Milton Friedman on Energy

Born on this day 105 years ago, free-market economist Milton Friedman (1912–2006) was one of a kind.

Even the dyspeptic Paul Krugman called his rival “the economist’s economist … a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time and possibly the most brilliant communicator of economic ideas to the general public that ever lived.” The Economist (issue of November 23, 2006) called him “the most influential economist of the second half of the twentieth century…and possibly all of it.”

Milton Friedman’s major professional mark was in monetary economics. But as a public intellectual, writing popular books and a biweekly Newsweek column, he became conversant in different fields, including energy.

Friedman understood how, for much of US history, major energy regulation was sponsored by some segment of the industry. “Few U.S. industries sing the praises of free enterprise more loudly than the oil industry,” he stated in 1967. “Yet few industries rely so heavily on special government favors.”[1]

The same can certainly be said today for the nuclear, wind, solar, ethanol, electric vehicle, and carbon-capture industries. From time to time, an interventionist proposal might also emanate from an oil, coal, or natural gas company.

Friedman’s harsh reaction to President Nixon’s wage and price control order of August 1971 is particularly important for the energy debate, for this action, not the Arab Embargo, created the oil shortages and a decade of spiraling regulation. The negative effects of the wage and price controls were so great that federal price controls on energy have not been part of the debate since.

Friedman explained how a surplus of regulation caused a shortage of oil and gas. He did not buy the “running out of resources” argument, elegantly dressed as Harold Hotelling’s fixity/depletion model, as did so many economists–even those at Resources for the Future.

Near the end of his long career, Friedman weighed in on the global warming debate with a blurb for Thomas Gale Moore’s book for the Cato Institute, Climate of Fear: Why We Shouldn’t Worry About Global Warming (1999). Friedman opined:

This encyclopedic and even-handed survey of the evidence of global warming is a welcome corrective to the raging hysteria about the alleged dangers of global warming. Moore demonstrates conclusively that global warming is more likely to benefit than to harm the general public.

Some salient Friedman quotations follow with commentary.

Energy Economics

“I do not believe there is a natural resource economics. I believe there is good economics and bad economics.”

– Milton Friedman to Robert Bradley, e-mail communication, September 8, 2003.

Comment: This is a very profound view. Many economists, viewing minerals as fixed and thus depletable, have tried to separate natural gas, coal, and oil from so-called nondepletable goods. Friedman is saying that there is no special scarcity value for minerals, energy, or other natural resources. This puts him in the camp of Julian Simon and Ludwig von Mises, not Hotelling-inspired economists.

Energy Depletion

“[Oil, gas, and coal are] producible … at more or less constant or indeed declining cost because of the improvements in the technology of drilling and exploring and so on.”

– Milton Friedman, “The Energy Crisis: A Humane Solution” (Cato Institute: 1978).

Comment: This is Friedman’s nod to what Julian Simon memorialized as the “ultimate resource”—human ingenuity. (Friedman, by the way, felt that Simon’s empirical work on human improvement should have qualified him to win the Nobel Prize in economics. Simon died in 1998.)

Protectionism

“The infant industry argument is a smoke screen. The so-called infants never grow up. Once imposed, tariffs are seldom eliminated.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), pp. 5–6.

Comment: Think about wind power and (on-grid) solar power, particularly in reference to the federal Renewable Energy Production Tax Credit (PTC), first established in 1992. Now 25 years old, the PTC has been extended nine times: in 1999, 2002, 2004, 2005, 2007, 2009, 2012, 2014, and 2015.

Nixon’s Price Control Order: August 15, 1971

“I regret exceedingly that he decided to impose a ninety-day freeze on prices and wages. That is one of those ‘very plausible schemes … with very pleasing commencements, [that] have often shameful and lamentable conclusions.’”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“Individual price and wage changes will not be prevented. In the main, price changes will simply be concealed by taking the form of changes in discounts, service, and quality, and wage changes, in overtime, perquisites and so on…. But to whatever extent the freeze is enforced, it will do harm by distorting relative prices.”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“By encouraging men to spy and report on one another, by making it in the private interest of large numbers of citizens to evade the controls, and by making actions illegal that are in the public interest, the controls undermine individual morality.”

