R-Squared Energy Blog

Pure Energy

We’re Number One!

The U.S., that is, in total fossil fuel resources. At least those were the findings of the Congressional Research Service in a report they just released:

U.S. Fossil Fuel Resources: Terminology, Reporting, and Summary

The primary reason is our huge coal reserves. While we are 12th in oil reserves (Table 5 of the report), our coal reserves are by far the largest in the world. All together, the fossil fuel reserves (oil, natural gas, and coal) of the U.S. are reported at just under one trillion barrels of oil equivalent (BOE). The global total is reported at 5.6 trillion BOE.

While I think you have to take data from some of the listed countries with a grain of salt – especially when talking about categories like “undiscovered technically recoverable” oil and natural gas – it does point to the importance that coal will play when oil reserves start to seriously deplete. I have said this before, but when gasoline is $5/gallon, most objections to coal as a fuel will disappear. At that point I think you will start to see coal-to-liquids (CTL) plants moving forward.

Also from the report, at first glance this chart may seem ridiculous:

But I am also reminded of my amazement at a U.S. oil statistic I once came across. In 1982, U.S. reserves were 27.9 billion barrels. In 2005, U.S. reserves were 21.8 billion barrels. But over the course of that 24-year period we produced 57 billion barrels of oil and pulled our reserves down by only 6 billion barrels. So the graph above seems far-fetched, but so does the evolution of our reserves over past quarter century.

Of course it goes without saying that government policies will heavily influence which resources are developed, and over what time period. My guess is that over the next few years we will favor policies that are intended to wean us off of fossil fuels. While I applaud good intentions – and in fact my new job is all about moving developing fossil fuel replacements – I expect we are going to see more than a few unintended consequences. The one I am most concerned about is heavily disincentivizing domestic production, but not having an adequate answer for the domestic production shortfall. In this case, while more alternative energy may be the target, more oil imports may be the unintended consequence.

November 4, 2009 Posted by | coal, CTL, domestic production, oil production, oil reserves | 48 Comments

The Long Recession

Sometimes people ask me what I think will happen as a result of peak oil. Well, it depends. We could see alternatives – natural gas, ethanol, GTL, CTL, etc. – fill the gap of falling oil supplies for a while. It just depends on how quickly production falls. But if the alternatives are not up to the task, then I think what we will see – borrowing terminology from The Long Emergency– is The Long Recession. Here’s how it would work.

As economies heat up, demand for oil increases. This puts upward pressure on oil prices, which can ultimately cause a recession such as the one we are in now. Historically, spiking oil prices tend to consume disposable income and lead to recessions. Jeff Rubin, whose new book I recently reviewed, has claimed that four of the past five recessions were caused by spiking oil prices.

In normal cycles, oil companies build up capacity when oil prices are high. A recession caused by high oil prices, combined with overcapacity built up during the price rise, can keep oil prices at bay for a long time. But what if oil capacity can’t be overbuilt, because oil production has peaked? In this situation, oil prices will start to recover just as soon as the economy starts to come out of recession. This may in turn “restall” the economy, leading to a long recession that just repeats the cycle every time the economy begins to recover.

It is hard to say that we are at that point. However, oil prices have recovered quite a bit of lost ground, and have now crossed $70/bbl:

$70 oil menaces budding recovery

At the end of May CNNMoney.com ran a story asking if $60 oil will kill any economic recovery. ‘No,” most analysts said – consumers could shoulder $60 crude, and analysts didn’t see prices going much higher.

Now oil is touching $70 a barrel. Goldman Sachs recently said it sees crude at $85 by the year’s end. With the economy still on life support, oil is drifting dangerously close to being the wet blanket at the recovery’s party.

Hmm. Sounds like what could be waiting on the other side of this recession is…a recession.

There are alternatives that start to become economical with oil at $70 or more. Oil sands, for one. Natural gas vehicles also start to look pretty good at those oil prices. Even GTL, CTL, and BTL stand a chance of being economical if oil prices hang around at lofty levels. But companies – especially oil companies – are pretty risk averse when it comes to predicting oil prices. I doubt any U.S. oil companies are basing future economics on the expectation of > $70 oil. If they were, you would see far greater investments into unconventional energy sources.

June 9, 2009 Posted by | btl, CTL, economics, gtl, oil prices, recession | 20 Comments

The New and Improved CTL Scheme

“In theory, there is no difference between theory and practice. But, in practice, there is.” – Jan L. A. van de Snepscheut

A very short paper (two pages) appeared in the latest Science detailing an improvement on coal-to-liquids (CTL) technology. A couple of people have e-mailed me to ask for my take on it. You can get the executive summary from the quote at the top, or from my version, which is:

“In the world of energy, people sometimes have trouble distinguishing make-believe from reality.” – Me

Wired Magazine weighed in on the (subscription-only) Science report – Producing Transportation Fuels with Less Work – a few days ago:

Bad News: Scientists Make Cheap Gas From Coal

If oil prices rise again, adoption of the new coal-to-liquid technology, reported this week in Science, could undercut adoption of electric vehicles or next-generation biofuels. And that’s bad news for the fight against climate change.

The new process could cut the energy cost of producing the fuel by 20 percent just by rejiggering the intermediate chemical steps, said co-author Ben Glasser of the University of the Witwatersrand in Johannesburg, South Africa. But coal-derived fuel could produce as much as twice as much CO2 as traditional petroleum fuels and at best will emit at least as much of the greenhouse gas.

“The bottom line is that there’s one fatal flaw in their proposed process from a climate protection standpoint,” Pushker Karecha of NASA’s Goddard Institute for Space Studies wrote in an e-mail to Wired.com. “It would allow liquid fuel CO2 emissions to continue increasing indefinitely.”

