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By Robert Rapier on May 5, 2011 with 98 responses

How Much is Oil Worth?

The reason that oil company profits are so volatile is that sometimes the price of oil becomes pretty disconnected from the cost to produce it and convert it into finished products. This is because oil is a globally traded commodity, and like other commodities such as corn, iron, and pork bellies, the price is set by how much people are willing to pay for it. This is an important point that is often lost on people who seem to believe that commodities are priced the way Ford prices trucks: Determine the cost of production and a return on the investment, and you arrive at a price. Unlike most trucks, a barrel of oil may see its price change dramatically without any real change in the underlying cost of production, leading to volatile profits.

Any time oil prices spike up as they have recently, you will hear people say “They are charging too much for oil.” I heard this when oil was $40, $80, $100, etc. That brings up an interesting question: How much is oil really worth? This is obviously a complex question, and the answer is going to be different for different people. But let’s try to put some parameters around the problem with a thought experiment.

For a producer, at a minimum oil is going to be worth what it costs to produce it plus some profit margin. That would seem to be the lower end of the actual value of oil, related back to the cost of production. But the cost to produce it is going to vary a lot around the globe. The cheapest oil to produce in the world can probably be found in Saudi Arabia, where some can still reportedly be produced for under $5 per barrel. If global demand was incredibly weak, and was expected to be weak indefinitely, then you might expect to be able to get oil for $5-$10 a barrel, and wholesale gasoline for $0.30/gallon.

Of course global demand isn’t weak, so most of us don’t have access to oil at anywhere close to the cost of production. So in a supply-constrained world, where oil is going to the highest bidder, how high might it go? To establish the upper end of oil’s value we have to consider exactly what it is that oil is doing for us, and the alternatives.

Consider the energy value of oil. On flat surfaces, people expend about 170 BTUs of energy per mile walked. A gallon of gasoline contains about 115,000 BTUs. You would have to walk about 700 miles, which at 3 miles per hour would take you 233 hours to expend the amount of energy contained in a gallon of gasoline. If you drive a fuel efficient car, a gallon of gasoline might take you 40 miles. If your alternative is to walk 40 miles — which might take you 13 hours — then a gallon of gasoline might be worth $50 or even $100 to you. In fact, if you were paid minimum wage in the U.S. you could earn almost $100 in the time it would take you to walk 40 miles.

Of course if you have a bicycle as an option, or are living in a country in which wages are low, that gallon won’t be worth nearly as much to you. On a bike, you could cover a 40 mile distance in 3 hours comfortably, potentially making a gallon of gasoline worth 3 hours of your time instead of 13 in the case of walking. Still, that gallon of gasoline might be worth $20 to you if the alternative is to bike that distance. That equates to an oil price of over $800 a barrel. (As a raw material for the chemical and plastics industries, we might come up with a value even higher than $800 a barrel).

The average person probably can’t imagine paying $10 or $20 a gallon for gasoline, but if demand continues to rise then it is certainly possible that we will pay those prices. If our alternatives are walking or biking to our destinations, most of us would probably opt to pay $20 for that gallon to make our 40-mile trip. We would just drastically cut down on those 40-mile trips.

Even today in Europe there are places where gasoline is $10 per gallon, and the cars are still on the road. I suspect we will see the same in the U.S. There will be a shift toward more public transit and more fuel efficient cars, but I think over the long term fuel prices will continue to rise, and we will continue to pay for it far beyond levels that we currently deem “too expensive.”

  1. By Wendell Mercantile on May 5, 2011 at 11:32 am

    Consider the energy value of oil.

    Even at $4 or more per gallon, the energy in gasoline is a pretty good buy. Being able to move 4,000 lbs a distance of 20 miles or more is not bad return for $4 — especially when you consider how difficult it would be to move two tons without that fuel.

    Of course the solution is to quit moving around so much dead weight every time we want to move a 180 lb person from Point A to Point B. Using a 4,000 lb vehicle to move a 180 lb person, is ridiculously inefficient — the payload is only 4% of the weight for which we are using energy to move.

    That means 96% of the motor fuels we burn do nothing more than move the package carrying an extremely small payload. Instead of concentrating on moving the package, we need to figure out how to move the payload.

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  2. By Kit P on May 5, 2011 at 11:54 am

    “We would just drastically cut down on those 40-mile trips.”

    I think ‘we’ might see us drastically cut down on those trips to $100 a pop restaurants.

    RR correctly pointed out that benefit of energy is much higher than the cost. Second RR pointed out that you can not save much energy by walking.

    People commute to get from rewarding high paying jobs to affordable places to raise children. While some like Wendell and myself are able to do that with commuting 40 miles, I am not doing to save money or energy. Who wants to spend time in a car avoiding idiots texting?

    If it cost $3/day, $6/day, or $12/day; those people are not going to change. Corollas and carpooling is not as fashionable as $60k luxury SUV. Feel guilty? Well make that a $65k hybrid luxury SUV.

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  3. By Wendell Mercantile on May 5, 2011 at 12:34 pm

    Being able to move 4,000 lbs a distance of 20 miles or more is not bad return for $4…

    I might add that it is not bad return for four American dollars that are quickly becoming less and less valuable. Some significant percentage in the spike in the price of oil and motor fuel is because the rest of the world is learning American dollars are on the road to becoming worthless.

    A stronger dollar would quickly drive the price of oil and fuel lower. But I have no suggestions of how the Obama administration can strengthen the dollar when the only way we will ever be able to settle the national debt is with seriously inflated — and increasingly worthless — dollars.

    While some like Wendell and myself are able to do that with commuting 40 miles…

    Kit P.

    I don’t commute 40 miles. From my house to work is three miles, and I walk that 95% of the time. For the last five years, I have put only about 2,000 miles annually on my 12-year old pickup truck. I use my truck only for doing essential, truck-like things for which I can’t use our car.

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  4. By Kit P on May 5, 2011 at 1:58 pm

    “I don’t commute 40 miles.”

    I suppose my sentence would make more sense as ‘without commuting’. The point I like to make is that people who consider energy in their life style already do it. For those who do not, cost is not a factor.

    My primary concern is not cost but safety. If you ride a bike or walk, avoiding idiots texting is matter of life and death not expensive body work.

    I do understand why Americans are confused between oil and electricity:

    “said Denise Bode, AWEA CEO. “In an economy in which gas prices have hit $4 a gallon and are still on the rise, America must implement long-term energy policies centered on homegrown sources. And wind delivers. By powering our electric cars using wind, Americans can pay the equivalent of 70 cents a gallon at the pump.””

    http://www.awea.org/newsroom/p…..282011.cfm

    If enough BEVs are used it will reduce oil use but since we not make electricity with oil it does not matter where the electricity comes from. There is that cost thing again. If you want to save money on oil, drive less. Hauling around $30k worth of batteries is not a good way to save money.

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  5. By mac on May 5, 2011 at 2:11 pm

    How much is oil worth ?

    Apparently, not $10 a gallon, At least not for Dallas Area Rapid Transit.

    DART has just inked a deal with Clean Energy Fuels to build four new CNG re-fueling stations for DART who will be purchasing 452 new CNG buses and 200 cng para-transit vehicles.

    http://www.energyboom.com/tran…..n-contract

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  6. By Optimist on May 5, 2011 at 2:50 pm

    Of course global demand isn’t weak, so most of us don’t have access to oil at anywhere close to the cost of production.

    I think you are missing a paragraph or two right before this sentence, RR. Something along the lines of:
    At $5-10/bbl only Saudi Arabia would be producing oil. Since Saudi Arabia produces ~10 million bpd (according to the EIA), compared to a world-wide demand of ~86 million bpd, that implies that world demand would have to drop by 88%. On top of that, at $10/bbl there would be little incentive for the Saudis to maintain production: if a major well needed maintenance, it might be left out of production for months, as the Saudis work at a leisurely pace on the repairs. To say the least, this is an unrealistic situation.

    A more appropriate measure of what a barrel of oil is worth, would be to consider the cost of the most expensive barrel to produce, a concept that economists call the last (marginal) unit produced. In theory, an lower price would take this unit out of production, since its production can no longer pay for itself. An increase in price, would (according to the theory) bring more oil to market, as previously unprofitable units become profitable.

    Most likely the most expensive barrel of oil to produce is that from the Canadian tar sands. According to Wikipedia, those cost about $27 – 28/bbl of bitumen in 2007. With the current low price of natural gas, it isn’t obvious if that cost would have increased or decreased since 2007. Allowing for some profit, that would imply that the minimum oil price at current levels of demand would be in the order of $35/bbl.

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  7. By mac on May 5, 2011 at 3:58 pm

    Robert said:

    “On a bike, you could cover a 40 mile distance in 3 hours comfortably, potentially making a gallon of gasoline worth 3 hours of your time instead of 13 in the case of walking. Still, that gallon of gasoline might be worth $20 to you if the alternative is to bike that distance.”
    ——————————————————————————————————–

    Or, how about this ?

    You could drive the 40 mile distance in your electric car for .80 cents

    Why would you want to walk ?, or bicycle?, or pay $20 to drive a gas powered vehicle? ……………………when you could drive the entire 40 mile distance in an electric car for a mere 80 cents ?

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  8. By Benny BND Cole on May 5, 2011 at 4:05 pm

    Cover of business section today, LA Times, is people looking at CNG cars.

    I wonder if CNG cars will someday flip, like faxes, or Internet connections or iPads. At some point a critical mass is reached, and then there are a lot of users and suppliers.

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  9. By rate-crimes on May 5, 2011 at 4:29 pm

    “How Much is Oil Worth?”

