|Are you driving your last gasoline powered car?|
|Written by Steve Frazer|
|Saturday, 05 June 2010 11:30|
Vehicle owners now understand the ever dwindling supply and higher expense and risks of extracting petroleum will continue to increase the price at the pumps.
For over 100 years we have enjoyed this cheap energy source, but the party is coming to an end. People are considering hybrids to delay the inevitable end of the petroleum age, people are considering EV's as an alternative - though not enough are concerned about Peak Minerals - and more and more people are considering walking and riding bicycles.
If the projections from the 2010 Department of Defense, J.O.E. Report prove to be correct, then within the next 2 years, US drivers will have to adjust their budgets to accommodate $4/gallon gasoline. Higher extraction costs, greater demand from developing nations and lower production capacity will direct the price per barrel to new record highs. Actually, there are several petroleum industry subsidy reports that suggest US citizens are already paying as much as $5/gallon with the combination of pump price and taxes directed to these subsidies. If the Obama Administration makes good on their promise, they will eliminate these petroleum industry subsidies so over the next 4 years we will see $5-$6/gallon gasoline. The government of India and several other nations have done exactly this in recent weeks. This should not come as a surprise to anyone as the cost of gasoline in most industrialized nations without subsidies is already at $6-$7 (USD) gallon.
The sense of uncertainty cast by the Department of Energy in recent projections is historically unseen. The DoE usually stands among the most optimistic sources regarding the issue of depletion of world petroleum reserves. Glen Sweetnam, Director of the Department of Energy Technical Services, is now publicly announcing a definitive warning (last 3 paragraphs) that comes after a long set of incrementally increasing warnings dealing with troubles ahead on the supply side of the world petroleum market. Production/Supply shortages beginning in 2011 have become the common message around the world. In a 2nd Q, 2010 report, Lord Ron Oxburgh, a former chairman of Shell, wrote that "It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. Any new or unconventional oil is going to be expensive." He went on to quote King Abdullah of Saudi Arabia commenting on a new minor oil find: "Leave it in the ground...our children need it."
Respected petroleum commodity analysts now suggest that in about 6-8 years, the cost of petroleum for the US market may be so high that black crude will simply no longer be the source of our transportation fuels. It is not that the world will run out of petroleum over the next decade, rather, it is that the sale price of petroleum products as transportation fuels in the US will exceed the price of other options and production of gasoline from petroleum especially is one of the lowest profit markets for the petroleum industry.
Obviously, this equation is incredibly complex as OPEC nations, Russia, Mexico and a few others will burn petroleum for decades to come until their conventional petroleum fields are depleted. However, unconventional sources of petroleum such as the oil sands in Canada and Venezuela and deep sea and arctic wells are a growing percentage of the petroleum supply for the US and this hard to extract and hard to process petroleum will result in $7 gallon gas at the pump. The following graph shows the costs of petroleum from various sources per the value of the USD in 2008. Keep in mind that the USD has lost about 24% of its value since 2008 due to the unbridled printing of US currency (this can be verified by simply researching the increased price % of gold since 2008).
The following CNBC report on petroleum supply into the US is sobering. The report was made in early 2008 and the projections have all been on the mark. CIBC is the Canadian Imperial Bank of Commerce - Fortune ranked #170 with $350B in assets and over 40,000 employees.
Canadian pollster and media pundit Allan Gregg welcomes prominent authors, artists, and cutting-edge thinkers to discuss an eclectic mix of topics. To quote the economist, Jeff Rubin (from the 2010 video below), "You didn't need President Obama raising Mile Per Gallon standards when gas prices were over $4 gallon, people figured it out all for themselves". Jeff Rubin wrote this report in 2008 to provide perspective for the impact the petroleum price has on world GDP.
ETC Green Staff are having conversations with friends, family, business partners and clients to suggest that they are driving their last gasoline powered car. The average period for ownership of a vehicle in the US is 5-6 years and the above course of events will likely result in petroleum costs too high for the transportation fuels market in about 6 years. Synthetic gasoline sourced from bio-oil is available from several companies today, but the processing is expensive (over $10/gallon) and barring a significant technology breakthrough, is not likely to come down in cost to support a workable economic model within the next decade.
