EPA threatens industry by executive order
BY MORRIS R. BESCHLOSS
PVF, economic analyst emeritus
With the January “Massachusetts political miracle” crushing President Obama’s potential legislative initiatives, business as a whole and the PVF sector in particular are breathing a unified sigh of relief. With the government’s takeover of healthcare, cap-and-trade, renewable energy dependence, and labor union card check seemingly out of the Administration’s grasp, a vast majority of business owners, large and small, have been given a new lease on life.
Although the business-hostile Administration has been subjected to a shocking setback, the Obama team is already sharpening its new strategic initiatives, utilizing its executive powers to circumvent Congressional limitation. Knowing full well that most Congressional personnel will put more emphasis on re-election this year, Obama has given Lisa Jackson, EPA executive head, the power to take direct action against industries charged with exceeding the strict standards of effluence mandated by previous Congressional action.
The U.S. Supreme Court has already cleared the way for such direct action by acknowledging the EPA’s powers to do so. This means that an equivalence of cap-and-trade could still be enforced by decree, as could be tighter strictures on coal production, oil drilling and natural gas “fracking.”
Also endangered could be oil converted from tar sands in Canada, but blacklisted by the EPA because of its high content of greenhouse gas and CO2 emissions. Also looked at with a jaundiced eye is the development of nuclear power-generating installations, due to the inability to determine burial grounds for radioactive residue. Economically, new nuclear installations are already questionable due to increasing costs and time duration allotted to completion.
That leaves the nuclear energy sector dependent on the “thickening” of 104 established power-generating locations, primarily developed prior to the Three Mile Island near meltdown in 1979.
Natural gas, which generates roughly one-half of coal’s greenhouse gases and CO2 is barely tolerated by the EPA. However, even the most radical EPA partisan realizes that solar, wind and geothermal will only be marginal in providing the electric generating power in upcoming years. Experts like Houston University Economics professor Economides, who presented a repeat lecture in mid-February at the PVF Roundtable, has indicated that renewable energy will provide no more than 3% of energy sources necessary for transportation, electric power and heating, etc. by 2050.
However, the strong anti-productive and climate-change radicalism of EPA will do everything in its power to hobble conventional sources of power development. This attitude is especially counter-productive, since it prohibits coal production, oil drilling and even natural gas “fracking,” all of which would contribute to mass job creation.
A massive national infrastructural improvement program of highways, dams, railroad tracks and bridges— the likes of which hasn’t been seen since 1957, during the Eisenhower Administration — could employ literally hundreds of thousands of unemployed, while bringing America’s infrastructure up to snuff. When considering that the U.S. population is double that of 1957, this could be a win-win problem solver.
But under present political circumstances, such a natural initiative is not in the cards of the Obama Administration. Barring a 180-degree agenda change, such a program might have to await a new White House inhabitant.
States join business groups to slow EPA mandates
With mounting job losses threatening state governments with ever-increasing budget deficits and substantially shrinking tax bases, a panicking group of state capitals is directly confronting the EPA’s demands for breakneck speed in implementing the reduction of CO2 and greenhouse gas emissions. Although such pleas have already emanated from the American Petroleum Institute, the National Association of Manufacturers and the U.S. Chamber of Commerce, this is the first time that state governors have taken the bull by the horns.
This puts President Obama between a rock and a hard place. Although the White House is more anxious than ever to have the EPA force compliance with hard-nosed emission standards, it is equally hard-pressed by increasing long term unemployment. With the Copenhagen climate control fiasco influencing greater urgency with EPA compliance standards, Obama felt that Commissioner Lisa Jackson’s pressure would force the Senate’s passage of cap-and-trade.
However, political reality will likely force Obama to yield to the Democratic Congressional states and pressure groups to avoid another falling crutch underpinning the Democratic Congressional majority, and the dire peril it faces in the November mid-term elections.
Electric power sector faces demand/supply paradox
As the first decade of the 21st Century came out of the starting gate, the lack of electric power became a source of concern to the burgeoning industrial, commercial and consumer sectors. With these three areas expected to break all demand records over the next 10 years, the problem was seen as one of utility development to keep factories, commercial edifices and residential entities going.
Despite the phony Enron price-fixing shortages that stopped development after being uncovered, a perceived shortage after this discovery threatened brownouts and blackouts in the foreseeable future. But by the middle of the decade, it became obvious that electric usage, while growing in conjunction with residential and commercial building, was offset by a slowdown in the industrial sector.
After the deep mid-year recession reached full bloom in September 2008, industrial power utilization eventually sank to the lowest level since the early 1990s, bringing total kilowatt hours used to an unexpected reduction, not previously anticipated by utilities and users.
To confuse the situation even further, the EPA has now been given a free hand in forcing mandates on utilities to maximize their control over the emission of greenhouse gases and CO2.
This has put America’s electric power sector in an unprecedented quandary. With overall electric demand sliding, EPA putting the squeeze on new utilities and restricting existing ones, the electric power sector has reduced its activities to maintenance and minimum expansion. This phenomenon is also putting a crimp in the intense development of renewable energy, solar, geothermal and wind power, which will need unavailable government funds to bring these powering resources up to the level of Congressional mandates.
Since nuclear, coal and oil drilling are out of bounds during the current Administration, it seems that neither growing demand nor expanding availability will allow the electrical sector to generate new dynamics in the immediate years ahead.
China revitalizes global steel industry
China’s switch toward bringing its 1.4 billion population into a modern lifestyle by utilizing its world-leading manufacturing sector, has reversed the downward plunge of its steel related exports. A 23% drop in exports last year provided China’s need for domestic stimulus, which led to turning its production machine toward domestic development.
Having taken leadership of the world’s steel industry in this decade, China is expected to jump its production another 10% this year. But even at this accelerated rate, China’s world-leading output will not exceed demand, as the Asian nations of India, Indonesia, South Korea, and Taiwan, plus Brazil lead the world out of its searing recession.
After years of a downward spiral, such iron ore suppliers as Australia’s Rio Tinto and others have pushed up prices as shortages rapidly metastasize. The sudden steel surge is also giving new life to U.S. coal mining, which has been in the crosshairs of America’s Environmental Protection Agency.
China will produce a record 600 million tons this year, about half the world’s output. The runner-up is Japan, which only produces one-sixth of the China’s steel production. Russia came in third, and the U.S. a poor fourth. This is a far cry from America’s 150-million-ton production, which in 1950 put the U.S. at the top of the world heap. It’s an embarrassing testimonial as to how far the U.S.’s once mighty manufacturing sector has fallen.
Leading economists expect China to continue its red-hot growth pattern, which has taken a bevy of raw materials right along with it.
Iron ore spot prices have reached $110 a metric ton, the highest in more than a year. Coal prices for steel mills and electricity production have surged more than 30% as China, last year, started curbing its coal mining to allay environmental concerns. Even steel scrap has hit a multi-year high.
Copper, aluminum and zinc prices have also risen. The only possibility of stopping the Chinese juggernaut is its own government, which is already beginning to put on its financial brakes due to the fear of overheating.
To stay up to date with my twice-daily blogging, be sure to log on to my hyperlink at www.theworldreport.org and then click on ‘Morrie’s page,” announced in the middle of the World Report website. Your recommendation for my blog, as well as the individual columns will be much appreciated.
Morris R. Beschloss, a 54-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst emeritus for The Wholesaler.