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Wired: Why $5 Gas Is Good for America

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  • Felix Kramer
    Long story, better to read in print (on newsstands now) because of many graphics and sidebars. Before the entire main story we ve started with sidebars about
    Message 1 of 1 , Nov 29 1:09 PM
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      Long story, better to read in print (on newsstands now) because of many
      graphics and sidebars.
      Before the entire main story we've started with sidebars about ethanol and
      PHEVs (the author assigns PHEVs to technologies that won't be competitive
      until we have $70+/barrel oil)

      Here's what author says about PHEVS in the main story:
      And some seemingly distant options are right under our noses; consider the
      plug-in version of the hybrid car.

      Grid electrons propelling cars for short trips
      Tank up in your garage - 64 cents' worth of kilowatts will take you as far
      as a gallon of regular. Too bad the batteries in today's hybrids won't go
      more than a few miles. Extend the range to 30 miles (cost per vehicle:
      $10,000) and add the ability to suck power from the grid, and you have a
      dual-fuel vehicle that kisses gasoline good-bye for short trips. The
      electrons can come from dirty coal, clean solar, or anything in between.
      Fuel cost: $120/b.o.e.* (including battery)
      Environmental friendliness: 3.5 of 5
      Technological maturity: 4.0 of 5

      Fill 'Er Up With Frankenfuel
      Drilldown: Ethanol
      By Spencer Reiss

      J. Craig Venter is stuck in lunch-hour traffic among the endless office
      parks of Rockville, Maryland. We're sitting in his Toyota Highlander
      hybrid, a vehicle he finds satisfactory - for now. "I wanted a fuel cell
      car that could run on biohydrogen," he says. "Unfortunately, they're not
      available. Not yet, anyway."

      Venter isn't one to wait. After all, this is the guy who shocked the
      scientific world by sequencing the human genome years ahead of what anyone
      else thought possible. Then he set sail in the Sorcerer II, his 92-foot
      research vessel, to create a library of the DNA he found floating in the
      ocean. Last June, he launched Synthetic Genomics, a private company that
      gives an entrepreneurial push to his Rockville-based Institute for Genomic
      Research. Running on $31 million from private investors, the new shop has
      the kind of business plan only Venter could propose - make micro­organisms
      from scratch to solve world-threatening problems. First up: Clean energy.

      "Breeding and selection can take you only so far," he says. "Look at what's
      going on with this planet - we need to do some accelerated evolution."

      His initial target is biofuel, particularly ethanol, a mainstay alternative
      fuel. Today the alcohol is made by fermenting sugarcane or corn. Venter and
      others, however, are focusing on material that's low in sugar but rich in
      cellulose: corn husks, straw, and other waste that farmers and the rest of
      the agricultural industry discard by the ton. Enzymes transform the
      cellulose to sugar so it can be converted to alcohol, but the enzymes
      available today are secreted by microorganisms that thrive only under
      strictly controlled conditions. That makes them expensive. Moreover, they
      don't convert cellulose to sugar very efficiently. So Venter and his team
      of researchers - 29 and counting - are combing their database for DNA
      sequences that can make a hardier bug which produces a more capable enzyme.

      A straw-munching bug customized for maximum efficiency would eliminate the
      ethanol industry's long-standing problem: high costs. A Canadian company
      called Iogen is building the first commercial ethanol-from-cellulose
      factory with a production price equivalent to oil at $67 a barrel. Venter
      thinks he can cut costs by a third or more. And he has another way to win:
      the prospect of GMO cellulose containing more energy than conventional crops.

      "Today's plants are optimized to make food for humans, not fuel for cars,"
      he says. "There are literally millions of better ways out there, hidden in
      genetic code and in our understanding of how the code controls cell
      metabolism. Our job is to find them."

      Venter isn't placing all his bets on ethanol. On the third floor of
      Synthetic Genomics' headquarters, flasks of green goo - cyanobacteria - are
      arrayed under sunlamps. Photosynthesis, it turns out, produces not only
      oxygen but traces of hydrogen.

      The Sorcerer's voyage uncovered thousands of unique gene families that
      metabolize light, Venter says, any one of which might hold the key to
      something as startling as giant pools of algae pumping out hydrogen under
      the desert sun.

      "Plants are the original hybrids," he explains. "They run on sunlight
      during the day and burn carbohydrates at night. And there are millions of
      them out there that we've just started to find." The right bacterium could
      give Venter the information he needs to build an organism that produces
      unlimited quantities of clean, renewable fuel - and to turn his Highlander
      into the automobile he really wants.

      The original gasoline alternative (and a common additive) is produced by
      fermenting and then distilling corn or sugar. But even billion-dollar
      subsidies and other inducements haven't made ethanol competitive with
      gasoline. Research - most notably in genomics - now focuses on making it
      from less costly waste cellulose. Corn stalks and husks provide a ready
      supply, but novel crops like switchgrass might be more efficient.