    At least several virtual human slaves for each ‘consumer being’ in the developed world . . . at least for a little while longer. Smile

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  10. By rate-crimes on May 5, 2011 at 4:34 pm

    “On a bike, you could cover a 40 mile distance in 3 hours comfortably” – Robert

    That is an average speed of only ~13 mph.  After a few months of preparatory riding, a healthy adult could cover that distance in three hours while napping.  Many of us can cover 60 miles comfortably in 3 hours.  I have a friend who can cover more than 75 miles in three hours; albeit as a world record holder.

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  11. By paul-n on May 5, 2011 at 5:24 pm

    Oil is worth as much as we are willing to pay for it.  Those of us who are less willing have, as Kit suggests, structured our lives to minimise oil use.

    For the remaining amount that we can’t avoid using,  we will pay whatever we have to, because there is little choice, and ultimately, the value delivered is worth the cost – as evidenced by the Euros who continue to drive (smaller cars for smaller distances) when fuel is $10/gal.

    Cycling while healthy in principle becomes potentially very unhealthy if there is nowhere safe to do it.  I am four miles from town but the winding, tree lined road has no shoulder and has water ruts and soft gravel where the asphalt stops – I have cycled it once, and survived and will never do so again.  Once in town it’s a different story, but then I can walk to everything once I am there.

     

     An interesting , and different, take on calculating travel times, and cost, for cars and bikes, that shows how bikes can be faster than cars, can be found here.  As more people have less or no income, they might start doing this calculation themselves – if it is safe to ride their roads.  

     

    @ Benny   For the CNG question I can point to the example of LPG (liquified petroleum gas – a 70-30 propane-butane mix) used in Australia – similar to propane vehicles here.  It does not get taxed the same – avoiding a 38c/l ($1.43/gal) excise tax so has always been cheaper than gasoline. Mileage is lower, and works out to about 2/3 the cost per mile of gasoline.  

    You do have to pay off a $2-4k conversion, and for factory fitted models it is about a $2k premium.  LPG cars used to be only taxis, couriers, travelling salesmen, etc – anyone who did more than 40k miles/year.  I owned two different LPG cars in my time in Aust, and my father has one today – has saved a lot of $over the years.  Availibility of LPG is about the same as diesel – not every station, but enough that you can always find it.

    LPG use has been growing steadily over the decades in Australia, thanks partly to some Texas style aggressive marketing;

     

    There are now 600,000 lpg vehicles, out of a national fleet of probably 15million – so it has taken a long time to get to there.  But growth is picking up fast – last year – 125,000 conversions were done (incl factory), compared with total new car sales of 1.03million.  

    I think it will be quite some time before we see hybrids/ev’s get to 12% of sales.

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  12. By mac on May 5, 2011 at 6:39 pm

    “Oil is worth as much as we are willing to pay for it.”

    With alternatives such as LPG in Australia, CNG in U.S. that are cheaper than gasoline by the mile, then just exactly what is going to hold us in bondage to gasoline at $10 or $20 dollars a gallon ?

    Riot police ?

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  13. By armchair261 on May 6, 2011 at 12:29 am

    optimist,

    I’d go a little higher. $35 might be enough to keep most presently producing and future low-cost low-volume projects humming, but I think we’d see a pretty sharp drop in drilling, impacting supply in the near to intermediate term. At that price you’d also be seeing a big drop in exploration in the high cost areas where our incremental material reserve volumes are going to have to come from, like deep water and Arctic regions. I haven’t done the math but I suspect you’d need in the range of $60-70 to keep exploration going at enough of a pace to deliver significant new supply 5-10 years out.

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  14. By moiety on May 6, 2011 at 3:03 am

    Wendell Mercantile said:

    That means 96% of the motor fuels we burn do nothing more than move the package carrying an extremely small payload. Instead of concentrating on moving the package, we need to figure out how to move the payload.


     

    Assuming that the efficiency is 100%. In any case very small numbers.

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  15. By paul-n on May 6, 2011 at 3:19 am

    Mac,

    IF gasoline is over $10+ per gal nothing will hold things back- all the alts will be in play and be fuel price competitive.  Even EV’s – if only because people will be accepting of small cars and short trips at those fuel prices – and that is the only way EV’s can be price competitive to buy – when they are half the car, and half the price, of the Leaf.

    But there’s the rub – you can get off oil – but only at a price so high that you don;t want to use oil, or any equally expensive alternative, anyway.  And that is pretty much what Jeff Rubin has been saying for three years now.

     

    LPG only really works in Aust because it gets the tax break.  AS the % of LPG cars on the road gets higher, that tax break will have to come off, and it is being pahsed out through 2016.  Now, when gasoline gets to $10/gal, a $1.43/gal tax credit hardly seems enough to make the toruble of LPG worthwhile, especially since you’ll be driving a lot less at that price.  Take away the tax break and there is zero incentive to change.

    This is why there is a big push for “drop in” alt fuels – if no up front capital is needed, no fuel tax break is really needed either.  But they have been the hardest nut to crack – even ethanol doesn’t qualify as drop in after E10. 

    And if people here are angry now at $4/gal, what would they be doing at $10/gal?  Then not just big oil, but any and all alt fuel purveyors would be seen as the Dark Side.  Europe has had to deal with it since WW2 – America has never had to deal with it – small wonder the politicians want to do anything to avoid going there.

    Oil is worth a lot – but no one really wants to pay the price

     

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  16. By Wendell Mercantile on May 6, 2011 at 9:42 am

    Oil is worth a lot – but no one really wants to pay the price.

    We are actually not paying much more than we did in 1980. Gas at $4.00 per gallon now is the same as gas at $1.53 per gallon in 1980.

    The real problem is that the Fed keeps printing money, and the value of the dollar keeps getting smaller and smaller, so it takes more and more dollars to buy something — especially commodities such as a barrel of oil and a gallon of gasoline which have intrinsic worth because they provide energy that can do work.

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  17. By sunweb on May 6, 2011 at 9:56 am

    Article is a beginning look at the cost of gasoline
    and other products from petroleum. 
    However, shouldn’t we consider the embedded energy in automobiles as
    well as the infrastructure to support them as part of the cost?   Bicycles also but of course a lesser
    embedded cost I would think. This would also go for any transportation mode such as electric vehicles.  

    However:

    We will do anything and everything to maintain our present
    personal level of energy use and the comfort it affords us.  We will do anything and everything to
    the earth, to other people and even to ourselves to continue on this path.   And if we don’t have the energy
    level we see others have, we will do anything and everything to the earth, to
    other people and even to ourselves to attain that level.  The proof of this assertion is simple;
    we are doing it.

    From:
    The Curmudgeon Report

    http://sunweber.blogspot.com/2…..eport.html

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  18. By Wendell Mercantile on May 6, 2011 at 10:38 am

    Bicycles also but of course a lesser embedded cost I would think. This would also go for any transportation mode such as electric vehicles.

    Sunweb,

    The embodied energy in EVs is quite high. It’s there because of the energy needed to extract, process, refine, and form materials such as Neodymium, Samarium, Praseodymium, and Lithium used in the traction motor magnets and the batteries.

    Most of the materials and much of that embodied energy can be recycled into a new EV when the old one wears out, but still there is a significant initial embodied energy cost.

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  19. By Benny BND Cole on May 6, 2011 at 1:31 pm

    Paul N-

    Thanks for the news on the Aussies. I am in Thailand several times a year, and LPG/CNG use there is rising also.

    There needs to be some regulatory reforms in the USA to make the CNG cars more available, and of course, a build-out of CNG/LPG stations. I read in the LA Times that in California there are high regulatory costs associated with a switch-over form gasoline to CNG. This is nuts.

    Still, if the current natural gas prices hold relative to oil, this trend will build for years, and globally.

    The good news is that both CNG and PHEVs are a lot cleaner than gasoline ICEs. Both are already cheaper to operate.

    Some people have CNG pumps at home, and are pumping CNG at $1.35 a gallon equivalent! In Oklahoma you can buy used CNG trucks and cars (conversions) for well under $15k at cngvehicles.net. I have read that Oklahoma and Utah are leading the CNG movement.

    This also means all the Peak Oil scare-mongering is just that–in fact, in the USA, we have a huge upside–we import oil. If we import less, we benefit, economically! And have cleaner air!!

    Really, the whole Peak Oil scenario may have it backwards–we could easily end up with higher living standards and a cleaner environment. Nothing to be scared of, that.

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  20. By Optimist on May 6, 2011 at 3:04 pm

    Sunweb, I’m sorry to see you view the human race as a bunch of rats, who can do nothing to change their own circumstances. Unfortunately, as long as you cling to that absurd view, one cannot make a sensible argument with you.

    From your linked rant: I remember a woman in a gated community in Arizona during an interviewed in 1974 saying, “I got mine, let them get theirs.”
    Let me see: you are basing your entire view of humanity on ONE woman in AZ? LOVE your scientific method!

    The truth is that with such a selective method you can prove ANYTHING.

    Until you come to a more sensible world view, one cannot take the rants you post too seriously.

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  21. By Optimist on May 6, 2011 at 3:11 pm

    I’d go a little higher. $35 might be enough to keep most presently producing and future low-cost low-volume projects humming, but I think we’d see a pretty sharp drop in drilling, impacting supply in the near to intermediate term.

    I suspect you’re right, Armchair. My point was that RR’s $10/bbl is a bit absurd. $35/bbl would be the absolute minimum.

    But there’s the rub – you can get off oil – but only at a price so high that you don;t want to use oil, or any equally expensive alternative, anyway.  And that is pretty much what Jeff Rubin has been saying for three years now.

