The recent spike in oil prices cannot be pinned on traditional factors, such as international events.

As oil prices skyrocket, some policymakers want to halt efforts to increase the US’ emergency oil reserve, but the administration says energy security depends on the stockpile’s size.
The Department of Energy pulls approximately 70,000 barrels of oil off the market every day for the Strategic Petroleum Reserve (SPR), the world’s largest oil stash, stored in massive underground salt caverns along the Gulf of Mexico’s coastline, UPI reported.
To date, the SPR holds 698 million barrels of oil, but the DOE has been actively working to increase the reserve’s size in order to meet the Bush administration goal, announced by the president last year, of doubling its contents to 1.5 billion barrels by 2027.
But with oil prices reaching records highs of $100 per barrel this year, some congressmen say the administration’s actions are worsening the load on consumers and adding to market instability. Last week Sen. Byron Dorgan, D-N.D., introduced a bill calling on the Department of Energy to cease adding oil to the SPR for the rest of 2008, or until prices fall below $50 a barrel.
“We need to use a little common sense here,“ Dorgan said in a statement. “I believe maintaining the current reserve is important for our economy and national security but the time to stock up is not when prices are highest.“
A pause in purchases for the SPR would stimulate the economy, Dorgan said, by moderating energy prices.
Administration officials disagree.
The total amount of oil going into the reserve each day represents such a small portion of the market that it couldn’t possibly affect prices in any significant way, said Julie Ruggiero, a spokesperson for the DOE.
“The department is continuing to fill the SPR at a modest rate É that equate(s) to less than one-tenth of 1 percent of daily world oil consumption,“ Ruggiero told United Press International.
But even a small percentage can have a big impact on prices, said Philip Verleger, president of PKVerleger LLC, an energy economics consulting firm. Verleger told senators at a December hearing the recent spike in oil prices cannot be pinned on traditional factors, such as international events.
“By deduction, then, the cause of the increase must lie elsewhere,“ he testified. “The one and only significant change was DOE’s decision to begin filling the Strategic Petroleum Reserve.“
Prior to August 2007, Verleger said, the DOE had not been actively adding to the SPR, and it was the specific mix of crude oil it began adding to the reserve last fall that caused the rise in prices.
Although there have been recent surpluses of sour crude oil, sweet crude accounts for a much smaller share of the market, and a significant portion of it is not available to consumers.
Of the oil going into the SPR this fall, sweet crude represented 33 percent--or as much as 0.1 percent to 0.5 percent of the total sweet crude market, according to Verleger’s calculations. He said he believes this could be responsible for up to 10 percent of the sweet crude price increase.
But administration officials say efforts to fill the reserve should not fluctuate with the market.
“The Strategic Petroleum Reserve (SPR) is not a tool to be used to manipulate prices,“ said Scott Stanzel, a White House spokesperson. “When it has been used, say in the previous administration (to do so), it has had a very limited affect.“
The SPR functions as an insurance policy for the nation, Stanzel told UPI, in the event of a natural disaster, a terrorist attack or some other disruption to supply. The increasing demand for oil, and tightening market, make the need to bolster the SPR even more imperative, he said.
US daily imports of oil have risen dramatically since the SPR’s inception in 1975, effectively decreasing the length of time the SPR can satisfy the country’s energy needs every year.
“We have a net less protection from potential disruptions (to oil supply) than we did nearly 20 years ago,“ Stanzel told UPI.
Currently, the reserve holds a 56-day supply of oil imports. Under an agreement with other industrialized countries through the International Energy Agency, the United States is obligated to have the equivalent of 90 days worth of imports stored for emergencies. The president’s plan to double the reserve would result in a stockpile of that size in the SPR, Energy Secretary Samuel Bodman testified in the Senate Energy Committee last week.
However, the IEA does not mandate the 90-day requirement be met be government entities alone. When industry stores are factored into the equation, the total reaches 118 days--well above the IEA requirement, said Barry Piatt, communications director for Dorgan.
However, the IEA supports the administration’s push to increase the SPR, said Jason Elliott of the IEA.
“The US does not oblige industry to hold minimum levels of stocks, as many other IEA countries do, so while the U.S. is compliant with the IEA commitment, the IEA has encouraged the US administration to expand the SPR cover in order to guarantee sustainable compliance,“ Elliott told UPI.
Adding to the SPR doesn’t actually increase security, though, said Frank Verrastro, director of the Energy and National Security Program at the Center for Strategic & International Studies, a bipartisan think tank.

