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Gimmick Car Fuels: Biofuels And Hydrogen Are Back

Commodities / Renewable Energy Oct 27, 2011 - 08:30 AM GMT

By: Andrew_McKillop


Best Financial Markets Analysis ArticleNot for long, of course.
Biofuels as a gimmick alternative to oil-fuelled cars wax and wane with oil prices. At times of specially high stress, that is high or fast-rising oil prices even hydrogen cars will be dredged out of the timewarp closet, to join today's real favourite - electric cars. Gimmick fuels and the cars which go with them are totally linked to the vagaries of oil prices because they all need oil to be manufactured: their media exposure soars when oil prices are high, then wanes with oil price lows, but everybody (sane) knows the simple fact: these are time wasting and money wasting gimmicks, to which we can add - with H2 Cars - they are outright lethal hydrogen bombs on wheels making Osama bin Laden totally surplus !

Anybody who cares to check oil markets over the past 10-15 days will see how well the relentless bearish fundamentals have been brushed aside by "unidentified players" to enable a riot of price growth. It is therefore no surprise that the BBC, dredging in its archives from around the year 2001, added another "1" to the date line and published this on 25 October 2011:

"The UK's first commercial hydrogen filling station has opened in Swindon. The opening of the UK's first public refuelling station for hydrogen vehicles in Swindon is part of efforts to create a "hydrogen highway" along the M4 motorway. (This is) also seen as an important step in a UK-wide scheme to make hydrogen vehicles a viable alternative to petrol-driven cars".

With well-chosen soundbytes from a mad professor explaining that hydrogen is Zero Emission and isn’t produced by Saudi Arabia or Russia, the BBC announced that H2 cars are back and confided that electric cars and hydrogen fuel cell cars do not necessarily compete with each other, any more than the diesel cars competes with gasoline fuelled cars. Yes, we can have both, and why not biofuels, also ?

Biofuels are a bad idea. This inconvenient truth is countered by using calculated amnesia, by mainstream media like BBC which supplies us the right news, and our political masters who tell us what is right (or far-right) to think. They apply the same amnesia to forget that electric cars didn't work far in the past, H2 cars didn’tt work in the recent past, and cranking up the biofuels bandwagon is only a nice use of journalists' paid time when oil prices rise: biofuels didn't work the last time oil prices rose.

Sugar and maize alcohol car fuels were well known in wartime, and rapidly abandoned after.  Brazilian sugarcane ethanol fuel was a major hope for several years after the 1973 Oil Shock, but was then trimmed back almost to nothing, in a strict tradeoff of sugar exported as sugar, or used to make fuel to substitute imported oil. In any case Brazil is now a fast growing oil producer.

Producing biofuels (on a global basis over 65% produced by Brazil and the USA) surely gulps in huge amounts of food crops, and surely drives up food prices without saving much petroleum: US corn ethanol fuel production took nearly 40% of America's total maize crop in 2010. If approximately two-to-three times the present total agricultural surface area of the US was planted with fuel maize and fuel soy, this could substitute the USA's entire present gasoline demand with fuel alcohol, and diesel fuel demand with soybean oil biodiesel. However, Americans may prefer to eat - people can be strange when asked to choose between not eating, and producing high priced oil saving fuels.

Exactly like H2 cars and electric cars, the economic failure of biofuels is the reason they only shine when oil prices are moving up smartly. Apart from technical shortcomings like the hygroscopic water-absorbing nature of pure alcohol and its need for totally separate fuel transport, storage and distribution equipment, the basic problem with biofuels is they cost too much. Why use oil to produce fuels from food crops, for saving oil, and then whine about food prices rising ?

At this moment however, another brief return of biofuels is on programme and can be expected. Fear of oil prices attaining, that is being nursed, talked and shoved up to reach some magic high number, like Goldman Sachs' nice price of  $130 a barrel, is a great moment to bang the biofuels drum  - and  who cares if the real price paid at the filling station, for European motorists today, is already around $350 a barrel ! Not only big government and climate crazies like biofuels - but Big Oil also.

