Opinion: Oil Hits the Fan
B>By J. Scott Susich
I>Advanced Energy Commerce Inc.
Rising fuel prices this spring rocked the trucking industry. It’s not enough that the economy is slow and security costs have increased, record-high diesel made for a real misery hat trick.
February and March saw markets trading in record territory with crude oil hitting $40 a barrel and diesel commanding $1.77 at the pump. These were the highest prices ever. During this time I realized we may have turned the corner on alternative fuels. Let me explain:There are some facts about the oil industry that Americans are going to have to accept. First, prices will remain volatile. Since 1993, gasoline and diesel have become very specialized and regionalized fuels. In about a decade, we have moved from five basic grades of fuel to over 125 boutique blends.
Diesel now contains varying sulfur levels, tax implications, cold-weather properties and regional specifications like those ordered by the California Air Resources Board that make it different from one state to the next. This high degree of specialization has created a just-in-time infrastructure that will not change unless the entire system is expanded.
Which leads to fact No. 2: Domestic fuel production has been in steady decline for the last decade. Americans will not allow new refineries to be built on our soil. Nor will they allow increased drilling in Alaska or off our shores.
The result of this “not-in-my-backyard” environmental thinking leads to fact No. 3: Dependence on foreign oil has never been higher. More than half our oil comes from foreign countries. Not only do we import oil, we import diesel, gasoline and everything in between.
Americans are gluttonous in our consumption of energy. Oil is either a component of what we consume or the energy source used to make and transport what we consume. Our country contains 5% of the world’s population, yet we consume more than 25% of the world’s energy.
Through petrochemicals and sub-processing, we find oil in our clothes, carpets, building materials, paints, lubricants and everything plastic. Let’s not forget our food, which is grown with the help of oil-based fertilizers, and the fuel needed to plant, cultivate, harvest, process and transport our food to market.
Think electricity flows out of thin air? Guess again; it’s oil, coal and natural gas. We have never consumed more oil, nor been more dependent on foreign oil, than we are today. If the people of China consumed oil at the same rate we do, the earth would be out of oil in 20 years. The wastes, inefficiencies and greed that have created our dependence on oil have compromised the trucking industry, our economy, our national security and the lives of our sons and daughters who are sent to war to guarantee its supply.
Alternative fuels are finally positioned to step into the spotlight. Currently, the trucking industry runs mainly on diesel fuel. Trying to make a quick switch to an unrelated fuel like hydrogen or natural gas is not practical due to infrastructure costs.
Biodiesel, however, can be run in conventional diesel engines in its pure form or as a blend with regular diesel. Its performance characteristics are virtually identical to diesel, with the added bonus of improving emissions. Biodiesel can be made from the soybeans growing along I-80 in the Midwest. It can be made from used fryer grease from the local McDonald’s. Even by-products of the shampoo manufacturing process can be used. All of these sources are on American soil.
At the time of this writing, the average wholesale price of biodiesel was $2.07 per gallon vs.$0.90 for diesel (taxes not included). The biodiesel price, however, is based on a meager national production of about 20 million gallons. The $0.90 diesel price is based on billions and billions of gallons of imported foreign oil.
Applying the same economies of scale to biodiesel production would resolve issues associated with small-scale processing and reduce the price dramatically.
Drivers can make this happen by seeking truck stops that offer a biodiesel blend. A B2 blend contains only 2% biodiesel, but can have a big impact by removing 2% of oil-based diesel demand.
Given the billions of gallons the trucking industry consumes, 2% adds up quickly and adds less than $0.03 to the price. Once in place, the blend can be increased to 10%, 20% or even 100%, driving down demand for diesel even more. Drivers and fleet managers can encourage their companies to buy biodiesel blends for their own bulk tanks.
Finally, the entire trucking industry can push the transition by voting for congressional representatives who support alternative fuels.
am convinced America and the trucking industry will soon begin the transition to alternative fuels, even if it costs more in the short run. The events of this spring will create a convergence of increasing alternative fuel production with the realization that these fuels are a better “alternative” than remaining hostage to foreign oil.
Imagine if the United States would reduce its oil dependence by 50% over the next 10 years. The positive effects on the environment, our economy and foreign affairs would be nothing less than stunning.
The writer is a principal of Advanced Energy Commerce Inc., which operates the Energy Management Institute. The combined organizations offer consulting, publishing and education services on energy issues. The writer also serves as editor of EMI’s weekly Alternative Fuels Index newsletter.
This story appeared in the May 5 print edition of Transport Topics. Subscribe today.
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