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Arctic Leaf

Let freedom ring: Oil companies, capitalism and fuel choice

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It’s a free county, ain’t it? Americans have many choices that are denied to citizens of other less-fortunate nations. But we forget how many decisions are made for us, sometimes out of necessity, such as paying taxes; sometimes out of greed, such as the monopolistic actions of oil companies in denying many Americans the ability to purchase alcohol-based fuels at their corner gas station. Try it someday! On your way home from work, on your shopping trip to your friendly supermarket or on your way to see a movie at your favorite theater, make a stop for fuel at a gas station. Make sure to have some gasoline in your tank, because it likely will take you a lot of time to find a gas station that sells E85 or even E15.

Now, I went to Harvard Law School for four days, before I decided that there were too many lawyers around and memorizing case studies was not my forte. But Harvard provides significant value added, apart from being near Harvard Square and Boston. I was exposed to terms and content related to antitrust, restraint of trade, collusion and monopolies. Now, I didn’t stay long enough to know whether those concepts applied to oil companies that restrict consumer choices of alternative fuel. Probably not, because I am sure, by now, one of my Harvard colleagues would have filed a well-reimbursed case to break open the fuel market to options like ethanol, methanol and more. But whether legal or not, oil companies deserve their comeuppance for limiting many of us who, too often, are required to use more expensive, environmentally harmful gasoline, instead of existing, safe, alternative fuels.

How do they do this? Well, if you are a gas station owned or franchised by an oil company, your contract and rules related to behavior often prevent you from adding a pump or adding to an existing pump to sell E15 or E85. As relevant, since oil companies generally require the stations they own to buy fuel from them, and since they don’t sell E15 or E85, adding a pump would be akin to waiting for the hereafter (and acting on faith that you will get there).

Wait, there is more! Every now and then an oil company wants to publicly show it is a bit beneficent (for image purposes), but don’t hold your breath with respect to proof that image and reality are the same. Sure, you might find an alternative-fuel pump near the rear side of the garage proximate to the men’s room, or, if you are lucky, on the side of the station near the air pump. Most oil-company-owned stations and franchisees are generally precluded from putting an alternative-fuel pump under the covered island or space out front. They also face restrictions on advertising alternative fuels as an available product and oil-company pricing limits competition from alternative fuels.

Congress has refused to enact open fuels legislation, which would require oil companies to open up their gas stations to other fuels. Ongoing efforts by public and private sector advocates, as well as nonprofit groups, to encourage policies that would convert older cars to flex-fuel vehicles and to encourage Detroit to build more FFVs could well lead to a large consumer market for alternative fuels and generate a positive market reaction among independent gas companies and, perhaps, even some smart oil companies. While I have been wading through the pros and cons of allowing oil companies to increase exports to other nations, I do believe that if increased exports are in the nation’s future, they should be approved only if the oil companies agree to require their stations and franchises to offer alternative fuels in a primary space alongside gasoline. A bit of tat for tat is in the public interest. Let freedom ring for consumer! Let capitalism mean competition for gasoline and alternative fuels at your nearby gas station! Oh, I forgot, alternative fuel station!

Arctic Leaf

Right, wrong and indifferent — the AAA, oil and alternative fuels

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My favorite automobile service group — the AAA — has once again treaded without fear or trepidation into analysis. Remember earlier, when it suggested that E15 harms engines, based on what looked like an oil-industry-generated study? The AAA’s methodology was weak and its conclusions suspect, a judgment supported by the EPA’s response. According to the agency, AAA’s conclusions were erroneous and based on a limited sample. EPA’s own findings were generated from a relatively large sample of cars, indicating that E15 is safe for most engine types and reaffirmed the wisdom of its approval of E15 usage.

I was surprised to find an article in Oil Price by blogger Daniel Graeber, based to a large degree on comments from AAA’s Michael Green suggesting that the oil shale boom has prevented gas prices from going higher than they are now. Graeber approvingly quoted Green, who said, “Sadly, the days of cheap gasoline may never return for most American drivers despite the recent boom in North American crude oil production.” Assumedly, Green meant that the cost of drilling tight oil will remain high and the costs per barrel of oil will follow suit.

Green apparently went on to indicate that political leaders, particularly, members of Congress who argue for a drill-baby-drill policy, are wrong to link more wells to significant price relief for folks who find gas costs a real problem.

The AAA is right when it suggests that, despite the oil shale boom and signs of increasing demand in America, refineries are sending increased amounts of oil-based products overseas. Understandably, their patriotism doesn’t extend to accepting a lower price for oil in the U.S. when they can get higher prices overseas.