Again, it is not that the world will run out of petroleum over the next 10 years, rather, the higher priced petroleum sourced products will be replaced by lower priced bio-oil sourced products. The future for a net petroleum exporting nation vs. the future for a net petroleum importing nation is very different. US petroleum production has been in decline since the 1970's and the US is the largest net importer of petroleum in the world. As the supply declines, a growing percentage of the total volume of petroleum extracted will be used for applications other than transportation.
On 2010-10-13, the EPA approved the use of 15% ethanol to be sold as "gasoline" across the US. This will accelerate hose and engine seal deterioration on virtually all vehicles manufactured prior to 2003. While the 10% ethanol blend was a stretch to be still refered to as "gasoline", a 15% ethanol blend simply cannot be labeled gasoline. In the next 1-2 years as service stations begin to sell this E15 blend and phase out gasoline, this E15 will reduce your gas mileage by about 3%-5% as ethanol has about 40% less energy density than gasoline and demonstrates an extremely high evaporation factor. This article, "Are you driving your last gasoline powered car", has just taken on a new meaning and accelerated time line as you may not be able to purchase a gallon of gasoline anywhere in the US within the next 3-4 years. (Update: 2011-02-23: Congress voted to place a hold on this E-15 roll-out due to the overwhelming number of complaints from the public)
Considering the current production cost of biodiesel is in the $1-$2/gallon range and dropping with new technologies and economies by scale, the answer is clear: US consumers, following the lead of European, Indian, Chinese, Australian and African consumers, will soon migrate to advanced diesel powered vehicles. There are issues such as various sources and types of crude (sweet or sour) produce different amounts of gasoline vs. diesel fuels. Still another variable is that while European refineries are engineered to typically produce over 30 gallons of diesel per 42 gallon barrel, US refineries have historically produced less than 10 gallons of diesel per barrel. Why would the US population buy $6-$7 gallon gasoline when they could be purchasing 1/3 less fuel to drive the same distance (same vehicle with an advanced diesel vs. gasoline engine - more information below) and pay $3-$4 gallon for a higher energy density, lower emissions fuel? The CEO of Audi made a plea to Washington to change direction from funding EV's and Plug-in Hybrids and support advanced diesel and biodiesel.
ETC Green Staff have recently conducted a poll to see if people understand the cost savings of diesel powered vehicles compared to gasoline powered vehicles. When asked, only 3 out of 500 people (all non-diesel vehicle owners) calculated the savings correctly. This savings is the combination of the higher efficiency diesel engines, higher energy density per gallon of diesel fuel and the much longer life expectancy of diesel engines over gasoline engines.
Virtually every advanced diesel engine car, SUV and truck is also offered with a gasoline engine version (same make, same model, same options other than engine). If the price of gasoline is $3.00 gallon (as it is currently), then the equivalent price of diesel to drive the same distance in the same car could be in the range of $3.60 to $4.20 gallon. However, diesel fuel is typically within +/- 5% of the cost of 87 octane regular gasoline so diesel fuel is 25% less expensive than gasoline today due to its higher energy density. Diesel fuel is actually often less expensive than gasoline in real cost at the pump during the summer months as the warm weather blends require less additives than the cold weather blends.
Diesel engines achieve greater fuel efficiency than gasoline (petrol) engines. Diesel engines have a higher compression ratio than gasoline engines so typically produce an energy efficiency rating of 45% while gasoline engines only 30%. When we add the higher efficiency of a diesel engine with the higher energy density of diesel fuel, we see that diesel technologies have an average 30% efficiency advantage over gasoline technologies. The following chart shows the fuel side of this advantage via standard energy units.
The 3rd way advanced diesel engines save on costs and resources is their extended life cycle compared to gasoline powered or hybrid powered vehicles. Diesel vehicles have a proven history of reaching 300K miles with only regular maintenance costs and $100 batteries. This advanced diesel cost model results in 1/2 to 1/3 the environmental impact and recycling compared to EV's and Hybrids.
