The Real Reason Gas is So Expensive

Friday, March 29, 2013

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In a recent article in The National Interest, Gal Luft points out that even though domestic drilling is up, fuel efficiency has improved, and America's oil imports are down, gas prices are still high. This is because the price of gas is not controlled by market forces. The price is controlled by OPEC. Luft writes:

Saudi Arabia’s story is more or less the story of the other eleven members of OPEC. The cartel’s modus operandi has been to throttle down supply to drive prices back up while adjusting the definition of a “fair” price. In 2004, OPEC’s “fair” price was $25 a barrel. Two years later, $50 was considered “ideal.” Now the fair price is $100. With the onset of the American oil boomlet, the organization is sure to go down the same path. In fact it already has reined in its supply continuously for six months and is currently producing 30 million b/d, the exact number of barrels it produced forty years ago. Over the past four decades the world GDP grew fourteen-fold; the number of cars quadrupled; global crude consumption doubled. Yet OPEC, which sits on top of three quarters of the world’s conventional crude reserves, has kept its contribution to the oil market the same. Realistically, we cannot defeat the cartel in the courts or with diplomacy. What we can do is deploy what it fears most: competition with our cheap and abundant natural gas.

By opening vehicles to a variety of natural gas-derived fuels, we will be able to pit a cheap and abundant commodity against one whose price is inflated and controlled by a cartel. This is true for compressed natural gas; electricity, which can power pure electric vehicles and plug-in hybrid electric vehicles; or methanol, a liquid fuel sold today for a dollar less than gasoline on an energy-equivalency basis that can power flexible-fuel vehicles that cost manufacturers an extra $100 to make compared to gas-only cars.

The International Energy Agency predicts that by the end of the decade the United States will overtake Saudi Arabia as the biggest oil producer. This may happen, and there are many reasons to welcome the development. But we should not delude ourselves into thinking that the role of driller-in-chief will bring lower crude prices. It won’t. Unless we break oil’s virtual monopoly over transportation fuel it will be the disgruntled youth in Riyadh who will determine how much we pay at the pump.

Oil is a monopoly, and OPEC is exploiting it. The solution to a monopoly is competition. Click here to find out what you can do to encourage competition in the fuel market.


Putting E85 in a Gas-Only Car

Saturday, March 23, 2013

We recently tried it in our car and succeeded. Click here to read why we wanted to burn E85 in our car. This is what happened:

We'd read the letter by John Kolak on using E85 in regular cars, and then we read Marc Rauch's response. Rauch describes his ongoing experiments with E85 in non-flex-fuel vehicles (which you can read here). And we also read about Robert Zubrin's experiments with methanol and his discovery that non-flex fuel cars already have the components to be flex fuel cars.

But we were still skeptical and didn't want anything bad to happen to our beloved 2001 Prius, so we bought a conversion kit and installed it (which you can read about here).

In order to fix an unrelated problem with our car, we took off the conversion kit (temporarily, we thought) but in the process, we broke one of the conversion kit's plugs. So we decided to gather up some courage and try E85 without a kit just to see what would happen. We were watching David Blume's video where he says he once mentioned on a national talk show that anyone could put E85 in their regular car, and immediately the petroleum industry made it mandatory for all gas stations to put stickers on their E85 pumps warning people not to put E85 into non-flex-fuel cars. Watch Blume's video here. Blume's reassurance that you can put E85 into any car (and that it's perfectly legal) was the final straw for us.

We decided to do it. We thought we'd try it in stages. So first we waited until our tank was pretty empty and put in one gallon of E85. By our calculations, that meant we were running on 33% alcohol. We figured if there was a problem, we had plenty of room in the tank to fill up with regular gasoline and dilute the ethanol enough to stop whatever problem it was causing. But we didn't have any problems. We couldn't even tell the difference. Our 2001 Prius was successfully burning E33! This was encouraging.

The next phase of our experiment was to let the tank empty out some more. Then we put in three gallons of E85. By our calculations that made it E70 (70% ethanol in the tank). We still had enough room to add four more gallons of regular gasoline if there was a problem, which would have brought it back down to about E30, and we already knew the car could handle that.

But again, there was no problem. We couldn't tell any difference. The car was running perfectly! We drove around quite a bit, using up most of the tank. Everything was going smoothly.

This was great. Then we embarked on a 500-mile trip and on our way out of town, we filled up with E85, which put us at probably E80 or so. While we were at the station, we looked carefully at the little warning sticker. It said we should check with the clerk before putting E85 in our car. So we went in to see what the clerk would say. He said the warning was on there because E85 can damage engines. "Where did you hear that?" we asked. "The tow truck guy told me," he said, "apparently it burns too hot or something."

We straightened him out. Alcohol burns cooler than gasoline.

