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Lac-Megantic2

Big difference between crude, ethanol train crashes

Something amazing happened in the aftermath of the ethanol train derailment in Iowa.

No fish died.

At least none that we know of. Environmental officials in the state probably feared the worst after eight cars spilled ethanol following the Feb. 4 derailment north of Dubuque.

The Associated Press quoted state Department of Natural Resources spokesman Kevin Baskins this week:

Efforts to monitor water quality and aquatic life in the river are ongoing, Baskins said, but past results shows that the majority of ethanol in the water dissipated downstream, and no fish kills have been reported.

Not long after the crash, Fuel Freedom published a blog post outlining the differences between how ethanol and crude oil behave during an accident, although both are flammable. Relying on research at the Renewable Fuels Association, we noted that ethanol — even the denatured, toxic variety in the train cars that derailed — is water-soluble.

Sure enough, AP reported Feb. 10:

Results from several monitoring stations along the Mississippi River show much of the ethanol that leaked into the water after several train cars derailed has dissolved, the Iowa Department of Natural Resources said Monday. … Baskins said the ethanol dissipated fairly quickly in the first mile downstream, with fuel levels virtually undetectable 10 miles from the site.

It’s a stark contrast to the growing number of horrific accidents involving trains carrying oil. A runaway train in Quebec crashed in 2013, with the resulting inferno killing 47 people in the town of Lac-Megantic. There have been numerous incidents since then, and two of them right around the Iowa ethanol-train derailment shows how spectacularly different the fuels behave when there’s leakage and a fire.

Joan Lowy, an AP reporter in Washington, D.C., wrote a story this week about the efforts to improve the safety on railroads and in the tank cars that transport oil:

On Feb. 5, the Transportation Department sent the White House draft rules that would require oil trains to use stronger tank cars and make other safety improvements.

Nine days later a 100-car train hauling crude oil and petroleum distillates derailed and caught fire in a remote part of Ontario, Canada. Less than 48 hours later, a 109-car oil train derailed and caught fire in West Virginia, leaking oil into a Kanawha River tributary and burning a house to its foundation. As the fire spread across 19 of the cars, a nearby resident said the explosions sounded like an “atomic bomb.” Both fires burned for nearly a week.

Much of the attention lately has been focused on the aging DOT-111 tanker cars that have been in use since the 1960s. But the Ontario and West Virginia accidents involved newer tank cars known as 1232s. Both trains also were traveling under 40 mph, Lowy reported. “Those folks who were arguing that the 1232s may in fact be puncture-proof really can’t make that argument anymore,” said Sen. Heidi Heitkamp, Democrat of North Dakota.

Railroads contend that implementing new safety measures, such as thicker tank walls and installing electronic brakes that slow trains quickly rather than in succession, would cost them billions of dollars and slow down an already crowded schedule, owing to the increased use of oil by rail.

Lowy cited a Department of Transportation analysis, which predicts:

… that trains hauling crude oil or ethanol will derail an average of 10 times a year over the next two decades, causing more than $4 billion in damage and possibly killing hundreds of people if an accident happens in a densely populated part of the U.S.

Based on recent history, and simple science, safety officials might be looking more closely at the risks of one particular fuel over others.

(Photo: Disaster in Lac-Megantic, Quebec, in 2013. Credit: TSB Canada)

What does loving America have to do with the whims and opportunity costing of the oil industry?

The Greeks are going broke…slowly! The Russians are bipolar with respect to Ukraine! Rudy Giuliani has asked the columnist Ann Landers (she was once a distant relative of the author) about the meaning of love! President Obama, understandably, finds more pleasure in the holes on a golf course than the deep political holes he must jump over in governing, given the absence of bipartisanship.

2012-2015_Avg-Gas-Prices1-1024x665But there is good news! Many ethanol producers and advocacy groups, with enough love for America to encompass this past Valentine’s Day and the next (and of course, with concern for profits), have acknowledged that a vibrant, vigorous, loving market for E85 is possible, if E85 costs are at least 20 percent below E10 (regular gasoline) — a percentage necessary to accommodate the fact that E10 gas gets more mileage per gallon than E85. Consumers may soon have a choice at more than a few pumps.

In recent years, the E85 supply chain has been able to come close, in many states, to a competitive cost differential with respect to E10. Indeed, in some states, particularly states with an abundance of corn (for now, ethanol’s principal feedstock), have come close to or exceeded market-based required price differentials. Current low gas prices resulting from the decline of oil costs per barrel have thrown price comparisons between E85 and E10 through a bit of a loop. But the likelihood is that oil and gasoline prices will rise over the next year or two because of cutbacks in the rate of growth of production, tension in the Middle East, growth of consumer demand and changes in currency value. Assuming supply and demand factors follow historical patterns and government policies concerning, the use of RNS credits and blending requirements regarding ethanol are not changed significantly, E85 should become more competitive on paper at least pricewise with gasoline.

