Confronting the Oil Crisis

Confronting Today’s Oil Crisis in the U.S.
An Objective Analysis By Paul Notari
January 18, 2007

With little doubt today the United States is being confronted with a crisis of major proportions. As world oil demand keeps growing and oil supplies are curtailed or threatened by political turmoil in foreign oil producing countries, world oil prices could well continue to escalate upwards at an alarming rate. This would portend a major increase in transportation costs with serious economic repercussions throughout the country. It is a crisis that must be addressed immediately. To delay is to invite disaster.

The question is what can we do NOW? There are several avenues that could relieve the situation in the long term, but few that we can deploy now to meet our immediate needs. For example, when we talk about a “hydrogen” solution, we are really talking about a revolutionary technology whose practical application is likely a decade or more away. When we talk “electric vehicles“ (EVs) we are assuming that battery and/or super capacitor technology will advance dramatically in the next few years so that auto batteries can be recharged quickly and the driving range between recharges can be extended appreciably. At one time GM and Ford both built and displayed prototype EVs but eventually both companies gave up on the idea. In 2001 a few hundred electric vehicles (EVs) were actually produced and placed on the market by Toyota but they had their limitations and were not well received by the public.

The country consumes about 21 million barrels of crude oil per day, about 14 of which are used for transportation.  The remaining 7 million are used for heating and the manufacture of chemicals and plastics.  The distressing fact is that more than 13.4 million barrels per day are imported.

 To confront the situation we must be realistic.  We must be open minded and address the problem with an unbiased viewpoint.  The bottom line is that there is no simple solution, no magic bullet, no single remedy.  The only way to solve the problem is to address BOTH the supply side and the consumption side of our oil predicament whout any preconceived biases or prejudices.

 On the supply side there are several avenues that could relieve the situation.  The first avenue, of course, is to increase our domestic oil supply.  Such increase, however, will first need to offset the ever declining oil production in the lower United States before any positive growth can be realized.  All things condidered it is a fact that any substantial increase in our domestic supply will depend upon how successful we are in finding new deposits offshore and/or on public lands, and how soon we can develop a practical means of producing substitute fuels.

There is the hope that liquid petroleum can be economically produced from tar sands, from coal, or from oil shale. While a substantial supply of oil is currently being produced from tar sands, the oil produced must still be imported from Canada and the process is yet very costly and beset with serious environmental problems. Producing oil economically from this country’s enormous coal supply is another option that is seriously being explored by several private companies with some support of the federal government, but it is still a long way from grand scale commercialization. Oil production from shale, on the other hand, is still in its early development stage and few breakthroughs are foreseen in the near future. All of these technologies have problems associated with land use, water use, and ecosystem destruction that have yet to be solved. For these reasons none of these technologies appear to be realistic solutions in the near term.

This leaves mainly biofuels, i.e., ethanol and biodiesel. While wide attention is now being given to these fuels as petroleum substitutes, strong reservations have been expressed as to their true merit by some respected authorities. One of the leading critics of ethanol as a practical answer to our fuel crises is Prof. David Pimental of Cornell University. He calculates that more energy is required to produce ethanol than the energy achieved. Many have challenged Pimental’s conclusions on the basis that his data is badly outdated and that he includes too many irrelevant energy inputs in his calculations. In fact, the US Department of Agriculture (USDA) analysis clearly shows, contrary to the Pimental paper, that U.S. farming and ethanol manufacturing practices are energy efficient and are becoming more so each year. It asserts that the energy content of ethanol delivered to the consumer is significantly larger than the total fossil energy inputs required to produce it. USDA estimates that ethanol facilities produce at least 1.23 BTUs of energy as ethanol for every fossil BTU expended considering all energy inputs including corn transport, ethanol production, and the distribution and transport of the finished ethanol. The key here is not ethanol’s energy balance, but rather how much petroleum is used in the process versus how much petroleum is displaced. After all the aim is to relieve our petroleum needs not our overall energy demand.

While not accepting Pimental’s “flawed” analysis, most professionals do believe that a major shortcoming of ethanol is its poor EROEI (Energy Returned On Energy Invested). The ratio today using corn as a feedstock for ethanol is only 1(in):1.5(out) at best. Although this is positive, Prof. Charles Hall (State University of New York) points out that, “expecting to run a country totally on liquid fuels of this low EROEI is almost laughable.” Another danger, as warned in Jared Diamond’s book, “Collapse,” is the possible land degradation that would occur if the enormous acreage needed to produce enough substitute fuel to meet our nation’s oil demands is devoted to energy crops.

