Lost On The Shore

'Fiscal Responsibilty'

As I write this the price of crude oil is somewhere near $145 a barrel - a sum that would be unimaginable a couple of years ago.  As I wrote earlier, it is a classic supply and demand situation - the demand continues to rise, driven by sustained and robust economic growth in China, India and the former soviet union.  Supply, on the other hand, has remained relatively stagnant for the past several years. 

But the price of oil hasn't risen by the same percentage everywhere.  In Europe, the price has still risen substantially over the past several years, but not nearly as much as it has here.  Why is that?  Well, the Europeans (many of them anyway) pay for their oil in Euros, and the value of Euro has been much stronger than the dollar.  In 2004, you could buy a Euro for about $1.10, in 2006 it cost about $1.25, today it costs about $1.57 to buy a Euro.

Oil traders, financial analysts and producers all agree that one of the factors driving up the price of oil for us has been the weakness of the dollar.  If we could strengthen the dollar, it would do much to restrain the price of oil (and other commodities).  And one good way to strengthen the dollar would be to balance the federal budget. 

Now Andy Harris, like most Republican politicians since Reagan runs on a simple mantra of 'lower taxes'.  He also talks about something called fiscal discipline.  Every Republican says they want lower taxes.  They know we all want to pay less and it's an easy thing to say.  And if Harris is elected, you can bet he will vote to lower taxes.  But whose taxes will he lower?  It's safe to say it won't be mine and probably not yours.  He'll push to lower taxes for himself and his rich cronies from the Club for Growth or as conservative Mike Huckabee called it - the 'Club for Greed'.

Let's go back and look at the tax cuts that George W. Bush pushed through a compliant Republican Congress when he became President.  Over the ten-year period of his tax cuts, from 2001 to 2010, an astonishing 52 percent of the total cuts will go to the richest 1 percent of taxpayers! 

Now let's look at the flip side - the 'fiscal discipline' side.  Since George W. Bush became President, with a compliant Republican-controlled Congress, Federal spending has grown at an average of 5 percent per year - faster than the growth of the economy and much faster than the 2 percent growth during the Clinton years.  During this period we've added about $3 Trillion to the national debt, which will be a burden to our children and our country for years and years to come.  So much for Republican fiscal conservatism.

So we know what to expect if Harris is elected - more tax cuts for the rich, more bloated Federal spending and a further decline in the value of the dollar leading to higher and higher commodity prices.  Hold on to your wallet.

[The photo shows the supertanker 'Abqaiq', owned by Saudi Arabia, taking on oil at Iraq's Basrah off-shore oil terminal]

We're Number Two!

The Milken Institute recently released their 2008 State Technology and Science Index recently.  The Index ranks states in their ability to succeed in the technology-driven information age.  Maryland was ranked number two, just behind Masschusetts.  The author of the study pointed out that states that invest in their science and technology assets are creating a strong environment for building and retaining high wage jobs.  The Index gives a good idea of who is ahead in the race for scarce human capital and other resources needed for succesful high-tech industry.

I've written before about the importance of a strong educational system in creating and keeping good-paying jobs in Maryland.  A look at some of the factors used by the Milken Institute in making their rankings is informative.  In the human capital area, for example, Maryland ranked first in the percentage of adults with bachelor's degrees or better, third in the percentage of population with advanced degrees and third in the percentage of population with PhDs.  Maryland also ranked among the top three states in the number of computer scientists, database and network administrators, microbiologists, physicists and software engineers per 100,000 people.

In research funding, Maryland ranked first in per capita Federal research dollars, first in per capita academic research spending and first in per capita R&D spending on biomedical sciences, engineering, life sciences and physical sciences.

The big investment the state is making in education will help ensure that Maryland maintains its leadership in this crtical area.  The recent announcement by the governor that more than a billion dollars will be devoted to developing and supporting the state's biotech industry will also help. 

There was much concern after the tax increases that were voted through in the recent special legislative session that people and businesses would leave the state - and perhaps some will.  But the kind of enterprises that stand the best chance of succeeding in today's and tomorrow's global economy are those that are attracted by just those factors cited by the Milken Institute.  They don't locate in Maryland because of the low cost, they locate here because of the highly skilled and productive workforce we have.

