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To Use Less Oil, We Need To Think About Cars As Software Platforms

FastCoExist.com

Some time in the future–perhaps a decade from now–we’ll all be driving around in electric cars (probably). Battery technology will have evolved to allow longer trips on a single charge, and they’ll be significantly cheaper than they are now.

A decade from now, though? That’s a long way off. In meantime, we’re going to need other ways to reduce our dependence on oil–both because oil increases instability in the world (look at Russia’s current oil-fueled adventures) and because it contributes to climate change, a problem that really can’t wait.

Paul Harvey, the rest of the news and natural gas

Paul Harvey was a conservative icon in radio news during the mid to end of the 20th century. While I often differed with the substance of his commentary, he was a welcome travel partner when driving, particularly on a long trip. What I liked most about him was that he generally articulated his views without being malicious, and his voice was just wonderful. He sounded like a symphonic rap musician, using iambic pentameter.

One of Harvey’s favorite phrases was here’s “the rest of the story.” Remembering it, gives me a wonderful opening for this column.

This week there were several optimistic articles on natural gas growth this past week . One article in particular caught my eye. The piece described the expanded, but still relatively low, market penetration of natural gas as a transportation fuel. Given the cost and environmental benefits of natural gas, I was pleased to read the content and see the numbers and quotations. But in Paul Harvey’s terms it did not tell “the rest of the story”!

Yes, natural gas is making inroads into the trucking industry, even among buyers of new cars, asserts the article. “The boom in natural gas production in the U.S. has ignited a revolution in the auto sector that could reshape the way Americans fuel their vehicles, market participants and analysts said in a week-long special on FOX Business.” ClearView Energy Partners, the Newport Beach, California company that is building fuel stations along major interstate trucking corridors, will likely facilitate the growth of natural gas as a fuel in trucks. It will provide one of the missing pieces that have impeded natural gas’ popularity — fear of running out of fuel. “About 25% of the truck market could convert to natural gas by 2020, according to a report by Citigroup…eight in 10 new trucks Waste Management brought in 2012 were powered by natural gas.” Your friendly bus driver’s bus is increasingly likely to run on natural gas.

“Only a tenth of a percent of natural gas consumed in U.S. last year was used for fuel in vehicles, according to the Energy Department. Of the more than 15.2 million natural gas vehicles on roads across the globe, [only] about 120,000 are in the U.S.” Natural gas clearly hasn’t taken off yet as a transportation fuel in the U.S. Kevin Book, ClearView’s managing director of research indicates that, “I think you look at locomotives, also a very interesting and potentially large market, and also some of the marine applications before you start talking about smaller passenger cars.” I suspect his negative perceptions of natural gas as a competitive fuel in cars stems from the present costs of CNG passenger vehicles and the present absence of CNG fuel stations — a possible temporary problem if ClearView’s commitment to develop a natural gas highway could extend to private automobiles. We have had many successful freedom movements in this country. There would be only relatively marginal costs to extend the capacity of the natural gas highway’s fuel stations to include CNG availability for all consumers of natural gas vehicles and to assure availability of natural gas derivative fuels like ethanol. If you build it, many of the 17 million FFVs now on the road will come and more will follow, given what’s presently on the (near term) horizon.

Here is more of “the rest of the story,” à la Paul Harvey. One of the most innovative programs to stimulate the use of natural gas, CNG, was initiated by Gov. Hickenlooper and Gov. Fallin. Under their nonpartisan umbrella, 22 states have agreed to replace older cars, when they are due to retire, with CNG cars. Their commitment will create a large pool of CNG purchases over the next few years. Detroit has agreed to work with the states and both the governors and carmakers want to use the effort to produce a less expensive CNG car for American households.

But there is more! Two companies, Coskata, Inc. and Celanese have had success in converting natural gas to ethanol and are both striving to commercialize and define strategies to market their product. If they are successful, other companies will follow in light of historical “copycat capitalism.” The result will be a fuel that will be environmentally better and clearly cheaper than gasoline. The result will also be increased demand for fuels like E85, which will generate consumer purchases of FFVs and the conversion of existing, older cars. It may also open up the pockets of investors concerning the support for future E85 pumps. If ethanol becomes popular because of price and environmental objectives, can methanol be far behind (excuse me, Percy)? Freedom to choose what you drive and what fuel you use on the high and bi ways of this nation would be consistent with the American way and creed.

