The discovery of Coal Oil

Oil is now at US$140 per barrel and steady. THe pressure is on to find viable sources of alternative energy. Recently, scientists have announced what may be a new end-run around the oil problem: producing diesel fuel from coal, natural gas, and organic material. Researchers say they have developed a way to shuffle the carbon atoms derived from cheap fuel sources like coal to form more desirable combinations, such as ethane gas and diesel fuel. The synthetic diesel "is much cleaner burning than conventional diesel, even cleaner burning than gasoline," said Rutgers University chemist Alan Goldman.

Nazi Germany

The technology might one day wring more diesel fuel and ethane gas from hydrocarbon byproducts produced by oil refineries. But the new chemistry's greatest potential may be as a follow-up to an 80-year-old technology known as Fischer Trospch (FT) synthesis. Developed by German scientists Franz Fischer and Hans Tropsch in the 1920s, FT synthesis converts carbon from coal, natural gas, or wood into hydrocarbons, including propane-like gas and diesel fuel. Nazi Germany used the technique during World War II to manufacture synthetic fuel from coal, churning out 124,000 barrels a day by 1944.

Today oil-poor South Africa uses FT synthesis to distill most of the nation's diesel from its extensive coal deposits. One downside to the process, however, is the output of so-called mid-size hydrocarbons—molecules with 4 to 8 carbon atoms—which can't be used as fuel. Hydrocarbons consist of hydrogen and carbon atoms. The number of carbon atoms (anywhere from 1 to, say, 99) determines whether a particular hydrocarbon is a gas, liquid, or solid and whether it's the proper weight to burn as fuel. The breakthrough could deliver U.S. energy independence.

Key to Energy Independence?

In the U.S. the governors of Pennsylvania and Montana, both coal-rich states, have touted FT technology as a future source of homegrown diesel fuel. Last September, Pennsylvania governor Edward Rendell said his state's government would buy fuel from a planned FT plant in the state designed to convert waste coal from mining operations into low-sulfur diesel.

"When oil was $20 a barrel, it really wasn't considered economical," Goldman, the Rutgers University chemist, said. But today's high oil prices are now tipping the scales in favor of alternative fuels.

Environmental Impact

One thorny issue is the net environmental impact of coal-based synthetic fuels. According to the U.S. Environmental Protection Agency, FT fuels are cleaner burning than petroleum-derived products, producing fewer particulates and less dangerous nitrogen oxide.

But as FT fuels burn, they also release carbon dioxide and other greenhouse gases. According to the U.S. Department of Energy's National Renewable Energy Laboratory, coal-based synthetic fuels may produce twice the greenhouse gas emissions of petroleum-based fuels. Experts say one alternative may be the use of carbon collectors derived from animal waste, plants, and other organic material, which trap carbon from the atmosphere.

Key word:

coal oil

Update on Latest Oil Prices

Crude oil futures fell back from their early-July $145/bbl peak, but remain high, supported by a meagre 2Q08 stockbuild, tight distillate markets and ongoing geopolitical risks. Refiners are paying record premiums for distillate-rich crudes in an effort to bolster yields; however, weak gasoline and fuel oil cracks are keeping refining margins low.

Non-OPEC supply is seen rising 640 kb/d to 50.6 mb/d in 2009, following a late-year increase in 2008, with Asia, the Caspian, Brazil, Canada and the US adding to supplies. In addition, NGLs from Saudi Arabia, Qatar, the UAE, Nigeria and Iran underpin the 810 kb/d expansion in OPEC gas liquids in 2009.

OPEC crude supply increased by 350 kb/d in June to 32.4 mb/d, as Saudi Arabian supply rose to 9.45 mb/d and exports from floating storage lifted Iranian supply to 3.8 mb/d. Although higher supply lowers effective OPEC spare capacity to 1.7 mb/d, increases from Saudi Arabia, Angola, Iraq and Nigeria lift overall capacity by around 1.0 mb/d by end-2008.

