The Home Star bill—or, Cash for Caulkers—could create more than $9 billion in energy savings. (image: csmonitor.com)

Making your home more energy efficient could soon be more affordable than ever. On Thursday, the House of Representatives passed the Home Star Energy Retrofit Act—more informally known as Cash for Caulkers—to help homeowners make upgrades to lower their utility bills, said the Associated Press. The program, slated to cost $5.7 billion over two years, would also create jobs in the construction industry and reduce carbon emissions, its supporters say.

The Home Star bill proposes two different rebate programs that consumers could choose from. The first, named the “Silver Star” program, would offer rebates of up to 50 percent on a variety of home improvement projects and purchases of energy-efficient appliances. From weatherstripping and insulation to window replacements and efficient furnaces, homeowners could get a combination of rebates up to a total of $3,000.

The second program, dubbed the “Gold Star” program, requires a more extensive retrofit but also yields greater rewards. Homeowners who undergo a home energy audit and make improvements that increase energy efficiency by 20 percent would get a $3,000 rebate, the same amount as the maximum rebate under the Silver Star program. But under the Gold Star program, homeowners can earn more upgrades when they increase efficiency beyond 20 percent. For every 5 percent increase in efficiency beyond the 20 percent mark earns another $1,000, up to a maximum total rebate of $8,000.

Consumers would get the rebates, or discounts, directly from vendors at the point of sale. Vendors would then apply to the government for Home Star funds. In this way, the program would be more streamlined than the weatherization program included in the stimulus package, which has been slowed down by bureaucratic hurdles, as Fox News points out.

The Home Star bill had bipartisan sponsorship—Rep. Peter Welch (D-VT) and Rep. Vernon Ehlers (R-MI) sponsored the bill—and received the backing of an unlikely coalition of environmental and business groups. However, when it came to the vote House Republicans mostly opposed the bill, citing concern over the high price tag when the House has not figured out a way to pay for the bill. John Boehner of Ohio succinctly summarized the Republican opposition:

We are going to authorize $6.6 billion of money we don’t have so we can caulk homes?

Home Star’s supporters counter that the program, expected to be used by 3 million households, would save $9.2 billion in energy costs over the next 10 years. With more money in their pockets, consumers could increase spending on other goods and stimulate economic recovery.

Don’t rush out and begin making purchases for your home retrofit just yet—the bill now moves to the Senate, which is still tangled up with a financial regulation bill and possible climate and energy legislation. But Home Star’s supporters think the bill could be on the legislative fast track, and Rep. Ed Markey (D-MA) has predicted that the bill will become law this summer, just in time for households to weatherize and prepare for the winter.

The projected size and location of the Deepwater Horizon oil spill slick as of the night of Friday April 30. (image: nyt.com)

As the Deepwater Horizon oil spill in the Gulf of Mexico expands and its threat to coastal environments worsens, one market expert says it still has not had an effect on oil prices. MarketWatch reported on Friday that Rick Mueller, director of oil markets at Energy Security Analysis Inc., said the spill would probably not affect oil prices because the leaking oil field “was not a production field and it was not a big field to begin with.”

The New York Times cited unconfirmed reports that the now-massive oil slick had begun to reach the Louisiana coast on Friday afternoon. The spill, designated an event “of national significance” by President Obama, now poses a huge threat to coastal ecosystems in the Gulf, as well as fishing industries in the affected areas. Government officials and Gulf Coast residents are bracing for what could be the worst environmental disaster in years, if not decades.

The environmental and economic devastation of the spill could have major political fallout that shapes future US energy policy. A shift in public opinion away for supporting offshore drilling could put the brakes on a federal plan to expand drilling allowances and build support for the development on biodiesel and other green energy sources.

President Obama gives a speech on energy security at Andrews Air Force Base on Wednesday. (image: nytimes.com)

In a speech delivered at Andrews Air Force Base in Maryland, President Obama announced that the Interior Department would lift bans on oil and natural gas drilling off the coast of the southeastern US and parts of Alaska. Along with the announcement, Obama made a clear effort to cast his decision as a middle road between unchecked drilling and a blanket ban on drilling expansion. Details of the policy reported on Wednesday by the New York Times support this characterization: vast areas of the Atlantic ocean, a section of the Gulf of Mexico, and select areas off the coast of Alaska will be opened, while waters along the entire Pacific US coast and other Alaskan coastal regions will remain off-limits.

In his speech, Obama referred to the compromise decision as a product of careful deliberation on America’s energy security and future energy resources. As such, he tied expanded drilling to an increase in renewable energy use, saying that both resource categories were required to meet US energy needs. “We have less than 2 percent of the world’s oil reserves. We consume more than 20 percent of the world’s oil,” he explained. “And that means drilling alone cannot come close to meeting our long-term energy needs.”