The Wired story has spread like wildfire. I have seen numerous references to it. It has spawned lots of debate over whether it is desirable to increase our usage of coal. But one important detail seems to have been overlooked: It’s not real.

So what’s the story? Here is a clue, from early in the paper:

We outline reaction chemistry and processing designs that could dramatically reduce these energy inputs and minimize the amount of CO2 emissions that would be emitted or mitigated by other costly strategies, such as carbon capture and sequestration.

This is a ‘process’ only in that it has been drawn up on paper. This isn’t even at the stage of lab scale. This is Step 1: You have an idea. Next comes the step where you try to economically evaluate the implications, and then if they are favorable you start doing some laboratory experiments. This is the stage where probably upwards of 90% of all ideas that were thought to be good fail because the theory overlooked something that turns out to be a problem in the lab.

However, if the lab studies look good, you go on to build a pilot plant to demonstrate the concept at a larger scale. Again, the majority of the ideas that make it past the lab stage get weeded out at this stage. You have situations like CWT building a pilot plant only to find out that they have an odor problem that didn’t seem all that bad in the lab. Or you find out that while the front end of the process works well in the lab, and while the back end works well, when the front is connected to the back there is a problem. Maybe the front end produces a trace impurity that is a real problem for the catalyst in the back end. In the lab, this wasn’t a problem because you were simulating the back end with gases from a cylinder. However, those gases were of a higher purity than what you are producing now in the pilot plant. The list of land mines is endless.

None of this suggests that this is an idea without merit. But an idea is not a process, and so Wired got a little carried away with their description. In fact, the Science paper heavily references Sustainable fuel for the transportation sector (PDF) by Rakesh Agrawal et al. at Purdue. Theirs is another proposed process. It is called the H2CAR ‘process,’ and is another idea in need of some laboratory testing. For a layman’s explanation of H2CAR process, see:

H2CAR could fuel entire U.S. transportation sector

For a more detailed technical (and skeptical) view see:

H2CAR: Another blind alley

In that essay Engineer-Poet (of The Ergoshpere) concludes that this idea is doomed to die once the economics are considered fully.

But the bottom-line here is that it is important to distinguish between what is real and what is make-believe. A process that has survived lab tests or that is successfully being piloted is real. A process that only exists on paper is make-believe, and should be recognized as such. That’s not to say that the make-believe process won’t some day turn into a real process, but the lab has an uncanny ability to kill a lot of seemingly great ideas.

March 31, 2009 Posted by | coal, CTL | 39 Comments

Coal-Based Ethanol

The handwriting has been on the wall on this issue for a couple of years. In fact, I first mentioned it in March 2006 in Improving the Prospects for Grain Ethanol. Here is an excerpt of what I wrote:

This is an option that most environmentalists will abhor. However, it is the one most likely to take place in the short-term. The natural gas input into ethanol production is a serious long-term threat to economic viability. Since natural gas is a fossil fuel, and supplies are diminishing, it will put upward pressure on the price of ethanol over time. However, if the energy inputs could be produced from coal, ethanol prices would be insulated from escalating natural gas prices.

Using coal might also lessen the significance of the EROEI debate. If you take 1 BTU of (cheap) coal, and you get back 0.8 BTUs of (more valuable, liquid) ethanol, then EROEI doesn’t have the same significance as when you use natural gas to produce ethanol. You converted the BTUs into a readily usable liquid form. This argument may be valid from an economic point of view, but it ignores the fact that coal is still an inherently dirty energy source. If coal remains abundant and cheap, coal economics will beat natural gas economics, but coal will increase the rate at which we put carbon dioxide into the atmosphere. If we come up with a viable method of sequestering the carbon dioxide produced at the power plant, then we might have a temporary economic solution (although we are still using up a non-sustainable fuel in the process).

Now I am not going to tell you that I think this is a good idea. I am just telling you what I think is going to happen. And a couple of days ago a friend sent a link that says Iowa is considering a couple of new coal plants for some ethanol plants, acknowledging the superior economics of coal as fuel:

Iowa needs $2 billion in coal-fired electricity production to supply power for ethanol; critics say coal use “ungreens” ethanol

Two coal-fired electricity plants, in Marshalltown and near Waterloo, have been proposed in Iowa to provide electricity for the growing collection of Iowa ethanol plants. Critics say that ethanol’s need for coal-powered electricity makes the case that it is not a green fuel.

Alliant Energy, co-owner of the Marshalltown project, said that the needs of the ethanol plants can only be solved at this point in time by nuclear, natural gas or coal, and that natural gas is not economical while nuclear has been taken off the table due to environmental concerns. The proposed plants would cost $1 billion each.

Last week, Xethanol Corporation announced that it would invest $500,000 in Consus Ethanol for its cogeneration project that would provide power for its ethanol production process from waste coal, that would have a $0.48 per gallon cost advantage over comparable ethanol plants in the Midwest powered by natural gas. The Pittsburgh-based facility will distribute fuel to East Coast markets, which have higher prices for ethanol.

That last bit is interesting. Where is Xethanol finding any money to invest? Since I last wrote about them, they have racked up another $6 million loss, dropping their total current assets to under $15 million. They remain on the trajectory to bankruptcy, which is one of my predictions that is still unresolved.

But that’s a digression. On the subject of using coal as the source of BTUs for ethanol production, there are two things that stand out. First, the current process of using natural gas to produce ethanol makes little sense, since you can use natural gas directly in a CNG vehicle. You gain little or nothing by turning a BTU of natural gas into a BTU of ethanol (plus some animal feed). However, coal can’t be used directly as automotive fuel, so one can make the argument of upgrading the quality of the energy source by turning some of coal’s BTUs into ethanol.