If they really want low taxes there's always Mississippi...which ranks 50th out of 50 on the index.

[The painting of Archimedes was made by Domenico Fetti in 1620.  It hangs in the Alte Meister museum in Dresden]

Oil Follies

Certainly one of the issues on everyone's mind these days is the price of gasoline and the price of oil.  The runup in the price of both over the past couple of years has everyone wringing their hands and looking for solutions.  Every politician from the local dogcatcher to the President of the United States (and more importantly, the King of Saudi Arabia) has either come up with a plan to address the 'oil crisis' or is working on one. 

Andy Harris, the Republican nominee for Congress in Maryland's First District recently released his plan.  As I understand it, the plan includes:

1. Temporarily suspending the Federal and state gasoline taxes from Memorial Day to Labor Day.
2. Temporarily reducing the 40+ gasoline blends used in the United States to four blends in an effort to simplify refining and improve the efficiency of refining and transporting gasoline.
3. Opening the Arctic National Wildlife Preserve, the Aleutian Islands and the US continental shelf to oil and gas production.
4. Increase long-term oil refining capacity by establishing fast track approval for new and expanded refineries.
5. Provide incentives for technological innovations in alternative forms of energy such as nuclear, solar, geothermal, and cellusolic ethanol.

Before analyzing the plan, let's take a look at the background of the problem. 

World Petroleum Production and Consumption (Millions of BBL/day)

	2003	2004	2005	2006	2007
Production	79.6	83.1	84.6	84.6	84.6
Consumption	79.6	82.3	83.7	84.6	85.4

These figures are from the US Energy Information Administration.  Note that production has stagnated since 2005 while world consumption has continued to grow.  Consumption by industrialized countries (OECD members) in 2007 was basically the same as it was in 2003 - a little under 49 million barrels a day.  Consumption in other countries, however, increased from about 31 million barrels a day in 2003 to 36.4 million barrels a day in 2007.  Every indication is that the demand from non-OECD members will continue to increase.  Demand in China, with its 2 billion citizens and India with its billion or so will continue to grow at a rapid rate.  Demand in the former USSR is also growing. 

Production, on the other hand, isn't increasing at all.  While new fields are coming on line, in the Caspian Sea area for example, and new discoveries are being made, they are insufficient to overcome the long-term decline of three to four percent in the production of existing fields.

Many blame speculators for increasing the price of oil by driving up demand and, in fact, they do contribute to some of the wild fluctuations and instability in the market, but they never actually take delivery of the oil and thus don't contribute to the ultimate demand.  So what we really have is a growing imbalance between a static supply and a growing demand that is driving prices higher.

With that in mind, let's take a look at Andy Harris's proposed energy plan.

First he proposes eliminating the gasoline tax - both Federal and state - between Memorial Day and Labor day.  This will have the effect of increasing demand but will do nothing to boost supplies.  In addition, of course, hundreds of millionss of dollars that should be used to ease traffic bottlenecks, maintain roads and expand mass transit will be lost.  Sure the price might drop a bit initially, but will creep back up as demand returns and we'll have nothing to show for it.  I've written about it before, but I have to say it again - this is a bad idea.

Second, he wants to reduce the 40 or so different gasoline blends in the United States to 4 - he doesn't say how.  The reason these different blends exist is to mitigate air quality problems in many large metropolitan areas around the United States.  They are designed to reduce emissions of volatile organic compounds which, combined with sunlight, produce ozone.  Some also are formulated to reduce emission of nitrogen oxides which pollute air and waterways and can contribute to acid rain.  Certainly a reduction in the number of blends will reduce transportation and storage costs for the oil companies.  The effect on consumer costs is uncertain.  Many of the blends cost more to produce than conventional gasoline but pollute less.  It's hard for me to see how this will save money for consumers without increasing ozone pollution in our metropolitan areas.  I don't see any additional production or reduced demand from this.

Third, he wants to open the Arctic National Wildlife Reserve (ANWR), the Aleutian Islands and the US Continental shelf to exploration.  The US Geological Survey estimates that there are between 7 and 8 billion barrels of recoverable oil in ANWR.  The Energy Information Administration estimates that opening ANWR to production would result in a peak production of 780,000 barrels per day in 2027 which would reduce the price of a barrel of oil by about 75 cents - not quite two cents per gallon. 

