About Marshall Kaplan

Marshall Kaplan is the former Dean of the Graduate School of Public Affairs at University of Colorado and held the Wirth Chair in Energy, Climate Change and Community Development. He also served in the Carter and Kennedy administrations and as an Advisor to Assistant Secretary Floyd Hyde when George Romney was Secretary of HUD. He was a principal in the policy advisory firm of Marshall Kaplan, Gans and Kahn. Marshall has written several books and numerous articles on regional and urban policy, New Towns, poverty, infrastructure, environment and social welfare policy. He was honored by the Colorado ADL for his contributions to the nation and community in the early 1980s.

Optimist and Pessimist, the Oil and Gas Journal and Replacement Fuels

ShutterstockThe Optimist proclaims that we live in the best of all possible worlds and the pessimist fears this is true (James Branch Cabell). Or as I once said in a presentation in China after Tiananmen Square, a strategic optimist is a realist with brains.

I live with the hope we can do better as nation with respect to the environment, our economy and the quality of life choices open to Americans, particularly low- and moderate-income Americans. But I worry that given the ideological and related political divisiveness among us, we may not.

In this context, after reading the recent article, “SAFE: Report’s ‘flash points’ emphasize US transportation fuel problem” in the Oil & Gas Journal, often seen by some as a mouthpiece for the oil industry, my thoughts reflected both optimism and pessimism. I concluded that I was a realist tempered by experience (and with hopefully a brain). Okay, what did the piece suggest that stimulated my mental and emotional adrenaline?   Two or three quotes used by the author Nick Snow, respected Washington editor of OGJ, taken from a national conference convened by Securing America’s Future Energy (SAFE):

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The Journey of a Thousand Miles, Replacement Fuels and FFVs

President John F. Kennedy, first lady Jackie, and the poet Robert Frost at a dinner for Nobel Prize winners at the White House, April 29, 1962. (Wikimedia Commons)The headlines recently have been terrible — a commercial plane shot down over the Ukraine, war in the Middle East and more. It makes you wonder, over and over again, about Man’s and Woman’s inhumanity to his or her fellow men and women.

While certainly not equal in impact on the world at the present time, I happened to run across one point of light recently concerning a set of innovations which, in the long run, could positively impact climate change, security and consumer choice issues. It was reflected in a couple articles describing the partnership between the state of California’s Energy Commission and Cummins Engines to develop an E85-fueled engine that apparently cuts CO2 by up to 80% (read it in Fleets and Fuels, July 15, 2014) in medium-duty trucks.

According to Cummins Engines and the Commission, a relatively small 4-cylinder, 2.8-liter engine has been successfully subjected to 1,000 miles and 1,500 hours of testing. It is now going through validation tests in Sacramento.

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USA, USA, USA… The Search for Competitive Fuel Choices

USA supporters celebrate a goalUSA, USA, USA, USA.  No, I didn’t just come from watching the US playing in World Cup.  But after reading the glowing, cheerleading, overly enthusiastic, often nationalistic media accounts of the U.S. overtaking the Saudis in oil production, the win-lose aspects of the soccer chant somehow became embedded in my persona (like counting sheep or gas pumps at night when I don’t sleep). We beat the Saudis at their own game- — oil.  We’re number one…Wow!  Next, will we emulate the Saudis and place onerous and discriminatory restrictions on women driving and, unlike the Saudis, argue that it’s a conservation measure?  Of course not! We don’t have to be number one in everything. But oil does make strange bedfellows, and equally strange behavior, as well as policies.   Please substitute, couchfellows.

Unfortunately, most of the media stories avoid analysis of what the new oil prominence of the U.S. means to the nation and world.  Yes, increased production likely means less dependence on the Middle East, particularly Saudi oil.  Indeed, we now import  about 33% of oil needs, the lowest percentage in years.

But oil independence remains a myth.  Oil interests are pushing for reduction of regulations concerning exports of U.S. crude and have always exported considerable refined oil products allowed by the law.   Their motives, despite frequent public comments to the contrary, are generally to sell to the price that is to the buyer who offers the most return. He, she or it frequently is a global purchaser.  Independence is a slogan that often blurs motive and reflects good politics but bad substance and contrary to reality.

