API Conference Call on Gas Prices

On May 16th, I participated in another conference call with the American Petroleum Institute. The subject was gas prices. Since I am probably not the best person to challenge the API on gas prices, I put out an invitation at The Oil Drum for others to join the call. (The reason I am not the best person to challenge them is (1) I understand why gas prices are rising; (2) I work in the industry; and (3) I think prices should be even higher to spur conservation efforts). So, joining me on the call were 2 of my colleagues from TOD - Alan Drake and Chris Miller (Dryki). I will pull out some excerpts of our questions, but you can read the entire transcript here. I am told that they had some recording difficulties, so there will be no audio posted.

Here was the entire roll call, from the transcript:

Bloggers on the call included Robert Rapier of The Oil Drum and R-Squared Energy Blog, Chris Miller of The Oil Drum and MaineCommonwealth, Alan Drake of The Oil Drum, Kristen Hays of The Houston Chronicle’s NewsWatch: Energy, Geoffrey Styles of Energy Outlook, Jerry Taylor of Cato-at-Liberty, Byron King of The Daily Reckoning, and David Marino of Platts’ The Barrel.

And here is the list of participants from the API:

WELCOME: Red Cavaney, CEO, API

HOST: Jane Van Ryan, API

Rayola Dougher, Manager, Energy Markets, API
Ron Planting, Manager of Statistics, API
Bob Greco, Director, Downstream
Cindy Gordon, Manager, Refining Issues, API

I once again had a handful of questions that were submitted by readers, but since I asked the most questions on the last API call, I decided to let others get their turn before I jumped in there.

First off, some excerpts from Red Cavaney's brief opening talk, followed by some Q&A from those of us who represented TOD. (Note: There are some errors in the transcript which I corrected when I noticed them. For instance, at times questions were attributed to the incorrect person).

RED CAVANEY: A couple points I would make in terms of a lot of the claims that are out there and a lot of the activity: first of all, contrary to the claims that a number of critics are making, there is not any overwhelming evidence to indicate that refiners are withholding supplies or manipulating the market. In fact, if you look at the data, refiners are producing record amounts of fuel and they’re doing that in response to record demand. Refiners have, in fact, been expanding capacity for some time. If you look at the last decade, we’ve added the equivalent of 10 new refineries and if you look at the announced capacity expansions which are to come on line between now and 2011, you’re talking about an additional eight more refineries.

Since about 1976, all of our additions here domestically have been additions to existing capacity rather than green-field efforts and there’s a reason for that. First of all, they are much less costly on a per barrel basis. Number two, they can be brought in at least half the time or even more quickly as a result of the fact that they’re in environments and in areas where people are familiar with them and they understand the value that’s brought to the community and the like. And then, finally, when you take a look at all this, it’s the smart thing to do to be able to keep abreast of where the demand is, which is what we have been doing over the last decade. And the amount that’s been announced, if it all comes through, will, in fact, keep us slightly ahead of demand there as well.

What we are concerned about is the signal we’re receiving at the federal level. First of all, to make the kind of investments that are necessary to continue to invest in refineries and to continue to increase capacity, people need to see signals that indicate there’s a predictable policy environment going forward.

I have asked for a list of the announced capacity expansions.

Byron King got in the first question - one on imports - and then Chris Miller got in the first question from the TOD group:

CHRIS MILLER: This is Chris Miller. I wanted to follow up on Red’s statement about consistent policy. It seems to me that the gasoline producers are running flat out at a very high capacity and demand is going up very high as well. If, in fact, we are in a very tight market and there’s not much flexibility – Matt Simmons had that searing summer of gasoline shortage outage article in EV World – what would a consistent policy look like if, in fact, we’re banging around at very high levels of what we can do?

MR. CAVANEY: Well, the first thing is that what folks are looking for is an idea that gasoline and ultra-low sulfur diesel, in particular, are not going to be disadvantaged in the policy climate going forward over the next 10 to 15 years. If you’re going to make these capacity additions, they’re going to want to know that those additions are going to be able to realize the return on the investment that they make.

It’s no secret the number of announcements that have been made about the number of bio-refineries – not only currently producing, but that are coming on over the course of the next two years – and the amount of activity that’s in Congress focused on the second generation of bio-refineries, cellulosic.

So if you add these which contribute to the volume, it’s ultimately going into the gasoline, the tanks, for light-duty trucks and cars, to the mixed signals about…refining capacity, [saying] no we’re going to penalize you because you’re making too much money. Those things just don’t create [a] healthy environment and we think it’s a much better policy that…they be consistent and [end] up not necessarily having to do more in the tax code or otherwise, but just what we affirm what we heard so much about two years ago that efficient refining capacity and related infrastructure is important to serving the consumer and they just reaffirmed it.

But we don’t see much of that at all right now, particularly at least, in the House debate. We’re hopeful that when the Senate considers that, we’ve heard some early comments that there may be a little bit more of the discussion about the value of consistency on our policy here.

MR. MILLER: I guess the – where I’m coming from is the issue of if we start getting shortages, I just don’t know how the policymakers are going to stay consistent.

MR. CAVANEY: Well, the first thing is if you have tight supplies and, as I mentioned earlier, we have product available that we can get in here quickly without having a lot of constraints on it, that’s going to keep products flowing to the consumer and hopefully take a little bit of the pressure off from cries that, I’m not going to be able to get the product when I want it, where I want it, and things like that. So that, to us, is the most important thing here in the intermediate term.

Now, the other point is there are a number of refineries that are going to be coming back on line here. They’re down for some of the normal schedule turnaround; others more extended periods of time because of the tightness in both the labor and in the engineering stream of product, and others of them are just refineries that have been running hard and had, whether it was a fire or some other incident that needs to be addressed.

So we do have refining capacity sort of waiting in the wings and what we’re hopeful – when we look at crude, it looks like the crude we’ve got in hand, Ron, is in fairly good order, I think about 11 percent above –

MR. PLANTING: Eleven percent.

MR. CAVANEY: Eleven percent above, so we’re set when those will come back on and that’s what we’re keeping our fingers crossed and our backstop is additional product from abroad.

There was quite a bit of discussion on refinery maintenance issues, and then I jumped in with an observation I had recently made that was as of yet unexplained to me:

MR. RAPIER: Hi, this is Robert Rapier. I’ll let you guys know that I’ve got a handful of questions here again, so if there’s a lull, call on me. I’ll try not to hog the time. I’ll be quiet to let everybody else get their questions in, but if you have a lull, call on me and I’ve got a question.

Prior to Hurricane Katrina, we regularly input over 16 million barrels a day into our refineries. I’ve got the EIA numbers in front of me. Since then, we’ve only hit that 16 million barrel mark twice, and our utilization post-Katrina has been down quite a bit. It seems to me there’s some lingering issue there that I can’t identify, but it seems like there is a Katrina-related problem there that’s kept us from getting back up to where we were. Any ideas, any comments on that?

MR. PLANTING: This is Ron Planting. One thing that may be part of that is that we’ve had slower growth in petroleum demand in the U.S. In 2006, the total petroleum demand was about 20.6 million barrels a day, which was actually down from 2005. Also, I believe it took a while for some of those refineries to get back up and running after Katrina, even into 2006 there were still some that were trying to get themselves together.

MS. DOUGHER: Postponed maintenance was done as a consequence, we think, of Hurricanes Rita and Katrina, so part of that – (crosstalk)

MR. RAPIER: Right, and I know that because I had some experience with that, that maintenance was postponed [to meet immediate demand caused by Katrina outages]. I’m just looking at late summer 2006. We still weren’t hitting the numbers we were in 2005. This year we’re down from where we were last year.

MS. VAN RYAN: We may have to take a harder look at some of those numbers, Robert, and perhaps we could get back to you offline. Would that be all right?

MR. RAPIER: Yes. Specifically, let me give you a date. On July 1, 2005 the input was 16.5 million barrels. We’ve never hit that number again. So I’m just wondering if there’s not some Katrina problem. And it may be like you say, it may be that last summer there were still some lingering problems, and we may see the inputs come back up to above the 16 million barrel mark this summer. That may be the case.

MR. PLANTING: This is Ron again. I think, as Rayola was saying, that there was kind of change in reaction with the refineries that were knocked out by Katrina and Rita. And the refineries that weren’t affected kept running when they might have otherwise been doing maintenance. And maybe we’re still seeing some effects from that, that they are finally catching up on some of that maintenance.

MS. VAN RYAN: Yeah, we’ll definitely get back to you.


MS. VAN RYAN: And it’s hard to know too if there could be an impact from – maybe the blending stocks make a difference to – we’ll take a look at the numbers and see what – if there is an explanation for that.

I think I have my answer for that, though. In watching the May 16th Senate testimony of Paul Sankey, he mentioned that BP has 2 of the 5 largest refineries in the U.S. running at half capacity. Furthermore, the units that they have down are the ones that allow them to process heavy crudes, which has forced them to run light crudes. Clearly this puts pressure on light crudes that would not have otherwise been there, helping to tighten up the light crude supply.

Geoffrey Styles then asked them a question on gasoline inventories. Alan followed up on their answer with another comment/question, which led to an extended discussion on the issue:

MR. ALAN DRAKE: On a related point having to do with inventory levels, during the Hurricane Rita evacuation from Houston, despite the fact that Houston is the largest single refining center in the nation, there were substantial gasoline shortages at the retail level, enough to strand thousands of people on the road and National Guard and so forth. And in the current very light inventory situation we’re facing, what are the likely impacts if – we are also facing a hurricane season that is estimated to be 50-percent above average -- we have a major metropolitan area evacuation, which is a major spike in demand. How likely are we to run into large numbers of empty gas stations, and large numbers of stranded motorists?

MS. DOUGHER: Well, I think that Houston story was a bit complicated too by just the traffic alone and the evacuation that was done at the time, but Cindy Gordon, our refining manager might be able to provide some insight on.

CINDY GORDON: Yeah, sure. I mean, certainly the hurricane’s compounded of 2005 were beyond a worst-case scenario for whether or just our industry or lots of industries around. And in post-assessments, what the industry has done not only together in trying to attempt to address different lessons learned and how things can be improved the next time.

We have held, as an industry, conference, as well as the government, but individually, companies are specifically reevaluating their plans so that hopefully next time around, if we ever do see something as devastating as we did in 2005, they can establish certain staging areas. We can’t know about that. A trade association can’t discuss that it in an aggregate, but companies themselves are actually looking at pre-positioning supplies. Whether that means to facilitate recovery of their facilities and operations more efficiently or staging fuel supplies in key locations that may be easily transferred or more readily available to move towards the areas in need if a situation like that happens again.

MR. PLANTING: Also – this is Ron Planting again – I think the results are just to the issue of getting electricity for service stations to run pipelines, things like that.

MR. DRAKE: I was talking about the evaluation prior to the arrival of the hurricane.

MR. PLANTING: Oh, I see.

MR DRAKE: Not the post – basically getting a million or more people out of harm’s way.

MR. PLANTING: Right. But that is also something that has been looked at, right. I think there are companies who have blocked a lot of generators and done other things to –

MR. DRAKE: Well, electrical supply was not an issue until after the hurricane.

MR. PLANTING: Right, right.

MR. DRAKE: And I was talking about – you know, in the case of Houston I think.

MR. PLANTING: I understand.