Ah! But life is not always easy for diverse ethanol fuel providers — particularly those who yearn to increase production so E85 can go head-to-head with E10 gasoline. Maybe we can help them.

Psychiatrists, sociologists and poll purveyors have not yet subjected us to their profound articles concerning the possible effect of low gas prices on consumers, particularly low-income consumers. Maybe, just maybe, a first-time, large grass-roots consumer-based group composed of citizens who love America will arise from the good vibes and better household budgets caused by lower gas prices. Maybe, just maybe, they will ask continuous questions of their congresspersons, who also love America, querying why fuel prices have to return to the old gasoline-based normal. Similarly, aided by their friendly and smart economists, maybe, just maybe, they will be able to provide data and analysis to show that if alternative lower-cost based fuels compete on an even playing field with gasoline and substitute for gasoline in increasing amounts, fuel prices at the pump will likely reflect a new lower-cost based normal favorable to consumers. It’s time to recognize that weakening the oil industry’s monopolistic conditions now governing the fuel market would go a long way toward facilitating competition and lowering prices for both gasoline and alternative fuels. It, along with some certainty concerning the future of the renewable fuels program, would also stimulate investor interest in sorely needed new fuel stations that would facilitate easier consumer access to ethanol.

Who is for an effective Open Fuel Standard Program? People who love America! It’s the American way! Competition, not greed, is good! Given the oil industry’s ability to significantly influence, if not dominate, the fuel market, it isn’t fair (and maybe even legal) for oil companies to legally require franchisees to sell only their brand of gasoline at the pump or to put onerous requirements on the franchisees should they want to add an E85 pump or even an electric charger. It is also not right (or likely legal) for an oil company and or franchisee to put an arbitrarily high price on E85 in order to drive (excuse the pun) consumers to lower priced gasoline?

Although price is the key barrier, now affecting the competition between E85 and E10, it is not the only one. In this context, ethanol’s supply chain participants, including corn growers, and (hopefully soon) natural gas providers, need to review alternate, efficient and cost-effective ways to produce, blend, distribute and sell their product. More integration, cognizant of competitive price points and consistent with present laws and regulations, including environmental laws and regulations, is important.

The ethanol industry and its supporters have done only a fair to middling job of responding to the oil folks and their supporters who claim that E15 will hurt automobile engines and E85 may negatively affect newer FFVs and older internal combustion engines converted to FFVs. Further, their marketing programs and the marketing programs of flex-fuel advocates have not focused clearly on the benefits of ethanol beyond price. Ethanol is not a perfect fuel but, on most public policy scales, it is better than gasoline. It reflects environmental, economic and security benefits, such as reduced pollutants and GHG emissions, reduced dependency on foreign oil and increased job potential. They are worth touting in a well-thought-out, comprehensive marketing initiative, without the need to use hyperbole.

America and Americans have done well when monopolistic conditions in industrial sectors have lessened or have been ended by law or practice (e.g., food, airlines, communication, etc.). If you love America, don’t leave the transportation and fuel sector to the whims and opportunity costing of the oil industry.

American Ethanol Racing2

NASCAR revs up for fifth season on E15 at Daytona

When the green flag drops in the 57th Daytona 500 on Sunday, it will mark the beginning of the fifth season NASCAR has run its cars on E15 ethanol blend.

No matter what you’ve heard about E15, don’t expect to see any of the roaring Chevy SS cars to sputter, stall or blow a hose because of the fuel.

Not only do the cars achieve better performance on the 98-octane fuel, the National Association for Stock Car Auto Racing has praised E15 because it emits fewer toxins into the environment, and it’s made from domestically produced resources.

“NASCAR conducted an exhaustive analysis before making the seamless transition to Sunoco Green E15, a race fuel blended with 15 percent American Ethanol,” NASCAR Chairman and CEO Brian France said at Indianapolis Motor Speedway last July, when the circuit celebrated 6 million miles of racing run on the fuel. “As we eclipse 6 million tough competition miles across our three national series, we can definitively say this renewable fuel stands up to our rigorous racing conditions while significantly reducing our impact on the environment.”

Sunoco had been the official fuel supplier for NASCAR for years, but in 2010 the circuit announced it would ditch its previous 98-octane unleaded racing fuel and adopt Green 15, so named because of its green color. All cars and trucks across NASCAR’s three series — the Camping World Truck Series, the XFINITY Series and the big dog, the Sprint Cup Series — have run on the fuel since the 2011 season, with no problems.

“You can imagine the heat and the duress that these engines are under,” said Mike O’Brien, vice president of development at Growth Energy, the Washington, D.C.-based trade association that represents ethanol producers and advocates. “The fuel burns at a little bit lower temperature, so the stress on the engine is less. And when they take those engines apart after the races, they find that the brittleness of the metal just isn’t there like it was before. And on top of that, keep in mind, people sometimes say, ‘Well, NASCAR’s not the same as street cars. There’s a lot of truth to that, but when it comes to the fueling system, the fueling system is exactly the same between the street cars and NASCAR. There’s no modification whatsoever on those fueling systems.”