The U.S., as the most powerful Western nation, irrespective of any mathematical domestic surplus, will continue to extend its role as defender of the global supply chain from the Middle East or elsewhere.  While we may be less dependent on foreign oil, U.S. leaders have in the past, and likely will in the future, use a combination of diplomacy and military threats and action to defend and sustain the flow of foreign oil to allies or assumed allies.    In this context, the role we play in the world extends our dependency.   Unfortunately, wars will be fought and U.S. soldiers will die because of this felt dependency.

Most of the USA, USA, USA chants in the media coverage of our new oil prowess, implicitly, neglects the difficult juxtaposition between increased oil production and supplies and higher gas prices.  Less dependence hasn’t brought the reduction, or even stabilization, of gas prices promised by the oil industry.  Gasoline in California is now generally well over $4 a gallon for regular, and in the nation it’s more than $3.60.  Why?  We have a surplus, don’t we?  Oil companies want to export more, and soon it appears they will be able to.  As Dr. Pangloss asked in Candide, is this the best of all possible worlds (let me add, for the U.S.)?

Clearly the cost of oil at the pump is not strongly linked, at the present time, to the amount of U.S. oil that shows up on EIA calculations and projections.  Both price and supply are going up simultaneously.  Yes, there is uncertainty, given events in the Middle East and yes, uneven growth around the world has increased demand in some areas and suppressed it in others….  The link between high prices and the Middle East is difficult to precisely measure.   Consumer costs per gallon are likely affected more by investors, as well as speculation on Wall Street, than the actual numbers concerning increased production of U.S. oil.

So apart from prayer and penitence, what can we do to get a better deal for consumers, and to prevent gasoline from becoming a negative factor concerning U.S. GDP growth and the environment?  How can we help assure that being number one means robust economic growth, more income in the wallets of Americans, particularly low-income Americans, increased security and fewer dirty emissions?

These are not easy questions, and they do not lend themselves to simple ideological responses.  Clearly, as renewable fuels and vehicles come on line that meet the incomes and desires of most Americans, both will play a vital role in America’s future.  But reliance on coal-fired utilities for power in some areas of the nation, battery costs, mileage limitations from single battery charges, and lack of infrastructure impede their ability to have a significant positive impact at the present. The market for renewable fuels and vehicles is relatively small and will remain so until technological advances catch up with potential demand.

Where is Diogenes when we need him?  We have a path in front of us that would buy time toward a better American future, one that could offer competition to gasoline-competition that would be good for the economy, the consumer, and the environment.   Increased availability of replacement fuels, particularly natural gas-based ethanol, combined with large-scale conversion of older cars to flex fuel vehicles and increased production of new flex fuel vehicles by Detroit, would give gasoline a run for the money, if  gas-only stations become fuel stations and allow consumers choice.  Less than one percent of all gas stations in the U.S. that are branded by the big oil companies offer E15 or E 85 (Renewable Fuels Association, July 2014).

I remain an optimist that more freedom will reign soon at the pump. The noted people’s philosopher, Charles M. Schulz, author of Peanuts, lessened my fears about the future when he said, “Stop worrying about the world ending today. It’s already tomorrow in Australia.”  USA, USA, USA. Fuel choice, Fuel choice, Fuel choice!

Resources for the future and an alternative vehicle and fuel pathway

Auguste ComteI have been a fan of Resources for the Future (RFF) since my early days in Washington many years ago. While the organization’s reports won’t keep you awake at night nor can they easily convert into a Bollywood movie, they generally provide sound nonpartisan analyses of resource and environmental issues. In this context, the Fuel Freedom Foundation (FFF) retained RFF to independently study the potential economic, environmental and national security gains from replacing a portion of domestic gasoline use in the light-duty fleet with various natural gas-based fuels such as ethanol or methanol.

The request reflected the relatively large price differential between the growing supply of natural gas and gasoline and FFF’s assumption that natural gas-based fuels (ethanol and methanol) could not only offer the U.S. security benefits, they would be cheaper and cleaner than gasoline. If FFF’s assumption was right, public and private sector strategies to encourage the conversion of older vehicles to FFVs and to increase the production of new FFV vehicles in Detroit would seemingly be in order. Similarly, finding financially feasible ways to produce, develop, distribute and successfully market natural gas-based alcohol fuels would appear quite sound.

