Redstate

By Josh Painter Posted in Energy — Comments (1) / Email this page » / Leave a comment »

With all the kerfuffle over high gasoline and diesel prices, I've heard it said and seen it written that if only we Americans would use less oil, prices would drop like a stone, and we could return to the good old days of two-dollar gas.

Unfortunately, that's not true, and it's not that simple. We need to reduce our consumption, yes, but we also need to increase domestic production and refining. Unfortunately, we've been going in the other direction for way too long a period of time. From 1990 to 2007, US production decreased by 31% at the same time as consumption increased by 24%.

Actually, we have already started using less oil. Weekly U.S. gasoline consumption has declined for almost three straight months now, marking the first period of consumption decline in more than 15 years. Historically, Americans have reduced gasoline consumption by large amounts only twice, not counting World War II gasoline rationing and the brief refinery shutdowns in the wake of Katrina. Both reductions occurred during the two oil shocks of the 1970s.

Also, the problem has grown in complexity. There are more contributing factors to high prices now. We are producing less domestic crude, and our refinery capacity is limited, at least until Marathon Oil's Ashland refinery expansion in Louisiana is completed by 2010. But the Marathon expansion will only increase the supply of refined gasoline by 7.5 million gallons a day. That sounds like a lot, but it's just a drop in the bucket, as we burn about 375 million gallons a day in the U.S.

In the 1970s, China and India were not factors. Today, those two countries have a combined population of more than 2.3 billion people, accounting for fully 40 percent of the planet's population. And they are modernizing at a rapid pace, buying cars and electronics, building highways and power plants - in short, pursuing the good life just as we Americans did in the postwar years. In China oil consumption has doubled in the last decade, making it the world's second-largest oil importer behind only the United States. India has doubled its own oil consumption since 1992.

Another contributing factor is reformulation. Gasoline sold in Denver differs from gasoline sold in Miami. This proliferation of different environmentally mandated pump blends has reduced the availability of substitutes to moderate price increases. If a shortage occurs in Los Angeles, we can't just truck in refined gasoline from Oklahoma City to make up the difference. Thank an environmentalist next time you see one.

There are even more variables:

The falling dollar, the transformation of commodity markets into financial markets and steady global demand for oil are all contributing factors, says Mark Zandi, chief economist for Moody's Economy.com and an economic adviser to Republican Sen. John McCain's presidential campaign.

"Given the turmoil in the credit markets, investors are turning to commodities and oil as a trading vehicle," Zandi explains. "It doesn't take a whole lot of money" flowing out of the bond or stock market and into oil or natural gas to drive up prices.

Typically during a recession in the United States, demand for oil falls because people make a conscious decision to drive less. But any decline in U.S. fuel consumption has been offset by greater demand for all kinds of fuel in emerging economies, which Zandi says are doing well and therefore contributing to the price escalation.

Strong global demand is likely to increase, not decrease, pressure on U.S. gas and oil prices.

Finally, the price of gasoline at the pump generally follows crude oil prices. According to the Department of Energy's Energy Information Administration (EIA):

Gasoline pump prices generally rise and fall in response to crude oil price increases and decreases... OPEC cuts and high crude prices affect gasoline prices directly through the feedstock cost but also indirectly by reducing gasoline inventories... Average inventories for refined products have declined over time, contributing to price spikes as additional supply is less available quickly to meet demand.

So we see that reducing U.S. demand for oil, which we are only just beginning to do in repsonse to higher prices, is no longer enough to solve the problem. We have to increase our supply domestically and our capacity to refine it. There's no way of getting around it. We need to drill in ANWR, off the Gulf of Mexico, off California, off Florida, and in the Baaken. We need to produce more oil from shale and sand desposits also. But it will take time, perhaps a decade or more to ramp up domestic oil exploration, production and refining. Again, thank an environmentalist next time you see one.