A White House press release offered a more general statement from the President on that subject:

I want to emphasize that this announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies on homegrown fuels and clean energy. And the only way this transition will succeed is if it strengthens our economy in the short term and the long term. To fail to recognize this reality would be a mistake.

As proof of this broad and balanced approach, Obama made two announcements on the energy efficiency of vehicles along with the allowance of expanded drilling. In just a few days, he said, the White House would unveil higher fuel efficiency standards for vehicles sold in the US that would amount to saving “1.8 billion barrels of oil.” In addition, the president announced that the federal government would “lead by example” and vastly expand its use of hybrid vehicles:

In order to save energy and taxpayer dollars, my administration—led by Secretary Chu at Energy, as well as Administrator Johnson at GSA—is doubling the number of hybrid vehicles in the federal fleet, even as we seek to reduce the number of cars and trucks used by our government overall.

The Navy’s energy security logo on the F18 fighter jet scheduled to be “the first plane ever to fly faster than the speed of sound on a fuel mix that is half biomass.” (image: navy.mil)

After he emphasized the “sensible” and middle-of-the road nature of the new energy policies, Obama drove home his view of why it is important. He touched on the issues of energy independence and efficiency in the context of national security. He lauded the US Armed Forces for their leadership in energy efficiency, citing huge investments in efficiency measures this year, and pointed to an Air Force F18 fighter jet parked behind him.

This navy fighter jet, appropriately called the Green Hornet, will be flown for the first time in just a few days, on Earth Day. If tests go as planned, it will be the first plane ever to fly faster than the speed of sound on a fuel mix that is half biomass.

As is expected in all major political statements in our current economic climate, Obama peppered his speech with references to energy initiatives creating jobs and growing the national economy. He began his remarks by congratulating his administration on making the “largest investment in clean energy in our nation’s history,” and said the investment was “expected to create or save more than 700,000 jobs across America.” He repeated previous statements that a robust green energy industry in the US is crucial to America’s economic recovery.

Finally, Obama used his administration’s moderate approach to the issue to urge Congress to act on energy reform. He closed his speech with a broad call to action:

I think that we can break out of the broken politics of the past when it comes to our energy policy. I know that we can come together to pass comprehensive energy and climate legislation that’s going to foster new energy—new industries, create millions of new jobs, protect our planet, and help us become more energy independent. That’s what we can do. That is what we must do. And I’m confident that is what we will do.

For American consumers, the new drilling policies will not change much, at least at first. The allowance of drilling in new areas does not mean drilling will begin in the next few years, if at all. According to analysis from the Times, “Much of the oil and gas may not be recoverable at current prices and may be prohibitively expensive even if oil prices spike as they did in the summer of 2008.” The new policy gives oil and natural gas companies the option of drilling in a wider swath of territory, but offers no incentives to begin drilling activity. The lower prices and increased domestic production claimed by drilling supporters, which have been contested by many sources, including the Department of Energy, would not be realized for at least five years, and probably more.

The stricter vehicle efficiency standards will deliver cost savings to American drivers by requiring them to buy less fuel. As Obama put it, “new standards…will reduce our dependence on oil while helping folks spend a little less at the pump.” However, these requirements will only apply to new vehicles and probably won’t go into effect for a few years, so it will only be the new car owners of tomorrow that will see the benefits of higher fuel efficiency mandates.

How much oil does OPEC have? Oxford researchers say that OPEC exaggerates its oil reserves, and public agencies have accepted their figures. (image: media.wnct.com)

Researchers from Oxford University claim that OPEC’s oil reserve estimates are inflated but have been accepted by public agencies that compile statistics on oil and energy, reported the Daily Telegraph of London. The researchers warned that organizations like the International Energy Agency (IEA) and the Energy Information Administration (EIA) are aware that OPEC’s estimates are misleading, and could be failing to prepare governments for the oil shortages and price spikes that would accompany “peak oil.”

The Oxford researchers said that estimates of global oil reserves are “exaggerated by one-third,” and that conventional oil reserves amount to only 850–900 billion barrels—not the 1.2–1.4 trillion barrels that are currently estimated. The researchers wrote that the errors in statistics of oil reserves are “broadly acknowledged but not taken into account due to political sensitivities.” David King put the matter more bluntly, saying the IEA couldn’t afford to give unpleasant information to Western governments that pay its bills: “The IEA…has to keep its clients happy.”

IEA data has come under fire before, from outside analysts and a whistleblower in its own agency who said the agency overestimated the role that unconventional oil, such as the oil sands of Alberta, would play in future global oil supplies.

