This is Why Goldman Thinks Oil is Headed to $20 a Barrel

Friday, December 18, 2015

The following, by Huileng Tan, was originally published on MSN.com here:

Goldman Sachs sees further weakness for oil due to the worsening of already weak fundamentals after OPEC held back from cutting production at its recent meeting.

The investment bank is standing by its prediction of $20 a barrel bottom — the breakeven cash cost for highly levered high-cost US shale producers. If oil prices fall below that level, companies will have to make output cuts in order to avert losses.

Even though global oil stock will remain below storage capacity, Goldman said the rebalancing is "far from achieved" as U.S. rig count and exploration and production guidance are "too high" to achieve the required supply decline.

OPEC is also likely to pump aggressively toward the high-end of Goldman's 32-million-barrel a day forecast as Iran resumes productions after U.S. sanctions are lifted over the next few months.

Oil storage also runs the risk of hitting constraints by next spring.

Oil prices have fallen over 50 percent in the last 18 months due to burgeoning energy supply and slowing demand.

"The post-OPEC oil price decline accelerated as the discord between members became more apparent and the lack of a supply response more certain. The meeting confirmed our view that it is not in OPEC's interest to balance the market in the face of still growing higher-cost production," Goldman Sachs analysts wrote in a report Thursday.

OPEC's resolve was strengthened after U.S. production picked up once prices neared $60 a barrel this summer, they added.

The group of 13 oil-producing countries has kept its production ceiling around 30 million barrels a day for years, with kingpin Saudi Arabia standing firm against an output cut in order to maintain market share and drive higher cost producers out.

"Despite the fiscal challenges that low oil prices create now, the alternative of cutting production reduces long-term revenues instead," said the Goldman Sachs analysts.

Oil prices are now near seven-year-lows with U.S. WTI crude prices are around $35 a barrel — below Goldman's three-month $38 a barrel forecast — while Brent crude is now around $37 a barrel.

OPEC said in its latest monthly report that the supply of oil from countries outside of the cartel will contract next year.

Some market watchers who see OPEC's strategy working eye a rebound in prices by late 2016.

Analysts at Societe Generale said in a note Friday that they expect Brent oil to rebound to $60 a barrel in the fourth quarter of next year due to a drop in stockbuild growth in the second half of the year.

"Saudi Arabia's policy change in November 2014, when it decided to stop defending prices and pursue a market-share strategy by maximizing production of its low-cost crude is beginning to bear fruit: US shale oil production has started to drop," the SocGen analysts wrote.

Read the original article here.

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Will Gas Prices Go Back Up?

Tuesday, December 1, 2015

The following is excerpted from an article in the Wall Street Journal entitled, OPEC Is Ready to Rumble Over Saudi Output, published Nov. 29, 2015:

Pressure is building on Saudi Arabia to rein in its oil output after a year of pumping full tilt, setting up the most contentious OPEC meeting in years.

A year ago, the Organization of the Petroleum Exporting Countries surprised markets with a Saudi-led strategy of keeping output high to win market share and squeeze presumably weaker rivals in the U.S. and elsewhere out of the market.

But with those rivals proving resilient and prices falling to new lows, members including Iran have decided the effort was a failure and are preparing to press Saudi Arabia directly to pull back on production at the group’s meeting this week.

Discontent is even building inside Saudi Arabia over the strategy. Still, the oil-rich kingdom isn’t likely to relent — in part because it is wary of rising Iranian output as sanctions are lifted. The result is likely to be a continued standoff that keeps the market glutted and prices weak.

Tensions within OPEC have mounted as Saudi Arabia contributes to a global glut of oil with record production levels. Crude prices, weighed down by the oversupply, have averaged $56 a barrel in 2015, down from $97 in 2014, gutting the finances of OPEC members such as Venezuela, Algeria and Angola and threatening their ability to keep up production.

This week, Iran is expected to demand that Saudi Arabia cut back from production levels of more than 10 million barrels a day.

Venezuela, Nigeria and Angola are also expected to force discussions over production cuts.

Saudi Arabia, which long acted as swing producer supporting the market when necessary with output cuts, has signaled it won’t alter course. Its new approach is a long-term strategy designed to force out supplies from non-OPEC producers thought to need higher prices to keep pumping, such as those getting crude from deepwater projects and oil sands.

Privately, Saudi officials acknowledge they too have been distressed by the persistence of low oil prices, which has forced the kingdom to spend down some of its reserves of hard currency. They are considering their options “because there is a growing discontent in the kingdom about the low oil price,” said an oil official from a Persian Gulf country.

But Saudi Arabia is unlikely to consider cutting until June 2016 at the earliest, when Iran’s ability to return to the market and the effect on prices becomes clear, analysts and officials say. Answers to questions about demand, especially surrounding an economic slowdown in China, the world’s biggest consumer of energy, will also be clearer then.

Analysts say the kingdom likely has enough of a financial cushion to weather the low oil prices for now.

Another factor keeping prices low, analysts say, is the price war that has broken out among OPEC members. Saudi Arabia and Kuwait are offering to pay for the shipping and even insurance on deliveries for customers in Asia, where the competition has been particularly fierce. The competition has also spread to Europe.

Read the whole article: OPEC Is Ready to Rumble Over Saudi Output.

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G20 countries pay over $1,000 per citizen in fossil fuel subsidies, says IMF

Thursday, August 6, 2015

Subsidies for fossil fuels amount to $1,000 a year for every citizen living in the G20 group of the world’s leading economies, despite the group’s pledge in 2009 to phase out support for coal, oil and gas.

New figures from the International Monetary Fund (IMF) show that the US, which hosted the G20 summit in 2009, gives $700bn a year in fossil fuel subsidies, equivalent to $2,180 for every American. President Barack Obama backed the phase out but has since overseen a steep rise in federal fossil fuel subsidies.

Australia hosted the most recent G20 summit, where prime minister Tony Abbott was forced to reaffirm the commitment to the phase out, but it still gives $1,260 per head in fossil fuel subsidies.

The UK, which is cutting renewable energy subsidies, permits $41bn a year in fossil fuel subsidies, which is $635 per person. In contrast, Mexico, India and Indonesia, where per capita subsidies average $250, have begun cutting fossil fuel support.

The vast fossil fuel subsidies estimated by the IMF for 2015 include payments, tax breaks and cut-price fuel. But the largest part is the costs left unpaid by polluters and picked up by governments, including the heavy impacts of local air pollution and the floods, droughts and storms being driven by climate change.

The IMF, which published a global estimate – $5.3tn a year – of fossil fuel subsidies in May, calculates that ending fossil fuel subsidies would slash global carbon emissions by 20%, a huge step towards taming global warming.

Ending the subsidies would also prevent 1.6m premature deaths from outdoor air pollution, a 50% cut. The money freed by ending fossil fuel subsidies could be an economic “game-changer” for many countries, says the IMF, by driving economic growth and poverty reduction.

“The [new] figures reveal the true extent to which individual countries are subsidising pollution from fossil fuels,” said Lord Nicholas Stern, an eminent economist at the London School of Economics. “The failure to reflect the real costs of fossil fuels in prices and policies means that the lives and livelihoods of billions of people around the world are being threatened by climate change and local air pollution.”

“In particular, these figures reveal that the G20 countries are wasting trillions of dollars each year on subsidies for fossil fuel pollution,” Stern said. “It is time for the G20 to recognise that the extent of subsidies is far greater than has been previously understood, and to honour their commitment.”

Stern criticised the UK government’s recent attacks on renewable energy subsidies: “The government should remember that if it wants to cut the subsidies for low-carbon energy, it should cut the subsidies for fossil fuel pollution that are at the core of the problem for which clean technology is the sensible and attractive solution.”

In July, Stern estimated that tackling climate change would require investment of 2% of global GDP each year. The IMF work indicates that ending fossil fuel subsidies would benefit governments by the equivalent to 3.8% of global GDP a year.