– Milton Friedman, “Morality and Controls,” Newsweek, October 28, 1971.

Comment: Friedman’s criticism ranges from economics to civil liberty to human morality. Regarding oil and gas, quality changes could not compensate for such intervention, leading to physical shortages.

1970s Energy Crisis

“It is a mark of how far we have gone on the road to serfdom that government allocation and rationing of oil is the automatic response to the oil crisis.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“The present oil crisis has not been produced by the oil companies. It is a result of government mismanagement exacerbated by the Mideast war.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“Lines are forming at those gas stations that are open. The exasperated motorists are cursing; the service-station attendants are fuming; the politicians are promising. The one thing few people seem to be doing is thinking….

“How can thinking people believe that a government that cannot deliver the mail can deliver gas better than Exxon, Mobil, Texaco, Gulf, and the rest?”

– Milton Friedman, “FEO and the Gas Lines,” Newsweek, Marc 4, 1974.

“The long gasoline lines that suddenly emerged in 1974 after the OPEC oil embargo … and again in the spring and summer of 1979 after the revolution in Iran, [came after] a sharp disturbance in the supply of crude oil from abroad. But that did not lead to gasoline lines in Germany or Japan, which are wholly dependent on imported oil. It led to long gasoline lines in the United States, … for one reason and one reason only: because legislation, administered by a government agency, did not permit the price system to function.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 14.

“There is one simple way to end the energy crisis and gasoline shortages tomorrow—and we mean tomorrow and not six months from now, nor six years from now. Eliminate all controls on the prices of crude oil and other petroleum products.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219.

Comment: Price controls on oil and on natural gas were removed in the 1980s, and markets went from shortage to surplus where they have been—with rare exceptions—ever since.

Milton and Rose Friedman explained prices controls and shortages in their most popular book, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219:

Economists may not know much, but we know one thing very well: how to produce surpluses and shortages. Do you want a surplus? Have the government legislate a minimum price that is above the price that would otherwise prevail…. Do you want a shortage? Have the government legislate a maximum price that is below the price that would otherwise prevail. That is what New York City and, more recently, other cities have done for rental dwellings, and that is why they all suffer or will soon suffer from housing shortages. That is why there were so many shortages during World War II. That is why there is an energy crisis and a gasoline shortage.

Milton Friedman’s timeless energy insights should be appreciated for all time.


[1]“Oil and the Middle East,” Newsweek, June 26, 1967. Reprinted in Milton Friedman, An Economists Protest (Glen Ridge, NJ: Thomas Horton and Daughters, 1973), p. 21.

The post Milton Friedman on Energy appeared first on IER.

from Raymond Castleberry Blog http://raymondcastleberry.blogspot.com/2017/07/milton-friedman-on-energy.html
via http://raymondcastleberry.blogspot.com

Milton Friedman on Energy

Born on this day 105 years ago, free-market economist Milton Friedman (1912–2006) was one of a kind.

Even the dyspeptic Paul Krugman called his rival “the economist’s economist … a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time and possibly the most brilliant communicator of economic ideas to the general public that ever lived.” The Economist (issue of November 23, 2006) called him “the most influential economist of the second half of the twentieth century…and possibly all of it.”

Milton Friedman’s major professional mark was in monetary economics. But as a public intellectual, writing popular books and a biweekly Newsweek column, he became conversant in different fields, including energy.

Friedman understood how, for much of US history, major energy regulation was sponsored by some segment of the industry. “Few U.S. industries sing the praises of free enterprise more loudly than the oil industry,” he stated in 1967. “Yet few industries rely so heavily on special government favors.”[1]

The same can certainly be said today for the nuclear, wind, solar, ethanol, electric vehicle, and carbon-capture industries. From time to time, an interventionist proposal might also emanate from an oil, coal, or natural gas company.

Friedman’s harsh reaction to President Nixon’s wage and price control order of August 1971 is particularly important for the energy debate, for this action, not the Arab Embargo, created the oil shortages and a decade of spiraling regulation. The negative effects of the wage and price controls were so great that federal price controls on energy have not been part of the debate since.

Friedman explained how a surplus of regulation caused a shortage of oil and gas. He did not buy the “running out of resources” argument, elegantly dressed as Harold Hotelling’s fixity/depletion model, as did so many economists–even those at Resources for the Future.