RFF’s study was completed last September and is available online.

I have read the document many times. It is compelling because it honestly portrays gaps in information and uncertainties concerning public policy and regulation, technology, geography, price trends, competition, and availability as well as access to natural gas-based fuel. Indeed, embedded in the report is the fact that policymaking in public, nonprofit or private sectors or predictions concerning consumer behavior is never perfect. As complexity increases, decisions often require reliance on perfectibility over time, rather than perfection in the present time.

Apart from RFF’s marshalling of available, relevant data and its related analysis, the study’s conclusions are supportive of leadership groups and leaders who seek an “alternative path” in support of the use of natural gas-based fuels and the conversion of older cars to flex-fuel vehicles.

What RFF concluded is that the only replacement fuel currently available to the more than ten million FFV E85-capable vehicles “does not have a cost advantage at the pump over conventional gasoline.” But assuming companies like Coskata, Inc. and Celanese are able to deliver on their financial modeling, live tests and price predictions concerning the production and distribution of natural gas-based ethanol, owners of FFVs, including owners of new and older converted vehicles could see cost benefits near $1 per GGE (gasoline gallon equivalent) in the very near future.

This is no small benefit. It will be particularly important to low and moderate-income folks, permitting them more choices when it comes to jobs, housing and other basic needs. It will also reduce the strain caused by reduced economic and income growth on middle class households. RFF also indicates, with somewhat less certainty as to how much, that there will likely be environmental benefits.

Making this new replacement fuel path viable will require the EPA to lower the costs of certification of kits that help convert older cars to FFVs, and to sanction relatively simple software adjustments, particularly for newer FFVs and their twins (not the human kind but automobiles whose engines reflect FFF characteristics. This path will also need the EPA and advocates of natural gas-based ethanol to work together to develop a vehicle-testing procedure for older cars that is both cost efficient, sound and hopefully, relatively quickly. Finally, it will necessitate a fuel market that reduces, if not eliminates, the almost monopolistic conditions generally imposed by oil companies and often supported, at least implicitly, by government policies and regulations.

Consumers, clearly, would benefit from more competition at the pump and from more pumps devoted to replacement fuels. Auguste Comte, the great 19th century philosopher and founder of positivism, never saw a gasoline station, but his simple motto, “Love as a principle [need for increased natural gas-based flex fuels and need for flex-fuel cars], the order as a foundation [development of policies and infrastructure for natural gas-based fuels and increased FFVs] and progress as a goal [extend consumer choice]” nicely frames RFF’s narrative. In turn, RFF’s study, while recognizing the value of renewable fuels, supports an alternative, natural gas-based replacement fuel as well as a vehicular pathway to help achieve national, regional and local economic, social welfare and environmental benefits. It’s near July Fourth. Let’s move toward freer increased choices among fuels and increased vehicular capacity to use them.

A return to making love, not war – Iraq and replacement fuels

Make love not warEarly on I wrote a column about an unanticipated Thanksgiving dinner conversation with a special operations soldier who had served in Iraq. His comment, in response to a question I asked about whether he and his buddies knew why they were sent to Iraq, was brief and blunt: “oil and U.S. security.” He would have none of what he thought was b.s. about “freedom and democracy” or “weapons of mass destruction.” Before I asked the question I actually already knew what his answer would be, but a glass of wine, a wonderful piece of turkey and good company suggested that my inquiry would lead to an opening for a longer repartee on the Middle East and U.S. policy. It did, and again oil and oil politics were the dominant theme.

I suspect that many of the writers of today’s headlines and op-ed articles anticipated Republican Eric Cantor would win. They are now arguing, in sometimes misleading reference terms concerning democracy, inter-sectarian harmony and morality, for a more aggressive U.S. policy toward the invasion by Sunni radicals of parts of what once on a map called the nation of Iraq.

But the real issue for many “experts,” I again suspect, is oil — a fear, whether factual or not, that if Iraq collapses, the world oil supply (already close to equilibrium concerning demand and supply) will relatively quickly reflect shortages and much higher prices per barrel of oil ($150 a barrel) and oil’s product, gasoline ($5 and more).