Austin_Dillon2Growth Energy partnered with the National Corn Growers Association to create the American Ethanol Racing brand as a way to promote ethanol as a fuel for vehicles. American Ethanol sponsors Richard Childress Racing driver Austin Dillon, who will be driving the No. 3 car (with the green logos) in Sunday’s Daytona 500. The green start flag even says “American Ethanol” on it. (See the rest of the starting lineup here.)

Ethanol supporters are hoping to get across the message that, yes, NASCAR’s race cars are different than the version ordinary people drive, but E15 is safe for most newer vehicles the general population drives. The EPA says E15 is approved for all cars and light-duty trucks from model year 2001 or newer.

There’s a movement around the country to allow gas stations to sell E15 at their pumps, joining the thousands of pumps that offer E10, a blend of up to 10 percent ethanol that is the “regular gas” the vast majority of America drives on. There are 113 locations in 16 states that sell E15. But there has been resistance among some quarters. Many cling to the “ethanol will damage my car” fear.

“The cost of E15 is generally a little less than the regular 87 [octane E10], and with E15 the octane’s a little better, so they get a little bit better performing product at a lower price. Now what consumer wouldn’t want that?

Sunoco says Green 15 ethanol is made from corn, and is blended at its facility in Marcus Hook, Pa. By the time NASCAR announced it was adopting Green 15 as its official fuel, it had undergone extensive testing to make sure it wouldn’t damage engine parts. “E15 is the most-tested fuel ever on the planet,” O’Brien said.

Thanks to that hard work, and NASCAR’s commitment, no matter who takes the checkered flag Sunday, America wins.

(Photos: Top, Austin Dillon’s No. 3 Childress Racing car. Credit: ZimmComm New Media, Flickr.com. Inset, Dillon in 2012. Credit: American Ethanol, Flickr.com )

Porgy and Bess, Marxian dialectic, oil and alternative fuels

Porgy and Bess poster“We got plenty of oil and big oil’s got plenty for me” (sung to the tune of “I Got Plenty of Nutting” from Porgy and Bess). “I got me a car…got cheap(er) gas. I got no misery.”

This is the embedded promise for most Americans in the recent article by David Gross, “Oil is Cratering. American Oil Production Isn’t.” His optimism concerning at least the near future of oil — while a bit stretched at times, and economically and environmentally as well as socially somewhat misplaced — serves at least as a temporary antidote to individuals and firms with strong links to the oil industry and some in the media who have played chicken with oil (or is it oy little?). But in a Marxian sense (bad economist, but useful quotes), Gross does not provide a worthy synthesis of what is now happening in the oil market place. Indeed, his was a thesis in search of an antithesis rather than synthesis. Finding a synthesis now is like Diogenes searching for truth in light of almost daily changes in data, analyses and predictions concerning the decline in oil and gas prices by so-called experts.

Gross’s gist is that “Signs of the oil bust abound….The price of West Texas Intermediate crude has fallen in half in the past six months. The search for oil, which fueled a gold-rush mentality in North Dakota and Texas, is abating.” Rigs have closed down, employment is down and oil drilling areas face economic uncertainty, but, despite signs of malaise, “a funny thing has happened during the bust. Oil production in America has been rising…In November, the U.S. produced 9.02 million barrels of oil per day, up by 14.5 percent from November 2013… Production in January 2015 rose to 9.2 million barrels per day. And even with WTI crude settling at a forecasted price of about $55 per barrel for the year, production for all of 2015 should come in at 9.3 million barrels per day — up 7.8 percent from 8.63 million barrels per day in 2014…The U.S., which accounts for just 10 percent of global production, is expected to supply 670,000 new barrels — 82 percent of the globe’s total growth.”

Somewhat contrary to his facts about rigs closing down, Gross indicates that America’s oil largesse results from “American exceptionalism.” Shout out loud! Amen! American oil companies are able to produce larger amounts, even when oil numbers suggest a market glut, because they play by new rules. They are nimble, they are quick, they jump easily over the oil candlestick. They rely on new technology (e.g., fracking), innovation and experimentation. They don’t have to worry about environmental or social costs. The result? They bring down the cost of production and operations, renegotiate contracts and lay off workers. “The efforts at continuous improvement combined with evasive action mean a lot more profitable activity can take place at these prices than previously thought.” The industry appears like a virtual manufacturing and distribution version of Walmart. It, according to Gross, apparently can turn a positive cash flow even if the price per barrel stays around where it has been….from close to $50 to $70 a barrel. Holy Rockefeller, Palin and Obama! Drill, baby, drill! Just, according to the President, be circumspect about where and how.

Not so fast, according to both Euan Mearns, writing for the Oil Drum, and A. Gary Shilling, writing for Bloomberg Oil, both on the same day as Gross.

