State Owned Oil Refinery

Well, this sbject has been pretty well hashed over by individuals much more knowledgeable about it than I, but I said I’d comment, so I will.

I have had a number of people express to me their belief that ND should build a refinery and produce cheaper, more readily available petroleum products for ND residents. On the surface, that statement doesn’t sound unreasonable, but it certainly leaves a number of issues unaddressed.

First of all, if this is a profitable venture, why aren’t any private companies building a refinery? What is the cost of a new refinery and how long would it take to construct? Would the state find a labor force to manage and run it when it was completed? What changes are possible within the petroleum industry before construction is complete? Can we know that companies drilling wells will choose to send their product to a state-owned refinery? If they don’t, should the state get into the drilling business? Do we expect mineral owners to sell crude to the state at a lower price than they could to a private company? Does the state have any business competing with private business? If consumers feel the price of farm products is causing food to be more expensive, should the state get into the production ag business?

I haven’t asked about transportation of crude and/or refined oil and distribution of the product to consumers or even if we can find a market share. Nor have we considered the tone this would set for the future of private oil industry in ND and their continued development of new technology that makes more oil recoverable in our state.

Unless there are some encouraging answers to the concerns I’ve mentioned, I think it would be very premature to build a state-owned refinery. I think we would do better to invite private enterprise to take on the task, even encourage them to do so. Offering incentives (such as tax reductions) that encourage private enterprise is less risky than the billions of dollars of taxpayer’s money we would risk on a state-owned project. And we avoid building a bridge to socialism in the process.

By the way, I’m not trying to deny that the oil industry has enjoyed record profits. But maybe not a huge profit per gallon of gas but a record demand for gallons. The “oil boom” has been a significant factor in ND’s record budget surplus as well. And if your investments happen to include some oil company stock, well, good for you!

I certainly respect the viewpoint of those who have spoken to me in favor of a state-owned refinery, but I ask you to consider the concerns I’ve listed, and others, and let me know if you see a need for addressing them before considering such an investment. As always, I appreciate hearing from you!

Chuck

Food, energy, the high price of grain, and global warming.

Busy harvest.

(An article written by Chuck Damschen for the Monday, March 24, 2006 edition of the Cavalier County Republican, Ag Outlook.)

As we head into the 2008 crop season we do so with guarded optimism that the commodity prices we have enjoyed the past several months will carry on for the new crop. I’m no marketing expert, but when I can lock in a reasonable profit with some protection, I’m fairly well satisfied. So I contract most of next year’s barley as malting for $6.13 – 6.81/bu. and almost half of my anticipated wheat for $10.10/bu. I know, I know, I missed the market peak for new crop. I missed with all of my 2007 crop, too. But I sold on the upswing instead of after it peaked, for the most part, and I’m thankful for what I did get.

The question remains as to how long these prices will last. We have a pretty good idea how long the higher input prices will last. A number of reasons have been sighted for high commodity prices. I heard an author analyze that it was the planned use of ethanol that caused $20+/bu. wheat. While it may be true that all of our present agricultural production, if dedicated to energy production, would be only a small portion of the energy we now consume, I doubt many of us believe that’s why wheat hit $20+. The spike above $12/bu. is more likely attributed to speculators bidding to cover their positions with little grain left in the country.

I believe the turn toward renewable energy supplements has certainly contributed to increased grain prices. More so, the fact that the world has consistently consumed more food than i has produced, dwindling the supply. Market analysts predict that this trend will continue into the future which whould mean good prices for our commodities. I hope they’re right!

The problem with high grain prices is that it prices itself out of economic feasibility in the renewable fuels market. As the renewable energy industry develops it will very likely advance in its efficiency of converting grain or biomass into fuel. If and when it will become competitive with fossil fuels has not been determined. In the meantime we should be utilizing all of our resources wherever they are available.

One of the greatest obstacles to utilization of our resources is extreme environmentalism making the construction of oil refineries and coal fired power plants cost prohibitive as well as blocking the development of oil fields in several prime areas. The myth that human activities have caused global warming and that global warming is a crisis it he latest obstacle to efficient energy production. An article concerning global warming, entitled “Anatomy of a Fake Consensus“, by Joseph Bast, appears in the Heartland Institutes’s Environment and Climate News magazine. It has this to say about the UN climate alarmist branch, the Intergovernmental Panel on Climate Change (IPCC):

The best that can be said about the latest IPCC report [claiming a scientific consensus on man-made global warming] is that it represents a negotiated political statement by about 50 scientists and many politicians, UN bureaucrats, and green activists.

We can use all of the energy we are capable of producing right now. Cooperation between the traditional and renewable energy industries is essential. In the meantime, let’s make the best we can of the positive effect this changing world is having on production agriculture. And let’s hope the government will promote the development of all of our available energy resources.