Should we be sending kids to fight for our apparent God-given right to Middle Eastern oil? Although I think a lot about the ethics of public decision making, I am not an ethicist. But as long as there are alternatives to supply, my hard-nosed policy advice would be against war or the steps that might lead to war. Iraq has not been the noble state that welcomed America in to rescue it ostensibly from Saddam Hussein. Its form of democracy has been limited, corrupt and sectarian.

What should our calculations be, concerning alternative supplies of oil? First, we ought to really think through whether a full or partial shutdown of Iraqi oil wells will mean a damn. Iraq alone supplies a small share of U.S. oil imports. Most of the often-shrill economic coverage of the radical Sunni invasion and its potential impact on U.S. oil seems to relate more to perceptions, not empirical evidence, about shortages and prices. Commentators “perceive” what the oil markets might or will do — really what oil speculators and investors will or will not do — based on what is currently happening in Iraq, not on facts on the ground. Neil Cavuto of Fox Business said, “Oil is a commodity, a global commodity, and like any stock in almost any market, it often trades on issues having little to do with basic fundamentals, and more to do with simple fear.”

Assuming, however, there is a real worldwide shortage of oil as a result of a closure of Iraqi wells, or that fear drives the prices up so much that there is a strain to the economy, the Saudis, probably, among all the OPEC nations, are the only ones with sufficient oil in the ground to make an immediate difference concerning supply. But will they? They have shown some flexibility in the past to U.S. petitioning. They have also, at times, despite their security relationship to the U.S., turned us down. This time around the Saudis could well be more than a bit sensitive, particularly if it looks like the radical Sunnis might win. The Kingdom is vulnerable with respect to a radical brand of Sunniism. I bet they also fear a potential Shiite effort to push the radicals back, particularly one led by Iran. Life is never simple for the House of Saud.

Okay, where are we? Oil is sold in an international marketplace. No matter which side you are on regarding the Keystone XL pipeline, if approved and completed, it will not have a major impact on U.S. gas supply or prices. Ask your friendly oil refinery or oil company executive where he or she believes Keystone-supplied oil will be going. Most of the assumed supply will be traded internationally for the highest global price. The predicted increased supply of U.S.-produced gasoline will probably help diminish price increases slightly, but don’t make a bet on how much. Today, a price of a gallon of regular unleaded gasoline is well over $4 in California and U.S. production is at a very high level.

What would likely help keep gasoline prices from spiking significantly and, at the same time, lessen the amplitude of the cycles is a commitment to competition in the fuel marketplace. Let Adam Smith reign! Allow safe, cheaper, environmentally better replacement fuels, particularly natural gas-based ethanol (and someday soon, methanol) to compete with gasoline. Encourage the conversion of older vehicles to flex-fuel vehicles! Push for renewable fuels and related vehicles that appeal to a larger market than at present, given costs and design constraints! Reduce our dependence on imported oil! Make love, not war! Drive (excuse the pun) for strategic solutions!

Shakespeare and Julia Child on monopolies, competition and alternative fuels

shutterstock_78887653You must remember the famous community activist who once asked, “To be, or not to be, that is the policy and behavior question; whether ‘tis nobler in the mind to suffer the slings and arrows of outrageously high, constantly shifting gasoline prices or to take arms against a sea of troubles generated by monopolistic fuel markets and open them up and end them.” I’m paraphrasing, of course.

Unfortunately, Shakespeare, now that we need him, is no longer available. But his question, articulated by his political friend Hamlet, still needs to be answered. I suggest we respond to his query in the context of another question: Is competition in the market for vehicular fuel a public good and in the public interest? Ah ha, you ask, why must we ask this question? Don’t we live in a capitalist or quasi-capitalist nation? Gosh, ever since we all were kids, were we not brought up on the wisdom of free markets and their ostensible link to freedom and democracy, a trifecta holy grail?

Sure we were! But the presented wisdom apparently didn’t mean all markets, and most important for this article, the market where most of us purchase fuel. By and large, the market for fuel is limited to a single, generally similar, primary product — gasoline. Competition, when it exists, generates from relatively small price differences, more often than not. Overblown value propositions in advertising concerning engine performance benefits from brand X or Y notwithstanding.

