Can alternative vehicles still play a role?

A couple of Google engineers shocked the world last week by announcing that after working on the RE<C (Renewable Energy Cheaper Than Coal) Initiative for four years, they had concluded that renewable energy is never going to solve our carbon emissions problem.

In a widely read article in IEEE Spectrum, the prestigious journal published by the Institute of Electrical and Electronics Engineers, Ross Koningstein and David Fork announced that after working at improving renewables on the Google project, they had decided that it wasn’t worth pursuing. Google actually closed down RE<C in 2011, but the authors are just getting around to explaining why.

At the start of RE<C, we had shared the attitude of many stalwart environmentalists: We felt that with steady improvements to today’s renewable energy technologies, our society could stave off catastrophic climate change. We now know that to be a false hope.

Google’s abandonment of renewable energy raises the immediate question: What about the effort to reduce carbon emissions from vehicles? And here the news is much better.

Although everyone concentrates on coal and power plants, they regularly forget that half our carbon emissions come from vehicles. It’s typical that Google’s RE<C effort didn’t address what to do about our cars. It’s too complicated to try to control the emissions from 200 million point sources.

But what’s never discussed is the fuel that goes into these vehicles. It’s well known that ethanol and methanol cut carbon emissions compared with gasoline. That’s a good chunk of the battle right there. But it doesn’t even take into account the possibility of making both fuels from non-fossil-fuel resources, so that both would be all pluses on our carbon budget.

Ethanol, as currently produced in this country, is synthesized entirely from corn, so there is no fossil-fuel element involved. Ethanol currently takes up 10 percent of all the gasoline sold is this country, but it is currently marketed at 85 percent ethanol in the Midwest, with only a 15 percent element to guarantee starting on cold days.

Methanol is generally synthesized from natural gas, so there is still a fossil-fuel element there, but there is always the possibility of making methanol from non-fossil sources. Municipal waste could easily be converted directly to methanol.

And of course there is always the possibility of synthesizing ethanol and methanol using renewable energy. People always talk about storing wind or solar energy as hydrogen, but methanol would be easier to store than hydrogen since it is a liquid to begin with and not subject to leakage and escape. Methanol can be easily stored in our current infrastructure.

The Chinese are currently building six methanol plants in Texas and Louisiana to take advantage of all the natural gas being produced there. All this methanol is slated to be shipped by tankers back to China, where it will be used to boost China’s own methanol industry — and to run some of the 1 million methanol cars the Chinese have on the road.

Yes, the Chinese are far ahead of us when it comes to using methanol a substitute for oil. But there’s a scenario that will introduce methanol in the American auto industry. With all this methanol on hand in Texas and Louisiana, someone will install a pump on one of the premises for dispensing methanol. Cars at the site will use it. Then someone will say, “Hey, why don’t I use this in my car at home? It’s cheaper.” Before you know it, there will be a contingency to have the EPA decide that methanol can be used in automobile engines the same as ethanol is currently used. And in the end, we will have large quantities of methanol substituting for foreign oil.

Is it a dream? No more unrealistic than the dreams that kept the Google scientists occupied for four years.

Religion, structural changes in the oil Industry and the price of oil and gasoline

Oil barrelAmericans — in light of the decline in oil and gas prices — don’t take happy selfies just yet! Clearly, the recent movement of oil prices per barrel below $80 and the cost of gasoline at the pump below $3 a gallon lend cause for, at least strategically, repressed joy among particularly low-income consumers, many of whose budgets for holiday shopping have been expanded near 10 percent. Retail stores are expressing their commitment to the holiday by beginning Christmas sales pre-Thanksgiving. Sure, sales profits were involved in their decisions, once it appeared to them that lower gas prices were here to stay, at least for a while. But don’t be cynical; I am sure the spirit moved them to play carols as background music and to see if in-store decorations made it easier for shoppers to get by headlines of war, climate change and other negative stuff and into, well yes, a buying mood. If retail sales exceed last year’s and GNP is positively affected, it will provide testimony and reaffirm belief that God is on America and the free market’s side, or at least the side of shopping malls and maybe even downtowns. Religious conversions might be up this year…all because of lower costs of gasoline at the pump. The power of the pump!