Thus we have a dilemma. The only immediate substitute for oil seems to be ethanol and biodiesel. Ethanol has it limitations as stated previous. Biodiesel, which is a biofuel made primarily from waste fats or soybeans, can directly replace diesel oil but it too has EROEI weaknesses although not as great as ethanol. Does this mean we should throw up our hands and live with the staggering escalation of oil prices until one of the long term alternative fuel technologies can finally be implemented? No way! This would be economic suicide for this country and the world. We must do something meaningful now.

So let’s look at the options. First we must continue to expand our biofuels production as much and as sensibly as we can. While not the total answer, biofuels can be a substantial contributor (possibly as much as 15%) to our liquid fuel needs. However to really make a difference, we should quickly change our feedstock component from corn to cellulosic matter; i.e., farm waste and especially grown energy crops such as specialty grasses and short rotation woody biomass. The benefit of this is that we would achieve a much higher EROEI than from corn alone and we could grow many of the energy crops on land that is fallow, underused or unsuitable for food crops. For example, this would allow production of ethanol from corn stalks, along with the corn itself, thereby reducing cost and enabling much more ethanol production per acre of corn. And this process of producing ethanol from cellulosic matter is not out of the realm of possibility in the near term. The National Renewable Energy Laboratory in Golden, Colorado has long been engaged in a research program aimed at developing a practical means of converting cellulosic feedstock into ethanol. Researchers at the University of Florida have also done research in this area and are confident that the practical conversion of cellulosic matter to ethanol is eminent. As evidence, a new ethanol plant in Canada that uses only cellulosic waste as its feedstock has now come on line. It was built by the Royal Dutch Shell company in partnership with Iogen of Canada. More such plants are in the planning stage.

Mass conversion of ethanol plants from corn to cellulosic feedstocks could well be implemented in this country by offering federal subsidies or tax incentives to private owners of ethanol plants already in operation or contemplated for the future. But, as pointed out by Professor Hall, this in itself is not near enough. This country consumes about 21 million barrels of petroleum per day, 14 of which are used for transportation. Currently a NET average of about 150,000 barrels/day (54.75 million barrels/year) is being supplied by biofuels (assuming that only 1 gallon of liquid fuel is required to produce 2 gallons of ethanol - an optimistic assumption at this time). Further, ethanol produces only 70% of the energy that gasoline does. This means we must produce about 1.4 gallons of ethanol to displace 1 gallon of gasoline. All things considered, even if we increased biofuels production thirty fold, this would supplant little more than 15% of our petroleum needs (less than one-fourth of our oil imports today). This in itself is a most ambitious goal, to say the least. It would be unreasonable to expect that we could ever produce enough ethanol to match all or even 60% (amount imported) of our liquid fuel consumption. And even if we could, it is questionable whether this would be desirable considering the enormous amount of land area that would be necessary to produce the ethanol feedstock.

Therefore, if we are to solve the total problem we must augment an expanded ethanol production initiative with a dramatic reduction in oil consumption. This, of course, is easier said than done. To make a significant impact (say enough to reduce our oil imports to zero), even with a dramatic rise in ethanol production and with the modest increase in domestic oil production that we can realistically expect, we would have to reduce our petroleum usage by about 7 million barrels per day; no small accomplishment. To reach this figure, our options are limited. In 2005, the 235+ million on-road U.S. car/light truck fleet averaged 20.3 miles per gallon (mpg); down from 22.5 mpg in 1985. Our commercial airlines, trains, freight trucks, and farm machinery are continuing to consume gasoline and diesel fuel at an enormous rate. And the amount of oil necessary to produce petroleum based products such as plastics and chemicals is increasing each year. So what can we do to reach our goal of reducing our petroleum consumption by 7 million barrels per day?

The best answer is to increase transportation fuel efficiency and reduce consumption across the board. For financial reasons, many airlines are already replacing their old stock with more fuel efficient planes. Many truckers are actively seeking ways to reduce travel miles for deliveries and increasing the fuel efficiency of their trucks. But the lion’s share of the burden must fall upon the private owners of cars and light trucks (which include SUVs and minivans). Some small inroad has already been made by the introduction of hybrid gasoline-electric autos by some Japanese manufacturers. Many of these cars boast mpg ratings of more than twice the average mpg rating of all other cars. Since their introduction five years ago, sales have been far above expectations. And it is further encouraging that many hybrid autos are being modified by their owners so that they can be plugged into any electric power source when the vehicle is idle thereby recharging the batteries without using the vehicle’s gasoline engine or regenerative braking system. This increases the mpg tremendously and some hybrid auto manufacturers are seriously considering making this feature an option on future models. But gasoline savings based on the expected number sales of hybrid vehicles over the next decade is still just a drop in the bucket. To reach our goal, much more must be done to improve the mpg efficiency of all cars on the road.