Consumers who, many times, assiduously read the papers or go online to find out where different brands of tires are cheapest or travel miles to visit dealers to get a perceived “good deal” on a car are frequently constrained to their neighborhood gas stations or the stations located near the nearest shopping center or big box store. While price may be a key factor in driving their decision as to which station will fill up their tank, absence of diverse fuel alternatives results in a relatively narrow band of prices per gallon and a competitive floor on consumer savings and costs.

Opening up gas markets will be tough. The oil industry controls or strongly influences over 40 percent of the stations and holds a big, profitable stick concerning what can be sold and how it can be sold at its franchised facilities. Prices are set low enough to scare independents into selecting less-than-favorable locations, or pricey enough to give them some room to keep their own costs relatively high.

To date, state pilot or demonstration programs concerning alternative fuels like ethanol and methanol have had mixed results. Why? Their costs of production and their environmental/GHG costs are lower than gasoline. Are we Americans just dumb? No. Initiatives to date have had to surmount problems including: consumer access to fuel stations with flex-fuel pumps (their costs range from $50,000 to over $100,000); a growing but still relatively small percentage of flex fuel autos compared to the total number of vehicles; the lack of consumer information concerning their own flex-fuel vehicle’s ability to use ethanol; the fear generated by some interest groups often related to the oil industry about the impact of alternative fuels on engines; the seeming ability of the oil industry to manage local prices; and the decisions by supply chain participants, particularly retailers to raise alternative fuel prices to capture immediate profits (reducing their intermediate and long-term ability — as the new kid on the block — to compete with gasoline.)

Evidence from Brazil suggests that demand emanating from an educated public, combined with a commitment to increase the pool of alternative-fuel vehicles and readily accessible fuel stations with ethanol pumps will cause a reduction in gasoline prices. Juliano J. Assunção, Joao Paulo Pessoa and Leonardo Rezende noted in a December 2013 London School of Economics publication, “Our estimates suggest that the model prediction is correct and that as the percentage of flex cars increase by 10%, ethanol and gasoline energy equivalent prices per liter fall by approximately 8 cents and 2 cents, respectively. Considering the volume of sales and size of the flex fuel fleet in 2007, a rough estimate suggests consumer savings to the order of 70 million Reais in the Rio de Janeiro state that year. Our estimates also show that the price gap as well as the price correlation between the two fuels has increased with the increased penetration of flex fuel cars.” Other studies have suggested similar positive impacts.

A U.S. recipe appears clear and consistent with America’s assumed belief in letting the market decide most resource allocation issues connected to the production of non-social welfare related goods and services. Ingredient one: Amend laws and regulations to encourage individual owners to convert older cars to flex-fuel automobiles; ingredient two: mix the resulting converted cars with newer flex-fuel vehicles to create a large flex-fuel pool; ingredient three: liberally sprinkle in enough information to inform consumers and potential-ethanol-supply-chain participants, including potential blenders and retailers, of the potential demand for ethanol as a fuel; ingredient four: add real, solid seasoning to the mix by fostering development, distribution and the sale of natural-gas-based ethanol to achieve significant increased environmental and cost benefits. Julia Child couldn’t build a better dish for the nation as it simultaneously tries to expand the viability of renewable fuels, and Shakespeare’s friend, Hamlet, would not need antidepressants.

An oil-drilling sing along, to the tune of “Politics and Polka”

Correlation or causation, correlation or causation
Misleading numbers, mistaken assumptions. Who will be the joker?

Okay, I am neither poet nor composer. I can’t even sing. But Fiorello Laguardia was an early hero from the time I met him in my sixth grade history books, and the musical Fiorello! was good fun.

Fiorello LaguardiaMayor Laguardia would be amused and bemused by recent articles suggesting that the Monterey Shale isn’t what it was cracked up to be a year or two ago. The story lends itself to his famous encounters with comic books. Despite earlier media hype, its development will not lead to economic nirvana for California and could well lead to real environmental problems.

Why were the numbers that were put out by the oil industry just a couple of years ago wrong? Maybe because of a bit of politics and polka! The articulated slogan concerning oil independence from foreign countries mesmerized many who should have known better.