But, holy Moses (I am ecumenical), we really haven’t been taken across the newly replenished figurative Red Sea yet. There are road signs suggesting we won’t get there, partly because of the historical and current behavior of the oil industry. Why do I say this?

If history is prologue, EIA’s recent projections related to the continued decline of oil and gasoline prices will undergo revisions relatively soon, maybe in 6 months to a year or so. I suspect they will reflect the agency’s long-held view that prices will escalate higher during this and the next decade. Tension in the Middle East, a Saudi/OPEC change of heart on keeping oil prices low, a healthier U.S. economy, continued demand from Asia (particularly China), slower U.S. oil shale well development as well as higher drilling costs and the relatively short productive life span of tight oil wells, and more rigorous state environmental as well as fracking policies, will likely generate a hike in oil and gasoline prices. Owners, who were recently motivated to buy gas-guzzling vehicles because of low gas prices, once again, may soon find it increasingly expensive to travel on highways built by earthlings.

Forget the alternative; that is, like Moses, going to the Promised Land on a highway created by a power greater than your friendly contractor and with access to cheap gas to boot. Moses was lucky he got through in time and his costs were marginal. He was probably pushed by favorable tides and friendly winds. The wonderful Godly thing! He and his colleagues secured low costs and quick trips through the parting waters.

Added to the by-now conventional litany concerning variables affecting the short- and long-term cost and price of gasoline and oil (described in the preceding paragraph), will likely be the possible structural changes that might take place in the oil industry. If they occur, it will lead to higher costs and prices. Indeed, some are already occurring. Halliburton, one of the sinners in Iraq concerning overpricing services and other borderline practices (motivated by the fear of lower gas prices), has succeeded in taking over Baker Hughes for near $35 billion. If approved by U.S. regulators, the combined company will control approximately 30 percent of the oil and gas services market. According to experts, the new entity could capture near 40 percent relatively quickly. Sounds like a perfect case for anti-trust folks or, if not, higher oil and gas costs for consumers.

Several experts believe that if low gas prices continue, oil companies will examine other profit-making, competition-limiting and price-raising activities, including further mergers and acquisitions. Some bright iconoclasts among them even suggest that companies may try to develop and produce alternative fuels.

Amen! Nirvana! Perhaps someday oil companies will push for an Open Fuels Law, conversion of cars to flex-fuel vehicles and competition at the pump…if they can make a buck or two. Maybe they will repent for past monopolistic practices. But don’t hold your breath! Opportunity costing for oil companies is complex and unlikely to quickly breed such public-interest related decisions. Happy Thanksgiving!


10 reasons why falling oil prices is good for the U.S. and replacement fuels

While they might not make the Late Show with David Letterman, here are ten reasons why the fall in oil and gas prices, if it is sustained for a while, is, on balance, good for the U.S. and replacement fuels.

  1. U.S. consumers are getting a price break. While the numbers differ by researchers, most indicate that on average they have saved near $80 billion. According to The Wall Street Journal, every one cent drop in gasoline adds approximately a billion dollars to nationwide household consumption.
  2. Low- and moderate-income households will have extra money for basic goods and services, including housing, health care and transportation to work.
  3. Increased consumer spending will be good for the economy and overall job growth. Because of the slowdown in production and the loss of jobs in the oil shale areas and Alaska, the net positive impact on GNP will be relatively small, higher at first as consumers make larger purchases, and then lower as oil field economic declines are reflected in GNP.
  4. Low prices for oil and gas will impede drilling in tight oil areas and give the nation time to develop much-needed regulations to protect environmentally sensitive areas. Oil is now under $80 a barrel. The price is getting close to the cost of drilling. Comments from producers and oil experts seem to suggest that $70-75 per barrel would begin to generate negative risk analyses.
  5. Low prices for oil and gas will make it tough on Russia to avoid the impact of U.S. and EU sanctions. Russia needs to export oil and gas to secure revenue to meet budget constraints. Its drilling and distribution costs will remain higher than current low global and U.S. prices.
  6. Low prices of oil and gas will reduce U.S. need to import oil and help improve U.S. balance of payments. Imports now are about 30 percent of oil used in the nation.
  7. Low prices of oil and gas will further reduce dependence on Middle East oil and enhance U.S. security as well as reduce the need to rely on military intervention. While the Saudis and allies in OPEC may try to undercut the price of oil per barrel in the U.S., it is not likely that they can sustain a lower cost and meet domestic budget needs.
  8. Low prices of oil and gas will create tension within OPEC. Some nations desiring to improve market share may desire to keep oil prices low to sustain market share, others may want to increase prices and production to sustain, if not increase, revenue.
  9. Low prices of oil and gas will spur growth in developing economies.
  10. Low prices for oil and gas will likely secure oil company interests in alternative fuels. It may also compel coalitions of environmentalists and others concerned with emissions and other pollutants to push for open fuel markets and natural gas based ethanol, methanol and cellulosic-based fuels as well as a range of renewable fuels.

