Hawaii
Energy Policy Forum > 2003
Articles
Living Without Oil
BY MARIANNE LAVELLE
Mon Feb 10 2003
U.S. News & World Report
http://www.usnews.com
Grant Goodman wanted to do his part to reduce U.S.
dependence on foreign
oil. So two years ago, the Phoenix concrete producer began
using
biodiesel--made from refined soybean oil--to fuel his fleet
of 130
diesel-powered cement mixers and excavators. For his efforts,
Goodman in
2001 won a local entrepreneur of the year award and plaudits
from the
Environmental Protection Agency (news - web sites). But protecting
the Earth
was not Goodman's only concern. "Let's start with national
security--the
billions and billions we waste dancing around the issue,
protecting those
pipelines, invading Iraq, doing whatever else we're doing
in the Middle
East. It all gets down to continuing the flow of oil to this
country."
Goodman's stance hasn't been easy. Biodiesel fuel sold for
70 cents per
gallon more than regular diesel fuel, giving competitors
of his Rockland
Materials a decided edge. "It cost me a few hundred
grand," says Goodman.
Those harsh economics forced him last year to resort to a
petroleum mix
including 40 percent or less of biodiesel. But don't count
him out. He plans
to build his own soybean oil refinery this year to help him
return to 100
percent biodiesel. Goodman has urged other local businesses
to make the
switch, but as long as petroleum is cheaper, he says, "I'm
this guy
screaming in the wind."
Sure, in theory, everyone agrees the nation should break
its 20
million-barrel-a-day oil habit, 58 percent of it imported.
Last week,
President Bush (news - web sites) noted that "sometimes
we import from
countries that don't particularly like us. It jeopardizes
our national
security." Antiwar protesters, who argue that Iraq's
massive oil reserves
have made it a U.S. target, use sharper rhetoric. "No
blood for oil!" they
shouted at demonstrations at gasoline stations around the
country last week.
At the other end of the political spectrum, Martin Feldstein,
who headed
former President Reagan's panel of economic advisers, has
argued that the
United States should set a goal of complete oil independence
by the year
2020. "Otherwise, we will continue to be hostage to
the policies of the
current and future rulers of Saudi Arabia, Iraq, Iran, and
their neighbors."
And indeed, the jitters of potential war in the Middle East
and political
upheaval in Venezuela, the nation's fourth-largest oil supplier,
have pushed
up the price of gasoline for eight consecutive weeks. If
global events turn
awry, an oil price shock could, as has happened repeatedly
in the past, tip
the struggling economy back into recession.
Within reach. But has anyone found a reasonable alternative
to the black
gold that fuels the U.S. economy? Some answers seem tantalizingly
close,
especially for transportation, which consumes the vast majority
of our oil.
Hundreds of truck fleets and bus systems already run on two
diesel-fuel
alternatives, biodiesel and natural gas. Meanwhile, biotechnology
has made
it possible to extract fuels from farm products like corn
husks, long
discarded as waste. And, of course, there are the many recent
advances in
the harnessing of energy from the world's most abundant element,
hydrogen--the science for which Bush pledged $1.2 billion
support in his
State of the Union message.
But much more money and an even broader government commitment
will be needed
to reverse the current U.S. trajectory toward greater oil
addiction. After
all, largely because of the popularity of gas-guzzling sport
utility
vehicles, the average fuel economy of the 2003 fleet of cars
sank 6 percent
below the peak set 15 years ago. Critics say that until the
new technology
is ready to help the nation kick the oil habit, the Bush
administration
should focus on breaking the addiction step by step. Fuel-economy
regulations, they argue, could force greater use of the breakthrough
hybrid
gas-electric engine and other lesser-known innovations that
can squeeze more
miles out of every gallon of gasoline.
Japan's government, for example, vows to put 10 million "ecofriendly" cars
on its roads by 2010, a number it hopes will include not
only 50,000
hydrogen fuel cell cars but also natural gas vehicles, electric
autos, and
hybrids. Japan's auto industry views that as an attainable
goal, given the
tax incentives and subsidies that support it. Stephen Tang,
president of
Millennium Cell, an Eatontown, N.J., firm that has developed
a hydrogen
fueling system, is hopeful that a similar commitment will
catch fire here.
"
If we can get the oil man to say the word 'hydrogen,' that's
significant
progress," says Tang.