Second, the cost of energy per BTU is far lower for coal. The current price of natural gas is $8 per million (MM) BTUs. However, according to the EIA coal sells for about $40/ton, or 2 cents a pound. The energy content of bituminous coal is about 12,750 BTU/lb, which calculates out to $1.57 per MMBTU. (Just double-checked my numbers, and found that the EIA reported that coal prices in September 2007 were $1.78 per MMBTU, so I was in the ballpark).

So, the economics are going to drive ethanol producers toward coal as their fuel of choice. And some have already been driven there. I predict we will see a lot more of this in the future, especially in light of my previous essay on the economics of corn ethanol. Plug in coal at $1.57/MMBTU instead of natural gas at $8, and it makes a huge difference. But for ethanol producers who do go this route, don’t pretend that what you are doing is clean or renewable.

February 4, 2008 Posted by | coal, CTL, ethanol, Xethanol | 43 Comments

Coal-Based Ethanol

The handwriting has been on the wall on this issue for a couple of years. In fact, I first mentioned it in March 2006 in Improving the Prospects for Grain Ethanol. Here is an excerpt of what I wrote:

This is an option that most environmentalists will abhor. However, it is the one most likely to take place in the short-term. The natural gas input into ethanol production is a serious long-term threat to economic viability. Since natural gas is a fossil fuel, and supplies are diminishing, it will put upward pressure on the price of ethanol over time. However, if the energy inputs could be produced from coal, ethanol prices would be insulated from escalating natural gas prices.

Using coal might also lessen the significance of the EROEI debate. If you take 1 BTU of (cheap) coal, and you get back 0.8 BTUs of (more valuable, liquid) ethanol, then EROEI doesn’t have the same significance as when you use natural gas to produce ethanol. You converted the BTUs into a readily usable liquid form. This argument may be valid from an economic point of view, but it ignores the fact that coal is still an inherently dirty energy source. If coal remains abundant and cheap, coal economics will beat natural gas economics, but coal will increase the rate at which we put carbon dioxide into the atmosphere. If we come up with a viable method of sequestering the carbon dioxide produced at the power plant, then we might have a temporary economic solution (although we are still using up a non-sustainable fuel in the process).

Now I am not going to tell you that I think this is a good idea. I am just telling you what I think is going to happen. And a couple of days ago a friend sent a link that says Iowa is considering a couple of new coal plants for some ethanol plants, acknowledging the superior economics of coal as fuel:

Iowa needs $2 billion in coal-fired electricity production to supply power for ethanol; critics say coal use “ungreens” ethanol

Two coal-fired electricity plants, in Marshalltown and near Waterloo, have been proposed in Iowa to provide electricity for the growing collection of Iowa ethanol plants. Critics say that ethanol’s need for coal-powered electricity makes the case that it is not a green fuel.

Alliant Energy, co-owner of the Marshalltown project, said that the needs of the ethanol plants can only be solved at this point in time by nuclear, natural gas or coal, and that natural gas is not economical while nuclear has been taken off the table due to environmental concerns. The proposed plants would cost $1 billion each.

Last week, Xethanol Corporation announced that it would invest $500,000 in Consus Ethanol for its cogeneration project that would provide power for its ethanol production process from waste coal, that would have a $0.48 per gallon cost advantage over comparable ethanol plants in the Midwest powered by natural gas. The Pittsburgh-based facility will distribute fuel to East Coast markets, which have higher prices for ethanol.

That last bit is interesting. Where is Xethanol finding any money to invest? Since I last wrote about them, they have racked up another $6 million loss, dropping their total current assets to under $15 million. They remain on the trajectory to bankruptcy, which is one of my predictions that is still unresolved.

But that’s a digression. On the subject of using coal as the source of BTUs for ethanol production, there are two things that stand out. First, the current process of using natural gas to produce ethanol makes little sense, since you can use natural gas directly in a CNG vehicle. You gain little or nothing by turning a BTU of natural gas into a BTU of ethanol (plus some animal feed). However, coal can’t be used directly as automotive fuel, so one can make the argument of upgrading the quality of the energy source by turning some of coal’s BTUs into ethanol.

Second, the cost of energy per BTU is far lower for coal. The current price of natural gas is $8 per million (MM) BTUs. However, according to the EIA coal sells for about $40/ton, or 2 cents a pound. The energy content of bituminous coal is about 12,750 BTU/lb, which calculates out to $1.57 per MMBTU. (Just double-checked my numbers, and found that the EIA reported that coal prices in September 2007 were $1.78 per MMBTU, so I was in the ballpark).

So, the economics are going to drive ethanol producers toward coal as their fuel of choice. And some have already been driven there. I predict we will see a lot more of this in the future, especially in light of my previous essay on the economics of corn ethanol. Plug in coal at $1.57/MMBTU instead of natural gas at $8, and it makes a huge difference. But for ethanol producers who do go this route, don’t pretend that what you are doing is clean or renewable.

February 4, 2008 Posted by | coal, CTL, ethanol, Xethanol | 190 Comments

The Week in Energy – September 1, 2007

As I mentioned in the previous post, I plan to start posting on a more infrequent basis. Every 5-10 days, I will post some short excerpts/links to energy stories I found interesting, odd, or comical. I will keep my own comments to a minimum. And while I plan to leave the comments section open, I don’t plan to spend time there as it is too easy to get sucked into endless debate.