Near the end of his long career, Friedman weighed in on the global warming debate with a blurb for Thomas Gale Moore’s book for the Cato Institute, Climate of Fear: Why We Shouldn’t Worry About Global Warming (1999). Friedman opined:

This encyclopedic and even-handed survey of the evidence of global warming is a welcome corrective to the raging hysteria about the alleged dangers of global warming. Moore demonstrates conclusively that global warming is more likely to benefit than to harm the general public.

Some salient Friedman quotations follow with commentary.

Energy Economics

“I do not believe there is a natural resource economics. I believe there is good economics and bad economics.”

– Milton Friedman to Robert Bradley, e-mail communication, September 8, 2003.

Comment: This is a very profound view. Many economists, viewing minerals as fixed and thus depletable, have tried to separate natural gas, coal, and oil from so-called nondepletable goods. Friedman is saying that there is no special scarcity value for minerals, energy, or other natural resources. This puts him in the camp of Julian Simon and Ludwig von Mises, not Hotelling-inspired economists.

Energy Depletion

“[Oil, gas, and coal are] producible … at more or less constant or indeed declining cost because of the improvements in the technology of drilling and exploring and so on.”

– Milton Friedman, “The Energy Crisis: A Humane Solution” (Cato Institute: 1978).

Comment: This is Friedman’s nod to what Julian Simon memorialized as the “ultimate resource”—human ingenuity. (Friedman, by the way, felt that Simon’s empirical work on human improvement should have qualified him to win the Nobel Prize in economics. Simon died in 1998.)

Protectionism

“The infant industry argument is a smoke screen. The so-called infants never grow up. Once imposed, tariffs are seldom eliminated.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), pp. 5–6.

Comment: Think about wind power and (on-grid) solar power, particularly in reference to the federal Renewable Energy Production Tax Credit (PTC), first established in 1992. Now 25 years old, the PTC has been extended nine times: in 1999, 2002, 2004, 2005, 2007, 2009, 2012, 2014, and 2015.

Nixon’s Price Control Order: August 15, 1971

“I regret exceedingly that he decided to impose a ninety-day freeze on prices and wages. That is one of those ‘very plausible schemes … with very pleasing commencements, [that] have often shameful and lamentable conclusions.’”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“Individual price and wage changes will not be prevented. In the main, price changes will simply be concealed by taking the form of changes in discounts, service, and quality, and wage changes, in overtime, perquisites and so on…. But to whatever extent the freeze is enforced, it will do harm by distorting relative prices.”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“By encouraging men to spy and report on one another, by making it in the private interest of large numbers of citizens to evade the controls, and by making actions illegal that are in the public interest, the controls undermine individual morality.”

– Milton Friedman, “Morality and Controls,” Newsweek, October 28, 1971.

Comment: Friedman’s criticism ranges from economics to civil liberty to human morality. Regarding oil and gas, quality changes could not compensate for such intervention, leading to physical shortages.

1970s Energy Crisis

“It is a mark of how far we have gone on the road to serfdom that government allocation and rationing of oil is the automatic response to the oil crisis.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“The present oil crisis has not been produced by the oil companies. It is a result of government mismanagement exacerbated by the Mideast war.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“Lines are forming at those gas stations that are open. The exasperated motorists are cursing; the service-station attendants are fuming; the politicians are promising. The one thing few people seem to be doing is thinking….

“How can thinking people believe that a government that cannot deliver the mail can deliver gas better than Exxon, Mobil, Texaco, Gulf, and the rest?”

– Milton Friedman, “FEO and the Gas Lines,” Newsweek, Marc 4, 1974.

“The long gasoline lines that suddenly emerged in 1974 after the OPEC oil embargo … and again in the spring and summer of 1979 after the revolution in Iran, [came after] a sharp disturbance in the supply of crude oil from abroad. But that did not lead to gasoline lines in Germany or Japan, which are wholly dependent on imported oil. It led to long gasoline lines in the United States, … for one reason and one reason only: because legislation, administered by a government agency, did not permit the price system to function.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 14.