Christiana Figueres, the UN’s climate change chief charged with delivering a deal to beat global warming at a crunch summit in December, said: “The IMF data reveal a simple and stunning truth: that fossil fuel subsidy reform alone would deliver far more funds than is required for the global energy transformation we need to keep the world below a 2C temperature rise [the level governments have promised to hold them to].”

In April, the president of the World Bank, Jim Yong Kim, told the Guardian that it was crazy that governments were still driving the use of coal, oil and gas by providing subsidies. He said they should be scrapped immediately as poorer nations were feeling “the boot of climate change on their neck”.

The new IMF data show that national fossil fuel subsidies are significant – about the same as defence spending – when compared to national GDP in the US (3.8%), Australia (2.0%) and UK (1.4%). In nations with severe air pollution problems, the subsidies are an even higher as a proportion of GDP, such as China (20%), India (12%) and Ukraine (60%).

The countries with the highest fossil fuel subsidies per person are the middle eastern oil states, with subsidies in Qatar amounting to $6,000 a year and those in Saudi Arabia $3,400. The UAE gives $3,000 a head, but announced on 22 July it was ending its $7bn-a-year petroleum subsidies.

Fossil fuel subsidy reforms are beginning in dozens of countries, including India where subsidies for diesel ended in October 2014.

“You could look at the glass as half empty or half full,” said Ian Parry, the IMF’s lead green taxes expert. “There are some encouraging signs, such as reforms in Mexico, India and Indonesia, and 40 countries now have some form of carbon pricing, albeit typically at a too low level. On the other hand, these schemes cover only 12% of global carbon emissions, so we are an awful long way from where we need to be. We are at base camp.”

Parry defended the inclusion of the costs of air pollution and climate change impacts in the IMF’s subsidy estimates: “We think that energy prices need to cover both the production and environmental costs. This is largely in countries’ own interest, as many of the environmental costs, like air pollution, are local.” Lord Stern said the IMF had actually underestimated the costs of global warming.

Fossil fuel subsidies can benefit some of the poorest in the world, but Parry said: “There are much more efficient ways to address those concerns. Most current benefits, from holding down energy prices, are poorly targeted, with much going to higher income groups.”

The article G20 countries pay over $1,000 per citizen in fossil fuel subsidies, says IMF appeared first on HowMany.org - Population growth and the Environment - How overpopulation affects the U.S. and the World.

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U.S. Gas Exports: The Pipe Dream

Wednesday, August 5, 2015

In a recent article in Natural Gas Europe, Gal Luft wrote:

The Obama Administration is often accused of being sluggish in granting permits for projects to ship liquefied natural gas (LNG) to countries that do not have a free trade agreement with the U.S. Critics claim it has thus denied the U.S. a historical opportunity to become a leading natural gas exporter on par with Russia and Qatar. Whether ten approvals out of forty applications in four years is sluggish or not is a matter of perspective. But the debate on the pace of approvals has masked a much more important fact: American gas is no longer desired abroad, no matter how many permits are granted, and certainly not in Asia — the fastest growing market for gas.

Here is why: LNG prices in Asia are linked to oil prices; when oil prices were high Asian economies were forced to pay exorbitant prices for their imported gas. In the case of Japan where the Fukushima incident led to the shutdown of 54 nuclear reactors, at one point LNG prices reached almost $20 per one million British thermal units (mmbtu). During that time the North American fracking revolution unleashed a huge amount of gas into the market, creating a fantastic opportunity for the U.S. gas industry to capture the arbitrage between Asian and North American prices and export daily billions of cubic feet to foreign destinations. So promising was the LNG play that a 2014 report by Citi Group projected that the U.S. would become the world’s leading LNG exporter by as early as 2020.

But ironically the same fracking miracle that flooded the North American market with surplus natural gas also led to a spike in oil production and contributed to the fall in global oil prices. Since oil and gas prices are linked the collapse in oil prices led to an even sharper decline in LNG prices. LNG spot prices in Asia have recently fallen below $7/mmbtu, a level nearly one third of last year’s peak. While at the well head U.S. gas price — below $3/mmbtu — is among the cheapest in the world, when slapped with liquefaction and tolling costs the price could reach $9/mmbtu, no longer competitive in many markets including Asia. The slowdown in China’s growth, the European recession, the restarts of Japanese nuclear power plants, the rise in Australian LNG exports, the new gas pipelines China and Russia are planning to build in Siberia and the specter of Iranian gas entering the market once the sanctions are lifted all mean that in the foreseeable future America’s gas may not be attractive for most buyers.

With the dream of becoming a major player in the Asian market quickly fading the U.S. should consider alternative uses for its gas. America's immediate neighborhood, the Caribbean basin and Central American markets, could be the first markets for America's gas. Many of those countries — Granada, Jamaica, Barbados, Nicaragua and Cuba to name a few — still generate large portions of their electricity from oil products and their economies are susceptible to occasional oil shocks. The same is true for Puerto Rico which is effectively bankrupt and could benefit greatly from switching its power sector from oil to natural gas. But most of those markets are too small and too poor to justify the construction of LNG receiving terminals where LNG is re-gasified into dry gas that can power electricity turbines. For such regional markets the gas can be delivered in the form of low pressure Compressed Natural Gas (CNG) on board dedicated vessels. This way the gas can simply be shipped in its gaseous form without having to go through a costly and energy intensive conversion into liquid and then back into gas. Moving gas in CNG vessels would offer the U.S. gas producers new nearby markets while sparing the customers the need to invest billions of dollars in LNG infrastructure.

The second potential market for America’s gas is the transportation sector. While a large amount of gas is used for power generation, with important economic and environmental benefits, only one percent of U.S. natural gas is used as automotive fuel. This is a real folly. Even at the currently depressed crude prices North American natural gas is still three times cheaper than oil on an energy content basis. But despite the cheap price of our gas, the U.S. is home to only about 150,000 of the world’s roughly 18 million natural gas vehicles. In China, where natural gas prices are 3-4 times higher, gas is used much more widely in vehicles. A new report by the United States Energy Security Council reveals that though China’s overall vehicle fleet is half the size of America’s it has ten times more natural gas vehicles and twice as many natural gas refueling stations than the U.S. Furthermore, China is in the process of converting its vehicle fleet to run on methanol, an alcohol fuel that can be made from natural gas as well as coal and biomass. Indeed, though poor in gas China seems to be utilizing the resource better than the gas-rich U.S.

The answer to the North American gas glut isn't building multi-billion dollar LNG terminals along U.S. coasts with the hope of exporting gas to distant markets where it is no longer wanted. Promoting innovative approaches to exporting gas to our neighbors in configurations other than LNG and advancing fiscally conservative solutions to opening the transportation sector to natural gas-derived fuels are the only ways for U.S. natural gas producers to ensure that if they continue to drill for more gas there will be takers.

Gal Luft is co-director of the Institute for the Analysis of Global Security (IAGS) and Senior Adviser to the United States Energy Security Council (USESC). He is also co-chairman of the Global Forum on Energy Security.

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Fuelverine

Monday, July 27, 2015

John Brackett, the engineer who shows you how to hack your car's computer in the movie PUMP, has created an interesting web site loaded with great information. Check it out: Fuelverine.

On the web site, Brackett writes:
I created this site to give you a choice, because your government and the car manufacturers keep pretending you don’t have one. With the latest EPA regulations, $5,000-15,000 per vehicle is added just in emissions control systems to keep that dirty gasoline from polluting our atmosphere. With alternative fuels, most of these components wouldn’t be needed. There are half a dozen other fuel choices that could be made locally, burn cleaner, create local jobs, improve infrastructure and provide true energy independence. But why are we not allowed to use them? Is it a chicken vs the egg problem? Yes. Is it a technical problem? Not in the slightest. Is this your problem even if you don’t have a car? Yes. Everything in our economy is tied to the cost of oil and transportation, which is controlled by a monopoly, lobbyists, and your government. Do you realize every taxpayer spends $5,700 per year in subsidies for the oil companies… who are making record profits while our country goes more in debt. In whose interest is it that we don’t have fuel choice?