In his so-called FreedomFUEL initiative, the president zeroed
in on what is
unquestionably the most promising alternative fuel. Hydrogen
is everywhere,
and when used to power a special battery called a fuel cell,
its only waste
product is water. It's an alluring option, but slippery.
Hydrogen is
extremely difficult to harness, store, and distribute. And
many people are
most familiar with hydrogen for its darkest moment: the 1937
Hindenburg
dirigible disaster. However, scientists reported in 1998
that the zeppelin's
flammable coating, not its fuel, ignited this deadly blaze.
Lip service? All of the major oil firms have investments
in hydrogen; in
fact, BP's new motto is "Beyond Petroleum." But
energy analyst Fadel Gheit
of Fahnestock & Co. says the corporate commitment is "minuscule." The
Royal
Dutch/Shell Group's promised $1 billion for renewable energy
over the next
four years fades beside its $24.6 billion capital investment,
mostly in oil
and natural gas, in 2002 alone. "These companies don't
want to be left out
in the event that some of these ventures come to fruition," Gheit
says, but
"
they're not holding their breath."
How soon will cars that run on hydrogen be on the market? "My
answer has
always been 'four years after we figure out how to have hydrogen
at the
corner gas station,' " says Thomas Moore, vice president
of
DaimlerChrysler's advanced car division. Perhaps scores of
firms are working
on solutions. DaimlerChrysler, which has earmarked $1.4 billion
for fuel
cell research from 2001 to 2004, has worked with Millennium
Cell on a
concept car, the Natrium, named after the Latin word for
sodium. It is
fueled with a water solution of the compound sodium borohydride,
and a
chemical reaction releases hydrogen as needed. Energy Conversion
Devices, a
Rochester Hills, Mich., company chaired by former General
Motors CEO Robert
Stempel and developer of the nickel metal hydride battery
that now powers
hybrid cars, has worked with ChevronTexaco to convert that
same technology
into a hydrogen storage and delivery system. A metal hydride
element aboard
the car would absorb hydrogen, like a sponge, then release
it as needed into
the fuel cell to power the vehicle.
Although President Bush called hydrogen a "pollution
free" technology, that
isn't necessarily the case. Extracting hydrogen from its
most common source,
water, requires electricity. Energy Secretary Spencer Abraham
(news - web
sites) says that electricity could come from coal, a domestic
but dirty
source, or from nuclear energy, an option whose expansion
the U.S. public
has not welcomed. Hydrogen also can be gleaned from gasoline,
an idea that
has garnered notable support from Big Oil. Environmentalists
want to see
large amounts of new wind and solar power deployed to help
generate the
fuel, and the Bush plan would put most funding toward that
goal. But wind
power, although competitive and growing at a rate of 28 percent
last year,
still accounts for less than 1 percent of U.S. electricity.
Expensive
solar's footprint is even smaller. Until renewable energy
is more
widespread, many suspect that hydrogen will be manufactured
out of a clean,
though not ideal, alternative fuel, natural gas.
That's the hope of H2Gen of Alexandria, Va., which plans
to roll out its
first on-site hydrogen generation stations using natural
gas later this
year. The company hopes to silence critics who say distributing
hydrogen
would be prohibitively expensive, requiring either tanker
trucks of liquid
hydrogen or construction of a new nationwide pipeline system.
H2Gen's idea
is to hook its 6-by-7-foot fueling stations to existing natural
gas lines
and, through an on-site chemical process, extract hydrogen
at a cost
competitive with that of gasoline. "We see ourselves
as a transition to the
renewable hydrogen future," when there's enough wind
and solar energy to
produce hydrogen from water, says Sandy Thomas, company president.
When consumers begin to see hydrogen cars in showrooms, which
General Motors
Vice President Larry Burns thinks will be by 2015, they may
not be
recognizable. GM's version, the Hy-wire, has no hood, steering
wheel, or
pedals. The driver uses handgrips to steer, accelerate, and
brake while
looking out through a floor-to-ceiling windshield. "We
think we can truly
reinvent the automobile and the industry around the fuel
cell and make good
money doing that," says Burns.
High stakes. But with terrorism a national concern, many
observers see 12
years as too long to wait for the country to wean itself
from Middle East
oil. Given the high stakes, is any alternative ready now?