MR. DRAKE: And I participate in the evacuation from New Orleans that went forward fairly smoothly. And we did not have the product shortages that they experienced in Houston. But with the light inventory in – let’s say Miami and Fort Lauderdale have to evacuate, is there going to be enough gasoline available to get people at least far enough away that they are out of harm’s way. And with the current light inventory, that seems like something perhaps – if you are not allowed under current law to discuss, you ought to ask for a change that would allow you to discuss that.

MS. GORDON: I think that is something again the companies are doing in making their decisions on independently. It’s really not an industry call.

JERRY TAYLOR: Well, this is Jerry Taylor. Doesn’t it – isn’t it axiomatic that scarcities occur when prices don’t match demand. I mean, in no matter how short inventories are, if sellers are allowed to price or interested in pricing in what the market will bear, scarcities don’t occur. It seems to me we had shortages in use and what not because gasoline service station owners, for whatever reason – out of fear of the law or out of a conscience or what not, didn’t price it at what the market would bear, ergo, things disappear. Or am I wrong about that?

MS. DOUGHER: Well, I think a lot of consumers went out and filled up their tanks, too, in advance of the hurricanes, and whether they use that amount or not. And a lot of these local stations just flat ran out with so much demand, they just didn’t have the storage.

MR. DRAKE : I think even at $20 a gallon, many Houston gas stations would have sold out. Now, if you priced it at a hundred dollars a gallon, perhaps not.

MR. TAYLOR: You have some curious ideas about the elasticity and demand, I’ll tell you.

MR. DRAKE: I drove eight-and-a-half hours of stop-and-go traffic to get out of New Orleans.

MR. TAYLOR: I’m sure you did; but unless my money is infinite, it doesn’t matter. Prices do affect human behavior even those circumstances.

MR. DRAKE: They would have sold out at $20 a gallon, I strongly suspect; perhaps not at a hundred dollars.

MR. RAPIER: If I can follow up on both Alan and Geoffrey, I think here is what they are getting at. We – it’s not just that inventories are light. I have tracked the inventories every week and you can see that the falling inventories directly correlated to the rising price. Price has gone up, as gasoline fell for 12 weeks in a row, it looks to me almost a certainty that we will go into Memorial Day with record-low inventories. And so I think what Alan is saying is it looks like the risk is much greater than it has been past years going into hurricane season here. We’re going in there very, very low relative to previous years, the lowest ever in fact.

MS. DOUGHER: But the most recent statistics do show that that corner is being turned somewhat and the inventories are starting to build again, and imports are coming in, and consumer demand has moderated somewhat. So I – you know, I don’t know what it’s going to look like in two weeks, but I think that situation could be vastly improved if more refiners could come on it.

MS. DOUGHER: But you may be right; we may be facing that in a couple of weeks, and we’ll have record-low inventories heading into the hurricane season, but it’s just – I think it’s too soon to really know that for sure.

MR. MILLER: This is Chris Miller. I want to follow up on that same vein, and what I was asking Red earlier, the system, it seems to me, it’s lacking resilience. And I guess my question is, what is going to – what have you talked about and discussed for when the scarcities do happen because sooner or later they are going to happen. So is that something your trade association has looked into?

MS. DOUGHER: Certainly the difference between supply and demand is very thin right now, but we are also at a global product market; it’s not just a U.S. market for our refineries in terms of production; it’s worldwide. And we continue to produce most of the gasoline we use here in the United States, about 88 percent or more. So we’re in competition from, for supplies from around the world.

And I don’t think we’re going to run out of supplies; it’s just a matter of what that price is going to be and how quickly we can ramp up our own production moving forward, and also improve our imports. I’m not as pessimistic as some looking out there. I’m not especially optimistic either. I’m not making any forecasts, but there is every reason to think the situation can improve as we move into the summer season.

Alan then got to prod them on his rail ideas:

MR. DRAKE: I have one that is a longer-term question, and it is only peripherally related to the topic, although it is related.

MR. DRAKE: You know, first of all the American Concrete Association rarely goes out and promotes substitutes for concrete. And I have noticed the API is at least endorsing weekly the use of ethanol. But what would it take for the API to endorse a building out technically mature non-oil transportation modes that could, for example, trade 20 BTUs of diesel for one BTU of electricity? You know, this would minimize a certain percentage of the U.S. population from oil prices entirely and leave more oil products available for the rest of the economy and the rest of the population.

MS. VAN RYAN: Alan, this refers to the light-rail proposal?

MR. DRAKE: Light-rail. Also electrifying our railroads. If you take freight off an 18-wheeler and put it on an electric railway, UP, Norfolk Southern, whatever, you trade BTUs of diesel for one BTU of electricity. And you also get major savings in the D.C. area, where you’re based, off D.C. metro, WMATA. And you get also very comparable energy changes there as well in trading gasoline for electricity at a very high ratio.

MS. DOUGHER: Well, you know, our rail system is really stretched as it is right now. And part of the reason it is stretched is just the bio-fuels, to try to move those around because they can’t be moved in the pipeline system. And I went back and I looked at how much money right now from the federal highway trust fund is going to mass transit and some of that also going to the railroad administration, and it’s about 18 percent of all of the receipts. So it’s a significant amount of money.

MR. DRAKE: Well, it’s supposed to 20 percent, but it’s been cut down on every allocation. That was – the Carter administration thing was 20 percent, which has been cut down to 18.

MS. DOUGHER: That is right. And that is very significant when you look in terms of miles driven out there, that you don’t have the ridership that you do in mass transit that you do in automobiles for example. So that is really up to local governments to decide, and it’s also up to the marketplace to decide how are you going to distribute this product and what we’re going to do. I mean, it’s not very profitable right now, the railroad system. And you would have to really, really force a different fuel and force others in the marketplace to use the railroad instead of trucks. Trucks are faster; they have been better; they have been – (cross talk).

MR. DRAKE: Well, they also have right-of-ways that pay no property taxes. If you were to exempt the railroad right-of-ways from property taxes, that incentive alone – and I will point out that Warren Buffet has decided that railroads are major investment focus of his now.

MS. DOUGHER: Well, that may be. And I think, you know, it’s not a real focus of the oil industry right now; we’re very focused on refineries and on production and on policy to promote the efficient use of energy and to promote investment in new technologies, the broad range of technologies, and also to bring more supplies to the marketplace. And that is really our primary concern and our key focus as a policy moving forward.

MR. DRAKE: Well, that is what I ask, is what would it take for the API to endorse non-oil transportations as an alternative in certain areas?

MS. DOUGHER: Well, we already do endorse non-oil transportation in terms of using ethanol. We’re embracing ethanol and we’ve increased – we have more than doubled the use of ethanol in the past year or more. Seven billion gallons this year will be used in the gasoline system. We have got 50 percent of our gasoline supplies had some ethanol in it. So we are embracing these fuels as we move forward, and we’re investing an enormous amount of money in emerging technologies and renewable fuels, about a third of all of the money going into these different end-use technologies – it’s being vested by oil companies. So they are out there; they are looking at a whole portfolio of fuels moving forward, not just oil and natural gas.

MR. DRAKE: Well, the heavy truck industry – inter-city heavy truck is using almost 2.5 million barrels day of diesel, and another quarter million or so by the railways. And eliminating that, or even a significant fraction of that could free up over a million barrels a day for other uses.

MS. DOUGHER: That would be really up to the market to determine that price. If it’s not profitable now, it’s hard to think it would be –

MR. DRAKE: We’re moving property taxes.

MS. DOUGHER: But I think we are getting far a field from some of the subjects we wanted to address here today.

Remind me to do my homework if I ever decide to debate Alan on his rail ideas. (Not that I would, because I think he is correct, but he certainly knows his stuff there.)

Chris then asked about the recent decisions by various states to suspend fuel taxes:

MR. MILLER: Chris Miller here. I have got a quick question on something else. State policy – a lot of states are under pressure to reduce their fuel taxes. Where do you guys stand on that? What do you think about that?

MS. DOUGHER: Well, I don’t think it’s a good idea because they have to continue to fund their roads in any event. And when they talk about – you know, some states have tried it. I think Florida did it a couple of years ago, and they’ll reduce maybe a few cents or a nickel or a dime, or some are talking about just suspending it for the entire summer. But it masks the real supply and demand. It doesn’t help consumers at all in the long run; it just takes off a few pennies off the cost during the summer, but sooner or later they are going to see that come back, and they are going to have less funds for their roads, so it’s a real tradeoff there, and I don’t think it’s going to help consumers. I don’t think it’s a good idea.

MR. MILLER: So you think, more or less, leave it as is as opposed to increase it perhaps?

MS. DOUGHER: Sure. A lot of consumers know the prices, what the price is, and maybe they’ll moderate their consumption and it will keep the supplies coming in. I don’t think it’s a good idea to artificially cut off your gasoline taxes when you still need them for your roads and for your infrastructure, so I don’t think that is a good idea at all.

I then asked them to respond to allegations that despite record profits, refiners were not reinvesting in the business:

MR. RAPIER: Robert Rapier. One more refinery question from me. I read a newspaper article yesterday that there was recent testimony of the EIA to the Senate, and they said that a historical lack of investment in infrastructure, predominantly refinery capacity, was a huge primary factor in rising gasoline prices. I’ve seen this theme repeated, that, you know, the refineries are falling apart and they’re not investing money in them. Do you have some numbers to throw out there to rebut that?

MS. DOUGHER: Oh, sure. Just last year alone they increased their investments by about 25-percent jump up to $9 billion. There have been cycles in the industry. It goes way back. It goes back to the ‘70s to price controls. When the lifted the price controls from the ‘70s, it had an impact on the refiners because then those tea kettle refineries, the little refineries, really couldn’t afford to stay up and running, and they closed down fast because they were no longer subsidized.

Then we had the Clean Air Act Amendments and lots of investment going into making new cleaner burning fuels. So the refineries that were left standing did a much better job of bringing product to market for a lot less money. The investment has moved forward, but it has not been a profitable end of the industry. It has not realized nearly the rates of return on investment that the upstream sector has, and for a long time there they realized about half the rate of return as, say, the S&P Industrials were earning.

It has been an industry that has struggled for a number of years, and only just recently have the margins really started to improve. I think that they’d have to be sustained for a significant period of time to see massive new investments to continue to come in, and they need regulatory certainty moving forward, too, to make those investments. There’s a lot at risk here in terms of policy, and you’re right about the investment in terms of there has been not a lot of investment in the past, but there were really good reasons for that, as well.

Alan next asked about asphalt, which is a subject that has been popping up a lot lately:

MR. DRAKE: Related to that, do you have any statistics on asphalt production? I’ve heard that that’s being squeezed with the addition of new cokers and so forth to upgrade a product that would normally have gone to asphalt a few years ago, and is now ending up in gas tanks either as diesel or other products.

MS. DOUGHER: I think you’re right about that. We should get you information on that, if you’d like, but I don’t have it off the top of my head right now. But you are right and it is a concern to roofers and anyone needing asphalt. There’s been less of it available and we’re turning more of the barrel into higher-end products than the asphalt, the bottom of the barrel.

