose where to live and/or develop, and if they know in advance that their choice is risky because of geology or climate, except for emergency support, should extensive public assistance be provided without too much discussion or analysis in the form of subsidies, insurance, tax breaks (an imputed subsidy) — particularly when it’s so hard to maintain social welfare and education initiatives for the poor who have few choices?

texas2Policy polarization is as bad as political or ideological polarization and complex questions of policy deserve more than an either/or dialogue, particularly when the pool of funds, public, nonprofit or private resources is limited, and should require efficient and equitable choices. It may well be that living in risky areas is the only choice of some households, given income or job constraints. But clearly, many of the folks living in hurricane-prone areas along the East Coast (e.g., Hilton Head) or in earthquake-susceptible areas like the Marina in San Francisco, are not among the poor or very poor. Developers, who read relevant government maps and study models, also know that higher tides and flooding, likely related to climate change, are increasingly possible along America’s coast lines. Yet development still goes on and builders make profits, and in the end the public often pays when calamities happen.

Now, what does all this have to do with ethics, gasoline and alternative replacement fuels? I have been intrigued with the recent spate of articles concerning the fact that the decline of gas prices (increasing over the past two weeks, at least) has benefited certain vulnerable, low-income people and has harmed others. As important, perhaps, the decline has made community leaders and residents in areas subject to the recent oil boom worried about the impact of price reductions on the tax base, new development and maintaining services. Most are clearly more sensitive than they have been to the effect of oil boom and bust periods.

Clearly, the least advantaged among us have secured what amounts to a personal income and household budget boost from the lower costs of gasoline. It is likely that their jobs and quality of life prospects have increased simultaneously. They can search for a job farther from their home, they can visit relatives who do not live in their community more easily and affordably, they might even be able to take a vacation using their car. But other low- and, indeed, moderate-income folks have suffered either because current or anticipated cutbacks in oil production, for example, in the Texas shale area will cost or will soon cost many of them their jobs and because their communities have had to cut back on needed often promised services. An oil producer, local to the Texas shale area, recently told Financial Times: “We are stacking rigs and laying people off every day. Everyone is.”

Questions whether the current increase in oil prices is a preface to the future or are just a part of resource instability are now being argued in the media by would-be experts. But the ethical questions concerning winners and losers, as well as possible public support options and company behavior, are and will remain pervasive. They are just as difficult to answer now as they were years ago and will likely still be difficult to answer years from now.

“While the town’s oil workers [and their communities (my addition)] count themselves as victims of the slump in crude prices, they in part contributed to their own downfall,” the author of the Financial Times piece wrote. Visions of permanent, high-paying jobs drew many employees to oil-boom areas and visions of higher taxes and sustained economic growth converted town leaders to boosters for speculative spending and oil-related development — often without attention to reserves and debt.

Estimates of profits, technological inventions, such as fracking, and the high price of oil and gas just a few years ago generated producer behavior in seeking leases and installing drilling rigs.

Sorry to drop a name, but if you buy into Rawlsian ethics (and if you don’t, let’s discuss), a country’s real greatness is defined by how it treats the least among us. In this context, the oil companies deserve little sympathy. They are long-time recipients of significant direct and indirect or imputed public subsidies. Production is still rising, and their bottom line, in light of the choices they have to cut back spending, will likely remain strong.

The ethical issues, as noted earlier, are trickier for employees and towns. To some extent, employees were captured by iterative boom town publicity, employments ads, “drill, baby, drill” talk out of Washington, and reports of comparatively high income levels in oil production areas. Over America’s history, household mobility has probably raised more incomes and provided more quality of life choices to those involved than any existing public policy.

Clearly, many people who had choices because of income and family structure to begin with were motivated to move to the oil shale areas. If they chose to move and their decisions were wrong, to what extent is the larger community or the nation responsible to provide support, apart from advice? It’s a tough question, given budgetary constraints and the increased numbers of low-income folks in the nation, some of whom had no choice concerning jobs but to move to boom communities or to stay in place. Similarly, if the cities and towns involved saw oil production as their ticket to a glorious future, and if they were wrong or they didn’t hedge the bet, does management weaknesses and local boosterism merit more than sympathy for the human condition and the lack of perfection in our leaders? Again, these are tough questions because real people are involved. Many Midwestern, Southwestern, and Western areas have become ghost towns or towns that once dreamed and are now more off-the-road tourist attractions of what used to be viable communities.

Let’s go back to the future. Maybe just maybe some of these global ethical issues could be reduced if the oil industry itself assumed some responsibility for social and community problems during “bust” times. Not just a reserve fund or diverse investments and products to help the company ride out long busts, but a fund to help communities they have “rigged (excuse the play on words)” and their residents ride out the down economic tide, and for employees to relocate if they want to. Probably a bad idea, but think about it! Companies get federal help, even in boom times, even when most analysts of right and left say it’s unnecessary. What’s wrong with a relatively small payback? Values based capitalism!

Perhaps ethical issues could be lessened if the federal government and oil companies could be convinced to move toward open fuel markets. Gas prices seem to be on the rise. One way to hold them down and provide low- and moderate-income workers a break is to convert gasoline stations to fuel stations. Given the lower prices of alternative fuels, competition, in this instance, would sustain at least part of the income benefits that consumers, including low- and moderate-income consumers, have had when gas was priced at low levels. Competition might also help maintain the economy of some shale areas that, for example, produce natural gas and have, or can have, site blenders for ethanol.

As I said earlier, basic ethical problems related to resource distribution, whether related to hurricanes, tornadoes, earthquakes or oil economic boom and bust cycles are difficult to resolve easily. Assigning fault between public, private sectors and individuals is a complicated task, made more complicated because of numerous exogenous variables that are not readily influenced in the short term (e.g., climate change or tension in the Middle East) at least by institutional, group or human actions, as well as a lack of data concerning cause and effect relationships and the power of special interest groups. We probably are condemned to the noted political scientist Charles Lindblom’s description of policymaking as muddling through to decisions. After consulting many companies and working with citizen groups and individuals over the years, I would add that the muddling process applies in varying degrees to them also. It’s the American way and has its advantages, particularly when we are uncertain about alternative strategies. Indeed, often it has better outcomes than decisions by fiat. Many times, it helps generate consensus during decision making processes and about decisions. Importantly, it also many times increases involvement of disenfranchised constituencies. But we can try to do better muddles!