We haven’t reached fuel Nirvana. The differential between gasoline and corn-based E85 has lessened in most areas of the nation and now appears less than the 20-23 percent needed to get consumers to think about switching to alternative fuels like E85. But cheaper replacement fuels appear on the horizon (e.g., natural gas-based ethanol) and competition in the supply chain likely will reduce their prices. Significantly, in terms of alternative replacement fuels, oil and gas prices are likely to increase relatively soon, because of: continuing tensions in the Middle East, a change of heart on the part of the Saudis concerning maintaining low prices, the increased cost of drilling for tight oil and slow improvements in the U.S. economy resulting in increased demand. The recent decline in hybrid, plug-in and electric car sales in the U.S. follows historical patterns. Cheap gas or perceived cheap gas causes some Americans to switch to larger vehicles (e.g., SUVs) and, understandably, for some, to temporarily forget environmental objectives. But, paraphrasing and editing Gov. Schwarzenegger’s admonition or warning in one of his films, unfortunately high gas prices “will be back…” and early responders to the decline of gasoline prices may end up with hard-to-sell, older, gas-guzzling dinosaurs — unless, of course, they are flex-fuel vehicles.


Methanol — the fuel in waiting

Methanol is a bit of a mystery. It is the simplest form of a hydrocarbon, one oxygen atom attached to simple methane molecule. Therefore, it burns. Methanol is one of the largest manufactured trading commodities after oil, and has about half the energy value of gasoline (but its high octane rating pushes this up to 70 percent). It is a liquid at room temperature and would therefore fit right into our current gasoline infrastructure — as opposed to compressed natural gas or electricity, which require a whole new delivery system.

Methanol made from natural gas would sell for about $1 less than gasoline. Methanol can also be made from food waste, municipal garbage and just about any other organic source.

So why aren’t we using methanol in our cars? It would be the simplest thing in the world to substitute methanol for gasoline in our current infrastructure. Car engines can burn methanol with a minor $200 adjustment that can be performed by any mechanic. You might have to fill up a little more often, but the savings on fuel would be significant — about $600 a year. So what’s stopping us?

Well, methanol seems to be caught in a time warp. It is the dreaded “wood alcohol” of the Depression Era. Methanol is poisonous, as opposed to (corn) ethyl alcohol, which only gets you drunk. (In fact, commercial products such as rubbing alcohol are “denatured” by adding methanol so people will not drink them.) But if methanol is poisonous, so is gasoline, as well as many, many other oil products. Yet methanol is somehow caught up in old EPA regulations that make it illegal to burn in car engines — even though it is hardly different from the corn ethanol that currently fills one-tenth of our gas tanks.

Methanol’s main feedstock is natural gas, and for a long time that was seen as a problem. “Methanol wasn’t practical because the price of natural gas was so high and we seemed to be running out of it,” said Yossie Hollander, whose Fuel Freedom Foundation has been promoting the use of methanol for some time. “But now that natural gas prices have come down, it makes perfect sense to use it to make methanol. We could do away with the $300 billion a year we still spend on importing oil.”

The EPA actually granted California an exemption during the 1990s that allowed 15,000 methanol-powered cars on the road. The experiment was a success and customers were happy but natural gas prices reached $11 per million BTUs in 2005 and the whole thing was called off. Only a few months later, the fracking revolution started to bring down the price of natural gas. It now sells at $4 per mBTU. Yet, for some reason the EPA has not yet reconsidered its long-standing position on methanol.