The IEA advises its member countries, which are nearly identical to the members of the Organization of Economic Cooperation and Development (OECD), on energy policy. Because of the influence of the agency, its estimates and statistics are closely watched and hotly debated. The IEA has previously said that peak oil—the moment at which global oil production will have irrevocably peaked, and which some observers believe will never occur—would happen in roughly 2020. This latest paper from Oxford avoids picking a date for peak oil, but says demand will outpace supply by 2014, the year that Kuwaiti scientists have predicted oil production will peak.

These findings come out just as the British energy minister meets with members of the UK Industry Taskforce on Peak Oil and Security, a business group that grabbed headlines in February when it issued a report warning that peak oil was imminent. A spokesperson for the British energy ministry said the meeting did not signify any change in British energy policy, but the report from Oxford gives academic backing to the Industry Taskforce’s argument that oil shortages may strike Britain earlier than previously expected. With business leaders and Oxford researchers in agreement, British public opinion—and public policy—may follow.

Energy Secretary Chu wants the US to pluck the low-hanging fruit of increased savings and reduced emissions offered by energy-efficiency upgrades. (image: mercblogger.com)

“Low-hanging fruit” has become something of a political cliché in recent years, used to refer to easily achieved goals that, once realized, produce substantial positive results.

For many, home energy-efficiency improvements are the perfect example of low-hanging fruit on the tree of cost savings for individual Americans and the government. Secretary of Energy Steven Chu has always believed this, and on Tuesday reiterated his belief and backed it up with some interesting evidence. In an article published on the Huffington Post, Chu described several studies undertaken by the Department of Energy that clearly show that, when done properly, energy-efficiency initiatives lower residential energy bills, reduce energy usage, and cut down greenhouse gas emissions. All of these positive results are usually realized within a year, and require minimal up-front investment.

Chu frames his argument as a response to “some economists” who say that if the benefits of energy-efficiency programs were so obvious, the market would have already sought them out and implemented them without government prodding or incentives. Chu identified five main market failures that stand in the way of widespread energy upgrades: “inertia, inconvenience, ignorance, lack of financing and ‘principal agent’ problems (e.g., landlords don’t install energy efficient refrigerators because tenants pay the energy bills).” He then enumerated steps the DOE would take to address those problems.

First, the Department plans to overcome inertia in the home energy retrofit business by looking into training programs for home energy auditors, developing technology to make audits easier and more accurate, and pushing for post-work inspections to ensure that improvements were done correctly and will deliver potential savings. The home energy audit has become a valuable first step toward energy savings—once a home’s energy deficiencies are indentified, they can usually be quickly and easily remedied. Even without major government initiatives, energy audits have already begun to grow as a necessary side-business for many energy and heating, ventilation, and air conditioning (HVAC) companies. Many heating oil service technicians now double as energy auditors.

To address the inconvenience of implementing home energy improvements, Chu pointed to the DOE initiative called “Retrofit Ramp-Up,” that will seek to provide efficiency upgrades to entire neighborhoods at once. According to Chu, “If we can audit and retrofit a significant fraction of the homes on any given residential block, the cost, convenience and confidence of retrofit work will be vastly improved.” The program also seeks to make efficiency upgrades a “social norm”—if most of a homeowner’s friends and neighbors know what energy audits are and are aware of the benefits of audits and efficiency upgrades, that homeowner would presumably be more likely to undertake such action his or herself.

To jump the cost hurdle that blocks some energy-efficiency improvements, the DOE has offered several tax incentives, rebates, and financing plans to encourage homeowners to invest in such improvements on their own. Chu offers the example of a program that would allow homeowners to pay back loans for efficiency improvement projects as part of their property taxes, which would tie the cost of energy upgrades to the home, along with their benefits.

To address the reluctance of disinterested parties in the real estate market to implement energy upgrades, Chu suggests making energy-efficiency inspections a required step in home sales. Just like structural and termite inspections, energy inspections would be considered in determining a home’s value, and the cost of improvements could be easily tacked on to a mortgage.

As Chu wrote, the evidence is clear that home energy audits and energy-efficiency upgrades are indeed low-hanging fruit that constitute a smart investment for individual Americans and government agencies alike:

-“a recent McKinsey report…found the potential to reduce consumer [energy] demand by about 23% by 2020 and reduce GHG emissions by 1.1 gigatons each year—at a net savings of US$ 680 billion.”

-“the National Academies found in 2009 that accelerated deployment of cost-effective technologies in buildings could reduce energy use by 25-30% in 2030,” with most improvements yielding a “a payback period of two to three years.”