Mearns’ and Shilling’s perspectives are darker, indeed, gloomy as to the short term future of the oil market. The titles of their pieces suggest the antithesis to Gross article: Oil Price Crash Update (Mearns) and Get Ready for $10 Oil (Shilling). “The collapse in U.S. shale oil drilling, that looks set to continue, must lead to U.S. oil production decline in the months ahead…It looks as though the U.S. shale oil industry is falling on its face. This will inevitably lead to a fall in U.S. production” Mearns evidently places much less value on the industry’s capacity to literally and strategically turn on the present oil market dime.

Shilling asks us to wait for his next article in Bloomberg for his synthesis of what’s likely to happen- sort of like the trailers in Fifty Shades of Grey, except his data is not enticing. His voice through words is just short of Paul Revere’s: price declines are coming! The economy is at risk! Men and women to the battlefields! “At about $50 a barrel, crude oil prices are down by more than half from their June 2014 peak at $107. They may fall more, perhaps even as low as $10 to $20.” Slow growth in the U.S., China and the euro zone, and negative growth in Japan, combined with conservation and an increase in vehicle gas mileage, places a limit on an increase in global demand. Simultaneously, output is climbing, thanks mostly to U.S. production and the Saudis’ refusal to lower production. Shilling’s scenario factors in the prediction from Daniel Yergin, a premier and expensive oil consultant, that the average cost of 80% of new U.S. shale oil production will be $50 to $69 a barrel. He notes, interestingly, that out of 2,222 oil fields surveyed worldwide, only 1.6% would have a negative cash flow at $40 per barrel. Further, and perhaps more significant, the “marginal cost of efficient U.S. shale oil producers is about $10 to $20 dollars a barrel in the Permian Basin in Texas and about the same for oil produced in the Persian Gulf. Like Gross, Shilling pays heed to American efficiency but suggests its part of a conundrum. “Sure, the drilling rig count is falling, but it’s the inefficient rigs that are being idled, not the [more efficient], horizontal rigs that are the backbone of the fracking industry.” Oil production will continue to go up, but at a slower rate. This fact, juxtaposed with continuing, relatively weak growth of global and U.S. demand, will continue to generate downward pressures on oil prices and gasoline.

Even a Marxist, who is a respected dialectician, would find it tough to make sense out of the current data, analyses and predictions. More important, if you wait just a bit, the numbers and analyses will change. Those whose intellectual courage fails them and who generally put their “expert” analyses out well after facts are created by the behavior of the stock market, oil companies, consumers and investors deserve short shrift. They are more recorders of events than honest analysts of possible futures — even though they get big bucks for often posturing and/or shouting on cable.
So what is the synthesis of the confused, if there is one? Oil could go down but it could also stabilize in price and start going up in fits and starts. Production is likely to continue growing but at a slower rate. Demand sufficient to move oil prices depends upon renewed and more vigorous GDP growth in Asia, the U.S. and Europe. Realize that very few analysts are willing to bet their paychecks on definitive economic predictions.

Saudi reserves will likely provide sufficient budget revenues to support its decision to avoid slowing down production and raising prices at least for a year or so (notice the “or so”). Market share has supplanted revenue as (at least today’s) Saudi and OPEC objectives. But how long Saudi beneficence lasts is anyone’s guess and, indeed, everyone is guessing. Deadbeat nations like Venezuela and Russia are in trouble. Their break-even point on costs of oil is high, given their reliance on oil revenues to balance domestic budgets and their use more often than not of aging technology and drilling equipment.

As the baffled King from “Anna and the King of Siam” said, concerning some very human policy-like issues, “It’s a puzzlement.” There are lots of theses and some antitheses, but no ready consensus synthesis. Many Talmudic what ifs? What is clear is that the dialectic is not really controlled or even very strongly influenced by the consumer. Put another way, the absence of alternative fuels at your friendly “gas” station grants participation in the dialectic primarily to monopolistic acting oil and their oil related industry and government colleagues. Try to get E85 or your battery charged at most gas stations. Answers to most of the “what ifs” around oil pricing and production, particularly for transportation, would be shaped more by you and I — consumers — if we could break the oil monopoly at the pump and select fuels of personal choice including an array of alternates now available. Liberty, equality and fraternity! Oh, those French.

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Making the case for sustainable energy

Bloomberg and the Business Council for Sustainable Energy are not at all discouraged by the big drop in oil prices. In fact, they say that the move toward non-carbon-based energy is so strong now that it’s taking on an air of inevitability.

That was the conclusion of the third annual Sustainable Energy in America Factbook, released by the council last week and researched and published by Bloomberg New Energy Finance (BNEF). The press conference, held in conjunction with the report’s release, featured an all-star lineup of industry experts, including David McCurdy, head of the American Gas Association; Tom Kiernan, CEO of the American Wind Energy Association; and Mark Wagner, vice president for government relations at Johnson Controls.

