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Why aren’t we using methanol?

The more you look at the contemporary scene with gasoline and imported oil, the more you have to wonder why we’re not switching some of our fuel needs to methanol.

Look at what’s happening: Oil has become so plentiful that we’re reverting to the old situation of the 1950s, when the big concern among oil people was that some new discovery was going to be made in some far corner of the world and there would be a new “glut” that would cause the bottom to fall out of the market. It was during this era that we placed a 20 percent cap on our oil imports. The concern was that there was so much cheap oil in the world that the American oil industry would be decimated.

All that changed in 1970 when American production finally leveled off — right about the time geoscientist M. King Hubbert had predicted “Hubbert’s Peak” would occur. The import ban proved easy to circumvent, and before we knew, it we were importing 36 percent of our oil, most of it from the Persian Gulf. OPEC, first convened in Baghdad by Saddam Hussein in 1960, suddenly became more than a debating society and realized it had real market leverage. Instead of begging the oil companies for higher royalties, the OPEC nations suddenly realized they could raise their price and even withhold supplies. The era of the Energy Crisis had begun.

Congress did all the wrong things in responding. It extended President Nixon’s price controls on one commodity, oil, creating a domestic shortage — too much consumption, not enough production. We made up for this by importing more oil, in which the price controls didn’t apply. While President Carter mandated a “moral equivalent of war” and wore cardigan sweaters, the price controls had the exact opposite effect: Our imports swelled from 36 percent to 50 percent in 1980, and we were sitting ducks when the outbreak of the Iran-Iraq War suddenly cut short supplies. The result was the Second Gas Shortage.

President Reagan put an end to all this by striking down the oil-price controls his first week in office. Drillers went wild in Texas, and the Saudis flooded the market in trying to maintain market share. Soon prices had collapsed back to 1972 levels, and the “oil shortage” was pretty much forgotten.

Meanwhile, similar developments were taking place in natural gas. This commodity had been subject to federal price controls since the 1930s. Basically, it was an attempt by the Northern consuming states to rob Texas and Louisiana of their natural resources. In 1977 we actually experienced a “natural gas shortage” that caused factories and schools all over the North to close down in mid-winter, while Texas and Louisiana were burning natural gas for electricity — then considered horribly wasteful — because the price controls did not apply intrastate. This “crisis” was solved more slowly as natural-gas price controls were not phased out until 1988. Once again, supplies gushed forth. (We did learn a lesson. Nobody has talked about price controls on oil and natural gas since.)

Even with the market freely operating, however, the natural supplies of both oil and natural gas seemed to be diminishing, so that by 2005 we were running short of gas and back to importing more than half our oil. Then George Mitchell’s fracking revolution began. Suddenly, America was the world’s leading producer and oil and gas were once again in abundance.

Yet as far as freeing ourselves from further dependence on foreign oil, the results have been disappointing. Even though we are again producing 10 million barrels of oil a day, we are still dependent on imports for 30 percent of our oil, about one-quarter of this from the Persian Gulf. Low prices have stimulated consumption. People are going back to buying bigger cars and our gasoline use is hitting new records. Sales of electric cars and other alternative vehicles have nearly collapsed. Whatever impulse there is toward conservation is highly dependent on price.

Anything that requires a new infrastructure — electric cars, hydrogen vehicles, compressed natural gas and propane — will have trouble getting beyond a niche market. It’s simply too troublesome and expensive to get people to convert. But corn ethanol and methanol both slot easily into our current system of gas pumps and can compete.

The trouble with corn ethanol is that we are rapidly exhausting the potential supplies. We now use 40 percent of the corn crop to replace 3 percent of our gasoline. Cellulosic ethanol may expand supplies, but it is still basically experimental.

That leaves one fuel that could potentially replace vast amounts of our imported oil — methanol made from natural gas. We have enough natural gas supplies from fracking to make this a game-changer.

The great irony is that China sees this opportunity and is already seizing it. The Chinese are busy constructing two huge methanol conversion plants in Texas and Louisiana in order to take advantage of the abundant supplies coming out of the region. The Chinese have a million methanol cars on the road and will be carrying these supplies back to China to power their growing transport sector.

Yet the EPA continues to refuse to allow methanol to be used in car engines, mainly because of the reputation earned as a poisonous “wood alcohol” during Prohibition.

As Anne Korin of the Institute for the Analysis of Global Security once said: “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.” The entire farm belt is working to support ethanol, but there is no “methanol state” or corresponding congressman working in its favor. For that reason it languishes.

For almost 50 years the Indianapolis 500 cars have run on methanol. Yet it is still forbidden in our commercial transport sector. Isn’t it time that somebody considered the general good and started crusading on behalf of methanol?

(Photo by Vivid Racing, posted to Flickr)

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What do Ann Landers and Abigail Van Buren have to say about marriage and oil strategy?

