Bio Fuels – Where are the leaders of industry?
September 25, 2005
Hurricane Katrina was the latest event that showed us how perilous it is to be so dependent upon one primary source of energy - oil. Gasoline at record highs, ongoing instability in the Middle East, ongoing war in Iraq, political disputes with Venezuela, global warming and China’s growing appetite for energy should convince Americans that our oil consumption and dependency is out of hand and heading in the wrong direction.
The facts point to the need for Americans to cut back on oil consumption and to do so sooner rather than later. Since 2000, US transportation (i.e. cars, trucks, etc) went from 40% of all oil consumed in the US to 60% by 2004. We need to focus on this segment of energy use because it represents our greatest opportunity to slow the upward growth of oil consumption and ultimately reduce it. We can do this by changing our driving habits, by using public transportation, buying more fuel efficient vehicles, or perhaps changing the type of fuels we consume. Ultimately, we will most likely need to do “all the above.” It’s just a matter of how abruptly we will need to change.
According to a March, 2005 International Energy Agency working paper entitled, “Alternative Fuels: An Energy Technology Perspective” only two replacement fuels offer the greatest potential. Hydrogen offers both a reduction in pollution as well as eliminating our foreign energy dependency. However, the paper points out that Hydrogen technology as well as the necessary distribution systems to deliver this fuel are several decades away. So we can see that Hydrogen shows promise, just not any time soon.
If we can’t wait decades, what is the other fuel source that we should be pursuing? The International Energy Paper suggests “bio-fuels” as a possible short-term solution. Bio-fuels are renewable and include vegetable oils, plants, forestry waste, animal waste and municipal waste. There are many companies and government agencies that have already started using diesel and bio-diesel blends. B20 is commonly known and it contains 20% bio-diesel. B100 is also being used and as the name implies, it contains 100% bio-diesel. Still others use straight bio-oil. Unlike bio-diesel, bio-oil requires minimal upfront processing and virtually no chemical additives. However, bio-oil does require changes to a diesel engine or to the fuel system of a vehicle.
Not only are bio-diesel and bio-oil renewable, they are also better for the environment. A University of California Davis study published back in 1996 measured emissions and “mutagenic” activity, comparing diesel to a diesel blend and to 100% vegetable oil. 100% vegetable oil came out significantly better in all tests with straight diesel coming in dead last.
If bio-diesel and bio-oil are so good, why isn’t everyone with a diesel engine pursuing this option? Why don’t we see more diesel cars on the roads in America? In a nutshell, bio-fuels costs more than diesel, we don’t make enough of them, our EPA rules limit the use of diesel engines and lastly, we don’t have the political will to make this happen.
The economics of world oil are outside the scope of this article. Suffice it to say, that our current tax policies favor imported oil over domestic energy sources. It is cheaper and more profitable for large oil companies to import foreign oil than it is for them to invest the dollars needed to build and operate large scale bio fuel operations, pay the associated US wages and all the applicable federal, state and local taxes. While the daily price of oil fluctuates, the supply is tightly controlled by OPEC and the price ultimately is set based upon OPEC’s daily oil production decisions. This makes investing in bio-energy a risky business. All OPEC needs to do is to lower the price of oil and a fledgling bio industry would no longer be competitive. Our current bio-diesel industry barely survives due to a modicum of state and federal government support and to the tenacity of a few hard core believers like Willie Nelson who is out advocating that rural America get off the foreign oil bandwagon.
The answer is obvious but politically painful. Imported oil should face a “value added tax” of around $10 per barrel. This would make investing in bio-energy production less risky by limiting OPEC’s ability to impact the street price of diesel.
So if we have the cost with diesel equalized, can we make enough bio-diesel or bio-oil to make a difference? Passenger vehicles use about 130 billion gallons of fuel per year. Replacing this with bio-fuels would require about a quarter of the land in the lower 48 states or nearly 500 million acres*. To impact oil imports, this would require a complete and fairly sudden shift away from gasoline engines to diesel engines for passenger vehicles. So having all US passenger vehicles switch to bio-fuels isn’t a short-term solution. However, there are a few industries in the US that are already heavy consumers of diesel.
