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Growing a New Energy Economy

The following is the introduction to the forthcoming second edition of Biodiesel: Growing a New Energy Economy, by Greg Pahl.

We are running out of oil. This is an undeniable fact. The only remaining question is not if but when.

However, pumping the global oil barrel dry is not the immediate problem. The more imminent danger is what happens when demand outstrips supply: dramatic price increases for oil, followed by exponential price increases. Recent record-high gasoline prices of well over $3.60 per gallon in the United States are only a hint of what is coming in the near future. Since 2000, oil prices have quadrupled, and we can expect more of the same in the years ahead. The main problem is that, even now, annual demand for oil is four times greater than the volume of new oil reserves discovered (which peaked back in the late 1960s and early 1970s). Moreover, many of the highly publicized “huge” new recent oil finds will add only a few days’ supply to the global oil market, which currently consumes 86 million barrels a day. By 2025, that demand is expected to climb to around 121 million barrels a day, according to the U.S. Energy Information Administration. This is troubling, since a number of industry experts now say that global production will probably never exceed 100 million barrels a day due to future supply limitations. What’s more, as demand continues to increase, production from most of the largest existing oil fields is declining at a rate of 5 percent or more annually, and world production of oil is expected to peak sometime in the near future. Sooner or later, the line on the chart for demand that’s heading up will cross the line on the chart for supply that’s coming down. Whenever that occurs, we will have reached the critical “tipping point.”

The utter chaos this would cause in the global economy is almost too frightening to contemplate. But we’d better take a good, close look, because the date for this scenario will arrive long before we actually run out of oil. And this date is coming much sooner than most people realize. The experts, as always, are divided on when it will take place. One of the most sanguine views, promoted by the U.S. Department of Energy, maintains that oil production won’t peak until 2037. Many observers, though, feel this estimate is far too optimistic, especially considering the huge increase in demand from countries like China, which overtook Japan as the world’s second-largest oil consumer in 2003. Renowned petroleum geologist Colin Campbell estimates that global extraction of oil will peak around 2011. Geophysicist Kenneth Deffeyes says the date for maximum production was December 2005.

While these predictions may sound alarmist, the massive 2004 accounting scandal involving oil giant Royal Dutch/Shell and the subsequent 22 percent (4.35 billion barrels) cut in the company’s petroleum reserve estimates is viewed by some industry experts as just the tip of the iceberg of overinflated reserve figures. If these calculations are as misleading as some people suspect, then we are in for a very rough ride in the very near future. Regardless of who turns out to be right about the timing of oil’s tipping point, most of today’s middle-aged population probably will live to see the consequences. They may wish they hadn’t. And as for the younger generations, well, they just may be out of luck.

Nearly two-thirds of the world’s proven oil reserves are located in the 13 countries that make up the Organization of the Petroleum Exporting Countries (OPEC): Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. The fact that the majority of these nations are located in the increasingly unstable Middle East is not especially reassuring. And the fact that the former colonial powers of Europe, and more recently the United States, have been involved in numerous wars in the region in an ongoing attempt to protect the uninterrupted flow of oil is even more troubling and does not augur well for the future. Figure 1, a chart from the U.S. Energy Information Administration, shows where most of the world’s remaining reserves are located.

[Figure 1. World Proved Oil Reserves by Geographic Region as of January 1, 2007 U.S. Energy Information Administration]

Most of the global economy is so dependent on the price of oil that any substantial price increase means big trouble. The huge price increases for oil predicted for the time after we reach the tipping point will lead unquestionably to much higher food prices, as well as to disruptions in the increasingly globalized system of food production and distribution. As a result, millions of people, particularly in struggling Third World countries, almost certainly will starve. Prices for most other goods also will rise dramatically. A severe global economic depression, massive unemployment, political instability, and more international conflict are almost certain to follow. It’s conceivable that industrialized society as we know it could collapse—even before we are decimated by the consequences of global warming caused by the use of fossil fuels.

This second scenario, which environmental activists and scientists have been warning about for many years, is beginning to look increasingly likely. Eight of the warmest years in recorded weather history have taken place in the past 10 years, according to the United States Historical Climate Network. And it’s not just environmentalists who are worried. In February 2004, a secret Pentagon study that the Bush administration had tried to suppress was leaked to the press. The study warned about the possible consequences of sudden climate changes caused by global warming and offered a terrifying picture of a global catastrophe costing millions of lives due to wars and natural disasters. The threat to worldwide stability posed by global warming far surpasses that of terrorism, according to the study. More recent studies and reports by scientists from around the world have simply confirmed the bad news about global warming. These scientists have added increasingly urgent calls for immediate action to try to halt—or at least slow down—some of the worst effects of global warming. Will the international economic meltdown be caused by oil prices or by global warming? Either way, we’re in deep trouble.