We project that within 4-5 years, biodiesel blends will be 50% less expensive than gasoline and within 6-8 years, B100 will be sold at about 30% of the cost of petroleum sourced fuels. UOP, the world's leading transportation fuels chemical engineering firm, has embraced 2nd Generation feedstock sourced biodiesel and has developed additives for biodiesel down to -45 F for northern climates and cold weather engine applications (jet aircraft). The following petroleum and national fuel cost tables are being updated real-time (the average fuel costs may seem high due to the influence of high pump prices in Hawaii, Alaska, DC and various other remote U.S. state locations):
In the past 4 years, over 75% of vehicles sold in some European nations are powered with diesel engines. These numbers are fluctuating based on tax structures and local EPA peer agency regulatory changes. However, as the price of petroleum continues to climb, ultimately, diesel engines will dominate both the heavy truck and the light fleets worldwide for a list of practical, undeniable reasons - basically they are more efficient than gasoline engines and they provide an immediate migration to biodiesel - a fuel that is already less expensive than petrodiesel today if sourced from preferred 2nd generation feedstock.
Most of these vehicles are powered by the new Common Rail Diesel (CRD) engine and include a Turbo Direct Injection (TDI) fuel system. TDI specifications include fuel injection pressures around 30,000 PSI. This extreme pressure virtually atomizes the fuel so combustion is far more complete. This more complete burn results in higher engine efficiency, better mileage and lower emissions. JD Powers and Associates and other polling firms are reporting that advanced diesel vehicles may outsell gasoline only and gasoline/hybrid powered vehicles in the US by 2014. Ponder the concept of a 20%-40% volume reduction in fuel usage and emissions when comparing same make/model vehicles in the gasoline vs. advanced diesel versions. Replacing spark-ignition engines with advanced diesel engines and components expected to be available in the next 5 years would yield fuel savings of as much as 46%. BMW produced the following consumer awareness video to communicate this concept.
The logical progression of biodiesel blends (B5-B100: Biodiesel% and balance of petrodiesel) provides the world a smooth transition to B100 fuels (100% biodiesel). Biodiesel has much higher lubrication properties than petroleum diesel. This results in reduced internal engine wear, enhanced performance, reduced operating costs and extended engine life. In 2009, the National Biodiesel Board, the USDA and the National Renewable Energy Labratory, contributed to this document on biodiesel fuel
All the major vehicle manufacturers are designing and building cars and trucks that use these advanced diesel engines and many are engineering the vehicles to use biodiesel fuels. This concept is not new and there are now over 120 vehicle make and model options that run CRD engines in the US market. Critics often bring up the issue of current biodiesel blend limits - typically 10%-20% in many advanced diesel engines manufactured today. The issue is that some emission systems are engineered to remove the particulates contained in petroleum diesel and if B100 is used, the particulates are not present so these emission systems begin to fail. We are talking directly with the engineering teams of 26 car manufacturers and they all have prototype emission systems that will be available on future models that will handle any biodiesel/petrodiesel blend. There will likely also be aftermarket emission systems for older diesel vehicles to radically clean up the emissions and allow these vehicles to run a higher percentage of biodiesel.
Today there are a dozen B100 compliant vehicles on the market. General Motors of India has been manufacturing vehicles that run on B100 for the past 2 years. Five of these vehicle models have been redesigned to meet US DOT safety standards and EPA emissions and will be available in the US market in 2011 and 2012. The car company, Mahindra of India, is also manufacturing B100 compliant cars, trucks and SUV's and their vehicles are also now in the US market. Toyota has also engineered their latest FJ and RAV4 diesel models to run on B100.
The US uses about 370 million gallons of transportation fuel per day - various percentages of gasoline, petrodiesel, ethanol, kerosene and biodiesel. The US Energy Information Administration (EIA), Division of the Department of Energy, maintains these records. Well over 60% of this fuel is imported from foreign nations. The daily consumption of transportation fuels world-wide is slightly over 1 billion gallons/day (diesel fuel equivalent). The Energy Information Administration reports that on a “well to wheels” basis — a measure incorporating emissions over the fuel-oil lifecycle, from its withdrawal from the well to refining and ultimately to its combustion in a vehicle's engine — greenhouse gas emissions from petroleum sourced diesel cars are roughly 15 percent lower than those arising from comparable gasoline cars.
