In recent days we've seen oil prices top $135/barrel. The market has begun to show a negative response to such high prices. Major airlines announced major cutbacks in staff, flights and effectively hiked prices. The Ford Motor company (NYSE:F) has announced that its bid to become a profitable company again won't happen until 2009 and that it would change its 'focus'. According to its annual reports, Ford's Automotive division has not turned a profit since before 2002. General Motors (NYSE:GM) shares hit a 34-year low (that's without adjusting for inflation).Consumption data has yet to show an actual reduction in demand but with projected reductions associated with these types of announcements, it appears as though oil prices may come down at the expense of the U.S. economy. America needs to close the gap on its energy deficit. And soon.
Why hasn't the United States opted for Energy Independence earlier?
It pretty much comes down to cost. The financial cost of oil in the last century was so low that exploiting this allowed the economy to grow at a rate much higher than it would if more expensive renewable energy sources were used. For example, running a car on corn-based ethanol is much more expensive than running it on gasoline when you look at the overall costs. It also costs money to improve fuel efficiencies--few people will pay the extra cost of a hybrid because it simply doesn't pay out (this may change in the near future). American policymakers obviously didn't anticipate how quickly oil prices would rise otherwise they would have done more. Some did have this foresight, but for the rest of us, 'hindsight is 20/20' sums it up.
How do we measure energy cost?
There are several ways to do this. One very good indicator is Energy Returned on Energy Invested (EROI or EROEI). It's basically a ratio of the energy produced by a particular energy source to the energy required to produce it. Think of it as a rough indicator of how much it will cost to produce one gigajoule of energy (higher number=cheaper cost). For example, in order to get gasoline, an oil well needs to be drilled, produced and the products refined. All of this takes energy, but for the case of oil, the energy output is about thirty times the energy required to get it out of the ground and produce it. High-quality (high EROI) oil reservoirs like the supergiants are the first to be exploited. As these become depleted, oil prices go up, which leads to lower quality (lower EROI) reserves like the oil sands being exploited. The key to this is that for non-renewable energy sources, EROIs always trend downwards and energy prices trend up. The following table lists rough estimates of the EROI for different energy sources.
Why is hydrogen negative?Hydrogen is not a potential energy source. It is a potential energy carrier like electricity. It can potentially be used as a transport fuel but because of thermodynamic energy losses (nature's inefficiencies), some energy is lost in the process. I have heard some claims that cars can run on water. There are only two ways that a car will be able to 'operate' on water:
- The car has some sort of very advanced 'charger' device. You fill it with water and plug it in overnight and it splits water molecules into its elemental hydrogen and oxygen via electrolysis, and stores it in a tank for use by a fuel cell device while driving. The technology to do this isn't competitively priced yet and associated electricity costs are high.
- The laws of thermodynamics are wrong.
What about plant-based ethanol fuels?
It's currently debated whether or not corn-based ethanol can net more energy than it requires to produce it. Even if it does, it's unlikely to make America energy-independent given such a low rate of energy return. It took Brazil 30 years to get to the point of using subsidy-free cane-based ethanol, which has a much better rate of return than corn does. Technology improvements will help improve the EROI but this will take years to do. And as we've seen, the huge farming areas required to produce transportation-grade ethanol can also lead to food shortages.
So what is the solution?
Most experts agree the future of energy will need to include some sort of balance between 'all of the above'. Wind and solar are still developing technologies and they have constraints that won't allow them to meet more than 20-30% of America's energy needs. For example, if the sun isn't shining, you won't produce any electricity with solar--this may be okay in some instances, but not if you're using it to heat your home. The other problem is that energy sources that generate electricity can't be used as transport fuels yet because electric and hydrogen fuel cell vehicles are still 15+ years from being competitive on the market. The Chevy Volt looks promising, but they had to go back and redesign the lithium-ion battery (they had some issues with fires, explosions and such). It appears the only solution for Americans right now is to improve fuel economy standards and eliminate unnecessary driving.
What else can be done?
The policymakers need to look at the 'big picture'. If fossil fuels are conserved for applications in which there currently no feasible alternatives (primarily transportation), then the price of crude will come down. For example, heating oil and natural gas is used to heat many homes in America. This is the most efficient way of heating a home, but the simple alternative is electricity. The cheapest way to get electricity without the use of hydrocarbons is nuclear (in terms of EROI, hydroelectric is better but it is effectively maxed out). Nuclear is also the only proven technology that is 'market ready'. Nuclear may have some legitimate concerns, but for some reason it is no longer considered 'green' despite the fact that it has essentially zero emmissions. Plans are currently in the works to build a nuclear plant to power energy-intensive Canadian oil sands projects. The oil sands require steam for oil extraction, and hydrogen to upgrade heavy oil to lighter 'synthetic' crude, both of which are well suited for nuclear power plants. Currently, we are using natural gas for this. I think I'd rather save natural gas for the barbecue.
Next up: guest writer Laszlo Zsidai will give us some of his perspectives on nuclear from his experience in the industry.
Additional reading:
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1 comment:
Nice Article, comment and a question.
Purchasing a hybrid car at roughly $10,000 more than its equivalent gasoline car (thus going hybrid over an already pretty fuel efficient car) would take roughly 10 years to break even. That is assuming all else is equal. Which it is not (look into the cost of replacing the battery in a hybrid).
Where did you get the EROI table?
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