Everything on a car will break, and if it doesn’t, the bolt next to it will. Then you have to heat, cut, grind, lather, repeat. It’s an endless cycle and if you don’t do your own car work, will usually cost you a grand per visit for what used to be simple tasks. This story is only going to get worse over the upcoming years. So much so, that I don’t believe people will be able to afford a vehicle at current trends, especially when gas goes back to $5/gallon, which it will.

So who am I to tell you what to do? My education is in Mechanical Engineering with a concentration on Automotive Engineering. With the guidance of some brilliant minds, I’ve been able to run engines on a dozen fuels cleanly and reliably. Now it’s your turn to learn what you can do to enable your own fuel choice and start demanding a change.

Check it out: Fuelverine.

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Keep Gas Cheap

Thursday, July 16, 2015

Jeffrey J. Mathews has created a new web site and video that can help you create real fuel competition, starting with your own car. Sales from the video will help fund a documentary about fuel competition in America. Check out the web site here:

KeepGasCheap.com

You can keep in touch with the project by subscribing here. On the web site's informative about page, it says:

There is no question that imported oil has drained trillions of dollars out of our economy for the past 40+ years. We can become 100% energy independent just like the nation of Brazil is today. Every U.S. President since Nixon has stated that we need to become energy independent but absolutely nothing has been done in over four decades. The U.S. government is not going to take any initiative to solve the problem. The oil companies are not going to solve the problem because half of Big Oil’s enormous profits come from imported oil. It will be up to “We the People” to solve this problem for ourselves. That is why it is my desire to gain public support for an open fuel standard, one that mandates multiple fuels be available to Americans so that we will never need to import oil ever again.

Several years ago I decided that I would one day drive across the country, from coast to coast, using only domestically produced ethyl alcohol as my fuel of choice and that this event would be recorded as a documentary film for all the world to see.

I have prepared an informative 20-minute video just for you, called Fuel Competition (watch the trailer here). The purpose of Fuel Competition is two-fold:

1) To demonstrate by my own example how you can get completely off of imported oil and how to find fuel in your community that is domestically sourced. (Hint: you won’t find any available from the franchisees of the big name-brand oil companies.)

2) I must earn the money I will need for the cross-country, full-feature documentary film. According to Kevin Knoblock, it is going to cost me a minimum of $300,000 to produce this film.

Even though it cost me thousands of dollars to produce, I have priced my Fuel Competition film at $1.29 so that every person, regardless of income status, can afford to buy it. Fuel Competition is a short film that you need to see because I provide valuable information that you can use to empower yourself to eliminate your use of imported oil and save you money every time you fill your tank.

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Ethanol Chronicles — An Almost Daily Blog

Sunday, July 12, 2015

The oil industry has been holding its fuel monopoly in place through various means, including funding a successful disinformation campaign for decades. The folks at The Auto Channel are helping to educate people about gasoline's primary competitor, ethanol. They've started The Ethanol Chronicles. They welcome everyone to jump into the discussion.

In the description of the Chronicles, Marc J. Rauch, Vice President and co-publisher of The Auto Channel writes, "On a fairly regular basis, Bob Gordon and I answer questions and respond to comments that are either emailed to us or that we find on other outlets. The following (which you can read here) are some of the best of the banter sessions. Should you get to the point where you'd just like to peruse one single long document that can answer nearly all the questions CLICK HERE."

It is fairly common these days for people to accuse those who don't agree with them of "disinformation." But the oil industry's is real and longstanding, not just about ethanol, but about anything that might cut into their profits. Read more about it here:

The Oil Industry's Campaign to Discredit Ethanol

Big Oil's Big Stall On Ethanol

Big Oil's War on Ethanol

Big Oil Uses "Ethanol Excuse"

Oil Industry and Food and Farm Groups Sue EPA Over Increase in Ethanol Blend

Oil Companies Push Back on Ethanol

What Oil Industry Did When David Blume Recommended Ethanol

Big Oil vs. Ethanol

Oil industry launches new offensive against ethanol mandate

Work of prominent climate change denier was funded by oil industry

Exxon knew of climate change in 1981 – but it funded deniers for 27 more years

Oil company funds dozens of front groups and researchers trying to discredit links between fossil fuels and climate change – or denying climate change was occurring at all

U.S. Taxpayers Subsidizing World's Biggest Oil Companies, Granted by Politicians Who Received Significant Campaign Contributions

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Processing Oil Uses a Tremendous Amount of Fresh Water

Monday, July 6, 2015

"What do almonds, golf, fracking, and Kim Kardashian's lawn have in common?" asks Julia Lurie. "They've all been publicly shamed for their outsized water use during California's ongoing drought.

"But you likely haven't heard as much about one of the state's major water sucks: oil refineries, which are estimated to be the second-biggest water user of non-ag businesses in the state (after golf).

"The plants process more than 80 million gallons of oil per day, turning it into products like gasoline, diesel, and jet fuel. According to the Environmental Protection Agency, each gallon of oil takes between 1 and 2.5 gallons of water to refine, most of which is either dumped into the ocean after it's used and treated, or evaporated as steam. Once in the ocean, the water is unusable unless it's desalinated."

Read the rest of her article here: Yet Another Way That Oil Is Screwing The Environment.

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Taking Ethanol Out of Gasoline CREATES Fuel Problems

Thursday, July 2, 2015

The following is republished from the Urban Air Initiative. See the original here.

One of the great misconceptions following ethanol is that it causes compatibility issues in certain engines. But new data shows that the opposite is true, and ethanol-free gasoline blends actually increase much of the wear and tear on hoses, seals, and fuel tanks.

This is the finding of new research released today by ICM, Inc. and the Urban Air Initiative (UAI). The findings were presented at the semi-annual meeting of ASTM, an international standards organization that develops and publishes technical standards. Steve VanderGriend of ICM and technical director for UAI presented data showing how the high aromatic content of gasoline, particularly toxic aromatics like benzene and toluene negatively impacts engine parts. The toxic aromatics create a significant increase in the escape of harmful emissions that can have a devastating impact on public health given that these aromatic compounds are known and suspected carcinogens.

“What we are seeing is that benzene and toluene are increasing permeation, which means increasing the amount of fuel vapors that seep from a vehicle. For anyone who has a garage at home and smells gasoline, vapors are escaping through the vehicles fuel system or small engine gas tank”, said Mr. VanderGriend.

Ethanol is often blamed for increasing evaporative emissions. However, the ICM and Urban Air Initiative research clearly shows increased aromatics cause a greater degradation on hoses, plastics, and other components which creates an escape route for gasoline vapors to permeate into the air.

In his presentation at ASTM, VanderGriend explained the extensive testing done on fuel lines, gas containers, and plastic components. These materials were each soaked in straight gasoline (E0) and a 10% ethanol blend (E10) for extended periods of time. In every case the ethanol free gasoline increased the damage to fuel lines, gas containers, and plastic components, while the materials soaked in E10 were impacted less.

To better visualize the damaging effects of straight gasoline, click here to watch a time lapse video involving a simple Styrofoam cup. The E10 blend contained 20% aromatics and had a slower impact on the cup. The E0 blend, with 26% aromatics, instantly destroyed the cup. While not as scientific as soak testing, the results are similar.

“The notion that somehow ethanol free gasoline is superior product could not be further from the truth”, said Mr. VanderGriend. “In our home town of Wichita, the average E0 has 46% more benzene and toluene by volume than the same 87 octane blend with ethanol. The fuel costs more and presents a mechanical and health risk that is incorrectly being attributed to ethanol”.

He went on to explain that ethanol, with the highest octane value of any fuel additive on the market today, could not only continue to replace aromatics like benzene and toluene in today’s gasoline but it will be critical as future vehicle designs will require higher octane to meet mileage and emission standards.