Similarly, why, while once accepted by relevant federal agencies, have the production numbers concerning the Monterey Shale been recently discounted by the same agencies (EIA) and independent non-partisan analysts? Quite simply, they now know more. Succinctly, it’s too expensive to get the oil out and the oil wells, once completed, will have a comparatively short production life.

Drilling an oil field that is located under flat land is easier than drilling for very tight oil — oil that lies underwater or under a combination of flat as well as hilly, rolling, developed, partially developed or undeveloped areas known for their pervasive, pristine, beautiful environment. Further, the geological formations in the Monterey Shale area are a victim of their youth. They are older than Mel Brooks, but at 6-16 million years, the Monterey Shale is significantly younger than The Bakken. Shale deposits, as a result, are much thicker and “more complex.” According to David Hughes (Post Carbon Institute, 2013), existing Monterey Shale fields are restricted to relatively small geographic areas. “The widespread regions of mature Monterey Shale source rock amendable to high tight oil production from dense drilling…likely do not exist…” “… While many oil and gas operators and energy analysts suggest that it is only a matter of time and technology before ‘the code is cracked’ and the Monterey produces at rates comparable to Bakken and Eagle Ford,” this result is likely is not in cards…the joker is not wild. “Owing to the fundamental geological differences between the Monterey and other tight oil plays and in light of actual Monterey oil production data,” valid comparisons with other tight oil areas are…wishful thinking. Apart from environmental opposition and the costs of related delays, the oil underwater or underground in the Monterey Shale is just not amenable to the opportunity costing dreams of oil company CEOs, unless the price of oil exceeds $150 a barrel. According to new studies from the EIA, the recoverable reserves, instead of being as it projected earlier from 13.7 to 15.4 barrels, will be closer to 0.6 barrels.

If you believe in “drill, baby, drill” as a policy and practice, the cost/price conundrums are real. Low costs per barrel for oil appear at least marginally helpful to consumers and increases in oil costs seem correlated with recessions. Increased production of tight oil depends on much higher per barrel prices and, in many instances, increased debt., Neither in the long term is s good for the economic health of the nation or its residents.

Breaking the strong link between transportation and oil (and its derivative, gasoline) would make it easier to weave wise policy and private-sector behavior through the perils of extended periods of high gasoline prices and oil-related debt. Expanding the number of flex-fuel vehicles (FFVs) through inexpensive conversion of older cars and extended production of flex-fuel vehicles by Detroit would provide a strong market for alternative transition fuels and put pressure on oil companies to open up their franchises and contracts with stations to a supposedly key element of the American creed-competition and free markets. The result, while we encourage and wait for renewable fuels to reach prime time status, would be good for America, good for the environment and good for consumers.

Star light, star bright: Wishing for a cleaner, less-expensive fuel

starry nightStar light, star bright, I wish I may, I wish I might, have this wish I wish tonight… How many of you said these words on a starry night, particularly if you were with your best girl or boyfriend as a teenager? Or, as a loving parent, how many of you taught your child to say these words as part of your effort to build his or her vocabulary or memory…or just to instill their capacity to dream?

Now Kate Gordon, the, legitimately well respected, president of Next Generation, seems to have forgotten the difference between wishing, hoping, dreaming and reality. Her recent brief “expert” article in the Wall Street Journal departs from reasonable projection into fanciful wishes.

Gordon is correct that the “average car” on the U.S. road is about 11 years old and that their negative impact on GHG emissions and our health is significant. She is also correct in pointing to the large impact that high gas prices have on “our wallets,” (I would add) particularly for low and moderate-income households. Clearly, for the poor and near-poor families and for the economically fragile moderate-income households, present gas prices mean less of the basic necessities: modest job choices, good food, housing and healthcare.

Where Gordon and I part company is with her suggestion that an auto replacement initiative or what she calls an Enhanced Fleet Modernization programs would generate a visible, short-term impact and would likely be supported now, by assumedly the federal or state governments, in a significant way. (I should indicate that while I was head of the urban policy in the Carter administration, HUD senior officials thought about offering support by providing older cars to carless, low-income folks to permit them to secure job opportunities in the suburbs. How times have changed. The concern about GHG emissions and other pollutants emitted from older cars that run on gasoline are now seen as a real environmental problem.) The difficulty with Ms. Gordon’s proposal is number one, money and bureaucracy; number two, money and bureaucracy; and number three, money and bureaucracy. Even California, which she touts, has had mixed results with its replacement and incentives to replace older car programs. Clearly, exporting California’s experience to many other states, given economic and political constraints, would be difficult and would likely result annually in a relatively small impact on the nearly 300,000,000 cars in the U.S of which approximately 85-90 percent are over six years old.