Global oil product demand is expected to grow by 1.1% or 860 kb/d to 87.7 mb/d in 2009, on a par with 890 kb/d growth in 2008. High oil prices contribute to a contraction in OECD oil product demand, offset by robust growth in developing economies. Strong non-OECD consumption also offsets downward revisions elsewhere, lifting 2008 demand by a modest 80 kb/d.

A counter-seasonal US crude stock draw restricted the May OECD total oil stockbuild to 23.9 mb, only half its usual gain. Preliminary June data suggest a total 2Q08 OECD stock change of around +100 kb/d, well below the five-year average 2Q build of 900 kb/d.

3Q08 global refinery throughput is revised down by 0.4 mb/d to 75.3 mb/d on weak OECD demand and poor margins. The addition of 2 mb/d of crude distillation capacity and significant investment in upgrading units elsewhere should keep gasoline markets well supplied and slightly ease middle distillate tightness during early 2009.

Tips for Surviving High Oil Prices

Here are some tips for surviving the high oil price:

1. Catch public transport

If you have any public transport facilities in your area, use them! They are a far more efficient way of using energy than a private car. In most large cities, the cost of using public transport is 10 times less than the cost of owning and operating a private car. Its not only good for the environment, its also good for your back pocket!

2. Car pool

If you still insist on using a private car, make sure you share the costs with someone else. Ask some work mates or colleges about share rides or other members of your household. Not operating your own car, you will save a packet not only on petrol, but also on insurance and registration. For social events, see if other people in your area can offer you lifts.

3. Hybrid Vehicles

There are now a large number of vehicles on the market which consume only a fraction of the fuel that normal cars consume. The Toyota Prius, Honda Civic Hybrid and some Lexus models only take in a tiny amount of petrol. They can travel the same distance as regular cars and take only half the petrol. The costs of purchasing a hybrid vehicle are usually only marginally higher than a normal vehicle.

4. Smaller Cars

In the 70s there was an oil crisis as well, although it was not seen as being this severe. That is when small Japanese cars became popular. The fact is that big heavy SUVs and HUMMERS may be fashionable but they guzzle gas at an unbelievable rate.

5. Convert Car Fuel

Many forms of public transport run off non oil derived fuels such as LPG or natural gas. Some governments around the world offer incentives to consumers to convert their cars to these fuels.

6. Walk

Does dropping the kids off at school or going to the shops really require a car trip? Of you can walk to the local shops or the kids can walk to school it might be a good way to help cut down on the running costs of your car.

Peak oil: petrol to reach $8 a litre

PETROL could hit $8 a litre within a decade as oil production begins to dwindle and demand continues to soar, a CSIRO study to be released today says.

The study, Fuel For Thought, warns this would add up to $220 a week to the cost of running a medium-sized passenger vehicle by 2018, resulting in severe social and economic consequences.

The only way to ward off such a scenario was for "fuel and vehicle manufacturers to quickly ramp up alternative [fuel] supplies and technologies".

The study was conducted by the Future Fuels Forum, a CSIRO-led conglomerate of state governments, manufacturers, and energy, industry and motoring groups.

It modelled the medium-term impact on transport fuels caused by the oil crisis and the effects of subjecting petrol and other fuels to an emissions trading scheme. Both problems would have to be managed simultaneously, it says.

It finds the oil shock will have a far greater impact on petrol prices than an emissions trading scheme. The CSIRO's John Wright said that within the next 10 years Australia would have to shift towards diesel and gas and hybrid electric vehicles to respond to oil prices and climate change.

Beyond 2020, Australia should aim to be relying more on non-conventional fuels such as hydrogen, synthetic fuels produced from coal and gas using carbon capture and storage, and biofuels that do not reduce food production by requiring valuable arable land to produce.

"Securing access to affordable and sustainable fuel underpins Australia's economy and way of life, and as a nation with relatively high vehicle use we are vulnerable to the economic, environmental and social impacts of rising oil prices and rising temperatures," he said.

The report bases its worst case scenarios on the assumption the world will reach peak oil within the next five years. Peak oil is when oil production hits its maximum annual rate, then starts to decline and is no longer able to match demand.