“There is one simple way to end the energy crisis and gasoline shortages tomorrow—and we mean tomorrow and not six months from now, nor six years from now. Eliminate all controls on the prices of crude oil and other petroleum products.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219.

Comment: Price controls on oil and on natural gas were removed in the 1980s, and markets went from shortage to surplus where they have been—with rare exceptions—ever since.

Milton and Rose Friedman explained prices controls and shortages in their most popular book, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219:

Economists may not know much, but we know one thing very well: how to produce surpluses and shortages. Do you want a surplus? Have the government legislate a minimum price that is above the price that would otherwise prevail…. Do you want a shortage? Have the government legislate a maximum price that is below the price that would otherwise prevail. That is what New York City and, more recently, other cities have done for rental dwellings, and that is why they all suffer or will soon suffer from housing shortages. That is why there were so many shortages during World War II. That is why there is an energy crisis and a gasoline shortage.

Milton Friedman’s timeless energy insights should be appreciated for all time.


[1]“Oil and the Middle East,” Newsweek, June 26, 1967. Reprinted in Milton Friedman, An Economists Protest (Glen Ridge, NJ: Thomas Horton and Daughters, 1973), p. 21.

The post Milton Friedman on Energy appeared first on IER.

Milton Friedman on Energy

Born on this day 105 years ago, free-market economist Milton Friedman (1912–2006) was one of a kind.

Even the dyspeptic Paul Krugman called his rival “the economist’s economist … a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time and possibly the most brilliant communicator of economic ideas to the general public that ever lived.” The Economist (issue of November 23, 2006) called him “the most influential economist of the second half of the twentieth century…and possibly all of it.”

Milton Friedman’s major professional mark was in monetary economics. But as a public intellectual, writing popular books and a biweekly Newsweek column, he became conversant in different fields, including energy.

Friedman understood how, for much of US history, major energy regulation was sponsored by some segment of the industry. “Few U.S. industries sing the praises of free enterprise more loudly than the oil industry,” he stated in 1967. “Yet few industries rely so heavily on special government favors.”[1]

The same can certainly be said today for the nuclear, wind, solar, ethanol, electric vehicle, and carbon-capture industries. From time to time, an interventionist proposal might also emanate from an oil, coal, or natural gas company.

Friedman’s harsh reaction to President Nixon’s wage and price control order of August 1971 is particularly important for the energy debate, for this action, not the Arab Embargo, created the oil shortages and a decade of spiraling regulation. The negative effects of the wage and price controls were so great that federal price controls on energy have not been part of the debate since.

Friedman explained how a surplus of regulation caused a shortage of oil and gas. He did not buy the “running out of resources” argument, elegantly dressed as Harold Hotelling’s fixity/depletion model, as did so many economists–even those at Resources for the Future.

Near the end of his long career, Friedman weighed in on the global warming debate with a blurb for Thomas Gale Moore’s book for the Cato Institute, Climate of Fear: Why We Shouldn’t Worry About Global Warming (1999). Friedman opined:

This encyclopedic and even-handed survey of the evidence of global warming is a welcome corrective to the raging hysteria about the alleged dangers of global warming. Moore demonstrates conclusively that global warming is more likely to benefit than to harm the general public.

Some salient Friedman quotations follow with commentary.

Energy Economics

“I do not believe there is a natural resource economics. I believe there is good economics and bad economics.”

– Milton Friedman to Robert Bradley, e-mail communication, September 8, 2003.

Comment: This is a very profound view. Many economists, viewing minerals as fixed and thus depletable, have tried to separate natural gas, coal, and oil from so-called nondepletable goods. Friedman is saying that there is no special scarcity value for minerals, energy, or other natural resources. This puts him in the camp of Julian Simon and Ludwig von Mises, not Hotelling-inspired economists.

Energy Depletion

“[Oil, gas, and coal are] producible … at more or less constant or indeed declining cost because of the improvements in the technology of drilling and exploring and so on.”

– Milton Friedman, “The Energy Crisis: A Humane Solution” (Cato Institute: 1978).

Comment: This is Friedman’s nod to what Julian Simon memorialized as the “ultimate resource”—human ingenuity. (Friedman, by the way, felt that Simon’s empirical work on human improvement should have qualified him to win the Nobel Prize in economics. Simon died in 1998.)