The article appears inconsistent, when at one point it mentions that crude oil inventories are running above average, and later blames current exports for low supplies and low supplies for preventing a drop in prices at the pumps.

Both are correct in indicating sales of oil products abroad probably do have an effect on costs-up to now probably marginal. Certainly, if Washington extends export privileges, increased sales of oil abroad may have a more significant impact on consumer costs. More relevant, however, concerning gasoline costs at the pump, will be economic recovery in the U.S., investor speculation and the oil sector’s ability to manage prices.

Cheap oil has been, recently, and likely will be in the future, a fantasy. The cost of oil per barrel has hovered at around $100 and upward for an extended period, and drilling in shale is relatively expensive. Continuous exogenous and existential (don’t you like those words — they create great passion and emotion) threats from the Middle East and Eastern Europe, also, will likely tilt oil prices upward in the near future.

I would commend the AAA, assumed by many to be the leading advocate for automobile owners in the nation, for grasping the fact that the behavior of producers is likely to lead to higher gas costs and create burdens, particularly for low and moderate-income groups. Now with this knowledge, shouldn’t the AAA argue for breaking oil’s near monopoly on fuel? If the AAA was really interested in helping vehicle owners lower their cost of fuel, it might take the lead in arguing for choice at the pump. Wouldn’t it be great if they really stood up for more open fuel markets as well as alcohol-based transitional fuels, such as ethanol and methanol? Competition at the pump from flex-fuel vehicles, combined with conversion of older vehicles to flex-fuel cars would, over time, mute increases in gas prices and, at the same, time generate environmental benefits for a better America. Support for alcohol-based fuels is consistent with support for renewable fuels, if one is concerned about the environment and GHG emissions. Let’s bring them on as fast as we can. But let’s acknowledge that renewable fuels are not really ready yet for prime time. They are too expensive for many Americans and their technical limitations, particularly concerning electric batteries, are not yet coincident with the desires of most Americans.

Arctic Leaf

Rin Tin Tin, RINs and the price of ethanol

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Is the son or daughter of Rin Tin Tin alive and well? For a while I thought he or she was, while catching up on my reading over the weekend. I kept reading articles about RINs (Renewable Identification Numbers), their possible impact on the ethanol market and relatively high ethanol prices, despite the apparent weakening of the ethanol market. There seemed to be RINs and more RINs on every page I turned! Because I hadn’t slept for two nights, I couldn’t really focus on the contents of the articles, but only on the dog Rin Tin Tin and his offspring. How many of you have done that? Come on, be honest. Don’t make me feel bad!

I felt guilty after it became obvious that my focus on Rin Tin Tin resulted from a tired brain and eyes. I am back to the complex world of RINs today. (I had a bit of sleep).

Okay, you ask, “What the hell are RINs?” They are sort of a pass at reflecting company fulfillment of government mandates concerning biofuels. For this article, think ethanol! They are issued at the point of ethanol production or the purchase of the fuel by companies. They are approved by the EPA. They reflect a credit that verifies that the required amount of ethanol has actually been blended into gasoline. Succinctly, the Renewable Fuel Legislation, now the law of the land, mandates that a Renewable Identification Number (RIN) must be attached to every produced or imported gallon of renewable fuel in the U.S. One more thing, RINs are separated from the batch of renewable fuel when it is blended with gasoline. This fact indicates compliance with the law and Renewable Volume Obligations (RVOs). Credits, at this juncture, can be used for trading purposes.

In 2012, before the EPA’s Nov. 2013 proposal to change RIN quotas and lower requirements for ethanol, the price of RINs was very volatile. Initially, they ranged around 1 to 10 cents a gallon. By spring of 2013, however, they were around $1.

Why the price increase and what does it bode for the price of ethanol in the future? Initially, the RINs were thought of as a way to encourage refiners to produce renewable fuels, like ethanol, and to “pay” for credits if they don’t “play” by  meeting fuel targets.

Part of the volatility and increase in costs of RINs, probably, has to do with speculation by banks and other financial institutions. Thomas D. O’Malley, chairman of PBF Energy, indicated in a recent New York Times article that financial institutions “helped transform an environmental program into a profit machine…These things were designed to monitor the inclusion of ethanol in the gasoline pool…They weren’t designed to become a speculative item. For the life of me, I can’t see the justification for it.” Interviews with members of the financial community, conducted by the New York Times, seem to suggest agreement with O’Malley.