Landers_BurenAnn Landers and Abigail Van Buren, well-known advisors and columnists for people with relationship issues, were, at one point in time, distant cousins of mine. So I was willingly exposed to daily columns about the lovelorn, love-confused and folks in need of love. Ms. Landers and Ms. Van Buren were actually sisters. They, however, didn’t like each other much. I bet you didn’t know that! Their words were generally wise; their advice was mostly cautious; and, at the time, their words were from a puritan bent. Sometimes they were funny, and rarely did they cater to the prurient interest. They were G-rated!

Last night, I caught up on reading my favorite newspapers and journals and, out of the blue, my mind wandered to my now-deceased former cousins – Ms. Landers and Ms. Van Buren. I bet either one could have addressed questions from depressed oil executives due to a lack of love for the industry from the general public. I think the last poll concerning reputations placed oil industry executives close to land speculators, exotic animal poachers, football deflaters and wife- or husband-beaters. The oil company executives appear to shoulder much of the blame for past high gasoline prices and the possible return of high prices, as well as increased GHG emissions and pollution. While other variables are involved, increased numbers of the public appear to hold oil executives responsible for America’s iterative need to risk boots on the ground or in the air in the Middle East to protect our access, or our allies’ access, to oil. Some executives appear to have taken the public’s negative perceptions to heart. My psychiatrist friends believe they carry much hidden guilt.

I have created a fictional letter from an oil executive going through therapy for depression because of his job and the possible related breakup of his marriage, and imagined the response from both Ann Landers and Abigail Van Buren. I wanted to help the poor executives. On reading my draft, the words seemed so real and so sad. The guy seemed to have manic-depressive characteristics. His letter and a response from one of the sisters follows:

DEAR ANN OR ABBY:

I have a terrible problem. It’s affecting my marriage. I love my wife, even though sometimes I don’t understand her.

I should tell you that when I left college with a Wharton MBA, I wanted to change the world for the better. I thought I could do good and also make some money. Isn’t that what’s meant when political leaders say that America is an exceptional place? Capitalism with a heart and soul!
I honestly disagree with the economist Milton Friedman (or was it Alfred P. Sloan?) when one or the other said something like “the business of business is business.”

I am an executive at Exxon. I usually feel good every morning when I go to work. I believe that Exxon, through its oil and gas operations, has helped to power the United States. It’s provided mobility to residents, whether rich or poor. It generated jobs and income all over the world. What’s good for Exxon is good for the U.S.! Isn’t it? (Bring back “Engine” Charlie Wilson … do you remember the ex-secretary of defense?)

But my wife disagrees with me about Exxon. She has her Ph.D. from Harvard (you know, that school in Cambridge). She is a believer in alternative fuels, like ethanol. She thinks – or, I forgot, feels – that oil and gasoline are the scourge of the nation: bad for the environment, America’s security, personal health and well-being and the economy, and bad for what, I thought, was once a beautiful and romantic marriage.

Our present differences have resulted in large bills for marriage counselors. At our last session, which cost $350 for the hour, she told the counselor that she was happy that the oil company revenues have gone way down because of depressed demand, a surplus of global oil supplies, increased costs for drilling, the rise in value of the dollar and OPEC’s effort to sustain both production and relatively low oil prices. She seemed overjoyed, almost manic, that companies have reduced exploration for oil. The counselor’s response was, “Well you must feel good! Ending exploration will help save pristine sensitive areas like the Arctic Circle.” She seemed to have gone over a professional line. The counselor, to me, reflected a new breed. My wife and I were paying for part therapist, part advocate. She clearly was a Democrat. I was worried.

During our session, my wife seemed mean from time to time. At one point, in front of the therapist, she indicated that she was pleased that jobs are being lost in the oil sector. When I interrupted her to meekly note that my own high-paying job could be on the line if the oil market continues to be a downer, she gasped, full-throated, and said, “I told you so. It’s a lousy industry, a polluting industry and an industry that contributes to global warming. You should have left the company a long time ago.” After I started to cry (men do cry), she added, “I wouldn’t let our daughter [we don’t even have a daughter] go out with an oil executive and, if she married one, I would disown her.”

Our counselor was no help. All she could say were things like, “look at each other,” “think of good memories,” “talk to each other from your heart, particularly before you go to bed.” Hell, I just got a heart transplant, and it knows nothing. I also sleep on the couch since my wife got on the E85 kick! Please help me. We have a loveless, sexless, talk-less marriage. We are on the brink. What can I do? – DESPERATE OIL EXECUTIVE

DEAR DESPERATE OIL EXECUTIVE:

My sister and I don’t want to say there is no hope for your marriage. We don’t often agree on anything, and we have relationship issues ourselves. Generally, when we are alone, however, both of our cups are half or more than half full. For you and your wife to survive as a couple, I think (and on this one, I am sure my sister would agree,) that you need to work a lot harder at understanding one another. It seems like you have not heard how strongly your wife feels about ending U.S. dependence on oil and gasoline. Give her respect! Her opinion is not yet a majority one, and it is courageous. She is a real thought leader. Be proud of her! To her, the need for alternative fuels has become both ideology and compelling wisdom. It’s part of her persona.