Car replacement is a nice thought, but probably, at this time, an exotic one. If policymakers are seriously looking for a way for large numbers of owners of older cars to immediately reduce their vehicle’s negative effect on the environment, air quality and their own costs of fuel, there are better ways. While we wait and hope for the advent of vehicles that are ready to run on renewable fuels and that simultaneously meet the travel as well as budget needs and demands of most low, moderate and middle-income Americans, we should look at natural-gas-based ethanol as a fuel for newer flex fuel cars and for large numbers of older vehicles converted to flex-fuel vehicles.

Ethanol is not perfect as a fuel but it is better than gasoline. It emits fewer GHG emissions and other pollutants harmful to the nation’s quality of life. Recent regulations, like ones initiated by Colorado, that significantly reduce emissions from drilling now will likely make life cycle environmental evaluations of natural gas changed into ethanol a much better environmental deal. The process appears technologically feasible at a cost lower than the production costs of gasoline. If ethanol is allowed to compete with gasoline by oil companies on an even playing field — oil companies generally control who gets what and where at most “gas” stations — ethanol will be cheaper than gasoline for the consumer.

It is relatively inexpensive to convert older cars to flex-fuel vehicles — perhaps as little as $100 to $200. Finding a way through lessening the cost of certification to expand the number of conversion kits certified by the EPA and, or, where relevant, allowing recalibration of software and engines, would expand the benefit-cost ratio for many older cars. Star light, star bright, we can have the wish we wish tonight concerning a cleaner environment and lower consumer prices in a relatively short time, while we continue to push for electric vehicles and a whole range of renewable fuels to achieve prime-time performance for most Americans.

Let freedom ring: Oil companies, capitalism and fuel choice

ExxonIt’s a free county, ain’t it? Americans have many choices that are denied to citizens of other less-fortunate nations. But we forget how many decisions are made for us, sometimes out of necessity, such as paying taxes; sometimes out of greed, such as the monopolistic actions of oil companies in denying many Americans the ability to purchase alcohol-based fuels at their corner gas station. Try it someday! On your way home from work, on your shopping trip to your friendly supermarket or on your way to see a movie at your favorite theater, make a stop for fuel at a gas station. Make sure to have some gasoline in your tank, because it likely will take you a lot of time to find a gas station that sells E85 or even E15.

Now, I went to Harvard Law School for four days, before I decided that there were too many lawyers around and memorizing case studies was not my forte. But Harvard provides significant value added, apart from being near Harvard Square and Boston. I was exposed to terms and content related to antitrust, restraint of trade, collusion and monopolies. Now, I didn’t stay long enough to know whether those concepts applied to oil companies that restrict consumer choices of alternative fuel. Probably not, because I am sure, by now, one of my Harvard colleagues would have filed a well-reimbursed case to break open the fuel market to options like ethanol, methanol and more. But whether legal or not, oil companies deserve their comeuppance for limiting many of us who, too often, are required to use more expensive, environmentally harmful gasoline, instead of existing, safe, alternative fuels.

How do they do this? Well, if you are a gas station owned or franchised by an oil company, your contract and rules related to behavior often prevent you from adding a pump or adding to an existing pump to sell E15 or E85. As relevant, since oil companies generally require the stations they own to buy fuel from them, and since they don’t sell E15 or E85, adding a pump would be akin to waiting for the hereafter (and acting on faith that you will get there).

Wait, there is more! Every now and then an oil company wants to publicly show it is a bit beneficent (for image purposes), but don’t hold your breath with respect to proof that image and reality are the same. Sure, you might find an alternative-fuel pump near the rear side of the garage proximate to the men’s room, or, if you are lucky, on the side of the station near the air pump. Most oil-company-owned stations and franchisees are generally precluded from putting an alternative-fuel pump under the covered island or space out front. They also face restrictions on advertising alternative fuels as an available product and oil-company pricing limits competition from alternative fuels.