Anyway, with our tank full of E85, we drove up over the Cascade Mountains (in Washington State). No problems. The only thing that seemed different is that the car had a little more power than we were used to. This is not surprising. They use ethanol in the Indianapolis 500 because it is safer but also because it can give a car more horsepower (it's a higher-octane fuel).

Other than that, we couldn't tell any difference. So our non-flex-fuel Prius went up a long grade to a high elevation burning E80 with no problems. This was incredible. We were so happy. John Kolak and Marc Rauch and David Blume were right!

After about 90 miles, we stopped at a rest area and when we got back on the road, the engine light came on.

Uh oh.

But we already knew this was a possibility. Rauch said he has put straight E85 into many cars and in some of them, the engine light came on. Our car kept running fine. There wasn't really a problem. But the O2 sensor was detecting fewer emissions than expected, and the car's computer thought something must be wrong.

Rauch said he took his car into a shop and had them check why the engine light was on (without telling them he was burning E85). They told him his O2 sensor was broken. He said thanks, drove away, filled up on straight gasoline and after awhile, the engine light went off. He took the car to the shop again, told them the engine light was coming on intermittently and had them check it out. Nothing was wrong now. The sensor had healed! Not really. It was never broken in the first place.

So we decided on our trip to drive the Prius for awhile with the engine light on. The car ran perfectly. When it was time to fill up, we put in one gallon of regular gasoline to see if that would make the light go off. Apparently that wasn't enough. So we filled up on regular gasoline. Still the light stayed on. We thought we were going to have to take it to the shop to get it reset or something.

But before we headed for home, the light went off and has been off since!

Now we think we'll just burn E85 all the time and let the engine light shine like a badge of courage. We took a risk and discovered we can immediately stop sending our fuel dollars to OPEC and we can give it instead to American farmers and American workers where it can do some good for our economy and our air quality (ethanol produces fewer emissions that cause health problems).

Maybe once in awhile when we get nervous about it, we will fill the tank with gasoline just to see the engine light go off again. But then again, maybe not. It feels too good to fill our tank with freedom.

Read more: Burning E85 Without a Conversion Kit.


Announcement: Event This Tuesday, You're Invited

Friday, March 15, 2013

An important national security and transportation fuel briefing is scheduled to take place this coming Tuesday, March 19th in 2200 Rayburn HOB in Washington, DC, and you are invited.

The discussion will provide valuable information about:

  • How to free our nation of OPEC’s chokehold on our economy
  • How to stop the financing of terrorism via petrodollars
  • How to reduce the cost of gasoline
  • How to open up the transportation fuel market to competition, finally providing the American consumer a choice of fuels at the pump

Please take the time on Tuesday to attend the briefing and to have your questions about this issue answered.

The name of the event is "U.S. Energy Security Council Congressional Briefing." Here's the official description:

The United States Energy Security Council invites you to a congressional pizza lunch Tuesday, March 19 at Noon in Rayburn 2200 to discuss why oil prices have gone up while oil imports have gone down, the natural gas boom, the Arab Spring, and what can be done to improve U.S. energy security.
WHEN: TUESDAY, March 19 Noon

WHERE: Rayburn 2200

WHO: Dr. Gal Luft, Co-Director of the Institute for the Analysis of Global Security (IAGS) and an adviser to the United States Energy Security Council (USESC). Dr. Luft has published numerous studies and articles on security and energy issues in various newspapers and publications such as Foreign Affairs, Foreign Policy, The American Interest, Commentary Magazine, Middle East Quarterly, LA Times, The Washington Post and The Wall Street Journal. He recently co-authored Petropoly: The Collapse of America's Energy Security Paradigm.

The United States Energy Security Council is the highest level extra-governmental group ever assembled to address the energy security challenge. The group includes former Cabinet officers, heads of companies, and military leaders. Learn more at


Renewable Methanol

Saturday, March 9, 2013

Potential clean fuel.
The Methanol Institute (MI) released a new white paper from California-based environmental consulting firm TIAX entitled Methanol as a Renewable Energy Resource.

Funded by MI, the report is designed to tell the story of methanol as a significant source of renewable transportation fuel. More specifically, the white paper highlights several key facts, including:

Renewable methanol can be produced via four primary pathways: municipal waste, industrial waste, biomass, and carbon dioxide;

Biomethanol is the subset of renewable methanol produced from biomass feedstocks;

In the case of renewable methanol, feedstock availability is not expected to be a limiting factor;

Renewable methanol has an advantage among alternative fuels in that it is one of few fuels actively seeking to use CO2 streams as its feedstock; and

The renewable methanol pathways being pursued today rely on feedstocks that have little value or would otherwise incur fees for their generators, which is advantageous for the economics of renewable methanol.