It appears that your wife has not heard about your passion for doing good while you work hard to bring home a large payroll stub every month. Maybe you have neglected your youthful passion and how important it was to you after college. Maybe the lack of passion in your love life relates to your own forgotten passion as a human being and professional. I can’t tell from here, but it’s worthy of examination.

Meanwhile, to help save your marriage, if you’re a believer, pray; if you are an agnostic, have faith; and if you are an atheist, believe in yourself or yourselves. Maybe you could do good and please your wife by helping convince your oil company to favor opening up its franchises to competition from alternative fuels and provide charging and blending pumps at each station. Talk to her! If she will let you, hold her tight (or at least hold hands), and while doing so tell her you both can find common ground. Buy her an electric-powered Prius or Tesla; maybe even an E85 high-octane EPA-approved Chevrolet. Give her the keys and say, “I love you”! Try to begin a new beginning. Maybe it will get you off the couch and help the nation move toward alternative fuels. I wish you and your wife good luck. Indeed, my friend Dinah Shore would want you both to “see the USA” in your new environmentally friendly, alternative-fuel Chevrolet. Many miles of happy driving, and may your renewed marriage be full of love and affection.

7 ways our oil addiction is hurting the economy

We spend billions of dollars every year on oil that could be spent on cleaner, cheaper, American-made fuels. The impact of this addiction can be seen throughout our economy in a cycle of job and money loss:

  1. AMERICAN JOBS: When oil prices fluctuate, all levels of the economy are affected. When businesses have to pay more to ship their products because of a spike in fuel prices, they have to cut those costs elsewhere, leading to job loss.
  2. RECESSIONS: Of the 11 recessions in the U.S. since World War II, 10 were preceded by an oil-price spike. By breaking our oil addiction and investing in fuel choice, we can break this cycle.
  3. RELIANCE ON IMPORTS: The U.S. imports about 40 percent of its oil, sending money abroad that could have helped our economy at home. Building up the domestic infrastructure of alternative fuels would spur economic activity, instead of siphoning away billions that flow overseas.
  4. HOUSING: High gas prices hit close to home. As gas prices rise, the value of homes farther away from big cities, according to economist Joe Cortright, begin to devalue as the cost of commuting rises.
  5. WALL STREET: In July 2008, the price of oil hit $147 a barrel, and two months later Wall Street followed suit. In one day, the DOW Jones Industrial Average fell 777 points, ushering in the financial crisis.
  6. FLUCTUATING PRICES:  When gas and oil costs go up, the cost of other products follows. Suddenly, consumers have to pay more for everyday goods that require gasoline or diesel to be shipped. And when we’re spending more on our everyday necessities, we’re spending less on other things we need — delaying big purchases.
  7. LIMITED CHOICES: With no other options (unless you’re driving a flex-fuel or an electric car), the fluctuation of gas prices leaves the average consumer a sitting duck — unable to pay the price, but unable to purchase any other fuel. That’s why bringing fuel choice to the pump is so important.

The U.S. is at the mercy of oil companies as prices fluctuate, impacting our economy, including day-to-day prices for consumers and the overall job market. It’s time to break this cycle of dependence by bringing fuel choice to the pump.

Join the movement: http://www.fuelfreedom.org/take-action/

Former Shell Oil chief: U.S. must become more oil independent

Just in time for the Fourth of July weekend: Our very own John Hofmeister speaking words of wisdom about the need for the United States to wean itself off oil as its dominant transportation fuel.

“It’s incumbent upon the United States of America to become more oil independent,” Hofmeister said at a security conference in Israel in June. “Because it still relies on nearly 7 million barrels a day of imports, and in a nation that uses 18 and a half to 19 million barrels of oil per day, the loss or the risk of 7 million barrels a day of imports puts that nation at about two-thirds of independence, and that’s not enough for the world’s largest economy.

“So there remains an interdependence, until the U.S. can find independence, and it has every right and every responsibility to pursue independence. As does every other nation.”

Watch Hofmeister’s full talk at the Herzliya Conference in Tel Aviv:

Hofmeister knows of what he speaks: He was the president of Shell Oil Co., the American subsidiary of oil giant Royal Dutch Shell, from 2005 to 2008. The author of “Why We Hate the Oil Companies” now travels the world talking about the need for alternatives to oil. He’s not only on the board of directors and advisors at Fuel Freedom, he founded a nonprofit called Citizens for Affordable Energy.

U.S. crude prices closed at $56.96 a barrel Wednesday, down $2.51 or 4 percent, the biggest one-day drop since April 8. Compare that to last summer, when the price was above $100. But the market remains volatile, and Hofmeister said having oil at an affordable price long-term is necessary for national security.

“If you’re not taking care of yourself, no one else will,” Hofmeister said.  “And so nations should look to their security — not just to their defense forces, but to their energy supplies — which in the United States, is why I’m almost entirely focused now on transitioning natural gas to transportation fuels, as well as biofuels, as well as electricity for transportation. Because the future of oil is simply limited. We’re not running out. It won’t disappear. But it simply won’t be available at this price for an indefinite future.”