Mr. VanderGriend called on the ASTM to establish a task force to define maximum levels of aromatics in gasoline and to establish standards for the use of toluene as a blend component. ASTM agreed to begin a task force to begin monitoring aromatic levels in gasoline.

For more information on the work of the Urban Air Initiative, visit www.urbanairinitiative.com and www.fixourfuel.com.

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Important Points About Ethanol As Fuel

Friday, June 12, 2015

The following is an open letter from Marc Rauch, the executive vice president and co-publisher of The Auto Channel to Loren Steffy, writer for Chron. Reprinted here with Marc Rauch's permission.

Hi Loren -

I just had the opportunity to read your "Ethanol Chronicle" series that was published on the Houston Chronicle website from February to March 2007. (http://blog.chron.com/lorensteffy/category/the-ethanol-chronicles)

Yes, I realize that that was eight years ago, but one of the great aspects of the Internet is that things are often where they were left for anyone to see and comment on.

Nothing much has changed in the efforts to find an alternative to petroleum oil engine fuels. Likewise, the typical arguments used against ethanol in 2007 are still being used today. So while I'm very tardy in commenting on your series, I think that my counter-arguments are as fresh as ever. Additionally, while the same arguments are still being used against ethanol, the research and science has progressed considerably. It may be too late to include my comments at the bottom of the Houston Chronicle webpages, but perhaps you will revisit the subject again in the near future and find my remarks useful to that new effort.

It seems to me that your experience with using E85 was generally very positive and intuitive. For example, the fueling process didn't require learning any new pumping or safety techniques, and you didn't have to travel extended distances to unsavory filling station locations. I mention this because if you were doing a comparison between using a gasoline-powered vehicle and a CNG-powered vehicle you would have had to learn some new pumping techniques, learn to wrestle with obstinate CNG hoses, and get acquainted with some dark CNG fueling facilities that you wouldn't want your wife or daughter to have to use on their own. (Incidentally, I own a dedicated CNG vehicle and I'm a big fan of this alt fuel, but it does present these challenges.)

What's more, your story didn't indicate any performance difficulties or changes when you used the E85. I would describe your experience with the flex fuel vehicle and the fuel as having been "seamless." I presume you would agree with that.

The negative experience would have been the lower MPG from E85 as compared to regular gasoline (I assume it was E10, but might have been some other formulation that was available to you in 2007). By my calculations you experienced about an 18% reduction in MPG. However, you correctly assessed that the lower price of E85 mitigated the loss in MPG, and could even make the lower MPG irrelevant by providing a net gain from using E85. As a matter of interest, at the E85 filling station that I typically use, E85 is nearly 25% less than E10. So even if I experienced 18% fewer MPG I would come out well ahead. As it turns out, my MPG loss is not nearly so great (under 10% difference), so I come out far ahead.

Along the way you were exposed (or perhaps re-exposed) to some of the negative criticisms of ethanol, such as the Pimentel-Patzek EROEI claims and the limitations of E85 availability. And your series concluded with what I feel is Henry Groppe's biased pro-petroleum oil praise.

Before I continue, I would like to tell you that what I thought was really great about your test was that you did it by renting a flex fuel vehicle. Your experience is the first I've ever come across in which an "objective" journalist writing about ethanol fuels actually stepped up to the plate and did a real on-the-road comparison. Time after time I've read critical reviews of ethanol in which there was no hands-on testing conducted by the author. In my personal experimentations over the years I have been fortunate enough to be given plenty of flex fuel and non-flex fuel press vehicles with which I could do similar tests. Added to that, I've been willing to use my own personal gasoline-powered vehicles as guinea pigs. Consequently, I'm always suspect of a report damning ethanol (or any other alt fuel) that doesn't include practical personal experience.

Writing The Ethanol Chronicles in the year you did, you of course didn't have the opportunity to evaluate the Pimentel-Patzek 2005 study against the numerous opposing studies and backlash that were to come in subsequent years. This includes challenging reports by domestic and foreign universities, USDA, Argonne National Laboratory, and the findings revealed in an hour-long televised debate that pitted Pimentel and Patzek against Michigan State University Professor Bruce Dale and the NREL's John Sheehan.

To say that Pimentel-Patzek has been soundly rebuked is an understatement. Unfortunately the weight of the oil industry's checkbook has been able to overcome any perfunctory media discussion of Pimentel-Patzek's (flawed) results.

Your concern that there were not enough E85 filling stations is still a valid concern. It would definitely be helpful to any motorists (with or without flex fuel vehicles) if E85 was as ubiquitous as E10. However, one of the best features of a flex fuel vehicle is that it doesn't require only one type of fuel. As compared to having a dedicated CNG vehicle that is dead-in-the-water if it can't get to the next CNG facility, a flex fuel or non-flex fuel vehicle (that uses high level ethanol-gasoline splash blends) can go right back to E10 or non-ethanol gasoline when needed. So there should never be any "range anxiety" issues.

Another point you mentioned in 2007, and couldn't have predicted the outcome was the elimination of the national at-the-pump subsidy for using E85. As you know, that subsidy was retired nearly two years ago. It was believed that the price of E85 would then go higher than E10. However, that hasn't happened, the price of E85 is still lower than E10, and often much, much lower than ethanol-free gasoline.

In response to the encouraging results that you shared with Henry Groppe, you quoted Mr. Groppe as saying "That’s not the point....Part of the reason oil has been our fuel of choice for so long is because it’s incredibly efficient and has a high energy content."

I'm afraid that Mr. Groppe's long association and probable financial entanglements with the petroleum industry has either clouded or obfuscated the real reason why petroleum oil fuels have been our primary engine fuels for so long: The petroleum industry bought that position through financial considerations and duplicitous, sometimes deadly, actions. For the sake of brevity I will not present what these duplicitous, sometimes deadly actions are, but I would be most happy to provide extensive details and references upon your request.

Moreover, the issue of gasoline's BTU rating being higher than ethanol is completely irrelevant to any comparison between gasoline and ethanol. If "higher energy content" had any relevancy when comparing fuels used in internal combustion engines then you would be able to use diesel fuel in a gasoline-powered vehicle and get better mileage. Engine-fuel optimization is the key, not BTU rating. In my opinion, a man in Mr. Groppe's distinguished position in the energy industry should have known this and not have made this comment.

Loren, ethanol can become a viable replacement for gasoline, or at the least a very significant part of the solution to ending our oil addiction, but only when the truth is allowed to be seen and heard.

Very truly yours,

Marc J. Rauch
Exec. Vice President/Co-Publisher
THE AUTO CHANNEL LLC
www.theautochannel.com

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Hey California...Why Wait Until 2030?

Thursday, June 11, 2015

By Marc J. Rauch, Executive Vice President/Co-Publisher of THE AUTO CHANNEL.

AUTO CENTRAL - June 10, 2015: Later today, a meeting will be taking place in Sacramento (California's capital), to examine California Governor Jerry Brown's new energy and climate proposal calling for a 50 percent reduction in petroleum use by 2030.

The event will be broadcast LIVE over the Internet for those in the world who are not available to personally attend. It begins at 2:30PM PST and can be seen at http://www.realclearpolitics.com/topic/in_the_news/california_energy_challenge.

The invitation to attend or watch the live stream reads, "A panel of thought leaders in policy, academia and industry will convene in Sacramento to debate (and) examine whether California can balance climate and clean air goals while still meeting America's most populous state's significant energy requirements, transportation demands and economic prosperity."

If man-made climate change is occurring...If additional clean air measures are necessary...If California's economic prosperity is in jeopardy...then why wait until 2030? California, and America, and most of the world has the solution right now, today.

The solution doesn't require significant engine conversion; it doesn't require futuristic technology or not-yet-available innovation. It merely requires taking the blinders off, and the gags out of public officials' mouths to inform the public that they should use more ethanol in their gasoline-powered vehicles, and ethanol-based bio-diesel in their diesel-powered vehicles.