Protectionism

“The infant industry argument is a smoke screen. The so-called infants never grow up. Once imposed, tariffs are seldom eliminated.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), pp. 5–6.

Comment: Think about wind power and (on-grid) solar power, particularly in reference to the federal Renewable Energy Production Tax Credit (PTC), first established in 1992. Now 25 years old, the PTC has been extended nine times: in 1999, 2002, 2004, 2005, 2007, 2009, 2012, 2014, and 2015.

Nixon’s Price Control Order: August 15, 1971

“I regret exceedingly that he decided to impose a ninety-day freeze on prices and wages. That is one of those ‘very plausible schemes … with very pleasing commencements, [that] have often shameful and lamentable conclusions.’”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“Individual price and wage changes will not be prevented. In the main, price changes will simply be concealed by taking the form of changes in discounts, service, and quality, and wage changes, in overtime, perquisites and so on…. But to whatever extent the freeze is enforced, it will do harm by distorting relative prices.”

– Milton Friedman, “Why the Freeze is a Mistake,” Newsweek, August 30, 1971.

“By encouraging men to spy and report on one another, by making it in the private interest of large numbers of citizens to evade the controls, and by making actions illegal that are in the public interest, the controls undermine individual morality.”

– Milton Friedman, “Morality and Controls,” Newsweek, October 28, 1971.

Comment: Friedman’s criticism ranges from economics to civil liberty to human morality. Regarding oil and gas, quality changes could not compensate for such intervention, leading to physical shortages.

1970s Energy Crisis

“It is a mark of how far we have gone on the road to serfdom that government allocation and rationing of oil is the automatic response to the oil crisis.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“The present oil crisis has not been produced by the oil companies. It is a result of government mismanagement exacerbated by the Mideast war.”

– Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

“Lines are forming at those gas stations that are open. The exasperated motorists are cursing; the service-station attendants are fuming; the politicians are promising. The one thing few people seem to be doing is thinking….

“How can thinking people believe that a government that cannot deliver the mail can deliver gas better than Exxon, Mobil, Texaco, Gulf, and the rest?”

– Milton Friedman, “FEO and the Gas Lines,” Newsweek, Marc 4, 1974.

“The long gasoline lines that suddenly emerged in 1974 after the OPEC oil embargo … and again in the spring and summer of 1979 after the revolution in Iran, [came after] a sharp disturbance in the supply of crude oil from abroad. But that did not lead to gasoline lines in Germany or Japan, which are wholly dependent on imported oil. It led to long gasoline lines in the United States, … for one reason and one reason only: because legislation, administered by a government agency, did not permit the price system to function.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 14.

“There is one simple way to end the energy crisis and gasoline shortages tomorrow—and we mean tomorrow and not six months from now, nor six years from now. Eliminate all controls on the prices of crude oil and other petroleum products.”

– Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219.

Comment: Price controls on oil and on natural gas were removed in the 1980s, and markets went from shortage to surplus where they have been—with rare exceptions—ever since.

Milton and Rose Friedman explained prices controls and shortages in their most popular book, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), p. 219:

Economists may not know much, but we know one thing very well: how to produce surpluses and shortages. Do you want a surplus? Have the government legislate a minimum price that is above the price that would otherwise prevail…. Do you want a shortage? Have the government legislate a maximum price that is below the price that would otherwise prevail. That is what New York City and, more recently, other cities have done for rental dwellings, and that is why they all suffer or will soon suffer from housing shortages. That is why there were so many shortages during World War II. That is why there is an energy crisis and a gasoline shortage.

Milton Friedman’s timeless energy insights should be appreciated for all time.


[1]“Oil and the Middle East,” Newsweek, June 26, 1967. Reprinted in Milton Friedman, An Economists Protest (Glen Ridge, NJ: Thomas Horton and Daughters, 1973), p. 21.

The post Milton Friedman on Energy appeared first on IER.

SEI Student Spotlight: Shannon Ware

Shannon Ware is a Senior Commercial PV Designer based in St. Louis, MO. This week she traveled to Solar Energy International (SEI) to take PV351L: Tools and Techniques for Operations and Maintenance Lab Week (Grid-Direct), an intensive, advanced training designed for solar professionals already working in the PV industry who want to take their technical skills to the next level. Shannon certainly has a lot of experience in the industry. She primarily designs commercial systems, recently completing a large 322 kW DC parking structure in San Diego. In 2014, she became a NABCEP Certified PV Installation Professional.

