As part of a useful and informative feature on U.S. oil supply and North Dakota’s Bakken Formation boom of shale oil, Popular Mechanics crunched the numbers to test political claims that we can achieve ‘energy independence’ by 2020.
Before we even get to the details, the piece makes an important point, albeit implicit rather than explicit. Discussions of ‘energy independence’ are in fact a proxy for oil independence. Among all the major sources of energy, the only one we must import is oil. That makes oil—and not ‘energy’ at large—the root of our national dependence.
Popular Mechanics makes clear that, contrary to political claims on both sides, independence by 2020 is impossible to achieve with the current fuel mix, even if Canadian tar sands are included as a domestic source. The math on the Bakken so far has shown a more than 10-to-1 ratio of increase in number of wells to increase in output (+280% wells for a measly-by-comparison 25% production increase). That inefficient ratio will be tough to sustain. And the necessary Gulf of Mexico contribution is even less likely.
Yet even if these unlikely supply scenarios unfold, we won’t be oil independent. The numbers show that even if electric vehicles constitute 45% of new car sales (wouldn’t that be nice?) as the most optimistic estimates imagine, and automakers sell 1.5 million natural gas vehicles by 2020, we wouldn’t get there.
There are a couple important takeaways from this exercise. First, meeting the improbable production levels for the pricey oil from Bakken and the Gulf of Mexico would mean sustained high oil prices. Can we afford that? The larger point is that we cannot achieve oil independence within the current fuel and technology mix. We need to open the market to promote competition and spur innovation that can diversify our fuel choices, fatten our wallets, reduce our national debt, and create jobs, not to mention give us cleaner air and fewer oil spills.
Dr. Gal Luft, Co-Director of the Institute for the Analysis of Global Security (IAGS) and Fuel Freedom advisor, recently traveled to Shanxi Province, China to learn more about their blending and use of methanol as a liquid vehicle fuel. A few of Dr. Luft’s key findings indicate the scale, cost and environmental benefits of methanol use, both in Shanxi province and China at large:
• Methanol is now blended and tested in 26 of China’s 31 provinces, with the most widespread penetration in Shanxi (pop. 36 million)
• With more than 200 facilities nationwide, China’s methanol production capacity has grown from 2 billion gallons per year in 2003 to 15 billion gallons today, about the size of America’s ethanol industry.
• In less than a decade, China’s use of methanol in the transportation sector has grown from virtually zero to replacing five percent of the country’s gasoline demand.
• Roughly 70,000 taxis were converted to run on M100 and M85. By 2015, an additional 200,000 light-duty vehicles will be converted for methanol use.
• Hundreds of buses and commercial vehicles already run on M100 and M85 and 50,000 methanol heavy-duty trucks are planned to be introduced.
• Chinese automakers like Cherry, Geely, Shanghai Automotive, and Maple have rolled out cars that can run on M100 or M85. GM China is ambivalent about M15, but is interested in M85.
• In Shanxi alone, more than 1,200 service stations offer methanol blends. The number of refueling stations offering alcohol fuel is expected to double by 2015.
• The price of M100 (100% methanol) is 34% that of gasoline.
• Taxi drivers report cost-saving of $1,500-$5000 per year due to the use of methanol.
• Shanxi officials reported a 20% decrease in CO, NOX and Benzene emissions and 70% reduction in particulate matter. The use of methanol did increase formaldehyde, but according to the Chinese, the blends meet EPA emissions regulations despite the slight increase.
The entire summary is available here.
The New York Times recently came out with a case for methanol from natural gas as an alternative to gasoline. Although the U.S. is “the Saudi Arabia of natural gas,” this abundant energy source languishes underground for lack of sufficient demand to make it profitable. The transportation sector would provide a substantial new market opportunity, provided that existing legal, logistical and regulatory barriers can be removed.
”Unfortunately, most cars sold in the United States offer consumers no choice beyond gasoline. The so-called flex fuel vehicles that are now on the market are warranted to operate only on gasoline and ethanol. If Congress were to enact an open fuel standard that required new cars to be warranted to run on all-alcohol fuels, including methanol, natural gas could compete with oil in the liquid fuels market. Producing these cars would cost about $100 more. And these fuels could be distributed through the current refueling infrastructure with only slight retrofits.” (The Methanol Alternative to Gasoline” NY Times)
At an approximate equivalent fuel cost of $3 per gallon, sustained high oil prices may be the key to summoning the collective will to make progress toward transportation independence. As noted in The Economist’s Babbage blog, the technology is ready and the price is right (without subsidies!):
”Fortunately, the fuel systems of modern motor cars have been upgraded over the past few decades to cope with the demands of ethanol and methanol in anti-knock additives. Meanwhile, the cost of converting a petrol-powered vehicle to run equally on methanol has fallen to around $100. After allowing for methanol’s lower energy content, and including fuel taxes and the cost of all the necessary infrastructure, methanol producers reckon they can deliver the same quantity of energy found in a gallon of petrol for $3.”
Methanol has fueled not only racecars. It has been tested in real-world programs from California to New York in the U.S., in Europe and now in China. If we get serious about freeing ourselves (and our wallets) from the rollercoaster of oil price volatility, methanol can be an important part of the solution. Along with ethanol, natural gas, and electricity, we can give consumers a choice at the pump and ensure that oil companies have to compete for our fuel dollars.
