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DAVID KRUSE

By Staff | Sep 5, 2014

With Russian tanks reportedly moving into eastern Ukraine, Fox Business News pundits said, “We don’t have to worry – the energy risk is all Europe’s problem.”

It is Europe’s problem more directly than it is ours, but it is everybody’s problem. Ukraine is in the worst spot, dependent on Russia for its gas supply.

The EU is in a similar situation, but with a lot more leverage with Russia. Both Putin and ISIS benefit from higher oil prices as they depend on oil income to finance their malfeasance. The average daily crude oil production in the U.S. has risen from near 5 billion barrels per day in 2008, to 9.3 billion barrels projected for next year.

The U.S. has become much less dependent on foreign oil and gas and is on the not-so-distant road to total independence from Middle East energy, because of new technology utilizing fracking, allowing recovery of huge quantities of domestic oil and gas from old and new fields, specifically from North Dakota’s Bakken region.

Last week, 10.03 percent of the U.S. daily gasoline consumption came from ethanol making biofuel a key component of U.S. energy independence. It would take some kind of really major global conflagration in order to upset the U.S. economy from foreign energy supply disruption.

The same can’t be said for the rest of the world with Europe, China, Japan and others being far more vulnerable to a global oil shock than the U.S. The risk to the U.S. economy from an oil threat is now more indirect from the disruption it would cause to the world economy.

U.S. wind turbine investment is combining with low cost natural gas to produce reasonably priced electricity versus countries like Brazil and Germany, which are struggling with either supply or cost of electricity.

One of the exchange students from Germany that we hosted back in 1996 and whose family we meet with every other year is now an economist at Dresden University. His job is to research ways for Germany to become energy independent using renewable energy sources.

The Germans built the first autobahns and now they are building the Stromautobahn which is a 500-mile long electricity highway connecting wind turbines in the North Sea to the German industrial region.

Electricity prices in Germany are now double that of the U.S. The Germans are on track so that 35 percent of their electricity will come from renewable sources by 2020, 40 to 45 percent by 2025 and 50 percent by 2050.

The whole program is called Energiewende and involves construction of wind parks 60 miles off the coast into the North Sea and 4,000 miles of high voltage lines in total.

The more electricity they get from wind, the less they need to generate from NG and the less dependent they are on Russia.

The Germans are focused on an energy plan, while we in the U.S. struggle to put together a comprehensive plan to produce, transport and distribute the energy that we find ourselves blessed with in this country.

The proposed Keystone XL pipeline has been controversial, bringing poor quality Canadian Crude to U.S. refineries with potential for export. The Obama administration has held up the project for environmental concerns over carbon pollution, but ironically has held up the RFS implementation, too, which makes no sense in context with one another.

There is absolutely no reason corn-based RFS should have been modified and what EPA has done will actually pull the rug out from under cellulosic ethanol development and commercialization.

We do have our own oil to move internally across the country. They have been loading 600,000 barrels of crude a day onto railcars in the Bakken field to eastern refineries.

There is a direct relationship between that and the backlog of 2,600 to 3,000 grain cars that are needed to catch up moving grain from elevators that are plugged in that region with another huge harvest coming.

The corn basis is 80 cents to $1 bushel below everywhere else because they can’t move their grain to markets. It is late summer and they have not caught up.

While they complain a lot to the Surface Transportation Board, not much has been resolved and improvement has been marginal.

There is supposedly no grain car shortage, but the tracks are jammed with oil cars with locomotives and crews moving oil instead of grain. Oil companies obviously would rather move oil than serve their traditional ag customers.

Energy Transport Partners from Dallas, Texas, want to build an 1,100-mile oil pipeline through Iowa to connect the Bakken to an existing transport system in Patoka, Ill., at a cost of nearly $5 billion.

It would carry 320,000 to 420,000 barrels of oil daily that would not have to be railroaded east. This would certainly help farmers in that region gain back some railroad service. This oil pipeline is buried two feet deep and you farm over it. I have an NH3 pipeline buried through one of my farms and it is no big deal.

America needs both an Energiewende transition to renewable energy sources of power and a Stromautobahn electricity highway to connect wind turbines to consumers in order for the country to have real energy independence from the despots and barbarians in the world who control energy supplies.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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