    I understand the statement, but I fail to see a problem. The day is coming, regardless.

    You want energy independence? How much is it worth to you?

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  22. By armchair261 on May 6, 2011 at 5:03 pm

    I think RR is referring to an exceptionally weak global demand scenario, as in a severe global recession, and in that case a lower price would be possible. But you and I are thinking about a “normal” global economy, and in that case $10 couldn’t be stable.

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  23. By Walt on May 6, 2011 at 8:39 pm

    Although we are taxed at the pump, which corresponds to the miles we drive, this is a new twist.  It might be the well-to-wheel carbon tax that I see floating in some circles.  Keep an eye on this bill as taxes are going up, up, up for the middle class!

     

    http://thehill.com/blogs/floor…..y-the-mile

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  24. By paul-n on May 6, 2011 at 9:11 pm

    Huh – $300m to study the idea of doing a tax based on vehicle miles?

    Some Americans seem to think they are always the first to come up with new ideas.  In the case of a road tax based on mileage, not only has it been looked at elsewhere, it is already being done.  They can spend just a fraction of that ridiculous sum of money and take a holiday to beautful New Zealand where such a system of Road User Charges, based on mileage and vehicle weight, is already in operation, and has been for some time.

     

     

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  25. By mac on May 6, 2011 at 9:13 pm

    Ben,

     

    OPEC CAN KISS OUR NATURAL GAS !

    http://www.KissMyNaturalGas.com *

    Classified Ads For The Natural Gas Alternatives

    The Best Way For Americans To Become Energy Independent Is For Us All To Send OPEC A Message: We Don’t Need Your Oil Anymore!

     

    *Sounds to me like these people mean business. – mac

     

     

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  26. By Optimist on May 6, 2011 at 9:31 pm

    Another attempt by T. Boone Pickens?

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  27. By paul-n on May 6, 2011 at 10:12 pm
    No, just a link to an awful site for selling cng vehicles.

    Mac – how about posting in regular font? – we really don;t need text shouting here.  In fact, at the risk of being a blog nazi, we really didn’t need that post at all – it just generates heat, not light.

     

    Optimist,

    in response to your statement about “not seeing a problem” with what Rubin (or I )said, the problem is this- people are starting to hyperventilate at $4/gal – what kind of trouble will we see at $10?  They day of really expensive oil is indeed coming, and the current attitude of governments (around the world) is to just hope it doesn’t come soon.   But it’s a case of a plan for it is better than just hoping it doesn’t come.  The US can;t drill its way out of higher prices – even Canada, which can produce all its own oil, can;t escape higher prices.  

    We will have to live with high oil prices, but no one in authority is looking at how to do that seriously at how to do that – that’s the problem.

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  28. By Rufus on May 6, 2011 at 10:37 pm

    Gasoline is just an adulterant that they put in my E85.

    In five years, probably, all new flexfuel cars will get the same mileage on ethanol, as on gasoline. Also, with the new heated injectors, gasoline will not be required to facilitate “cold starts.”

    At that time, Oil’s worth to me will be Zero.

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  29. By Wendell Mercantile on May 6, 2011 at 11:42 pm

    Rufus~

    Ethanol had its day in the Sun and will soon be consigned to the dust bin of history — remembered fondly only by Big Corn and Big Ag. Many in a position of power are finally wising up to the subsidized scam of ethanol.

    In five years, you’ll be able to readily buy cars that run on methanol and mixed alcohols made from domestic feedstocks other than food, and from liquid fuel derivatives of natural gas.

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  30. By mac on May 7, 2011 at 1:14 am

    Paul,

    I have always posted in regular fonts. I forgot I was up in the forum when I cut and pasted the ad. Here, the fonts are automatically set, reduced to standard size and in black and white.

    I thought the ad was hilarious It certainly expresses the way many people feel about OPEC, myself included. I also got a laugh out of your LPG six-shooter ad from down under..

    Whether natural gas is the ultimate transportation solution, I don’t know. One thing is obvious — anyone who converts their transportation sector to CNG will no longer have to worry about OPEC oil imports. Widespread use of CNG and PHEVs has the potential to perhaps deliver us from relying on any imported oil whatsoever.. Under such a scenario, our domestic supplies might then be sufficient for anything else that falls through the cracks and to make petro-chemicals. asphalt and so on.

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  31. By Mercy Vetsel on May 7, 2011 at 1:24 am

    Great post. You have good economic intuition and are analyzing a very relevant question in a useful way, but I think the standard economic framework for understanding the shape of a demand curve would help.


    How much is oil really worth? This is obviously a complex question

    Well, the basic economic framework isn’t complex at all. At the margin, oil is worth exactly the price. Price is the point where marginal supply equals marginal demand.

    Therefore, on the demand side, the price is set not by the ambulance driver who would pay $300/gallon, but by the guy who is indifferent between driving three hours to visit his mother or staying home and using the savings to mail her flowers.

    the answer [value of oil] is going to be different for different people

    Yes, that’s the classic nature of a demand curve. Water for your lawn is worth the market price, but water to drink is worth a fortune. Your main question is really “what is the shape of the demand curve for oil?” Or put another way, if supply became severely constrained, how high could the price of oil go?

    You make a good point that portable fuel with high energy content (like gasoline) is indeed very valuable, but to figure out what OIL is worth, we need to consider some of the cheapest substitutes available.

    Natural gas, gas-to-liquids and coal-to-liquids are economically viable even at today’s prices, if those prices end up being sustained. The reason they still have $10/gallon gas in some parts of the world is that the price has been increased by taxes that would also apply to the lower cost substitutes.

    The main lesson from $10/gallon gas is that battery cars and all of the other sexy green alternatives (not subject to the tax) cost more than the equivalent of $10/gallon.

    Sasol has been doing CTL economically for years, even expanding capacity in the period leading up to the 2008 spike in prices. This means peak oil can’t happen without peak coal.

    So what if we assume that Americans will swallow higher prices rather than using CTL to keep gasoline in the < $5 gallon range? (yeah, right)

    Even considering only green alternatives I don’t see long term demand for oil at prices that translate into $10/gallon gasoline. At that price, the Nissan Leaf starts to make sense and H2 fuel cells become a realistic alternative.

    -Mercy

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  32. By paul-n on May 7, 2011 at 2:38 am

    @ Rufus – if you don’t want any adultery with your ethanol (and ethanol has been known to cause it) then you could always just buy a truckload from a distillery.  Way fuel prices have been going its probably a better bet than treasury bonds.  

    I would love to see some E100 cars being done  - then ethanol is truly an oil-free fuel.  I would even support double the blenders credit for that, even though there is no blending being done.

     

    @ Mac – fair enough about the cut and paste problem – I have run into that.  While I am no friend of OPEC, I just couldn’t take that ad seriously.  I am of the view that OPEC is not really “the problem” – that would be the excessive American demand for oil.  OPEC has been playing price shenanigans for decades, it is indeed time to leave them in their dust.  

    But a wholesale switch to another fuel, be it CNG or ethanol or pixie dust, won’t really solve the problem, in my opinion – it will just switch the excessive consumption to a different energy source.  If NG, then fairly quickly you will have the rest of the country complaining that the landowners over the Marcellus Shale who are resisting drilling on their land are preventing the rest of America from having cheap NG, etc.

    When a city/town runs out of water and has to have severe restrictions, and then spend big $ on a  new source, there are usually some changes made to reduce water wastage to minimise the situation happening again – Las Vegas has been outstanding in this regard.  With oil, it seems everyone wants to avoid said changes, or wants someone else to make them.  

    When the wastage is eliminated, there is a much better chance for energy (oil) independence to actually be achieved. 

     

     

     

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  33. By paul-n on May 7, 2011 at 3:02 am

    Mercy wrote;

    The main lesson from $10/gallon gas is that battery cars and all of the other sexy green alternatives (not subject to the tax) cost more than the equivalent of $10/gallon.

    I’m not sure this statement is completely true.  the high prices have certainly eliminated a lot of the marginal uses for fuel, which is why they use half there than here.  But also, lots of Euro cities have good transit systems, which is the greenest alternative of all.  I think that long before it gets to $10 here, we will see more and effective transit being done in most cities and even towns (or between them).  Maybe not all rail, but more transit of all forms.  It is actually the only fuel reducing action within the control of most cities, and as the fuel prices go up, so do the demands for more transit – at some point it will start to happen.  

    The alt fuels will be in play then too – but I don’t think we will get to $10 (before tax) either.   

    This means peak oil can’t happen without peak coal.

    Not necessarily – it is possible that we are at peak oil already.  I agree that “no oil” won’t happen without “no coal” but the peak certainly can.

     

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  34. By Rufus on May 7, 2011 at 8:34 am

    We could, for all practical purposes, be at “peak coal” in 20 yrs (that’s when the mines at Powder River Basin are played out.)

    Paul, Flexfuel cars such as mine will run just fine on E100. All I have to do is add heated injectors for cold starting.

    BTW, even with horrible harvests, here, and globally, the last year, and very high-priced corn wholesale ethanol is selling for $2.52 in Chicago. And, That is before the $0.45 Blender’s Credit is applied. You guys are talking about, maybe, using this, or that, in the future. Ethanol is Here, and Now.

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  35. By Wendell Mercantile on May 7, 2011 at 11:22 am

    I would love to see some E100 cars being done – then ethanol is truly an oil-free fuel.

    Paul,

    Except for that pesky business about the fossil fuels used to make ethanol.

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  36. By Rufus on May 7, 2011 at 11:28 am

    Nat gas is used, now, because it’s cheap, but it is in no way, a necessity.

