Valero

Recently, someone asked me if Valero was a foreign oil company. It turns out that Valero is the largest refiner in the U.S. with headquarters in San Antonio, TX. The name Valero comes from Misión San Antonio de Valero, better known worldwide as The Alamo. Only recently have I seen Valero retail stations. It has operated retail as Shamrock and Diamond Shamrock.

A Rose By Any Other Name...

This is an excerpt from a Christian Science Monitor article published during the 2008 presidential campaign season:

But what exactly is clean coal? And why are all the candidates so quick to proclaim their support for it?

To answer both those questions: It’s a vague concept with positive connotations. And it’s a vague concept with positive connotations.

http://features.csmonitor.com/environment/2008/10/17/what-is-clean-coal-anyway/

The term is vague and that results in a lot of banter about the term rather than debating the pros and cons of the technology. The term always refers to the burning of the coal because the mining techniques remain the same and are definitely dirty.

“Clean Coal” can mean a number of quite different things. On the minimalist side, some use the term to describe one or more simple coal washing techniques. The “Clean Coal” method that is relevant to today’s concerns about climate change involves the IGCC process and similar processes.

Integrated Gasification Combined Cycle (IGCC) plants operate as follows:

• Coal is reacted with oxygen and steam to produce a synthetic gas (syngas).


• The syngas is cleaned to remove pollutants including sulfur.


• A gas turbine burns the syngas to produce electricity.


• “Waste” heat from the gas turbine and gasification reaction is used to create steam for a steam turbine which produces additional electricity.

IGCC plants produce about half the currently-regulated pollutants (carbon dioxide is not regulated) compared to conventional pulverized coal power plants. In the cleaning step, much of the carbon can also be removed but I suspect that would severely reduce the efficiency of the plant.

The claim to fame of the IGCC process is that carbon emissions can be captured more feasibly than in a pulverized coal power plant. Then the question is: what do you do with the captured carbon dioxide? Petroleum producers have long been injecting carbon dioxide into depleted oil wells to wring out the last bit of oil. However the feasibility of storing carbon dioxide on a massive scale in geological formations remains to be proven. Will it leak out? Will it make the ground unstable?

One of the two operating IGCC power plants in the U.S. is in Polk County, Florida (the other is the Wabash River Plant near Terre Haute, Indiana). The state of Florida will not indemnify the Polk plant for carbon dioxide storage underground, i.e. Polk will not assume the risk of their stored carbon dioxide leaking into someone’s basement and asphyxiating them.

The term “Clean Coal” is overused lately given the scarcity of operational plants. One organization http://www.thisisreality.org/ has been pointing out this fact in a clever cable TV spot. It shows a man in a hardhat providing a “tour” of a “Clean Coal” plant; all that is shown is a wasteland.

The Greatest Show on Earth

That title has announced the Ringling Brothers, Barnum, and Bailey Circus for decades. It came to mind yesterday as I was watching the House Select Committee on Energy Independence and Global Warming hearing on C-SPAN. It must have been the thought of clowns and the dramatic showmanship exhibited by the politicians.

The hearing, “Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives,” was intended to “probe the causes and solutions to America’s oil dependence”.

In reality it was a sample of the pandering I predicted in my previous post on March 18. The committee had 5 oil executives lined up like ducks in a shooting gallery and after 40 minutes of opening statements they started shooting—questions, that is.

Right off the bat Rep. Markey, the chairman, wanted to know how much Exxon-Mobil had allocated to “renewables” for 2008. The answer, $100 million, did not satisfy. Next, Rep. Sensenbrenner wanted to know what each executive thought was the most pressing issue between them and the government. They all mentioned access to new oil fields. That meant they wanted to be able to drill on the outer continental shelf and in the Arctic National Wildlife Refuge (ANWR).

The grilling continued with many questions on the size of the oil industry profits and trying to extract promises from the execs to do foolish things like sacrificing some of their profits to reduce oil prices “to be patriotic”.

A few interesting things were mentioned:

• There is a program popularly known as “splash and dash” where the government, i.e. taxpayers, provide a subsidy of $1 per gallon for a mixture of biofuel and petroleum fuel. This is quite a scam; I will blog about it at a later date.
• “International”, i.e. Exxon-Mobil, Shell, etc., oil companies control only about 6% of world petroleum reserves while “national”, i.e. Saudi Arabia, Iran, Venezuela, etc., oil companies control more than 80% of reserves.
• Given only “supply and demand”, the price of oil should be about $55/barrel. The other half of the price is due to investor speculation, geopolitical risk, and the lower value of the U.S. dollar.
• A topic that is very important to understanding issues relating to energy and global climate change is the scale of the petroleum system (I will be blogging about that in future posts). Mr. Hofmeister of Shell pointed out that the U.S. consumes 20 million barrels per day of petroleum. That equates to 10,000 gallons per second!
• Chevron boasts that they are the world’s top producer of geothermal power. They produce over 1200 MW (enough to supply 7 million homes). Their geothermal facilities are in Indonesia and the Philippines.
• Rep. Hall (D-NY) mentioned the recently-publicized method to create fuel from the CO2 in the air. That sound like “pie in the sky” (or perhaps “gas in the sky”). I will have to investigate that and post my findings in a future blog entry.