U.S. farms and
fields have yielded some homegrown energy choices, like biodiesel,
natural
gas, and ethanol, but it has been hard for them to challenge
the entrenched
oil industry with its relatively low prices and robust infrastructure.
Biodiesel would seem to have the inside track; it can be
pumped into nearly
any diesel engine tank with no modification. In fact, Rudolph
Diesel used
peanut oil to power the engine he debuted at the 1900 World's
Fair.
Biodiesel can be made from any fat or vegetable oil--even
used and purified
kitchen grease--although it is usually made from the nation's
second-biggest
crop, soybeans. Environmental benefits are impressive; 100
percent biodiesel
eliminates sulfur emissions and cuts particulate matter and
some other
pollutants by about 50 percent.
Oddly, U.S. government policies have served as both boon
and restraint to
biodiesel. The 1992 Energy Policy Act, which encourages a
percentage of
federal and state government vehicles to run on alternative
fuels, was
amended in 1998 to give credit for biodiesel use. Sales have
exploded
30-fold since 1999 to 15 million gallons. But to get credit,
the federal
government requires only that the fleets run on a mix of
20 percent
biodiesel, 80 percent petroleum. With biodiesel as much as
double the cost,
and taxed at the same rate as petroleum diesel, governments
seldom buy more
than the 20 percent mix.
Naturally, this practice reduces environmental benefits.
Biodiesel also
increases emissions of one smog-producing pollutant, nitrogen
oxide, or NOx.
Although technical solutions, such as adjusting engine timing,
appear to be
available, some environmentalists remain lukewarm. Daniel
Becker, head of
the Sierra Club (news - web sites)'s energy program, says
the "french fry
grease hustlers" are not competing with petroleum at
all but are vying for
market share against an alternative fuel his organization
prefers: natural
gas.
Gassing up. Big-city residents have seen natural gas buses
popping up in
their mass transit systems. City governments have found they
can move closer
to meeting tough new federal antismog standards by converting
some of their
fleet to CNG, or compressed natural gas. Natural gas is not
environmentally
benign; it emits greenhouse gases, and exploration and drilling
often prove
controversial. But CNG engines emit virtually no particulate
matter, toxic
chemicals, or sulfur and 50 percent less NOx. What's more,
85 percent of
natural gas consumed in the United States is produced domestically;
nearly
all the rest is from Canada. The 130,000 CNG vehicles on
U.S. roads last
year displaced 124 million gallons of gasoline, and the sector
is growing 10
percent a year. Natural gas passenger cars and pickup trucks
are now
available.
However, cost and inconvenience can be stumbling blocks.
The suggested
starting price of a Honda Civic GX natural gas car is $20,510,
nearly 60
percent more than a gasoline-run sedan and $1,000 more than
Honda's hybrid
gas-electric Civic. The price tag of the heavy-duty CNG engines
is still
$20,000 to $50,000 more than that of a traditional diesel
engine. Finding a
fueling station that pumps out the pressurized gas can be
a challenge. When
Washington, D.C.'s transit agency, Metro, decided last year
to add 250 new
CNG buses to its fleet, opponents complained the agency could
buy twice as
many diesel buses for the $105 million tab of the vehicles
and their fueling
station. But advocates noted that over time, Metro would
save money on fuel.
Natural gas is the only oil alternative that has been selling
for less than
gasoline; the discount last fall was about 25 percent. Also,
tax incentives
from the federal government and some states help offset capital
costs. New
solutions also are on the horizon for the fueling problem.
FuelMaker, a
Canadian company in which Honda has a 20 percent stake, plans
this year to
begin sales of its "Phill" appliance, which will
allow drivers to fill up
from natural gas lines at home; expected price: about $1,000.
Second chance. After the 1970s oil crises, policymakers turned
to what
seemed at the time to have the most potential: ethanol. Corn
alcohol hasn't
exactly lived up to its promise. The 2.13 billion gallons
of ethanol
produced last year, up 20 percent from the previous year,
still amounted to
less than 2.6 percent of U.S. oil imports. More accurately
called an
additive than a replacement fuel, ethanol is typically mixed
with 90 percent
petroleum; an oxygenate, it boosts combustion and reduces
tailpipe
emissions.