    In the future virtually all ethanol plants will be powered by the lignin left over from the cellulosic facility.

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  37. By Wendell Mercantile on May 7, 2011 at 12:15 pm

    Rufus~

    NG is a fossil fuel. And what about the ag equipment* and the fertilizer plants making that essential ingredient for corn ethanol: synthetic anhydrous ammonia?

    ————-
    * Have you seen any tractors running on lignin? Ag equipment makers won’t even make tractors that run on ethanol.

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  38. By carbonbridge on May 7, 2011 at 12:29 pm

    Rufus said:

    In the future virtually all ethanol plants will be powered by the lignin left over from the cellulosic facility.


     

    Good point Rufus.  That leftover complex lignin material from batch fermentation after applying extra expensive acidic enzymes and longer cooking times — is still chock full of unused, unconverted carbon atoms which didn’t get produced into ethanol the first time through the bio-bug ligno-cellulosic next-gen EtOH fermentation distillary.

    If that same complex woody lignin biomass substrate were gasified instead of being heated, cooked, hydrolyzed with acid enzymes all in advance of being batch fermented into ethanol with CO2 offgas using yeasts — then these same residual carbon atoms in the lignin could be instantly utilized and catalytically converted to produce even greater yields of biodegradable, longer chained, stronger BTU, greater octane, lower-costing, linear alcohols.

    ‘Cept gasification is one of two front-ends for a totally different breed of cat — something called GTL or gas-to-liquids.  And GTL is NOT your current make/model of batch fermentation ligno-cellulosic ethanol distillary.  Instead, this ‘methanization-type’ [think/see 90 yr. old methanol chemistry set design here] of GTL apparatus is 24×7 continous production and employs super-heated steam as its active process driver, not bio-bugs nor acidic enzymes.  This GTL system is highly exothermic and produces very great excess heat to be utilized in co-generating electricty, powering the GTL plant, recycling steam pressures – and even producing large quantities of distilled water every day.

    I’ll start doing some research here.  Thanks for pointing out these lignin leftovers from ‘next-gen ligno-cellulosic ethanol’ coming down the pike to me and also to others reading here.  Very much appreciated.  I think you might be on to something! Is it burning this leftover lignin which you were thinking about?   :-)

    –Mark

     

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  39. By Rufus on May 7, 2011 at 12:33 pm

    No, but they make tractors that run on biodiesel. Probably, 40% of ethanol refineries remove the corn oil (more than enough to handle all of the farming/transportation needs of corn/ethanol production.)

    In the future Almost All biorefineries will remove the corn oil. The equipment isn’t expensive, and the profits are significant.

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  40. By Rufus on May 7, 2011 at 12:40 pm

    Some are looking at “burning,” Mark, while others, like Poet, are looking at anaerobic digestion to biogas.

    Either way, you’re going to be left with excess power for electricity generation.

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  41. By Rufus on May 7, 2011 at 12:45 pm

    In the meantime, Green Plains Renewable Energy is, as we speak, using the warm, nutrient-enhanced waste water, and CO2 from its ethanol production to grow Algae in bioreactors.

    The Algae, of course, can be used for many products, including, but not limited to, biodiesel, ethanol, pharmaceuticals, cosmetics, etc.

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  42. By rrapier on May 7, 2011 at 2:04 pm

    Rufus said:

    Gasoline is just an adulterant that they put in my E85.

    In five years, probably, all new flexfuel cars will get the same mileage on ethanol, as on gasoline. Also, with the new heated injectors, gasoline will not be required to facilitate “cold starts.”

    At that time, Oil’s worth to me will be Zero.


     

    I would say then that you fail to realize all of the other things that oil produces, besides being used as fuel.
    RR

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  43. By rrapier on May 7, 2011 at 2:06 pm

    armchair261 said:

    I think RR is referring to an exceptionally weak global demand scenario, as in a severe global recession, and in that case a lower price would be possible. But you and I are thinking about a “normal” global economy, and in that case $10 couldn’t be stable.


     

    Exactly. I am thinking in terms of absolute rock bottom price for oil. Imagine a total global demand collapse; for instance a renewable fuel breakthrough that actually eliminated demand for oil. My thought experiment helps (me) put a lower value on what oil would be worth.

    RR

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  44. By Rufus on May 7, 2011 at 2:21 pm

    I looked at that list of 50 things made from oil (of course, there will Always be “some” oil. They will be pumping small amounts of oil out of the large onshore fields for hundreds of years.)

    But, having said that, I didn’t see a single item on that list that couldn’t be made w/o oil.

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  45. By paul-n on May 7, 2011 at 3:13 pm

    Wendell wrote;

    * Have you seen any tractors running on lignin?

    Well, of course I have – they are much more interesting to see than ordinary tractors.  

     

    If you have never seen one of these things fired up, then put it on your bucket list – they are quite something – from a safe distance

    And lest you think they are good for nuthin, check out this video for an interesting, if slightly inefficient, way to plough hard ground;  You only need to watch to about 1:30 to get the idea…

     

    Seriously though, there are many ways for distilleries to power themselves with things other than NG, they just haven’t to date, and with NG beaing as cheap as it is presently, and being produced in the midwest, what is the business case to change?  

    They would make much better use of the NG if they did an NG CHP plant and use the plentiful waste heat for the process- but then they would quickly find they are making more money from the electricity than the ethanol!

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  46. By paul-n on May 7, 2011 at 3:18 pm

    @ Rufus – are you sure your flex fuel can run E100?  Is that in the owner’s manual and EPA approved?  Great if the car can run on it, but the technical ability to use it is not the same as the legal ability to use it.

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  47. By rrapier on May 7, 2011 at 3:22 pm

    Rufus said:

    I looked at that list of 50 things made from oil (of course, there will Always be “some” oil. They will be pumping small amounts of oil out of the large onshore fields for hundreds of years.)

    But, having said that, I didn’t see a single item on that list that couldn’t be made w/o oil.


     

    But you said oil would have zero worth to you. That’s like saying toilet paper has zero worth, because you have a big pile of leaves in your back yard.

    RR

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  48. By armchair261 on May 7, 2011 at 3:43 pm

    Rufus,

    Gasoline is about 46% of refinery yield. I don’t think the remaining 54% of the barrel could be easily (read, economically) replaced: we are a long way off, I believe, from significant reductions in fossil fuel demand in the trucking, rail, shipping, and aviation industries. These industries alone account for about 41% of the barrel. So, combining that demand with asphalts and chemical feedstocks, I think it’s possible that strong demand growth for several decades coupled with plateauing or even declining supply could still put pressure on oil prices in the future, even if most cars were gradually converted to hybrid or electric over the next decade or two.

    Recent fossil fuel demand growth rates have been running at about 2% or more for the last ten years, according to the IMF’s April report “Oil Scarcity, Growth, and Global Imbalances.” A 2.5% growth rate over 20 years would translate to a 64% growth in demand. Assuming present US yields applied to global production (I know, not accurate), that means a current non-gasoline demand of 48,000,000 bopd would grow to 79,000,000 bopd, not too much less than today.

    Some shaky assumptions here for sure, but as a sense check it could suggest that even if we converted to a 100% green auto fleet worldwide, there could still be pressure on oil supply well into the future.

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  49. By carbonbridge on May 7, 2011 at 3:57 pm

    Paul N said:

    @ Rufus – are you sure your flex fuel can run E100?  Is that in the owner’s manual and EPA approved?  Great if the car can run on it, but the technical ability to use it is not the same as the legal ability to use it.


     

    Paul:  Both M-85 chips and E-85 chips will operate and combust neat alcohols without the gasoline portion EVEN if the owner’s manual says differently.  Problem herein is that the consumer has a very hard time purchasing anything other than E-85.  Getting anhydrous ethanol into your fuel tank isn’t easy for most people… However, when combusting a neat fuel past a FFV chip, the air/fuel ratio is a bit off – as the chip is NOT calibrated for E-100 or M-100.  Based upon oxygen content dissolved in the fuel, the chip thinks that an E-100 blend is actually E-85 and calibrates air/fuel ratio and spark ignition advance that way.  And the resulting effect is that E-100 is actually a leaner mixture than is E-85.

    So when you run neat alcohols past an FFV chip – everything performs very well but actually the air/fuel ratio is a bit on the lean side AND the spark advance doesn’t go quite as far upwards as it could have – and correspondingly adjust even tighter for a totally neat alcohol minus all gasoline content.  This is when you achieve the greatest power from pure alcohols and emit a biodegradable exhaust emission devoid of any unburned hydrocarbons.

    This is something which is going to have to change regarding FFV chips.  We’ve visited this before, yet I see a new FFV chip with about three or maybe even six different settings on it – some small control panel located in the glove box which can be switched around to more accurately interpret and fully adjust the engine’s air/fuel ratio and spark ignition timing depending upon what blend or totally neat fuel is actually being combusted.  The FFV chip measures incoming dissolved oxygen content and then starts adjusting from there.  And so far, there have only been M-85 chips (possibly all discontinued now) and E-85 chips.

    When properly adjusted with chips like these, E-85 or M-85 blends produce MORE snappy torque response than does pure gasoline.  Yet mileage is typically [I say typically, not always] a direct result of BTU value of the fuel(s) being combusted.  Neat methanol features about 56,000 BTU’s/gallon.  Neat ethanol clocks in at 75,500 BTU’s.  Higher mixed alcohols which I’ve been combusting since 1995 measure 90,400 BTU’s/gallon.  And forget what the internet tells you about gasoline being at 125,000 BTU’s — it isn’t.  Most street gasoline comes in at about 112,000 BTU’s per gallon. 