Next Byron King asked about energy inputs into refineries. He said that he had heard that it takes 10-12 percent of the energy in a barrel of oil to refine it. The API didn't know, but I did so I answered his question. I told them that the number was correct, and that I had known this for a long time but couldn't say so on the record because of the reason I know - because I have access to proprietary energy models for one of our refineries. But recently this number was published in a paper by Alexandre Szklo and Roberto Schaeffer entitled "Fuel specification, energy consumption and CO2 emission in oil refineries." (1) In the paper, they write:

Between 7% and 15% of the crude oil input is used by the refinery processes. For example, the two largest Dutch refineries in 1995 posted energy use at 7% of the crude oil feedstock. There are refineries in the USA with energy use at almost 15% of the crude oil processed (EIA/DOE). Actually, in recent years, energy use in US refineries has been virtually stable, ranging between 9% and 10% of the crude oil processed.

Chris Miller followed up on his previous tax question:

MR. MILLER: This is Chris Miller. I want to follow up on my tax question again, maybe for Ron. Prices have gone up what, more than a dollar or about a dollar in the last year or so, and demand has grown. What kind of increase in price or taxes would it take to reverse that growth by some number, say 5 percent?

MR. PLANTING: This is Ron, believe it or not. I don’t have a specific number for that, but over the years we’ve seen gasoline demand grow. Over the last 10 years, say, half a percent per year was the lowest, 3 percent growth was the highest. A lot of that does relate to what people are paying for, and it also relates to recessions. I don’t really have a specific number as to what would bring it to zero.

MR. MILLER: A wild guess?

MR. PLANTING: But we have seen very slow growth the last year or two because of higher prices.

MR. MILLER: Not even a shoot-in-the-dark guess?

MR. GRECO: Well, this is Bob Greco. I don’t have a guess of that, but I can show you an example of the difficulties with this. When you look at the example in Europe, where you’re roughly about 800 to 1,000 dollars a ton from a carbon tax standpoint, four or five dollars a gallon. The vehicle miles traveled are at a lower level right now, but the rate of increase is the same or roughly the same as it is in the U.S.

It’s from a lower base, but at the same time people are driving more in Europe, just as they’re driving more in the U.S., and that’s in the face of what would be a politically infeasible level of gas tax in the U.S. So the answer is, that tells you that’s a pretty big number – (laughter) – based on that type of response.

MR. MILLER: Fair enough. Thanks.

Finally, a follow-up on an earlier question on ethanol that I ended up answering:

MR. STYLES: This is Geoff Styles again. Could I just follow up on Bob’s earlier comment a minute ago about ethanol because this whole question of the ethanol energy balance, I think, is actually still a pretty important question. The whole industry – owes Mr. Rapier a debt on this one because he has done, I think, yeoman work trying to straighten people out on this.

But what you see consistently out there is people in the ethanol community comparing their 1.3-to-1 positive energy return on ethanol to a 0.8-to-1 energy return on gasoline coming out of a refinery and asserting all over the place that that means that ethanol is a more efficient fuel than gasoline. I think as long as people believe that that’s true, it’s going to push us very far beyond the point where ethanol is actually attractive. Robert, do you want to throw anything else on that since you’re the man –

MR. RAPIER: No, but I can answer that. I’ll let the API take it, but yeah, I’ve addressed that many, many times because they are comparing an efficiency to an energy return. If you compare apples to apples, ethanol is 1.3-to-1; gasoline is about 10-to-1.

MR. STYLES: Exactly.

MR. RAPIER: That’s your 10 percent number, your 10-percent input to get your product out ends up being 10-to-1. And so your apples to apples comparison, gasoline is about 6 or 8 times as energy efficient as ethanol. [Note: To be precise, gasoline is really 4 or 5 times as efficient if you accept the 1.3 to 1 energy return estimate and throw in the crude extraction piece.]

MR. STYLES: Robert, 10-to-1, does that include also the energy required in refining?

MR. RAPIER: If you do the crude and the refining piece, you drop it down to about 6- or 7-to-1. I’ve gone through all the calculations.

MR. STYLES: Because that’s more in line with what I was thinking.

MR. RAPIER: Right.

Final Thoughts - Chris Miller

I'm no petroleum expert; my interest was systems resiliency - what was the API thinking about upcoming shortages and what sort of policies would the petroleum industry like to see adopted then?

I felt disappointed by the answers. Reading the transcript, my questions were plenty clear. To me. But I suspect my questions simply "did not compute" as far as those on the call were concerned. What part of "tomorrow will not be like today" don't they understand? Yes, it's a very difficult concept - humans are not wired for paradigm shift.

I hope I'm wrong; I hope we have plenty of energy forever. But then again, even that good outcome would be a disaster, I mean how many cars can we fit on this planet? We're so far down the exponential growth curve than any outcome short of enumerating enumerating the 10 zillion names of God and our being immediately beamed up to nirvana is a disaster for the species and Gaia.

Shortages Don't Compute

Final Thoughts - Alan Drake

I am even more concerned about there being adequate fuel for hurricane evacuations than before.

Hopefully, Houston and New Orleans can tap into local refineries, but I wonder. The refineries will be shutting down and they may be shipping product out as quickly as they produce it (how many hours worth is kept on hand ?). Transporting product even 20 miles by truck can be challenging in an evac situation (truck drivers evac as well).

New Orleans had it's first warning at 10 PM Friday (>6% probability) and roads (and airport) started closing around 4 PM and all closed (AFAIK) by 5:30 PM Sunday. Saturday was the only day we had to refuel in New Orleans (all closed Sunday morning except one I saw) and almost all stations ran out, but there was barely enough for most everyone that wanted out. Few cars stranded on the side of the road. We may have a stronger tradition of keeping our tanks half full during hurricane season and "topping" up whenever one is about to enter the Gulf.

I have vague memories of the radio announcing where new gasoline deliveries were being made on Saturday afternoon and evening.

Houston OTOH has almost 100 hours warning (at least 80 from memory). They have massive shortages and thousands of cars stranded for weeks on the side of the road (they were pushed off as they ran out). A couple of dozen people died of heat exhaustion.

Repeat Katrina and Rita with current stocks and the outcome does not look pretty.

Hypothesize Cat 4/5 with projected landfall on Ft. Lauderdale/Miami border. Or Tampa Bay, Jacksonville, Charleston or any major coastal city without local refineries and shortages and chaos will result. Cars stalled for lack of gas will slow an already slow evac process.

Many middle class people with cars will be stranded and frustrated and forced to ride out whatever comes. This is, IMO, an issue of public safety.

Best Hopes for no major hurricanes hitting major cities this year,

Final Thoughts - RR

Overall, I think this session was very informative, and I do appreciate the effort the API is making to educate the public. One of the problems that I can see is that many of us on these calls are already very knowledgeable about these issues, so it would be good to get some people on who are both influential and don't know as much about energy issues as they should. In particular, it would be nice to have some political leaders or staffers on the call, as well as some vocal opponents of the oil industry. After all, when they are explaining to me why prices are rising, they are preaching to the choir.

One thing I think they really were not clued in on is just what the gasoline inventory situation looks like. Yes, they knew it was low, but they felt like it had turned the corner and was on the way back up. Maybe, but we are still in a very, very low inventory situation and I did not get the impression that they appreciated this.


Here's your complete reference if you ever need to come up with an EROI for energy usage in an oil refinery.

1. Szklo, Alexandre and Schaeffer, Roberto, Fuel specification, energy consumption and CO2 emission in oil refineries, Energy Vol 32 pp. 1075–1092, May 17, 2006.

Note that the 10% they quote computes to a 10/1 EROI. In other words, for 1 BTU of oil, it takes 0.1 BTUs to refine it. 1 divided by 0.1 is 10. Contrast that with ethanol, where it takes 1 BTU to produce 1.3 BTUs of ethanol. So, you have an EROI for oil refining of 10/1 (reduced to probably 6.5/1 if you start with crude in the ground) versus 1.3/1 for ethanol. That's why ethanol from corn will always need subsidies to compete (or a very cheap energy input like coal).

Thank you RR, Dryki and Alan for your efforts; I find these API calls very informative. Somewhat scary that the callers seem more informed that the API.

As I understand it, the problems associated with rail profitability in this country stem from actions taken by Detroit automakers, the oil companies, and trucking unions to impose extraordinary and deliberately harmful regulations on rail during the 1920s. These regulations have largely remained intact since then coupled with the freebies that auto/truck transport gets (the subsidies like property tax free rights of way). Rail regulation needs a clear headed review from top to bottom, with a particular eye towards European and Asian rail systems and what works elsewhere. Only when the regulatory burden is equal can the API make a statement that trucking and automotive use is more economical.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

I agree.

California is now trying to get a waiver on some passenger rail regs that will improve economics and operations. Supposedly, if this works, it will have national implications.

Unfortunately, I am not an expert on the delat between US, EU and Japanese rail regulations, but I know people that are :-)

Best Hopes for "The Rule of Reason" in regulations,


Well, here's the "Reason". Publicity and hysteria go up exponentially with the number of deaths in a single incident:

3000 deaths in auto accidents: yawn. Happens every day (worldwide.) Move on, please.

3000 deaths ten or twenty at a time in bus crashes: local publicity for some days; wider publicity perhaps for a news cycle, if children died.

3000 deaths 200 at a time in plane crashes: worldwide publicity and incessant news crawls for several days for each crash. Hundreds of millions spent by regulators dissecting causes.

3000 deaths all at once at WTC: worldwide publicity and incessant analysis for next several decades. Toss existing legal systems into trash and remake entire world.

Pardon my cynicism, but the overregulation that follows naturally from this sort of thinking is one more reason why I think the US Constitution had the right idea (long since abandoned) in setting up a limited government.

I agree as well, but I think the problem with transport policy is pretty fundamental. Literally billions and billions of dollars of public money has been spent on roads, and they are not taxed. The government has the power to expropriate for road expansion, and incremental projects ($10 million here, $10 million there, soon you're talking real money) go on endlessly. On the flip side, the railways must own, build and maintain their right of way with their own funds, and then property tax is assessed as well, and... is anyone surprised at the end result? What do you think the value of land taken by a 10 lane highway is compared to a two track railway? How easy is it to compete against a subsidized operation?

Think of it another way: an intermodal train can carry (easily) 400 containers. Never mind the energy efficiency advantage, what kind of manpower is required to move 400 trailers by truck? (And how much does it cost to repair the roads that are used for such purposes...) How on earth did we get to a state that trucking is economically competitive over long distances?*

It makes no sense, unless you consider the subsidies. You get what you pay for, and North Americans especially are paying for roads.

*I'm not suggesting trucks carrying containers necessarily go long distances, but there are many situations for which a container could have been loaded rather than a "standard" truck trailer. Consider long-distance house movers, for example.

Hi JustZizGuy
Railroads were initially subsidised to build lines, both the Federal Government and the State of Texas gave away huge amounts of the public lands to build tract. Texas, since it was a sovereign republic before annexation in 1845, retained all unpatented lands in its borders. The railroads were in the land speculation business as well as the transportation business.
Railroads have common carrier status under the law. In other words, they can condemn lands just like a government can for right-of-way. So can pipelines and electric utilities for that matter.
Since they constructed the Railroads with essentially a grant and have profited at the public trough for 150 years, I have a hard time feeling sorry for them. They abused labor and farmers for many years, they are card-carrying members of the corporatocracy that runs the U.S.A..The Railroads are possibly a saviour of our "non-negotiable lifestyle", but expect them to operate in their own interest, not the people's.
If you'd like to read further about these land grants, check out "The Handbook of Texas" online, as well as the history of The Texas Railroad Commission on their website. I'm a landman in Texas, and I've read about this bit of history for years, and it is within my area of professional expertise here in Texas.