Congress has refused to enact open fuels legislation, which would require oil companies to open up their gas stations to other fuels. Ongoing efforts by public and private sector advocates, as well as nonprofit groups, to encourage policies that would convert older cars to flex-fuel vehicles and to encourage Detroit to build more FFVs could well lead to a large consumer market for alternative fuels and generate a positive market reaction among independent gas companies and, perhaps, even some smart oil companies. While I have been wading through the pros and cons of allowing oil companies to increase exports to other nations, I do believe that if increased exports are in the nation’s future, they should be approved only if the oil companies agree to require their stations and franchises to offer alternative fuels in a primary space alongside gasoline. A bit of tat for tat is in the public interest. Let freedom ring for consumer! Let capitalism mean competition for gasoline and alternative fuels at your nearby gas station! Oh, I forgot, alternative fuel station!

Right, wrong and indifferent — the AAA, oil and alternative fuels

AAAMy favorite automobile service group — the AAA — has once again treaded without fear or trepidation into analysis. Remember earlier, when it suggested that E15 harms engines, based on what looked like an oil-industry-generated study? The AAA’s methodology was weak and its conclusions suspect, a judgment supported by the EPA’s response. According to the agency, AAA’s conclusions were erroneous and based on a limited sample. EPA’s own findings were generated from a relatively large sample of cars, indicating that E15 is safe for most engine types and reaffirmed the wisdom of its approval of E15 usage.

I was surprised to find an article in Oil Price by blogger Daniel Graeber, based to a large degree on comments from AAA’s Michael Green suggesting that the oil shale boom has prevented gas prices from going higher than they are now. Graeber approvingly quoted Green, who said, “Sadly, the days of cheap gasoline may never return for most American drivers despite the recent boom in North American crude oil production.” Assumedly, Green meant that the cost of drilling tight oil will remain high and the costs per barrel of oil will follow suit.

Green apparently went on to indicate that political leaders, particularly, members of Congress who argue for a drill-baby-drill policy, are wrong to link more wells to significant price relief for folks who find gas costs a real problem.

The AAA is right when it suggests that, despite the oil shale boom and signs of increasing demand in America, refineries are sending increased amounts of oil-based products overseas. Understandably, their patriotism doesn’t extend to accepting a lower price for oil in the U.S. when they can get higher prices overseas.

The article appears inconsistent, when at one point it mentions that crude oil inventories are running above average, and later blames current exports for low supplies and low supplies for preventing a drop in prices at the pumps.

Both are correct in indicating sales of oil products abroad probably do have an effect on costs-up to now probably marginal. Certainly, if Washington extends export privileges, increased sales of oil abroad may have a more significant impact on consumer costs. More relevant, however, concerning gasoline costs at the pump, will be economic recovery in the U.S., investor speculation and the oil sector’s ability to manage prices.

Cheap oil has been, recently, and likely will be in the future, a fantasy. The cost of oil per barrel has hovered at around $100 and upward for an extended period, and drilling in shale is relatively expensive. Continuous exogenous and existential (don’t you like those words — they create great passion and emotion) threats from the Middle East and Eastern Europe, also, will likely tilt oil prices upward in the near future.

I would commend the AAA, assumed by many to be the leading advocate for automobile owners in the nation, for grasping the fact that the behavior of producers is likely to lead to higher gas costs and create burdens, particularly for low and moderate-income groups. Now with this knowledge, shouldn’t the AAA argue for breaking oil’s near monopoly on fuel? If the AAA was really interested in helping vehicle owners lower their cost of fuel, it might take the lead in arguing for choice at the pump. Wouldn’t it be great if they really stood up for more open fuel markets as well as alcohol-based transitional fuels, such as ethanol and methanol? Competition at the pump from flex-fuel vehicles, combined with conversion of older vehicles to flex-fuel cars would, over time, mute increases in gas prices and, at the same, time generate environmental benefits for a better America. Support for alcohol-based fuels is consistent with support for renewable fuels, if one is concerned about the environment and GHG emissions. Let’s bring them on as fast as we can. But let’s acknowledge that renewable fuels are not really ready yet for prime time. They are too expensive for many Americans and their technical limitations, particularly concerning electric batteries, are not yet coincident with the desires of most Americans.