I have no idea how much recoverable oil is in the Aleutian Island area - I haven't been able to find much about it.  It appears certain there are significant amounts of recoverable crude oil in the unexplored parts of the US continental shelf - perhaps more than exist in ANWR.  Americans need to decide what kinds of risks they want to take to obtain additional domestic oil supplies - even if they are small compared to our imports.  It's worth noting, though, that we seem unwilling to allow even wind turbines to be built offshore, much less oil platforms, pipelines, etc. that would come with significant oil production.  This proposal does add something to production, albeit not for ten or fifteen years at the earliest.  

Fourth, he wants to increase long-term refining capacity in the United States, presumably by eliminating some of the environmental and safety reviews that are now required.  Refining is an interesting problem.  Over the past year, the price of oil has increased much faster than the price of gasoline, sharply reducing the profits levels of refineries.  Oil companies like Valero and Sunoco which refine oil but don't produce it have dropped sharply over the past year.  As a result refiners are shifting their operations to produce more distillate (diesel and heating oil) which has a relatively high price and less gasoline from each barrel.  

Harris's proposal ignores the real problem with refining - it's not consistently profitable.  If companies can't earn a reliable and fair return on investment in new refinery capacity, none will be built, regardless of any loosening of regulations.  I don't see anything here which will alter the supply/demand relationship.

Fifth, he wants to provide incentives for technological innovations in alternate forms of energy.  I'm all for this, provided the incentives don't turn into long-term subsidies.  We need to find alternatives and, in the long run, this will help to reduce demand for petroleum and all that comes with it.

So what does all this do for Marylanders and the voters of the First District?  Not much in the short term except for the ridiculous and self-defeating gas tax holiday.  But maybe there's not much that can be done in the short term.  I do note that Harris's proposals contain nothing about mass transit or public transportation, nothing about smart growth that would reduce transportation needs, nothing about increasing corporate fleet mileage requirements and nothing about alternative fuels such as the plug-in hybrids being developed by General Motors and Toyota and the hydrogen fuel cell car recently introduced by Honda, but that may be too much to ask.

[The photo (click on it to see the large version0 is of the Thunderhorse production platform built by BP at a cost of about $1 billion.  It was struck by hurricane Dennis in 2005 before it was in production and partially capsized due to a construction error.  It's a reminder that there are risks to offshore drilling and production that need to be balanced against the potential rewards]  

 

Wealthy Maryland? - 3

Average incomes on the Shore and in Western Maryland are much lower than in the Baltimore/Washington corridor and poverty rates are, by and large, higher.  What, if anything, can or ought to be done about that?  Not surprisingly, I have some suggestions.

I've written often here about the relationship between education and income.  Maryland, as a whole, has one of the highest household incomes of any state in the union and also has one of the highest rates of educational attainments.  That's no coincidence.  Many companies choose to locate in Maryland, despite its relatively high cost, because of its highly-educated and productive workforce. 

But almost all of those companies locate in the wealthier sections of Maryland - not on the Shore and not in Western Maryland.  There are a couple of reasons for this - the workforce they need is there and major government installations - NIH, the Food and Drug Administration, Fort Meade and NSA and Aberdeen Proving Grounds are all in the area.  For years, these areas forged ahead because their excellent school systems produced the kinds of workers that high tech industry needed and because of the presence of these important magnets.  The presence of major universities at College Park and Johns Hopkins in Baltimore helped too.

With the approval of the Thornton program, the state began to provide substantially increased funding to schools in the poorer parts of the state and there has been considerable progress in those areas.  Recently, for example, Ocean City Elementary School, here in Worcester County, became the first school in the state in which every student passed the state achievement tests - certainly something to be proud of.

But education by itself isn't enough.  Plenty of bright and well-educated students graduate from school on the Shore, go away to college and never come back - primarily because the kind of jobs they're looking for don't exist here.  So the kind of industry that provides good, high-paying jobs won't locate on the Shore because the workforce they need isn't here.