Government officials and business leaders simply have to tell the truth about ethanol. They have to stop the pernicious lies and gross exaggerations about the effects of ethanol on the vast majority of vehicles on the road. If public officials and business leaders don't know the truth then they should be allowed to hear it without interference from Big Oil's checkbook.

Virtually every single gasoline-powered vehicle manufactured since the mid-1990's can use high level blends of ethanol-gasoline fuel; blends that are much higher in ethanol than E10 or E15. The very vast majority of gasoline-powered vehicles on the road were manufactured after the mid-1990's.

If California thinks they have the power to make demands on automobile manufacturers, and they do think so, then California should mandate that all automobile manufacturers extend their warranties to include the use of higher level blend ethanol-gasoline fuels. If California can ram electric-powered vehicle mandates down the manufacturers' throats, then this should be a snap. Why would it be a snap? Because whereas building electric cars costs every manufacturer thousands of dollars in profit, ethanol acceptance would require little if any new capital outlay. Everybody would be happy, and healthy, and more prosperous.

The only people who would not be happy is OPEC and Big Oil, you know, the people who brought us poisonous tetraethyl-lead gasoline, gasoline with MTBE, oil spills, explosions, wars to defend their foreign oil fields, and hundreds of thousands of dead or wounded American service men and women. If California is planning on big changes anyway by 2030 — changes that will have profound financial effects on the oil industry — then why wait? Do we need more dead soldiers, sailors, and airmen? Does California need to be further hurt financially? If man-made global warming/cooling is really happening do we really need to wait until more damage is done?

All that has to happen is for Jerry Brown to call a press conference, step up to the microphone, scratch his head thoughtfully, give a little "aw shucks" grin, and announce: "You know folks, it turns out that ethanol really is safe to use in your cars and trucks. It turns out that we let the oil industry do what the tobacco industry did for so many years...lie. So please start using more ethanol in your gasoline vehicles immediately. Please start using more ethanol-based bio-diesel immediately. Thank you and have a nice day."

That's all that Jerry Brown has to do. It will help California, it will help America, and it will help the world.

Oh, and if Brown wanted to announce that he's cancelling the stupid high-speed train and shifting the money to build desalinization plants and pipelines to bring down water from Washington or Canada, this might be the perfect opportunity to finally do something for the people who have been so good to his family for so long.

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Former CIA Director James Woolsey Interviewed by T. Boone Pickens

Friday, May 29, 2015

They talk about "energy independence" in America, which is an imprecise and therefore misleading term. The U.S. is already independent with electricity. What we need is fuel independence. But more importantly, a robust market competition among fuels, which is entirely possible with the new few choice bill.

Listen to the interview here: Former CIA Director James Woolsey on American energy independence.

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Beginning Fuel Competition

Wednesday, May 13, 2015

"If you were to build a gas station today, from the ground up," writes Landon Hall, "you’d scribble out a list of the types of fuel you’d want to offer your customers. At the top, of course, would be regular 87-octane unleaded gasoline, which contains 10 percent ethanol. But next on the list likely would be E85 ethanol blend.

"That’s right: Cheaper, cleaner-burning E85 might just be a hot seller, if you did it right. Mike Lewis, co-founder of Pearson Fuels in San Diego, has been selling it for 12 years, and he knows there’s a customer base out there for it. Last month he sold more than 34,000 gallons of E85 at his flagship station, accounting for 20.7 percent of his overall fuel sales.

"Customers consistently buy more E85 at the station than mid-grade gas (89 octane), premium (91) or diesel combined."

Read the rest: Fuel Competition in California.

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Saudi Arabia and OPEC Successfully Damage America's Oil Boom

Sunday, April 26, 2015

In an article in the National Journal, Ethan Epstein writes:

North Dakota had just begun to emerge as a veritable Saudi Arabia of the Great Plains. Hydraulic-fracturing technology — better known as "fracking" — had opened up exploitation of the vast Bakken (rhymes with "talkin' ") Shale formation, a 200,000-square-mile rock formation, filled with oil, that spans parts of Montana, Saskatchewan, Manitoba, and western North Dakota. Soon the state would surpass Alaska to become the nation's number-two oil producer, trailing only Texas. (If it were a country, North Dakota would now be 19th worldwide in oil production, tied with Colombia.)

By this spring, the cost of a barrel of oil had plummeted by 60 percent. Production in North Dakota had fallen apace, leaving both longtime residents and the newcomers who moved here to make a quick buck in a kind of limbo — waiting to see whether, and when, prices will rise again. It's been a hard lesson in the economic realities of a natural-resource economy, showing just how beholden North Dakota — like other regions of the country that have embraced fracking, such as western Pennsylvania and Texas — has become to global geopolitical currents that it can't control.

Last June, the price of a barrel of crude stood at around $115; since this winter, it's been hovering at about $50. North Dakota oil goes for even less than that — about $38 a barrel — because of the high costs associated with moving the stuff out of a geographically remote locale. The plunging price of crude has sent shudders through the Bakken and Watford City. The future now seems even more uncertain than it did during the heady days of the initial boom, and ominous signs are everywhere. In the past year, the number of active drilling rigs in North Dakota — the ones that drill new wells — has fallen by more than half, from a peak of 218 to fewer than 100.

The above are excerpts. Read Ethan Epstein's entire article here: Fracking Town USA.

We do not need to suffer these economic booms and busts caused by oil's strategic status if we had true fuel competition in America. Please write to your Members of Congress and urge them to co-sponsor the Fuel Choice and Deregulation Act.

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A New Fuel Choice Bill

Friday, April 10, 2015

The following is an April 9th, 2015 article in National Review by R. James Woolsey and Anne Korin. Ambassador R. James Woolsey is a former director of Central Intelligence, co-founded the U.S. Energy Security Council, and chairs the board of the Foundation for Defense of Democracies. Anne Korin is a co-director of the Institute for the Analysis of Global Security (IAGS) and an adviser to the U.S. Energy Security Council. The article is entitled, The Flexible-Fuel Solution.

Negotiators in Geneva
Negotiators in Geneva appear to be sleepwalking into a Sunni–Shia nuclear arms race, so a bad neighborhood — as former Israeli prime minister Ehud Barak so memorably described the Middle East — is likely to get much worse. The Islamic State’s Mesopotamic marauding is adding industrial quantities of fuel to the fire. Since the region is home to some two thirds of world conventional oil reserves, oil prices are unlikely to stay at two digits for very long.

That’s unfortunate, since low oil prices — while depressing for the shale patch — are certainly fantastic for the majority of Americans. High global oil prices erode disposable income and act as a tax hike on Americans, while funneling billions upon billions of dollars to some of the world’s worst regimes. It’s been nice to have a respite from $147 oil, but policymakers should be well aware that, despite reduced imports, it is still the regimes of OPEC that — by both their action and their inaction — have the most influence over the price of oil. While we’ve never imported more than 15 percent of our oil needs from the Middle East, what we have imported and still do import from the region — due to the fungibility of the commodity — is the price of the black liquid. Analysts wait with bated breath for Saudi oil minister Ali al-Naimi’s statements because they know that if the Saudis choose to tighten the taps significantly, oil prices will climb.

The increase in U.S. domestic oil production due to the shale revolution makes all the more stark the 40-year freeze we have had in OPEC production capacity. The oil cartel, which sits on 72 percent of the world’s cheapest and easiest-to-lift oil — $2.50 a barrel is the Saudi production cost — produced 30 million barrels a day in 1974, and lifts less than that today. Assuming OPEC’s reported reserves are not inflated, a deliberate choice to keep production capacity over four decades much smaller than reserves allow is in keeping with normal cartel behavior: keeping supply tight to maximize revenue, and periodically cranking up production (or refraining from cranking it down) to allow the market to flood in order to bankrupt competitors. The short-term cost to Persian Gulf royals of lower prices such as we have today is well compensated by the long-term gain, especially as Asian customers lock themselves into a dependence on Saudi Arabia by building refineries optimized to the Kingdom’s products, namely medium and heavy sour crude (shale-patch oil is sweet and light).