    Consider spending several hundred dollars and test your favorite gasoline and see for yourself exactly how it clocks in regarding BTU’s, octane rating as a combination of lower motor and higher research octanes (averaged at the pump as M&R/2) plus Reid Vapor Pressure which is adjusted seasonally, and a few other measurments, etc. 

    Please be aware in advance that your ‘favorite gasoline sample’ labeled 87 octane [probably quite correctly] can have between 40 and 110 different hydrocarbon components within it.  We never know the makeup of the gasoline which we purchase as consumers except that the octane numbers are usually right on.  Yet it is the differences in the chemical makeup of the fuel itself which seems to perform better or worse in specific cars and trucks.  This is why we tend to ‘favor’ one brand of local gasoline as it [typically] provides the motorist with better mileage than another competing brand.

    –Mark

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  50. By mac on May 7, 2011 at 4:51 pm

    Rufus,

    Yes, virtually everything in the list of “50 things that come from oil” can be made without oil, often with better results. Check out this article in GreenCarCongress..

    “Scientists in Brazil are studying the production and incorporation of cellulosic nanocrystals (also known as cellulose whiskers) derived from several sources such as pineapple, curaua, banana and coir into thermoplastics matrix composites for automotive applications.”…………

    “Some of these nano-cellulose fibers are almost as stiff as Kevlar, but unlike Kevlar and other traditional plastics, which are made from petroleum or natural gas, nano-cellulose fibers are completely renewable.

    “The properties of these plastics are incredible. They are light, but very strong—30% lighter and 3-to-4 times stronger. We believe that a lot of car parts, including dashboards, bumpers, side panels, will be made of nano-sized fruit fibers in the future. For one thing, they will help reduce the weight of cars and that will improve fuel economy.”

    “So far, we’re focusing on replacing automotive plastics. But in the future, we may be able to replace steel and aluminum automotive parts using these plant-based nano-cellulose materials.”

    —Alcides Leão, Ph.D., study leader, São Paulo State University

    http://www.greencarcongress.co…..10328.html

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  51. By Rufus on May 7, 2011 at 5:10 pm

    That was some great information, CB. Thanks.

    Paul, I’m a little embarrassed to admit that I haven’t bothered to look at what the owner’s manual says about blends over E85. Of course, I don’t know how you would go about finding anything over E85 (I suppose you would have to find a refinery that was willing to sell it to you.) I know some drag-racers use straight ethanol.

    Some really fast drag-racers :)

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  52. By Wendell Mercantile on May 7, 2011 at 5:43 pm

    Of course, I don’t know how you would go about finding anything over E85

    Couldn’t you just go over to your local county ethanol distillery? Haven’t heard you talk much about that lately.

    I know some drag-racers use straight ethanol. Some really fast drag-racers :)

    Some really fast drag racing drag racing cars with engines that would never work in a road worthy passenger car; that produce peak power for only a handful of seconds at a time; and that must be rebuilt after a few dozen runs.

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  53. By Rufus on May 7, 2011 at 5:51 pm

    You haven’t been paying much attention, have you sport? The world is coming around to where I said it would 3 years, ago – small cellulosic refineries drawing feedstock from the immediate area. They won’t all come at once, but a few will start construction this year.

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  54. By rrapier on May 7, 2011 at 6:14 pm

    Rufus said:

    You haven’t been paying much attention, have you sport? The world is coming around to where I said it would 3 years, ago – small cellulosic refineries drawing feedstock from the immediate area. They won’t all come at once, but a few will start construction this year.


     

    Haven’t you said that like 3 years in a row?

    Some might get built, but do you know how many will make it in the long run? Next to none. It’s like the Range Fuels guys finally figured out: “Gillis said Range officials were shocked to learn just how little wood pulp is actually contained in a large heap of debris.”

    The low energy density of biomass combined with the fact that you get a 4% solution of ethanol was why plants have failed at this for over 100 years.

    RR

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  55. By Wendell Mercantile on May 7, 2011 at 6:45 pm

    RR,

    Logistics of providing biomass

    In a somewhat related note, a local electrical generation station (40 mW) not far from here recently converted one of their coal-fired generating stations to biomass. So far they have found they need ~70 semi-trailer loads a day to keep the plant running, and they have had to scour the country for a 120-mile radius to keep a steady supply of biomass flowing.

    They have had a steep learning curve. The residents are complaining about the many semi-trucks rolling through town, the ash, and the smoke; biomass storage piles have caught fire due to spontaneous combustion; and so far the DNR has issued two letters of non-compliance for failure to meet air-pollution standards.

    The world is coming around to where I said it would 3 years ago…

    Rufus~

    They are? Please, tell me where there is small cellulosic ethanol plant up and running. The truth is that ethanol — both corn and cellulosic — is past its peak, and those in power are finally starting to realize that fact.

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  56. By Rufus on May 7, 2011 at 6:46 pm

    That’s why the ones that will make it will be those that have operated “Pilot” plants, and “Demonstration” Plants (which, as you well know, Range didn’t,) and will be operating on ag waste, and grasses, not wood. And will be using an enzyme approach, not gasification.

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  57. By mac on May 7, 2011 at 7:28 pm

    How much is oil worth ?

    Ar present about 6-8% of crude oil production is used to produce plastics. This appears to be changing rapidly. as companies that manufacture plastics (and other chemicals) turn away from crude oil as a feedstock.

    From an article in the New Internationalist here are a few random quotes:

    “By 2010 DuPont intends to turn 25 per cent of its global chemicals and plastics production to bio-based feedstocks and ultimately hopes to move away entirely from oil.”

    “According to analysts at Bio-Era Consulting this is an industry-wide trend. A fifth of the $1.8 trillion chemicals and plastics market may be derived from plants by 2015, mostly food sugars.”

    “Bioplastics already account for 10 to 15 per cent of the global market and are expected to grow to almost a third of total production in just over a decade. They currently bring in over a billion dollars a year – a figure that is set to swell to more than $10 billion by 2012.”

    “Today, with oil prices skyrocketing, it’s cheaper feedstock not green principles that is driving chemical companies back to bio-based plastics.”

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  58. By Rufus on May 7, 2011 at 7:45 pm

    Good stuff, Mac. I guess $100.00 Oil changes a lot of things.

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  59. By Rufus on May 7, 2011 at 7:56 pm

    Well, Wendell, Genera, at Vonore, Tn has been producing ethanol from cellulose for a year, or so, now.

    Abengoa starts construction this summer. Quite likely Poet, and Dupont, as well. There are a couple that Have started contruction, but I don’t know anything about them; so I’ll wait to comment.

    Inbicon has been producing a million gallons/yr, I think it is, for a couple of years now.

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  60. By Wendell Mercantile on May 7, 2011 at 9:08 pm

    Genera, at Vonore, Tn has been producing ethanol from cellulose for a year, or so, now.

    Genera is a University of Tennessee research and demonstration (R&D) project. Let me know when it’s producing ethanol in quantity and is economically viable.

    Inbicon is producing at their plant in Denmark, but it’s hardly one of your “…small cellulosic refineries drawing feedstock from the immediate area.” It required a large grant from the Danish government, and is only possible because it’s located next to a large thermal electrical generation station and is able to use waste steam from the power plant. (Admittedly, that’s a good use of the waste steam, but that’s only possible in select locations.)

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  61. By Rufus on May 7, 2011 at 10:18 pm

    You’re right, Wendell. It’ll never work. Oh, well. We’ll just have to try something else.

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  62. By paul-n on May 7, 2011 at 10:38 pm

    The low energy density of biomass combined with the fact that you get a 4% solution of ethanol was why plants have failed at this for over 100 years.

    RR

    Very true BUT – 100 and two years ago they were saying they could do it – with peat!

    [from Commercial Peat: Its uses and possibilities, 1909, emphasis added is mine. ] 

    The motor industry, which is fast becoming one of the world’s greatest industries, is thus dependent upon the supply of a fuel which to all appearance must, according to the present trend of progress, fail in the near future to be equal to the demand. The Motor Union of Great Britain and Ireland became somewhat alarmed at the serious rise in the price of petrol, and in September 1906 it was suggested that a special Committee should be appointed to fully discuss this important subject.”

    Peak Oil, back in the day – always good for getting government to do something – trick is to get them to do what you want;

    “In July 1907 the official report of the Committee was issued, and through the courtesy of the secretary of the Motor Union the following extracts are taken: “The Committee have carefully considered the various substitutes for petrol which have been brought before them, and have unanimously arrived at the conclusion that the main efforts of the Motor Union should be in the direction of encouraging in every way the use and development of a substance, such as alcohol, produced from vegetation.”

    And let’s make sure we specify the vegetation we want, and say how we have to keep up with those other countries that are already doing it;

    “Alcohol offers a complete and satisfactory substitute for petrol so far as its properties are concerned, and hence probably the most important recommendation of the Committee is that connected with the production on a large scale of alcohol for the purposes of a fuel. It may be noted that the argument added to all others, but which to many in this country would probably appear the most important of all, is the fact that it would form a home industry, especially if produced from some substance, such as peat, potatoes, or beet, which would place the country in an independent position with regard to foreign supplies, a consideration which, it should be noted, is leading the Governments of France and Germany, particularly the latter, to give every encouragement to the use of alcohol as a fuel.”

    Well, we know how that turned out – gasoline all the way ever since.  Amazing how similar that all sounds to what we have been hearing from the ethanol industry, and governments, for the last decade – I wonder if Bob Dineen has this on his bookshelf?