Anyway, I was targeting this weekend for this essay, but I have slowly chipped away at it each morning this week, and I think there is enough there to post. Let me know whether you find this format useful. I am open to changing, as long as I can keep my time investment low as previously discussed.

Spreading Coal-to-Liquids Myths

General Motors: Ethanol Mythbusting by Spreading Ethanol Myths

Texas Surpasses California’s Installed Wind Power

The Children of the Corn are Getting Upset

TWIP: Lowest Ever Gasoline Inventories

Spreading Coal-to-Liquids Myths

The first entry comes from Malcolm Berko, who apparently writes a financial column out of Boca Raton. In answering a question from a reader, Mr. Berko helps to further confuse the public about energy issues as he paints coal-to-liquids (CTL) as the solution to our dependence on oil:

Taking Stock: Something not natural about synthetic oil firm

Some excerpts:

Dear Mr. Berko: Please tell me about Sasol, which is a synthetic oil and gas producer in South Africa.

J.W.

Detroit

Dear J.W.:

Since the oil crisis of 1973, many people are astonished that Congress and the White House have done nothing to ameliorate the problem. However, there is a super solution called “coal hydrogenation,” developed by Standard Oil of New Jersey (now Exxon Mobil Corp.) in 1930. It’s a simple process, and the resulting fuels cost much less than the fuels produced by Big Oil. In fact, those fuels are not an atomic particle less efficient than the same product produced from a barrel of oil.

But Exxon, Shell and the other Big Oils have billions of dollars of vested interests in oil properties, infrastructure equipment, etc., and “hydrogenation” would give Big Oil lethal gas pains. So to protect their interests, the oils covertly purchased influence from Congress (which is easy) to keep “coal hydrogenation” as far from the U.S. as possible.

Recently, a Congressional representative whose vote is not for sale told me that “active support for coal hydrogenation could cause me personal and political damage. Those oil companies are seriously nasty.”

In 1934, about 85 percent of Germany’s oil was imported, and the German Reich needed oil independence to fuel its factories and war machinery. The Nazis’ solution was a process developed in the U.S. by Standard Oil of New Jersey. It is called “coal hydrogenation, ” and because Germany had immense coal deposits, its supply of fuel and lubricants was almost unlimited. Between 1934 and 1942, Standard Oil financed and guided Germany’s hydrogenation process, producing the synthetic fuels that powered Germany’s formidable war machines across Europe, Africa and Russia. Undeniably, without the hydrogenation process, Germany could not have commenced World War II.

Back then, Standard Oil of New Jersey had enough congressmen on its private payroll to do anything it wanted to do. As a result, the actions of its officers and its board of directors nearly caused the Allies to lose World War II while their avarice and venality cost thousands of American lives. It is clearly documented that in the hubris of their success, Standard Oil made substantial contributions to German SS chief Heinrich Himmler ‘s personal fund and as late as 1944, was an active member of Himmlers “Circle of Friends.” So don’t for a nanosecond believe that gas prices at today’s pump are due to the high cost of a barrel of oil.

I won’t deconstruct the response, but I would like to ask Mr. Berko a couple of questions. Given that a number of countries other than the U.S. (Russia, China, India, Australia, and Germany) have larger coal reserves than South Africa, do you think it’s possible that there is a reason other than the “Big Oil boogeyman” that CTL hasn’t taken off? Can you think of a reason why South Africa might have (historically) had an added incentive to produce liquid fuels from a CTL process? Finally, given that Germany had developed a coal-to-liquids industry, and has large coal reserves, why do you suppose they abandoned their efforts after the war, instead of maintaining the industry?

For the record, the Energy Information Administration has estimated capital costs for CTL at $60,000 per daily barrel of production. This is around triple the cost of a conventional refinery, or an ethanol plant. Oil companies have looked at CTL numerous times, and have not pursued it on the basis of high costs. After all, don’t you think they would rather buy coal and turn it into diesel if you could really do so at a comparable cost? Their raw material supply would be much more secure.

General Motors: Ethanol Mythbusting by Spreading Ethanol Myths

General Motors has apparently decided that the best way to fight ethanol myths is to repeat some of the more common ones:

E85 “Mythbusting”

Certainly nobody can question their sources. After all, the Renewable Fuels Association, USDA, and National Corn Grower’s Association wouldn’t steer you wrong. I won’t go through the entire list, but they did hit some of my favorites:

Here are a few of myths out there on E85, and truth provided by experts.

Current research prepared by Argonne National Laboratory (a U.S. Department of Energy Laboratory), indicates a 34% gain in the overall energy input/output equation for the corn-to-ethanol process. That is, if 100 BTUs of energy is used to plant corn, harvest the crop, transport it, etc., 138 BTUs of energy is available in the fuel ethanol.

Of course we know that’s false. According to the USDA’s own numbers (the same source as that Argonne number), spending 100 BTUs of energy into ethanol production results in 106 BTUs of ethanol, and about 20 BTUs of animal feed.

It is worth noting that in fact, gasoline has a negative net energy of .87, meaning it takes 13 percent more energy to produce than it delivers.

I read a keen observation by someone recently on this account: How could an energy sink have transformed the globe in the 20th century?

Studies, including two by the DOE and USDA, have proven we can produce 60-90 billion gallons, on an energy equivalent basis, and potentially offset fossil fuel use by 30% or more by 2030.

The studies proved it, did they? Thank goodness. Just curious, though. How much has our fossil fuel consumption dropped over the past 5 years, as ethanol has exponentially ramped up?

The relatively small increases in food prices in 2007 have been attributed to increased energy costs (oil cost). (source: USDA and National Corn Grower’s Association (NCGA))

And rest assured that it has nothing to do with the ethanol-fueled doubling of corn prices in the past couple of years. Just ask the National Corn Grower’s Association.