A couple of days ago the Governor unveiled a proposal for the state to spend as much as $1.1 billion over the next ten years to attract and support biotech firms in Maryland.  That's a good thing, I guess.  The state is uniquely positions to become a 'biotech hub' with the National Institutes of Health, the Food and Drug Administration, Johns Hopkins University and the army's biological warfare center at Fort Detrick all within about forty miles of each other.  But how much of that money will support new or existing industry on the Shore or in Western Maryland - areas where income is lowest and the needs greatest?  None.

So what can be done?  I think there are a number of things.  First, the state should provide a bit more support for infrastructure development.  The Rural Broadband Initiative is currently building a fiberoptic line linking Wallops Island, Salisbury and the Western Shore.  This will bring true high speed internet to many parts of the Shore that don't have it now.  There's also investment needed in other areas.

Second, the state should invest some money to capitalize on the presence of the two universities on the Shore.  The Shore is an ideal place to expand their environment and marine biology programs to eventually  serve as magnets for companies in those areas. 

Third, the governor should establish a small office to focus on the Shore and on Western Maryland.  The announcement about the biotech initiative is a good example of how these regions get left out of things - not out of malice but simply because they are overlooked by those whose focus is solely on the Baltimore/Washington corridor.  By having an advocate for these regions in the executive branch, there's a better chance we won't be overlooked.

And fourth, the influx of retirees to the Shore should not be overlooked. Rural life has its charms and here on the Shore, where there are plenty of quiet bays, rivers and creeks, life can be quite pleasant.  The retirees bring money and a heighted demand for medical services which provides some good-paying jobs. 

So let's all recognize and applaud the high incomes that many Marylanders enjoy, but let's not forget those who don't share in the wealth.

[ Boating  was painted by Edoard Manet in 1874.  The original hangs in the Metropolitan Museum of Art in New York City]

 

Items of Interest

It's been a soggy couple of days on the Shore and we're looking at a few more before we finally break into our late spring and summer weather.  While I'm waiting I want to catch up on a few items of interest that caught my eye over the past week.

Energy prices continue to rise. Gasoline prices set a new record in Maryland this week.  Gasoline prices nationwide reached an average of $3.67 a gallon and oil reached $126 a barrel.  Gas prices here on the Shore ranged from about $3.55 to $3.65 while in the high priced areas of Montgomery County prices were in the $3.75 - $3.85 range with one station posting $3.97 and a station in DC was asking $4.05 for regular.  Diesel prices are higher everywhere. 

The tourism industry here on the Shore relies heavily on vacationers driving over the Bay Bridge from the DC/Baltimore area and down from the Philadelphia area.  With the peak summer driving season starting in a few weeks, the ability of consumers to absorb these increases could have a dramatic impact on the economy here.

On the electricity side, BG&E posted their new rates and PEPCO Holdings announced that their first-quarter profits doubled from last year.  It looks like a difficult summer on the electricity front, also.

Transportation  In a related development, the New York Times today reported that higher gas prices are driving record crowds to mass transit.  Mass transit systems are struggling to cope and equipment shortages are becoming apparent as is apparent both in Baltimore and Washington.  With a huge proportion of the state's transportation budget tied up in the InterCounty Connector, the state and local jurisdictions are going to have to look hard at their budgets to see where they can free up some funds to expand mass transit options.

Here on the Shore, there's little mass transit to speak of.  In Ocean City, though, the town is encouraging visitors to rely on its bus system while visiting there.  A crowded summer weekend can easily overtax the system there and they are going to have to be careful to ensure they have enough capacity.

On a brighter note, the state has announced that construction will begin next year on the MARC station in Edgewood.  With thousands of new jobs coming to the Aberdeen Proving Grounds, this station will be a critical part of the transportation infrastructure there. 

Health  A recent study in New England shows that teenagers in places with strict smoking bans in restaurants were forty percent less likely to become regular smokers.  Apparently, huddling outside restaurants and bars to take a puff isn't 'cool'.  Lower smoking rates among teens will help keep health care costs from growing so fast.  Every little bit helps.

Real Estate The number of home sales continues to decline in Maryland.  The National Association of Realtors, as they have every recent month, said that the turnaround is about to start, but almost no one else seems to think so.  Spring is normally the peak selling season, but it doesn't seem to be happening, at least here on the Shore.