At the Methanol Policy Forum last year, Anne Korin of the Institute for the Analysis of Global Security (IAGS), made a very insightful remark. “I think methanol fares poorly in Washington precisely because it doesn’t need any subsidies or government assistance in making it economical. For that reason you have no big constituency behind it and no member of Congress crusading on its behalf.”

That may be about to change, however. China has a million cars burning methanol on the road and wants to expand. In the past few weeks alone, Texas and Louisiana have been hit with what is being called “Methanol Mania.” The Chinese are planning to build six major processing plants to turn the Gulf Coast into the world’s biggest center of methanol manufacture. One project will be the largest methanol refinery in the world, two times the size of one located in Trinidad.

All this methanol is intended to be sent back to China. The Chinese want to employ it as a feedstock for their own plastics industry, plus use it in Chinese cars. They will be shipping it the expanded Panama Canal, which will be completed in 2015.

But at some point someone in this country is going to look around and say, “Hey, why don’t we use some of this methanol to power our own automobiles.” At that point the methanol industry, along with the Texas and Louisiana, may have enough political leverage to get the EPA off the dime and see a decision about using methanol in our cars as well.

(Photo credit:


The decline of oil and gas prices, replacement fuels and Nostradamus

“It’s a puzzlement,” said the King to Anna in “The King and I,” one of my favorite musicals, particularly when Yul Brynner was the King. It is reasonable to assume, in light of the lack of agreement among experts, that the Chief Economic Adviser to President Obama and the head of the Federal Reserve Bank could well copy the King’s frustrated words when asked by the president to interpret the impact that the fall in oil and gasoline prices has on “weaning the nation from oil” and on the U.S. economy. It certainly is a puzzlement!

What we believe now may not be what we know or think we know in even the near future. In this context, experts are sometimes those who opine about economic measurements the day after they happen. When they make predictions or guesses about the behavior and likely cause and effect relationships about the future economy, past experience suggests they risk significant errors and the loss or downgrading of their reputations. As Walter Cronkite used to say, “And that’s the way it is” and will be (my addition).

So here is the way it is and might be:

1. The GDP grew at a healthy rate of 3.5 percent in the third quarter, related in part to increased government spending (mostly military), the reduction of imports (including oil) and the growth of net exports and a modest increase in consumer spending.

2. Gasoline prices per gallon at the pump and per barrel oil prices have trended downward significantly. Gasoline now hovers just below $3 a gallon, the lowest price in four years. Oil prices average around $80 a barrel, decreasing by near 25 percent since June. The decline in prices of both gasoline and oil reflects the glut of oil worldwide, increased U.S. oil production, falling demand for gasoline and oil, and the likely desire of exporting nations (particularly in the Middle East) to protect global market share.

Okay, what do these numbers add up to? I don’t know precisely and neither do many so-called experts. Some have indicated that oil and gas prices at the pump will continue to fall to well under $80 per barrel, generating a decline in the production of new wells because of an increasingly unfavorable balance between costs of drilling and price of gasoline. They don’t see pressure on the demand side coming soon as EU nations and China’s economies either stagnate or slow down considerably and U.S. economic growth stays below 3 percent annually.

Other experts (do you get a diploma for being an expert?), indicate that gas and oil prices will increase soon. They assume increased tension in the Middle East, the continued friction between the West and Russia, the change of heart of the Saudis as well as OPEC concerning support of policies to limit production (from no support at the present time, to support) and a more robust U.S. economy combined with a relaxation of exports as well as improved consumer demand for gasoline,

Nothing, as the old adage suggests, is certain but death and taxes. Knowledge of economic trends and correlations combined with assumptions concerning cause and effect relationships rarely add up to much beyond clairvoyance with respect to predictions. Even Nostradamus had his problems.