    There’s more – see if this sounds at all familiar;

    The conclusion which was impressed upon the committee more and more at each meeting was that a famine in petrol appears inevitable in the near future, owing to the fact that demand is increasing at a rate much greater than the increase in supply.  The very important matter of the coming shortage does not seem to be realised by those most concerned…

    …And it is therefore evident that should government take a wider view {= mandate!}as to the question of alcohol as a fuel for internal combustion engines, then  this price of {2shillings} per gallon could be materially reduced.  If this were done the price could easily be brought to such a figure where it would be a very serious competitor to petrol in this respect alone. 

    Yep, if you just mandate it, we promise to get the cost down.  But in the meantime, just so we can get going against Big Oil;

    The government that will recognise this and allow untaxed alcohol, suitably denatured, to be used for light, heat and power, will be conferring an immense boon and benefitting a very large portion of the population

    A century of asking for tax breaks, though it was written more eloquently back then.

    And then, this part sounds suspiciously like what Rufus is saying;

    After experimenting for over two years, a company in Copenhagen has developed a process for the extraction alcohol from peat.

    !?!?!

    I guess the strategy then and now is to say someone in Denmark is doing it because likely no one will bother going to Denmark to verify it.  Unlike Range Fuels, it seems like they did actually produce something though {process is sulphuric acid hydrolysis};

      They state that from one ton of peat about 40 gallons of ethanol may be produced, in addition to valuable by products {lignin, sulphate of ammonia}

    If it wasn’t for the fact that Inbicon is in a different town in Denmark, I’d suspect they just dusted off the century old plant, slapped on some paint and said “we’re open”  - probably just as effective now as then for extracting government money .  

    Well, we know they wouldn’t really do that, because technology has advanced in the 102 years – right?   So how does Inbicon’s yield comnpare to 1909?  From Inbicon’s website - 33,000 tonnes of wheat straw produces 1.2m gal of ethanol, plus lignin and molasses.

    WTF? – that works out to 42.4 gallons per ton!

    I am not sure what is more unbelievable – that nothing has improved, not even by 10%,  in a century – or that governments are still swallowing the exact same story – hook, line and sinker!

    It does prove that those who do not know history are doomed to repeat it.

    In any case, Rufus, you are right – it will never work – time to try something else

    I actually like the peat ethanol approach better – if it had worked, there would be a certain coolness factor to saying your car runs off fuel from “peat bogs”

     

    Especially if it looked like this;

     

    [1909 Alco 6 race car - courtesy No Tech Magazine]

     

     

     

     

     

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  63. By PeteS on May 7, 2011 at 10:55 pm

    Totally O/T — Sam Avro … is there any way the comment date, commenter name etc. could be aligned with the top of each comment instead of the bottom. Always nice to know who the commenter is before you read the whole way down.

     

    P.S. Paul N — excellent piece of history.

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  64. By Rufus on May 7, 2011 at 11:07 pm

    Yes, it was an entertaining story. Glad we settled that.

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  65. By rrapier on May 8, 2011 at 12:39 am

    PeteS said:

    Totally O/T — Sam Avro … is there any way the comment date, commenter name etc. could be aligned with the top of each comment instead of the bottom. Always nice to know who the commenter is before you read the whole way down.

     

    P.S. Paul N — excellent piece of history.


     

    Pete,

    Sam got married this past week and is on his honeymoon. I think he will be back to reading, commenting, and taking care of technical stuff this next week though.

    Cheers, Robert

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  66. By PeteS on May 8, 2011 at 6:17 am

    Robert Rapier said:

    Sam got married this past week and is on his honeymoon.


     

    Oh yeah? What kind of excuse is that??

     

    Only joking. Congrats Sam! Cool

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  67. By moiety on May 8, 2011 at 7:56 am

    Rufus said:

    That’s why the ones that will make it will be those that have operated “Pilot” plants, and “Demonstration” Plants (which, as you well know, Range didn’t,) and will be operating on ag waste, and grasses, not wood. And will be using an enzyme approach, not gasification.


     

    Range did operate at pilot and demo scale.

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  68. By Wendell Mercantile on May 8, 2011 at 11:04 am

    Oh, well. We’ll just have to try something else.

    Rufus~

    Agree — methanol and mixed alcohols from non-food feedstock.

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  69. By rrapier on May 8, 2011 at 12:14 pm

    PeteS said:

    Robert Rapier said:

    Sam got married this past week and is on his honeymoon.


     

    Oh yeah? What kind of excuse is that??

     

    Only joking. Congrats Sam! Cool


     

    My wife gives me fits to this day because I spent (a tiny) part of our honeymoon watching the College World Series. We also got married on the day Ayatollah Khomeini died, and troops moved against the people in Tianamen Square. So in my defense, there was a lot going on. :)

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  70. By Rufus on May 8, 2011 at 12:17 pm

    Range did operate at pilot and demo scale.

    Really. I wasn’t aware. In Colorado?

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  71. By Mercy Vetsel on May 8, 2011 at 12:54 pm

    Great post. You have good economic intuition and are analyzing a very relevant question in a useful way, but I think the standard economic framework for understanding the shape of a demand curve would help.


    How much is oil really worth? This is obviously a complex question

    Well, the basic economic framework isn’t complex at all. At the margin, oil is worth exactly the price. Price is the point where marginal supply equals marginal demand.

    Therefore, on the demand side, the price is set not by the ambulance driver who would pay $300/gallon, but by the guy who is indifferent between driving three hours to visit his mother or staying home and using the savings to mail her flowers.

    the answer [value of oil] is going to be different for different people

    Yes, that’s the classic nature of a demand curve. Water for your lawn is worth the market price, but water to drink is worth a fortune. Your main question is really “what is the shape of the demand curve for oil?” Or put another way, if supply became severely constrained, how high could the price of oil go?

    You make a good point that portable fuel with high energy content (like gasoline) is indeed very valuable, but to figure out what OIL is worth, we need to consider some of the cheapest substitutes available.

    Natural gas, gas-to-liquids and coal-to-liquids are economically viable even at today’s prices, if those prices end up being sustained. The reason they still have $10/gallon gas in some parts of the world is that the price has been increased by taxes that would also apply to the lower cost substitutes.

    The main lesson from $10/gallon gas is that battery cars and all of the other sexy green alternatives (not subject to the tax) cost more than the equivalent of $10/gallon.

    Sasol has been doing CTL economically for years, even expanding capacity in the period leading up to the 2008 spike in prices. This means peak oil can’t happen without peak coal.

    So what if we assume that Americans will swallow higher prices rather than using CTL to keep gasoline in the < $5 gallon range? (yeah, right)

    Even considering only green alternatives I don’t see long term demand for oil at prices that translate into $10/gallon gasoline. At that price, the Nissan Leaf starts to make sense and H2 fuel cells become a realistic alternative.

    -Mercy

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  72. By Rufus on May 8, 2011 at 2:07 pm

    The Good News is we have a man in the White House that has the balls, and the Socialist leanings of FDR (a positive in a time of severe financial crisis.)

    The Bad New is: his ultra-greenie advisors are fixated on “Electric” Cars.

    We, as a country, can accomplish an incredible amount in three, or four years, but right now the “politics” are too muddy.

    We need to “catch a break.”

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  73. By paul-n on May 8, 2011 at 5:39 pm

    Rufus/PeteS

    I’m glad you enjoyed that piece of history – amazing just how close the parallels are.  The book is quite fascinating – all that information merely came from p 1-4 of it!

    I am being kind to Inbicon because I think they are reporting their production in US gallons, in which case it is equal to 35 imperial gallons, and only 88% of the 1909 yield.

    Ther is some evidence from the book that government hasn’t changed much in 102 years either;

    Owing to the great strictness of the Excise authorities in England, the cost of denaturing and the expenses of [government] supervision bring the total cost of the alcohol up to 2 shillings [ the actual production cost being 1shilling]

    The most interesting piece of information is that the process also yields 66lbs of sulphate of ammonia – a commonly used nitrogen fertiliser.  S of A today sells for about $300/ton, so you have $9 of fertiliser per ton of feedstock.

    Even better though, if you were growing 10t of biomass/ac, you could get back 660lb of S of A, containing 140lbs of N – that is a typical application rate for corn growing, and more than would be needed for switchgrass/miscanthus/trees etc.

     So, you would have the potential to be N neutral, or even an N exporter!

    This only seems to work with acid hydrolysis – I have not seen this listed as a byproduct of the enzyme process.

     

    We now return to regularly scheduled programming…

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  74. By Rufus on May 8, 2011 at 6:33 pm

    Paul, if you’ll notice, a one ton per acre yield of wheat straw will produce 727 lbs of C5 Molasses, which the cattle will metabolize back into fertilizer (while they are utilizing the nutrients,) or which can be put through an anaerobic digester for more energy.

    In any case you are looking at a self-sustaining process which produces ethanol, electricity, cattle feed, and fertilizer from nothing more than a waste product, a reasonable capital investment, and an increasingly affordable mix of enzymes.

    BTW, Abengoa has contracted for wheat straw for $15.00/Ton for their plant in Hugoton, Ks.

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  75. By paul-n on May 8, 2011 at 7:39 pm

    $15/ton – bargain!  That is less than $1/mmBTU.  Sounds like a good opportunity for a competitor to do a simple biomass to electricity system, or just pelletise the straw directly and ship to Europe where it is worth $150/ton.  What happens when there is a bidding war for the straw?

    That said, I wish Abengoa success – there haven’t been many in cellulosic ethanol to date.