According to the American Trucking Association, trucks consume 650 million gallons of diesel per week, over 30 billion gallons per year. The Construction and Maritime industries as well as the US government are also huge users of diesel and potential candidates for bio fuel replacement. All of these industries have well established nation-wide diesel distribution systems, making it easy for them to adopt and deliver new bio fuels. If the overall cost is at parity with diesel, then the adoption by these industries would be fairly straight forward. If bio-fuels cost more, these industries would need to pass along the cost increases (which would ultimately go to us as consumers) or they would need tax incentives to make the switch (which would get passed along to us as taxpayers). According to a recently released report cosponsored by the US Department of Agriculture and the US Department of Energy, it is technically feasible for the US to produce enough bio-mass to replace 30% of our imported oil. This would require a substantial amount of effort, money and planning but it is definitely feasible.
More convincing still is that biodiesel is already being used quite successfully in school bus fleets, postal truck fleets, mass transit bus systems and heavy farm equipment throughout the country as a result of state and municipality mandated programs and private enterprise. But, interestingly, the largest single purchaser of biodiesel in the US, consuming over 5 million gallons of B20 in the 2003-2004 period alone, is the US government. All of the armed services successfully use biodiesel in non-tactical vehicles and regard it, as one naval commander described it, as “an all-American fuel”**.
Based upon on the results of the USDA and USDE report and the fact that we have several industries that already are and can continue to make the transition sooner than passenger vehicles, it only makes sense that we should aggressively pursue a national bio fuel program to replace what foreign oil we can. So why don’t we?
Why don’t we pursue a solution that helps wean ourselves off foreign oil, is easier on the environment and would put billions of dollars into our own economy? Because large oil companies, lobbying groups and politicians have a vested interest in the status quo. Large oil companies have many years of oil reserves on their books. It is in the oil company’s best interest to get the most out of these reserves up until the last day of production. Also, oil companies are rewarded by Wall Street and their stock holders for short-term results, not socially responsible long-term investments.
To break this logjam in thinking, true political and corporate leadership*** is needed with a long term planning horizon. The evidence is clear; the time to act is now. The leaders within the trucking, construction and maritime industries are uniquely positioned to drive this initiative and set a new course for the future of America.
Americans for Energy Independence
*Energy Disclosed: Abundant Resources and Unused Technology; Suppes, Storvick; 2004
**For a great primer on biodiesel , consider reading “Biodiesel: Growing a New Energy Economy” by Greg Pahl (2005), Chelsea Green Publishing Company, White River Junction Vermont.
***At the time of publication, Bill Ford Jr. requested President Bush to convene an energy summit. Chevron had already started full-page advertising to draw attention to this issue.
Bill from IL
9/26/2005 4:57:17 PM
Bio-diesel makes a lot of sense for the trucking industry, although I would imagine that retro-fitting the older trucks would be difficult. A similar option is there for cars as well, in fact it's already at the pumps, ethanol. A fairly cheap retro-fit and cars can run on up to 100% ethanol, although a blend generally works better. It like bio-diesel isn't a perfect fit but until hydrogen is ready it could stem the tide and lower the nations dependancy on foregin oil.
Paying for all this would be fairly easy. Have a movable surcharge on imported oil. If the price of imported oil goes down to get rid of alteratives, the "tax" would keep it at the current rate. If the price of oil goes up, the "tax" goes down and alteratives would then be competative anyway. America would in essence set the price for oil sold here.
The money should also go for effective public transportation and developing other energy alteratives.
Lorraine from CA
9/27/2005 8:14:26 PM
Bill, I like your ideas on the movable surcharge. It would offer the support this new industry would need to expand. One more point about bio-diesel...In the research I've done, trucks won't need to be modified in any way to use bio-diesel. The modifications would be necessary only for use of bio-oil, since it is more viscous. Also, bio-diesel could be used in various concentrations such as how the military uses it in a B20 or 20% blend. I completely agree we're talking shorter-term solutions here and must contiinue improving public transportation and developing other fuel sources.
J Steele from MO
9/29/2005 8:03:29 AM
Bio-diesel can be created from a variety of feedstocks. You CAN create enough feedstock to supply Bio-Diesel for our entire trucking industry. No modifications to fuel stations (just imagine the cost of doing that for Hydrogen!) and no modifications to diesel engines - in fact, bio-diesel lubricates the parts of the engine and reduces maintenance costs. You can create bio-diesel from algae. Imagine huge algae farms. It's all possible.
mike from CO
10/2/2005 12:24:23 AM
"In a nutshell, bio-fuels costs more than diesel". As of this week, here in Denver, B100 costs 3.09/gal and petro diesel is around 3.29/gal. (I grinned ear-to-ear filling up today). The place where I fill up is seeing more and more truck drivers switching to B20 or B100. The ramifications this are mind-boggling.