This dynamic makes a great deal of sense for OPEC regimes, rentier states that need to ensure that the long-term price of oil is high in order to balance their oil-fueled national budgets, while keeping domestic spending high enough to dissuade their subjects from storming the palace doors. It is not such a good deal for the United States and its allies, since oil-price spikes tend to trigger economic downturns. That there will probably be increasing hits to supply from wars and terrorism in the region will only make things worse.

There is a way out of this conundrum, and it involves the shale patch. The reason oil-price spikes send our economy into a tailspin is that most cars and trucks are open only to gasoline or diesel. As a collective, OPEC, with its lowest marginal cost of production, acts as a monopolist in the oil market. Our petroleum-dedicated fuel tanks allow OPEC to act as a monopolist in the transportation-fuel market as well. While the vagaries of geology mean there is not much, despite the admirable efforts of American entrepreneurs, that can be done about the former, the latter is a problem that can be solved. Opening our fuel tanks to fuel competition would allow fuels made from natural gas, coal, and biomass to be arbitraged against petroleum-based fuel. Eventually, such competition would serve to keep oil as moderately priced as its competitors.

Shale-patch production has so tremendously increased the supply of natural gas that, even with oil in the mid two digits, on an energy-content basis natural gas is still three times as cheap. Cheap liquid fuel made out of natural gas, such as methanol, can be used in flexible-fuel vehicles that cost less than $100 extra to manufacture than do gasoline-only cars and that allow drivers to decide at the pump whether to fuel with gasoline or with something else based on comparative price or other considerations. Natural gas can also be used directly, as compressed natural gas, and it can be used to generate electricity, which fuels plug-in hybrid and electric vehicles.

Opening the transportation-fuel market to competition has long faced a chicken-and-egg issue: Why should automakers sell cars that are open to a fuel not retailing at many fuel stations, and why should fuel stations retail a fuel if cars aren’t warranted to use it? Flex-fuel vehicles overcome the technical part of this conundrum, because they can be fueled with gasoline while fuel stations catch up with the new fuels at their leisure. A bill just introduced by Senator Rand Paul (R., Ky.) answers the question for automakers. The no-subsidy, no-mandate Fuel Choice and Deregulation Act would give automakers the option of reducing their existing hefty and expensive fuel-economy obligations by opening at least half the vehicles in their fleet in a given model year to fuel competition of some sort. The bill is technology neutral, letting the market rather than government decide which fuels and drivetrains make most sense at any given time. It would serve to throw open America’s fuel tanks to competition and keep prices at the pump low over the long term. It is a critical policy shift that would insulate our economy from the volatility of a region in which the likelihood that the Arab Spring becomes an Islamic nuclear winter rises by the day.

Read more: Fuel Choice and Deregulation Act of 2015 Introduced.

Read the full text of the bill: Fuel Choice and Deregulation Act of 2015.

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How the Oil Industry Influences National Beliefs

Sunday, March 22, 2015

"The New York Times recently published an op-ed attacking renewable fuels from the Manhattan Institute's Robert Bryce," wrote Denise Robbins in Media Matters, "without disclosing his ties to the oil industry, despite a directive from its former public editor for the paper to fully disclose its op-ed contributors' financial conflicts of interest."

While the Renewable Fuel Standard (RFS) is an incomplete solution at best (robust fuel competition is what we need), we thought the excerpt below was an interesting look at one of the ways the oil industry has managed to keep its transportation fuel monopoly despite innovations such as turning municipal waste profitably into clean fuel (while reducing landfill bulk and greenhouse gases) or the ability to create ethanol for a dollar a gallon using undrinkable water and unfarmable land. Robbins writes:

In a March 10 New York Times op-ed, Robert Bryce falsely characterized the Renewable Fuel Standard (RFS) as an expensive "tax." The standard, which requires oil refiners, blenders, and gasoline and diesel importers to blend a set amount of renewable fuel into their gasoline supply, was dismissed by Bryce as a "boondoggle" and a "rip-off."

But the Times failed to disclose Bryce's financial incentive to attack the RFS, identifying him only as a "senior fellow at the Manhattan Institute and the author of a new report from the institute, 'The Hidden Corn-Ethanol Tax.'" The Manhattan Institute has, in fact, received millions from oil interests over the years, including $635,000 from ExxonMobil and $1.9 million from the Claude R. Lambe Charitable Foundation, where Charles Koch and his wife sit on the board of directors. Koch made his fortune from oil and currently has significant holdings in oil and gas operations.

Bryce is, in essence, acting as a spokesperson for the oil industry, which has much to gain from weakening or repealing the RFS. The renewable fuel requirement is set to increase over the next several years, potentially replacing up to 13.6 billion gallons of the conventional fuel supply by 2022.

These financial ties might explain why Bryce's op-ed was peppered with industry myths, including that renewable fuel can damage car engines (this has been proven wrong) and is bad for the environment (ethanol's lower greenhouse gas emissions are better for the climate).

The New York Times faced backlash after similarly failing to disclose Bryce's financial interests in a 2011 op-ed attacking renewable energy policies. A letter signed by more than 50 journalists and media professionals expressed concern that such a lack of disclosure is "a growing problem in American journalism" and asked the public editor to "lead the industry and set the nation's standard by disclosing financial conflicts of interest that their op-ed contributors may have at the time their piece is published."

Read the whole article here: NY Times Fails To Disclose Oil Funding Behind Pro-Oil Op-Ed.

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Can the American Energy Revolution Survive a Deal with Iran?

Friday, March 20, 2015

By Gal Luft, originally published in Downstream Today:

There is no lack of voices warning against the dangerous implications of the nuclear agreement the Obama Administration is advancing with Iran. The opposition has mostly focused on the destabilizing geopolitical impact of a nuclear Iran and what it means for the security of the U.S. and its allies. But there is one less obvious casualty — the North American oil and gas industry.

Undoubtedly in the event of lifting of the sanctions, cash-starved Iran would do all in its power to quickly ramp up its oil exports to make up for lost revenues, and the oil market could face an injection of 500,000-800,000 barrels/day of Iranian crude. At a time when U.S. crude oil supplies are already at their highest level in more than 80 years and storage facilities are reaching their maximum capacity, an influx of Iranian oil could easily slice current oil prices by half. This would be a crippling blow to America’s oil and gas industry, effectively marking the end of the North American energy renaissance.

Even before Iran opens the floodgate the industry finds itself in a precarious situation. To cover their capital investment and operational costs, North American oil drillers have collectively borrowed in recent years about half a trillion dollars. This debt was secured from financial institutions on the premise that the oil would be sold for $100 a barrel or so. But at $50 a barrel the revenues are out of tune with expectations. To avoid bankruptcy, oil companies are forced to pump as much oil as they can to generate sufficient cash flow in order to service their debt. But such Red Queen practice cannot go on for much longer. Hence, many projects have been shelved or streamlined; U.S. rig count, a key barometer of drilling activity, has been declining for the past six months; oil services companies have announced 40,000 layoffs to cope with lower oil prices; and independent oil and gas companies, particularly those with high production costs, are facing defaults and bankruptcies.

