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PetroleumRx > Uncategorized  > Transportation after 2025 – without oil?

Transportation after 2025 – without oil?

Sharing this note sent to PRX staff on April 13, 2016:


Team –


I attended an interesting presentation last night at ASU’s Skysong.  In that, Dr. Mike Tamor presented a concept that I think has its genesis at Ford Motor Company and has been floated so far to a number of large electric utilities and other auto makers.  Our industry, petroleum marketers, is an afterthought at this point, but I figured I’d raise some awareness of the concept here.  It’s the first thing I’ve seen that does two seemingly incompatible things: 1) drives down CO2 emissions in the US, and 2) can be something petroleum marketers and their associations can justifiably back politically.  I’ll try to recap the gist of the presentation:


CO2 emissions source from many industrial sectors, but the two largest are the stationary power plants that produce our electricity and the transportation sector that runs mostly on oil.  Their carbon outputs are similar in size and both face inevitable mandates to cut that down.  Currently, they are doing so in isolation from each other.  For the power industry, cutting carbon is pursued by switching the fuel source, mostly from coal to gas, or even better, from hydrocarbons to wind or solar.  For the auto industry, carbon reduction is achieved via greater efficiency or a switch to greener fuels.


There is a huge differential in costs, however, and that’s what Ford and its allies hope to exploit here.  The EPA estimates the current cost of carbon mitigation (per metric ton) to the auto industry at $155.  Ford puts that figure at $200.  Both expect that cost to rise at each new round of seeking more efficiency.  By contrast, the cost for power companies to achieve the same carbon reduction is between $15 and $40, depending on the source.  Furthermore, this cost has been in decline and is projected to decline further (wind and solar is getting cheaper).


What Ford is after is a way to divert money mandated to achieve greater fuel efficiency, and instead push some of that over to the power sector to accelerate carbon reduction there, where it’s about ten times cheaper to have an impact.  Specifically, they are proposing that Auto OEM’s be allowed to trade in Renewal Energy Certificates (REC), as the power industry does already, and use those in lieu of achieving some of their efficiency targets.


The effects that were touted:


1) Total carbon reductions should accelerate, compared to business as usual, mostly from faster collection of the low-hanging fruit in the power sector.

2) Consumer costs for autos will be lower than BAU, because less will be invested in achieving efficiency the harder way.

3) The power sector will transition rapidly to purge hydrocarbons as a fuel source, funded by automakers, and not rate payers.


The effects that were left unmentioned, but should be evident:


1) The coal industry, and later, the natural gas industry, would be savaged by this team-up of Oil/Auto and Electric Utilities.

2) The status quo of oil-based transportation would be prolonged, to be dealt with later, after the power sector is mostly green and its marginal costs of production are historically low.

3) That would set the stage for using cheap, green power to either directly electrify transportation (bad for our guys), or to help produce more carbon-neutral fuels to replace current fuels.  The latter option would drop right into our current fleet and fuel distribution systems.





Bill Smallwood