Hofmeister expanded on another of his major themes: that natural gas, which is cheap and plentiful in the United States, could help the U.S. and other nations reduce oil consumption. Natural gas is used as a fuel in its gaseous, compressed form — as CNG and LNG — and it can also be processed into liquid alcohol fuel, ethanol or methanol.

“Over the next decade, nations like the United States, or like Israel, or like much of Europe if not the whole of Europe, that are not transitioning at least a third of their oil demand away from oil and toward natural gas will only look back in regret.”

(Photo credit: Poet Biorefining plant in Macon, Missouri. From FarmProgress.com)

Declare your independence from oil with Fuels 101

Fuel Freedom has something new this Fourth of July to help Americans declare their independence from oil and its monopoly on the U.S. transportation fuels market.

This week we launched Fuels 101, a set of tools you can use to learn about alternative fuels. The pages include:

  • Check Your Car. An interactive feature that allows you to determine whether your car, truck or SUV is a flex-fuel vehicle, and thus can run on any combination of gasoline and ethanol, up to E85 (85 percent ethanol, 15 percent gasoline).
  • Fuel Types. A guide to the different transportation fuels, including ethanol and methanol. All facts, no myths.
  • Find a Fueling Station. We’re using the Alternative Fuels Data Center’s cool interactive map, which helps you find not only E85 stations, but CNG and others.

Consider Fuels 101 an introductory course in all the alternatives to fuel. Although they come from different sources (ethanol, for instance, can be made from a variety of starchy plants, not just corn) and are made in different ways, their commonality is that they burn cleaner than petroleum-based fuels, reducing toxic pollutants that befoul our air and water. Domestically produced fuels also create American jobs and strengthen our national security.

Give Fuels 101 a spin. Don’t worry, none of it will be on the final.

Fuels 101 is the kickstart to what we’re calling Fuel Freedom Month. Our goal is to raise awareness coast to coast about ways we can all help create a genuinely competitive fuels market for the first time in America.

To learn more about how you can help, visit our Take Action page. And while you’ve got some down time between barbecues and fireworks displays this weekend, watch our all-American documentary film, PUMP the Movie, starring Jason Bateman.

You can also get regular updates on social media by following Fuel Freedom’s Facebook page and Twitter feed. PUMP has cool content as well (it has an independent streak of its own), so check it out on Facebook and Twitter as well.

Happy Independence Day, America!

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Time to declare independence from expensive oil
Fuel Freedom to Hannity: ‘We can bankrupt terrorism’

The military/oil complex – Do we deserve a chance to debate when the nation goes to war?

Marshall-soldiers

Dwight D. Eisenhower was America’s iconic military leader during World War II and its president from 1953 until 1961. His fatherly smile and his general demeanor lent confidence to Americans. Whether he was one of America’s best presidents is a question for historians to decide. But his last comments before leaving office were historically profound and very prophetic with respect to U.S. involvement in the Middle East.

Ike, as he was affectionately called, said in his farewell address to the nation on Jan. 17, 1961 that “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. … Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”

Regrettably, perhaps since WWII, no American entanglement on foreign soil, indeed, no American war (except perhaps critical wars like Grenada and Panama … a bit of cynicism), has reflected the sustained support of the American people from beginning to end. Many American citizens have had trouble justifying our involvement on moral, military, political, economic and social welfare grounds. Some of the theories, often embellished in rhetoric, used by our leaders as rationales for various wars since WWII, have been discarded because of their simplicity or their failure to conform to post-war facts on the ground. Remember The Domino Theory justifying the Vietnam War?

We have not been entirely honest with the service personnel we have sent to Afghanistan and Iraq. While not a random sample, I have been fortunate to talk with many of the returning soldiers from the wars in Afghanistan and Iraq (including a Special Forces veteran or two), and most believe that, at its core, the nation’s involvement in both countries rests not on bipartisan justifications concerning exporting democracy and freedom, but on the desire to preserve and protect access to oil for the west. Implicit in their comments is a belief that Eisenhower’s warning about the military industrial complex has now become a reality (except that with respect to Iraq and Afghanistan, it is more accurate to call it the military/oil company complex).

The intensity of their perspective, while perhaps forged in part by their being involved up front in the horrors of war and killing, is not theirs alone. “Of course it’s about oil; we cannot really deny that,” said Gen. John Abizaid, former head of U.S. Central Command and Military Operations in Iraq. Former Federal Reserve Chairman Alan Greenspan agreed, writing in his memoir, “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.” In 1998, Kenneth Derr, then CEO of Chevron, said, “Iraq possesses huge reserves of oil and gas — reserves I’d love Chevron to have access to.” Today it does. According to a policy brief from scholars at Harvard’s Kennedy School, “Although, the threat of ‘resource wars,’ over position of oil reserves is often exaggerated, the sum of the political effects generated by the oil industry makes oil a leading cause of war.”