In many states, local jurisdictions are facing severe budgetary problems as falling assessments lead to reductions in property taxes.  Here in Maryland, the problem is not quite so urgent as our three-year assessment system means that assessed values are still rising in most jurisdictions.  Some counties, though, like Montgomery and Prince George's, which have come to rely heavily on transfer taxes, are suffering as home sales decline sharply.  All local jurisdictions need to be very careful in committing to future costs, though, as the same three-year assessment cycle which is helping them now will be hurting them in the future as new assessments drop.

[The photo is of Thomas Point Shoal Light] 

And The Hits Just Keep On Coming

Pilgrim's Pride is the latest chicken producer to report a loss.  The report by this company, the largest chicken producer in the country, follows the loss reported by Tyson Foods, the world's largest meat producer, of a loss for the third quarter.  Purdue Farms, the largest poultry producer on the Shore, is privately held and doesn't report profit and loss, but I would be surprised if they were not struggling also.

The primary culprit in each case is high grain prices with some contribution from high energy prices and transportation costs.  The companies have been unanimous in blaming flawed government ethanol policies for contributing to the higher cost of grain.  To a significant extent, they are right.  The huge subsidies for ethanol production has led to an explosion in the number of ethanol plants that now suck up about a quarter of our total corn production.  Further, the demand for corn has led many farmers to shift production out of wheat and other grains into corn.

This demand, coupled with crop failures overseas and increased demand from rapidly developing countries like India and China has sent grain prices up substantially and has affected the price of many other foodstuffs.  But anyone who shops for food already knows that. 

On top of all this, of course, the congress is prepared to pass a wasteful and grossly inflated farm bill which will increase subsidies to farmers and significantly increase consumer prices for many things.  But I digress.

It seems that a cutback in poultry production may be coming and that will be just another hit for the Eastern Shore, where the economy is already hurting due to the sharp decline in residential housing construction.  With the cost of gasoline more than $3.50 a gallon, it's likely we will see a reduction in tourism too.  We already know the crabbing industry is taking a hit. 

So it could be a difficult year here on the Shore.  We'll have to see what comes next.

Stimulating Someone's Economy

Well, I received my 'economic stimulus' yesterday.  I'm not sure what we'll do with it.  Probably it will go into a money market account for the time being.  The total tab for all of these economic stimulus checks (actually, wire transfers in most cases) is about $150 billion. 

Of course, the government doesn't have that kind of money.  In case you've been asleep somewhere, the US Government is running a huge deficit thanks to President Bush.  So the government is borrowing the money to pay us all the tax rebates which are supposed to stimulate the economy.  I presume the cost of this will fall on my children or grandchildren, so thanks kids!

From what I read, a lot of the money will be used for one-time purchases - that high definition TV people have been wanting, or or to pay down credit card debt - I'm sure Citicorp will appreciate that - they could use the money. 

I guess the sad thing about this is that there are so many useful things the congress and the president could have done with the $150 billion that would not only stimulate the economy but would address some of our problems too.

For example, the money could have been used for school construction - distributed to the states and then used to fix up existing schools or build desperately-needed new schools.  Or the money could have been used for highway and mass transit construction - a way to reduce the amount of gas we use either by reducing congestion or getting us out of our cars altogether.  Or to make long-deferred repairs to facilities in our national parks. 

These are just some examples, but they have something in common.  They are construction-oriented to provide jobs for the many displaced from the home construction business and they leave something of lasting value for our children, who are going to pay the bill anyway. 

Of course, all of these would take a bit longer to get started than just shoveling money at the voters, but virtually all of the jobs created would be here in the United States, not in China, Taiwan or South Korea where they make those great TVs and the Wiis. 

There was a time when our leaders, in times of economic downturn would look to solutions that would not only stimulate the economy but would provide employment for Americans and use the money to provide a lasting benefit for the future.  Look at the Tennessee Valley Authority, the Bonneville Power Authority, the Hoover Dam, the Civilian Conservation Corps and the Works Progress Administration.  What we're doing now is pretty dismal by comparison.

And it's easy to blame our leaders for this, but the problem is really with us.  We demand instant gratification.  We want everything now and don't want to pay for it.  Let our kids do that.  And President Bush has learned this perfectly.  If he had his way, he and his Republican cohorts would eliminate every tax and push government spending and borrowing to a new high.  As another famous leader said a few years ago: 'Après moi le Deluge', and he was right. 