Before getting into the solar industry, she’d had a full career beginning with a Bachelors of Science in Ocean Engineering,followed by a stint in commercial printing and digital publishing, and then successful time in real estate sales of historic homes. After taking an interest in green home building,  she grew into a larger passion for sustainability. Shannon eventually took solar training and through an influx of serendipity immediately landed her first PV installation contact.

For that install, Shannon acted as the project manager and also designed, permitted and ran the installation of that first 25kW  commercial PV system. She was drawn to the design process of PV installations because of the creativity and problem solving skills needed. Shannon said “you need to have an engineering mindset. Every roof is different and you’re dealing with shadows and shading while looking to be efficient for your customer.”

Though Shannon has a diverse range of experience designing PV systems, she came so SEI “looking to expand skill set in commissioning and troubleshooting.”  She said “I’ve always wanted to come out [to SEI]. It’s the best in the world!”

The post SEI Student Spotlight: Shannon Ware appeared first on Solar Training – Solar Installer Training – Solar PV Installation Training – Solar Energy Courses – Renewable Energy Education – NABCEP – Solar Energy International (SEI).

SEI Student Spotlight: Shannon Ware

Shannon Ware is a Senior Commercial PV Designer based in St. Louis, MO. This week she traveled to Solar Energy International (SEI) to take PV351L: Tools and Techniques for Operations and Maintenance Lab Week (Grid-Direct), an intensive, advanced training designed for solar professionals already working in the PV industry who want to take their technical skills to the next level. Shannon certainly has a lot of experience in the industry. She primarily designs commercial systems, recently completing a large 322 kW DC parking structure in San Diego. In 2014, she became a NABCEP Certified PV Installation Professional.

Before getting into the solar industry, she’d had a full career beginning with a Bachelors of Science in Ocean Engineering,followed by a stint in commercial printing and digital publishing, and then successful time in real estate sales of historic homes. After taking an interest in green home building,  she grew into a larger passion for sustainability. Shannon eventually took solar training and through an influx of serendipity immediately landed her first PV installation contact.

For that install, Shannon acted as the project manager and also designed, permitted and ran the installation of that first 25kW  commercial PV system. She was drawn to the design process of PV installations because of the creativity and problem solving skills needed. Shannon said “you need to have an engineering mindset. Every roof is different and you’re dealing with shadows and shading while looking to be efficient for your customer.”

Though Shannon has a diverse range of experience designing PV systems, she came so SEI “looking to expand skill set in commissioning and troubleshooting.”  She said “I’ve always wanted to come out [to SEI]. It’s the best in the world!”

The post SEI Student Spotlight: Shannon Ware appeared first on Solar Training – Solar Installer Training – Solar PV Installation Training – Solar Energy Courses – Renewable Energy Education – NABCEP – Solar Energy International (SEI).

SEI Student Spotlight: Shannon Ware

Shannon Ware is a Senior Commercial PV Designer based in St. Louis, MO. This week she traveled to Solar Energy International (SEI) to take PV351L: Tools and Techniques for Operations and Maintenance Lab Week (Grid-Direct), an intensive, advanced training designed for solar professionals already working in the PV industry who want to take their technical skills to the next level. Shannon certainly has a lot of experience in the industry. She primarily designs commercial systems, recently completing a large 322 kW DC parking structure in San Diego. In 2014, she became a NABCEP Certified PV Installation Professional.

Before getting into the solar industry, she’d had a full career beginning with a Bachelors of Science in Ocean Engineering,followed by a stint in commercial printing and digital publishing, and then successful time in real estate sales of historic homes. After taking an interest in green home building,  she grew into a larger passion for sustainability. Shannon eventually took solar training and through an influx of serendipity immediately landed her first PV installation contact.

For that install, Shannon acted as the project manager and also designed, permitted and ran the installation of that first 25kW  commercial PV system. She was drawn to the design process of PV installations because of the creativity and problem solving skills needed. Shannon said “you need to have an engineering mindset. Every roof is different and you’re dealing with shadows and shading while looking to be efficient for your customer.”

