It seems like every day there’s a new think piece out there decrying the subsidies that renewable energy, alternative fuels, and the vehicles that can run them receive. Yet when it comes to the substantial government assistance for oil companies, those same critics are conspicuously silent.
Even with a surge the past two days, oil prices have been on the downward slide the past 14 months, dropping from about $115 a barrel to around $40. But that hasn’t translated to savings at the pump for all drivers.
In some areas of the United States, gas prices have remained stubbornly flat during the oil plunge, or have inexplicably risen. Fuel Freedom Policy Manager Gal Sitty has put together this informative graph that tracks the price of oil (an amalgam of Brent crude, the international benchmark, and West Texas Intermediate, the U.S. standard) compared with the average price of gasoline in three big states: California, New York and Ohio.
Experts have no shortage of explanations for these anomalies. They usually sound like this: Something-refineries-inaudible. Cue Charlie Brown’s teacher talking wah-wah speak.
It’s true that a unit at the BP refinery in Whiting, Indiana, one of the largest refineries in the Midwest, is back online after breaking down Aug. 8. Media outlets report that gas prices in the region already have begun falling again, but they’re sure not doing so as quickly as they shot up. And it doesn’t explain that gentle slope of a line for New York above.
In California, where gas prices pushed toward $5 in July after a sudden, insufficiently explained shortage, prices remain high, purportedly owing to the Exxon Mobil refinery in Torrance still being below capacity six months after a fire. As Sue Carpenter, automotive writer at the Orange County Register, explains:
Crude oil typically accounts for just 46 percent of the cost of a gallon of gasoline, according to U.S. Energy Information Administration. Taxes account for 16 percent, 13 percent is marketing and distribution, and 25 percent is refining.
In California, though, crude oil is just 34 percent of the cost of a gallon of gas, and refining is 35 percent, according to the California Energy Commission.
Still, it’s curious that just as California motorists were getting hammered, oil refineries weren’t sharing the pain: Refineries in the state collected $1.61 per gallon in July, the highest since the state began keeping records in 1999.
It’s clear that there isn’t enough refinery capacity in the U.S. (Raise your hand if you’d like one built in your back yard. There are people in Whiting who still remember what happened there 70 years and a day ago.) But even if refinery disruptions are partially to blame, it’s only further evidence that we’re too beholden to a volatile global oil market, and we’re dependent on an aging, infrastructure for refining.
The only way to make the fuel pricing structure sustainably affordable is to introduce fuel choice so gasoline has to compete with cheaper, cleaner alternatives like ethanol and methanol.
Until that happens, wild price swings and supply disruptions will be the norm in America.
Related posts:
Ann 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.
You and I want to be called rational. We want to believe that with solid analysis, most things are predictable by smart people in this complex world of ours. Are they? I thought about this after reading a recent interview with a noted futurist at Mercedes-Benz, Eric Larsen.
My conclusion, based on his view of the future of cars and transportation fuels, is that his thinking — while provocative — is too tidy, often too rational and many times likely wrong. His comments brought back the words of Matthew Arnold, “We do not do what we ought; what we ought not, we do; and lean upon the thought; that chance will bring us through” – a variation on chaos theory.
Let’s together go through some of Larsen’s views, which, at times, I have taken the liberty to paraphrase or summarize (fairly, I hope).
Larsen: Continued suburban growth, wealth and American family needs will support and create demand for large vehicles.
In making an argument for large cars, Larsen indicates that the suburbs will be around for a long time and that young people will want children and home-based lives, with lots of space around them. They will fill up a car with kids, dogs and stuff from big-box supply stores. That means people will still want big cars. Conversely, rich people want luxury, based on their income and their desire to show off. He indicates, In our new AMG model we have an idea of, one man, one engine. Although he doesn’t use the term, according to Larsen, wealthy people are somewhat schizoid. They want to show they care about the world, and to do this many often buy the more-expensive Prius or provide a niche market for Tesla. But they go back and forth between doing good and doing what their wealth permits and their status seems to generate, a desire for big, technologically contemporary cars. Wealth is so tough to manage! No wonder psychiatrists charge big bucks.