The white paper also highlights the work done by BioMCN, Enerkem, Chemrec; VärmlandsMetanol, Carbon Recycling International, Blue Fuel Energy, University of California Riverside, Los Alamos National Laboratory, Syntec Biofuel, Gas Technologies, Range Fuels, and Air Fuel Synthesis.

The report can be found here: Methanol as a Renewable Energy Resource.


Petroleum Sellers Would Have to Drastically Lower Their Prices to Compete

Friday, March 8, 2013

Natural gas is hugely abundant in the United States, and as such, it is inexpensive. It could be easily converted to methanol and used as a liquid fuel, which could sell without subsidies for considerably less per mile than gasoline, creating real fuel competition and using market forces to lower fuel prices. That's what the Open Fuel Standard would accomplish.

The following are excerpts from a recent story in the Wall Street Journal about a railroad company taking advantage of the natural gas glut:

BNSF Railway Co., one of the country's biggest consumers of diesel fuel, plans this year to test using natural gas to power its locomotives instead. BNSF, the largest railroad in the U.S., estimates it is the second-biggest user of diesel in the country, after the U.S. Navy.

BNSF Chief Executive Matt Rose said his company would quickly move to a "retrofit of existing road locomotives" if the pilot locomotives prove reliable. The pilot trains are expected to get rolling this fall in the hopes retrofitting could begin about a year later.

A gallon of diesel fuel cost an average of $3.97 last year, according to federal statistics. The equivalent amount of energy in natural gas cost 48 cents at industrial prices. That gap doesn't accurately reflect the potential savings since the railroad will have to pay to cool natural gas into a dense, energy-packed liquid. Still, experts believe that natural gas has the potential to be significantly less expensive than diesel for years to come.

Preliminary tests indicated that LNG-powered trains could go farther before refueling than diesel trains and have comparable towing power.

The BNSF move is the latest step by companies and industries to use more natural gas, a fuel that is efficient, domestically produced and cleaner than alternatives. The growing supply of natural gas in North America has made it significantly less expensive than crude oil for each unit of energy delivered.

Electric utilities, which years ago essentially abandoned burning oil in favor of coal, have started shifting to natural gas-fired power plants. Chemical, steel and fertilizer makers are planning new facilities in the U.S. to take advantage of low natural gas prices.

Like municipal bus fleets, which have converted to engines running on compressed natural gas in Los Angeles and other U.S. cities, trains are easier to fuel than other modes of transportation because they repeatedly travel on fixed routes. That makes it less cumbersome to build enough fueling depots.

Read the whole article here: Berkshire's BNSF Railway to Test Switch to Natural Gas.


Gas Prices Set Two Ugly Records In February

Wednesday, March 6, 2013

The following was excerpted from Business Insider:

Dubious record alert: American gasoline prices just set an all-time high for February, according to AAA.

The average price of gas in February was $3.65 per gallon, 10 cents higher than the previous record for the month set just last year.

Today’s national average of $3.782 per gallon is five cents higher than the average a year ago.

We've also set a record for fastest price increase. We started out the year at $3.29 per gallon, and have climbed to a national average of $3.78 per gallon.

The previous record through the end of February was a rise of 46 cents per gallon in 2012.


A Monopoly Endangers Consumers

Friday, March 1, 2013

The following was a recent email message from Fuel Freedom Foundation. If you'd like to sign up for their emails, click here.

Nobel Prize-winning economist Milton Friedman said that “the great danger to the consumer is the monopoly.” True to his famous words, consumers are once again threatened by the oil monopoly and actions forced by its chokehold on our transportation.

One underreported factor contributing to unseasonably early, skyrocketing gas prices is oil companies abandoning their refinery operations to feed their drilling and exploration divisions. This development has alarming consequences for our economy and we have little power to respond to this issue as long as viable replacement fuels are barred from competing on an equal footing with oil.

Refinery closings lead to the immediate loss of direct and indirect jobs in the local economy.

Refinery closings in Hawaii and New Jersey are causing residents of those states to increasingly rely on imported gasoline and other refined petroleum products to meet demand.

Higher gasoline prices, as a result of tighter supplies, tax the already overburdened budgets of working Americans.

Since most food and consumer retail goods are transported throughout the country, higher gasoline prices increase inflationary pressure on the price of these items.

Friedman also said, "The most important single central fact about a free market is that no exchange takes place unless both parties benefit." Surely, companies should be permitted to do what they can to succeed, but in a monopoly, the absence of free-market forces means that one side benefits all the time while the rest of the economy always loses. As long as the oil monopoly stays intact, the consumer and the economy at large will be put in danger by every action the oil industry takes.

Let’s bust this trust, once and for all, with replacement fuels. Ethanol, methanol, natural gas and electric vehicles will create a free market for transportation fuels and save us from the predatory pricings of big oil.

To find out what you can do to help, click here.


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