Though Shannon has a diverse range of experience designing PV systems, she came so SEI “looking to expand skill set in commissioning and troubleshooting.”  She said “I’ve always wanted to come out [to SEI]. It’s the best in the world!”

The post SEI Student Spotlight: Shannon Ware appeared first on Solar Training – Solar Installer Training – Solar PV Installation Training – Solar Energy Courses – Renewable Energy Education – NABCEP – Solar Energy International (SEI).

from Raymond Castleberry Blog http://raymondcastleberry.blogspot.com/2017/07/sei-student-spotlight-shannon-ware.html
via http://raymondcastleberry.blogspot.com

A Crude Primer: Would a Barrel of Oil by Any Other Name Smell as Sweet?

Oil Qualities

When people talk about a barrel of crude oil, there is a tendency to lump all of it into one large category. The reality is that there are different flows of crude oil from all over the world that have various, distinct qualities. There are two main qualities used in the classification process. The first is API gravity and the second is the sulfur content.

API gravity is a measure of the density of oil on a “light to heavy” scale. Generally, “light crude” has an API gravity greater than 38° and “heavy crude” has an API gravity of less than 22°. Water by comparison has an API gravity of 10°. Some heavy crude is dense enough to sink in water.

The sulfur scale ranges from “sweet to sour”. If oil has a sulfur content of less than 0.5 percent it is considered “sweet,” and if it is above 0.5 percent it is considered “sour.” Oil that is heavy or sour requires a more complex, more intensive, and more expensive refining process.

How Does Oil Get to Market?

Oil markets can most simply be understood as composed of three stages: upstream, midstream, and downstream. The upstream phase is the exploration for and production of oil, which occurs when a company drills an oil well. Once the oil is extracted from the ground, the oil is typically sold to a transporting company. Transporting the oil is the midstream stage and can consist of multiple transactions between a number of companies. The third stage is the refining stage, in which oil is turned into useful products.

How is Oil Priced?

Oil is produced in over 90 countries around the world. The price for a barrel of oil in a given location is determined by a number of factors. The characteristics of the oil as described above constitute one factor. In general, refiners are willing to pay a higher price for light sweet crude because it is cheaper to refine light sweet oil into useful products. However, a much more important factor is the geographical location of the oil supply, and access to diverse markets that have demand for the oil.

Consider two barrels of light sweet crude oil produced in different regions: Barrel #1 is produced in a sparsely populated area with no infrastructure in place to transport and process the oil. Barrel #2 is produced close to an oil refinery hub like the Gulf Coast in the US. Which do you think would fetch the higher price?

The answer, of course, is Barrel #2. Though the first barrel may be of identical quality, without the infrastructure—railways, pipelines, etc.—in place to easily transport it, midstream companies would not pay a premium for it because their transportation costs would be so much higher.

The “true” value of oil in a market is ultimately determined by companies/traders who enter into contracts with each other to buy and sell it. These oil traders are constantly negotiating—with buyers trying to get a lower price and sellers trying to get a higher price. As contracts are entered, the prices are reported and the public can see what the market says oil is worth. This price is called a “benchmark.”

Different Markets

There are several unique oil markets in the US alone and hundreds of others around the world. The distinctions in these markets are created by factors like the type of refineries in the region, the type of oil that can be affordably transported to the region, and the types of refined fuels that are in the highest demand in the region.

For example, the US Gulf Coast is a large market for heavy sour crude. This is mostly due to the fact that a high percentage of oil refined in the Gulf Coast has historically been from Mexico and Venezuela—both of which produce mostly heavy sour crude. As a result, a majority of the refinery capacity is designated for medium to heavy sour crude. The US East Coast, on the other hand, is not as good of a market for heavy crude because most of the refineries in that part of the country are not built to refine heavy sour crude. Within each unique market there are benchmark prices that determine what the value of a barrel of oil should be for any given transaction.

Why Are WTI and Brent Predominant?

WTI is the benchmark that refers to a blend of US oil flows that tend to be high quality light sweet oil varieties that are priced in Cushing, Oklahoma. Brent is the benchmark that refers to oil originating in the North Sea. Why have they become so distinguished?