According to the Times, speculation in RINs “could have consequences for consumers. In the end, energy analysts say, the outcome will be felt at the gas pumps — as the higher cost of the ethanol credits get tacked onto the price of a gallon of gasoline.” The Times reports that the “credits, which cost 7 cents each in January [2013], peaked at $1.43 in July, and [were] trading for 60 cents” in September. Jordan Godwin in the Barrel Blog indicated that like RINs in 2013, ethanol prices in 2014 are downright wacky. “In a matter of less than two months, ethanol prices went from six-month lows to eight-year highs.” Godwin and others blame delayed returning train cars during the winter and constraints on supply and production. I would add speculation by Wall Street and uncertainty as to the impact and longevity of EPA’s new regulations concerning the reduced mandates for ethanol and other biofuels. It’s a dilemma for proponents of alternative fuels. Less speculation regarding trading, sustained predictable production and refinement of the distribution system, (along with avoidance by some retailers and blenders to price ethanol well over costs) would facilitate more competition with gasoline at the pump. More predictable competition and larger sales at the pump of E15 and E85 would generate more private-sector fixes to the ethanol supply chain as well as likely stabilize prices and, over time, lower them. In light of ethanol’s benefits to the nation, wise folks might be asked to find policies and stimulate market behavior that permit the American people to have it both ways.

Arctic Leaf

Is butanol the next big thing in biofuels?

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Fuel Freedom recently learned about a man named David Ramey who drove his 1992 Buick Park Avenue from Blacklick, Ohio to San Diego using 100 percent butanol, without making any adjustments to his engine.

Ordinarily this wouldn’t be big news. But with the EPA now considering cutbacks in the 2014 biofuels mandate, some producers of ethanol are starting to turn to butanol as a way of getting around the limitations of the 10 percent “blend wall” that is threatening to limit ethanol consumption. This could be another breakthrough in our efforts to limit foreign oil.

Butanol is the alcohol form of butane gas, which has four carbons. Because it has a longer hydrocarbon chain, butane is fairly non-polar and more similar to gasoline than either methanol or ethanol. The fuel has been demonstrated to work in gasoline engines without any modification to the fuel chain or software.

Since the 1950s, most butanol in the United States has been manufactured from fossil fuels. But butanol can also be produced by fermentation, and that’s where another opportunity for reducing our dependence on fossil fuels exists.

The key is a bacterial strain called Clostridium acetobutylicum, also named the Weizmann organism for pioneering biological researcher Chaim Weizmann, who first used it to produce acetone from starch in 1916. The main use for the acetone was producing Cordite for gunpowder, but the butanol, a byproduct, eventually became more important.

Once set loose on almost any substratum, Clostridium acetobutylicum will produce significant amounts of butanol. Anything used to produce ethanol — sugar beets, sugar cane, corn grain, wheat and cassava, plus non-food crops such as switchgrass and guayule and even agricultural byproducts such as bagasse, straw and corn stalks — can all be turned into butanol. (Of course, not all of these are economical yet.)

Given the modern-day techniques of genetic engineering, researchers are now hard at work trying to improve the biological process. In 2011, scientists at Tulane University announced they had discovered a new strain of Clostridium that can convert almost any form of cellulose into butanol and is the only known bacterium that can do it in the presence of oxygen. They discovered this new bacterium in, of all places, the fecal matter of the plains zebra in the New Orleans Zoo.

DuPont and BP are planning to make butanol the first product of their joint effort to develop next-generation biofuels. In Europe, the Swiss company Butalco is developing genetically modified yeasts from the production of biobutanol from cellulosic material. Gourmet Butanol, a U.S. company, is developing a process that utilizes fungi for the same purpose. Almost every month, plans for a new butanol production plant are announced somewhere in the world. Many refineries that formerly produced bioethanol are now being retrofitted to produce biobutanol instead. DuPont says the conversion is very easy.

What are the possible drawbacks? Well, to match the combustion characteristics of gasoline, butanol will require slight fuel-flow increases, although not as great as those required for ethanol and methanol. Butanol also may not be compatible with some fuel system components. It can also create slight gas-gauge misreadings.

While ethanol and methanol have lower energy density than butanol, both have a higher octane rating. This means butanol would not be able to function as an octane-boosting additive, as ethanol and methanol are now doing. There have been proposals; however, the proposals are for a fuel that is 85 percent ethanol and 15 percent butanol (E85B), which eliminate the fossil fuels from ethanol mixes altogether.

The only other objection that has been raised is that consumers may object to butanol’s banana-like smell. Other than that, the only problem is cost. Production of butanol from a given substratum of organic material is slightly lower than ethanol, although the increased energy content more than makes up for the difference.

Ironically, the EPA’s decision to cut back on the biofuels mandate for 2014 is now driving some refiners to convert to butanol, since its greater energy density will help it overcome the 10 percent “blend wall.”