It’s good to know that the future of GM is in such capable hands.

(Thanks to Gary Dikkers for sending that link).

Texas Surpasses California’s Installed Wind Power

Texas, long associated with oil and gas, is now the wind capital of the United States:

Texas blows past California in energy

Aug. 25–Recent Texas developments suggest that California’s lead in one alternative-energy area may be gone with the wind — the wind turbine, that is.

Last year, for the first time ever, an industry association reported that Texas surpassed California as the country’s No. 1 generator of wind energy. Not only did the Lone Star State blow past the Golden State again in this year’s report, but Texas regulators in July voted to designate eight zones for production of about 20,000 megawatts of wind energy.

The development is a bit of a twist given that California, with its Million Solar Roofs plan and other programs, is a national leader in conservation efforts, whereas Texas has long been associated with old-school energy sources, such as oil and natural gas.

Texas’ lead is increasing. In 2005, Texas led California by 47 megawatts in installed wind energy, and in 2006, it led by 407 megawatts, according to the annual U.S. wind power rankings of the American Wind Energy Association.

One megawatt is enough electricity to power 750 California homes during peak demand. The association reported that Texas had a capacity of 2,768 megawatts as of Dec. 31. California had a capacity of 2,361 megawatts.

“Texas is wowing everyone with those numbers,” said Christine Real de Azua, a spokeswoman for the association.

Wind power is growing at an incredible pace. You can see a map showing a state-by-state comparison of installed wind power here:

Wind Power America

The growth in installed capacity is also shown. Interestingly, Iowa is in 3rd place behind Texas and California. Now if they can only use that wind power to distill off ethanol…..

The Children of the Corn are Getting Upset

Of course I say that with great affection, as we always raised a fair amount of corn, and I have spent many a summer’s day shucking corn. But some corn growers don’t think ethanol is getting a fair shake:

Rolling Stone Gathers Dross

So much of the article is blah, blah, blah – we have heard all this before and there is no way to argue with these people because they believe what they want to believe.

Incidentally, Renewable Fuels Association president Bob Dinneen did take the time and effort to respond to the Stone article with a letter to the editor, which was subsequently lambasted by the article’s author. In the middle of it all is a blogger by the name of Robert Rapier – a UK oil-industry engineer and contributor to “The Oil Drum” blog – whom Rolling Stone author Jeff Goodell used as a source for many of his claims about ethanol. Dinneen challenged the “energy blogger’s” figures and in turn has been challenged to a debate by Mr. Rapier. To my knowledge, Mr. Dinneen has yet to take up the offer, but I think he should – somebody should. We can’t sit back and be weenies and keep taking this lying down.

Indeed. Don’t be weenies.

TWIP: Lowest Ever Gasoline Inventories

Recall throughout the spring when I was warning about plunging gasoline inventories, which ultimately drove gasoline prices to record highs? Well, we never quite recovered, and the scenario I described in this post back in June:

If we have no disruptions from hurricanes, imports stay strong, and we have no major refinery outages, we are likely to slowly climb out of this hole. But recent history suggests that we are likely to see more draws over the summer, exacerbating an already tight inventory picture.

is now upon us. From This Week in Petroleum for the week ending August 29, 2007:

As the chart below indicates, not only is the absolute level of inventories low (see Figure 4 in the Weekly Petroleum Status Report), but in terms of days of supply, it is the lowest ever recorded (the days of supply data goes back to March 1991), reaching just 20 days. This is even fewer days than seen following the hurricanes in 2005. While the absolute level of total gasoline inventories has been slightly lower a few times in recent years, when the level of demand is taken into account, it has not been this low before.

Lowest gasoline inventories on record. Gasoline inventories were not this low following Hurricane Katrina, and yet we have had an uneventful summer. It is very possible that we will not dig ourselves out of this hole for a long time. In the short term, an upturn in gasoline prices is inevitable.

August 28, 2007 Posted by | CTL, EIA, ethanol, gas inventories, General Motors, Sasol | Comments Off on The Week in Energy – September 1, 2007

The Week in Energy – September 1, 2007

As I mentioned in the previous post, I plan to start posting on a more infrequent basis. Every 5-10 days, I will post some short excerpts/links to energy stories I found interesting, odd, or comical. I will keep my own comments to a minimum. And while I plan to leave the comments section open, I don’t plan to spend time there as it is too easy to get sucked into endless debate.

Anyway, I was targeting this weekend for this essay, but I have slowly chipped away at it each morning this week, and I think there is enough there to post. Let me know whether you find this format useful. I am open to changing, as long as I can keep my time investment low as previously discussed.

Spreading Coal-to-Liquids Myths

General Motors: Ethanol Mythbusting by Spreading Ethanol Myths

Texas Surpasses California’s Installed Wind Power

The Children of the Corn are Getting Upset

TWIP: Lowest Ever Gasoline Inventories

Spreading Coal-to-Liquids Myths

The first entry comes from Malcolm Berko, who apparently writes a financial column out of Boca Raton. In answering a question from a reader, Mr. Berko helps to further confuse the public about energy issues as he paints coal-to-liquids (CTL) as the solution to our dependence on oil:

Taking Stock: Something not natural about synthetic oil firm

Some excerpts:

Dear Mr. Berko: Please tell me about Sasol, which is a synthetic oil and gas producer in South Africa.

J.W.

