Consumer Energy Report is now Energy Trends Insider -- Read More »

By Robert Rapier on Aug 28, 2007 with no responses

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.