“Michael McAdams, president of the Advanced Biofuels Association, an industry group, said butanol was a ‘drop-in’ fuel, able to be used with existing gasoline pipelines and other equipment because it does not have a tendency to take up water, as ethanol does,” The New York Times reported last October. “‘It’s more fungible in the existing infrastructure,’ he said. ‘You could blend it with gasoline and put it in a pipeline — no problem.’

“Butanol would also help producers get around the so-called blend wall, Mr. McAdams said…With the 10 percent limitation, ‘you don’t have enough gasoline to put the ethanol in,’ he said. ‘You don’t have that problem with butanol.’”

So here’s to butanol. It will be yet another big step in reducing our dependence in foreign fuels.

Arctic Leaf

Of myths, oil companies and a competitive fuel market

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I do not wish to join the intense dialogue concerning whether or not the government should allow exports of crude oil. Others are already doing a good job of confusing and obscuring the pros and cons of selling increased amounts of America’s growing oil resources overseas.

What I do want to do is just focus on the logic of one of the oil industry’s major arguments for extending the permitting of exports — again, not on the wisdom of exporting policy. Permit me to do so in the context of the industry’s long-standing argument concerning the pricing of gasoline to U.S. consumers. The argument is that more oil drilling in the U.S. will lower the price of gas and put America on the path to oil “independence.”

In somewhat of circuitous manner, oil companies are using the opposite of their domestic advocacy for “drill, baby, drill” policy as a way to keep prices lower at the pump. Their yin is that producing more oil in the U.S. and sending significant amounts overseas, combined with declining vehicular fuel demand, will lower gas prices. Economist Adam Smith would applaud the simplicity if he were alive and well. Their yang presents a bit more complicated set of “ifs.” That is, the industry presumes that fulfillment of the yen (excuse another pun) to export will result in more U.S. oil being drilled because of increased world demand generated by the assumed ability of the U.S. to produce oil at less costs than the world price for oil. It will also help foster infrastructure development in the U.S. to break up current log jams concerning oil transportation. Finally, it will facilitate more efficient refineries, allowing them to specialize in different types of oil. The yin and yang will result in (marginally) lower prices of gasoline — so goes the rhetoric and oil-industry-paid-for studies.

Paraphrasing Dr. Pangloss in “Candide,” the oil companies hope for the “best of all possible worlds.” But, before Americans run out and buy stock, note the price of gasoline does not directly reflect oil production volume. Indeed, gas prices, despite increased supplies, have gyrated significantly and now hover nationally over $4 a gallon. Generally, oil and gas prices relate to international prices, tension in the Middle East and investor and banker speculation — not always or directly domestic costs. Stockholders and executives of oil companies function not on patriotism but on profit and to the extent that the law permits, they will sell overseas to get the best price — in effect, the best dollar over payment for a barrel of oil. Consumers, I suspect, are rarely a significant part of their opportunity costing.

Unfortunately, lack of strong empirical evidence tempers the company’s argument that increased world demand will stimulate good things like refinery efficiency and log-jam-ending infrastructure. Maybe if the price per barrel is right (clearly, higher than it is now) and seems predictable for more than a small period of time, refinery and infrastructure developments will be positive. But, the costs to the consumer, in this context, will be higher. It will also be higher because shale oil is tight oil and more risky and costly to drill.

Oil independence is a myth suggested by oil industry and a non-analytical media. Certainly, the oil boom and less vehicular demand have generated less imports and less dependency. But we still buy nearly 300 billion dollars’ worth of oil every year to respond to need and we still produce far less than demand.

Somewhere in the dark labyrinth of each major oil company is a pumped-up (another pun), never-used, secret justification for franchise agreements impeding the sale of alternative fuels in their retail outlets. To alleviate guilt, it may go something like this: “Monopolies at the pump will allow us to make larger profits. You know we will someday soon want to give back some of the profits to consumers by lowering the price of gasoline.” If you believe this still-secret beneficence, let me sell you the Brooklyn Bridge.

There is another way to steady the gasoline market and lower consumer costs. Inexpensive conversions to allow older vehicles to use safe, cheaper and environmentally better alternative fuels (as opposed to gasoline), combined with expanded use by flex-fuel owners of alternative fuels, would add competition to the fuel market and likely reduce prices for consumers. Natural-gas-based ethanol is on the horizon and methanol, once the EPA approves, will follow, hopefully shortly thereafter. Electric cars, once costs are lower and distance on single charges is higher, will be a welcome addition to the competitive mix.