Detroit

Dear J.W.:

Since the oil crisis of 1973, many people are astonished that Congress and the White House have done nothing to ameliorate the problem. However, there is a super solution called “coal hydrogenation,” developed by Standard Oil of New Jersey (now Exxon Mobil Corp.) in 1930. It’s a simple process, and the resulting fuels cost much less than the fuels produced by Big Oil. In fact, those fuels are not an atomic particle less efficient than the same product produced from a barrel of oil.

But Exxon, Shell and the other Big Oils have billions of dollars of vested interests in oil properties, infrastructure equipment, etc., and “hydrogenation” would give Big Oil lethal gas pains. So to protect their interests, the oils covertly purchased influence from Congress (which is easy) to keep “coal hydrogenation” as far from the U.S. as possible.

Recently, a Congressional representative whose vote is not for sale told me that “active support for coal hydrogenation could cause me personal and political damage. Those oil companies are seriously nasty.”

In 1934, about 85 percent of Germany’s oil was imported, and the German Reich needed oil independence to fuel its factories and war machinery. The Nazis’ solution was a process developed in the U.S. by Standard Oil of New Jersey. It is called “coal hydrogenation, ” and because Germany had immense coal deposits, its supply of fuel and lubricants was almost unlimited. Between 1934 and 1942, Standard Oil financed and guided Germany’s hydrogenation process, producing the synthetic fuels that powered Germany’s formidable war machines across Europe, Africa and Russia. Undeniably, without the hydrogenation process, Germany could not have commenced World War II.

Back then, Standard Oil of New Jersey had enough congressmen on its private payroll to do anything it wanted to do. As a result, the actions of its officers and its board of directors nearly caused the Allies to lose World War II while their avarice and venality cost thousands of American lives. It is clearly documented that in the hubris of their success, Standard Oil made substantial contributions to German SS chief Heinrich Himmler ‘s personal fund and as late as 1944, was an active member of Himmlers “Circle of Friends.” So don’t for a nanosecond believe that gas prices at today’s pump are due to the high cost of a barrel of oil.

I won’t deconstruct the response, but I would like to ask Mr. Berko a couple of questions. Given that a number of countries other than the U.S. (Russia, China, India, Australia, and Germany) have larger coal reserves than South Africa, do you think it’s possible that there is a reason other than the “Big Oil boogeyman” that CTL hasn’t taken off? Can you think of a reason why South Africa might have (historically) had an added incentive to produce liquid fuels from a CTL process? Finally, given that Germany had developed a coal-to-liquids industry, and has large coal reserves, why do you suppose they abandoned their efforts after the war, instead of maintaining the industry?

For the record, the Energy Information Administration has estimated capital costs for CTL at $60,000 per daily barrel of production. This is around triple the cost of a conventional refinery, or an ethanol plant. Oil companies have looked at CTL numerous times, and have not pursued it on the basis of high costs. After all, don’t you think they would rather buy coal and turn it into diesel if you could really do so at a comparable cost? Their raw material supply would be much more secure.

General Motors: Ethanol Mythbusting by Spreading Ethanol Myths

General Motors has apparently decided that the best way to fight ethanol myths is to repeat some of the more common ones:

E85 “Mythbusting”

Certainly nobody can question their sources. After all, the Renewable Fuels Association, USDA, and National Corn Grower’s Association wouldn’t steer you wrong. I won’t go through the entire list, but they did hit some of my favorites:

Here are a few of myths out there on E85, and truth provided by experts.

Current research prepared by Argonne National Laboratory (a U.S. Department of Energy Laboratory), indicates a 34% gain in the overall energy input/output equation for the corn-to-ethanol process. That is, if 100 BTUs of energy is used to plant corn, harvest the crop, transport it, etc., 138 BTUs of energy is available in the fuel ethanol.

Of course we know that’s false. According to the USDA’s own numbers (the same source as that Argonne number), spending 100 BTUs of energy into ethanol production results in 106 BTUs of ethanol, and about 20 BTUs of animal feed.

It is worth noting that in fact, gasoline has a negative net energy of .87, meaning it takes 13 percent more energy to produce than it delivers.

I read a keen observation by someone recently on this account: How could an energy sink have transformed the globe in the 20th century?

Studies, including two by the DOE and USDA, have proven we can produce 60-90 billion gallons, on an energy equivalent basis, and potentially offset fossil fuel use by 30% or more by 2030.

The studies proved it, did they? Thank goodness. Just curious, though. How much has our fossil fuel consumption dropped over the past 5 years, as ethanol has exponentially ramped up?

The relatively small increases in food prices in 2007 have been attributed to increased energy costs (oil cost). (source: USDA and National Corn Grower’s Association (NCGA))

And rest assured that it has nothing to do with the ethanol-fueled doubling of corn prices in the past couple of years. Just ask the National Corn Grower’s Association.

It’s good to know that the future of GM is in such capable hands.

(Thanks to Gary Dikkers for sending that link).

Texas Surpasses California’s Installed Wind Power

Texas, long associated with oil and gas, is now the wind capital of the United States:

Texas blows past California in energy

Aug. 25–Recent Texas developments suggest that California’s lead in one alternative-energy area may be gone with the wind — the wind turbine, that is.

Last year, for the first time ever, an industry association reported that Texas surpassed California as the country’s No. 1 generator of wind energy. Not only did the Lone Star State blow past the Golden State again in this year’s report, but Texas regulators in July voted to designate eight zones for production of about 20,000 megawatts of wind energy.

The development is a bit of a twist given that California, with its Million Solar Roofs plan and other programs, is a national leader in conservation efforts, whereas Texas has long been associated with old-school energy sources, such as oil and natural gas.