Running Out of Time

Is there any hope of avoiding this terrible scenario? Perhaps, but time is rapidly running out. In fact, it may have already run out. If so, we won’t know for sure until it’s too late to do anything about it. Ominously, a number of nations that have been working tirelessly to get the United States to sign the 1997 Kyoto agreement to cut greenhouse gas emissions recently have begun to suggest that, in the absence of meaningful progress, the world should “prepare for the worst.” Unfortunately, many politicians—especially in the United States—are still in denial and have long resisted doing anything about cutting greenhouse gas emissions, saying that it “would damage the U.S. economy” or “cost jobs.” What these head-in-the-sand politicians fail to grasp is that if the worst-case scenarios about global warming come to pass, the catastrophic economic damage caused will be far worse than any possible costs of trying to meet the targets of the Kyoto accord. This kind of shortsighted stupidity imperils all of us, and it is particularly galling to the millions of concerned citizens around the world (and even in the United States) who rightly view the United States as the world’s largest consumer of energy—and the biggest polluter. This country, with just 4.5 percent of the global population, consumes about 25 percent of the world’s energy and releases roughly 25 percent of the global carbon dioxide emissions, according to the Energy Information Administration. Without active, constructive participation by the United States to help deal with these critical issues, the rest of the global community is effectively stymied. The recent increased public awareness in the U.S. about global warming is an encouraging sign, but that awareness must be translated into immediate action if it is going to do any good.

It’s going to take a huge cooperative effort on the part of the entire global community to wean ourselves from our present addiction to fossil fuels in general, and petroleum in particular. Many alternative strategies that rely on various forms of renewable energy, including wind, solar, and geothermal, are gaining in popularity. But running most vehicles directly on these forms of renewable energy, given present technology, is not practical. “And even though technology allows for greater fuel efficiency than ever before, cars and other forms of transportation account for nearly 30 percent of world energy use and 95 percent of global oil consumption,” according to the Worldwatch Institute.

Ninety-five percent of global oil is consumed for transportation! This statistic points right to the heart of the problem and emphasizes why we are so vulnerable. Some people suggest that compressed natural gas (CNG) could serve as a substitute for oil. But using CNG would, at the very least, require expensive retrofitting of vehicles. Unfortunately, natural gas, though cleaner-burning, is still a fossil fuel, and natural gas prices have been soaring while world reserves are shrinking almost as fast as those for oil. Hydrogen-powered fuel cells are widely viewed as the ultimate solution for the transportation sector. But hydrogen is produced by the electrolysis of water, and the electricity required to produce enough hydrogen to fuel all the cars in the United States would require four times the present capacity of the national grid (unfortunately, the present grid relies on nonrenewable energy sources for over 90 percent of its capacity and is barely able to keep up with present demand). What’s more, there is no infrastructure for the production and delivery of the vast amounts of hydrogen that would be required. The transition to hydrogen is, at best, a long, long way off.

Available Now

In the meantime, there is one liquid fuel that is both renewable and can be used in a wide range of vehicles without any modifications to the engines. That fuel is biodiesel. For many years, farmers, environmentalists, and renewable-energy advocates in Europe and the United States have been promoting the use of biodiesel as an alternative to at least a portion of the petroleum-based diesel fuel market. But it wasn’t until the attacks on the World Trade Center on September 11, 2001, that most Americans finally began to realize the implications of their overreliance on oil—especially Middle Eastern oil—and its heavy economic, political, social, and military costs. The U.S.-led military campaign in Afghanistan and the subsequent ill-advised invasion of Iraq, with its terrible and costly aftermath, have added urgency to the movement seeking to wean the United States from its almost total addiction to petroleum-based fuels.

While many strategies are currently being pursued to accomplish that end, biodiesel is one of the most intriguing and, until fairly recently, one of the least publicized in the United States.

In most of Europe, the general public is aware of biodiesel due to long-standing governmental support, but the sudden emergence of biodiesel from relative obscurity in the United States in the past few years has taken many Americans by surprise. While other renewable-energy strategies such as solar, wind, ethanol, and fuel cells have received most of the media attention, a group of Midwestern soybean farmers and other entrepreneurs have been quietly building biodiesel production capacity and infrastructure. At the same time, a number of federal and state agencies and independent organizations have been testing and evaluating biodiesel performance and setting up fuel production standards, laying the foundation for a new sustainable energy industry. Based on that firm foundation, the biodiesel industry is experiencing dramatic growth, both in production capacity and in the number of retail fuel outlets across the country. Despite that growth, however, many people still have only a vague idea of what biodiesel is, and fewer still understand that it can be used for more than fueling diesel-powered cars or pickup trucks.