The slide in oil prices also impacts the natural gas market. The North American shale revolution has unleashed huge amounts of natural gas but due to lack of infrastructure to export the gas to international markets America’s gas is under-demanded and oil companies holding large amounts of gas in their portfolios are losing their shirts on this commodity as well. So far, the industry has put its faith on the construction of several multi-billion dollar LNG terminals from where the gas could be shipped to Europe and Asia. And indeed five such projects have been approved for construction by the Federal Energy Regulatory Commission (FERC). But a few of these projects could be derailed if the Iranian oil tsunami occurs. LNG prices in Asia are indexed to oil. This means that low oil prices drag down LNG prices — the spot price of LNG in Japan in at its lowest level in five years despite the fact that the country's fifty nuclear reactors are still idle — making America’s LNG less competitive in the Asian market compared to Australian or Qatari gas. Developers of LNG liquefaction facilities in the U.S. who for years struggled to obtain export permits will soon realize that their revenue projections and debt structure may no longer be viable under the low price scenario.

If there is any salvation for the industry it is in the creation of a new market for its product. This can be done in the sector in which it already has a big stake — transportation. Indeed this is the only sector that can gobble an amount of domestic natural gas significant enough to recover the depressed natural gas market.

A barrel of oil has roughly six times the energy content of a million Btu of natural gas. At current oil prices gas is almost three times cheaper than oil on an energy equivalent basis. This means there is enough room for oil prices to come down without crowding out gas from the transportation fuel market. But to generate demand for natural gas in transportation, cars, trucks and ships must be opened to fuels derived from the commodity, like methanol, ethanol, compressed natural gas and electricity. For this to happen automakers should be offered an option to reduce their fuel economy obligation — an unachievable 54.5 miles per gallon by 2025, twice the current efficiency level — if they open most of their cars to some sort of fuel competition, whether through flex fuel engines, electric motors, natural gas engines, fuel cells etc. The abundance of choice enabling vehicles would give rise to greater demand for natural gas and this would pad the balance sheets of America’s energy companies and keep them viable until the oil market rebalances itself. It will also provide consumers with lasting protection against future oil price hikes.

Unlike other industries that are used to investing a great deal of resources in creating demand for their product, oil and gas producers have never been challenged to seek new sources of demand. It has always been there for them. But the new market conditions beg for a new industry mindset — one that views fuel choice not as dangerous competition but rather as a lifeline in what could be a protracted and challenging period.

Gal Luft is Co-director of the Institute for the Analysis of Global Security and Senior Adviser to the United States Energy Security Council. He is also Co-chairman of the Global Forum on Energy Security.

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Why Is Jay Leno Misrepresenting Ethanol?

Tuesday, March 10, 2015

As you read the Op-Ed below by Marc J. Rauch, Executive Vice President and Co-Publisher of the Auto Channel (originally published here), keep in mind two things: Ethanol can be made from garbage, and when it is, it reduces the bulk and harm of landfills, and ethanol can be made for a dollar a gallon using unfarmable land and undrinkable water. Now here's Marc Rauch:

There are two things that everyone knows about Jay Leno: He's a great comedian, and he's a seriously great automobile enthusiast. Generally, when you become great at something you learn a lot about that subject; even if you don't want to learn about the subject, and you just want to be good at engaging in the activity, it's virtually impossible to not become a great student of the history and mechanics of that subject.

I have no doubt that Jay is a master of comedy history, along with the mechanics of what is funny and why it's funny.

I've watched enough video of Jay and his vehicles to believe that he is equally a master when it comes to knowing about his vehicles and the history of how they were designed. I also know that Jay has been a proponent of alternative fuels and advanced technologies. In fact, we even have a few dozen stories and videos of Jay on The Auto Channel website that feature him discussing these things.

I'm also aware of at least two other media pieces done by, or with, Jay in which he enthusiastically discusses his E85-powered 2006 Corvette. (One piece was a Popular Mechanics text story published in 2008, the other was a video produced in Las Vegas at SEMA 2007.)

In both of the stories, Jay expresses a favorable opinion of the advantages of high-level ethanol gasoline blends versus gasoline without ethanol or even just E10 gasoline (10% ethanol/90% gasoline). Among other benefits, Jay cites ethanol's higher octane rating, cooler operating engine temperatures, lower harmful emissions, and ethanol's engine cleaning characteristics that leave behind no nasty gasoline residue and gunk that clog key engine components, such as pistons and valves.

Well, a few days ago, it was brought to my attention that Jay has authored a new story that appeared in the March 2 edition of AutoWeek magazine. The article, titled "Can't We Just Get Rid Of Ethanol?" basically proposes that the United States end the "Renewable Fuel Standard" (RFS) because of issues related to the use of ethanol fuels in older vehicles. At the close of the story Jay exhorts readers and automobile enthusiasts to write to their legislators to demand action against ethanol.

Clearly there is a difference between old cars and new cars, that is to say "classics" and "antiques," and late model vehicles - like those that make up the overwhelming majority of vehicles on the road today. Therefore, it is understandable for Jay to express two different opinions about ethanol as it pertains to old cars versus new cars.

(For those of you keeping score at home, the average age of all cars and trucks on the road in America is only about 10 years. Keep in mind that since the early 1990's all gasoline-powered passenger cars and trucks manufactured for America have used engine and fuel-system components that are resistant to alcohol's solvent properties.)

However, the problem to me is that Jay didn't say "write to your legislators to demand more freedom of fuel choice to give us old car owners easier access to ethanol-free gasoline," he's instead calling for less freedom of fuel choice. More importantly, as much as I hate to say it, Jay is using information to sway the argument that is untrue and misleading. And so, since I think that Jay should know, and does know better, that he is lying in the AutoWeek story.

For example, in the new AutoWeek story, Jay states that "ethanol will absorb water from ambient air...causing corrosion and inhibiting combustion."

Ethanol doesn't absorb water from the ambient air. This lie is one of the oldest and most malicious of the lies created by the oil industry to denigrate ethanol. The only thing new in how Jay used this lie is that he used the word "ambient." I've not seen that before. I've seen quotes that use the word "thin" to denote ordinary air that we normally breathe, but not "ambient." Regardless, this is not what occurs.

It seems many years ago that some clever oil industry person must have learned that ethanol (alcohol) is a hygroscopic substance, and that the general dictionary definition for a hygroscopic substance is that it can attract moisture from its environment. What the oil industry wag then did was to substitute the word "attract" with "absorb," and "air" for environment. Thus, attracting moisture from its environment magically became absorbing water out of thin air.

To keep with a Jay Leno comedian metaphor, let me offer a classic Abbott & Costello routine that presents a startlingly clear analogy at how silly Jay's hygroscopic statement is:

Costello tells Abbott that a loaf of bread is the mother of the airplane. Abbott tells Costello that he's crazy. Costello asks Abbott if he agrees that necessity if the mother of invention. Abbott replies yes. Costello then asks if bread is a necessity; Abbott says yes. Costello asks is the airplane is an invention; Abbott says yes. Therefore, exclaims Costello, if bread is a necessity and the airplane is an invention, then a loaf of bread is the mother of the airplane.

What I'm getting at is just because you can play semantic word games with the definition of "hygroscopic" that doesn't mean that the result of the game is relevant and correct.

To prove that alcohol will not absorb water right out of the thin or ambient air, I always offer this simple at-home experiment: Fill any open container halfway with alcohol and place it on your kitchen counter. Allow it to sit for one or more days. If alcohol absorbs water right out of the air, then when you check the level of liquid in the ensuing days you would find that it has risen. If you find that the level of the liquid in the container has risen (without any manipulation, change to the environment of your indoor kitchen, or interference to the natural process) and you can document it, I will pay you $1,000.

Incidentally, cotton is also a hygroscopic substance. So just as additional proof that being a hygroscopic substance doesn't mean that it absorbs water right out of the air, place a ball of cotton on the other side of your kitchen counter and see if it gets saturated with water from just sitting out in the open.

Moving on to one of Jay's other points, if you were to pour a gallon of water in your gasoline tank your vehicle will probably have great difficulty starting. But that's not how water gets in your gasoline tank, unless you're very, very drunk when you go to the filling station. You can get water in your fuel system because of condensation. So what do you do if you have some water in your fuel system? Do you stick a straw in and suck it out? No, you add a product like Dry Gas. Dry Gas is ethanol, meaning that you use ethanol to solve the problem of water in your gasoline tank. That's right, to solve the problem!