Chris W from CA
10/2/2005 8:01:48 PM
Our anaylsis shows that bio-diesel costs more than regular diesel due to government subsidies which are not reflected at the pump. Of course, regular diesel benefits from biased tax codes and one could always add in part of the defense budget that goes toward protecting the Middle East.
J. Martin from CA
10/3/2005 12:34:35 PM
I agree that renewables are a "Better than nothing" idea, and maybe even a good stop gap. But what is needed is a totally new technology. Making the middle east irrelevant is a good start, but freeing the individual from grid based technologies should be the priority.
Les from CA
10/4/2005 5:14:38 PM
There are two options for producing hydrogen for fuel. One is the good old standby petroleum and the other is fracturing water. The first option, backed by George Bush, leaves us in the same box - importing oil and expending energy to produce hydrogen with the excess heat energy wasted by the oil barons as usual. The second option will consume energy to split water into oxygen and hydrogen with heat energy as a by-product. This heat energy is a usable resource which will require us to figure out how to use it to advantage.
Which would be your choice?
Rey F from CA
10/16/2005 1:13:00 AM
Biodiesel is a key option. But Hydrogen can also work if we get our best minds working on the project with some sense of urgency. They should be looking at it all. We need to write letters to the politicians.
JR from OR
11/8/2005 5:40:26 PM
Biodiesel is available NOW. You can start making a difference NOW. You can use biodiesel in *any* percentage in diesel engines NOW.
It is great to think about the future too - but don't forget that while you dream, you still have to get to and from work. You can do that in a fuel efficient diesel vehicle running renewable and domestic biodiesel NOW.
I have more than 50,000 miles of biodiesel use in two completely stock unmodified vehicles, a 2002 Volkswagen New Beetle TDI and a 2005 Jeep Liberty CRD.
Kirk P from WA
11/11/2005 1:03:01 PM
I post the following details to demonstrate how getting rid of OPEC won't take 20 years, how it can help us achieve energy independence, and save American consumers money. As a country, 2025 is a reasonable expectation for achieving energy independence. As an individual consumer or family, today is a reasonable expectation!
In a effort to kick OPEC out of my life, I use compressed natural gas and biodiesel in my family vehicles.
The natural gas in my tank is produced here in the US and Canada . The biodiesel in my wife's car comes from local sources of recycled cooking oil and domestic sources of vegetable oil from farmers.
When you look at cost per gallon the CNG is $1.70 and the B99 (99% biodiesel and 1% diesel) is $3.20 which averages $2.45, or roughly the price of regular unleaded. When viewed as cost per mile, the financial benefit becomes more evident. The CNG car (a Honda Civic GX) costs 5.5 cents per mile and the biodiesel car (a VW Jetta Wagon) costs 8.6 cents per mile. Compared to the average new vehicle sold today with a fuel economy of 27 mpg, the cost per mile at $2.45 per gallon is 9.1 cents per mile. Even at 75 cents more per gallon, bio costs less per mile because of the higher fuel economy of diesel engines. On average, fuel costs my family 7 cents per mile we drive. Compare that to the average family car at 9 cents and the average SUV at 13 cents per mile.
Both of our vehicles are easily maintained and reasonably priced. The CNG powered Honda was purchased from the State of California at a lower cost compared to the normal Civic blue book value. This savings would change as more people tuned into CNG's benefits. The Jetta and other diesel powered passenger vehicles usually sell at a premium in both the new car market and the used market. The initial cost can be recouped in fuel savings and in resale of the vehicle.
Refueling for both vehicles can be done at home or at public refueling sites. Although not on every corner, refueling is possible when driving longer distances. The CNG vehicle is more challenging on longer trips because I can't switch back to another fuel when CNG is not available. Ultimately it isn't much of an inconvenience. Like most American suburban families, we have two vehicles and can use the diesel vehicle when traveling long distance or if needed can rent a car.
Hope you too see the benefits of alternative fuels and make the switch today.