Arctic Leaf

Outnumbered 100-to-1, Methanol Is Upbeat

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“Why is it that we hear every day some new story about Elon Musk’s electric car, about Clean Energy Fuel’s efforts to build a CNG highway, or about some laboratory breakthrough that is at last going to bring us cellulosic ethanol, yet with methanol now cheaper than gasoline, you still never hear anything about it?”

That’s the question I posed to the three-member panel while serving as moderator for the wrap-up session at the 2014 Methanol Policy Forum in Washington last week.  The sponsors were the Methanol Institute, the Institute for the Analysis of Global Security (IAGS) and the Energy Security Council.

Anne Korin, co-director of IAGS, who earlier had moderated an even bigger panel that included former U.S. Senator J. Bennett Johnston, former National Security Advisor Robert McFarlane and former Ambassador to the European Union Boyden Gray, had a very unusual answer.  “If I may be permitted to be a bit cynical here,” she said, “I think the reason may be because methanol doesn’t require any subsidies.”  The implication, of course, is that those who come to Washington begging for money receive a lot more attention from Senators and Congressmen than those who don’t.

The question of politics versus economics had been raised at the outset of the daylong conference by Korin’s co-director at IAGS, Gal Luft, in his opening remarks.  “We’ve all heard this business about the circular firing squad and how the various alternatives to foreign oil shouldn’t be fighting each other,” he told the audience of about 400.  “But you have to acknowledge the importance of what goes on in Washington.  You can’t just talk about production ― you need money.  If you’re not at the table, that means you’re probably on the menu.

Luft showed a chart illustrating that while corn ethanol production exceeds methanol production by a factor of only 5-to-1 (14 billion gallons/year as compared with 2 bg/yr), the amount of money spent lobbying for ethanol is 50-to-1 (less than $100,000 vs. $5 million).  “When you add in the politics of the farm belt, it’s probably closer to 100-to-1,” he added.

So was anyone discouraged?  Not at all.  The news from industry executives is that methanol production is ramping up everywhere due to the bonanza of the fracking revolution.  It seems like only a matter of time before the idea of replacing large portions of our fuel imports with domestically produced methanol begins to command attention.

“In the past decade we closed down five methanol plants in the U.S. and moved them all to China,” John Floren, CEO of Methenex told the gathering of 400 at the Capital Hilton.  “The price of gas had become just too high.  Now we’ve moved two plants back from Chile and are looking at a third relocation.  We’ve got 1000 people working on our Louisiana site.  The chemical industry is starting to build as well.”

Tim Vail, the CEO of G2X, another methanol producer, had a similar take.  “The U.S. is a great place to invest right now,” he told the audience.  “The argument was always that you had to go to the ends of the earth to build methanol plants because that gas wasn’t available here.  Now all that has changed.  Our big worry is labor shortages but the construction industry is responding to our needs.  It takes away a lot of anxiety about having your assets appropriated by other countries.  China may seem like a good place to invest, but can you really trust the rule of law?”

Philip Lewis, chief technology officer of Zero Emission Energy Plants (ZEEP) was equally upbeat.  “I think the whole shale thing is being underestimated,” he said at the close of the morning session.  “It’s another industrial revolution.  And it won’t happen anywhere else because we have the thing that makes it work – private ownership of the resource.  In France, the government owns all the mineral rights and no one wants drilling on their land.”

But governments do have control over other things in this country and there was some questioning of whether federal agencies will be receptive to methanol as a fuel substitute or additive.  Matt Brusstar, deputy director of the EPA’s National Vehicle and Fuel Emissions Laboratory, claimed that his agency had been in the lead of methanol development for 30 years.  “Charlie Grady, who was in our department, was a big supporter of methanol,” said Brusstar.  “He even wrote a book about it.”  (Unfortunately, a Google search for Charlie Grady and methanol turns up no mention of Grady or his book.)  Patrick Davis, the director of the Fuel Cell Technologies Office in the Department of Energy, was even less encouraging.  “The Office of Science does not currently have any projects to create methanol as an end fuel,” he said.  “It could take a decade to sell enough methanol-compatible vehicles before a widespread distribution network would be feasible.”

When I queried Brusstar about Robert Zubrin’s documentation of the multi-thousand-dollar fines that the EPA is imposing for unauthorized conversions of engines to methanol, [See “Making the Case for Mars and Methanol,” Feb. 11] several government officials, plus Fuel Freedom Foundation director of research Mike Jackson, argued that faulty conversions can increase air pollution.