If I had to place a bet I would tilt toward gas and oil prices rising again relatively soon, but it is only a tilt and I wouldn’t put a lot of money on the table. I do believe the Saudis and OPEC will move to put a cap on production and try to increase prices in the relatively near future. They plainly need the revenue. They will risk losing market share. Russia’s oil production will move downward because of lack of drilling materials and capital generated by western sanctions. The U.S. economy has shown resilience and growth…perhaps not as robust as we would like, but growth just the same. While current low gas prices may temporarily impede sales of electric cars and replacement fuels, the future for replacement fuels, such as ethanol, in general looks reasonable, if the gap between gas prices and E85 remains over 20 percent  a percentage that will lead to increased use of E85. Estimates of larger cost differentials between electric cars, natural gas and cellulosic-based ethanol based on technological innovations and gasoline suggest an extremely competitive fuel market with larger market shares allocated to gasoline alternatives. This outcome depends on the weakening or end of monopolistic oil company franchise agreements limiting the sale of replacement fuels, capital investment in blenders and infrastructure and cheaper production and distribution costs for replacement fuels. Competition, if my tilt is correct, will offer lower fuel prices to consumers, and probably lend a degree of stability to fuel markets as well as provide a cleaner environment with less greenhouse gas emissions. It will buy time until renewables provide a significant percentage of in-use automobiles and overall demand.


From Philosophy About Truth To The Wisdom Of EPA Models About Emissions

Rereading Alfred North Whitehead, one of my favorite philosophers, provides the context for the current debate over the wisdom of using the EPA’s amended transportation emissions model (Motor Vehicle Emission Simulator, or MOVES) for state-by-state analysis. He once indicated that, “There are no whole truths; all truths are half-truths. It is trying to treat them as whole truths that plays the devil.”

I am uncertain about Whitehead’s skepticism, if treated as an absolute. However, it does give pause when judging the use of an amended MOVES model, based mostly on advocacy research by the nonprofit group, the Coordinating Research Council (CRC). The CRC is funded by the oil industry, through the American Petroleum Institute (API), and auto manufacturers.

CRC was tasked by the EPA with amending MOVES and applying it to measure and determine the impact of vehicular emissions. The model and related CRC analysis was subject to comments in the Federal Register but the structure of the Register mutes easy dialogue over tough, but important, methodological disagreements among experts. Apparently, no refereed panel subjected the CRC’s process or product to critique before the EPA granted both its imperator and sent it out to the states for their use.

I am concerned that if the critics are correct, premature statewide use of the amended MOVES model will mistakenly impede development and use of alternative transitional fuels to replace gasoline, particularly ethanol, and negatively influence related federal, state and local policies and programs concerning the same. If this occurs, because of apparent mistakes in the model (and the data plugged into it), the road to significant use of renewable fuels in the future will be paved with higher costs for consumers, higher levels of pollutants and higher GHG emissions.

With some exceptions, the EPA has been a strong supporter of unbiased, nonpartisan research. Gina McCarthy, its present leader, is an outstanding administrator, like many of her predecessors, like Douglas Costle (I am proud to say that Doug worked with me on urban policy, way, way back in the sixties), Russell Train, Carol Browner, William Reilly, Christine Todd Whitman, Bill Ruckelshaus and Lee Thomas. No axes to grind; no ideological or client bias…only a commitment to help improve the environment for the American people. I feel comfortable that she will listen to the critics of MOVES.

The amended MOVES may well be the best thing since the invention of Swiss cheese. It could well help the nation, its states and its citizens determine the truths or even half-truths (that acknowledge uncertainties) related to gasoline use and alternative replacement fuels. But why the hurry in making it the gold standard for emission and pollutant analysis at the state or, indeed, the federal level, in light of some of the perceived methodological and participatory problems?

Some history! Relatively recently, the EPA correctly criticized CRC because of its uneven (at best) analytical approach to reviewing the effect of E15 on car engines. Paraphrasing the EPA’s conclusions, the published CRC study reflected a bad sample as well as too small a sample. Its findings, indicating that E15 had an almost uniform negative impact on internal combustion engines didn’t comport with facts.

The CRC’s study of E15 was, pure and simple, advocacy research. CRC reports generally reflect the views of its oil and auto industry funders and results can be predicted early on before their analytical efforts are completed. Some of its reports are better than others. But overall, it is not known for independent unbiased research.

The EPA’s desire for stakeholder involvement in up grading and use of MOVES to measure emissions is laudable. However it seems that the CRC was the primary stakeholder involved on a sustained basis in the effort. No representatives of the replacement fuel industry, no nonpartisan independent nonprofit think tanks, no government-sponsored research groups and no business or environmental advocacy groups were apparently included in the effort. Given the cast of characters (or the lack thereof) in the MOVES’ update, there’s little wonder that the CRC’s approach and subsequently the EPA’s efforts to encourage states to use the amended model have been and, I bet, will be heavily criticized in the months ahead.