Kaplan: While America’s love for the big car remains a legacy of the good ‘old days when gasoline prices were low for long periods of time and incomes were growing – contrary to Larsen – habits, income and demography seem to be changing slowly, but nevertheless changing, and the result may lead to less suburban growth, more atypical families and less income for gasoline, particularly among low and moderate income families. In this context, smaller cars that behave more parsimonious with gas will likely show a visible uptick in sales, over time. Ladies and gentleman, place your bets on where prices will be in one, two, three or more years out. Make a fair guesstimate on trends concerning vehicle popularity and fuel use (your guesses will be no worse than what the experts predict). The odds are that gas prices will return to their “normal” highs and smaller cars that use alternative fuels will take a larger share of the market.
Larsen: Fracking has been a strong influence, keeping gas prices low.
Kaplan: Sure, fracking has led to higher levels of oil production in the U.S. and softened the market for gasoline, but lower prices (already on the rise again) relate to much more than fracking. They include: lower consumer demand, increased global supply of oil, the changing value of the dollar, the decision of the Saudis to avoid lowering production and to keep prices low to secure increased market penetration, etc. Most frackers did not anticipate the recent significant drop in the cost to consumers at the pump. Quite the contrary!
Larsen: Internal combustion engines are getting better mileage.
Kaplan: Yes, they are getting better mileage, thanks in part to CAFE standards and thanks in part to technology. New cars also emit less pollutants and GHG emissions. So what’s the rub?
Internal combustion engines using gasoline are likely to always generate more pollutants, and more GHG emissions than the alternative fuels now on the market. Dependence on gasoline because of reliance on non-flex-fuel internal combustion engines will also continue to lead the United States into military conflict to safeguard our own and our allies need for oil. Big cars pushed by Larsen, for the most part, continue to be gas guzzlers. Larsen is right to suggest that use of alternative fuels, including natural gas and electricity, instead of gasoline in bigger and newer luxury cars will help mitigate their present negative environmental, economic and security impacts. I am sorry he didn’t extend his comments to converting older big cars to flex-fuel status so they could use other alternative fuels that he seems to favor.
Larsen: [In context of his support of larger cars] natural gas is a cleaner fuel and easier to install from a technical point of view.
Kaplan: Larsen’s comment is basically correct for new cars and cars aimed at a luxury market. The fuel is cleaner than gasoline and installation of CNG equipment, when building a new car from the ground up, is not difficult. However, CNG, at the present time, adds about $8,000 or more to the price of a vehicle – whether new or converted – which prices them out of the market for most low- and moderate-income families.
Thanks to the leadership of the governors of Colorado and Oklahoma, a bipartisan demonstration is going on in 22 states. It focuses on replacing older state cars in fleets with Detroit-produced CNG vehicles. One of the key objectives of the effort is to see if building demand among states can get Detroit to develop a CNG fueled car that fits the budgets of more than just a relatively few Americans.
An equally promising initiative that would convert natural gas to ethanol is now being considered by both business, political, and foundation leaders across the nation. Ethanol, while not perfect, is a better, cheaper and more environmentally friendly fuel than gasoline. Its use requires a flex-fuel vehicle. Together, both will meet Mr. Larsen’s priorities. They will clearly reach the pocketbooks of the rich and famous. Happily, although not apparently Larsen’s major concern, both together will also reach the budgets of many low- and moderate-income households.
Larsen: Refueling with gasoline takes five minutes, once a week. People have anxiety about running out of fuel with electric cars. Tesla, cities and garages are building charging stations. But will they be sufficient?