Despite the notable lack of enthusiasm from government agencies, however, there was a strong sense among the rank-and-file that methanol may be about to find a place in the sun.  “This is a much bigger crowd than we’ve ever had,” said one veteran of previous conferences.  “It’s a very exciting time for methanol.”

 

 

 

 

 

 

 

 

 

 

 

 

 

Arctic Leaf

Progress on Fuel Efficiency: More is needed

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Every now and then I will read a White House Blog.  They’re sort of a fun read when you’re depressed about the state of the world and the country.  The content always somehow reminds me of  Gene Kelly dancing in the street in the middle of the rain, or that old (possibly New Yorker) cartoon where the patient tells the psychiatrist that he is not doing well and the good doctor says ‘no you’re just fine, you’re happy and healthy.’  Probably neither is the proper analog to the politically necessary positive nature of the White House blurbs.  I marvel at times at the President’s ability to seek a better America, especially given the politics of the present.  While his optimism and tenacity don’t always come through as “Morning in America,” I believe that his attitude is based on a reasonable outlook about what the nation can do, if it can engage in an honest dialogue about key environmental and alternative fuel issues.

Last week’s blog focused on the White House’s effort to increase fuel efficiency standards.  It notes correctly that the President’s legislative approach to the environment has resulted in the toughest fuel economy standards in history:

“Under the first ever national program, average fuel efficiency for cars and trucks will nearly  double, reaching an average performance equivalent to about 54.5 miles per gallon by 2025….In 2011, the President also established the first-ever fuel efficiency and greenhouse gas standards for medium and heavy duty vehicles, covering model years 2014 through 2018.”

More is to come! Increased fuel efficiency standards are currently being addressed by the Administration, and the EPA is hard at work developing Tier 3 rules.

The Administration’s record is a decent one and has benefited the environment, lessened ghg emissions, and strengthened the economy. Regrettably though, fuel efficiency regulations primarily apply to new cars.  They should be matched by a cost efficient and comprehensive federal effort to encourage the conversion of older non flex fuel vehicles; they also should encourage Detroit to continue producing larger numbers of flex fuel cars.

In this context, EPA and Detroit automakers need to reach a consensus concerning effective engine recalibration alternatives, as well as an extension of consumer warranties and related financial coverage of recalibrated vehicles.  Without permitting older cars to achieve the fuel efficiency and environmental advantages of flex fuel vehicles, we will not be able to respond to Pogo’s admonition and Commodore Oliver Perry’s initial statement (paraphrased): that we, as a nation, have met the enemy, and he is us!

To grant primacy to new or relatively new flex fuel cars would increase the nation’s ability to reduce ghg emissions and other environmental pollutants (e.g. NOx and SOx). There are well over 200,000,000 non flex fuel cars in the U.S. that cannot readily use available fuel blends higher than E-15 and will not be able to use natural gas based ethanol that hopefully relatively soon will come on the market.

Lowering the certification costs of conversion kits by the EPA and increasing the number of manufacturers of those kits would bring down their price from around 1,000 dollars to the near 300 dollar level that is common in the “underground” market.  Simplifying legal conversion could  —and indeed would —-make an important environmental difference.  Such action would also open up the fuel market to competition, and likely lower the price of gas at the pump for consumers. Finally, such actions would also support the President’s objective to wean the nation off of oil and gasoline.  Oh Happy Day!  Go for it Gene Kelly and the American Association of Psychiatrists!  It might be time to show some real love for environmentally and efficiency neglected and needy older vehicles.

Arctic Leaf

Oil and Natural Gas Prices and the Future of Alternative Fuels

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I love Vivaldi’s Four Seasons, especially the music from the spring. I love the optimistic line from the poem by P.B. Shelley, “if winter comes can spring be far behind.”  The unique cold weather, the Midwest, East Coast and even the South, has been facing this year will soon be over and spring will soon be here. Maybe it will be shorter. Perhaps, as many experts indicate, we will experience a longer summer, because of climate change. But flowers will bloom again; lovers will hold hands without gloves outside, kids will play in the park… and natural gas prices will likely come down to more normal levels than currently reflected.

Last Friday’s natural gas price according to the NY Times was $5.20 per thousand cubic feet. It was “the first time gas had crossed the symbolic $5 threshold in three and half years, although (and this is important) the current price is still roughly a third of the gas price before the 2008 financial crisis and the surge in domestic production since then.”

Why? Most experts lay the blame primarily on the weather and secondarily on low reserves, a slowdown in drilling, and pipeline inadequacies. The major impact so far has been on heating and electricity costs for many American households, particularly low and moderate income households and the shift of some power plants from natural gas back to coal.