“America is in the midst of a sweeping energy transformation,” the report began. “New technologies and concerns about energy security and the future of the world’s climate are together driving rapid change in the U.S. energy economy. … Traditional energy sources are declining while natural gas, renewable energy and energy conservation are playing a larger role.”

On the possibilities of replacing gasoline — despite its cheaper price — the council was particularly optimistic about the future of electric cars. “Here’s why cheap oil won’t stop electric vehicles:”

“1. Since 2010 there’s been no relationship between gasoline price and electric vehicle sales, according to BNEF analyst Alejandro Zamorano Cadavid. Electric cars are still in the early-adopter phase, and someone paying $100,000 for a Tesla doesn’t care that gasoline costs a buck less per gallon.

“2. In Europe, gas taxes are so high that it makes the price of crude less important. If you’re in Norway, and gas drops from $10 a gallon to $9 a gallon, electric cars are still a deal.

“3. In China, the government is stepping up support for electric vehicles. Pollution has become a serious problem, and the Chinese are getting serious about fixing it. Plug-in sales are soaring.”

Of course, the council is taking a world perspective. The report mentions, for instance, that fossil-fuel subsidies outpace renewable-energy subsidies by 6 to 1. Most of those subsidies, however, are government edicts in developing nations that reduce the price of gasoline to consumers. In Venezuela, for example, gasoline is being sold at 2 cents per gallon. But this is left over from Hugo Chavez’s policies of using the country’s oil production to provide almost free gasoline to the people under the principle of “sharing the wealth.” This policy has proved disastrous, and the low price of world oil has practically bankrupted the country.

The same pattern has occurred in other countries, but low oil prices are proving to be a boon to governments. “First, a number of countries, including India and Indonesia, have used the price drop as cover to cut gasoline subsidies that were weighing town their budgets,” says the report. “Second, countries that include China have pocketed the savings from cheaper oil by increasing gasoline taxes to make up the difference.”

The pattern in the United States, where there is a freer market, has apparently been that cheaper gas prices are not cutting into the progress of plug-in cars and hybrids. They have risen to almost 2 percent of all car sales, after languishing well below 0.5 percent only three years ago. There may be a temporary drop now due to low gasoline prices, but the prices are not likely to stay down, and sales will probably bounce back. This is particularly true since both Tesla and GM are planning to introduce all-electrics to the mid-range market by 2017. Both companies are planning to market electrics in the $35,000 range, which will remove them from the “first-adopter” stage.

Of course, switching to electric doesn’t mean much if the electricity is producing the same old pollution, but there the Business Council says that the switch to cleaner natural gas — and particularly solar electricity — will make electric cars even more attractive. The council notes that oil plays very little role in the generation of electricity, and that electricity price are still going up, which makes solar electricity even more attractive. “Solar . . . will be the world’s biggest single source [of electricity] by 2050, according to the International Energy Agency.”

Although the report doesn’t mention it, improvements in cellulosic ethanol will revolutionize that market as well. And there is always the possibility that we may take advantage of our abundant natural-gas resources to convert gas to methanol, another cheap and clean substitute for gasoline.

Altogether, it does not appear that the temporary drop in oil prices is going to slow the effort to produce cleaner, cheaper energy that moves us away from dependence on foreign oil sources. That’s good news all around.

Alternative and renewable fuels: There is life after cheap gas!

usatoday_gaspricesSome environmentalists believe that if you invest in and develop alternative replacement fuels (e.g., ethanol, methanol, natural gas, etc.) innovation and investment with respect to the development of fuel from renewables will diminish significantly. They believe it will take much longer to secure a sustainable environment for America.

Some of my best friends are environmentalists. Most times, I share their views. I clearly share their views about the negative impact of gasoline on the environment and GHG emissions.

I am proud of my environmental credentials and my best friends. But fair is fair — there is historical and current evidence that environmental critics are often using hyperbole and exaggeration inimical to the public interest. At this juncture in the nation’s history, the development of a comprehensive strategy linking increased use of alternative replacement fuels to the development and increased use of renewables is feasible and of critical importance to the quality of the environment, the incomes of the consumer, the economy of the nation, and reduced dependence on imported oil.

There you go again say the critics. Where’s the beef? And is it kosher?

Gasoline prices are at their lowest in years. Today’s prices convert gasoline — based on prices six months ago, a year ago, two years ago — into, in effect, what many call a new product. But is it akin to the results of a disruptive technology? Gas at $3 to near $5 a gallon is different, particularly for those who live at the margin in society. Yet, while there are anecdotes suggesting that low gas prices have muted incentives and desire for alternative fuels, the phenomena will likely be temporary. Evidence indicates that new ethanol producers (e.g., corn growers who have begun to blend their products or ethanol producers who sell directly to retailers) have entered the market, hoping to keep ethanol costs visibly below gasoline. Other blenders appear to be using a new concoction of gasoline — assumedly free of chemical supplements and cheaper than conventional gasoline — to lower the cost of ethanol blends like E85.