Kaplan: Electric cars will become more popular as the price comes down, batteries provide fuel for longer driving distances, more infrastructure is developed by the private sector. Larsen’s question, if electric cars become popular, are they really going to put a charger in every space in the garage, is a bit specious. Not every corner has a gas station and not every space in a garage needs to include a charging station. Greater mileage from batteries on a single charge will generate (excuse the play on words) the ultimate distribution of charging stations in garages and, indeed, on roads and freeways.
Larsen: Hybrids can do well in the suburbs, where everyone could have a charging station in the garage, with rooftop solar panels to produce electricity.
Kaplan: Clearly, Larsen would not be a good candidate for a coming-back-to-the-city initiative. Indeed, his apparent views do not fit the movement back to cities at the present time on the part of many diverse households in America. Irrespective, someday soon, solar panels will charge stations in different locations to fuel hybrids and electric vehicles. If panels succeed in the suburbs, they can also succeed in cities (please try singing to the tune of “New York, New York” … if you can do it here, you can do anywhere). The sun has not been appropriated by suburbanites.
Larsen works as research director at Mercedes, which probably colors his views of urban America, the demand for luxury cars and fuel options. His perceptions of where we are as a nation regarding alternative fuels is narrow and seemingly limited. But he has raised some interesting observations related to the roles of demography, place of residence, and income to car buying and consumer choices regarding fuels. I wish he was less dogmatic, more expansive and less riveted intellectually by his experience at Mercedes. We need to introduce him to chaos theory and more alternative fuels.
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)
Former Gov. Richard Lamm of Colorado and I once led a group of CEOs on a trip to London. It was focused on what Colorado could learn from the British healthcare system. During the trip we visited St. Elizabeth Hospital. There in the lobby was a stuffed, mummified body of Sir Jeremy Bentham, so I took a picture with him. He was not very talkative.
But the resulting photograph brings back memories, perhaps apropos to the oil industry. Seeing Bentham looking so well and remembering how much he meant to my life — both the pain and joy — I propose we bring back Adam Smith, and place him in the lobbies of the big oil companies. Why? Easy: they seem to have forgotten about the value of free markets, competition and capitalism. A little dose of recall and guilt every morning when they go to work and when they leave their offices every evening wouldn’t hurt. Over time, maybe there would be substance behind their luncheon or dinner speeches concerning free markets and capitalism. Maybe they would remember Smith’s warning that, “People of the same trade [in this case, the oil industry] seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
Right on, Adam! You are not my favorite economist or ethicist, but your quotation appears to fit the behavior of the oil industry. Sen. Dianne Feinstein, during California’s increase in gas prices a couple of years ago, suggested that oil companies and investors might have tried to set prices and blur their actions by casting blame on the refinery fires for gas price spikes. Her view was that market variations alone did not explain the high prices consumers were paying at the pump. Her comments implied some sort of collusion or manipulation.
The general behavior of the big five oil companies concerning competition from E85 lends credence to Feinstein’s suspicions. Listen, my reader, and you shall hear some examples of big oil’s apparent, sometimes seemingly coordinated, efforts to restrict the growth of E85 sales here (sorry, Longfellow), even though E85, at the time, posed no real immediate competitive threat to overall gasoline sales. Of the just over 150,000 retail fuel or gas stations in the nation, only 2.5 percent offer E85 and less than one half of one percent of the major brands provide E85 under their branded canopy. How nice of them! Read a franchise agreement from Exxon or Texaco, and see if you can find a provision for an E85 pump…maybe there are words suggesting a location in the back of the station, near the men’s or ladies’ room or in front of the station, clearly off center and not under the canopy.
Look hard at the language and the decisions of nationally branded retail stations. Franchisees are generally limited as to price, fuels, location of pumps and marketing strategies. Maybe these restrictions are legal and from a monetary and profit point of view, understandable. But from a consumer perspective, they limit choice and often frustrate competition.