If the decline in production was abrupt, petrol would hit $8 a litre by 2018, it says.

It also warns technology alone would not be enough to meet the fuel supply gap and "reduced travel across freight and passenger transport will be necessary". If oil supply declined slowly, travel would be reduced by 5 per cent.

"However, if reduction in oil supply is rapid and alternative fuel vehicles are slow to become available, then passenger and freight travel may be reduced by up to 40 per cent," it says.

This would have "significant social and economic impacts" and reduce the nation's economy by at least 3 per cent. "Transport-intensive activities such as tourism and mining are expected to be the most vulnerable," it says.

Labor is set to introduce an emissions trading scheme in 2010, which the report estimates will cost between 10 cents and 25 cents extra for a litre of petrol.

This is assuming a carbon price ranging from $40 to $100 a tonne. However, Labor is likely to start a scheme with a price less than that, meaning the impact on a litre of petrol will be less than 10 cents and Labor is looking at ways to offset any net increase in the petrol price.

Oil price

In terms of 2007 inflation adjusted dollars, the price of oil peaked on 30 June 2008 at over $143 a barrel. Before this period, the maximum inflation adjusted price was the equivalent of $95-100, in 1980.[164] Crude oil prices in the last several years have steadily risen from about $25 a barrel in August of 2003 to over $130 a barrel in May of 2008, with the most significant increases happening within the last year. These prices are well above those which caused the the 1973 and 1979 energy crises. This has contributed to fears of an economic recession similar to that of the early 1980s.[165] One important indicator which supported the possibility that the price of oil had begun to have an effect on economies was that in the United States, gasoline consumption dropped by .5% in the first two months of 2008,[166] compared to a drop of .4% total in 2007.[167]

However some claim the decline in the US dollar against other significant currencies from 2007 to 2008 is a significant part of oil's price increases from $66 to $130.[168]. The dollar lost approximately 14% of its value against the Euro from May 2007 to May 2008, and the price of oil rose 96% in the same time period.

Helping to fuel these price increases were reports that petroleum production is at[4][5][6][7] or near full capacity.[101][8][169] In June 2005, OPEC admitted that they would 'struggle' to pump enough oil to meet pricing pressures for the fourth quarter of that year.[170]

Demand pressures on oil have been strong. Global consumption of oil rose from 30 billion barrels (4.8×109 m3) in 2004 to 31 billion in 2005. These consumption rates are far above new discoveries for the period, which had fallen to only eight billion barrels of new oil reserves in new accumulations in 2004.[171] In 2005, consumption was within 2 million barrels per day (320×103 m3/d) of production, and at any one time there are about 54 days of stock in the OECD system plus 37 days in emergency stockpiles.

Besides supply and demand pressures, at times security related factors may have contributed to increases in prices,[172] including the "War on Terror," missile launches in North Korea,[173] the Crisis between Israel and Lebanon,[174] nuclear brinkmanship between the US and Iran,[175] and reports from the U.S. Department of Energy and others showing a decline in petroleum reserves,[176]

Another factor in oil price is the cost of extracting crude. As the extraction of oil has become more difficult, oil's historically high ratio of Energy Returned on Energy Invested has seen a significant decline. The increased price of oil makes non-conventional sources of oil retrieval more attractive. For example, the so-called "tar sands" are actually a reserve of bitumen, a heavier, lower value oil compared to conventional crude. It only became attractive to production companies when oil prices exceeded about $25/bbl, high enough to cover the costs of production and upgrading to synthetic crude.

[edit] Effects of rising oil prices

Main article: Effects of oil price

World consumption of primary energy by energy type in terawatts (TW), 1965-2005.
World consumption of primary energy by energy type in terawatts (TW), 1965-2005.[177]

In the past, the price of oil has led to economic recessions, such as the 1973 and 1979 energy crises. The effect the price of oil has on an economy is known as a price shock. In many European countries, which have high taxes on fuels, such price shocks could potentially be mitigated somewhat by temporarily or permanently suspending the taxes as fuel costs rise.[178] This method of softening price shocks is less in countries with much lower gas taxes, such as the United States.