-“improving the efficiency of buildings, which account for 40% of US energy use, is truly low hanging fruit.”

If Secretary Chu and his Department of Energy succeed in making audits and efficiency upgrades easier, cheaper, and more widely available, the savings will start rolling in sooner than many expect.

Richard Heinberg’s Goldilocks thinks that crude oil prices between $60 and $80 per barrel are just right. (image: twentydollars.files.wordpress.com)

We report regularly at HeatingOil.com on crude oil, crude oil prices, natural gas, peak oil, and alternative energy sources. Together, these broad categories of news provide us clues about our world’s energy future. As a global society, we are at a major crossroads: we can rest assured that the energy that the energy sources that power our cars, trucks, airplanes, end electrical plants 20 years from now will be very different than the fuels we rely on today.

Author Richard Heinberg has cleverly combined all of those factors into a concise anecdote that tells the tale of the world’s energy makeup over the last decade, providing clear signposts that show where to look for clues to what the next decade or two will look like.

Reuters’ Environment Forum blog posted Heinberg’s anecdote on Thursday, under the title, “Goldilocks and the Three Fuels.” His updated version of the classic tale is below:

Once upon a time (about a dozen years past), oil sold for $12 a barrel and a lot of people thought it would get even cheaper because the market was glutted.

But instead the price rose: many big oilfields were aging and yielding less, and it was getting harder to find new ones—especially in places easy and cheap to drill.

So the glut eroded and petroleum prices rose. Seeing a perfect opportunity (a necessary commodity with stagnating supply and growing demand), speculators drove the price up even further.

As prices lofted, oil companies and private investors also saw opportunity and started funding expensive projects to explore for oil in remote and inconvenient places, or to make synthetic liquid fuels out of lower-grade carbon materials like bitumen, coal, or kerogen.

But then in 2008, as the price of a barrel of oil reached its all-time high of $147, the economy crashed. Airlines and trucking companies downsized, motorists stayed home, and demand for oil plummeted. So did the price, bottoming out at $32 at the end of 2008.

But with prices so low, investments in hard-to-find oil and hard-to-make substitutes began to look tenuous, so tens of billions of dollars’ worth of projects got canceled. Yet the industry had been counting on those projects to maintain a steady stream of liquid fuels a few years out, so worries about a future supply crunch began to make headlines.

By mid-2009 the oil price had settled within a Goldilocks range—not too high (so as to kill the economy and, with it, fuel demand), and not too low (so as to scare away investment in future energy projects and thus reduce supply). That just-right price band appeared to be between $60 and $80 a barrel.

How long prices can stay in the Goldilocks range is anybody’s guess, but production declines in the world’s old super-giant oilfields continue to accelerate and exploration costs continue to mount, which means that the lower boundary of that just-right range will inevitably continue to migrate upward.

Meanwhile the world economy remains frail, so that even $80 oil could strain the recovery.

When discussing the increasing perils of the current oil supply-demand-price balancing act, some commentators opine that the world supply of oil has peaked; others say it is demand that has peaked. It is a distinction without a difference.

There are similarities with U.S. natural gas. Current shale gas projects are tapping into an abundant supply of fuel, and there is plenty more where that came from. But the costs of getting it out combined with the per-well decline rates are high, so gas prices need to be very high to turn a profit.

Nearly everyone believes that U.S. coal supplies are virtually endless, but the Goldilocks syndrome is coming into play there, too. Coal prices just about doubled in the two years leading up to the economic crash of 2008, and high-quality coals from the eastern region of the country are depleting fast.

We will never run out of coal, oil, or natural gas—in the absolute sense. The Industrial Revolution started in British coalfields, and there is still an enormous amount of coal in Britain; but the coal that’s left there is prohibitively expensive to mine, so that nation’s coal industry is virtually gone.

Goldilocks grew dissatisfied with her options, got up, and left. The same has been gradually transpiring in the U.S. oil patch over the past four decades, and the same will happen wherever useful non-renewable resources are found.

Economic theory says the market will always find a substitute for whatever resource is depleting to the point of scarcity. When it comes to fuels, the substitutes are alternatives to coal, oil, and gas—primarily, renewables like wind and solar. Investing in them should be a no-brainer.

But, during the Goldilocks interval, increasing price volatility for oil, gas, and coal can make all energy investments dicey. That means that, as a society, our main strategy for navigating the energy transition will almost certainly have to be conservation.

The lesson of the parable: If you’re an investor, beware—oil prices are going to be increasingly hard to predict over the longer term.

And if you make energy policy, don’t get any more hooked on non-renewable resources than you already are. If you do, you’ll eventually be spending much of your time chasing fickle Goldilocks—and in the end, she’s a bear.