Perhaps as important, apparently many ethanol producers, blenders and suppliers view the decline in gas prices as temporary. Getting used to low prices at the gas pump, some surmise, will drive the popularity of alternative replacement fuels as soon as gasoline, as is likely, begins the return to higher prices. Smart investors (who have some staying power), using a version of Pascal’s religious bet, will consider sticking with replacement fuels and will push to open up local, gas-only markets. The odds seem reasonable.

Now amidst the falling price of gasoline, General Motors did something many experts would not have predicted recently. Despite gas being at under $2 in many areas of the nation and still continuing to decrease, GM, with a flourish, announced plans, according to EPIC (Energy Policy Information Agency), to “release its first mass-market battery electric vehicle. The Chevy Bolt…will have a reported 200 mile range and a purchase price that is over $10,000 below the current asking price of the Volt.It will be about $30,000 after federal EV tax incentives. Historically, although they were often startups, the recent behavior of General Motor concerning electric vehicles was reflected in the early pharmaceutical industry, in the medical device industry, and yes, even in the automobile industry etc.

GM’s Bolt is the company’s biggest bet on electric innovation to date. To get to the Bolt, GM researched Tesla and made a $240 million investment in one of its transmissions plan.

Maybe not as media visible as GM’s announcement, Blume Distillation LLC just doubled its Series B capitalization with a million-dollar capital infusion from a clean tech seed and venture capital fund. Tom Harvey, its vice president, indicated Blume’s Distillation system can be flexibly designed and sized to feedstock availability, anywhere from 250,000 gallons per year to 5 MMgy. According to Harvey, the system is focused on carbohydrate and sugar waste streams from bottling plants, food processors and organic streams from landfill operations, as well as purpose-grown crops.

The relatively rapid fall in gas prices does not mean the end of efforts to increase use of alternative replacement fuels or renewables. Price declines are not to be confused with disruptive technology. Despite perceptions, no real changes in product occurred. Gas is still basically gas. The change in prices relates to the increased production capacity generated by fracking, falling global and U.S. demand, the increasing value of the dollar, the desire of the Saudis to secure increased market share and the assumed unwillingness of U.S. producers to give up market share.

Investment and innovation will continue with respect to alcohol-based alternative replacement and renewable fuels. Increasing research in and development of both should be part of an energetic public and private sector’s response to the need for a new coordinated fuel strategy. Making them compete in a win-lose situation is unnecessary. Indeed, the recent expanded realization by environmentalists critical of alternative replacement fuels that the choices are not “either/or” but are “when/how much/by whom,” suggesting the creation of a broad coalition of environmental, business and public sector leaders concerned with improving the environment, America’s security and the economy. The new coalition would be buttressed by the fact that Americans, now getting used to low gas prices, will, when prices rise (as they will), look at cheaper alternative replacement fuels more favorably than in the past, and may provide increasing political support for an even playing field in the marketplace and within Congress. It would also be buttressed by the fact that increasing numbers of Americans understand that waiting for renewable fuels able to meet broad market appeal and an array of household incomes could be a long wait and could negatively affect national objectives concerning the health and well-being of all Americans. Even if renewable fuels significantly expand their market penetration, their impact will be marginal, in light of the numbers of older internal combustion cars now in existence. Let’s move beyond a win-lose “muddling through” set of inconsistent policies and behavior concerning alternative replacement fuels and renewables and develop an overall coordinated approach linking the two. Isaiah was not an environmentalist, a businessman nor an academic. But his admonition to us all to come and reason together stands tall today.

The laws of gravity, gasoline and alternative replacement fuels

Newton-AppleWhat goes up in the physical environment, generally (at least until recently), must come down, according to Newton’s law of universal gravitation and Einstein’s theory of relativity. But does what goes down often keep going down? No, not when it’s primary a financial market measurement and the indices reflect a company or companies with a reasonable profile and future.

What goes down in the marketplace often comes up again — not always, but maybe, sometimes — and with varying degrees of predictability? Don’t be confused! The variables often aren’t subject to the laws of physics. The phrase, “it depends,” is often used by purported financial analysts to explain stock, hedge fund and bond trends and their predictions. Indeed, a whole new industry of cable economic shouters has grown up to supposedly help us understand uncertainty. Generally, their misinterpreted brilliance shows after the fact (the markets close) and their weaknesses reflected in their attempts to predict and project trends accurately in the future.

Happily, the ongoing decline of oil and gas prices has been seen as generally good for the overall economy, stimulating consumer purchasing and investing. Regrettably, the decline is becoming a lodestone tied to the necks of an increasing numbers of workers and communities affected by layoffs in some shale oil areas where production has started to slow down and where some small drilling, as well as service firms, have either gone out of business or have pulled back significantly. Texas is suffering the most. The state is down 211 rigs, about 23 percent of its 906 total rigs. The decline in production is not uniform because newer wells drill far more efficiently than older ones. Overall, however, several major petroleum and oil field service companies in Texas have cut budgets and employees.