Some economists predict that a substitution effect will spur demand for alternate energy sources, such as coal or liquefied natural gas. This substitution can only be temporary, as coal and natural gas are finite resources as well.

Prior to the run-up in fuel prices, many motorists opted for larger, less fuel-efficient sport utility vehicles and full-sized pickups in the United States, Canada and other countries. This trend has been reversing due to sustained high prices of fuel. The September 2005 sales data for all vehicle vendors indicated SUV sales dropped while small cars sales increased. Hybrid and diesel vehicles are also gaining in popularity.[179]

[edit] Historical understanding of world oil supply limits

Although the earth's finite oil supply means that peak oil is inevitable, technological innovations in finding and drilling for oil have at times changed the understanding of the total oil supply on Earth. As scientific understanding of petroleum geology has increased, so has our understanding of the earth's total recoverable reserves. Since 1965, major oil surveys have averaged a 95% confidence Estimated Ultimate Retrieval (P95 EUR) of a little under 2,000 billion barrels (320×109 m3), though some estimates have been as low as 1,500 billion barrels (240×109 m3), and as high as 2,400 billion barrels (380×109 m3).[6][180]

The EUR reported by the 2000 USGS survey of 2,300 billion barrels (370×109 m3) has been criticized for assuming a discovery trend over the next 20 years which would completely and dramatically reverse the observed trend of the past 40 years. Their 95% confidence EUR of 2,300 billion barrels (370×109 m3) assumed that discovery levels would stay steady, despite the fact that discovery levels have been falling steadily since the 1960s. That trend of falling discoveries has continued in the 7 years since the USGS made their assumption.[6]

[edit] Criticisms

Some do not agree with Peak Oil, at least as it has been presented by Matthew Simmons. The president of Royal Dutch Shell's US operations John Hofmeister, while agreeing that conventional oil production will soon start to decline, has criticized Simmons's analysis for being "overly focused on a single country: Saudi Arabia, the world's largest exporter and OPEC swing producer." He also points to the large reserves at the "US Outer Continental Shelf, which holds an estimated 100 billion barrels (16×109 m3) of oil and natural gas. As things stand, however, only 15 percent of those reserves are currently exploitable, a good part of that off the coasts of Louisiana, Alabama, Mississippi and Texas. Simmons is also off the mark, Hofmeister contends, because he excludes unconventional sources of oil such as the oil sands of Canada, where Shell is already active. The Canadian oil sands — a natural combination of sand, water and oil found largely in Alberta — is believed to contain one trillion barrels of oil. Another trillion barrels are also said to be trapped in rocks in Colorado, Utah and Wyoming,[181] but are in the form of oil shale. These particular reserves present major environmental, social, and economic obstacles to recovery.[182][183] Hofmeister also claims that if oil companies were allowed to drill more in the United States enough to produce another 2 million barrels per day (320×103 m3/d), oil and gas prices would not be as high as they are in the later part of the 2000 to 2010 decade. He thinks that high energy prices are causing social unrest similar to levels surrounding the Rodney King riots.[184]

Key Words:

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A fundamental change is coming sooner than you might think

SINCE the industrial revolution 200 years ago, mankind has depended on fossil fuel. The notion that this might change is hard to contemplate. Greens may hector. Consciences may nag. The central heating's thermostat may turn down a notch or two. A less thirsty car may sit in the drive. But actually stop using the stuff? Impossible to imagine: surely there isn't a serious alternative?

Such a failure of imagination has been at the heart of the debate about climate change. The green message—use less energy—is not going to solve the problem unless economic growth stops at the same time. If it does not (and it won't), any efficiency saving will soon be eaten up by higher consumption per head. Even the hair-shirt option, then, will bring only short-term relief. And when a dire prophecy from environmentalism's jeremiad looks as if it is coming true, as the price of petroleum rises through the roof and the idea that oil might run out is no longer whispered in corners but openly discussed, there is a temptation to believe that the end of the world is, indeed, nigh.