The best way to reduce oil consumption to the level needed is to launch an “Apollo” size federal program aimed to increase the average mpg of our car/light truck fleet over the next fifteen years from 20.3 mpg to 35 mpg. This time frame is based on the fact that the average turnover of our light car fleet in the U.S. today is about this length of time. Therefore, the ideal goal would be to phase in new high-efficiency vehicles to replace all low-efficiency vehicles as they are removed from service over the period. To accomplish this, our federal government would have to launch a massive public relations campaign, along with an innovative financial incentive program, to convince car owners that it is in not only in their own best interest, but in the national interest as well, to change their automobile preferences from SUVs, minivans, and light trucks to smaller, more efficient vehicles. Special rebates should be given to car buyers to purchase hybrid cars and, better yet, “plug-in” hybrid cars once they become commercially available   The rebates should also apply to electric vehicles (EVs) once they become more practical and price competitive and even to iesel autos that meet more sttingent fuel efficiency standards.

In addition, auto manufacturers should also be given strong incentives to produce and promote the sale of more fuel efficient automobiles and trucks. Higher and higher fuel efficiency (CAFÉ) standards for cars, as well as light trucks, should be gradually imposed on car manufacturers for implementation over the next decade. The standards should be increased an amount each year sufficient to make a significant impact on national fuel consumption but not so great as to cripple the auto industry. CAFÉ standards are based on the average mpg for each class of vehicles under regulation that are being produced by a given manufacturer. By gradually increasing the standards on a year by year basis, auto manufacturers will be allowed to convert their assembly lines for the production of more fuel efficient vehicles over a realistic period of time without imposing serious financial penalties.

PATH TO FOREIGN OIL
INDEPENDENCE

  If we are to relieve our oil independence in the near future (say 15 years) we must act NOW.   All things considered, the only realistic solution is to take every acceptable measure to reduce our oil consumption and to increase domestic oil (or substitute fuel) production as is necessary. To reach total independence in this time frame we would have to achieve the following: 

First, and FOREMOST, we would need to drastically reduce our transportation oil consumption by almost 40% or some 5 million barrels/day.  This means an upping of CAFÉ standards by government edict to an average of no less than 35mg.  This will require a mass manufacture and sale of highly fuel-efficient vehicles with a subsequent change in our life style habits.  We can no longer lavish ourselves with large gas guzzling vehicles.  We need to replace them with fuel efficient cars and trucks such as hybrid and plug-in hybrid vehicles, and possibly EVs and fuel efficient diesel autos.   

Second, we would have to increase our domestic oil production from the current level of 7.5 million barrels/day to about 10 million barrels/day. This is a 33% increase and will certainly mean more offshore drilling, possibly some discrete drilling on public lands, and, if it can become economical and environmentally acceptable, the production of oil via natural gas liquids (NGL), coal liquefaction and/or extraction from oil shale.  This is a very ambitious goal and its realization depends largely how fast coal liquefaction and oil shale technologies can come on line. 

Third, we would need to produce more and more biofuels, hopefully as much as a NET 4.3 million barrels/day which will displace approximately 3 million barrels/day of petroleum.  This assumes that practical methods of producing ethanol from cellulosic feed stocks and from algae will be developed within the next five years and that they will be the predominant methods of producing ethanol over the following ten years. It also assumes that there will be a major increase in biodiesel production.   

Fourth, we would have to reduce the amount of oil used for air and rail transportation, for busing, for trucking, for heating and, to a large extent, for the manufacturer of chemicals, plastics and other products, by some 23%, or about 2 million barrels/day. 

Fifth, we must learn to economize on our travel in every way we can (car pools, fewer road trips, shorter commutes, greater use of public transportation).  More mass transportation systems need to be built in large metropolitan areas.  State and local governments should pass new zoning laws and create incentives for better urban planning of all new real estate developments to ensure less travel between home, stores and places of employment. These actions could enable us to reduce our oil consumption by about 1 million barrels/day.

 Volla!  This adds up to 21 million barrels/day, matching the total level of oil consumption in the United States today.

These may appear to be near impossible goals, and maybe they are.  But we must strive to achieve them as best we can.  If we fall short we will still be far ahead of our current business as usual scenario and will reduce our oil imports appreciably.  If we do nothing, or delude ourselves by trying to take the easy way out, we will be doomed.

Paul Notari is past Chair of the Renewable Fuels and Transportation Division of the American Solar Energy Society Board of Directors.  In 1980, as head of the Technical Information Branch at the Solar Energy Research Institute (now the National Renewable Energy Laboratory), he was the originator and publisher of Fuel From Farms, one of the first textbooks on ethanol production technology.  The publication was widely distributed throughout the nation and is recognized as one of the primary movers in the launching of today’s ethanol industry. .