I wouldn’t bet more than two McDonald’s sandwiches on where natural gas prices will be in the long term. But I would bet the sandwiches and perhaps a good conversation with a respected, hopefully clairvoyant, natural gas economist-one who has a track record of being reasonably accurate concerning gas prices- that come cherry blossom time in Washington, the price of natural gas will begin to fall relatively slowly and that by early summer, it will hover between 3.75 to 4.25 per thousand cubic feet.

Natural gas prices over the next decade, aided by growing consensus concerning reasonable fracking regulations as reflected in Colorado’s recent regulatory proposals, and EPA’s soon to be announced regulations, should be sufficiently high to reignite modest drilling passions, improvements in infrastructure and increased supplies at costs sufficient to maintain an advantage for natural gas based fuels when compared to oil based fuels at the pump.

The present relatively low price of oil (Bent Crude $107 a barrel; WTI $97.00 a barrel) and its derivative gasoline ($3.30 a gallon) may impact the cost differential between gasoline and natural gas based fuels. But the impact could go both ways. That is, if the price of oil per barrel continues to fall and translate into lower costs for gasoline, the price differences between natural gas based fuels and gasoline would narrow. Conversely, if the price of oil goes lower than $90 a barrel, its present price, it likely will impede future drilling, particularly in high cost, hard to get at environmentally sensitive areas. This fact combine with renewed economic growth in the U.S., Europe and Asia, as well as continued tension in the Middle East and continued speculation could well result in a return to higher gasoline prices.

Clearly, the relationship between the cost of natural gas based fuels (CNG, ethanol and methanol) and gasoline is a critical variable in determining consumer behavior with respect to conversion of existing cars to flex fuel cars and the purchase of new natural gas cars (Based on the national pilot involving 22 states lead by Governor Hickenlooper(D) and Governor Fallin(R), as well as interviews with carmakers, creation of a deep predictable market for CNG fueled vehicles will bring down the price of such cars and give them competitive status with gasoline fueled vehicles).

The odds are that the lower costs of natural gas based fuels will serve as an incentive to buyers and existing owners to use them. That is, assuming problems related to fuel distribution as well as access and misinformation concerning the affect alternative fuels have on engines are resolved by public, non-profit, academic and private sectors. Maybe I will up my bet!

Arctic Leaf

Can the Methanol Revolution Start on Indiegogo?

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Indiegogo, the crowd-funding site normally populated by documentary filmmakers may seem like an unlikely place to try to launch the methanol revolution. But Scott Morris is ready to give it a try. shutterstock_154960103

The Alabama native has experience in driving and servicing racing cars, so he knows the role that methanol has played in places such as Indianapolis, where the Indy 500 cars raced on methanol since the 1960s until finally pressured recently to give it up by ethanol producers.

“If racing cars going 200 miles per hour can run on methanol, why can’t ordinary consumer vehicles?” asks the (tk-year-old native of Alabama.  “The government has been shoving various alternative fuels down the public’s throat for some time but it obviously isn’t working,” he says. “We’ve got something here that’s going to be driven by consumer desires and nothing else.”

That “something” is a plan to open methanol stations around his native Montgomery with the promise of a free tuneup that will allow drivers to use methanol without any problems, a warrantee on the converted engine, and a chance to fill up at a methanol pump for a cost of about half the price of a gallon of gasoline.

“Ultimately, our business plan is shaped around the idea – give the consumer what they want,” says Morris. And what they want is a cheaper fuel that’s good for America and not sending dollars overseas to countries that could be funding terrorism.”

What Morris has discovered as a car mechanic and fledging entrepreneur is what a lot of experts also recognize – that there’s a huge market opportunity in turning our abundant natural gas supplies into a liquid fuel that could replace gasoline. All it would take is a little engine adjustment and a little initiative.

“What we’re doing is converting the customer’s car to methanol for free,” says Morris. “Then we give them a warrantee against any damage. [This is opposed to the reluctance of the auto companies, which are saying they will not honor warrantees on cars built before 2001 if they use methanol.]  “Then they can fill up at one of the methanol stations in Birmingham we’re going to open up. But if they can’t find a methanol station, they can still use gasoline.

“To me that’s the free market,” he adds. “Give the customer a choice and see which fuel wins.”

Morris is confident that at a per-mile cost that is 40 percent lower than gasoline, methanol is ready to win the day. But he needs some help in getting started.

“We already have the support of one of the nation’s largest methanol producers,” he says. “They’ve pledged $200,000 but we have to match it with $300,000 of our own money.” That’s where Indiegogo comes in.  Morris has posted under the title, “Kiss Gasoline Goodbye.”