I surmise that the number of psychotherapists in the nation has increased in areas where investors in energy, particularly oil and gasoline stocks, hedge funds and derivatives ply their trade, hopes and dreams. Little wonder, after often intense coverage by some of the decline, the media’s coverage, by many newspapers and TV outlets, of the modest increase in the price per barrel of oil and the minuscule increase in the price of gasoline per gallon reads like a secular holiday greeting. Happy days are here again, at least for the oil industry and their colleagues!

But the skeptics have not been silent. This week’s headlines based on stories from many analysts read like a real downer, particularly if you were in the market. Listen, my children, and you shall hear little cheer to sustain yesterday’s investment optimism. For example, as one journalist put it, “Sorry, but the oil rout isn’t over yet,” or another, “Report: U.S. production growth could stop this year,” or a third, “Careful what you wish for: Oil-price recovery may sting.” It’s a puzzlement that only a Freudian therapist can address if you have enough money to pay him or her.

Fact: Very few analysts, even the best, can now honestly claim with certainty that they know where the price of oil and gas will be a year from now and beyond. And they are probably overwhelmed daily by their egos, by their practice of magic and by (a few in the groups) their seemingly habitual exaggeration and what feels at times like prevarication.

There likely will be frequent, short-term blips in the economics of oil and gas until non-market behavioral variables concerning what the Saudis will do or what the American oil companies will do about production to secure market share and other objectives are settled. Further, tension in the Middle East, if it escalates, may well disrupt oil supply while other global, as well as internal U.S. factors, could well affect the value of the dollar and convert it into significant price changes. America’s oil and gas investors, big or small, should probably learn to count to ten and take a month or two off in Sedona, Ariz. It’s really nice there.

Current uncertainty concerning the economics of oil and gas should not make consumers or policymakers lethargic. It’s not time to take Ambien. While I am not certain when or by how much, what has gone down will likely begin to go up, relatively soon.

Regrettably, the world is still dependent on fossil fuels and market, as well as broad economic, social and political conditions, should relatively soon, begin to boost prices. If we are serious about providing consumers with a better long-term deal regarding gas prices, reducing monopoly conditions created by government policies and oil companies should be granted priority. Ending government subsidies for oil in an era of budget deficits would be a good start.

Low gas prices have diminished investor and provider interest in developing alternative replacement fuels. But this is short term. Fuels, like E85, once gas prices begin to rise, will once again become very competitive and consumer friendly. Because the extended use of renewable fuels that satisfy broad market needs — from low-income to high-income households and from short to long trips — is still probably at least 5-10 years way, a national and local leadership commitment to alternative fuels is important if the nation and the communities in it are to meet environmental, economic and social welfare goals.

The policy and behavior issues relate to perfectibility, not perfection. Ethanol is not a perfect fuel. But it is better than gasoline — much better. Arguing for reliance now on electric cars or hydro fuels makes for easy rhetoric and receipt of awards at dinners, but the impact on the environment, for example, and GHG emissions will be long in coming in light of the small share electric vehicles will have for some time among older cars. Let’s push for renewables and facilitate an early choice for alternative replacement fuels including ethanol.

 

Image from jimdakers.com/2013/10/15/are-you-in-motion/

Mirai

Will renewables survive the oil downturn?

The seven-month-long plunge in oil prices appeared to be enough to re-establish gasoline as the default fuel for motorists, while stunting the progress of replacement fuels.

But attendees at last month’s North American International Auto Show in Detroit would have thought differently. Prominently displayed were various alternative vehicles that have been making headway and are just building momentum in the auto market, so they may be able to shrug off the precipitous fall in oil prices.

Also exhibited in Detroit was the first generation of hydrogen vehicles from Japan, which are challenging both the gasoline monopoly and the electric car, which is much more popular in America and Europe. The Honda FCV concept car boasts a driving range of about 300 miles and a refueling time of just three minutes, marking another step forward for the hydrogen fuel industry. California, where the cars are to be introduced later this year, is already preparing its “hydrogen highway,” which will make the cars feasible for drivers. Toyota’s fuel-cell offering, the Mirai — which also runs on hydrogen — is also scheduled to hit showrooms this year.

Chevrolet has had middling success with its electric-gasoline hybrid the Volt, but the maker has another generation planned with its concept car, the Bolt. The car will be made of extremely lightweight material and will have an all-glass roof and aluminum wheels for further weight reduction. Its lithium-ion battery will give the car a range of 200 miles and a recharging time of 40 minutes for an 80 percent charge. The price of $30,000 is likely to expand the market for electric cars.

Analysts note that oil is not used much for electricity anymore. The 1980s are the benchmark and generally remembered as the “Valley of Death” for renewables. Wind and solar were undercut by falling oil prices and lost their place in the generation of electricity. At the time, oil was providing 17 percent of our electricity. Now it provides barely 5 percent, and wind and solar energy have not felt any effect from oil prices.

