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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/

Analyst doubts low oil prices will hamper U.S. production

Whenever a petroleum analyst writes a sentence that begins: “I can still recall when prices collapsed in 1986 …” you know he’s seen just about everything in the global oil market. Michael Lynch has some sage words for those who are predicting slashed U.S. production (and accompanying job losses) owing to the rapidly falling price of crude oil.

Writing in Forbes, Lynch opines (emphasis added):

“Various arguments are being made now about how expensive oil has become to produce and the manner in which this will support prices, but this is much more valid in the long-term. … It is hard to imagine that a multi-billion dollar deepwater platform would be abandoned because of a six-month price drop.

“Other factors will prevent a decline in production from lower oil prices. Companies with contracts renting rigs won’t just cancel them, laying off employees is a near-last resort, and leases must often be drilled in a certain period to hold them. Abandoning wells also has a cost, and oil price drops that are thought to be brief won’t cause many companies to do that.”

Budweiser trades Clydesdales for natural gas

The famous Clydesdales that have hauled Budweiser’s barrels of beer since the 19th century are finally being replaced by 21st century compressed natural gas-driven vehicles.

Well, it isn’t quite that simple. There’s been an 80-year interval between the 19th and 21st centuries, when Budweiser’s trucks ran on gasoline and diesel fuel. But for 66 trucks at Budweiser’s Houston brewery, the 53-foot trailers loaded with 50,000 pounds are now going to be hauled by trailers running on compressed natural gas.

Anheuser-Busch actually has plans to convert its entire fleet to natural gas, according to James Sembrot, senior transportation director. “It’s significant that A-B feels comfortable swapping for an entire fleet that runs on CNG,” Christopher Helman wrote in Forbes. According to Sembrot, “the intention of shifting to natgas…is to reduce carbon emissions and fuel costs, while doing something green(ish).”

“The Houston brewery is among the biggest of the 14 that A-B operates nationwide. The closest breweries to this one are in Fort Collins, Colo., and St. Louis. Each truck rolls virtually around the clock — traveling in an average of 140,000 miles in a single year hauling beer to wholesalers. They move 17 million barrels of beer each year.” That’s a lot of beer running on natural gas.

Actually, it’s not Anheuser-Busch that is taking the initiative on Budweiser. The natural gas vehicles are being made available through Ryder, the nation’s largest trucking company since merging with Budget Truck Rental in 2002. Budget now has 2,800 businesses and 132,000 trucks around the country. Although only a small percentage run on natural gas, the company is dedicated to converting its fleet with all due dispatch, and the savings may prove to be extraordinary. According to Helman, “Sembrot tells me that the old trucks were getting 6.2 miles per gallon of diesel and running 140,000 miles per year. That equates to 1.45 million gallons of diesel to go 9.2 million miles. At about $3.80 per gallon, that’s roughly $5.5 million in total diesel costs per year. If they save about 30 percent per ‘gallon equivalent’ when buying CNG, that’s a savings of about $1.65 million per year.” That’s a lot of money save for switching to natural gas.

But it’s not just Budweiser and Ryder and a few forward-looking companies that are pushing ahead with natural-gas vehicles. The whole state of Texas seems to have gotten the bug. The Lone Star State now has 106 CNG filling stations, the most in the country. Forty are them are open to the public, while the others are fleet vehicles where vehicles from Anheuser-Busch and Ryder can fill up. Actually, far ahead of these innovators are FedEx and UPS, which have not converted their fleets for many years. And hovering in the background is T. Boone Pickens and his “hydrogen highway,” which is installing huge natural gas depots at key truck stops along the Interstate system. Much of this is aimed at Texas and the first complete link has joined San Diego to Austin in a seamless string of stations that will allow tractor-trailers to make the whole trip on natural gas.

All this has done wonders for Texas tax collections. At the start of the year, the Texas Controller’ Office was anticipating revenues less than $ million from excise taxes. Yet by July 31, 2014, collections were 220 times of that anticipated, and the Texas Controller’s office had collected $2,178,199. “These collections are more than double the estimated amount,” said David Porter, Texas Railroad Commissioner. “At 15 cents per gallon equivalent, $2 of motor fuels tax equals sales of 14,521,326 gallon equivalents of natural gas.”

Texas may be famous for fracking and producing more oil than Iraq, but they do not hesitate to look for new uses for gas and oil as well.

 

Photo by by Paul Keleher from Mass, US.