Some have charged oil companies with price fixing or collaboration in setting prices (a nicer way to say fixing). “No, not in America,” you say? Adam Smith would turn over in his grave! According to a report by AJW company in 2014, “Since RIN prices began to rise in 2013, the nationwide average discount for E85 vs. E10 at independent stations has been 14 percent or greater for all but one month. During the same period, the nationwide average discount for E85 at major branded stations reached 14percent only once. This discount is only a price comparison and does not factor in relative energy content of the fuels. As long as there is limited availability and unattractive pricing at major branded stations, low E85 demand likely will persist among consumers using those stations.”
Generally, I am not a fan of special-interest group research or funded research. I prefer to rely on, at least, relatively independent think tanks, universities and scholars. Yet, recently gifts of money for research blurs the line between the interest of funders and the integrity of the word independent. Caveat emptor!
A 2014 case study by the Renewable Fuels Association (RFA), an advocacy group funded, in part, by self-interested donors, tracked the per gallon fuel costs of all nine retail stations selling E85 in St. Louis during the summer of 2014. Each station had the brand names of one of the five largest oil companies.
The data indicated that there is some support for the notion that gasoline producers/suppliers and their franchised retailers in at least St. Louis purposely employed pricing strategies to discourage E85 consumption. They, apparently, wanted to negatively influence the consumer perceptions about the fuel.
Oil companies appeared to control key price behavior at the nine stations and, to some extent, worked together to set prices, either formally or informally. RFA argues that it’s hard to believe that the price similarities at stations in St. Louis happened by chance. For example, the average E10 retail prices were $3.45 dollars per gallon while the average E85 retail price was $3.47 dollars per gallon. Wholesale prices of E85 were an average of $2.58 per gallon, while E10 averaged $2.93 per gallon. “Based on prices for locally available ethanol, hydrocarbon blend stock, RFS RIN credits and a typical markup, E85 could have been offered at retail for $2.44-2.55 dollars per gallon.” There probably are many reasons why average E85 prices were more expensive than E10 and almost one dollar larger than their wholesale price….like someone from outer space tampered with the pumps or consumer demand for E85 overwhelmed supply and the stations responding to market pressures raised the E85 price to mute interest from buyers. Neither, of course, was true!
Oil companies and their retailers appeared to set the price of ethanol to steer E85 and fuel-agnostic buyers to gasoline. They also wanted to keep the loyalty of gasoline buyers. The similarity of prices could have occurred by chance. Sometimes, I wear a blue shirt in the morning and so does my colleague. We never discussed what we would wear. But our color schemes are coordinated. What the study doesn’t answer is why other St. Louis stations, independent from national brands, did not see an opportunity to come in below the prices of majors and sell E85. Personally, I would have liked the analysis better if other cities were included as cases for comparison and if the time period went beyond the summer. But it was an interesting provocative report and you can’t have everything.
Anecdotes and studies based on the relatively recent California methanol fuel experience and Colorado’s effort to build E85 sales seem to support the RFA study. They suggest that the fear of competition from alternative fuels among oil companies and or retailors led to, at best, begrudging support for both methanol and ethanol. They often located pumps (if they agreed to have them at all) in unfavorable positions in their or their franchisee’s retail stations. Marketing strategies were marginal at best, and non-existent at worst. Stories from some astute observers suggest that relatively high methanol and E85 prices were put in place to detour customers to gasoline. Among other factors leading to problems with each state’s initiatives, there was a lack of sustained interest by major oil companies in building and sustaining sales of both alternative fuels with competitive pricing.
Maybe things will change. The present downturn in oil and gasoline prices has led some oil company leaders to think more charitably about alternative fuels —natural gas, ethanol, methanol, biofuels — particularly in light of the development of more flex-fuel cars coming from Detroit, and from consumers who convert their older cars to be flex-fuel vehicles. They have begun to view alternative fuels more favorably as part of their future business and strategic plans. If they go further, they will have to face questions, which include: whether they integrate gasoline and alternative fuels under one organization and canopy or separate both, perhaps, as different brands. Real competition, probably, will require Congress to consider some variations on a theme of open fuels legislation. Success in building competition at the pump would make Adam Smith happy, were he alive, and be good for the environment, the economy and consumers.