Optimist and pessimist, the Oil & Gas Journal and replacement fuels

“The optimist proclaims that we live in the best of all possible worlds and the pessimist fears this is true” — James Branch Cabell. Or, as I once said in a presentation in China after Tiananmen Square, “a strategic optimist is a realist with brains.”

I live with the hope we can do better as nation with respect to the environment, our economy and the quality of life choices open to Americans, particularly low- and moderate-income Americans. But I worry that given the ideological and related political divisiveness among us, we may not.

In this context, after reading the recent article, “SAFE: Report’s ‘flash points’ emphasize US transportation fuel problem” in the Oil & Gas Journal, often seen by some as a mouthpiece for the oil industry, my thoughts reflected both optimism and pessimism. I concluded that I was a realist tempered by experience (and hopefully with a brain). Okay, what did the piece suggest that stimulated my mental and emotional adrenaline? Two or three quotes used by the author Nick Snow, respected Washington editor of OGJ, taken from a national conference convened by Securing America’s Future Energy (SAFE):

“A proliferation of global oil geopolitical ‘flash points’ (e.g., conflicts in countries or within countries that limit or could limit the supply of oil) makes it even more urgent for the U.S. to aggressively reduce its dependence on crude oil for transportation fuels…If we could be only 65% dependent on oil for our transportation fuels by 2025 instead of 90%, it would make a tremendous difference…We also need better politics developed by people who can find win-win situations so we can move forward…We all agree that we need to diversify our transportation sources away from oil.”

Nick Snow is no blazing liberal. According to his resume, Mr. Snow has spent 30 years or so as a journalist covering oil issues, many of those for media outlets friendly to oil interests (e.g., Oil Daily).

Have we reached nirvana? Did the article in the OGJ signal that big or small oil companies will soon announce their commitment to replacement fuels, like natural gas-based ethanol and methanol? Their support, given the fact that some oil companies already own significant natural gas fields, could be important from a public policy and an “on the ground production and distribution” perspective.

When I was a kid, older members of my family, if they wanted something but knew it was impossible to secure, would say, “I should live so long.” In some respects, while I’m surprised by the selected quotes used in the article by Mr. Snow, I doubt it heralds an epiphany by leaders of the oil industry or their companies.

Why am I a wannabe optimist but a realistic pessimist? Oil companies’ primary behavior over the past decade or more has been to oppose the development of most replacement fuels, FFVs and open fuel markets. Sometimes they have done this through other organizations that they influence or control, and sometimes directly. Clearly, gas station franchises granted by oil companies remain tied to a “just say no” position on replacement fuels, or a back- or side-of-the-station mandate concerning location of replacement-fuel pumps. For the most part, their reaction to “flash points” has been “drill, baby, drill,” and their battle cry has been that only more drilling will make the nation oil independent. This is a curious stance, since companies are simultaneously seeking to increase their ability to export globally. America still imports about a third of its oil, while retail prices for gasoline at most stations remain high.

I’m afraid that the OGJ piece by Snow is not a harbinger of good tidings concerning oil company endorsement of replacement fuels — at least any time soon. Rather, the article reflects a willingness of the author to honestly describe a major issue facing the nation, that is, the disproportionate share of oil in transportation fuels. Regrettably, excluded from the piece is a narrative about the fact that oil converted to gasoline has a significant negative effect on the environment, and that oil imports still take a toll on the economy. Replacement fuels would address security, environmental and economic issues, and related national objectives in a much more positive way.

I have a vested interest in remembering the famous Andrews Sisters. How many of you remember them? They played in my uncle’s band for a short time. So let me end, somewhat inappropriately, using the last stanza of one of their hit tunes “I Can Dream, Can’t I?” by composer Sammy Fain. I am sure neither the sisters nor Sammy would mind. With respect to the oil companies, “I am aware. My heart is a sad affair. There is much disillusion there. But I can dream, can’t I?”

Dreaming is about all you can do now, with respect to getting oil companies to develop, or support the development of, flexible replacement fuels. Maybe someday!