Two major, well-respected national energy and environmental organizations, Energy Future Coalition (EFC) and Urban Air Initiative, have asked the EPA to immediately suspend the use of the MOVES with respect to ethanol blends. Both want the CRC/MOVES study and model to be peer reviewed by experts at Oak Ridge National Lab (ORNL), and the National Renewable Energy Lab (NREL). I would add the Argonne National Laboratory because of its role in administering GREET, The Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model. Further, both implicitly argue that Congress should not use the CRC study and MOVES until the data and methodological issues are fixed. Indeed, before policy concerning the use of alternative replacement fuels is debated by the administration, Congress and the states both appear to want to be certain that MOVES is able to provide reasonably accurate estimates of emissions and market-related measurements, particularly with respect to ethanol and, as Whitehead would probably say, at least provide half-truths, or, as Dragnet’s Detective Jack Webb often said, “Just the facts, ma’am,” or at least just the half-truths, nothing but at least the half-truths.

What are the key issues upsetting the critics like the EFC and the Urban Air Initiative? Apart from the pedigree of the CRC and the de minimis roles granted other stakeholders than the oil industry, the CRC/MOVES model, reflects match blending instead of splash blending to develop ethanol/gasoline blends. Sounds like two different recipes with different products — and it is. Splash blending is used in most vehicles in the U.S. and generally is perceived as producing less pollution.

Let’s skip the precise formula. It’s complicated and more than you want to know. Just know that according to the letter sent to the EPA by the EFC and Urban Air Quality on Oct. 20th, the use of match blending requires higher boiling points for distillation, and these points, in turn are generally the worst polluting aromatic parts of gasoline. It noted that match blending, as prescribed by the MOVES, results in blaming ethanol for increased emissions rather than the base fuel. There is no regulatory, mechanical or health justification for adding high boiling point hydrocarbons to test fuels for purposes of measuring changes in vehicle tailpipe emissions, when ethanol is part of the fuel mixture. Independent investigations by automakers and other fuel experts confirm that the use of match blending in the study mistakenly attributed increased emission levels to ethanol rather than to the addition of aromatics and other high boiling hydrocarbons, thereby significantly distorting the model’s emission results. A peer-reviewed analysis, which will be published shortly, found that the degradation of emissions which can result is primarily due to the added hydrocarbons, but has often been incorrectly attributed to the ethanol.

The policy issues involved due to the methodological errors are significant. If states and other government entities, as well as fuel supply chain participants, use the model in its present form, they will mistakenly believe that ethanol’s emissions and pollutants are higher than reported in study after study over the past decade. The reported results will be just plain wrong. They will not even be half-truths, but zero truths. Distortions in decision making concerning the wisdom of alternative transitional replacement fuels, particularly ethanol, will occur and generate weaker ethanol markets and opportunities to build a strategic path to renewables. The EPA, rather than encourage use of the study and the model, should pull both back and suggest waiting until refereed review panels finish their work.

Atlanta marquee-crop

Hollander: Oil is a ‘burden for the American people’

Fuel Freedom co-founder and Chairman Yossie Hollander guided PUMP the movie to a successful weekend in Atlanta, hosting two Q&As after Friday night’s and Saturday night’s showings at the historic Plaza Theatre.

He also promoted the film and its message on radio, appearing on both WMLB-AM1690 (“The Voice of the Arts”) and its sister station, WCFO-AM1160 (“The Talk of the Town”). You can listen to the first interview below:

During the segment, Hollander was asked how he got involved with PUMP, a project more than two years in the making.

He answered: “We realized long ago that oil is one of the toughest problems we have. We are funding our enemies, but it’s mainly a burden for the American people. It’s the air we breathe. The brown cloud you see above Atlanta is not from coal, it’s from oil.

“And mostly it’s the burden on our pockets. Families really suffer, and we figured out this is the biggest problem that we can solve. If we can do it with cheaper American fuels, we can actually change America.”

Here’s the second interview, on WCFO, which aired Saturday and Sunday:

PUMP premiered in September and continues to play in theaters around the country. This week it debuts in Tucson, Anchorage and Brunswick, Maine. Visit for theaters and times, and to buy tickets.