Media reports from over the last decade or more suggest the same nefarious link between war and oil exists concerning Afghanistan; indeed, this link exists between all of our country’s recent wars in the Middle East. Sure, oil is not the only reason we go to war, but those of us concerned with public policy and the fog, as well as human, economic and social costs of war ought at a minimum, try to make sure that citizens in this nation are aware of and can debate the role of oil. More transparency may lead to less national harm and more rational decisions about joining or starting conflicts.

Why, in light of the fact that oil, oil exploration, oil development and oil distribution has been and remains a key variable generating U.S. involvement in many past and present wars, do we, as a nation, avoid a sustained strategic drive to foster the use of alternative competitive fuels, such as ethanol, methanol, natural gas, electricity and hydrogen fuel? Our efforts to date have been relatively minuscule and often are impeded more by a lack of a vision of the public good, ideological and partisan whims, economic and political interests than by an honest appraisal of independent analyses and honest debate. We owe the young people that we sent to battle at least this much. Give them a chance to make love, not war! We can be fuel agnostic and let the public interest and ultimately the marketplace choose the winners when it comes to cheaper, cleaner, safer fuels. The nation and its residents deserve a chance to safeguard the country’s environment, its economy and its security!

(Photo: A ceremony in Iraq in December 2011 marking the withdrawal of the last U.S. troops from the country. Credit: Getty Images)

4 Non Blondes, The King and I and alternative fuels

4-non-blondes-650-430“Twenty-five years [lots more years for me] and my life is still
Trying to get up that great big hill of hope
For a destination”

Combine the lyrics from 4 Non Blondes with the personal frustration suggested by the “it’s a puzzlement” comment from the King of Siam in “The King and I,” expressed when he was perplexed by a changing world, and you will understand why many are confused by three relatively recent actions that limit or impede the growth of alternative fuels.

Most advocates of consumer choice at the pump and the end of Big Oil’s near-monopoly concerning transportation fuel praised the president’s State of the Union address a couple of years ago. He proposed that the nation wean itself off of oil. Wow, some fuel choice advocates were thrilled, almost orgiastic. Just think, in a couple of years customers might search for fuel stations selling a range of lower-cost alternative fuels, instead of only gasoline. Environmentalists welcomed the president’s comments. Less pollution and fewer GHG emissions! Most economists were pleased. They saw more jobs and further GNP growth. Servicemen were happy. They would be asked to fight fewer wars for oil.

In this context, there was hope that the cheaper cost of oil, and its derivative, gasoline — both of which are now rising in cost — juxtaposed with the regulations resulting from the BP Deepwater Horizon oil spill, Shell’s failure to use its original drilling permit to drill successfully and the availability of less expensive competitive fuels, would end the prospect of drilling in the pristine Arctic Circle off of Alaska’s coast. It would be just too costly. Good news! We can dream, can’t we!?

Similarly, some of my colleagues and friends who support fuel choice and a better shake for consumers than gasoline (concerning costs and GHG emissions), were hoping that improved technology, lower prices, and inventions like Elon Musk’s just-announced solar storage unit, could soon generate an increased ability for solar energy to power many coal-fired utilities, homes and even vehicles. In the aggregate, the U.S. would produce significantly fewer emissions and pollutants. What a welcome, possible, short-term happening! Musk for president!

The increased popularity of battery electric vehicles (BEVs) from Tesla (among those who can afford them) and the emergence of cheaper battery-powered vehicles from Detroit have also lent hope to those who are fuel agnostic or favor a long-term, robust renewable fuel market and more consumer choices at the pump. While electric cars offer a vision of the future, their broad acceptance by the public depends on design and technology improvements to both end the fear of running out of battery power while on the road, and provide more internal space — both at costs most Americans can afford. Both problems seem to be on the way to resolution, based on the pronouncements from Tesla and Detroit. We can only hope!

But despite the optimism gene internal to most Americans, the great “big hill of hope” has recently become even bigger to climb. While alternative fuel advocates remain relatively quiet and often unable to speak with one effective voice, federal and state policies and regulations have been changed to limit the ability of alternative fuels to secure significant market penetration. Despite large subsidies to the oil industry, neither the administration nor Congress has been willing to seriously try to weaken the ability of Big Oil to restrict alternative fuel sales at local gas stations. Indeed, several attempts to enact open fuels legislation have failed to even get out of Congressional committees.

Although the country seems awash in oil, just this week, the president gave conditional approval to Shell to drill in the Chukchi Sea off of Alaska, despite the company’s mismanagement of earlier attempts to do the same, and despite the objections of many environmental groups and Alaskan natives. Both industry and critics of the permits note that drilling will be risky, given very high waves, icy seas, strong winds, bitter cold weather and the need to protect the routes of migration and feeding areas for marine mammals. As The New York Times indicated this week, the permit is a “major victory for the petroleum industry and a devastating blow to environmentalists,” and for consumers, I would add. Estimates of the oil in the Chukchi Sea range all over the place. However, if oil companies are able to overcome high drilling costs and secure a significant flow of oil, even for a relatively short time, they will increase their ability to limit sales of alternative fuels among their franchises and through differential pricing, the sales of alternative fuels by independent retailers.