According to the Energy Information Agency, widely used benchmarks have four main qualities:

(S)table and ample production; a transparent, free-flowing market located in a geopolitically and financially stable region to encourage market interactions; adequate storage to encourage market development; and/or delivery points at locations suitable for trade with other market hubs, enabling arbitrage (profit opportunities) so that prices reflect global supply and demand.

WTI and Brent pass each of these four tests.

Let’s take a closer look at WTI, to explain what this means. Cushing is located in a region that is relatively close to very stable and ample production. Oil flows from the Bakken play in North Dakota, the Permian Basin of West Texas and New Mexico, the Scoop and Stack plays in Oklahoma, and several other US oil fields all flow through Cushing. The stable-and-ample requirement is covered easily.

With the US export ban now in the past, WTI has no problem meeting the threshold for EIA’s second requirement. The US market is very transparent, with all production and distribution data collected and reported by multiple state, federal, and private groups. Also, the oil industry in the US is privately run and suffers from relatively little government intervention.[1]

The Oklahoma hub also easily meets the third demand. Cushing is home to the largest crude oil storage facilities in the world with more than 80 million barrels of storage space. The fourth demand goes along with the third. The large storage capacity can be efficiently and affordably distributed to a number of other markets/hubs. Cushing oil supplies can be distributed to refineries in the Gulf Coast, the Midwest, and the East Coast through pipelines and railcars.

WTI vs. Brent

At different times WTI and Brent have each been considered a better indicator of global oil prices. Each has advantages and disadvantages. WTI flows mostly through pipelines into Cushing. This enables a higher volume of contracts for batches of various sizes. Due to the storage facilities and pipeline capacity, oil traders can respond quickly to demand in various markets and can supply to downstream companies in whatever size batch they demand.

Brent, on the other hand, is a waterborne supply and is transported by tankerload. Tanker ships carry enormous quantities of oil, so the contracts involving Brent tend to be bigger contracts. This results in a lower number of contracts. But the global financial markets are ever-shifting, and oil prices can change drastically in a short amount of time due to market sentiment, geopolitical conflicts, or even weather events. Creating a continuous price based on Brent can be difficult due to the lower volume of contracts that cannot react in real time as easily as WTI.

The advantage of Brent is actually the same as its disadvantage. As mentioned, it is a waterborne supply which means that companies can affordably access markets around the world. Transporting large shipments of oil on ship tankers is the cheapest way to transport oil. So unlike WTI, which has to travel through pipelines and railcars in landlocked areas, companies that produce Brent crude oil can cheaply access whatever market is paying the highest price for their oil. This exposure to many major markets, gives an accurate picture of what markets around the world are willing to pay.

Conclusion

The next time you hear a market analyst on Fox Business Channel discussing oil prices, you’ll have a little more insight into the topic if you remember these basics: “light” versus “heavy” refers to API gravity, “sweet” versus “sour” refers to sulfur concentration, and WTI and Brent are geographic benchmarks that give us a glimpse of the prices buyers and sellers are circling around on the open market.


[1] In 1975 the US passed the Energy Policy Regulation Act, which among other things put a ban on exporting oil from the US. This would seem to limit the ability of companies to use WTI as a reliable benchmark since it was cut off from global markets. The main reason that WTI remained a reliable benchmark is because the US market for oil is so large. So since WTI was the price point for crude oil produced in the largest market in the world, it remained an accurate indicator of the value of oil. This is not to say that the export ban did not negatively affect WTI’s influence, because it certainly did. This was most clearly seen from 2009-2015, the peak years of the ongoing shale boom in the US, during which time WTI traded at a substantial discount to Brent. This differential was due to the excess US light sweet production that was forced to sit in storage because there was simply not enough demand for it in US refineries, and the export ban restricted companies from sending their oil to markets that had space for their oil. In the decades prior to the shale boom, many US refineries updated their facilities to process heavier sour crude. In 2015 the export ban was lifted, which likely means that WTI and Brent will ultimately trade at very similar prices moving forward.

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from Raymond Castleberry Blog http://raymondcastleberry.blogspot.com/2017/07/a-crude-primer-would-barrel-of-oil-by.html
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