DrumBeat: August 19, 2006
Posted by threadbot on August 19, 2006 - 9:10am
Topic: Miscellaneous
Economic Impacts of U.S. Liquid Fuel Mitigation Options [PDF]
A new report by the authors of the "Hirsch report": Roger H. Bezdek, Robert M. Wendling and Robert L. Hirsch. It's sponsored by the National Energy Technology Laboratory.
The world is consuming more oil than it is finding, and at some point within the next decade or two, world production of conventional oil will likely peak. Peaking will lead to shortages and greatly increased prices and price volatility. In addition to peaking and its consequences, there are widespread concerns about the growing United States’ dependence on oil imports from both an energy security and a balance of payments standpoint.This study considered four options that the U.S. could implement for the massive physical mitigation1 of its dependence on imported oil:
• Vehicle fuel efficiency (VFE)
• Coal liquefaction (coal-to-liquids or CTL)2
• Oil shale
• Enhanced oil recovery (EOR)
We've hit the big time! From National Geographic:
...With gas prices high and the future of world oil production uncertain, interest in alternative fuels is surging.But ethanol, a fuel now widely used in Brazil, has been the subject of an often polarized debate in the U.S.
The controversy has been playing out recently both in science journals and on energy blog sites such as The Oil Drum.
Proponents like Silicon Valley venture capitalist Vinod Khosla argue that ethanol can replace gasoline, while opponents counter that not enough agricultural land exists to meet more than a fraction of the country's energy needs.
...But another outspoken ethanol critic, oil industry analyst and blogger Robert Rapier, has endorsed the E3 Biofuels approach, calling it "responsible ethanol."
Natural Resources are Fuelling a New Cold War
Oil and gas supplies are becoming scarcer and more expensive. The hunt for the world's remaining resources is creating new alliances and the danger of fresh conflicts. China is moving aggressively to sate its growing appetite for energy, potentially setting up a confrontation with the United States for the dwindling resources of the Middle East and Africa.
State subpoenas Prudhoe owners over oil spills
Zimbabwe changes fuel pricing policy
GOVERNMENT and the oil industry have - with immediate effect - fixed the price of diesel at $320 and that of petrol at $335 a litre for all users in the country.This effectively means that farmers, Government and public transporters, who were accessing fuel from the National Oil Company of Zimbabwe (Noczim) at a heavily subsidised rate, will have to pay the new increased prices, while private motorists, who were being charged around $700 for a litre of both petrol and diesel, will now pay less.
Nigerian militants release German worker as government cracks down
China Power Grids Strained by Heat, Drought
A WORLD oil expert predicts the price of unleaded petrol in WA will crash through the $2 mark this summer.London-based expert Chris Skrebowski arrives in Perth today for talks with the WA Government and to speak at a conference about the oil crisis.
Pumping the fear factor out of oil: As more production comes online over the next few years, prices may ease by as much as $20 a barrel.
Except for those in hurricane devastated areas, many Americans do not remember the long and stressful gasoline lines of the '70s & '80s gas crunches. The Asphalt Wonderland had a temporary crunch back in 2003. Perhaps a look back to refresh our memories is called for:
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PHOENIX, Arizona (AP) -- Three hours after she started to search Monday, Judy Bergeron was finally able to find gas for her sport utility vehicle. She first had to visit five stations, and then wait in line for about 45 minutes at the last one.
Motorists in the nation's sixth-largest city found stations with the pumps blocked off by yellow caution tape, or with lines that stretched a block or more. One gas station attendant called police because some patrons were getting upset and others were cutting in line.
There was no way to tell how many stations were affected because as some ran out, others were getting topped off by tanker trucks. But the problems, which seemed to come to a head Sunday, were seen throughout the city.
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What I found as most fascinating is how cellphones were used to gain a preferential advantage:
Some tanker drivers would call each other to exchange delivery times and location info, then they would call their families or buddies to tell when and where the deliveries would happen. You would see vehicles start to line up at an empty gas station a few minutes before the tanker rig arrived so that they would be served first and minimize their waiting time.
I recall some queues at empty stations would even have pickups with trailered boats lined up before the tanker arrived-- clearly these people had inside information-- no gas shortages for them. Other 'early birds' would not only fuel their vehicles, but would also fill-up extra gasoline cans, presumably for home power equipment, construction machinery like backhoes, etc if this 'early bird' was an independent construction contractor, or maybe they just wanted extra gasoline to hoard.
Those 'out of the info loop' would be at a decided disadvantage until they spotted a forming queue, or saw a tanker pull into a gas-station. They would quickly pull into the waiting lineup, then they would immediately grab their cellphone to alert their inclusive fitness circle of friends and families.