It doesn’t get any better. Just as opportunities to secure and store solar power — power that could be used to power homes, autos and utilities — seem almost ready for prime time, many of America’s utility companies — another great supporter of competition (excuse the cynicism) — have begun to seek legislative relief to impede solar’s growth. Their argument deserves discussion. If solar power grows, it could well be at the expense of improvements in the grid. But the use of their political power with state legislatures to seek ad-hoc remedies, different in each state, is not in the public interest. Legislative efforts to lower the price solar users secure from utilities when they put excess power on the grid may or may not be good policy or practice. Shouldn’t we know before such policies are enacted by states? Similarly, putting up regulatory impediments impeding the sale of solar units, including storage units, would likely really hurt what is now a risky start-up industry. The net result of poorly conceived state-by-state initiatives to protect the utility industry would be to limit the capacity of solar energy to substitute for coal in powering utilities and to reduce options to produce cleaner electric cars with almost zero GHG emissions. Similarly, restricting the storage of solar energy would end up slowing down the development of another alternative fuel — one based on solar-derived power.

Finally, the continuing efforts by several states to change Tesla’s business model have and will reduce competition for fuels and the use of electricity as a fuel. Why? Several state legislatures, under political pressure from auto dealers, have banned its direct-sales approach. If Tesla wants to sell its electric-powered cars in Texas, for example, it must sell through an auto dealer. Remember, some Texans recently wanted to secede from the union in order to free the state from “federal dictatorship” and, ostensibly, extend personal freedom and its corollary market competition! (I thought of signing the petition that was floating around to let Texas go.) Passing laws to protect one kind of business from another is un-American…almost like sending the Texas National Guard to monitor the training of U.S. soldiers to be sure they are not digging tunnels under Walmart and engaging in other nefarious activities contrary to the interest of the good citizens of Texas. Davy Crockett would be offended. The bottom line is that Texas and other states with similar regulations are limiting fuel choice by placing a Berlin Wall around their boundaries and not letting Tesla and its electric vehicles in. Ah. Freedom!

So, supporters have some big hills to climb and sometimes it may be a puzzlement to the climbers. But, as the singer Billy Ocean once vocalized, “When the going gets tough, the tough get going.” Building a coalition among the willing supporters of alternative fuels should not be difficult. They share goals concerning the need for increased consumer choices and the value of open fuel markets. If they reach out to include, rather than define boundaries to exclude; if they acknowledge that absolute wisdom concerning strategies does not exist; if they are willing to work toward consensus and bring their respective constituencies along with them; and if they recognize that time is of the essence concerning achievement of key public interest and quality of American life objectives, following Robert Frost, they will travel the road less traveled, and will likely soon begin to see light at the end of their travails and travels.

 

Photo Credit: Getty Images

Hofmeister: Oil companies actually hate high prices

When it comes to oil companies and how they think, John Hofmeister knows of what he speaks. So when the former president of Shell Oil took to the lectern at the Hudson Institute’s “Fueling American Growth” conference in Washington, D.C., on Thursday and told the assembled that Big Oil actually doesn’t like high oil prices, it shouldn’t have come as a surprise.

And yet … let us gather that in: Companies like BP and ExxonMobil that post billions in earnings (or slightly less, as the price of oil slipped late in 2014 and into 2015) actually prefer a world in which a barrel of oil trades at a safe, predictable, boring price.

Here’s an excerpt from Hofmeister’s remarks:

Contrary to some popular belief, oil companies don’t actually like high oil prices. They like predictable, rational prices that deliver a return on investment over time. Companies do not like spiking, ever-higher prices, because of what happens as a consequence: The cure to high oil prices is high oil prices. People stop buying. Surpluses develop and prices collapse.

What’s the cure to low prices? Low prices. Because people stop producing and, sure enough, we run into shortages, and prices rise. This ever-continuing volatility is not good for the industry, it’s not good for national security, and it is horrific for the economy. And oil companies have been around for a long time. They see beyond the advantages of volatility either way, and look for those predictable price spots – they call them sweet spots, actually – where you can achieve an attractive investor return on investment, and you can maintain a stable workforce, and you can invest in R&D, and you can produce just enough energy to keep the nation well-supplied.

Hofmeister, who’s on the board of advisors with Fuel Freedom Foundation and is one of the stars of the foundation’s documentary, PUMP, has predicted that oil prices will continue to surge upward over the next year because U.S. drillers won’t be able to simply ramp up production quickly again after the recent downturn in prices forced many of them to suspend operations.

The foundation has argued that the best way to reduce oil consumption, end oil-market volatility and make prices gasoline permanently low for consumers is to open the transportation-fuel market to cheaper, cleaner alternatives like ethanol and methanol.