I guess I'll just wait; the bread and circuses can't be far off.   

Gas Tax Fantasy

State Senator Andy Harris, concerned about rising gas prices, has suggested that Governor O'Malley call a special session of the General Assembly for the sole purpose of repealing the state gas tax from Memorial Day to Labor Day.

While his proposal has obvious political appeal, particularly to those short-sighted enough not to be able to see past Labor Day, there are a number of problems with the idea.

• The gasoline tax is the primary source of transportation funding in the state.  Reducing the gasoline tax will necessarily reduce the funding available for transportation improvements.  Roads in Maryland, particularly in the Baltimore/Washington area, are already heavily congested, which means a lot of gasoline is wasted waiting in traffic jams.  We need to reduce congestion, not increase it.
• Reducing the price of gasoline to the consumer will increase demand which will eventually increase the price not only of gasoline, but also of the oil from which it is derived.  Reducing or suspending the tax therefore puts more money into the hands of the oil-producing countries rather than keeping it here where it can be invested in improvements to our infrastructure.
• Suspending the tax merely postpones the inevitable.  Saving a few cents on a tank of gas does nothing to address the urgent need to find alternative sources of energy and use our existing sources more efficiently.

Andy Harris has proved he's as clueless about the economy as John McCain, who made a similar proposal on a national level which was panned by the a wide variety of economists and energy analysts for the same reasons I outline above. 

And why did Andy Harris wait until just a few days after the regular session ended to make this proposal?  Is it possible that this is just cheap political pandering?  Looks that way to me.

Some Energy Developments

There have been a few items in the news in the past week or so about Maryland energy issues.  I thought I'd go over them quickly.

First, the Southern Maryland Electric Cooperative (SMECO) has signed a contract with Comverge to provide 75 megwatts of 'Virtual Peaking Capacity'.  Basically, this is a demand response system which Comverge will install and maintain for SMECO and it's customers.  By signing up customers and installing equipment which allows certain equipment to be cycled on and off during peak load periods, the system effectively provides the utility with additional peak load capacity. 

Many Maryland utilities already have similar programs and all will certainly implement such programs in the near future in response both the the new legislation requiring a 15 percent reduction in both peak demand and per-capita energy use by 2015 (15x15) and the limitations on peak power availability in Maryland. 

Of course, these programs do almost nothing to reduce overall power consumption, simply shifting it from one period to another.  Nevertheless, they have the potential to reduce overall electricity cost because the cost of electricity is far higher at times of peak demand than at other times.

Separately, state officials announced that they are considering exempting a proposed new power plant in Charles County from the Regional Greenhouse Gas Initiative which includes the auction of carbon credits.  The Maryland Energy Administration, which apparently discovered only recently that the state has a critical electricity reliability problem, said that the new natural gas-fired plant, proposed by Competitive Power Ventures (a Silver Spring company), would help provide additional capacity for the state.

I've written several times here in the past about the need to provide additional generating and transmission capacity in Maryland and the fact that NOTHING in the states strategic energy plan addressed those shortages, so I guess it's a good thing that the Maryland Energy Administration is now realizing there's a problem.  But it's not good public policy to create a 'rule by exception' where the state establishes rules for everyone and then starts making exceptions for those who are 'in favor'.  It's better to have clear rules that apply to all without favoritism.

Environment Maryland, which seems to be becoming the lapdog of the Maryland Energy Administration supports the exemption saying 'as long as cleaner fossil fuel plants are replacing dirty fossil fuel plants it's a good thing for the environment.'  But, of course, this new generating facility would not replace anything, it simply would add to the supply of electricity...and greenhouse gases...generated in Maryland.  As I've said before, a carbon tax, rather than a cap and trade system, would eliminate this problem since a natural gas-fueled plant produces considerably less carbon dioxide than a coal-fueled plant.

The third item is the decision by the Federal Energy Regulatory Commission to recommend approval of the liquified natural gas (LNG) terminal proposed by AES corporation at Sparrows Point.  Under the proposal a terminal would be built at the old Bethlehem Steel shipyard where natural gas, chilled to its liquid state would be bought in by ships from overseas, returned to its gaseous state and then fed back in to existing natural gas pipelines.