I'm pulling for a US railroad renaissance all the way, and would love nothing better than to see Alan's slate of rail projects get moved to the front of the national agenda, but it's also true that US railroads were the (Exxon/ Microsoft/ WalMart/ Halliburton/ pick your favorite corporate villain) of their day.

For an excellent account of all that, see 'Hear That Lonesome Whistle Blow' by Dee Brown (who did sublimely righteous pissed-offedness better than any other historian I've ever read... )

Mike C
rail and bike fan in Boston

I'm well aware that huge land grants were given to railways. There didn't used to be an Interstate Highway System either. I'm talking about more recent history.

I don't know how things are in Texas, but railways in Canada do not profit "at the public trough". Of course companies will operate in their own best interests - that's a good argument for public railways, not for subsidizing roads. Why the completely different status for railroad versus road? If public subsidies and planning apply to roads, why not to rails? If private capital and planning and land is the best way, why aren't roads all private?

(If you want an example of an absolutely enormous land grant, check out the E&N Railway on Vancouver Island. Nearly one third of the entire land was given to the company. Nowadays, in more recent history, you have the provincial government spending billions of dollars on highways - $1.4 billion on one highway project alone - and the railway no longer operates.)

The railroads don't continue to feed at the public trough, they've been nudged away by the other hogs. But since they have no capital invested in their rights-of-way except maintainence and repair, ad valorem taxes are fair. In Texas these are the major support for our schools, counties and cities, the state has no ad valorem tax. There's an excellent arguement that they should be public. I agree, but I'm a communist.
Our fearless Governor and State Legislaure are building a huge , new Transportation Corridor, funded by a private toll road company. Its supposed to run from Laredo to San Antonio, Austin and Dallas and also from Houston to Dallas. Its going to supercede the interstates and have high speed rail lines, Electrical Grid pipelines as well as new Highways. I haven't paid any attention to how they are funding it, possibly bond guarantees. I'm sure they all plan to get richer from the scheme, and I'll help pay for it. Sometimes being a Texan really sucks.

Short bit of history.

Generally, railroad ROWs west of the Mississippi (basically) were given away to build 5 East-West transcontinental railroads PLUS alternating sections (section = 1 square mile) in a checkerboard next to the 100' wide ROW. In return, the US Gov't got a discount on cargoes shipped on the railroad.

After WW II, the RRs got Congress to repeal the discount, noting that they had "paid" for the ROW and land several times over (neglecting to calculate interest). I assume that if one calculates interest against a steady income stream (with a massive payment during WW II), that the railroads just about "paid" for their ROW and land with cut rate freight and passenger charges to the US Gov't.

And the railroads WERE seen as the robber barons of their age, when they had a monopoly on transportation. Given the large number of RR bankruptcies in the 1800s and early 1900s, I am unsure how much truth there was to that.

Some railroads were (and UP still is) quite arrogant in their behavior, pricing, etc. and NOT "good neighbors". But bad PR does not necessarily = robber baron.


We need to (re)build the railroads as a key part of public infrastructure. That means public ownership. There should be noisy and contentious public meetings where the public decides where the rails and stations go. I'd like to see them - at least the smaller commuter type rail and interurbans - set up as community investment trusts or co-ops. More or less along the lines of rural electrics or the blues before they got privatized. The structure of the ownership is going to matter a great deal. They are going to have to be subsidized; the free market is not going to do what's necessary.

cfm in Gray, ME

This year the freight railroads are investing $10 billion in infrastructure improvements. The best "bang for the buck" in increasing capacity is improved signaling (decidedly NOT sexy).

I know someone who worked on extending electrification on Amtrak's (they own it) NorthEast Corridor from New Haven to Boston. As a public entity, those meetings you want added several years to implementation of a "slam dunk" decision to build.

Given the track record (pun intended) of Amtrak and the same solution in the UK (public tracks, private trains), I cannot support public ownership of mainline railroads.

Th story in Alaska (the state that gives annual rebates to their citizens) is a mixed bag for the Alaskan Railroad (Fairbanks-Anchorage).

When Japan Rail was broken up and privatized, it was an outstanding success (no real disagreement).

This is a critical issue for the survival of this country ! I do *NOT* want to screw it up with social experimentation. I would not want to depend upon Amtrak freight to get the essentials of life.

For branch lines that were about to be abandoned (see Wisconsin), I can see public ownership of the tracks, but they are slow to fix that as well (still 1/2 1920s track).

Best Hopes,


The US freight railroad industry has been quite innovative and is a world leader (despite a lack of electrification). Double stack containers, the heaviest axle loadings and heaviest rail in the world (other than an isolated mine in Australia).

The failure to get the projected freight through the Chunnel has been blamed on the French SNCF. They handle voters quite well, but freight is a real weakness for them. New reforms that allow others to use their tracks may add frieght volume to EU railroads.

Amtrak is the not the scale I'm talking about; I'm talking about local commuter and interurban rail. And yes, it will add a lot of time, even for local systems. The alternative, however, is having some "official" decide. You tell me what's working in NOLA, the "officials" or the locals? Power has to be coincident with the biosphere/community; otherwise what you have will be taken by those "officials" and their goons.

That, of course, is Cheney's solution. All the "right people" will come out on top.

cfm in Gray, ME

I would think that moving shipping to rail would cut a substantial amount of diesel usage and create a market surplus. I don't know anything about petroleum refineries, but I thought that diesel was a bi-product of gasoline refining. I can't believe the oil industry would be interested in cutting trucking and the diesel demand. Shipping could be moved from diesel trucking to rail, rail could easily be moved to NG over electric.

Passenger vehicles could be moved to diesel.

Without an incentive to put more passenger diesel vehicles on the road, there is no incentive to move shipping from trucks to more efficient rail. Diesel engines are substantially more expensive to manufacture than gasoline and that is reflected in the vehicle purchase price. The retail diesel price locally has been close to the gasoline price and there is no justification for the extra capital expense of a diesel vehicle.

This is the type of thing that needs the government to step in on. A rebate for diesel vehicles, an incentive for rail to go to NG or even a plug-in hybrid scheme and tax the crap out of trucking.

If you meant diesel is a byproduct of refining, not so. However, with some effort, you can convert diesel to gasoline.

Also, diesel engines are inherently more efficient than gasoline ICEs, so there is a justification for their existence.

I have owned a lot of diesel construction/farm equipment and heavy trucks. One of my favorite diesel engines was a JD 4cyl, I wish I had one in my small truck, but there is no way a diesel conversion makes financial sense in a small low annual mileage passenger vehicle.

As a really bad example a VW Touareg. The gas V6 is $38K MSRP, V8 $43K and the V10 diesel is $59K. The fuel MPG from the brochure isn't a stunning improvement over the gas: 16/20,14/19,17/22

Why would I buy the diesel?
The 1 MPG saving isn't significant.

Diesel at the pump here is $0.92/L, gas is $1.25/L.

I have an older S10 pickup and a Saturn SL1. If I was going to replace either one and was making a decision on a small diesel, it's going to be $5K more than a comparable gas. This is an extremely conservative number and there aren't that many diesel vehicles available.

Assuming I can get 10 Imp. MPG better efficiency from the diesel. At 40 MPG gas, 50 MPG diesel. This comes out to $8.75/100km gas and $5.15/100km diesel. To make up the $5000 capital difference at $3.60/100km I have to drive 138,000 km.

I only have 130,000 km on our Saturn and it's a 1999. We just don't drive that much.

There is a wider price spread right now, but last year diesel pushed up close to the gas price and could do it again, which would make that even worse.

In larger high mileage trucks it makes economic sense. In small low annual mileage cars, you can't justify the capital cost.

If there is no incentive to go to a diesel vehicle, very few people will do it.

Your figures are from CURRENT model availability which is evidence of LACK thereof.
A larger supply of small and efficient diesels would drive down the price of those vehicles. Fully a third of the European private car fleet is diesel powered and successfully so, I might add, with more and more choices coming on line every year in the small car category.
How do THEY manage it?

Furthermore, let me cite the plumbing industry, which has embraced one particular model, the "Sprinter". The switch from the heavy gasoline powered service pickups and vans to the Sprinter has leveraged a very significant savings to local plumbers all over the USA....and this is just one industry, one model vehicle, and this vehicle is large but equipped with a SMALL (3.0 liter) engine.

I'm with you, small diesels are great. We have one in a backhoe that will run for days on 10 gal doing trenching. My nephew has a diesel powered arc welder on his truck that is the same.

Canada had a lot of LPG gasoline conversions 10 years ago. It was substantially cheaper at that time. The demand for LPG went up and so did the retail price and now it no longer makes sense to do the conversion. Supposedly not putting butane into summer gas makes it more expensive, but they are selling the butane in LPG for as much as summer gas.

Anything that is cheap for the consumer at the moment, whether it's corn or cellulose for an ethanol plant, silicon for PV or a consumer fuel is only cheap until demand increases. That's capitalism and why I believe the solar thermal is the only way out of the energy mess. You can't come up with a scheme that relies on something that is cheap now, it won't stay that way when demand increases.

Ethanol production increases and corn went from $2 to $4/bu. and will hit $5/bu. D'oh! Ethanol guys never saw that coming. Let's build a cellulosic ethanol from straw/stover plant.. woops they don't want to give us biomass for free. Let's convert passenger vehicles to diesel, NG, LPG or anything else...

Darn. The price went up with demand. As Mr. Young put it:
Keep on rockin' in the free world.

The difference between the gasoline and diesel models is, I bet, not solely the engine. You're also comparing completely different things - that V10 diesel is an outrageously outrageous bit of outrageousness. It has more torque than is really, well, what you might call necessary. Unless you're towing a 747:


Take a more reasonable example. The premium for a VW Golf TDI over the gasoline model was $1500 Cdn in 2000. The difference in fuel economy was approximately 6L/100 km versus about 9 (mostly city driving). The price of diesel and gasoline has varied widely over that period, but diesel has always been at or below the price of gasoline. Let's make it simple (and biased against the diesel) and assume the prices were always the same. 3L extra fuel per 100 km means on average an extra $3 per 100 km (nowadays it's more than that, years ago it was less than that...I'm averaging). To cover the capital cost difference you would have to travel 50000 km. Over that time you'd have to see which engine cost less to maintain as well, but the point remains that it is possible to recover the difference in initial cost through fuel savings alone in a reasonable time. As you can probably guess, I own a 2000 VW TDI. Your definition of "not driving much" may be accurate for the prairies or for most USians, but my definition is this: our car has yet to hit 70,000 km.

The efficiency difference is not overwhelming, so I agree that the economics are not strongly in favour of the diesel at current prices. Guess which way I think prices are headed? :-)

More to the point, I like the 1000 km (600 mile) range per tank, and I just like burning less fuel for the sake of burning less fuel for the same task. Some people spend $1500 on a sunroof and leather seats. I think it makes more sense to invest it in burning fuel less rapidly.

(Though I would still like to be able to burn no fuel... hydroelectric generation plus battery-electric car, plus a far better public transit system, is what I'd like.)

btw, currently diesel here is $1.019/L, gasoline is I think $1.249/L.