“There is a fuel that costs as much as 40 percent LESS per mile driven and can easily replace gasoline, without requiring you to buy a new car or pay to have yours converted, and can be sold at the gas stations we already have in America,” he tells prospective contributors. “Methanol is that solution. Methanol can be made form almost anything . .. Currently natural gas is the most viable feedstock and will be for many years to come.  But coal is a close second, and we have a LOT of coal. Between natural gas as coal, we have enough to fuel every vehicle in the USA for the next 400 years!”

Unfortunately, Crimson Fuel has a long, long way to go. With 33 days left on its Indiegogo campaign it has still only raised $100. Beyond that it will have to deal with the lack of approval from the Environmental Protection Agency in using methanol in gasoline engines.

In truth, Morris’s campaign is pretty quixotic at this point. But he’s recognized all the advantages of methanol and has a sound business plan. If nothing else, it’s a way of getting out the news. With all its advantages, the methanol revolution is bound to start somewhere. Birmingham, Alabama just might be the place.

Arctic Leaf

Can Ethylene Replace Gasoline?

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The effort to replace oil-based gasoline in our cars with similar fuels derived from natural gas took a big step forward last week with the announcement that Siluria, a promising start-up, will build a $15-million demonstration plant in Texas

The plant will produce ethylene, the most commonly produced industrial chemical in the world and the feedstock for a whole raft of products in the chemicals and plastics industry. But Siluria, which is not yet a public company, is also planning demonstration plants that will produce gasoline. Initial estimates are that the product could sell at half the price of gasoline derived from oil. If these projections prove to be anywhere close to reality, we could be on a path to a fuel economy that is finally able to cut its dependence on oil.

The idea of producing ethylene from natural gas has been around since the 1980s but achieved little success. Several major oil companies invested millions of dollars in the process but finally gave up on it. Jay Labinger, a Caltech chemist who did much of the initial research, finally wrote a paper in the 1980s warning other researchers that it was a waste of time. He may have given up too soon.

Siluria is a California-based startup that has received much of its funding from Silicon Valley investors who tried to move from computers and the Internet into the energy space over the last decade. So far their success hasn’t been great. In fact Vinod Khosla and other Silicon Valley energy entrepreneurs were the subject of an embarrassing critique on “60 Minutes” only two weeks ago. The Siluria venture, however, may be the gusher that makes up for all the other dry holes.

The 1980s efforts concentrated on heat-activated processes whereby methane is split into carbon and hydrogen and then recombined into the more complex ethylene, which has two double-bonded carbons and four hydrogens. All these efforts proved far too energy-intensive, however, and never became economical.

Siluria has been trying a different approach, seeking catalysts that would facilitate the process at much lower energy levels. Moreover, the company has spurned the more recent approach of trying to design molecules that fit the chemicals just right and gone back to the old shotgun approach where thousands of candidates are tried on a catch-as-catch-can basis.

Defying all expectations, the process seems to have worked. Siluria has come up with a catalyst that it says promotes the breakdown and subsequent reassembly of methane at very low energy levels. It has built pilot plants in San Francisco, Menlo Park and Hayward, California and last week announced plans for building a full-scale demonstration plant in La Porte, Texas in conjunction with Braskem, the largest petrochemical manufacturer in South America. If that isn’t proof that Siluria is on to something, what is

The implications of this development are enormous. Natural gas is two to six times more abundant than oil in the world and is now selling at 1/5th the price for an equivalent amount of energy. The traditional tandem pricing of oil and natural gas prices has now been broken and gas is functioning as a completely different commodity, much cheaper.

The difficulty all along has been that natural gas is hard to put into your gas tank. So far efforts have involved compressing natural gas, which means storing it at 3600 pounds per square inch, or liquefying it, which requires temperatures to be lowered to – 260 degrees F. Neither is very practical and would require a whole new auto engine and delivery infrastructure.

Efforts to convert gas into a liquid have concentrated around methanol, which is the simplest alcohol and has been used to power the Indianapolis 500 racing cars since the 1960s. But methanol is the deadly “wood alcohol” of the Prohibition Era and raises fears about poisoning – although gasoline is poisonous, too. The Environmental Protection Agency has never certified methanol for use in auto engines, although an M85 standard has been permitted in California.

Synthesizing gasoline through Siluria’s ethylene-based pathway could solve all these problems. Ed Dineen, CEO of Siluria, says that the gasoline product could sell at half the price of today’s gasoline. With more natural gas being found all the time – and with $1 billion being flared off uselessly around the world each year – any success in turning natural gas into a readily accessible automobile fuel could have a revolutionary impact on our entire economy.