$100 a Barrel Oil

Volume 1 Issue 2 - Opinion

coal-liquefactionIn my last column I predicted oil would exceed $100.00 per barrel and unfortunately that prediction has come to fruition. It would be great to say that I had mystical powers of seeing into the future but the prediction was a no brainer. Supply is limited and demand is on the rise: the only possible outcome is increasing prices. So, without fanfare, I now predict oil at $125.00 a barrel by mid summer. World reserves of crude oil are actually higher now than at anytime since the 1974 oil embargo, but as I detailed in Issue One the world oil market is now a commodities market and the price fluctuates with speculation. OPEC is toying with reducing production to insure prices stay high in the event of a worldwide recession. In the end, we here in the USA will see rising prices for everything we buy, not just diesel and gasoline.

The economic impact of escalating energy prices can be seen in the economic downturn across the USA. The miraculous cooperation between the President and the Congress in producing an emergency economic stimulus package is the best evidence of how adversely the high cost of energy is affecting our economy. Most economists calculate the increase in cost for the average family to be about $1200.00 per family. No big surprise the average Rebate to each family is – you guessed it – $1,200.00. It seems impractical to send out rebate checks every year, so hopefully, some other plan is in place for 2009.

Some readers took exception to my stand on ethanol in the last column, regarding it as attacking farmers. That is a misread, having spent the best summers of my life on my grandfather’s farm, I am keenly aware of what it takes to be a farmer. American farmers have given us a plentiful and low cost supply of every kind of food we can consume. Politicians are driving the ethanol production with unrealistic goals that can and will devastate the food supply. The use of biomass that would otherwise be wasted is the most efficient way to produce ethanol and not affect the food supply. Advancements in producing ethanol and biodiesel from algae are one of the most promising developments in the biofuels industry. Certainly, farmers will be key in any developing programs producing biofuels and, if history shows anything, it is that American farmers will meet the challenge.

Hopefully, ethanol feed stocks will be transferred to biodiesel feed stocks to achieve significantly improved efficiency of energy produced. Ethanol, at best, is energy neutral; producing as much usable energy as it takes to produce the ethanol. Biodiesel produces up to 3.5 times the usable energy it takes to produce the biodiesel.

Diesel powered vehicles are the bridge to more exotic powered vehicles of the future. Diesels achieve up to 40% improved fuel efficiency with the average being 25% improvement. The easiest and fastest method available for improving the average fuel economy ratings for the US fleet is to convert to diesel engines as soon as possible. Hybrids offer improvements but the increased complexity of the current hybrid technology leads me to believe several more modifications will need to occur in the future before all the bugs are worked out. And if the hybrid technology is perfected, the best combination would be a diesel hybrid, not a gasoline hybrid. Hydrogen fueled vehicles are certainly the best solution but the explosive nature of hydrogen requires some developments in production and storage.

Electric vehicles are very promising but cannot be the solution for all levels of transportation. Urban transport with all electric vehicles (plug-in to recharge) is readily available with off-the-shelf technology. Fairly small vehicles powered by batteries are being used more and more in dense urban areas. Improvements in battery technology will make these vehicles more and more useful in the future. It is important to note that the use of plug-in electric vehicles actually uses more energy than a comparable internal combustion engine. The production of electricity for the power grid and transmitting the electricity to the point of the recharge of the batteries is simply not as efficient as the internal combustion engine. However, the electric vehicles are environmentally friendly for the urban areas where pollution is more concentrated.

Mass transit offers some relief for fuel demand but the rail systems are in poor condition and it will take years to improve these systems to a point where increased use can make a difference. So, for the next 25 years the dependence on hydrocarbon fuels will be a reality of life. Converting to diesel-powered vehicles is the most promising and timely of the solutions for meeting the current and future demands for fuel. As I detailed in the last column, diesel produced from coal is the best solution for producing domestic diesel. There simply is no other viable solution but to convert as many vehicles as possible to diesel fuel and to produce that diesel from domestic coal.

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