Monthly Archives: November 2001
by Robert Anderson Kansas City Star Published November 26, 2001 [With oil prices @$16.50/ barrel]
Although no one knows exactly when, there’s probably a disruptive energy crisis looming on our horizon. I realize our current languishing oil and gasoline prices belie this assessment, but that’s the crux of our problem. This cheap fuel doesn’t adequately reflect our vulnerability to Mideast disruptions or signal the coming slide of non-OPEC production due to basic geologic depletion fundamentals.
We found most of the easy, sizable deposits 30-plus years ago. From here on they get a lot harder, smaller and deeper. In fact, at some point in the not-too-distant future, we’ll expend as much energy exploring, producing refining and transporting oil as it yields. In the meantime, the world is consuming oil at four times the rate of new discoveries.
Fifty years after President Eisenhower limited Persian Gulf oil imports to avoid having our troops sent there, a succession of presidential administrations of both parties has risked our soldiers, our prosperity and our environment on the shaky foundation of a few oily gulf despots.
Failure to account for our military defense of the Persian Gulf in oil and gasoline prices prevents us from considering cost -effective safer and saner alternatives. Our failure to plug in the true environmental costs of excessive oil consumption binds us to this energy quagmire that cannot possibly end smoothly.
Accounting methods, futures markets, big oil lobbies and their legislation discount the future value of oil, and that encourages the maximum consumption of a limited precious resource. We are in dire need of just the opposite- financial incentives for conservation along with viable supply alternatives such as agriculturally produced biofuels.
Although the United States demonstrated we are not to be confronted on the battlefield, our past four economic slowdowns demonstrate how economically vulnerable we are to spiraling oil prices.
At some point, none of us should be surprised if there’s a terrorist shift to oil infrastructure targets. After all, the higher oil prices surge, the greater will be the wealth transfers from the West to the Muslim world. And don’t look for fresh U.S. or non-OPEC production to gush into the higher economics this time around. We’re spent.
Of all exploratory wells drilled since the oil industries inception, nearly three-quaters have been here in the United States. We’re nearly 30 years past our oil production peak. No domestic drilling program or sky-high oil economics will alter this dismal reality. Like the belated implementation of all the airport security, are we going to wait for a big calamity before we take action?
One need not look any further than across the Atlantic or back through history to see a tangible, safer and cleaner alternative to increasing slates of Mideast oil.
Europe is already moving aggresively toward biofuels. They have proposed European Union legislation that will require 2 percent of their fuel will be derived from agricultural sources by 2005. They’ll subsequently ratchet it up to more than 20 percent by 2020, which will drop their greenhouse gas output close to similar percentages.
Although Americans are familiar with ethanol as a gasoline additive, biodiesel provides an even more attractive renewable alternative in terms of production simplicity, pollution and net energy gain (energy gained after subtracting energy inputs).
Biodiesel is a domestically produced, nonpetroleum motor fuel derived from agricultural oilseed crops such as soybeans, sunflowers, hemp, canola or even used fryer grease, It can be blended with petroleum diesel in any percentage, without any changes of our fuel distribution system or diesel engine modifications. It has a higher cetane rating (similar to octanes in gasoline), is biodegradable, has better lubricating qualities and is much cleaner than regular diesel.
In fact, when Rudolf Diesel invented the internal-combustion engine that bears his name, he fueled his inital prototypes with straight peanut and other vegtable oils. He was quoted as predicting “plant oil” fuel would replace the burgeoning oil and kerosene market of the day.
I’m willing to bet that Mr Diesel will eventually be proved correct. He was just 100 years off on his timing. Let’s not wait for the inevitable oil market calamity to get rolling in this direction.
Robert Anderson is a former marketing manager for Wichita-based Koch Refining and a former owner and founder of Tradewind Petroleum Services. He currently is a Kansas City-based independent petroleum economist.