     

    On the E100 thing – here is how it works in Brazil;

    Brazilian gasoline cars are optimized to run on the country’s mandatory gasoline blend, which varies between 20 to 25% of alcohol, as no longer is pure gasoline sold in Brazil. Since July 2007 the blend was set at E25, the maximum allowed by law. Though in theory Brazilian flex cars can run on any blend of gasoline and ethanol, the fact is that flex engines are optimized to burn any proportion of E25 gasoline and hydrous ethanol with up to 4.5% of water content (E100).

    Chevrolet and Ford between them sell over 65,000 vehicles a month in Brazil, so clearly they have resolved all the problems related to E100 operation.  

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  76. By Wendell Mercantile on May 8, 2011 at 11:25 pm

    In any case you are looking at a self-sustaining process which produces ethanol, electricity, cattle feed, and fertilizer from nothing more than a waste product, a reasonable capital investment, and an increasingly affordable mix of enzymes.

    Rufus~

    Why are you so fixated on ethanol? Your statement above would have made much more sense had you replaced “ethanol” with “methanol” or just said “alcohol fuels.”

    “Methanol and mixed alcohol fuels from biomass” makes so much more sense than “ethanol from biomass.” After all, for decades methanol was called “wood alcohol.” It is much simpler and more efficient to make methanol from biomass than it is to make ethanol.

    You just have to admit that the ethanol wave has crested. Had we put the same money over the last 30 years into methanol and a methanol infrastructure that we’ve sunk in ethanol, we’d now be much better off.

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  77. By paul-n on May 9, 2011 at 1:43 am

    Wendell, don’t you know that ethanol is addictive?  

    Rufus has to have a daily mention of ethanol, and has been for years, even though he knows ethanol consumption is bad for  [economic] health,  so clearly he is addicted.

    Time for an intervention?

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  78. By Rufus on May 9, 2011 at 1:50 am

    Well, Wendell, maybe it’ll catch on. I’m not a big fan for a couple of reasons:

    1) It’s made from a finite fossil fuel.

    2) The marginal volumes of natural gas are Imported.

    3) Although nat gas in relatively inexpensive at this time it seems likely the cost will increase quite rapidly as we start using more to power our vehicles.

    4) I’m leery of the health effects of methanol.

    However, having said all that, I would rather use methanol made from nat gas from Canada than use Petroleum from Saudi Arabia.

    All I can say is, best of luck to ya. I don’t care as long as American Soldiers aren’t dying for it.

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  79. By Rufus on May 9, 2011 at 1:55 am

    Paul, I think Energy is, at this moment, the most serious problem we face.

    I advocate for what I think is the best solution.

    Your mileage may vary.

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  80. By moiety on May 9, 2011 at 3:42 am

    Rufus said:

    Range did operate at pilot and demo scale.

    Really. I wasn’t aware. In Colorado?


    http://www.rangefuels.com/our-…..plant.html
     

    Example of pilot scale though this is what I said elsewhere on the site

    If I speculate on what I read from Range I feel that their tests were not rigorous enough. They say from their website that they have logged 000′s of hours on their pilot using 30 different feedstock’s. Let’s consider say 10000 hours. That is 333 hours per feedstock all things being equal. Using good scientific practice would have dictated changing the active materials (e.g. catalysts) and cleaning the system between each feedstock. Thus a long term lifespan of the key components appears may not have been fully assessed. As pointed out in the corrosion article, it takes times for failures to develop and I certainly have firsthand experience of that.

     

    From another recent post it appears that logistics may have been a key factor (RR posted this earlier http://www.wsbtv.com/news/2776…..tail.html)

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  81. By paul-n on May 9, 2011 at 4:44 am

    Paul, I think Energy is, at this moment, the most serious problem we face.

    Absolutely agreed

    I advocate for what I think is the best solution.

    Yes you do – and I am fine with that – just yanking your chain back there,  though, in fairness,  I have done more than enough of that for one weekend.

     

    While I agree that ethanol is a solution – it is not the *only* solution.  Ethanol – or the VEETC anyway, is now such a divisive issue, that no other alternative fuel is ever likely to get such a break – or a mandate.  

    And I don’t think that’s a good thing.  While there is scope to make more ethanol, it still won’t be enough.  Ethanol can’t lay claim to all the seats at the renewable fuel gaming table – if it can’t fill them.  

    And, in my opinion, there are seats at the table until the US is oil independent.  

    Ethanol is well and truly up and running – time to get another player (or two) in the game – there is plenty more oil to be displaced.

     

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  82. By Wendell Mercantile on May 9, 2011 at 9:38 am

    1) It’s made from a finite fossil fuel.

    Rufus~

    Methanol is the original cellulosic alcohol fuel. For most of the 20th century people called it “wood alcohol.” Do you think something called wood alcohol was made from a “finite fossil fuel?”

    Yes, methanol can be made from coal or natural gas, but it doesn’t have to be. One of the beauties of methanol and mixed alcohol fuels is they can be made from almost any organic material, without the expensive and energy-consuming distillation corn ethanol needs.

    Ethanol is only one of the possible alcohol fuels, and the most expensive to make. It only gained traction because of (wrongheaded) subsidies and Corn Belt politics.

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  83. By Kit P on May 9, 2011 at 10:26 am

    “Paul, I think Energy is, at this moment, the most serious problem we face.”

     

    If that is your biggest problem, your life must be easy.

     

    You can always tell how serious a problem is by the solutions used to solve them. During WWII, gasoline was rationed. Biomass gasifiers were used a lot. We are converting corn to ethanol and yes some of you are inventing reasons to be against it. Others are inventing reasons to be be against off shore drilling.

     

    Supplying affordable energy when and where we need it is not a problem. Every POTUS since Nixon could have rationed gasoline. If you ration while banning drilling, we will vote in a new POTUS.

     

    Face people love problems to complain about that are not really problems. Lots of Americans and our government has a problem living within their means.

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  84. By rrapier on May 9, 2011 at 12:44 pm

    Moiety said:

    From another recent post it appears that logistics may have been a key factor (RR posted this earlier http://www.wsbtv.com/news/2776…..tail.html)


     

    A competitor of theirs had told me a couple of years ago that beyond simply not understanding the logistics of biomass, the site they had chosen had very poor logistical access for getting biomass in and fuel out. I can’t remember if they said there was no access to a waterway, or rail, or maybe either.

    The bottom line is that there is a great deal of evidence that many involved with Range didn’t know what they were doing when it came to scaling up a biomass technology, and yet the government still forked over many millions to them. Speaks to the level of due diligence our government agencies are doing before spending our tax dollars.

    RR

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  85. By rrapier on May 9, 2011 at 2:33 pm

    Rufus said:

    BTW, Abengoa has contracted for wheat straw for $15.00/Ton for their plant in Hugoton, Ks.


     

    There are two inherent problems here. First, you might find $15/ton in rare niche situations, but it won’t be the norm. I know that because I have priced biomass many times.

    The second problem is bigger. Even if the biomass was free, you still have this little problem to contend with:

    Based upon information provided by the corporation proposing the
    biorefinery, Frontier Renewable Resources LLC, owned by Mascoma
    Corporation and J.M. Longyear, I would not consider cellulosic ethanol
    to be efficient from an energy perspective.

    The facility would have 6 boilers rated at 90 million BTU/hour that
    will operate 24/7 for 347 days per year according to information
    provided in the U.S. Department of Energy’s (DOE) Environmental
    Assessment. Converting the BTUs to megajoules, the boilers would
    generate 4.7 billion megajoules per year of energy that will be used to
    make ethanol.

    The plant is projected to produce 40 million gallons of ethanol/year
    according to the DOE’s Environmental Assessment and Frontier’s air
    pollution permit application, which has an energy content of 3.3 billion
    megajoules of energy. The boiler energy consumed in making ethanol
    would be 1.43 times more than the energy content of the ethanol that
    they plan to produce. According to the DOE’s Environmental Assessment,
    timber harvesting, wood processing and wood transportation would require
    approximately 3.75 million gallons of diesel fuel per year. When diesel
    fuel energy use is included in the energy required for the production
    of the ethanol, the ratio of energy consumed/energy produced increases
    to 1.59.

    So, 60% more energy to produce it than it contains. Sounds about right. In practice, it will probably be worse.

    You are way off the mark on this one, Rufus. The country will never be dotted with little cellulosic ethanol plants. That model doesn’t work for reasons I have explained many times before.

    RR

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  86. By Optimist on May 9, 2011 at 5:57 pm

    They day of really expensive oil is indeed coming, and the current attitude of governments (around the world) is to just hope it doesn’t come soon.   But it’s a case of a plan for it is better than just hoping it doesn’t come.

    If you are trusting the prostitutians to develop some common sense (uncommon sense in Washinton DC) and save us from high oil prices, you are in for major disappointment.

    Even if Washington DC was filled with honest, intelligent representatives, who cared deeply about energy issues, they still souldn’t figure this out. That’s because central planning gives you boondoggles like ethanol and hydrogen highways. Reassuring as that is, it doesn’t work in the real world. There is a reason we still use the free market, in spite of all its shortcomings.

    Our only hope is the free market. And that will only work if the prostitutians don’t interfere. This is where I get concerned about the future.

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  87. By Optimist on May 9, 2011 at 6:04 pm

    That’s why the ones that will make it will be those that have operated “Pilot” plants, and “Demonstration” Plants (which, as you well know, Range didn’t,) and will be operating on ag waste, and grasses, not wood. And will be using an enzyme approach, not gasification.

    Nice excuse, post-Range, Rufus. But Range actually got that part right: gasification makes more sense than expensive enzymes and dilute fermentations. As RR points out, there is an underlying supply problem.

    According to analysts at Bio-Era Consulting this is an industry-wide trend. A fifth of the $1.8 trillion chemicals and plastics market may be derived from plants by 2015, mostly food sugars.