I picked a bad example with the touareg and as far as mileage, in the first 3 years with the car I used to do 4 200km round trips per month and put the first 100,000km on the car. The other 30,000k are in the last 4 years. I drive my truck to work and a wee bit more and have put less than 5000km/year on it since I got it.

My whole point from above is that for consumer vehicles to switch to diesel, there has to be an incentive. It's probably not cheaper to maintain a diesel and it takes a while to recover the capital investment for people that are miserly with their driving. It would do wonders if they applied a tax on gas engines and a rebate on diesel engines to make it more attractive on a new vehicle purchase.

Makes more sense than banning incandescent lightbulbs in Canada.

It would do wonders if they applied a tax on gas engines and a rebate on diesel engines to make it more attractive on a new vehicle purchase.

Such a scheme has actually been in place in Norway since 1.1.2007 when the registration fee for new vehicles was reworked to favor vehicles with low CO2-emissions.
Since then, new car sales has been something like 80-90% diesel (although that's probably artificially high from deferred purchases of diesel cars).

The US passenger vehicle avg. mpg. was 25 mpg in 2003.


This includes car and SUV; gas and diesel engines. Now that there is clean US diesel fuel availble the diesel market will start to open up in the US. My 2002 Honda Civic got 40 mpg on the highway, but was rated for 39 mpg. A Saturn gasoline engine does not get 40 mpg. anywhere. When I bought my car gasoline cost $1.25 a gallon. There was no great gas savings in paying more for a gas saving Civic, the savings are apparent today + it was easier to find parking in the city.

The diesel cars get 50-60 mpg. One new prototype is supposed to get 63 mpg. My brother has a Volkswagon diesel and was able to use recycled vegetable oil in the tank or regular diesel. They are cheaper than hybrids and there are no batteries to replace. The diesel engine was supposed to last longer than a gasoline combustion engine.

A Saturn gasoline engine does not get 40 mpg. anywhere.

Transport Canada rated the 1999 Saturn SL1 at 5.7L/100km highway, 8.7 city (40/27 US mpg), (48/32 CDN mpg) for auto, the 5 speed manual is a bit better. This is about the same as a 2002 Civic highway at 5.5/7.3 std and 5.8/7.9 auto. The city mileage is a bit better in the Civic.

The basic problem is that we have socialist roads (we don't call them that but they are) but not socialist railroads. Most countries have socialst both.

There is actually a better way which has rarely if ever been tried: Save each mode of transport set up as a public-owned cooperative, with a directly elected board of trustees. All modes of transport would operate on a level playing field as far as tax policy and regulation and funding are concerned. People can vote for their preference in the tradeoff between quality of service and price of service.

The problem is that to get from here to there we would have to go through the nationalization process, then the government would have to hand off the control to an elected board. The first will not happen in the US except under extreme circumstances; the second doesn't happen anywhere because governments don't like to cede power.

“Save each mode of transport set up as a public-owned cooperative, with a directly elected board of trustees.” Posted by WNC Observer

The problem is, if these boards are elected, they will end up as dysfunctional and useless as the US government. Elections are ALL ABOUT WINNING and nothing else. If the board is elected, genuine, intellectually honest discussion and consideration of the issues and practical responses become impossible; the admen, hucksters, spin doctors and campaign contributors will keep the public sufficiently confused to ensure the election of board members loyal to whatever the special interest groups of the day are. I hate to think of what would have happened to Cuba after they lost the oil from Russia if they had had our system of government.

Antoinetta III

Thanks for the transcript. The politics of collapse are fascinating. I think my post is on target since if you read my post then read the transcript its obvious to me that powerful people realize its to late for change.

Rome took hundreds of years to collapse but I think we will be able to see the end of a empire within most of our lifetimes. First the politicians deny the problem until it effects the ability to do trade then as prices soar they act but by waiting they can no longer do the right thing in raise taxes to subsidize fixing the problem. In the case of Rome it was generic commerce disruption from barbarian invasions and for us it is oil. By waiting until the problem is unsolvable again for Rome they could not raise taxes to support a Army and we cannot raise taxes to support alternatives to oil. You end up locked into what ever diminishing technical and resource base you had before the crisis.

Now I actually don't know the details of the collapse of the Roman empire but extrapolating backward its obvious that this is a critical reason for failure. The root cause is of course its impossible to convince people to take action that lowers their standard of living before the situation becomes untenable. I posit that actions taken once you have passed the threshold remediation cannot be effective since you have squandered the resources needed to transition.

For Rome they would have had to recognize that the barbarian problem was certain to be ultimately fatal very early and taken steps to expand the culture of Rome through the barbarian lands even if they did not fully control them.

For us we would have had to continue unwavering to wean our selves of oil following the 70's oil crisis.

What we see now are the stage puppets in the final act posturing and still not willing to recognize the real problem. I'm sure that as Rome burned the generals still felt that with a little more investment they could expand the army and take Rome to greater heights.

Fiddle quotes.

MS. DOUGHER: Well, you know, our rail system is really stretched as it is right now. And part of the reason it is stretched is just the bio-fuels, to try to move those around because they can’t be moved in the pipeline system.

MS. DOUGHER: That would be really up to the market to determine that price. If it’s not profitable now, it’s hard to think it would be –

Note this was a comment on light rail of course the heavy subsidy of roads is not considered when you wish to talk free market.

The point is the pattern is clear once the system passes the point where fairly heavy taxation is not possible to effect change for the common good the government is effectively powerless to fix the problem. Whats actually going on is a version of Jevon's Paradox. A community of people not only consume from the commons but also they contribute a fraction of the wealth taken from the commons back to support the group this is as taxes and to some extent private investment the tragedy part is this only works as long as the commons is either renewable or growing. In the situation of declining common resources you can't even meet existing community needs much less underwrite a transition to in effect a new commons or better pastures. The reason that increasing taxation is impossible is simple. The economy is receding increased taxation either simply causes inflation or slows the economy further taxes can only extract a percentage of real wealth they cannot create wealth. This explains why the government loves a bubble during the bubble phase taxes pour in and the attendant inflation cheapens older debt. Recessions on the other had hit the government harder than the people as taxes fall and debt real debt servicing costs increase so governments fear recession for their own selfish reasons.

We have been lucky in a sense since the middle ages each time western society was pressured it discovered cheap almost limitless wealth. First in the new world and whaling thence to coal and oil. So the slow grinding of technology has allowed us to escape the intrinsic fate of societies for a thousand years. People that believe technology will same us don't recognize that the technical advances only succeeded each time because abundant and cheap resources existed to be exploited. Consider a Ferrari with no gasoline.

I think we have wasted our one bullet on ethanol. If you read the transcript you will see that they recognize its the only thing we will do or more important be able to do.

My take on this is that if you consider our current infrastructure then ethanol/biodiesel ensures that a minority will be able to continue to lead a western life.

disruption from barbarian invasions

They just changed the name to illegal immigration (and felony forgiveness)

It was news to me that the EROI for gasoline production was 6.5 to 1. The numbers that gets mentioned are EROIs of 15 or 20 to 1. I guess that was for production of the crude oil. My question now becomes; is the 4 to 1 EROI often quoted for the Canadian tar sands related to production of crude or production of gasoline?

The tar sands EROI is just for the conversion into a synthetic oil. Now, that oil needs less processing then to turn it into fuels, and the refineries that do so don't have to invest in heavy oil processing equipment, but it is still not nearly as good as conventional oil production.

Does the EROEI for the tar sands include these costs (refining) or the transportation costs or the costs in delivering the syncrude oil to distributors and stores? I'm wondering if its just as much of a false solution as ethanol or hydrogen.I certainly don't trust the hucksters figures.
The economics certainly suck as well. How can a company make money investing $100,000 per BOPD and make a profit when they have a $30 BBl lifting cost? This is where Enron accounting is most apparent, or "creative accounting" as it was called in the movie The Producers.


OK, right up front let me admit my ignorance. I know very little about what I am now asking, and am hoping that RR or someone can educate me a bit.

I do understand that liquid alphalt (aka bitumin) is produced as a fraction of petroleum in the refining process, and is then heated and mixed with aggregate to produce paving asphalt.

I also understand that tar sands consist mainly of bitumin mixed with sand.

To an ignorant person like myself, that sounds like they are somewhat close to being the same thing.

We have heard that the EROEI for turning tar sands into liquid synthetic oil that will work as a refinery feedstock is pretty poor.

My question is this: Instead of converting the tar sands to liquid to send to the refinery, and then sending the heavy fraction to the asphalt plants to turn into paving, might there not possibly be a more direct pathway from tar sand to paving that bypasses these intermediate steps to some extent and thus improves the EROEI?

Or would the cost of shipping the bulky and weighty non-hydrocarbon component of the tar sands be so high that it would more than offset any EROEI gains achievable through my suggested pathway?

Shhh... you keep it up and someone's going to find out there are no Alberta Tar Sands and the Russian Mafia is just ripping up all the pavement in the former USSR and they are processing it in up in Northern Alberta. :)

Or would the cost of shipping the bulky and weighty non-hydrocarbon component of the tar sands be so high that it would more than offset any EROEI gains achievable through my suggested pathway?

It is not a stupid idea, but I think this would be your problem. The bulk of the weight is the sand, and unless the sand can contribute to the aggregate, then you are transporting a lot of dead weight. Even if it can contribute to the aggregate, probably more cost effective to use local aggregate.

I've wondered the same thing myself. I suspect the tar sands are just too far away from the major centers of population to be cheaper to use than asphalt from a refinery. There are some smaller asphalt deposits closer in the United States. As I recall, there are some asphalt sands in southwest central Texas near Uvalde, and they are described in a book named The Economic Geology of Texas, published by the University of Texas Bureau of Economic Geology

robert..hi...i find it quite interesting that the oil insiders are thanking you for bringing to light the problems of ethanol EROEI....what a confederacy of dunces we have in positions of power in this country....

"o.k. fellas...lets get behind this ethanol thingie...after all the president says we need all this biofuel to get independent !"

There were some surreal moments during the call.

The ethanol thing is funny. A lot of oil companies are getting behind it. It is probably a little known fact that ethanol production is driving up natural gas costs, and many oil companies are big producers of natural gas. For those that are, ethanol producers are great business. Sad, but true.

Robert Rapier said:
"It is probably a little known fact that ethanol production is driving up natural gas costs, and many oil companies are big producers of natural gas."

Exactly, and likewise the tar sands. What you have is a pair of industries built around the concept of using a clean, extremely valuable resource, natural gas, to make fuels that are dirty in production and that you have to build billions in new infrastructure to produce and use. And if you try to use bitumin in tar sand, or end up using coal in production of ethanol (some have actually suggested it!), you compound the mess. It is one of the greatest make work boondoggles in history, and no one who runs the numbers from start to finish see it winding up as anything but a mess. Even the corn growers and ethanol producers have lobbied Washington that they cannot make it without a cheap and steady supply of natural gas, something that is soon to be far from assured. We will be trying to import natural gas from OPEC to make "home grown freedom fuel"? it's farcical.

Seldom in history have we had so many smart people work such long hours to come up with one of the worst possible solutions. We would have better off to burn the natural gas directly in vehicles if we are going to waste it away in such a fashion.