Ethanol doesn't actually absorb the water, it breaks the water molecules down so that ignition and combustion of the gasoline can take place. The water molecules are then expelled in the exhaust. In other words, ethanol aids combustion, not inhibits combustion as Jay stated.

Jay goes on to say, "It gets worse. Ethanol is a solvent that can loosen the sludge, varnish and dirt that accumulate in a fuel tank. That mixture can clog fuel lines and block carburetor jets." The sludge, varnish and dirt that Jay is referring to is caused by gasoline. So ironically, the cleaning characteristic that Jay is now criticizing is the same beneficial cleaning characteristic that he previously championed when discussing the benefits of ethanol.

Then Jay writes, "Blame the Renewable Fuel Standard (for these problems). However, that's not where the blame lies. The blame lies with gasoline; the liars in the gasoline industry; and the politicians who forced us to use gasoline, which resulted in gasoline becoming the dominant and default vehicle fuel. Ethanol cleans the gunk, gasoline causes it.

Even if ethanol is never introduced into a fuel system the time will come when the engine must be cleaned. The engine repair industry didn't spontaneously arise with the advent of E10 or E85 gasoline. Engine repair, maintenance and replacement is a natural result of the internal combustion process. If we can have a fuel that (as Jay previously wrote) burns 100 percent, leaving behind no nasty residue and leftover gunk that clogs key engine components, why shouldn't we have that fuel readily available? Shouldn't that fuel be our primary default engine fuel?

Jay talks about damage that ethanol has caused to the fiber diaphragms in the fuel system of one of his Duesenbergs. I think he's probably correct about this. But is this the reason why America should abandon the RFS and return to gasoline that contains poison?

If you watch the video that Jay did in Las Vegas in 2007 he says something very interesting; in response to the question of how he selects which vehicle he is going to drive to work on a given day, with great humility he acknowledges that there are greater problems in the world to worry about. That was a correct, very modest response. So in keeping with that recognition, I suggest that the fiber diaphragms in his or anyone else's Duesenbergs have no significance in our national decision on what is the correct engine fuel to use.

As a person who has owned classic cars (although I've never owned more than one at a time, and they weren't especially valuable), while I can appreciate his concern over his vehicles, I suggest he suck it up as a noblesse oblige sacrifice that he must make.

For some inexplicable reason Jay also throws in negative comments about ethanol producers and the "food vs. fuel" argument. This inclusion made me think that perhaps Jay didn't actually write this article - that it was actually written by some API stooge and Jay just signed off on it. Jay refers to some ethanol producers as "giant agri-businesses," and its mention is couched within a paragraph that is meant to demean the producers and the overall effort to make us energy independent. Admittedly, some ethanol producers are large corporations, but when you compare them to the giant oil companies they are virtually mom and pop businesses.

For example, in the same year that ExxonMobil reported their fiscal fourth quarter profit as $40 billion, Archer Daniels Midland reported their fiscal fourth quarter profit of $372 million. Although $372 million is nothing to sneeze at, it’s less than 1% of ExxonMobil’s profit. So if there's a picture being painted about huge greedy companies looking to take advantage of the American consumer, the illustration is of ExxonMobil not ADM. And we must remember that the ethanol we use in America is produced here in America by Americans. No American military man or woman has ever died defending domestic ethanol production and distribution.

As for "food vs. fuel," Jay might as well claim that the Earth is flat. About 10 years ago, The World Bank issued a statement in which they claimed that increased corn-based ethanol production was causing food prices to rise. Since that time, The World Bank has twice rescinded that earlier claim based on new and better studied information. The fuel-related culprit they acknowledge as causing food prices to rise is gasoline, diesel, and other petroleum oil products that are used in packaging.

I think that Jay was irresponsible for writing, or signing off on, this article. However, the bulk of the responsibility for letting this misinformation come to the light of day belongs to AutoWeek magazine. Regardless of what Jay Leno had to say, they should not have allowed it to be published, or at the least they should have published it with some considerable disclaimers. I guess that AutoWeek's decision was predicated upon the hope of increased advertising support from the oil industry, and that the reason they chose to embellish the headline title of Jay's story on the online version of the story with "Jay Leno hates ethanol" was to make sure that they were kissing enough ass. I also presume that Jay made the same decision to create the story based on the potential of getting oil company sponsorship for his new automotive content ventures. If I'm correct then there is little reason for this magazine article to have been written and published.

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Why Does the Price of Oil Keep Falling?

Friday, February 6, 2015

The plummeting price of oil is still the biggest energy story in the world. It's bringing back cheap gasoline to the United States while wreaking havoc on oil-producing countries like Russia and Venezuela.

But why does the price of oil keep falling? Back in June 2014, the price of Brent crude was up around $115 per barrel. As of January 23, 2015, it had fallen by more than half, down to $49 per barrel.

For all intents and purposes, OPEC is now engaged in a "price war" with the US. What that means is that it's relatively cheap to pump oil out of places like Saudi Arabia and Kuwait. But it's more expensive to extract oil from shale formations in places like Texas and North Dakota. So as the price of oil keeps falling, some US producers may become unprofitable and go out of business. And the price of oil will stabilize. At least that's what OPEC members hope.

The above is excerpted from an article on Vox.

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Fuel Choice Petition

Tuesday, February 3, 2015

Yossie Hollander at TEDx.
The following is a special message from Joseph “Yossie” Hollander, Co-Founder of Fuel Freedom Foundation:

I've certainly been loving the low gas prices lately, but not knowing if or when they'll skyrocket again makes me a little uneasy.

One thing's clear: We need to stabilize the market to permanently lower costs at the pump.

Making American produced alternative fuels like ethanol and methanol more widely available is how we get there. Doing so would not only reduce our dependence on foreign oil — we’d also create a whole new generation of US jobs.

If you're with me in wanting more fuel choice, add your name to our petition to ask major independent retailers to install alternative-fuel pumps at their existing stations.

Getting these fuels to the hands of consumers is a critical step in achieving stability and driving growth in the market.

It's time we had fuel choice right here at home so that Americans are not held hostage by the oil industry. Communities around the country that drove the surge in U.S. oil production are now victims of falling global prices. Already this month, thousands of workers are losing their jobs.

The antidote to this boom-and-bust cycle of oil prices is giving American drivers a real choice at the pump. There are entire sectors of the fuel industry that are left untapped — all we have to do is demand the choice to use them.

Our workers — and consumers — deserve better.

Make your voice heard. Urge major retailers to get on board with offering alternative fuels at their stations:

http://www.fuelfreedom.org/take-action/#tab-id-3

Thank you,

Yossi

Read more...

Fracking is Worth it When Oil is Expensive

Monday, February 2, 2015

"Fracking is not cheap and the Saudis know it," says an article in Addicting Info. "We’ve known how to get at shale oil for a very long time but it wasn’t worth the effort. It’s difficult and expensive. But when oil prices flew over $100 a barrel, it became more than worth it to tap that hard to reach crude. American oil production skyrocketed, not because of any Republican or Democratic policies, but because the oil companies were able to make a profit.

"But that only works if the price of oil stays high. From its all time high of $143.72 per barrel in June of 2008, the price has plummeted to $46.97. Fracking isn’t quite so profitable anymore. In fact, a number of fracking sites are closing down and jobs are disappearing in oil rich states like Texas.

"Now, the upside to this is that countries like Iran and Russia are going to suffer greatly, thus curtailing their more anti-social tendencies. It’s hard to be a regional power when your economy is collapsing."

But the bad news is that if Saudi Arabia can successfully suppress the fracking industry in America, they can then go back to high oil prices with less competition...and they also use their wealth for anti-social activities.

All of this nonsense could stop, and we could get off Saudi Arabia's economic roller coaster if we only had a brain. If we had robust fuel competition in America, everything would change.

Read more...

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