Personally, I like the concept of LNG.  Thousands of tons of natural gas, produced as a byproduct of oil production, are flared off daily in the middle east, africa and other places because there is little or no local demand.  Bringing the gas here instead of flaring it off allows the gas to be used productively, supplements our own diminishing supplies and helps stabilize our domestic price. 

The proposed terminal has attracted a lot of local opposition, primarily on safety grounds.  While the commission is required to consult with state and local governments on the location of LNG terminals, its decisions are final. 

Personally, I don't think this terminal is a good idea.  While I believe many of the safety concerns about the terminal itself and the associated pipeline are overblown, I'm concerned about additional shipping congestion on the Upper Bay.  When completed the terminal would be served by two to three very large LNG tankers a week.  In addition to the tankers, there would be armed escorts, air and shore patrols.  The existing LNG terminal at Cove Point in Calvert County is located in a much wider section of the Bay considerably closer to the mouth and with much less water traffic.  While the additional gas supply would be welcome, there are better places for this terminal.

[The photo is of a modern, membrane-type LNG tanker in Tokyo Bay owned by Nihon Gas] 

   

The Other Energy Problem

I've written a lot about the electricity supply problems in Maryland (and I'll write more) but there's a problem with another kind of energy that is affecting us all.

The photo above was taken in June of 1941, a few months before Pearl Harbor and the entrance of the United States into World War II.  But diesel at six and half cents a gallon and gasoline at fourteen and a half cents a gallon are distant memories for us now.  As I write this, regular gasoline is $3.45 a gallon and diesel is $4.29 a gallon in my area.  The gasoline price is a bit less than the national average and the diesel price is a bit above the national average.

Despite the huge runup in gasoline prices over the past couple of years, it doesn't seem to have affected demand; according to the Energy Information Administration's weekly report gasoline demand last week was 9.215 million barrels a day - up from 9.163 million barrels a day one year ago.  Of course, in the long term, the high price will reduce demand as people buy more fuel efficient vehicles, but that doesn't help us now.  The reality is that many people have already cut their gasoline consumption as far as they can. 

I believe higher petroleum prices are here to stay, too.  Growing demand in the expanding economies of China and India is going to continue.  The New York Times carries an interesting article today about the demand for new cars in those two countries.  New vehicle sales in China are expected to exceed six million this year (up from under a million in 2000) and two million in India.  The huge populations of those countries are going to drive an increased demand for cars and other forms of energy-related consumption.

So the question is how do we live with it?  Here in Maryland, there seem to be few alternatives to driving to your destination and the high levels of road congestion lead to more gasoline consumption, not less.  Here on the Shore, there are very limited alternatives to driving.  The nearest department store for me is a 60 mile round trip from my house.  For many others, it's even further.  On the Western Shore, with the suburbs of Washington now reaching Frederick and beyond, many face hours-long commutes to their jobs over inadequate roads.

We have oriented our economy toward driving everywhere.  There is some concern over in Ocean City about what the gas prices will mean for the summer season.  Realistically, there is no way to get to the resort except to drive and, with gasoline prices, food prices and electricity prices all weighing on us, how many will be able or willing to drive the distance and pay the prices for a week at the beach?

And what to do when you get here?  The Worcester County Times (I know, everyone's favorite newspaper) carries an article today on the effect of the high prices on boating and fishing community.  Some of the large headboats and charter fishing boats are looking at costs of up to $20,000 to fill up their tanks!

It would be nice to see the state exercising some leadership here.  We need to move our development strategy away from sprawl and toward more transit-oriented development.  I know our leadership keeps talking about 'smart growth', but in reality, they're just cheerleading.  Because responsibility for zoning and regulation of development are so fragmented in the state, there is no real coherent policy with any any teeth.

And it would be nice to see the state do more to develop alternatives to us having to drive everywhere.  Of course, with the bulk of the state's transportation budget being spent on the Intercounty Connector, money for mass transit is scarce, despite the fact that existing mass transit facilities are being overwhelmed by demand.

Our governor and our legislature can't do anything about the fuel prices - that's something beyond their control.  What they can do is to exercise some leadership to reduce Maryland's dependence on cars and gasoline to meet our transportation needs.  We need to start now.