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

The mistake people make is to consider that ethanol production was done to be green. Its not. Later if needed we will also do biodiesel. Instead if you look at it the following way it makes sense.

How do you secure a stable liquid fuel for the military and elite classes that uses our existing investments ?

Ethanol and later bio diesel make sense the only thing slowing down bio diesel and CTL is determining the best solution for our military aircraft. Once we know the best way to fuel them I expect congress will get behind supporting this source. Of course in the interim with ethanol you can use your existing oil for diesel/jet fuel production for the military.
As far as ethanol goes we have plenty of coal and a combined coal fired/electric/ethanol plant makes sense from a energy perspective so NG although its and issue its not a show stopper. Later nuclear can be used. Also cellulose based ethanol or syngas production will eventually be feasible at the right price.

Next of course the amounts of fuel needs are not planned to be any where close to what we use now at the current American standard of living and lifestyle. If you instead drop a good percentage of Americans down to a third world consumption level you will see that we actually have no problem powering our military and elite with our current coal reserves and ethanol potential.

The only thing missing is no matter what the powers that be need to expand the rail system significantly but didn't one of the richest men in the world just invest heavily in rail.

So I think the poor will finally get rail and probably electric but it will be a side effect of the above policies.
If I'm right you will see a lot of new rail laid out between the coal mines and the ethanol plants very soon. I'm not sure how much is needed since these plants are on the rail systems already but its a tidbit of information that would be interesting if true.



Not so dumb after all depending on your goals.
A wee bit of bait and switch :)

Maybe, but I'm not sure I need anything quite this lengthy and conspiratorial to explain ethanol. And it still takes a measure of popular support to get most things through Congress. No, it's sufficient that ethanol is another way to pay out huge farm subsidies. Farm subsidies please the somehow all-important Iowa voters, as well as numerous romantics and some primitivists.

Maybe it all started with the preposterous, boring catalog of living-expense accounts and pointless remarks that forms the body of Thoreau's Walden. Only now it's grown larger than life, attracting people who, when they fail in real life, delude themselves that a trip backwards in the ol' time machine will magically cure their dysfunction. Since that really isn't on, farm subsidies and environmental twaddle serve as substitutes.

The ethanol debacle is not isolated from other events. The recent and ridiculous credit bubble created by the Feds on purpose. The resulting housing bubble etc. The list is long.
And of course you see the Democrats back peddling on Iraq.
And this very recent action with Iran. If you step back and put my comment in perspective with everything else thats going on the end result is it seems our Government is not only peak oil aware but taking actions that point to position at least part of America to come out on top. I think they have done the same analysis we have and also understand the more general overshoot problem.

For me at least I felt for a long time that Peak Oil was a matter of getting the issue out to the government and public like environmental issues in a sense. I no longer feel this is true the government is very peak oil aware and has decided to take unilateral action without consulting or even educating the American people. Of course since the decision seems to include having a significant part of the American population in desperate poverty I'm not surprised they don't want to talk about it.

Maybe they think its impossible to take another route so they have chosen this course and seems the near term future of America has been predetermined. And further the slightly longer term prospects of democracy look dim which is even more disturbing. For a long time I held Roberts view point that a iron clad case was required to get action now I don't think its relevant. They already know.

Parts of government. It seems mostly executive branch. Cheney and the military brass certainly know and are deliberately setting up for their class to come out on top. RealID, checkpoint society/gated communities, the Fallujah model. All this legislation and activity to paint environmentalists as terrorists.

cfm in Gray, ME

A substantial portion of ethanol would be NG for NH3 nitrogen fertilizer production. I'm not a corn farmer, but it looks like the recommendation is 100-200lbs/acre of N to continuous crop corn. If they are getting 140-180 bu/acre yields, the ethanol conversion is supposed to be 328 gallons/acre. NH3 was going $900/tonne in Canada this spring (Which is bizarre that it was $200 cheaper in the US). 200 lbs/acre of nitrogen would be $63/acre of NH3. This link says there is 33.5 MMBtu of NG per US ton of NH3. If gasoline is 125,000 BTU/gal, the heat equivalent is 268 gallons of gasoline for a US ton of NH3. That comes out to 26.8 gallons of gasoline heat value of NG per acre for NH3 or about 10% of the ethanol yield. There would be additional NG in the other fertilizers and chemicals used.

(If I blew the math, someone please correct me)

The gossip here is that there is a serious plan in the works to run a pipeline from the coal mine at Estevan to the SaskFerco fertilizer plant at Belle Plain to crack hydrogen for NH3 from coal gas. 2.6 billion tonnes of known coal in the province would grow a fair bit of corn down in Iowa.

Seldom in history have we had so many smart people work such long hours to come up with one of the worst possible solutions.

The other prime example being Microsoft operating systems.


I know you have probably been through it, but how much natural gas will be used to cook up this year's estimated ethanol crop? Ballpark....

I don't know exactly what they are forecasting for ethanol production this year, but figure that the BTUs in the ethanol are ballpark 75% derived from NG. In other words, 1 BTU of ethanol burned 0.75 BTUs of natural gas (and some coal, gasoline, diesel, etc.)

...to make the kind of investments that are necessary to continue to invest in refineries and to continue to increase capacity...

From my perspective I note, as ever, the embedded establishment assumption/goal is indiscriminate growth, growth, growth; feed the addiction.

What a challenge. Thanks for the report, Robert.

Authentic learning ends where faith begins.
Are Humans Smarter Than Yeast?"

Contrast this call with the discussion we have heard from both the House and the Senate on gas prices. These are the kinds of questions that congress should be asking and if there are any staffers out there, they could certainly feed these kinds of questions to their respective congresspersons.

On the other hand, for the recent House hearing, representatives of the oil industry and were invited and declined to come. Is this because they don't want to feel they are under fire? It still seems they should get their story out if they have a good one which they seem to.

But congress needs to be asking the questions about Katrina preparedness, and maybe they are. The API is clearly not up to the task of providing good answers.

Red Cavaney, CEO of the API, did testify today. I have his testimony, but am looking for the Q&A. Here was his statement, which I have not yet dissected:

Thank you, Mr. Chairman. I request the Committee’s permission to submit a more detailed statement following today’s hearing.

Industry mergers are not a cause of higher gasoline prices. In fact, mergers contribute to production efficiencies that benefit consumers. As with all industries, mergers have occurred only after careful Federal Trade Commission (FTC) scrutiny to ensure the competitiveness of markets. The FTC reviews all proposed mergers and acquisitions in the oil and natural gas industry. It has required divestitures, or challenged mergers in the industry, at lower levels of concentration than in any other industry and has stated that “despite some increases over time, concentration for most levels of the petroleum industry has remained low to moderate.”

Those who allege that mergers cause gasoline price increases fail to recognize that there is no shortage of competitors today, and market power is not heavily concentrated. The eight largest refiners in the U.S. account for 66 percent of the market, a level of concentration that is exceeded by 15 other consumer product industries. In fact, in eight other major industries, the top eight companies, on average, account for 85 percent or more of their respective markets, according to U.S. Department of Commerce 2006 data.

There are 55 refining companies, 142 operating refineries, and approximately 165,000 motor fuel outlets. In the case of the latter, all but a small percentage are owned and operated by small businessmen and women, not refiners. According to the FTC, the share of U.S. refining capacity owned by independent refiners with no production/exploration operations rose from 8 percent in 1990 to over 25 percent in 2006.

In part, as a result of mergers, the industry has become more efficient, which has reduced costs to consumers, with gasoline prices dropping to all-time record lows in the late 1990s. Sharp increases in crude oil prices and costly investments made to reduce emissions have masked this benefit in later years.

Recent price increases reflect supply and demand. The same is true for past price increases, which have been thoroughly investigated by government agencies who would have taken the industry to task, if illegal or improper activity had been discovered. Invariably, these agencies have explained price spikes by supply/demand conditions that had nothing to do with manipulation of supplies or illegal agreements among companies.

Moreover, a 2006 investigation by the U.S. Federal Trade Commission found [quote] “no evidence indicating that refiners make product output decisions to affect the market price of gasoline. Instead, the evidence indicated that refiners responded to market prices by trying to produce as much higher-valued products as possible…. The evidence collected in this investigation indicated that firms behave competitively.”

Those who persist in suspecting that the industry is holding back supplies overlook the fact that, over the past 10 years, existing refineries have expanded capacity equivalent to building 10 new refineries and, based on public announcements of refinery expansions, are projected to add the capacity equivalent of an additional eight new refineries through 2011.

We recognize that today’s higher prices are a burden to people and a threat to the economy. The cause of the higher prices is an imbalance between supply and demand, worsened by policy shortcomings. So far in 2007, total U.S. gasoline demand has set a record. U.S. gasoline production is also at record highs. However, because of maintenance at European refineries, an extended port-workers’ strike in France, refinery problems in Venezuela and refining disruptions in Nigeria, less imported gasoline has been available to contribute to the traditional seasonal build in inventories.

Oil company mergers and acquisitions have not caused higher gasoline prices. We need to focus on the factors shaping those higher prices and not be misled by claims that have been repeatedly disproved, have no basis in fact, and mask root causes.

Here is a link to today's hearing in the Joint Economic Committee:


This was convened at Senator Schumer's request. The topic is: “Is Market Concentration in the U.S. Petroleum Industry Harming Consumers?”

I probably don't have time to watch it tonight, but will try to get around to it soon.

Hypothesize Cat 4/5 with projected landfall on Ft. Lauderdale/Miami border. Or Tampa Bay, Jacksonville, Charleston or any major coastal city without local refineries and shortages and chaos will result. Cars stalled for lack of gas will slow an already slow evac process.

I live in the Tampa Bay area, and you are quite correct, Alan, that this would be VERY bad. All through the 2005 hurricane season, multiple gas stations were out of everything except diesel. BP in particular had problems. While we did not have problems anywhere like Houston had, we also were not evacuated, nor were we hit directly by a hurricane. I fully expect some gas stations to run out a time or two in the next few months, hurricane or no.

An evacuation would be very bad for St. Petersburg regardless. Assuming that the bridges close, they don't have a really high-capacity evacuation route. They would need to travel at least 20 miles north, along the coast, before coming to a high-capacity road that links into the interstate system. At least Tampa has I-75.


Hello TheDave,

IMO, AlanfromBigEasy did our country a national service in bringing this problem to the IOCs attention. Alan Rocks!!

I posted a reply on possible evacuation fuel shortfalls several days ago when Alan's concern was first mentioned here on TOD. I basically stated that this would be the ultimate public relations disaster for the IOCs. The public would be rabidly foaming at the mouth in anger if fuel shortages resulted in 50,000 hurricane deaths.

Prepositioning refined fuels for Seasonal Hurricane Reserves along the major highways, as required, is cheap insurance for the IOCs compared to the blowback that would result from a hurricane disaster.

Possibly my speculative idea of Hell's Angels gas-stations: where a person can personally arbitrage gasoline prices and safely store fuel could be used to help jumpstart Seasonal Hurricane Reserves. Much safer than storing 5-gal jerry cans in your garage.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Just a little more thinking on Hell's Angel gas-stations for hurricane prone areas:

1. Let's say lots of people like the idea of safely storing 100 gals of gasoline average. So potentially you could have adequate hurricane reserves good to go all along the coasts.

