Gas Pains for the Environment

Common sense dictates that some of the more important keys to American energy independence are: more oil exploration and drilling; more natural gas exploration and drilling; more nuclear plants; more wind farms and solar panels—but not more bio fuels because diversion of corn and other plant life to the fuel market increases food prices more than is reasonable.

T Boone Pickens—with the concurrence of Aubrey K McClendon—both bigwigs in the Oil and Natural Gas industries—has created a plan for our energy independence. I checked it out on both their websites. Steven Milloy of Junk Science.com has covered the subject of Picken’s Plan in detail on Townhall about the Iran claims and several other misrepresentations. I’ll take a different tack here.

Pickens states that Compressed Natural Gas [CNG] is the answer to our skyrocketing fuel prices. While it may be part of a solution, it’s certainly not the only answer. There are far more compelling choices noted above.

In the words of Pickens:

“Converting just 10% of America’s vehicles to CNG will lower U.S. oil consumption enough to save nearly 50 billion dollars each year. That’s $50 billion less spent on foreign oil. Let Washington put those billions to work as incentives to build and buy CNG vehicles like the rest of the world enjoys.

This can be accomplished in less than 10 years if you have the right leadership.”

Pickens goes on to give us the mathematical reasoning behind his plan.

“According to the Energy Information Agency [EIA], the amount of ‘Finished Motor Gasoline’ used in 2007 was 9,286 thousand barrels per day.

9,286 thousand barrels/day = 9.286 million barrels/day. This is roughly 10 million barrels/day and 10% of this would be one million barrels/day. (The 9,286 number also appears on the EIA’s ‘Petroleum Basic Statistics’ page.)

1 million barrels/day x $130/barrel* x 365 days/year =
$47.57 billion (”nearly $50 billion”)
*$130/barrel as of July 2008.”

On the McClendon site is offered:

“America uses a lot of oil. Every day, 85 million barrels of oil are produced around the world. And 21 million of those are used here in the United States.

That’s 25% of the world’s oil demand. Used by just 4% of the world’s population.

Can’t we just produce more oil?

World oil production peaked in 2005. Despite growing demand and an unprecedented increase in prices, oil production has fallen over the last three years. Oil is getting more expensive to produce, harder to find and there just isn’t enough of it to keep up with demand.

The simple truth is that cheap and easy oil is gone.”

And:

“Cheaper: Natural gas is significantly less expensive than gasoline or diesel. In places like Utah and Oklahoma, prices are less than $1 a gallon…

“Incentives For Consumers To Drive CNG Vehicles: “A modest federal incentive is now in place for American consumers to buy CNG-fueled vehicles, and some states and cities add to that amount. It applies to the purchase of the Honda Civic GX, the only CNG vehicle currently made in the U.S.

But additional incentives are needed to help consumers convert their current vehicles from gasoline to CNG.

An additional federal incentive is available on the purchase of a home refueling appliance. It’s basically a compressor unit that is installed to draw on the natural gas pipeline in your home.”

Now, let’s consider this plan for a moment. My data and calculations just don’t jive with those of Pickens in many places. Firstly, he claims how clean and efficient a CNG fueled vehicle would be. We should build or convert enough vehicles to equal 10% of the cars on the road. Fine and dandy, but he doesn’t tell you that a CNG vehicle costs about 40% more than a standard car of the same make. Expect conversions of on-the-road cars to be pricey as well. Since supply and demand will regulate the CNG prices, they’ll end up to where the gas prices are now. There’s no economic reason for making the change to CNG. You’ll never get your money back.

And the price of CNG? CNG per gallon [actually shouldn't this be cubic feet?] costs range from [one station at 70 cents] from about $2 to over $4 in California alone. The rest of the Country [impossible to find CNG in the middle states] ranges from about $2.50 to $3.90 per gallon. I saw prices less than $2 in the Tulsa area, but still above $1. And we can’t all go to Oklahoma to fill up, can we? But the prices on Pickens’ price maps don’t have an explanation. Are they for gallons or cubic feet? And what can a car see as miles per gallon [cubic foot.]

Pickens’ Plan conveniently leaves out any discussion of miles per gallon in converted vehicles. According to recent data, a CNG fueled car has only half the range of a gasoline vehicle. Of course, Pickens doesn’t say that either.

Besides, if 10% of the vehicles around are CNG fueled, do you think the per gallon price will stay the same?

I’d look for these two gentlemen leading the charge towards higher prices as ‘fair’ in light of the cleanliness. And, they also want you to buy a government-subsidized appliance to tap into your home natural gas supply to fuel your car. Do you really want to play around with your home gas supply? And—wait a minute! What he’s really getting at is to increase not only automobiles but the number of homes that use natural gas as well. There it is. This whole plan is a clever ruse to increase his income through increased natural gas sales. And I bet he’ll be selling those tapping appliances as well.

But back to the ideas. Pickens’ idea that oil production peaked in 2005 is seriously flawed. For one thing, the Eastern potentates have partially closed the valves to keep the prices high. They need to open them up again. And, coincidentally, the powers-that-be seem to be delaying delivery of oil to keep the prices high.

If we can get the Democrats in Congress to let us drill offshore [where the oil is and not 50 miles away] and in that tiny portion of the landscape called ANWR, World oil production will be substantially increased, mostly in the US. And we can wave goodbye as the Middle East oil money begins to dry up and the Emirs have to reduce the number of wives and sizes of their palaces. Now those would be great reasons for rejoicing here in the US. Maybe the Saudis will have to delay importing sand for their palace moats.

The Pickens Plan features are based on incorrect calculations because they have faulty assumptions. According to Elmhurst College: “Although all fractions of petroleum find uses, the greatest demand is for gasoline. One barrel of crude petroleum contains only 25-35% gasoline. Transportation demands require that over 50% of the crude oil be converted into gasoline. To meet this demand some petroleum fractions must be converted to gasoline. This may be done by “cracking” - breaking down large molecules of heavy heating oil; “reforming” - changing molecular structures of low quality gasoline molecules; or “polymerization” - forming longer molecules from smaller ones.”

Thus Picken’s use of the current per barrel oil price is wrong. It should only be half as much. Thus with the corrected calculation below includes exact figures instead of gratuitous ’roundings.’

928,600 barrels/day x $106.89/barrel* x 50% x 365 days/year =
$18.1 billion
*$106.89/barrel as of Sep 26, 2008.

Quite a difference isn’t it?

But, while we might save $18.1 billion in gas costs, how much does he expect us to pay for CNG? There won’t be any savings no matter how he presents it.

For argument’s sake, the Pickens’ savings figure presented is not $50 billion but only $18.1 billion. But why does Pickens think that money we supposedly save is going to be used by the government? Pickens says: ‘Let Washington put those billions to work as incentives to build and buy CNG vehicles like the rest of the world enjoys.’ So, who pays for our CNG fuel?

Is he proposing a tax equal to his proposed pitiful savings? Where else would the money come from?

No, I think the Pickens Plan is a dud, and we should stay away from it. Thank you Mr Pickens and Mr McLendon, but please be honest in your advertising and stay away from environmental issues that you can only solve with flawed data and conclusions and self serving expectations.