Hofmeister said: “We will never get past the volatility of oil until we get to alternatives to oil.”

The primary reason that I care so much about alternatives and future fuels is, as a person from the oil patch, I know the limitations. I know what’s possible and what’s not, and the appetite for oil worldwide will never, ever be satisfied from the oil patch. It can’t be. The risks, the costs, the geopolitics, really cannot begin to address the 2 billion people on this earth who really don’t have access to oil-based petroleum fuels, and most of them never will. There just isn’t enough.

You can watch the whole video clip here:


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Canada, oh Canada, will your tar-sands oil help or hurt US fuel objectives?

Tar Pit #3I just finished a recent Forbes article by Jude Clemente, “Canada is North America’s Great Oil Security Blanket.” Gosh, it’s good to know that Canada can supply 10 million barrels a day for the next 675 years. Just think of the biblical proportions of Canada’s reserves. Methuselah lived only 969 years! I feel safer already.

I am (fairly) comfortable that the French won’t take over Quebec and act out residual imperial desires and that the British won’t try to recapture their former colonies. So, sleep easy and leave a note in the morning to your children, their children and their children’s children, ad nauseam. Future generations of U.S. residents won’t have to worry about the definitions of peak oil or real oil shortages, and we will always have fossil fuel in our future. Our very valued friend to the north can and will produce whatever oil the U.S. requires for centuries.

Aren’t we lucky?! Our decedents will be able to depend on what the author calls “ethical Canadian oil.” Why? He argues that “Canada is a democracy and a free market sought by investors that desire less risk.” Wow…freedom to choose and capitalism; John Rawls and Adam Smith. I am crying with joy. But my emotional high lasts for only a few minutes.

Do we need to substitute Middle East imports for Canadian imports, even though Canada is a trusted ally? Are Canadian oil reserves a real, long-term, strategic benefit to the U.S. and are they ethical (a funny term used in the context of big oil’s historical behavior, speculation with respect to investment in oil and the perils of surface mining)? According to many analysts, oil from tar sands is among the most polluting and GHG emission causing oil in the ground. Aren’t you happy? In light of reserves, we can tether ourselves to fossil fuels for hundreds of years and a range of environmental problems, including, but not limited to, air pollution, landscape destruction, toxic water resulting from tailing ponds and excessive water use. Many scientists warn of increased rates of cancer and other diseases. While the tar sand industry, to its credit, has tried to limit the problems, according to the Scientific American article by David Biello, “tar sands may be among the least climate- [and health-] friendly oil produced at present.” By the way, conversion to gasoline will likely result in higher prices for the least advantaged among us, not exactly Rawlsian ethics.

We are in a difficult position, policy wise. Sure, we can establish long-term institutional relationships with Canada and its provinces that will assure U.S. on-demand access for Canadian oil sands. To do this would be comforting to vested interests and some leaders who still believe that oil is the key to America’s economic future. But business, academic, nonprofit, community as well as government leaders are increasingly searching for alternatives that will be better for the economy, the environment and national security. Weaning the U.S. off of oil, as the president has sought, will require, at least for the transportation sector, substituting a “drill, baby, drill” mentality for a strategy that includes increased use of alternative fuels, open fuel markets and flex-fuel vehicles.

Alternative fuels are not perfect, but for the most part, they are much better than gasoline in light of national energy and fuel objectives. Many replacement fuels, like natural gas and natural gas-based ethanol, cannot compete easily because of government regulations (e.g., RFS, etc.) and oil company efforts, despite large subsidies to limit their purchase by consumers (e.g., lobbying against open competitive markets, franchise agreements, price setting, etc.). Most alternatives appear to have sufficient reserves to provide the consumer with cheaper and better fuel than gasoline for a long time. For example, natural gas seems to have more than a proven 100-year supply, and that’s without further exploration.

The policy framework is easier to define than implement given America’s interest group politics. It would go something like this: As soon as they are ready for prime time and reflect competitive prices, design and miles per tank, increasing numbers of electric and perhaps hydrogen-fueled cars will appeal to a much wider band of U.S. consumers than they do now. The nation should support initiatives to improve marketability of both thorough research and development. Until then, the good or the better should not be frustrated by the perfect or an unreal idealization of the perfect. Please remember that even electric cars spew greenhouse gas emissions when they are powered by utilities that are fired up by coal, and that the most immediately available source of hydrogen-based fuel is natural gas. Currently, there are no defined predictable supply chains for hydrogen fuel. Perhaps, more important, neither electricity nor hydrogen fuel cells can be used in the 300,000,000 existing cars and their internal combustion engines.