“$4/Gallon Gas by Summer!!!”

That is what some news stories are saying. I am surprised I have not seen TV footage of some pandering legislator in front of a gas station giving an angry speech about how Exxon-Mobil is sticking it to us as I did last year. When things go bad we like to have a target for our displeasure and when it comes to high gasoline prices, big oil presents a nice big target.

Actually, big oil has little to do with it. Well then, who or what has caused the steep rise in the price of gasoline? A big part of it is the cost of crude so let’s start with that.

Observed in the news today on Yahoo! Finance:

Light, sweet crude for April delivery rose $2.24 to $107.92 a barrel on the New York Mercantile Exchange.

Crude oil is now priced at an all time high adjusted for inflation. A great many complex factors contribute which include, but are not limited to, the following:

• The supply is limited which makes it a seller’s market. Contrary to popular opinion, big oil (that is, the private companies) lost their power to regulate crude price once demand bumped up against supply (no more glut of oil on the world market) and OPEC flexed its collective muscle. Now the price is largely set by the oil producing countries. In many cases (Saudi Arabia, Russia, Iran, Venezuela, to name only four) these producer countries relish the high crude prices because the cash supports their home economies and keeps their populations reasonably content. At any point Saudi Arabia, for instance, could expand their production capability and produce a surplus which would bring down the global price if they had some reason to do that. One reason would be to thwart a budding U.S. alternate fuels program which would only be financially feasible if crude stayed above some breakpoint, e.g. $50/barrel. Those OPEC-ers don’t like competition!
• Some significant part of the cost of crude is due to it being traded as a commodity. Recently natural resources like oil and gold have been favored by investors. The price has been driven up somewhat by the petroleum traders at the New York Mercantile Exchange and other places.
• Finally, the falling value of the dollar contributes because petroleum is denominated in U.S. dollars. When foreign investors observe our current struggle with the credit crunch they may think that we are taking our eye of the inflation ball. That makes the dollar less attractive and its value drops. Since the inherent value of a barrel of petroleum has not changed, the cost of that barrel must rise to account for the lower value of the dollar.
  
  

Having discussed the cost of crude oil, what are some of the other factors affecting the price of gasoline at the pump?

All of the following facts and figures are available at the Energy Information Agency (EIA) website. This is an energy guru’s Nirvana.

• About 53% of the cost of a gallon of gasoline is due to the cost of crude oil.
• About 19% of the cost of gasoline is due to federal, state, and local taxes.
• About 19% of gasoline cost is due to refining costs. When Katrina knocked out some refining capacity and pipelines in 2005 gas prices spiked high but came down as repairs progressed.
• Another cost factor is suggested in the above item, namely “supply/demand imbalances”.
• If you are further from the refinery (Gulf coast) gasoline will cost more due to transportation.
  

The above contributors to gasoline price is an incomplete list. See “A Primer on Gasoline Prices” on the EIA website for the rest of the story. The following factoids are found elsewhere on the same website.

Factoid Number 1: The U.S. imports the majority of its petroleum and the country that supplies the most is Canada (surprised?). In fact, we import more from Canada than from all the Persian Gulf countries combined!

Factoid Number 2: The U.S. actually exports some crude petroleum. We ship 822,000 barrels per month (a relatively tiny amount) to Canada and they refine it and send it back.

Factoid Number 3: The U.S. exports some refined petroleum products. This goes by and large to Caribbean and Latin American countries that do not have sufficient refining capacity of their own.

Nuts about Biodiesel

There is considerable interest in the jatropha nut as an oil source for biodiesel. Jatropha has a high oil content and it is poisonous. It is used for illuminating oil in many nations including India. A major benefit, if it proves to be useable for motor fuel, is that it grows in marginal soils that are unfit for food crops.

Yikes! FutureGen Cancelled!!!

I can't believe it. The highly touted demonstration plant for the future of clean coal blitzed.

See http://www.sciam.com/article.cfm?id=clean-coal-power-plant-canceled-hydrogen-economy-too&page=1

Energy Security

The February 11, 2008, edition of Newsweek magazine contains an interview with Frederick W. Smith, the founder of FedEx. He is a member of the Energy Security Leadership Council, a group of transportation executives and retired military officers. The article points out that one cause of the Japanese attack on us at Pearl Harbor was our embargo against them when we were an oil-exporting nation. Smith also points out that the defeat of Nazi Germany was in part due to our destruction of their oil supplies ( a little known fact is that over 90% of the fuel for Nazi planes, trucks, tanks, etc. was synthetic; produced from coal). Smith also states that a major factor in both wars against Saddam Hussein's Iraq were because of the threat to our oil supplies.

About 40% of our defense budget goes to ensure a supply of petroleum. So the true cost of our gas, jet fuel, and diesel fuel in considerably higher than the price on the pump.