In the meantime, we need to further develop alternative fuel technologies. More nuclear power reactors will mean less demand for heating oil to heat homes. The crude now going toward that purpose can be refined into gasoline and diesel. The United States also has more coal reserves than any other single country in the world. We have more coal that can be mined than the rest of the world has oil that can be pumped from the ground. We need to further develop and lower the cost of technologies which produce gasoline and diesel from coal. It is stupid and short-sighted not to use our most abundant energy resource. You know who to thank for this mypoia.

We have another abundant natural resource which we need to further exploit as a motor fuel. It is available for this use as either compressed natural gas (CNG) or in liquid form most commonly as propane (LNG). Using natural gas to run our cars and trucks would help lower the $600 billion that the U.S. now spends every year on oil imports. Natural gas fleet vehicles already account for about one and a half million vehicles worldwide. Honda currently offers Americans its Civic GX model, which runs on compressed natural gas (CNG). The CNG model runs and drives just like any other Civic. But because tune-ups are not required until well past the 100,000 mile mark, scheduled maintenance is less expensive. And, because NG burns so cleanly there are no carbon deposits in the engine, eliminating the need for valve jobs and greatly reducing cylinder and ring wear. The engine should last well in excess of half a million miles with proper maintenance. As an accessory, the automaker sells Phill, a suitcase-sized device which connects to your home's natural gas lines and fills the GX while it sits overnight. In addition to Honda, automakers such as Mercedes-Benz, FIAT and others are bringing NG-powered models into their lineups. We are unlikely to see two-dollar gasoline again, but NG costs only about $1.50 per equivalent gallon of gasoline, less than half the going pump price for unleaded regular.

Environmentalists, who have traditionally been hostile toward fossil fuels, need to change their attitude about CNG as a motor fuel. Concerns about air quality in most parts of the world are increasing the interest in using natural gas as a fuel for vehicles. The next time you see someone hugging a tree, tell him or her that after hydrogen, natural gas is the cleanest burning of all existing fuels. It is the cleanest burning of all fossil fuels and even burns cleaner than several of the renewable fuels they have been so quick to promote. Cars using natural gas are estimated to emit 20% less greenhouse gases than gasoline or diesel cars. NG as a motor fuel is not a new technology, as NG has been used this way since the 1930s. In many countries NG vehicles have replaced diesel buses, taxis and other public vehicle fleets. Natural gas, unlike gasoline, needs no refining for use as a motor fuel. Like other alternative fuels, NG needs an investiment in refueling infrastructure. Oklahoma leads the nation in this regard. The Sooner State has over thirty CNG refueling stations and nearly eighty similar facilities for LNG. Unlike other alternatives, however, that's all it needs. With the exception of the chemical added to NG allowing us to smell an otherwise odorless gas, NG is ready to burn as it comes out of the ground.

Also, except for the relatively small amount needed as an oxygenant in gasoline, we need to stop using ethanol. We need to immediately cease using corn, a needed food and feed crop, as a motor fuel source. Emerging technologies which allow the direct production of gasoline from celulose (weeds and waste) need to be perfected and adopted. Enough ethanol can be made from cellulose to oxygenate gasoline, and that's all the ethanol we need for vehicles. We need to make more biodiesel out of used cooking oil that would otherwise go to the landfills.

We have everything we need to make the United States energy independent. We have the technologies, the coal, the oil, the natural gas, the unused land area to grow switchgrass and the know-how to design and construct safe, modern and efficient nuclear reactors. All we need is to commit ourselves to making our country energy independent. Early in the 1960s, President Kennedy made the commitment to send men to the moon and return them safely. He set a ten-year time limit on accomplishing what seemed like an impossible task at the time, but we managed it with a year and half to spare. We need a similar commitment to making ourselves self-sufficient in our use of energy. It can be done, and with a lot less government spending to boot. It is largely a matter of removing roadblacks which stand in the way. The only question is, do we have the will to push aside the environmentalists who will try to stop us?

- JP