    Great stuff! Let’s solve the oil shortage by using FOOD to make car seats. What ever could go wrong?

    Snap out of it, people! We’ve seen this movie before. We know how it ends.

    And, no Rufus, $100/bbl makes no difference.

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  88. By paul-n on May 9, 2011 at 10:00 pm

    Kit P wrote:

    Lots of Americans and our government has a problem living within their means.

    Given that’s the case, it sounds like the government is truly “representative” of lots of the people.

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  89. By carbonbridge on May 9, 2011 at 10:21 pm

    Paul N said:

    Given that’s the case, it sounds like the government is truly “representative” of lots of the people.


     

    OT:  Totally.  This article had me laughing out loud just now. 

    What would Ed Abbey do [about this problem which we are collectively discussing herein]???

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  90. By Optimist on May 10, 2011 at 3:49 pm

    In this discussion on future gas prices, it pays to look back a bit. Before 2008, GM calculated that @$3/gal the sky would fall on GM: no more SUV sales, Americans crowding into Euro-size subcompacts. Today $3/gal is firmly in the rearview mirror, and it seems that even $4/gal can’t quite kill the SUV. My prediction is that $10/gal will generate a lot of exitement. At first. Then we start worrying about $15/gal. (Cycle repeats).

    OT: Cynics might suggest that $3/gal did indeed bring the sky tumbling down on what had been the world’s most profitable company at one point in time. I would argue that $3/gal was just a catalyst that finally brought accountability to the reign of CEO “Red Ink” Rick Wagoner (“we’re in the middle of a turnaround”), and the very accomodating Board of Bystanders. Luckily (for Rick), this is America, and the government is firmly committed to the principle of Too Big to Fail. As a result, Rick gets to keep his undeserved $ millions, while retirees who invested in GM bonds (safe as houses, literally) gets cleaned out by said government. To add insult to injury, the president even called the retirees “speculators”. We’ll show them*! Gotta love (crony) capitalism.
    *Anybody who can’t afford his own lobbyist.

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  91. By russ on May 10, 2011 at 3:50 pm

    Mercy Vetsel said:

    Sasol has been doing CTL economically for years, even expanding capacity in the period leading up to the 2008 spike in prices. This means peak oil can’t happen without peak coal.

    -Mercy


     

    Last time I was there – maybe 10 years back many the Sasol’s Lurgi Dry Ash Reactors were shut down – permanent I believe. I was there specifically to see the units in operation as the company I worked for was considering them for methane generation.

    CTL has been done – no question – but it isn’t cheap or lean. SA would have never, never gone that route except for the embargo.

     

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  92. By Optimist on May 10, 2011 at 7:47 pm

    Last time I was there – maybe 10 years back many the Sasol’s Lurgi Dry Ash Reactors were shut down – permanent I believe.

    SASOL’s Lurgi Dry Ash reactors were replace with the more efficient SASOL Slurry Phase reactor, I believe.

    CTL has been done – no question – but it isn’t cheap or lean. SA would have never, never gone that route except for the embargo.

    Initially, you’re quite right. SASOL was a world leader at converting expensive coal into cheap oil. But things have changed, and how. SASOL received a subsidy as long as oil was below $35/bbl. Today I believe they make a nice profit. I don’t think they have recieved a subsidy for ~15 years. As they say: We employ more than 30 000 people and remain one of South Africa’s largest investors in capital projects and skills training. Sasol is listed on the JSE Limited in South Africa and the New York Stock Exchange.

     

    If you think $10/gal is coming down the pike, I suggest investing in SASOL shares.

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  93. By Mercy Vetsel on May 10, 2011 at 9:17 pm

    russ said:

    Mercy Vetsel said:

    Sasol has been doing CTL economically for years, even expanding capacity in the period leading up to the 2008 spike in prices. This means peak oil can’t happen without peak coal.

    -Mercy


     

    Last time I was there – maybe 10 years back many the Sasol’s Lurgi Dry Ash Reactors were shut down – permanent I believe. I was there specifically to see the units in operation as the company I worked for was considering them for methane generation.

    CTL has been done – no question – but it isn’t cheap or lean. SA would have never, never gone that route except for the embargo.

     


     

    Russ – if they shut them down during the era of $20/bbl oil, they’re certainly back now.  In 2008, they started brand new CTL projects in India and China.  That would indicate that oil above $100/bbl makes CTL feasible overal and based on this quote from 2005, CTL covers operated costs at $30/bbl:

    “Secunda is a cash cow for Sasol,” as Sasol Synfuels International
    manager John Sichinga told the GTL-tec conference here (sponsored by
    Centre for Management Technology).

    “CTL is good once you’ve paid off the capital,” especially when world oil prices are holding above $30/barrel, he said.

    http://www.highbeam.com/doc/1P…..76071.html

    -Mercy

     

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  94. By paul-n on May 11, 2011 at 12:02 am

    “CTL is good once you’ve paid off the capital,” 

    Well – duh!  Anything is good once you have paid off the capital.  The best estimates for CTL are about $60-80K/bbl for capital, but given that Cdn oilsands projects projected at $50k/bbl; come in at $70k, I think for CTL you might as well assume $100k/bbl, for an American plant.

     

    Sasol figure $35/bbl operating so for an American plant, where you have to meet stringent safety and environmental regulations, you could probably assume $50/bbl.

    So, at an oil price of $100, you are looking at a six year payback, and an IRR in the low teens, assuming oil prices stay high and coal prices stay low. How many companies are willing to make that bet?  Given that China invested $10bn in Cdn oilsands projects last year, and none into CtL, I would say we have an answer.

     

    Oil prices have to go higher yet, and stay  there, for these projects to be worthwhile.

     

     

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  95. By moiety on May 12, 2011 at 8:02 am

    Robert Rapier said:

    Moiety said:

    From another recent post it appears that logistics may have been a key factor (RR posted this earlier http://www.wsbtv.com/news/2776…..tail.html)


     

    The bottom line is that there is a great deal of evidence that many involved with Range didn’t know what they were doing when it came to scaling up a biomass technology, and yet the government still forked over many millions to them. Speaks to the level of due diligence our government agencies are doing before spending our tax dollars.

    RR


     

    This time last year or maybe two years ago, I would actually have been slow to blame Range (and yes it is a blame game). Sure aren’t they doing something new and risky. I would at that time probably not noticed the squanderous amounts of money and carried on my way. But what has happened with Range certainly clarified some instances and actions that I see at my work. While I won’t blame someone for not being experienced and making mistakes (plastic anyone?) etc. I certainly will blame them if it appears that they have not asked questions.

    Its seems almost as if the Range people got infected with belief. Belief is good in the create process when you have to choose or change direction but from there, it must be curtailed. After the direction has been chosen, one must challenge the technology they work with. It does not make sense to me not to look for weaknesses and find what questions need to be answered. Unfortunately this is what I see again and again in renewable technology/research (I am from the research side specifically energy efficiency). Grandiose claims are common and disappointing. It is always bad when people start to tie into a technology just because it is the focus of their work. If you can convince yourself, you can convince others. In the very least one can apppear legitimate

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  96. By Mercy Vetsel on May 23, 2011 at 12:52 pm

    Well – duh! Anything is good once you have paid off the capital.

    Not everything. I was responding to the post indicating that SA CTL plants were shut down due to not covering the operation costs.

    I think you are all missing my point. It’s not that I love CTL or think it’s the greatest thing in the world, just that it (along with tar sands) puts a hard upper limit on how high oil can go.

    The fact that SASOL launched several new project in 2008 indicate that CTL is economical for sustained oil prices in the $100 to $150/bbl range. CTL is an enormous support level on the supply side and it’s economical at a price much lower than the price needed to make battery cars, corn ethanol and a host of other oil alternatives make economic sense.

    -Mercy

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  97. By paul-n on May 23, 2011 at 5:45 pm

    I think you are all missing my point. It’s not that I love CTL or think it’s the greatest thing in the world, just that it (along with tar sands) puts a hard upper limit on how high oil can go.

    I think to say they will put a “hard limit” on prices is a bit of  a stretch.  To build these things (XtL, and oil sands) requires massive capital in costs, long construction times, environmental permitting, etc etc.  If the price spiked to $200 tomorrow, and someone decided to build a ctl plant it would be at least fiver years, but maybe closer to ten, before it is online and producing.  Same goes for a greenfield oil sands development.

     

    And, there is still only so much that can be produced by these methods.  If Saudia Arabia stopped producing oil tomorrow, I’d question whether oil sands and CtL could even make up the 10mbd gap.  In the meantime, because Saudi has run out, everyone would be worrying about all the other OPEc countries running out – that might just have an upward influence on the price of oil, regardless of what CtL plants are being built.

     

    CtL may well be a way to make oil, when the price is high enough, but it won;t be able to keep prices down.

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  98. By rrapier on May 23, 2011 at 6:06 pm

    Paul N said:

    I think you are all missing my point. It’s not that I love CTL or think it’s the greatest thing in the world, just that it (along with tar sands) puts a hard upper limit on how high oil can go.

    I think to say they will put a “hard limit” on prices is a bit of  a stretch.  To build these things (XtL, and oil sands) requires massive capital in costs, long construction times, environmental permitting, etc etc.  If the price spoke to $200 tomorrow, and someone decided to build a ctl plant it would be at least fiver years, but maybe closer to ten, before it is online and producing.  Same goes for a greenfield oil sands development.


     

    Exactly. I would agree that CTL will provide long-term resistance to how high oil can climb, but in the short term CTL couldn’t prevent extremely high price spikes.

    RR

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