The International Energy Agency called on the United States to do more to curb energy use and fight global warming, saying pricing was the best way to curb demand.
According to AFP, the world’s biggest economy and energy consumer has made progress toward a more sustainable energy system but is lagging behind other industrialized countries and even developing countries such as China in some areas, the IEA said in a report.
“To address the multiple challenges that United States energy policy is facing, the price mechanism is the most important tool,“ said the report “Energy Policies of IEA Countries--United States 2007 Review.“
“The government should use it, by abolishing fossil fuel subsidies and creating taxation or other pricing regimes that internalize environmental costs,“ it said.
The IEA, which advises the US and 26 other members on international energy policies, acknowledged the challenge of changing the habits of Americans who are used to abundant resources and cheap energy prices.
“Failing to give the right incentives for conservation has removed the strongest reason for energy users to demand more efficient products.“
The current US policy for low energy prices “is leading to forecasts of demand that are unsustainable, and creates significant security and environmental risks not just for the United States, but also for the rest of the world,“ the Paris-based agency warned.
The IEA said the transport sector was key to achieving the country’s energy security and sustainabilty.
The IEA welcomed Congress’s passage in December of the first tightening of CAFE vehicle fuel-efficiency standards since 1975, which calls for a 40 percent increase in the fuel standard to 35 miles per gallon by 2020.
But it said the standards remain weak, and noted relatively little improvement in fuel economy since 1996.
“In general, in the field of vehicle efficiency, present policy goals in the United States are too timid to lead to the achievement of the cost-effective efficiency potential in the vehicle sector,“ said the report produced in conjunction with the Organization for Economic Cooperation and Development (OECD).
At a news conference in Washington, IEA executive director Nobuo Tanaka said a “more ambitious program is recommended“ for the United States to achieve a 50 percent cut in carbon-dioxide emissions by 2050.
“Stringent fuel standards are what we are recommending,“ he said.
He cited a number of options to explore as alternatives to traditional gasoline, such as second-generation biofuels, batteries and hydrogen fuel cells.
The report by the IEA, an autonomous agency under the framework of the 30-nation OECD, said that the lag time in the effect of the current proposals for an increase in the vehicle fuel standards would leave US consumers with “vehicles that are far below the fuel efficiency standards in other IEA member countries and even in important non-member countries such as China and India.“
Tanaka praised California’s efforts to further slash greenhouse gas emissions blamed for global warming.
“If California can, why not other states?“ he said.
But the car-clogged state has run into a roadblock: President George W. Bush’s administration.
In early January California said it was suing the US federal government for blocking the implementation of the state’s tough new standards on greenhouse gases.
The move came after the Environmental Protection Agency in December denied California’s request to be allowed to set new vehicle emissions standards which would be stricter than the federal laws.
Fifteen other states or state agencies joined California’s suit, including Maine, Maryland, New Jersey, New Mexico and New York.

Solar-energy technology has been improving incrementally, but its costs have been falling slowly.

It’s not easy being green--nor is it cheap. With the best will (and some of the most generous handouts) in the world, solar power still makes little sense for the average homeowner, even in sunny southern California. Under pressure from his environmentally conscious ten-year-old daughter, your correspondent has spent the past week talking to experts around the state and running the numbers to see if he could reduce Mayhem Manor’s carbon footprint.
Solar power ought to be the answer. The house faces south-east, lacks trees or other shadow-casting obstructions, and its flat roof offers ample space for a sizable solar array. At 720 feet up the hillside, it is well above the “marine layer“ (the locals’ fancy name for morning fog) and gets about 300 sunny days a year. So what’s the problem?
According to Economist.com, it’s not even as though the place gobbles electricity. When the house was being rebuilt five years ago, the new roof came with over a foot of thermal insulation. The floor-to-ceiling windows along two sides of the structure were replaced with double-glazed “low-E“ glass (the sort that blocks infra-red radiation), and thermal linings were included in all the exterior walls. Even during the summer, the air conditioner usually stays off.
Admittedly, the architect went overboard on lighting. Fully illuminated, the house demanded seven kilowatts of raw lighting-power before fluorescent lights replaced thirsty tungsten filaments. Overall electricity consumption is now a reasonable 8,300 kilowatt-hours (kWh) a year.
Given the local utility’s rate of 10.8 cents per kWh, that adds up to a modest $900 for the year--or just $2.50 a day. At those prices, solar energy simply cannot compete with juice from the local power-station, even with California-level subsidies.
The problem is that solar-energy technology has been improving incrementally, but its costs have been falling slowly.
If solar cells had abided by Moore’s Law, they too would have halved in price every 18 months or soÑand we would all be running our homes on sunshine. But getting photons from sunlight to dislodge more and more electrons in semi-conducting materials like silicon, and so generate electricity, is harder than building a better microchip.
(Moore’s Law describes an important trend in the history of computer hardware: that the number of transistors that can be inexpensively placed on an integrated circuit is increasing exponentially, doubling approximately every two years.)
The first solar cellsÑbuilt more than a century agoÑhad conversion efficiencies of around 1 percent. Since then, their efficiency has doubled once only every 30 yearsÑa veritable snail’s pace compared with the speed of microchip development.
It was not until the 1950s, for instance, that America’s famed Bell Labs stumbled on a way of boosting a solar cell’s conversion efficiency by “doping“ its silicon with certain impurities. It then took another 50 years to raise the efficiency to nearly 20 percent.
The performance of solar cells has picked up recently. But that’s only for the most exotic cells used in space. Today’s satellites have solar panels based on thin films of gallium arsenide that boast efficiencies of over 35 percent. Meanwhile, in the laboratory, exotic “quantum wells“ promise photovoltaic conversion efficiencies of 45% or more.
But the solar panels used in space cost millions to make and last for a decade at most. Back on earth, the only ones affordable enough to be used commercially are early models based on crystalline and amorphous silicon with efficiencies of around 15 percent.
And even these aren’t exactly cheap. Sanyo’s 200-watt module, one of the better panels used by the industry, offers 17 percent efficiency and costs $1,500 retail.
As a rule of thumb, the industry reckons that a solar panel capable of generating one kilowatt of power at peak times will average roughly 20 percent of that over the whole day. In other words, every kilowatt of installed capacity should be good for 4.8 kWh of daily consumption--or around 1,750 kWh per year. By that reckoning, Mayhem Manor would need 4.8 kilowatts of solar capacity to be able to generate the amount of electricity normally consumed from the grid.
Unfortunately, that ignores all the losses that occur between the sun’s rays striking the solar array and that direct current being converted into alternating current to run the house. Such losses can easily mop up 25 percent of the solar panel’s output. So, better install at least 6.4 kilowatts worth of solar panels on the roof.
Here’s where going green gets tough. At today’s prices, your correspondent would have to stump up $48,000 for the solar panels alone. Add the cost of the switching modules, the power controller, the fault protector, the DC-to-AC inverter and the service panel--not to mention the installation charges and the contractor’s profit--and the final bill could easily come to $65,000.