The next question then would be, "Can the world grow enough biofuels?". The answer is yes and with limited compromises. We read articles and formal university whitepapers every week suggesting a long list of reasons why biofuels cannot sustain our way of life. Our favorite false concept is that there is not enough land mass on the planet to grow enough crops to replace petroleum sourced fuels. Many of these reports are based on the premise that the fuel must cost less than $3/gal at the pump to work in our current economic model and most of these papers are based on current low yield (100 gallons/acre/year) biofuel source crops such as corn and soybeans. With new oil sources - Jatropha, Yellowhorn and Micro Algae - come new economic models with new opportunities and challenges.
Few people outside the jatropha and yellowhorn biofuels industry are aware there are 38M acres of orchards now being planted which will produce ~24 billion gallons/year of biodiesel. Jatropha orchard projections suggest over 150M acres that will produce 120 billion gallons/year. This includes a moderate yield/acre increase over the coming years as the result of domestication and genetics. This volume of jatropha sourced biodiesel could provide blends up to B30 world-wide which reduces our petroleum consumption rates which extends petroleum supply for many more years. These trees are being planted worldwide at a phenomenal rate - hundreds of millions per month and they will achieve maximum yield within 5 years. Making biodiesel from 2nd generation feedstocks such as yellowhorn and jatropha has a petroleum equivalent cost of $38-$43 per barrel. With ever rising world demand, a petroleum trading price of below $40 barrel has not been seen since 2003 and may never be seen again.
If our friends at the US National Renewable Energy Lab are correct with their practical yield projections from micro algae, then we can convert about half of these jatropha and yellowhorn orchards into algae farms over the coming decades and produce something over 600 billion gallons/year. This is actually twice the current volume of petroleum sourced transportation fuels used today world-wide.
The slide down the backside of Peak Oil will not be without bumps, but there is a soft landing and biodiesel and synthetic diesel are better for the environment. Even the Discovery Channel Mythbusters have shown that emissions drop by 30-40% by simply switching from gasoline to petrodiesel powered vehicles. Emissions drop even more if biodiesel blends are used (DOE-42562.pdf). As compared to petrodiesel, biodiesel has radically reduced emissions: use of preferred sourced B100 completely eliminates lifecycle carbon dioxide emissions (CO2), it also reduces emission of particulate matter by 40-65%, unburned hydrocarbons by 68%, carbon monoxide by 44-50%, sulfates by 100%, polycyclic aromatic hydrocarbons (PAHs) by 80%, and the carcinogenic nitrated PAHs by 90% on an average. The biodiesel molecules are simple hydrocarbon chains free of the aromatic substances and sulfur associated with fossil fuels.
If we continue down the current path of ever rising petroleum prices, the projections of Richard Heinberg and Jeff Rubin (videos above) will be our future. We have to stop sending hundreds of billions of dollars each year to the Middle-East to purchase petroleum. We do have options today that are sustainable and immediately economically viable, but we must send the message to our legislators, car manufacturers and petroleum companies. Also, if the funding currently being spent by the auto industry to increase MPG of current vehicles was used to create a sustainable 2nd generation feedstock biodiesel production capacity, this problem would be solved in only a few years. Everyone today seems so focused on MPG, yet this unit of measure is outdated. If the fuel is sustainable, economically viable and environmentally friendly, then MPG is not that important. Actually, if vehicles were running on B100, then lower MPG is more desirable as it better supports our economy. ETC Green Engineers are working with the EPA and DOT to suggest a new unit of measure - MPPG (Miles Per Petroleum Gallon) so people have a better understanding of the performance of the vehicle.
Favor high yield biofuel crops, replace virtually all engines with advanced diesel technology targeting B100 fuels and retool the petroleum refineries for maximum diesel yield production.
And here is a prediction you might not have seen coming - within the next decade, the price per gallon for biodiesel will drop below where it is today - even adjusted for inflation. There are viable world-wide biodiesel production models that support annual volumes 10x the amount of petroleum being extracted today. Within a few years, the big SUV's and high performance cars will return and people can own and drive them guilt free. Blue skies - Green fuel!
While our road to sustainable transportation fuels looks promising, here is even more good news, our best and brightest are on the right path with truly renewable baseload grid energy from the sun and specifically from biodiesel production. As the petroleum age fades into history, the new world economy will evolve rapidly and we must find and embrace these environmentally responsible solutions.