      Current cost: $60-75/b.o.e.*
      Environmental friendliness: 2 of 5
      Technological maturity: 3 of 5
      Carbon emissions: 3 of 5

      Potential oil killer: No
      US reserves: Renewable
      Global reserves: Renewable
      Global production 2004: 256 million b.o.e.


      Why $5 Gas Is Good for America
      The skyrocketing cost of oil is sending pump prices soaring. But it's also
      subsidizing research into new technologies that can change the energy game.
      By Spencer ReissPage 1 of 1

      At the climax of his book Twilight in the Desert, Houston investment banker
      and energy guru Matthew Simmons describes a visit to the world's most
      powerful oil company, Saudi Aramco, in Dhahran. Simmons listens in horror
      as a senior manager reveals the kingdom's darkest secret. The old ways no
      longer suffice. To keep their aging wells productive, the Saudis now rely
      upon one information age prop after another: advanced analysis of rock
      cores, 3-D seismic imagery, software for diagnosing underground oil flows -
      all integrated using something called fuzzy logic. Fuzzy logic? The Aramco
      man tries to explain the science of complex systems and partial
      information, but Simmons hears only tidings of a bleak future. Obviously,
      the end of energy as we know it is nigh.

      Well, blow us down - algorithms in the oil patch! What next?
      Hydrogen-spewing superbugs? In a word, yes. And that's just the beginning.

      Simmons' techno-cluelessness would be funny - calling Jed Clampett with his
      12-gauge! - if he weren't the spearhead of a whole hand-wringing school of
      petro-pessimism. The oil fields are running dry, the gas gauge is on empty,
      the American way of life is doomed - these ideas bob like plastic shark
      fins on the storm surge of current oil prices. But the history of energy
      innovation suggests something very different - and a lot less dire.

      Yes, a few billion newly motorized citizens of BRIC - that's
      economist-speak for Brazil, Russia, India, and China - have turned up
      unexpectedly at the filling station, pushing prices sharply north. And yes,
      the oil world has lately endured more than its usual share of ugly
      headlines: insurgency in Iraq, unrest in Venezuela, mayhem in the Gulf of
      Mexico. And, OK, all those air-conditioned Cadillac Escalades are thirsty
      beasts. A million extra barrels a day burned here, a million fewer pumped
      there, a little geopolitical instability, and suddenly the price of the
      stuff that makes the wheels go around is flirting with historic peaks.

      All of which would be seriously alarming but for one happy fact: We've
      never had more options for keeping those wheels turning. Aramco's fuzzy
      logic is just one of a multitude of new tools and fuels - some proven, some
      in the works, and some wildly speculative. The main thing standing between
      those possibilities and your gas tank is cheap crude oil that costs Aramco
      barely $3 a barrel to bring to the surface.

      So rising oil prices are more than just an irritant or even an ominous nick
      out of the GDP. They're an invitation to corn and coal and hydrogen. For
      anyone with a fresh idea, expensive oil is as good as a subsidy - with no
      political strings attached. Indeed, every extra penny you pay at the pump
      is an incentive for some aspiring energy mogul to find another fuel.

      For the better part of a century, cheap oil has fatally undercut all
      comers, not to mention smothered high-minded campaigns for conservation,
      increased efficiency, and energy independence. But growing demand is
      outrunning the oil industry's carefully computed supply curves, bidding up
      long-term expectations for the price of energy. The long term may not mean
      a lot when you're standing at the pump, but the oil industry lives in a
      world where big projects take a decade to build and the checks that pay for
      them have eight or nine zeroes. Crude hit $70 a barrel last August, but oil
      companies have learned the hard way how quickly prices can crash. They
      adjust their expectations accordingly - downward.

      For years, the industry's long-term benchmark was $20 a barrel in today's
      dollars; to get a green light, new investments needed to be profitable at
      that level. Now the industry is counting on prices to settle near $30. Some
      aggressive CEOs believe they'll stay as high as $40.

      The changing outlook opens horizons - for conventional drilling, sure, but
      also for alternatives. Some new technologies merely produce more crude. But
      others tap energy supplies that have nothing to do with black pools under
      the Middle East.