James Bond, low oil prices, the Russians and OPEC

Calling Miss Moneypenny…we need you to get to James Bond quickly. Urgently! According to respected sources, there is a conspiracy in place on the part of the U.S. government and the West to both foster the increased production of shale gas and to drive down demand for gasoline in order to decrease Middle Eastern and Russian oil prices to levels well below production and distribution costs. The effort is aimed at breaking up OPEC, keeping the Saudis in line regarding present levels of production and hurting Russia until it comes to its senses concerning Ukraine. Can you put me in touch with Bond? He could be helpful in determining whether there is manipulation of the market? He’s just the best!

Paranoia has set in on the part of some in the media. The “glut” of oil on the market and low demand has made new drilling an “iffy” thing. The production costs of oil per barrel have not kept pace with revenue from sales. Prices at the pump for gasoline have decreased significantly.

How can we explain the phenomena, except by the presence of manipulation? Indeed, it’s enlightening to see (assumedly) planned, tough, provocative statements from so-called experts that often make headlines followed by weak “No it cannot be true” statements by the same experts to protect their credentials. Being bipolar is, in these instances, seemingly a characteristic.

Thanks to CNBC, here are some summary comments.

Patrick Legland, head of global research at Société Générale, recently said that it was an interesting coincidence that the two events — a drop in oil prices and lower demand — suggests that the U.S. could be deliberately manipulating the market to hurt Russia. Is it lower demand or is the U.S. clearly maneuvering? Legland goes on to indicate lack of in-depth knowledge. Timothy Ash, head of emerging markets research at Standard Bank suggested the U.S. would obviously deny any accusations of manipulation and there is no evidence to suggest that this is the case. “It’s very had to prove. I have heard such suggestions before. It is clearly useful for the West as it adds pressure on Russia” (and, I would add, on OPEC).

Oh, there is more, Jim Rickerts, managing director at Tangent, in a courageous and clear-cut example of ambiguity, stated that manipulation is plausible, although we have no evidence.

Clearly, the manipulation assertions, even though there is little evidence, sell more papers, build a bigger audience for cable news and provide fodder for Twitter and politicians. To the tune of “Politics and Polka,” sing with me, “apparent correlation is not causation, correlation is not causation.”

Oil prices are on a downward spiral, while production and distribution costs are going up in the U.S. and much of the West. It is implausible that the government is behind these trends. Consumer demand is down, even with lower prices at the pump, because of the economy. The government has relatively few tools, except the public and private bully pulpit in the short term, to leverage prices. The current boom in oil shale and resulting surpluses result from decisions made by an extended group of people often years ago — for example, oil companies who recognized that the era of easy-to-drill and cheap oil was coming to an end, speculators who led the market in trumping the benefits in investing long in oil shale and waiting for assumed value to catch up, consumers who seemed to be on a high concerning use of gasoline and technological breakthroughs that made oil from shale seem more amendable to cost benefit calculations.

While there are examples of government manipulating prices of goods (e.g., price controls), most have led to unpredictable and often negative results. The U.S. government, whether controlled by Republicans or Democrats, has not shown itself adept at price setting and manipulation. Nor is it good at keeping things secret — something necessary if it engaged in international manipulation. The New York Times would already have a leaked copy of the strategy and unsigned emails would have been given to the Washington Post. Public discussion of the strategy probably would risk sometimes fake, sometimes real approbation-depending who gets hurt or will get hurt. The U.S. would face copycats, as they have in the past, like the Saudis and OPEC and, maybe someday, Russia. They would say, “well, if the U.S. can do it, why can’t we?” The U.S. would calmly respond, No we are not manipulating oil markets. You give us too much credit and assume to many skills. Also, remember, the U.S and the oil companies believe in free markets. Don’t they? Well maybe, but clearly, not all the time with respect to the government and almost none of the time with respect to the oil companies? (Try getting replacement fuels at the pump of an oil-company franchised “gas” station.)