Texas’ lead is increasing. In 2005, Texas led California by 47 megawatts in installed wind energy, and in 2006, it led by 407 megawatts, according to the annual U.S. wind power rankings of the American Wind Energy Association.

One megawatt is enough electricity to power 750 California homes during peak demand. The association reported that Texas had a capacity of 2,768 megawatts as of Dec. 31. California had a capacity of 2,361 megawatts.

“Texas is wowing everyone with those numbers,” said Christine Real de Azua, a spokeswoman for the association.

Wind power is growing at an incredible pace. You can see a map showing a state-by-state comparison of installed wind power here:

Wind Power America

The growth in installed capacity is also shown. Interestingly, Iowa is in 3rd place behind Texas and California. Now if they can only use that wind power to distill off ethanol…..

The Children of the Corn are Getting Upset

Of course I say that with great affection, as we always raised a fair amount of corn, and I have spent many a summer’s day shucking corn. But some corn growers don’t think ethanol is getting a fair shake:

Rolling Stone Gathers Dross

So much of the article is blah, blah, blah – we have heard all this before and there is no way to argue with these people because they believe what they want to believe.

Incidentally, Renewable Fuels Association president Bob Dinneen did take the time and effort to respond to the Stone article with a letter to the editor, which was subsequently lambasted by the article’s author. In the middle of it all is a blogger by the name of Robert Rapier – a UK oil-industry engineer and contributor to “The Oil Drum” blog – whom Rolling Stone author Jeff Goodell used as a source for many of his claims about ethanol. Dinneen challenged the “energy blogger’s” figures and in turn has been challenged to a debate by Mr. Rapier. To my knowledge, Mr. Dinneen has yet to take up the offer, but I think he should – somebody should. We can’t sit back and be weenies and keep taking this lying down.

Indeed. Don’t be weenies.

TWIP: Lowest Ever Gasoline Inventories

Recall throughout the spring when I was warning about plunging gasoline inventories, which ultimately drove gasoline prices to record highs? Well, we never quite recovered, and the scenario I described in this post back in June:

If we have no disruptions from hurricanes, imports stay strong, and we have no major refinery outages, we are likely to slowly climb out of this hole. But recent history suggests that we are likely to see more draws over the summer, exacerbating an already tight inventory picture.

is now upon us. From This Week in Petroleum for the week ending August 29, 2007:

As the chart below indicates, not only is the absolute level of inventories low (see Figure 4 in the Weekly Petroleum Status Report), but in terms of days of supply, it is the lowest ever recorded (the days of supply data goes back to March 1991), reaching just 20 days. This is even fewer days than seen following the hurricanes in 2005. While the absolute level of total gasoline inventories has been slightly lower a few times in recent years, when the level of demand is taken into account, it has not been this low before.

Lowest gasoline inventories on record. Gasoline inventories were not this low following Hurricane Katrina, and yet we have had an uneventful summer. It is very possible that we will not dig ourselves out of this hole for a long time. In the short term, an upturn in gasoline prices is inevitable.

August 28, 2007 Posted by | CTL, EIA, ethanol, gas inventories, General Motors, Sasol | 17 Comments

Oil from Montana Coal

I have been kicking around the idea of writing an essay on the coal-to-liquids (CTL) dream of Montana governor Brian Schweitzer. However, a story just appeared in the Billings Gazette that emphasizes many of the points I would cover in an essay:

Making oil from coal is bad for Montana

The essay argues that we shouldn’t do it, mainly due to global warming and pollution concerns. I agree that we shouldn’t do it, but I think we will do it as we become more desperate for energy. However, the cost of a CTL plant is double the cost of a conventional refinery. This means that CTL is still not an economic option, even though the process is viable from a technical standpoint.

The article above claims $6 billion to build one 80,000 bbl/day plant. This is consistent with estimates I have seen, which are even higher than estimates for GTL plants. So, before we turn to CTL, I think we will have to further deplete our conventional oil resources, and then start building GTL plants. At some point prices will be high enough to justify building CTL plants. Of course we may be growing bananas in Greenland by then.

Oh, and if you want to see some opinions that will make you shudder, read some of the comments following the article above. Some of those comments reflect an incredible ignorance of the issues we face. One of the posters is confident that God won’t allow us to destroy ourselves. Someone else argued that if we cut back on CO2, plants will start to die. We have a real uphill battle trying to get people to face up to the challenges before us.

July 22, 2006 Posted by | Brian Schweitzer, coal, CTL | 16 Comments

Oil from Montana Coal

I have been kicking around the idea of writing an essay on the coal-to-liquids (CTL) dream of Montana governor Brian Schweitzer. However, a story just appeared in the Billings Gazette that emphasizes many of the points I would cover in an essay:

Making oil from coal is bad for Montana

The essay argues that we shouldn’t do it, mainly due to global warming and pollution concerns. I agree that we shouldn’t do it, but I think we will do it as we become more desperate for energy. However, the cost of a CTL plant is double the cost of a conventional refinery. This means that CTL is still not an economic option, even though the process is viable from a technical standpoint.

The article above claims $6 billion to build one 80,000 bbl/day plant. This is consistent with estimates I have seen, which are even higher than estimates for GTL plants. So, before we turn to CTL, I think we will have to further deplete our conventional oil resources, and then start building GTL plants. At some point prices will be high enough to justify building CTL plants. Of course we may be growing bananas in Greenland by then.

Oh, and if you want to see some opinions that will make you shudder, read some of the comments following the article above. Some of those comments reflect an incredible ignorance of the issues we face. One of the posters is confident that God won’t allow us to destroy ourselves. Someone else argued that if we cut back on CO2, plants will start to die. We have a real uphill battle trying to get people to face up to the challenges before us.