2. Once a storm start bearing in, the Governor could declare 'force majeure' on these stores to free them for evacuations. A typical person would only need one fillup [25 gal] to safely evacuate, thus 75 gal could be sold at whatever the market would bear to those that did not store ahead of time.

3. Since I prepaid and stored 100 gal early--I would know that the station near my house would have my 25 gallons for my vehicle at the earlier low price. My remaining 75 gallons could be sold for $10/gal or more once the normal IOCs gas-stations run empty. So I not only potentially profit, but I help save lives too.

4. If nobody buys my 75 gals for evacuation, then when I return home after the hurricane, then I have plenty of fuel to run a home generator until electricity is restored. Or I can sell this gas to whoever needs it.

Phx doesn't get hurricanes, so maybe Alan and other TODers can further improve this idea.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Todays Telegraph:

Hurricanes are back, world warned by experts

By Tom Stevenson
Last Updated: 9:57am BST 24/05/2007

Hurricane forecasters have warned oilmen, insurers and coastal home-owners to brace themselves for a re-run of the $80bn (£40bn) catastrophe that cut a devastating swathe through the Gulf of Mexico two years ago. Weather watchers put the probability of an "above-normal" hurricane season this year at 75pc.

Experts warned of dire consequences if the summer storms arrive as predicted. At the National Oceanic and Atmospheric Administration, scientists said there would be between 13 and 17 named storms during the hurricane runs until the end of November


they don't have a really high-capacity evacuation route

I'm sorry, I just don't get it. New Orleans has (had?) a public transit service (with over 300 buses), and it has school bus service. Then there's the long-distance and charter bus fleets in the region that could be used, as well as some passenger trains in some areas. I'm sure at last some of this bus fleet exists in all moderately-built-up areas.

Those who have to haul all their live's possessions with them can take their chances driving their own vehicle. All you need to do is dedicate one lane for buses - preferably more than one, but even just one - and you can evacuate at least 18,000 people per hour per dedicated lane. (6 buses per minute, 50 people per bus.) Easily 200,000 people in a day - with ONE LANE for evacuation and ONE LANE for returning, empty buses. More sensibly, dedicate two lanes each way (I'm sure there's a four lane road, right?) and you can evacuate 400,000 people per day. If the round trip is, say, four hours (just a wild guess) then you need 1440 buses - certainly doable if you draw in the charter and other nearby school bus fleets. Yes, this would require extremely competent organization, but it is not, as they say, rocket science.

Instead, from what I saw and heard, most buses in New Orleans were not used and instead suffered water damage. The mind boggles at the level of devotion to car ownership and fear of "collective" solutions.

I should add that if you are willing to cram people on board the buses (80 per bus) and run them around the clock, with two dedicated lanes in each direction, you could conceivably evacuate the entire population of New Orleans a distance of two hours travel by bus (at least 100 miles) in 24 hours. Also consider that highway coaches have large baggage bays, so there is some possibility of taking some people's possessions.

For those wondering if 10 buses per minute is possible: decide on an exact speed for the operation (on the flat) and get the drivers to stick to it. I think it is possible, though I might be wrong on this one.

The total fuel requirement for this is mostly covered by what is already in the tanks of the buses. I seem to recall highway coaches having tanks of about 200 gallons, and getting about 7 miles per gallon. Range > 1000 miles.

e.g. new Prevost coaches: 230 gallon tank. MCI coaches: 222 gallon tank.


5 to 9 mpg highway:

Hello JustZisGuy,

There are some good ideas in these two posts of yours, but I think the bus-drivers never showed up because they were busy trying to get their families out of harm's way first. But I could be wrong as I wasn't there in NOLA.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Thank you.

As for sufficient manpower: again, this is a matter for competent management. The bus drivers' families would be looked after, just like everyone else, with a mass evacuation plan. However, as a perk you could certainly ensure they are one of the first to leave. It would definitely be helpful to have drivers that are not distracted and anxious while driving; knowing your family is safe would help.

Now, even if regular bus drivers were not available, I'm pretty sure the United States has a military... yes, I recall reading that somewhere... :-) a military that spends more money than the rest of the world's militaries combined, in fact. I'm guessing they just might be able to help.

Some background facts:

New Orleans Metro area had 1.2 million people (1 million today)

Evac area over 2 million (in final 9 hours MS gov asked LA Gov for more road space, both sides of I-59, which she was able to give him ~2.5 hours after request). So the issue is not just New Orleans.

First warning was 10 PM Friday (before that 6% probability), airport closed @ 4 PM Sunday, and roads around 5 PM Sunday (slightly different times depending, Airline Highway closed perhaps noon Sunday by moving massive sandbags across it).

"Rule of thumb" is 9 false evacs (I have done 5 in 14 years) for one "real one" that you are glad that you did (say Betsy)

There is only one city on any size within 2 hours of New Orleans, Baton Rouge, and it was overwhelmed (and had extensive power outages as well).

There are three 2+2 limited access highways out of New Orleans, I-10 East, I-10 West and Causeway. In addition, Airline highway to Baton Rouge (clogged with people from side streets), US 11 bridge (feeds into subdivisions in Slidell and almost useless for evac) and US 90 for the West Bank.

Radio reports of backups & congestion started about 1 PM Saturday and contraflow started about 2:30 PM (amazingly quick & efficient changeover). Basically 12 lanes out.

Louisiana law requires the property owners take "reasonable care" to minimize damage. This means boarding up (which I did all day Saturday).

Plan was to use shoulders as extra lanes out. OK Saturday during daylight hours, but accidents multiplied at night and they stopped using it. Too many stranded/broken down cars for use Sunday morning. Still, many people got out Saturday on those shoulders.

City buses seat 47, not 80. We now have about 60 operable buses on any given day.

RTA got enough bus drivers report to shuttle people from around the city to the SuperDome on Sunday and had enough time & drivers after that to shuttle about 1/3rd of the buses 5 miles to the wharves. (A number of drivers shuttled people but caught the tail end of the evac rather than shuttle buses to the wharves).

Paratransit was given a list of handicapped with phone #s Saturday and told to pick up 2 (or 3 if they would fit) and drive to Baton Rouge. This actually worked out fairly well.

School was not yet in session (AFAIK) and school bus drivers would not have reported in any case for evac.

Amtrak evaced their trains from New Orleans (about 1,000 seats). They claim they called the city and offered these seats, but they do not remember who they talked to. No one at the city remembers the call or the offer.

Nagin pleaded with people "not to evacuate an empty seat" and I responded by taking 3 poeple with me Sunday morning.

More analysis later.



Bus driver shortage? Please. Its an emergency. Any dumptruck driver can compentently and legally drive a bus, not to mention that a large portion of regular car drivers could manage, at least on slow-moving freeways. The government controls access to all those parked schoolbusses, probably widely distributed all over the city.

Announce you have 8jillion busses sitting here. Anyone with the appropriate license gets to load his/her family onboard first, gets to use the "bus lanes" to get their family (and 35+ other people) to safety faster, and gets some compensation at the destination (rental car since they left theirs?).

Not like MrRandomTruckDriver is going to steal a bus with 40+ passengers onboard.

Absolutely impractical !

First, 90+% of evacs are dry runs. Unneeded. After they dump off the 40+ pax, they will return the bus safe & sound ? And, once out, how many return trips will they make ?

And just where would you take these people ? The State of Louisana has found shelter space for 190,000 people, BUT this is ALL over the state (Shreveport is 6+ hours away).

*I* would not want to be on the highways with unskilled bus operators bumper to bumper with me trying to get to the entrance ramps !!

A much more minor waiver of safety regs by Texas in the dry run Houston evac (unneeded it turned out) killed 24 people. (Bus failed inspection, but Texas said use it anyway for nursing home evac. Apparently bad brakes caused small fire, add oxygen tanks and 24 died).

There are basically 12 lanes out, we got about a million people out on those 12 lanes in little more than 24 hours. You would take a critical 2 lanes, making a MAJOR shortfall in lane capacity for those wanting to go either East, North or South to friends & relatives (I went East) and you would not transport many more people per lane that what was accomplished.

You see a visual image and drowned buses and THINK you have a better idea. You do not. There were errors made and lessons to be learned, but Louisiana deserves at least an A- compared to the Texas D (Texas killed over 40, fire + heat exhaustion, in a dry run when they had 80+ hours warning).

The 60 or so operating buses of RTA will load up for a one way trip to Baton Rouge in the next evac. Drivers have agreed to do so (a mistake made during Katrina).


Some thoughts on gas prices and supply after reviewing recent posts.

Most TOD posters are very knowledgeable about crude supply, refining capacity, bottle necks, traders, etc., all of which influence price. Simultaneously, all posters here believe in peak oil (but disagree on the date) and so couch their assessment of the recent price/shortage situation from that reality. It is simple logic to explain why we have a problem. Too much demand with regard to supply of both crude and distillate capacity.

The general public, including congress knows none of this. They (we) have been told repeatedly and consistently that the concept of peak oil is nonsense. Peak oil is the friend of the lunatic fringe that hates business and growth. We have also been told repeatedly that liquid fuels and energy will be delivered to us in the future. Just like it was in the past. Please grow the economy and consume because that is good for the energy business, the car business, the banking business, and the country as a whole.

With that latest reality firmly in our minds how does one explain shortages and high prices? We are told to consume and we are, so where is the fuel? There is a huge disconnect. The first thought is that those greedy oil bastards are gouging us. What other answer could there be?

The next most likely answer is that the oil companies, bankers, and government have been lying to us about availability of energy. Both lots of supply and at a low price. But most people don't believe conspiracies so they reject that line of thought. Now, every time that someone of stature (Hubert, Carter, Hansen, Gore, Simmons, etc.) says peak oil is looming they get hammered in the public forum.

So smart politicians have stopped saying it is a demand problem and focus on the supply side. Well why isn't there more supply? What do mean crude oil supply is constrained? All of these questions are put in front of energy companies/suppliers/entities as a way for those people to justify why supply is lacking.

The public needs to hear from the energy companies own mouths why they are not delivering lots of cheap energy. Ultimately someone from the energy companies is going to have to explain (CERA anyone?) why supply can not increase forever at rock bottom prices. That will be the beginning of the public debate about peak oil.

But we aren't there yet. TOD is discussing the ramifications of peak oil while the rest of the country doesn't even know what peak oil is. You can't expect the public to respond rationally to a scarce commodity if they are constantly reassured that it is not scarce.

With that latest reality firmly in our minds how does one explain shortages and high prices? We are told to consume and we are, so where is the fuel? There is a huge disconnect.

You are correct, and this is one reason I hate Exxon's "no peak in sight" stance. If they would acknowledge energy scarcity, maybe the politicians might take note. But until they do, you are right - they think that there is some monkey business going on with supply to drive profits up.

You are correct, and this is one reason I hate Exxon's "no peak in sight" stance. If they would acknowledge energy scarcity, maybe the politicians might take note. But until they do, you are right - they think that there is some monkey business going on with supply to drive profits up.

Robert, care to comment on this from Alfred Cavallo?