I believe more pipeline breakdowns due to corrosion, ala BP's Prudhoe Bay example, are forthcoming, and we all know Peakoil will make fuel availability much worse. Supply and demand pricing is helpful for the long-term macro-effects, but does nothing to alleviate the local micro-economic condition of people wastefully driving around from one gas station to another seeking to refuel.
This desperate search is extremely stressful if your vehicle is already running on fumes. The past history of gas station queue violence is readily documented for all to read; detritovore addicts clearly will go nuts to get their next fix. Fuel thefts by siphoning, cutting gaslines, or even puncturing gastanks to get the last drops have been discussed here before. There have even been tanker drivers who had their rigs hijacked by gunpoint in the past!
I think we TODers need to discuss what might be the best way to mitigate this potentially violent postPeak problem of the black market in inside information and wasteful fuel searching in urban locales. Here are a few of my ideas:
- Any vehicle queuing up at an empty gas station before a tanker arrives clearly had access to inside info--they will be assessed an extra 50%/gal or be limited to only five gallons at the regular price.
- Any oil industry employee who discloses the critical dispatching info of tanker-truck deliveries will be terminated. This is also good for preventing hijackings.
- A tanker driver will only be told to drive to a certain neighborhood, then when GPS-monitoring confirms that the rig has arrived in this locale, only then does the dispatcher cellphone call to inform of the final destination. This will prevent the tanker driver from having time to alert family and friends. A neighborhood may have 15 gas stations of the same brand-- the trucker has no idea which one of these fifteen is his delivery point until nearly the last minute.
- Anyone seeking to merely 'top off' their tank will not be allowed to purchase fuel. You cannot buy gas if your gas-guage reads more than quarter-full--this should effectively end the desire to hoard by keeping one's tank full.
- Your vehicle's VIN number will be assigned to one gas station of each brand in your neighborhood, and you will be required to scan this barcode before purchasing. You are then free to choose the best price among these competing brands secure in the knowledge that you will find gas somewhere in your immediate local--no more desperate searching over a broad swath of urban real estate.
- You are free to purchase gas at any other gas stations from your assigned stations, but you will be charged any extra $1/gallon for not wisely watching your fueltank indicator and conserving. If your neighborhood community is good at fuel conservation by everyone pedaling bicycles often, then when you finally go to purchase gasoline--it will be cheap-- no Jeavons' Paradox applies from outside customers scooping up the intentional reduced demand savings.
Okay, these proposals maybe workable or not--I have no idea, but I welcome better ideas and discussion on any methods to minimize gasline queue violence for the postPeak Era. Remember, each year it will get continually worse until we successfully transition to PHEVs, mass-transit, and bicycles.Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Every car owner them will be entitled to buy a certain amount of gallons of gas every month.
These will be taken of your gas-credit-account.
Credits not spend can be saved for next month. Or can be sold to others via the internet.
Extra credits can be hand out tho those that give special service to the public, like house doktors.
The second thing I would propose is to abolish payroll tax and
compensate the loss of government income by raising the tax on oil products.
I don't think that replacing the Social Security tax with a petroleum tax would have any worse problems than the Social Security tax. For one thing, once there is little oil, there will probably be much less income to tax, so the Social Security system will have problems, no matter what we do.
I personally am pretty much a doomer when it comes to the US monetary system - I am afraid it will fail fairly early on, once people figure out about peak oil, and lending institutions stop making twenty or thirty year loans, including mortgage loans. Even the present downturn in the housing industry, if it gets worse, could hit the monetary system pretty hard.
Another thing to keep in mind is that at any point in time, there will be only so much of quite a few things available - oil, food, fresh water. The current monetary system or some new monetary system can help divide these goods up, but it can't make any more than there is in total.
With all these issues, I think that people should not count on social security, medicare, medicaid, and other social programs. We may luck out and get a little from them, but if there is not enough to go around, social welfare progams are likely to be cut. Private pensions are not likely to fare a whole lot better - they depend on the stock and bond markets to fund them, and will have problems if there are many bankruptcies, or problems with the monetary system.
The creditsystem actually uses the free-market. As I propose, the credits can be sold, so the highest bidder can get the most gasoline. But at the same time, the poor people and the not-so-in-need-of gas people get money for their sold credits.
Why would this not work?
The scheme would require some kind of massive, centralised planning to be enforceable. Charging individuals differing amounts for fuel is the first error, in my opinion. Also assuming that anyone queueing up at a fuel station has 'insider information' - what if all stations in an area are out of petrol? Does that criminalise every person queuing?
It seems you're presenting this idea in the context of some kind of future American society. Instead of working to socialise fuel, I would hope that by 'then', we would have moved away from ICE passenger vehicles.