Of course, natural gas has largely replaced oil, and a drop in gas prices could cut into the advance of renewables. Gas prices have traditionally been between one-sixth and one-twelfth of oil prices but have uncoupled themselves in recent years. This could work both ways, since gas prices have not fallen by the same degree that oil prices have.

Gas still holds its edge, however, and this means the attempt to use natural gas as an oil substitute may not slow. T. Boone Pickens has had some success in switching long-haul trucks to compressed natural gas, and this effort may be slowed only a little by gasoline’s new low price. However, if natural gas prices fall as well, then it may be able to keep pace with lower oil prices. The possibility that cheaper natural gas might encourage the conversion to methanol as a gasoline substitute would also be encouraged by falling natural gas prices.

That leaves the big question of whether ethanol can survive in the face of falling gasoline prices. In the first place, low gas prices are not likely to last forever. Some analysts are predicting crude oil prices will probably bounce back to $75 a barrel in the near future. Second, ethanol is protected by the federal mandate that says each gallon must contain 10 percent ethanol. If falling gas prices encourage the purchase of more gasoline – which it already has – then ethanol consumption must climb as well.

Ethanol has been under fire recently from studies that say it competes with food resources. The latest is a report from the World Resources Institute in Washington, which argues that “There are other, more effective routes to get to a low-carbon world.” But the rapid development of cellulosic ethanol severely reduces the possibility that ethanol will compete with food crops. And the possibility that natural-gas-based methanol might begin substituting for ethanol makes the threat of competing with food crops even less.

Altogether, it appears that renewable energy and alternate vehicles are going to survive the dramatic fall in oil prices. Alternative vehicles and other related technologies are now too far along to be crushed by falling oil prices the way they were in the 1980s.

(Photo: The Toyota Mirai at the Los Angeles Auto Show in November. Credit: Vision Automotriz, Flickr)

oil train_Iowa

Officials work to clean up ethanol spill in Iowa

UPDATED 2:21 p.m. PST Friday. Officials say it’s unclear how much ethanol has spilled into the Mississippi River following a train derailment about 10 miles north of Dubuque, Iowa. The 81-car train derailed on Wednesday morning, and 15 cars left the tracks in a remote, wooded area inaccessible by road. Crews had to build a temporary road to reach the site. Eight of the 14 cars that were carrying ethanol appeared to be leaking, and crews were working to minimize the impact on the river, and to wildlife, Canadian Pacific said. Fox Business reports:

“We have verified some ethanol has reached the water but we do not have an estimate of how much,” said CP spokesman Andy Cummings, who was at the scene Thursday. Ethanol mixes with water and, in high concentrations, can deplete the oxygen in water and kill fish, said Iowa Department of Natural Resources spokesman Kevin Baskins. He noted the impacted segment of the river was within the Upper Mississippi National Fish and Wildlife Refuge. Baskins said the primary concern is the threat to fish and other aquatic life, such as mussels, which can’t easily move away when oxygen levels dip. The DNR plans to sample fish collected from fishermen and monitor open-water areas in the largely iced-over river for signs of dead fish.

Ethanol is an alcohol fuel made primarily from corn, but it can also be processed from any other plant high in sugar content. It’s fermented in a distillery, and in the past it was commonly known as “moonshine.” The ethanol being transported was denatured, meaning it contained toxic additives to discourage human consumption. Such spills involving crude oil have tended to have more environmental impact. The Renewable Fuels Association points out in a report on the dangers and cleanup protocols for ethanol spills:

Ethanol is less toxic than gasoline. Carcinogenic compounds are not present in ethanol. … The biggest difference between ethanol and hydrocarbon fuels is the water solubility. This property changes how ethanol will react in the environment, including surface and ground water, and soils. The complete solubility of ethanol in water means that if a release reaches surface water, the ethanol will rapidly disperse and can no longer be recovered as a product. … Ethanol in surface water will rapidly biodegrade. The concentration of ethanol can create a toxic effect on aquatic organisms, though frequently the depletion of dissolved oxygen caused by biodegradation has a greater impact to fish and aquatic organisms.

As production of U.S. oil skyrocketed the past few years, much of it from large shale-rock formations in North Dakota and Texas, more oil needed to be transported through America’s rail system. There has been a series of derailments and fires, most notably the inferno in Quebec that killed 47 people 2013. Much of the spotlight has shone on the aging DOT-111 fuel-tanker rail car that’s been in use for decades. That was the model of car used on the Iowa train that derailed. Reuters reported:

The incident is likely to add to a debate about transporting flammable goods by train after a series of fiery accidents involving crude oil cargoes in recent years. The U.S. Department of Transportation has proposed new safety features for new tank cars transporting fuel and called for the phasing out of older cars considered unsafe. The U.S. ethanol industry has pushed back on the new rules, saying regulators should distinguish between corn-based biofuel and crude oil. Ethanol is less volatile than crude oil, is biodegradable and has a 99.997 percent rail safety record, according to the national Renewable Fuels Association.