The last or most recent Oil Price Fear Cycle can be dated as starting in the early 2000s, signalled by the arrival of H2 cars. The Bush administration's various Oil War initiatives can be considered either a deliberate failure, or simply a failure, signalled by oil prices reaching an extreme peak in 2008 at around $147 a barrel, and then fading almost to nothing under the weight of the sovereign debt-and-deficit crisis. Why worry about the oil bill when you owe trillions ?

Debt growth in star player countries, like Greece and what we can call Super Greece (USA), can amply pay for any imaginable oil import costs. US debt growth, for example, is currently running at around $1.5 trillion-a-year. The oil bill trails far behind: according to the US EIA, the net costs of oil imports after refined product exports and re-exports of crude, and oil trade gains was well below $200 billion in 2010, not the preferred "headline number" used by oil hysteria players, of $350 billion or $400 billion.

US debt growth each year covers at least 8 years of US net oil import costs - if the average barrel cost is  around $100. Debt growth beats high priced oil. This is the real world. Greek debt is growing at an even more impressive rate relative to Greek oil import costs. As long as oil exporter countries accept the same printed confetti money that is used to pay down debt and bail out banks, we can easily say there is no crisis at all, despite Goldman Sachs ex cathedra pronouncements on oil price outlooks.

Biofuels are a nice idea to Nice People, of course. They tell us that if the world is running out of energy and conservation is necessary, and anthropogenic global warming from burning oil (but oddly not from burning biofuels) is probably a life-or-death critical menace for the future, any type of "new energy" is cool, even if it drives up food prices. Polar bears need to eat, as Al Gore says.

Which is sure and certain. Biofuels production will not harm polar bear food supplies, will probably not reduce trade deficits on oil imports very much, but will affect human food prices. Biofuels do push up food prices. This is good for agribusiness and for raising world hunger, to be sure. Pushing up food prices,  in some cases like the Arab countries, can help trigger Regime Change, we have noted. Why exactly our corporate and political elites would want that, and want food shortage is hard to fathom - Hillary Clinton may have insights on this subject, for a coming podcast. Possibly our great rulers think higher priced food make middle class voters easier to control, manipulate and channel, at least until they lose their job and get violent. But the bottom line is simple: cranking up biofuels production would soon run out of irrigation water supply long before reaching its goal of drowning the world in alcohol.

For a long time now, ethanol fuel produced from cellulosic non-food feedstocks is the official great hope for "making biofuels real", but the production process is slow, expensive and difficult to scale up - until and unless some miraculous breakthrough is made. And miracles take time.

With little or no surprise, mainstream government policy in the oil-based consumer democracies now also focuses throwing R&D money at improving batteries for electric cars, while also throwing it at cellulosic ethanol. The possible or probable implosion of the electric car bubble is therefore now dragging the big spenders back to their earlier fads and foibles. In the US, Energy secretary Steve Chu's pet idea is to achieve a significant breakthrough allowing the production of relatively cheap biofuels at large scale from genetically altered plants or microorganisms, while also "enabling" electric cars.

This way, increasingly massive spending on EV batteries can be joined by renewed massive spending on biofuels. This double spend - double waste strategy can be considered ideal for the Double Dip economics practised in the US, Europe and Japan, paving the way forward with ever growing debt.

Needless to say we cannot expect any real world breakthroughs. In reality, in the downtrodden real economy, the price of energy is being kept at extreme high even during recession, with the official explanation being: "So what replaces oil? More oil of course!". This being the case, oil prices must rise and the taxpaying public will be happy to spend more on big ticket R&D programs to invent the best ever EV batteries and the most efficient cellulosic biofuels. And for real time wasters and money wasters, we can also have H2 Cars !  All we need is time - and your money.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2011 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


27 Oct 11, 17:07
h2 technology

In the true tradition of cranks, I read that hydrogen technology was getting exciting.

Storing it in small beads which makes it pourable/transportable and using advanced lasers for very

precise ignition.

Sure, it's R&D, experimental, but isn't that how we achieve progress? Do you really think early computers were cost effective?

I'm not sure why you don't think that Oil supply is an issue.

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