A recent expert roundup at the Council of Foreign Relations website took on the issue of “How to handle oil price volatility.” The arguments presented all center on the most typical responses to the many manifestations of our “oil problem.” These can be summarized as “conserve/improve fuel economy” and “drill more.” Unfortunately, neither of these proposed solutions can address the scale of the problem. Even together they are insufficient to meet the challenge.
The only meaningful way to reduce volatility is to reduce the influence that oil has over our transportation system. To do that, we must diversify our fuel options, and not just a little. We need to take meaningful action to exploit scalable and abundant U.S. domestic fuel supplies that can replace a substantial portion of the gasoline (and by extension oil) we use today. Opening the fuel market to wholly domestic substitutes can not only provide a buffer against resource and price volatility, but also keep our hard-earned dollars in the U.S., improve the air we breathe, and reduce the price at the pump. For Americans, that’s an all-around good deal.
Demand is lower, yet gasoline prices continue to rise. What gives? NPR’s “The Two-Way” blog breaks down the reasons. First is the new reality: rapid urbanization in the emerging economies, Asia in particular, is driving up oil prices. This trend will continue as long as petroleum remains the primary driver of economic growth, since Asian and other developing economies will not forego their opportunity to grow and prosper. And because increasingly dear oil is the sole feedstock for gasoline, the price we pay at the pump will be determined by high demand beyond our shores—no matter how much we either conserve or drill.
The least often cited of the reasons for high gasoline prices in the blog post is that the combination of relatively cheap U.S. refining and reduction in refining capacity means that American consumers compete for fuel with consumers around the world. Thus as a nation we have become a net exporter of gasoline, but as individuals have not benefitted from the surplus.
NPR came up with a really useful infographic that starts as a gasoline primer then highlights the factors that affect gasoline prices, from refining capacity limits to financial market speculation. The U.S. supply and demand curves are also interesting, reinforcing the sometimes overlooked fact that we use a lot more oil than we produce. Even after the recent rise in production. It’s a good reminder that we are not as energy independent as we’d like to think.
Like drivers everywhere, airlines are seeing their budgets squeezed by the recent rise in oil prices. The cost increase will certainly trickle down to travelers, if it hasn’t already.
Until we summon the will to address the real oil problem, Americans will pay more almost everywhere we go. We’ll feel it at the pump, at the grocery store, in restaurants and local businesses, and now in the air. The good news is that it doesn’t have to be this way.
A blog in the Wall Street Journal cautions that East Coast refinery closures may depress gasoline supplies and further drive up prices. This is just one more reason we cannot continue to depend wholly on petroleum to fuel our transportation system. For the sake of our long-term economic well-being, as individuals and as a nation, we must actively pursue avenues to open the fuel market and diversify our fueling options at the pump.
The combination of a presidential election year and gasoline prices historically high for this time of year, both parties are playing the blame game. However, the posturing with regard to gasoline prices does not address the fundamental reality that our policy options are limited when how much we drill and how much petroleum we consume are becoming less relevant, thanks to rapid urbanization in China and other developing economies. As the National Journal points out, “the inconvenient truth that oil is a global commodity whose price is not entirely dictated by U.S. energy policy is one you will rarely hear in campaign ads.”
The underlying problem is that oil has a virtual monopoly on transportation, and transportation is literally drives the growth–or lack of growth–of our economy. To escape the cycle of oil-driven economic effects, we must diversify our fuel options and force oil companies to compete for our fuel dollars. The right policy moves can facilitate market entry and availability of alternatives that can substitute for gasoline in our cars and trucks.
China’s methanol program is a good reminder that perhaps it’s time to play to our strengths, not to those of other countries. Rather than depend entirely on foreign-sourced petroleum, China is actively pursuing a more secure means of fueling their transportation future. Similarly, we need to accept that the U.S. is not the Saudi Arabia of oil, Saudi Arabia is. Sure, we’ve got a lot of petroleum that we should exploit, but not nearly enough to satisfy our needs.
The math is straightforward. We use more than 12 million barrels of oil per day. However, even during the most unregulated time in our history with the easiest to acquire oil (unlike shale, tar sands, and deep water drilling made possible only by today’s more advanced technologies), we have never drilled that much. The U.S. is now drilling at the highest rate in years, but still only produces roughly 6 million barrels/day. We need to make up the shortfall with massive quantities of alternatives that can fuel our existing vehicle fleet and that of the future. This requires feasible sources, available today, that can scale quickly to readily replace a substantial portion of the gasoline we consume.
So while we’re not the Saudi Arabia of oil, we are the Saudi Arabia of both natural gas and garbage. Why not capitalize on what we’ve got to make our economy stronger, more resilient, and more independent? To complement neat natural gas (CNG), ethanol and gasoline and diesel from U.S. petroleum, we should use our abundant supplies of both natural gas and municipal waste to produce methanol that can fuel our cars. With methanol in the fuel mix, we can not only displace a large amount of gasoline within the next decade, but also improve the environment and the air we breathe. What’s not to like about that?