I also wonder if you're trying to solve the problem from an oil-producer's perspective, or government perspective - basically capitalistic or socialist approaches to the situation.
Checking fuel guages, VIN etc. would all require extra personnel - why not just get some armed guards/police to secure fuel stations, and allow them to sell available supplies for whatever price 'the market' reaches 'equillibrium' at?
Price spikes + extra security seems to solve the issue for me.
If American neighbourhoods devolve into armed confrontations, you only have your military-industrial complex to blame.
Or, simply ration fuel - weren't 'they' already doing that for truckers somewhere?
Just about every gasoline pump in the US has a credit card payment slot. Simply allocate, i. e. ration gasoline to a reasonable average user rate, and require all gasoline purchases to be made by credit card. No more gallons on the card, no gasoline.
If there is a problem with that concept peddle it as a homeland security measure, in that we can monitor the driving of terrorist. The folks in the asphalt paradise will lap that up 8-)).
I believe rationing by price is always more effective than rationing by quantity, and is much easier to administer to boot. But I see no reason why we couldn't easily setup a two-tier pricing system that would benefit relocalization forces in detritus use, limit the worst of Jeavons' Paradox, yet still respond overall to the international price of crude/barrel. Scanning the barcode VIN # is much better than the odd-even day rationing we had back in the earlier days and all the corruption it created.
For example, my little scooter combined with my lack of owning a cellphone puts me at a decided disadvantage in moving to the 'early bird' front of the gasoline queue. A pickup owner, with a cellphone for inside info, and extra gas cans in the back of his pickup can beat me to the forming queue every time. My attempts at Powerdown are working against me, even if I can afford the 4 gallons to fill my tank, if when I finally reach the gas pump--none is available. Yet, long-term, I want the price to go as high as possible, so others will be forced to eventually downscale in their vehicle use too.
Trust me: I had the gas siphoned out of my '69 GMC pickup in the early seventies--It was no fun waiting 24 hours till my even-day came up, then waiting in a hours-long queue in the blazing sun with a five gallon gas can to later heft a quarter mile home for the partial refilling of my tank.
Riding a scooter vs. driving my old pickup effectively triples my energy circle's radius; I can cover a much larger territory, if needed, for the same cost. But, by staying within the original radii or less; by trying to relocalize myself as much as possible, it creates big savings for me and the environment. With the two-tier system, I could buy 1/4 gallon outside my neighborhood, pay the distance penalty cost, yet know that I have adequate fuel so that when I get back to my neighborhood, that I can refill near my house at the going market rate.
Rationing by price as a function of your distance from home is how nature imposes it controls--I am merely proposing the same for us humans. A predator cannot seek prey further than it's abilities to bring the bacon home to feed Momma and the kids; it's energy level constrains it to patrolling a discrete territory-- as detritus energy becomes limited, I suggest we must all learn to travel in increasingly smaller circles.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
My speculative proposals allow the gas station owners to set the market price; to respond to supply & demand, but it will be a two-tiered 'roaming' system to help promote Westexas's HELP idea of conservation and relocalization, and reduce the postPeak tendency of detritovores driving all over the place seeking fuel when spot shortages become commonplace. Otherwise, unless you and me have access to the local inside info, we can always expect to be forced to the end of the line, no matter how much we are willing to pay per gallon. In short, a black market in fuel info is more valuable than a black market in fuel supply.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Bob, gas station owners make about five cents per gallon, sometimes a little more, sometimes a little less. They are at the mercy of their suppliers as far as the price is concerned.
After Katrina and Rita last year, the wholesale price in many of places jumped far more, per gallon, than their profit margins. As a result many station owners did not have enough money to buy a new load. Many had to bag off their pumps until they could raise enough money for a load or else wait for the wholesale price to drop.
My point is, with such tiny profit margins, how on earth can service station owners "set the market price"? They get whipsawed by the market price just as much as we consumers do. They have no control over the market price.
What am I missing Bob? Is there something in your proposals that give them more control?
Ron Patterson
Thxs for responding. I don't claim to be an expert on gas station operation: I did not know that operators can be so severely whipsawed by their suppliers. I thought that they had much greater control over pricing decisions [within legal bounds], potential profit margins, etc to manage their considerable investment in a gas station. Sounds like a lousy business to own, even more so postPeak, unless they can be legislated more business freedom from their suppliers. For the same type of gasoline, and all from the same pipeline, gasoline in my neighborhood can vary by seven cents or more per gallon-- so there must be some local pricing power at work.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I am not sure it cost that much to get in the Gas station business. In most cases around here (NJ)the stations are owned by the companies and are just leased by the people that run the operation.They are pretty much under the thumb of the companies.
