The Screaming Pen

Providing Global Insight, Context, and Perspective

It’s a Definite Maybe

Alternatives to Black Gold

Bean Guzzler

When Tim Kay used his internal combustion engine to power a carriage in the late 19th century, the modern automobile was born. Originally hailed as an environmentally preferable alternative to manure dropping horses, the automobile’s reliance on refined oil -and our reliance on the automobile- has yielded several positives, namely economic expansion, industrial innovation, and Jed Clampett’s accidental discovery of Texas T, which led to the relocation of his family to Beverly Hills. It is also apparent that our reliance on oil has caused serious problems, including pollution and dependence on foreign oil in times of high prices. It is apparent that there may be an interesting side effect to high gas prices, however, as alternative sources of energy become profitable to produce when oil and gas prices are high.

The Options
Alternatives to purely gas and diesel powered vehicles are plenty, although for today’s discussion we will focus on the most likely options. They include completely replacing oil as a fuel, finding new ways to extract oil in different forms, and blending today’s fuels with additives in order to increase efficiency and decrease emissions. New technologies that could help accomplish these ends that were not economically viable to produce when oil was cheap, are now economically viable at $70 per barrel oil. Economic viability implies that if conventional oil is at a price lower than what it costs to produce an alternative, the alternative will not be produced because consumers will purchase the cheaper good. Along with providing insight into the direction of alternative energy, this is an important exercise in illustrating the market’s role in the energy issue. So far, it is apparent that the only way a move away from conventional oil will occur, is if market prices dictate a move, as tax credits for hybrid vehicles at both the state and federal level have been largely ineffective.

Shale Oil

The harvesting of the oil sands in western Canada have resulted in an economic boom in that area. This project, initiated on a large scale when oil became pricey, should serve as an example to America, who has similar reserves in the mountain states. Shale oil, which is held in porous rocks and is expensive to extract, is abundant in the Green River Basin of Colorado. It is estimated that the Green River Basin may hold up to two trillion barrels of shale oil. Cambridge Energy Associates estimates that it is viable to extract shale oil when crude is around $50 a barrel.

Related links:

Raytheon teams with Hyde Park Company for Shale Oil

BLM picks Oil Shale Development Candidates

Biodeisel

Biodiesel is a mixture of diesel fuel and vegetable oil that produces a cleaner burning fuel with fewer emissions. The vegetable oil acts as a natural detergent that cleans oil lines better than the chemicals that are added to diesel. It is estimated that the production of Biodiesel makes sense from a profit standpoint when crude is at $80 barrel.

Related Links:

Countries Largest Biodeisel Plant Planned

Interest in Biodiesel Increases with Price of Gasoline

Concerns

Although it is likely that we will eventually move to an alternative to conventional oil, OPEC nations would merely have to increase production for an extended period of time in order to drive the price of oil down, again making these alternatives unlikely. In order to be effective as a cartel and continually bring in the American dollars that prop up many of their economies, the oil producing nations need to do a better job from the production end. A shift away from oil would wreak havoc on the economies of Iran, Venezeula, and Russia, nations who are dependent on international oil sales. Also, this technology will not be adopted overnight, meaning that the current price of oil with regards to viability is somewhat irrelevant. If companies and investors believe that increasing oil prices are a secular, long term trend, then it would be absolutely necessary to begin developing alternative technology now, as a paradigm shift in the energy business could leave energy companies without an alternative energy business facing a loss in profitability.

-JPL

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May 10, 2006 - Posted by | Author: JPL, Energy, Oil

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