Not everyone, however, is so pessimistic. For, in the imaginations of a coterie of physicists, biologists and engineers, an alternative world is taking shape. As the special report in this issue describes, plans for the end of the fossil-fuel economy are now being laid and they do not involve much self-flagellation. Instead of bullying and scaring people, the prophets of energy technology are attempting to seduce them. They promise a world where, at one level, things will have changed beyond recognition, but at another will have stayed comfortably the same, and may even have got better.
This time it's serious

Alternative energy sounds like a cop-out. Windmills and solar cells hardly seem like ways of producing enough electricity to power a busy, self-interested world, as furnaces and steam-turbines now do. Battery-powered cars, meanwhile, are slightly comic: more like milk-floats than Maseratis. But the proponents of the new alternatives are serious. Though many are interested in environmental benefits, their main motive is money. They are investing their cash in ideas that they think will make them large amounts more. And for the alternatives to do that, they need to be both as cheap as (or cheaper than) and as easy to use as (or easier than) what they are replacing.

For oil replacements, cheap suddenly looks less of a problem. The biofuels or batteries that will power cars in the alternative future should beat petrol at today's prices. Of course, today's prices are not tomorrow's. The price of oil may fall; but so will the price of biofuels, as innovation improves crops, manufacturing processes and fuels.

Electrical energy, meanwhile, will remain cheaper than petrol energy in almost any foreseeable future, and tomorrow's electric cars will be as easy to fill with juice from a socket as today's are with petrol from a pump. Unlike cars powered by hydrogen fuel cells, of the sort launched by Honda this week, battery cars do not need new pipes to deliver their energy. The existing grid, tweaked and smartened to make better use of its power stations, should be infrastructure enough. What matters is the nature of those power stations.
The price is right

They, too, are more and more likely to be alternative. Wind power is taking on natural gas, which has risen in price in sympathy with oil. Wind is closing in on the price of coal, as well. Solar energy is a few years behind, but the most modern systems already promise wind-like prices. Indeed, both industries are so successful that manufacturers cannot keep up, and supply bottlenecks are forcing prices higher than they otherwise would be. It would help if coal—the cheapest fuel for making electricity—were taxed to pay for the climate-changing effects of the carbon dioxide produced when it burns, but even without such a tax, some ambitious entrepreneurs are already talking of alternatives that are cheaper than coal.

Older, more cynical hands may find this disturbingly familiar. The last time such alternatives were widely discussed was during the early 1970s. Then, too, a spike in the price of oil coincided with a fear that natural limits to supply were close. The newspapers were full of articles on solar power, fusion and converting the economy to run on fuel cells and hydrogen.

Of course, there was no geological shortage of oil, just a politically manipulated one. Nor is there a geological shortage this time round. But that does not matter, for there are two differences between then and now. The first is that this price rise is driven by demand. More energy is needed all round. That gives alternatives a real opening. The second is that 35 years have winnowed the technological wheat from the chaff. Few believe in fusion now, though uranium-powered fission reactors may be coming back into fashion. And, despite Honda's launch, the idea of a hydrogen economy is also fading fast. Thirty-five years of improvements have, however, made wind, solar power and high-tech batteries attractive.

As these alternatives start to roll out in earnest, their rise, optimists hope, will become inexorable. Economies of scale will develop and armies of engineers will tweak them to make them better and cheaper still. Some, indeed, think alternative energy will be the basis of a boom bigger than information technology.

Whether that boom will happen quickly enough to stop the concentration of carbon dioxide in the atmosphere reaching dangerous levels is moot. But without alternative energy sources such a rise is certain. The best thing that rich-world governments can do is to encourage the alternatives by taxing carbon (even knowing that places like China and India will not) and removing subsidies that favour fossil fuels. Competition should do the rest—for the fledgling firms of the alternative-energy industry are in competition with each other as much as they are with the incumbent fossil-fuel companies. Let a hundred flowers bloom. When they have, China, too, may find some it likes the look of. Therein lies the best hope for the energy business, and the planet.