I know a gas station owner who has had to constantly borrow more and more money to pay for the gas when it arrives. The oil companies pretty much want COD. Since he has more money borrowed and rates are up his interest cost are up. To make it worse more and more people are using credit cards to pay for the gas. The credit card company's charges are on the gross amount of the sale, which is higher cutting into the profit. I have read where some gas stations are spending $1000.00 a week and more in credit charge charges.
I was in various small business for 40 years. Many weeks I paid my employees on Friday and hoped I would do enough business over the weekend to cover the payroll. If there was a snowstorm I was in trouble. This is called (playing the float). It is even harder to do now that checks clear faster. When you are in this kind of situation, and many gas stations are, it is very hard to raise prices higher then the competition when you need the cash to pay the expenses.
Many things seem easy in theory but putting into practice is much different.
The hurricane evacuations, including the totally unncessary ones from some parts of Houston, would have been much safer and more orderly with some "gouging". A bit of "gouging" would also have saved much useless time and effort in Phoenix - and freed up gas spent driving in circles for useful purposes.
When the price is allowed to rise, the black market never forms in the first place and there's no need to worry about it. In addition, for example, the problem of people who refuse to plan ahead when a hurricane is coming disappears. They'd remember an $8/gallon last-minute price far better than any amount of governmental nagging and exhortation. Plus, they wouldn't top off their tanks along the way - and delay traffic in the process - unless they actually needed to. And they wouldn't re-wire their gas gauges to display whatever was needed. And they wouldn't be endangered by delays at long lines engendered by physical shortages or by elaborate bureaucratic qualification-checking procedures.
The trouble with complicated, dictatorial, bureaucratic approaches - price controls, rationing, martial law, etc - is that people devise workarounds, or it simply proves to be impossible to hire enough incorruptible bureaucrats (or fuel truck drivers) to enforce those approaches fairly. Either way, they provide people with powerful incentives to spend great gobs of time and money on evasion, at great expense to any effort at mitigation.
Politically, of course, there's a problem. Complicated oppressive bureaucratic approaches are an easy political sell because the attitude of the Great Shiftless Moron Mass is that no sacrifice is too great for somebody else to make when the chips are down. So the gas station people are supposed to stock up to the gunwales, and hang around until the wind reaches 120mph, the better to serve the blithely irresponsible who refused to prepare, and in order to punish them for being evil wicked gas station people, they're supposed to do all this for free. After all, it's great and glorious fun to bite the venal corporate hand that feeds us. And it's never politically correct to expect a voter to take responsibility for anything, such as filling the tank while the hurricane is still out at sea.
The political problem, though, is simply a known disadvantage of democracy - and likely one reason why the founders of the U.S.A. distrusted the short term whims of the people and didn't put direct (or more direct) democracy into the constitution. Their solution was representative democracy, but sometimes that doesn't work either, especially in the presence of electronic media, which short-circuit the originally-intended deliberative processes.
Tssk, tssk, tssk...
That is very politically UNcorrect, you seem to say :
With direct democracy the most irresponsible lead the show.
With representative democracy the most irresponsible STILL lead the show longterm PLUS the "representative" and "special interests" add their own gouging.
Do not despair of democracy, Iraq HAS democracy, only villains like Putin don't want democracy.
On an individual level we all need to start doing everything we can to reduce our use of fossil fuels (but TODers already know this). As the Israel/Lebanon war shows us, we are financing all sides of this type conflict by buying oil. We finance Iran, Israel for the war, outsource our jobs to China and India, and then get to finance the reconstruction! Surly a mad situation for the US.
Matthew
This strikes me as going at the wrong end of the problem. My inclination would be to increase taxes on energy and provide public transportation. Force the transition sooner rather than later.
cfm in Gray ME
Your quote: "My inclination would be to increase taxes on energy and provide public transportation. Force the transition sooner rather than later."
No disagreement from me, but it seems our politicians will not react until the fuel crisis causes much violence. I am hoping my speculative ideas [or better ideas by other TODers!] might mitigate this transition period as it takes years to build an effective and efficient network of mass-transit. What are our best ideas that can belatedly implemented by our leaders during this interrim period? Forcing rich and poor alike to shrink their wandering circles by imposing a draconian distance premium faster than relatively uniform supply and demand would impose seems to have some merit, IMO. Otherwise, a wealthy person attempting to buy gas in a distant neighborhood will be quantity limited by a shower of rocks from the locals. We are an extremely territorial animal at crunchtime.
Eventually, fuel will become so expensive and scarce that only the critical needs of the police, fire, and local military will be allowed to burn it, the remaining amount will be controlled by politically connected black marketeers carefully selling to the highest bidders, like DeBeers diamond control. Try to imagine a US that has burned all its native supply, and only one supertanker/ month reaches our shores.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?