What, exactly, is biodiesel, and why is it generating so much excitement? First, it’s important to understand that even though diesel is part of its name, pure biodiesel does not contain petroleum diesel or fossil fuel of any sort. Biodiesel generally falls under the category of biomass, which refers to renewable organic matter such as energy crops, crop residues, wood, municipal and animal wastes, et cetera, that are used to produce energy. More specifically, biofuels, a subcategory of biomass, includes three energy-crop-derived liquid fuels: ethanol (usually referred to as grain alcohol), methanol (usually referred to as wood alcohol), and biodiesel. Technically a fatty acid alkyl ester, biodiesel can be easily made through a simple chemical process from virtually any vegetable oil, including (but not limited to) soy, corn, rapeseed (canola), cottonseed, peanut, sunflower, avocado, hemp, and mustard seed. But biodiesel can also be made from recycled cooking oil or animal fats. There have even been some promising experiments with the use of algae as a biodiesel feedstock.

And the process is so simple that biodiesel can be made by virtually anyone, although the chemicals required (usually lye and methanol) are hazardous and need to be handled with extreme caution.

Best of all, biodiesel feedstock sources are renewable and can be produced locally. While fossil fuels were formed over millions of years (and are being rapidly depleted), biodiesel feedstocks can be created in just a few months. The source of the energy content in biodiesel is solar energy captured by feedstock plants during the process of photosynthesis, inspiring some to refer to the fuel as “liquid solar energy.” And the plants grown to make more biodiesel naturally balance most of the carbon dioxide emissions created when the fuel is combusted, eliminating a major contributing factor to global warming. What’s more, the resulting fuel is far less polluting than its petroleum-based counterpart; biodiesel produces lower quantities of cancer-causing particulate emissions, is more biodegradable than sugar, and is less toxic than table salt. And because it can be produced from domestic feedstocks, biodiesel reduces the need for foreign imports of oil, while simultaneously boosting the local economy. No wonder there is so much enthusiasm, especially in much of the agricultural community, about biodiesel: farmers can literally grow their own fuel.

While biodiesel may be a relative newcomer to the United States, in Europe it has enjoyed widespread acceptance as a vehicle fuel (as well as a heating fuel in some countries) due to deliberate government tax policies that, until very recently, have favored its use. In most European countries, diesel-powered cars represent a substantial proportion (40 to 50 percent) of the automobile fleet, and biodiesel powers many of them. The expansion of the European Union in May 2004 offered a good deal of additional potential for continued growth in biodiesel production and use in the so-called new accession nations. There is good potential for the industry in many other countries around the world as well.

What’s Inside

This book describes biodiesel’s dramatic growth and its potential to help pave the way for an eventual transition from fossil fuels to a wide range of renewable energy sources. It is divided into four parts. In part one we begin this exploration with a look at biodiesel basics. We’ll travel back in time to the nineteenth century to discover the roots of the device that has made the whole biodiesel movement possible—the diesel engine—and we’ll learn about its tireless inventor, Rudolf Diesel, and his renewable-fuel vision that is only now being realized. Then we’ll fast-forward to the 1970s to see how and why biodiesel was developed. We’ll also go through the biodiesel production process and examine the many (sometimes quirky) raw materials from which biodiesel can be made, and we’ll explore the fuel’s environmental impact. Finally, we’ll focus on the modern diesel engine and the many uses of biodiesel fuels.

In part two we’ll travel to Europe, the leader in global biodiesel production, to see why Germany, France, and Italy combined produce nearly five times more biodiesel than the United States, and how they managed to gain such a decisive lead. We’ll also visit the other European nations that have expanded their biodiesel industries and check out some of the more interesting developments there as well. Then we’ll travel around the world to see other new biodiesel projects from India to Australia and Japan to Brazil.

In part three our biodiesel odyssey finally arrives in the United States. We’ll look at some early biofuels projects sponsored by Henry Ford and see how the fledgling biofuels industry was eliminated by Big Oil and other business pressures. Then we’ll follow the revival of biofuels after the 1973 OPEC oil crisis and the subsequent development of the biodiesel movement in the United States. We’ll also learn about some of the main players in today’s biodiesel industry and take a look at the complex world of biodiesel politics. Then we’ll hear from a number of high-profile celebrities about their use of biodiesel and also see what many different people all across the country are doing with this renewable biofuel today.

In part four we take stock of the current state of the industry and explore some of the key issues that need to be confronted if it is going to be successful. We’ll also look at a number of concerns that some observers have raised about the dramatic growth of the industry. And, finally, we’ll look into a crystal ball with some of the industry’s key players to try to envision the outlines of where the biodiesel industry may be headed in the future.

While biodiesel is not the single solution to all our energy problems, it can be part of the transition from our current near-total dependency on fossil fuels, while at the same time creating jobs, assisting farmers, reducing harmful emissions, and promoting greater energy security. Biodiesel, along with a wide range of other renewable energy strategies, coupled with dramatically increased energy efficiencies and conservation, should help us to meet our energy needs as we make that transition. However, in order to achieve that goal, we need to increase the pace of the shift to a new energy economy—today, immediately, while there’s still time.

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