Much, but not all, of the political uncertainty regarding production rates can be captured by partitioning conventional oil extraction into OPEC and non-OPEC components. This has been done by ExxonMobil and others; ExxonMobil has concluded that non-OPEC production will peak by 2010. On the basis of this forecast, ExxonMobil has publicly stated that it will build no new refineries, presumably because the crude supplies needed may not be available from OPEC producers. The high and rapidly fluctuating U.S. gasoline prices currently being experienced are due in large part to a shortage of domestic refinery capacity, so that we are in fact already feeling the effects of an imminent non-OPEC peak.

Recently, Ecuador rejoined OPEC, and Angola has also become a member. Over the next two or three years, it will become clear that crude oil is indeed a finite resource, and we will be forced to adapt to much higher petroleum prices as India and China continue to expand their automobile and airline fleets. Fortunately, there are many ways to cope with this new state of affairs, first and foremost by embracing energy efficiency and conservation not as virtues for the elite, but as urgent and universal national goals.

Alfred Cavallo
Energy Consultant
Princeton, NJ, USA

A. Cavallo, Nat. Resources Res. 11 (no. 3), 187 (2002).
M. Rogers, Oil Gas J., 8 Nov. 2004, p. 16.
A. Cavallo, "World oil production: focus on non-OPEC supplies," World Oil, April 2006, p. 103.
A. Shihab-Eldin, M.Hamel, G. Brennand, Oil Outlook to 2025, OPEC Review Paper (2004).
(18 May 2007)


Also see Cavallo's "Oil:Caveat Empty" from the Bulletin of the Atomic Scientists May/June 2005

In the past Exxon has made statements like that when pressed by scientists or other specialists. But the message they keep pumping at the general public is that there is plenty of oil so buy, consume, etc.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

But wasn't it at the last API conference call with bloggers that the API itself basically dismissed the idea of "peak soon" by saying that "if" there was to be a peak, it would be sometime after 2040 (!)

So, if an astute reader were to decide to dig deeper than the NY Times or Washington Post, and by chance came to TOD, how would he/she be expected to digest that the very people supposedly closest to knowledge of what was happening in the oil industry could safely say peak "maybe" by after 2040?

Put that in the mix with ExxonMobil's "no peak in sight" that Robert referenced, OPEC and Saudi Arabia's assertion that they can provide the world with more than enough to past mid century, CERA's gloing reports to industry that there is still a plentiful supply of oil, the USGS (U.S. Geological Survey) assertion of several trillion of oil still to be gotten, and to top it all off, our own U.S. Department of Energy saying through it's EIA long term outlooks that oil, gas, and electriicity will be about as cheap as it is now right out to 2030.

Any one of these of these assertions above could be dismissed by the average but astute reader, but the weight of all of them in combination is a huge mountain of testimony by supposedly authoritive sources to overcome.
And even the TOD staff must come back to the API, and rely on EIA numbers again and again and again.

Peak is not carrying the day with the average public not because the public is "stupid sheepie" as they are often slandered here (and that by the way is a poor way to influence the public, swaying them by insult and humiliation), not because they are completely unalert, but because the MASSIVE weight of testimony and authority keeps pouring it on that "peak" is simply not a part of the mix to be feared. Robert Rapier himself said that "peak" did not figure in the thinking of most folks at near the top of the oil business, pure and simple, right Robert?

So why should the public believe that the price of gasoline is high because there is some kind of supply shortage?

They don't, they won't. And frankly, they can show that they have the evidence of the authorities and experts with them.

AGAIN, this is why the need for a massive mitigation effort to reduce oil and natural gas consumption MUST be based on other evidence and other reasoning: National security, balance of trade, environmental issues, modern and "chic" design (a hugely underrated factor: More people are interested in the Tesla electric than have ever been in little more realistic electric runabouts. Why? It's stylish, chic, the hot new thing).

I will for the first time lay this out as an AXIOM, almost a rule for us to begin to adjust our little heads around: Fear of "peak oil" will simply NOT cause any real effort to be expended to reduce oil and natural gas consumption. It just ain't gonna' happen.

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

Robert Rapier himself said that "peak" did not figure in the thinking of most folks at near the top of the oil business, pure and simple, right Robert?

Absolutely correct. I know people here have a hard time believing this. I know that it is convenient to suggest that refinery investments are lagging because of the knowledge of peak oil. But I am in the trenches here. I have been involved in many of these expansion discussions. The only time future availability has ever come up in any of my meetings is when I bring it up, and that is usually quickly dismissed with a sideways glance and a comment like “They have been saying that for 30 years.” I am telling you inside the industry it is a non-issue. I believe the industry is wrong on this point, but this is what they believe.

Robert, care to comment on this from Alfred Cavallo?

I actually have a graph to that effect somewhere from a presentation XOM once gave. And at first I thought "They recognize Peak Oil." But then an economist told me "No, because they think there are vast quantities of OPEC oil that will continue to grown."

NC, there are many perfectly valid reasons besides peak oil or oil company treachery for gasoline supplies to not be perfectly adjusted to demand at all times and all locations.

The huge number of blends required across the U.S., the fact that these blends change by the seasons, the history of cyclical financial return for refiners, the environmental and NIMBY difficulties in building or expanding refineries, all contribute to the existing state of the market.

And this list is just a start. One need not invoke either evil oil companies or peak oil as an explanation, although such simplicity is surely appealing to some.


At the same time, most Americans greatly overestimate the nation's domestic oil reserves and ability to substantially increase production. More than half (55%) of Americans mistakenly believe the nation holds more than twenty percent of the world’s oil reserves. In fact, the U.S. has less than 3% of this oil. Those who overestimate domestic oil reserves also are most likely to think “we can produce enough oil to reduce our dependence on oil imports.”

Slightly more than half of Americans (51%)think "we can produce enough new oil in the U.S. to reduce our dependence on oil imports,” with 46% disagreeing. This optimism is clearly related to the widespread belief that the nation contains far larger oil reserves than it in fact has.

The press looked pretty bored and they only asked one or two questions. One was why was there such a disconnect between the public's perception of domestic oil reserves and the reality. They blamed it on advertising done by the petroleum industry.

... for the convenience of TV, you can only be one of two kinds of human beings, either a liberal or a conservative. -- Kurt Vonnegut

Yeah, I've been discussing with Maine legislators the concept of rationing and dealing with the upcoming shortages. I discuss planning for the inevitable, so we are ready when it happens. That seems to get past their amygdala easier than a direct discussion of Peak Oil. And the point is, after all, getting some plans in place. Still, for the most part it's the usual range of helplessness, free market fundamentalism/wet dreams and "feds will save us".

cfm in Gray, ME

Down near the bottom of the transcript, I find this:

MR. KING: Okay, and then if you have a 4-percent drop in energy value per volume, that would create a 1.6-percent increase in demand simply due to the fact that the energy density is going down.

MR. PLANTING: I think it would be a few tenths of a percent.

MR. KING: Oh, I’m sorry. My apologies. It would be 0.16 percent. My apologies.

I don't think I quite understand the arithmetic here. If there is 4% less energy density I would expect to need about 4% more of the retail product, but 6% less gasoline. (Leaving aside all the oil consumed to produce and truck the ethanol precursors and the finished ethanol.)

Since the price vs elasticity issues involve splitting hairs over 1% increments in quantity consumed, how then does ethanol feed into this mess? Are the oil products used to produce and ship the ethanol figured in? Where does the 0.16% come from? When we say that the quantity of gasoline consumed is up this year, and we split hairs to reconcile it with DOT vehicle-miles-traveled guesses, is the quantity of gasoline used in such computations adjusted for the increasing adulteration by ethanol?

Russia and the OPEC Mideast were taking huge strides in buying autos.


There were numerous reports about Russian high double digit annual growth in foreign auto sales.

Russian petroleum production growth last year was consumed internally. One is not foolish to suspect Russia may have peaked in oil exports.

The US is growing in oil demand not shrinking.

A report of 11.3% April 2007 increase in Indian auto sales.


These are the good old days.

Thanks much for posting that call Robert! I also have had dealings with API over the years and reading this piece dovetails nicely with my previous experiences. They were of assistance to me in getting the word out to people of my equivalent position in other oil companies and putting their weight behind me when dealing with the Feds. But technical details, forget it, hehe.

It still puzzles me that you maintain support of management claiming 'No Peak Oil'. 'They've been saying that for 30 years', well yes they have. And they started out saying it was 30 or 40 years in the future, not to worry.

Well, now, the clock has been inexorably ticking off that 30 or 40 years and here we are. To even suggest that the top layers of management were not keeping track of that clock as they are forced to go further and further afield, into more and more risky political and physical environments is close to acusing each and every one of the top strategists of being completely blind, if not criminally stupid.

However, as in War, Chess or any other game, it is best to keep your strategy hidden as long as possible. Of course, once peak becomes imminent it is best to shut up about it until you are forced into making a comment and then use misdirection, denial, or whatever means necessary to keep the golden goose laying eggs.

Within the companies it has become need-to-know only info, quite unlike 30 years ago when it was discussed with no problem. At least among ones peers within your own company, lol.

I spent most of the 90s in the Amoco ivory tower in Chicago and it never ever came up as a serious discussion at my lowly level. To be quite honest, any one person knew his job and his job only. Most could have cared less about anything beyond the next cubicle. To call most 'Oil people' was to stretch the definition. Wouldn't know a hydrometer from a thermometer. It was scary. Peak oil? What's that?

Houston, however, (Production headquarters)was a different story entirely. They were the ones that had to find and deliver the next batch of goods and knew they had to go deepwater. Hmm, wonder why? No where else to go...

To think that they couldn't do basic math would be insulting. These were some of the sharpest minds the oil business had.

All through the 90s they researched and scratched around trying to gain expertise in deep water drilling. The bigwigs were planning on deepwater from at least 86 or so in specific terms and in general terms before that. By 89 they openly admitted, no, declared, to all employees within the company that we would probably not be an independant company by the turn of the century. They had to bulk up in order to afford the risk.

For those not able to see the presentations from the consultants to this effect, they sent out a videotape to every single company location. It would be interesting to find one of these and show it now, lol.

Were they the only ones that saw the handwritting on the wall? Of course not, everyone in the business ended up merging. And the reason is they knew it was going to get expensive to get the last of the oil.

Let's throw out just a few other public factoids; Shell writting off billions of bbls. of phony reserves- gee, about to get caught out if they don't? hehe; Shell committing billions to oil sands, hmm, there's that 'no place else to go' thing again; BP getting in bed with the Russians big time, talk about betting the future of the company, witness Shell getting their interest in the Salkind islands HALVED by the Russians after investing billions. This could go on a long time...

These guys have demonstrated a very good grasp of the supply situation down through history. To think that they have suddenly lost this grasp now is simply ludicrous. It is their lifeblood.

7 years in Amoco central surely didn't show me everything, but it did show me a few things and one of the most important things was that I was able to fine tune my BS filter. I spent time in all 6 of the domestic refineries, (3 years in Whiting) all of domestic chem plants, most of the gas plants and 2 different offshore fields. Helped with the fine tuning somewhat.

I am sorry to appear to be taking you to task for this Robert, you have contributed so deeply. But this issue seems so obvious to me.

In addition, it is crucial to me in trying to figure out what the powers that be plan next. By this I mean our political leaders also. They must have known in general terms for at least a decade now, probably closer to 2 decades.

They still attempt to keep the overall strategy veiled. We get to see only short term tactics when they are played, and then only through the eyes of the MSM.

Sorry to take up so much space.