So what’s a country to do, particularly one like the U.S., which is assumedly interested in reducing GHG emissions, protecting the environment, growing the economy and decreasing dependence on foreign oil? Paraphrasing, the poet Robert Frost, let’s take the road less traveled. Let’s develop and implement a strategic, alternative-fuels approach that incorporates expanding consumer choices regarding corn and natural gas-based ethanol, a range of bio fuels and more electric and hydrogen fuel cars. Let’s match alternative fuels with initiatives to increase Detroit’s production of new FFVs and the capacity (through software adjustments and conversion kits) for consumers to convert their existing cars to FFVs. To succeed, we should take a collective Alka-Seltzer and build a diverse strong fuels coalition that will encourage the U.S. to develop a comprehensive, alternative fuel strategy. The coalition, once formed, should place its bet on faith in the public interest and good analysis to gain citizen and congressional support. I bet the nation is ready for success — just remember how Linus of the famous Peanuts comic strip ultimately gave up his security blanket.

 

Photo Credit: http://priceofoil.org/

Car buyers go shopping for better mileage

With the price of oil down from about $115 to $63 since last June, the impression has been created that the auto world is once again in the hands of the oil industry, and that the gasoline engine is here to stay.

But this week at the Bloomberg New Energy Finance Conference, there was the distinct impression that alternatives to the gasoline engine are moving up so fast that within another five years we may see big changes. Bloomberg Business wrote that the result is “Future transport is likely to look a lot different than what the major oil companies are fueling now. Instead of biofuels such as ethanol and green diesel making the internal-combustion engine fit into a world with greenhouse gas limits, wholesale new solutions are coming fast.”

“Where we are is in an age of plenty,” Michael Liebreich, BNEF’s founder, told Bloomberg. “We have cheap oil, cheap gas, cheap renewables. You do have an abundance of supply in a way you haven’t had for decades. We also are in an age of competition.”

The biggest piece of news is that gasoline consumption has leveled off over the last decade and now is lower than it was in 2006. This is a remarkable development that no one knows quite how to explain. Part of it may be the lingering recession. Fleet mileage improvement has definitely made a difference, improving from 24.5 in 2001 to 31.6 today, a dramatic surge of 29 percent in 13 years. The Age of the Hummer is over, and people are being more selective in shopping for better mileage, even as the vehicles improve.

But Bloomberg Energy sees alternatively fueled vehicles also making headway in a way that is just becoming visible. Electric car sales have quintupled over the last four years, although they did start at a very low base. But battery prices are coming down as rapidly as solar-panel prices, which means that they soon will be in a range where the average American can afford them. Tesla’s 2017 debut of the Model 3, priced in the $35,000 range, is going to be a real turning point, if everything goes right.

Also coming along rapidly is the hydrogen car, which the Japanese auto industry has chosen as its alternative to gasoline. Toyota and Honda are just beginning to market their models in Japan, and BNEF anticipates there will be 4,200 on the road in Japan by 2018. But California is another big potential market, and sales are scheduled to begin there sometime late this year. The California Legislature has responded by expanding the Hydrogen Highway initiated by former government Arnold Schwarzenegger, making it easier for drivers to refuel.

Of course, all these predictions are taking place on a world scale, and there the progress may be even more rapid than in the United States. One thing Tesla discovered in its relatively abortive attempt to crack the Chinese market is that China already has a thriving electric-car industry. The cars, moreover, are not scaled-down versions of powerful sports cars but slow-moving vehicles that have been designed from the ground up.

In an article in Forbes last week, Jack Perkowski outlined what he called “China’s other electric vehicle industry:”

While the global automotive giants struggle to find a winning formula for electric vehicles, approximately 100 manufacturers in China have already identified a large potential market undiscovered by the traditional players. The common problems faced by EV automakers — high cost, driving range, and the availability of charging stations — are not issues for these manufacturers because their target customers are satisfied with low-speed and limited range EVs, as long as they provide affordable transportation. In 2014, 400,000 so-called ‘low-speed’ EVs were sold in China, compared to only 84,000 conventional all electric and hybrid electric vehicles.

To get a glimpse of the size of China’s potential market, consider this: China is already the world’s largest vehicle market, accounting for 25 percent of all vehicles manufactured globally. Yet there is only 1 vehicle per 10 people in China, whereas in the United States there are 8 for every 10 – more than one vehicle for every person of driving age. China also has another huge market for other electric vehicles. It has sold 90 million motorcycles and 120 million electric bicycles.

Estimates are that China now has a million such low-speed EVs on the road now and might reach 3 million by 2020. These cars can do about 48 miles per hour and are used for short runs around town in smaller cities, so range is not a problem. They are doing wonders for air pollution. Manufacture only began in 2006, and already some provincial governments are starting to write requirements that they be preferred to the older gasoline types.
Surprisingly, the only government entity that has been slow to embrace the low-speed EVs is the national government in Beijing. The Central Government has not counted these EVs is their official automotive statistics and is only now starting to write regulations on how crash-worthy they must be and on what roads they will be allowed to travel.

Perkowski concludes: “Low-speed EVs may not fit the stereotype of today’s modern passenger car, but in China, where incomes remain low for a large part of the country’s population, affordability often trumps those values held dear in more developed countries.”

Could China’s low-speed EVs find a market in the United States? It’s certainly possible. In any case, the anti-gasoline revolution may be coming in ways we did not anticipate.