Can alternative fuels write an alternative ending to the End of Oil? While big oil debates the merits of improving extraction methods versus developing new energy sources, consumers may rejoice in choice while environmentalists lament that the new fuels are really fossil fuels in sheep’s clothing.
It is estimated that recoverable natural gas reserves in the U.S. are 83 percent higher than was estimated in 1990. Seizing on this domestic, low carbon windfall, ExxonMobil moved to secure its position in the natural gas play by buying producer XTO for $41 billion in stock. Clearly, Exxon is betting big on future prospects for natural gas, running contrary to the wisdom in Washington.
President Obama is using his administration’s political sway to advance the case for clean nuclear power. But the World Bank has presented powerful research showing that natural gas is the more economical source of electricity in the United States. And back and forth it goes in a search for alternatives to oil.
Remember BioFuels? Biodiesel never quite recovered from the disastrous PR it received during the food-for-fuel debate. Clumsy damage control weakened Biodiesel’s effort to expand its market share during oil’s huge price spike in 2008 and the European Union didn’t help. The E.U. initiated punitive tariffs on biodiesel imported from the U.S. causing American producers to lose roughly 95% of their sales. The tariff was a reaction to what Europeans viewed as an unfair price advantage; specifically, the Blenders’ Credit which gave U.S. biodiesel producers a $1 federal tax credit for every gallon of production. At the time, Europe consumed 92% of the world’s biodiesel production while in the U.S., biodiesel had yet to find a niche.
Biodiesel’s final blow fell at the end of 2009 with the cancellation of the Blenders’ Credit and closure of many production plants. The National Biodiesel Board reports that the industry now operates at 15 percent capacity. So, what does the future hold for alternative fuels?
There is little chance that the U.S. will reach its alternative fuel production goal of 36 billion gallons per year by 2022. In early 2009, the Department of Energy announced $600 million in federal funding for BioFuels, but this will require continued political favour, public opinion and lobbyist influence.
Back in crude’s corner, the high price of oil means oilsands extraction is still profitable in Alberta. $70 per barrel is the magic number that keeps the End of Oil at bay. While the end still looms, the power of procrastination is strong and why sink money into alternative fuels until you absolutely have to?
Bob van der Valk resides in Terry, Montana and is the Fuel Pricing Analyst with 4Refuel LLC in Lynwood, Washington. He can be contacted at 425.216.9702. Bob is also a regular contributer on askthefuelexpert.com, a blog site packed with solid advice on managing fuel and reducing costs.