Aaron Walsh’s first car was a 2008 Chrysler Sebring flex-fuel, meaning it could take E85 or any other ethanol blend. It was a good car.
But his new car … wow. The 2012 Dodge Charger, in Tungsten Metallic gray. Now that’s a proper car for a young man. And Walsh never would have bought it if it didn’t come in a flex-fuel version.
“That’s my biggest reason for using it,” says the student from Haslett, Mich., just east of Lansing. “I absolutely hate the petroleum industry.”
His reasons are mostly environmental: the BP spill in the Gulf, etc. “I could go into it, but it would take a long time.”
The point is, he did something about it, and that something came around the time he decided he needed a vehicle upgrade. Walsh already knew the benefits of ethanol because of his father, who works for the state of Michigan, which encourages state employees to put E85 into their flex-fuel vehicles. So right around his 21st birthday, last June, he found the Charger and its 3.6-liter Pentastar V6 engine.
“I wanted something that didn’t have to run on gasoline,” he said. “And the first thing I wanted was an electric; I was really into the Chevy Volt. But then I realized a college student doesn’t have $40,000. Then I looked and saw that the Charger is $24,000.”
Walsh, who attends Lansing Community College, says finding an E85 station isn’t difficult. “It keeps getting easier and easier,” he says. He posts his fill-up data to his Twitter feed, @gasisoutrageous (his account name is #Number1BigHero6Fan … hey, dude has other interests besides ethanol), and he regularly gets in the twenties for mpg. Also, E85 is a lot cheaper than regular gasoline at many stations in the Lansing-Haslett area. Nationally, E85 was only $1.86 a gallon Thursday, 23.7 percent cheaper than E10, according to E85Prices.com.
Price isn’t the only benefit to buying E85. Higher ethanol blends burn more cleanly and efficiently than E10 (what most of us call regular gas). Using more alcohol fuels displaces oil, strengthening the overall U.S. economy, creating domestic jobs; reducing oil consumption is better for our air, water and health.
But the price at the pump is still a big factor, and most Americans know this. Walsh knows it, and needs it. He works at a convenience store, and says his dad has been helping him out covering the cost of payments and upkeep. The vehicle is also not exactly ideal for the brutal Michigan winters, with is rear-wheel and slick tires.
But he loves it. Using ethanol doesn’t mean you can’t enjoy your car at the same time. And that roaring engine runs great on high-octane E85.
“When I started driving, whenever I would slam on the accelerator pedal, I’d just hear dollar signs. Now I like the performance. I actually bought that car just because of the engine.”
Other posts in our “Share Your Story” series:
Communities around the country that drove the surge in U.S. oil production are becoming victims of falling global prices. Already this month, oil-and-gas servicing companies Baker Hughes and Schlumberger announced a combined 16,000 layoffs, owing to the steep drop in oil prices.
“They gave me 24 hours to leave my house,” John Roberts, a van driver for Schlumberger who was let go in Williston, N.D., told CNN Money.
In North Dakota, where work on the Bakken shale-oil formation had attracted thousands of workers amid an economic surge, Jim Arthaud, CEO of MBI Energy Services in Belfield, said up to 20,000 jobs could be lost in that area alone, and just among companies that service oil and gas drillers.
Prof. Bill Gilmer of the University of Houston told Forbes that 75,000 jobs could be lost in Houston alone in 2015. The city has added about 100,000 jobs a year since 2011.
The antidote to this boom-and-bust cycle of volatile oil prices is to provide a steady, dependable supply of cheap transportation fuel to American drivers for the long term. Increasing the use of alternative fuels will reduce our dependence on oil and protect the economy from the oil-market rollercoaster.