July 22, 2006 Posted by | Brian Schweitzer, coal, CTL | 8 Comments

Summary of Archived Essays

I generally get a lot of e-mails asking for comments on biodiesel, butanol, or any number of subjects I have previously written about. But once an article goes into the archives, it is not nearly as accessible. I am about to be on vacation for a week, so I thought this might be a good time to review some previous articles on various subjects that have scrolled into the archives.

Ethanol

1. Grain-Derived Ethanol: The Emperor’s New Clothes

Synopsis: In my first blog essay, I hit a number of the popular pieces of misinformation regarding grain ethanol.

2. Improving the Prospects for Grain Ethanol

Synopsis:Here I looked at some potential breakthroughs that could make grain ethanol truly viable.

3. Ethanol from Biomass: A Sustainable Option?

Synopsis: I took a brief look here at the potential of cellulosic ethanol, the subject of my graduate school research.

4. How Reliable are Those USDA Ethanol Studies?

Synopsis: Here I address a pair of USDA reports on ethanol published in 2002 and 2004. In 2002, they claimed the energy return on ethanol was 1.34 (even though using their numbers you get 1.27). Two years later, they admitted they had grossly underestimated some of the energy inputs, yet the energy return increased to 1.67. I explain how they managed to fool so many people with an accounting trick.

5. Energy Balance For Ethanol Better Than For Gasoline?

Synopsis: Does it really take less energy to make ethanol than to make gasoline? Of course not. In this essay I flesh out the truth behind this very misleading claim.

6. The Future of E85

Synopsis: What’s going to happen if the ethanol subsidy is allowed to expire at the end of next year? Bad news for E85.

7. 60 Minutes – The Ethanol Solution

Synopsis: Were you impressed with Dan Rather’s report on ethanol? I was not. Superficial reporting at its finest.

8. E85: Spinning Our Wheels

Synopsis: Should we dramatically increase the number of E85 pumps in the country? Why don’t we first figure out how we can possibly supply them? I take a critical look in this essay.

9. Lessons from Brazil

Synopsis: Based on the stories in the media, you might never guess than 90% of Brazil’s fuel demand is satisfied with petroleum, nor that they have a fraction of U.S. energy demands. We have no hope whatsoever of following Brazil’s example, as shown in this essay.

The Panderers and the Clueless

10. Who’s to Blame for High Gas Prices?

Synopsis: One of my favorite targets is pandering politicians. Here I take my first shot at them.

11. Politics as Usual

Synopsis: More pandering politicians. They bemoan global warming and damage to the environment, so by golly let’s make gasoline cheaper. That should help.

12. Another Uninformed Consumer Watchdog

Synopsis: Here I take on a consumer watchdog group who claims that gas prices are really going up because oil companies are ripping you off. However, the group seems never to have heard of supply and demand, so I cover that for their benefit.

13. Taxing “Windfall Profits”

Synopsis: Do politicians actually believe a windfall profits tax is going to bring down the price of gas? Probably not, but they need to give the impression that they are actually doing something about high gas prices.

14. Politicians, Profits, and Inventories

Synopsis: Pennsylvania Governor Ed Rendell drove 2 blocks to an event to complain about rising gas prices. I wonder if his brain was working that day.

15. I’m Being Gouged!

Synopsis: Are you being gouged? It depends. What is gouging, anyway?

Conservation

16. Fuel Efficiency and Lessons from Europe

Synopsis: My first post on conservation, wondering why we can’t learn a thing from our neighbors across the pond. This essay hit #1 on Reddit.com for several hours, and generated 5,000 hits more than on a typical day.

17. I Can Drive 55

Synopsis: You can have a big impact on your energy usage by just slowing down. I have.

Biodiesel

18. Biodiesel: King of Alternative Fuels

Synopsis: I explain in this essay why I am much more bullish on the possibility of biodiesel as a sustainable energy option. The biodiesel group at UNH was referenced, including a hypothetical scenario where 100% of U.S. fuel needs are met with biodiesel produced from algae.

Butanol

19. Bio-Butanol

Synopsis: Butanol is a rising star on the energy scene. Here I discuss some of the qualities that make it a better option than ethanol.

Peak Oil

20. Peak Oil: End of the World?

Synopsis: I discussed my view of Peak Oil, and why I think some effects of Peak Oil will be mitigated. I still view it as a very grave threat, but one that I believe we are capable of muddling our way through.

21. What You Need to Know about Peak Oil

Synopsis: This one is hosted offsite. I wrote this article on Peak Oil for Omninerd. I go into much more detail, giving the history of the debate and covering the potential mitigation options. This essay is very highly-referenced.

Miscellaneous

22. A Primer on Gasoline Pricing

Synopsis: I covered some of the reasons behind rising gasoline prices, and predicted back in March that gasoline prices would continue to escalate.

23. Compressed Air Energy Storage

Synopsis: I am a big fan of wind energy, but the intermittent nature of the wind has always been a problem. In this essay, I discuss a method for storing wind energy for later use.

24. XTL: Promise and Peril

Synopsis: Here I discuss the promise and peril of extending the fossil fuel economy with gas-to-liquids (GTL) and coal-to-liquids (CTL).

Those aren’t all of the essays I have written, but are mainly those that either generated a lot of traffic, a lot of comments, or were publicized by other web sites.

Have a safe and happy 4th of July. I will start on new material next week. I hope to finally get around to that long-delayed article on solar energy, which is my favorite alternative energy source.

Cheers,

RR

July 3, 2006 Posted by | conservation, CTL, E85, ethanol, gtl, Peak Oil, politics | 2 Comments