Okay, Miss Moneypenny, I changed my mind. We don’t need James Bond nor do we want to pay for the Bond girls. (Besides, the last Bond looked like President Putin when his shirt was unbuttoned and Sean Connery is on Medicare.) What we need is prayer and penitence for the experts for travailing in rumors. It is not terribly helpful when trying to sort out complicated issues related to oil prices and demand. If the government is somehow manipulating the market, many, even very pro-market advocates, will give it credit for a strategy that, should it be successful, might limit Russia’s desires concerning Ukraine and OPEC’s efforts at price fixing in the past. While the word has an evil sound, perhaps legitimately, manipulation would likely be judged better than war. But before credit is offered, look at the data and well-reviewed studies. Don’t fret, there is very little evidence that government manipulation has occurred in the recent past or is occurring at the present time.


Europe says yes to alternative vehicles

Things have always been a little easier in Europe when it comes to saving gas and adopting different kinds of vehicles. The distances are shorter, the roads narrower, and the cities built more for the 19th century than the 21st.

Europeans also have very few oil and gas resources, and have long paid gas taxes that would make Americans shudder. Three to four times what we pay in America is the norm in Europe.

Thus, Europeans have always been famous for their small, fuel-sipping cars. Renault was long famous for its Le Cheval (the horse), an-all grey bag of bones that’s barely powerful enough to shuttle people around Paris. The Citroën, Volkswagen and Audi were all developed in Europe. Ford and GM also produced models that were much smaller than their American counterparts. Gas mileage was fantastic — sometimes reaching the mid-40s. A big American car getting 15 miles per gallon and trying to negotiate the streets of Berlin or Madrid often looked like a river barge that had wandered off course.

More Europeans also opt for diesel engines instead of conventional gasoline — 40 percent by the latest count. The overall energy conversion in a diesel engine is over 50 percent and can cut fuel consumption by 40 percent. But diesel fuel is still a fossil fuel, which have a lot of pollution problems and don’t really offer a long-range solution. So, Europeans decided that it’s time to move on to the next generation.

Last week the European Union laid down new rules that will try to promote the implementation of all kinds of alternative means of transportation, making it easier for car buyers to switch to alternative fuels. The goal is to achieve 10 percent alternative vehicles by 2025 over a wide range of technologies, removing the impediments that are currently slowing the adoption of alternatives. If everything works out, tooling around Paris in an electric vehicle within a few years without suffering the slightest range anxiety would become a reality.

By the end of 2015, each of Europe’s 28 member states will be asked to build at least one recharging point per 10 electric vehicles. Since the U.K. is planning to have 1.55 million electric vehicles. That would require at least 155,000 recharging stations, which is a pretty tall order. But members of the commission are confident it can be done. “We can always call on Elon Musk,” said one official.

For compressed natural gas, the goal is to have one refueling station located every 150 kilometers (93 miles). This gives CNG a comfortable margin for range. With liquefied petroleum (LPG) it will be for one refueling station every 400 kilometers (248 miles). These stations can be further apart because they will mainly be used by long-haul trucks travelling the TEN-T Network, a network of road, water and rail transportation that the Europeans have been working on since 2006.

Interestingly, hydrogen refueling doesn’t get much attention beyond a sufficient number of stations for states that are trying to develop them. There is noticeably less enthusiasm for hydrogen-powered vehicles than is expressed for EVs and gas-powered vehicles. All this indicates how the hydrogen car has become a Japanese trend while not arousing much interest in either Europe or America.

At the same time, Europeans are planning very little in the way of ethanol and other biofuels (they also mandate 20 percent ethanol in fuel). Sweden is very advanced when it comes to flex-fuel cars. They have been getting notably nervous about the misconception that biofuels are competing with food resources around the world — Europe does not have its own land resources to grow corn or sugarcane the way it is being done in the United States and Brazil. Europe imports some ethanol from America but it is also now developing large sugar-cane-to-ethanol areas in West Africa.

Siim Kallas, vice president of the European Commission for TEN-T, told the press the new rules are designed to build up a critical mass of in order to whet investor appetites for these new markets. “Alternative fuels are key to improving the security of energy supply, reducing the impact of transport on the environment and boosting EU competitiveness,” he told Business Week. “With these new rules, the EU provides long-awaited legal certainty for companies to start investing, and the possibility for economies of scale.”

Is there any chance that the public is going to take an interest in all this? Well, one poll in Britain found last week that 65 percent would consider buying an alternative fuel car and 19 percent might do it within the next two years. Within a few years they find the infrastructure ready to meet their needs.