The United States has helped bring down the global price of oil by producing more oil – a lot more – here at home. But that oil, extracted from shale rock, mostly in North Dakota and Texas, is expensive to get out of the ground. As the global price of oil has plummeted, so too have the oil companies’ profit margins, and they’re starting to lay off workers on a mass scale.
To promote the use of more alternative fuels, as a counterweight to oil-price volatility, the U.S. should build up its infrastructure for producing and distributing fuels like ethanol and methanol. There are thousands of jobs that could potentially be created. In 2013, for instance, the U.S. produced 13.3 billion gallons of ethanol, which is blended into the gasoline we all use. The ethanol industry supported 86,504 direct jobs and 300,277 indirect jobs, according to the Renewable Fuels Association‘s most recent data. Those are domestic jobs that support American families, and which can’t be outsourced.
The sector added $44 billion to the nation’s gross domestic product and paid $8.3 billion in taxes, without government subsidies.
If we made such alternative fuels more widely available, we could not only reduce our dependence on oil, we’d create a whole new generation of U.S. jobs that would keep investment in the country and strengthen the overall economy.
The plunging price of oil has taken its toll on one of the world’s largest oil companies: Britain’s BP announced Wednesday it would cuts some of its 84,000-member worldwide workforce, as well as take $1 billion in charges over the next five quarters.
The New York Times reports that most of the financial hit will come in the form of severance pay, indicating that the number of job cuts could be significant. The company didn’t say how many positions it intended to shed.
The price of Brent crude has fallen some 40 percent since June. The price per barrel dropped another 1.5 percent Wednesday, to $65.32.
Bloomberg reports that BP’s move is the latest to come amid the price squeeze:
Europe’s third-biggest oil company by market value joins larger rivals Royal Dutch Shell Plc and Total SA in restricting budgets and offloading operations as margins are squeezed by the 40 percent drop in prices since June. BP said in October that about $1 billion to $2 billion may be cut from the $24 billion to $26 billion of planned capital expenditure in 2015.
Brazil’s state-controlled oil company, Petrobras, is embroiled in what might become one of the largest corruption scandals in the nation’s history.
This week The New York Times reported that prosecutor general Rodrigo Janot had prepared indictments on at least 11 executives from Brazil’s largest construction companies.
According to the story, Janot:
is opening the way for a trial that would focus scrutiny on growing testimony about a web of illicit dealings between former executives at Petrobras, the state-controlled oil company, powerful contractors and political figures in Ms. Rousseff’s government.
“We are following the money and we will reach all of these perpetrators,” Mr. Janot said Saturday night in an interview with the Globo television network.
The scandal, which involves claims of bribes to obtain contracts with Petrobras, stunned Brazil’s business establishment in November, when police arrested the executives and transferred them to a jail in the southern city of Curitiba. If testimony already obtained in the case is proven true, the case would dwarf previous corruption scandals in Brazil.
Evidence points to vast sums of money changing hands:
Pedro Barusco, once an obscure, third-tier executive at Petrobras, has agreed to return about $100 million in bribes related to his time at the company, a disclosure that could rank him among the largest known bribery recipients in Brazil’s history. Separately, Augusto Mendonça, an executive at Toyo Setal, a shipbuilding company, testified last week that he paid more than $23 million in bribes directly to the governing Workers Party and to Petrobras executives in exchange for contracts to build oil tankers.
The scandal already affecting the popularity of President Dilma Rousseff, who was narrowly re-elected in May. Rousseff is a former energy minister who once served as chairwoman of the board at Petrobras.
A new opinion survey released on Sunday by Datafolha, a prominent Brazilian polling company, showed that 68 percent of Brazilians hold Ms. Rousseff responsible for the bribery scandal. At the same time, Ms. Rousseff, who narrowly won re-election in October, has an approval rating of 42 percent, the survey showed.