      Big Oil is already reaping the benefits of innovations developed in the
      1990s, when long-term forecasts still pegged oil at $20 a barrel. Take
      digital oil fields - sensor-laden pumping operations under remote control -
      and ultradeep offshore platforms that drill beneath miles of water and rock
      to get at previously inaccessible deposits. But with the high end of
      long-term expectations hitting $40, novel energy sources are becoming
      attractive. Natural gas that used to be burned as an unwanted oil-field
      byproduct is being compressed into liquid fuel, and gooey tar sands are
      being shoveled out of the Canadian countryside to extract the embedded

      Push the long-term price forecast above $40, and more exotic possibilities
      come into play. Remember Jimmy Carter's synfuel program, which aimed to
      turn huge US coal reserves into gasoline? Three billion dollars in federal
      research money is now committed to making it happen. Corn, sugar, and
      soybean farmers hope rising prices can do what billions in subsidies and
      tax-funded research couldn't: make ethanol and biodiesel cost-effective.
      Smarter money is betting that using plant waste will prove more economical.
      These technologies join compressed natural gas, already widely used where
      it's worth spending extra money for cleaner exhaust.

      Sustained crude prices above $60 would make feasible technologies that
      today seem too expensive or entirely speculative. It's hard to see demand
      for oil surviving long at such a cost. But given a push now, some nascent
      technologies - hydrogen, most obviously, but also hydrocarbons locked away
      in methane hydrates - could become viable at the end of a long road.
      Technology breakthroughs are the key here: For instance, Shell has found a
      better way to extract oil from shale, reviving a long-abandoned resource.
      And some seemingly distant options are right under our noses; consider the
      plug-in version of the hybrid car.

      The cost of developing entirely new energy supplies is daunting, but the
      money is available - and we're not talking about the $14.5 billion porkfest
      served up by Washington's recent energy bill. The global oil industry will
      rake in three quarters of a trillion dollars this year. And when that kind
      of money is up for grabs, investors are never far away.

      But it's not just energy producers and their shareholders who should be
      smiling about today's high prices. Conservation your thing? Savor the long
      faces worn these days by Hummer salespeople. Eager for energy independence?
      There won't be any wars for oil in Colorado shale country. Praying for
      reductions in atmospheric carbon? Synthetic diesel made from natural gas
      would be a step in the right direction.

      True, fuzzy logic can't refill spent oil wells. But neither are digital oil
      fields and coal-to-liquid processing some last, forlorn rest stop on the
      highway back to the Stone Age. It was James Watt's steam engine that
      chained sailing ships to their berths - not lack of wind. Petroleum sent
      coal and horse power packing, even though mountains of coal waited to be
      mined and plenty of stallions remained in the barn. The oil shocks of the
      '70s gave a boost to funny little cars from Japan, and mid-20th-century
      American industrialism never recovered.

      Could a similar fate await Aramco's finest? It's not written in stone that
      humanity has to propel itself with petroleum alone. Happy as the oil kings
      may be to sell today's $60 barrels, they're playing with fire. Simmons
      himself inadvertently makes that point when he frets that Aramco depends on
      technologies "unheard of a decade ago." That's the whole point of
      innovation: There's no telling where the next game-changing energy resource
      will come from. But motivating tens of thousands of scientists and
      engineers to look for it increases the odds of finding the path to a
      happier, maybe even cleaner, planet.

      So what's a price-shocked, carbon-afflicted highway jockey to do? Keep
      driving. In fact, drive more. The longer gas stays expensive, the higher
      the chance we'll see alternatives. Put that pedal to the metal. And smile
      when you see a big black $3 or $4 out in front at the gas pump. Those
      innovators need all the encouragement they can get. Shale oil, uranium,
      sunlight - there's enough energy out there for a dozen planets. Where we'll
      all park is another matter.

      Contributing editor Spencer Reiss (spencer@...) wrote about solar
      energy in issue 13.07.

      As Prices Rise, Technologies Emerge
      Page 1 of 1

      Energy innovations that once seemed off-the-charts expensive are becoming
      potentially profitable alternatives. The reason: rising long-term oil
      prices, which make these methods more cost-effective by comparison. As
      prices push through each range, novel ideas - some proven, some speculative
      - get a closer look.

      Long-term price per barrel: $20-$30
      Energy Sources Unleashed:
      Ultradeep offshore Wells
      Futuristic gear for tapping formerly inaccessible deposits

      Gas to Liquid
      Natural gas converted into diesel fuel

      Tar sands
      A sludgy mélange of petroleum and gravel

      Digital oil fields
      Networked drilling rigs and remote-controlled wells

      Long-term price per barrel: $30-$70
      Energy Sources Unleashed:
      Natural Gas
      Conventional compressed methane - clean, efficient, and explosive

      Coal to Liquid
      An abundant energy resource transformed into diesel

      Vegetable oil pressed from soybeans and palm

      Gasoline-compatible alcohol fermented from corn, sugar, and cellulose

      Long-term price per barrel: $70 & up
      Energy Sources Unleashed:
      Methane hydrates
      A crystalline amalgam of methane and frozen water

      The most common element in the universe, and a superclean energy source

      Plug-in Hybrids
      Grid electrons propelling cars for short trips

      Environmental friendliness:

      Technological maturity:

      Oil shale
      High-grade petroleum melted out of sedimentary rock
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