But ethanol's green image has faded of late. Diesel tractors
plant,
fertilize, and harvest the corn used to make ethanol, and
substantial
coal-fired electricity is used to process the grain. Cornell
University
scientist David Pimentel, author of a study showing ethanol
consumes more
energy than it produces, calls it "unsustainable, subsidized
food burning."
Federal and state governments spend about $1 billion a year
to support
ethanol, most of which goes to agribusiness giants like Archer
Daniels
Midland, which owns 35 percent of the market.
But the ethanol industry could be transformed by biotechnology.
Researchers
can now unlock the sugars found in tough agricultural waste
products--corn
husks, rice hulls, saw grass, and wood chips--which can then
be fermented
into an alcohol that can fuel vehicles. This so-called cellulosic,
or
biomass, ethanol would require less energy to produce and
could be
manufactured from material that is now burned or buried.
Getting biomass
ethanol from the laboratory to the highway has been slow.
BC International
of Dedham, Mass., which plans to build a plant in Louisiana
to convert sugar
cane waste into fuel, is having a hard time getting $90 million
to build the
refinery. "It's a combination of the economy and the
fact that it's the
first of its kind," says Vice President John Doyle. "Bankers
and investors
love to say, 'Where is one of these running?' "
The Department of Energy (news - web sites) has supported
biomass ethanol
research and development, announcing $75 million in grants
in December.
Recipients include Cargill Dow and DuPont, which have successfully
used
biotech to convert corn into packaging materials, plastics,
and synthetic
fibers like those now made from petroleum. "The government
has a role in
helping to defray some of the risk" if the nation wants
faster development
of cellulosic ethanol, says Pat Gruber, vice president of
Cargill Dow. "Many
plants never work or take years to work. It's a scary thing
from an
investment standpoint," says Gruber. But the Bush administration's
new
budget would reduce biomass ethanol funding, leaving the
private sector to
lead future development.
Until true oil replacements can make a dent in the market,
many argue that
the government should focus on reducing consumption by requiring
automakers
to build more fuel-efficient cars. The Sierra Club calculates
that if the
vehicle fuel economy average of 20.8 mpg were raised to 40
mpg, it would
save upwards of 3 million barrels of oil a day. "The
technology is out
there, but the government needs to give the automakers a
very clear signal,"
says David Friedman of the Union of Concerned Scientists.
Still, carmakers
say that consumers don't want the smaller cars that higher
standards would
entail. And at an Alliance to Save Energy conclave last fall,
Karen Knutson,
a top aide to Vice President Cheney, cited studies showing
that smaller cars
are more hazardous: "Every mile per gallon saved kills
lives," she said,
eliciting hissing from the audience. Fuel-efficiency advocates
say carmakers
would not have to downsize but could install new technologies
that could
make even SUVs, which have their own safety concerns, more
efficient.
Greater savings can be reached if more manufacturers produced,
and more
consumers drove, the hybrid gasoline-electric engines pioneered
by Honda and
Toyota.
High hopes. The hybrid's popularity, coupled with mounting
criticism of the
SUV's gas-guzzling tendency, is forcing the market to respond
(box, Page
36). But GM's Burns says that consumers will not pay additional
costs that
are inevitable with high-efficiency vehicles unless they
get greater
performance and better value. "Just having a strong
preference for fuel
economy--we don't think that's going to happen at $1.50 a
gallon," says
Burns. He may have a point. Statistics show that as fuel
economy has grown,
the number of miles that Americans drive each year has risen.
That's why many economists say the more efficient way to
help Americans give
up oil would be to do what the Europeans do--tax gasoline
more heavily.
"
Some would argue that the price of oil ought to include some
of the cost of
the defense establishment, since we seem periodically to
have to send the
military over to defend oil producers," says oil economist
Philip Verleger
of the Council on Foreign Relations. It's an idea, however,
that has been a
nonstarter among antitax Republicans and populist Democrats
alike, since it
would hit low-income and rural Americans the hardest. Some
creative
solutions have been suggested, including an offsetting cut
in Social
Security (news - web sites) taxes for working Americans and
an elaborate
system of vouchers. But Verleger believes the U.S. government
passed up its
one chance to enact such a tax. "If George Bush had
pointed to the wreck of
the World Trade Center, and said, 'We must correct this problem,'
and the
only way is by raising the cost of gasoline on a phased-in
basis, it would
have worked," he says. "It was the golden opportunity
missed."
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