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Some bumps in the road to saving the planet.
By Judith Lewis
August 15, 2008

IT SEEMED, AT THE TIME, like such a good thing for the planet. In the winter of 2005, I turned in my red, gas-hungry Jeep Wrangler for a near-new, diesel-burning Volkswagen Beetle. Inspired by a number of pioneering friends, I would fill my little green slug Bug with a nontoxic, sweet- smelling fuel made from vegetable matter called biodiesel.

Unlike cars that run on straight, unprocessed vegetable oil, my BioBug required no mechanical conversion. Diesel fuel can be made out of any kind of grease: petroleum, lard, soybean oil, even, as one New Zealand powerboat racer proved two years ago, liposuctioned fat from human hindquarters. With a weatherproof shed and two 55-gallon drums, I turned my driveway into a home fueling station. And there, in full view of my greener-than-thou neighbors, I smugly filled my tank.

I never expected to save much money. Unless you brew it yourself with methane and lye, biodiesel is expensive. (This spring, it topped $5 a gallon.) I considered the cost worth the payoff. Biodiesel smells not like French fries but clean and nutty; if you spill a little on your skin, no worries—unlike gas, it won’t poison you. Diesel engines emit more smog-forming nitrogen oxides than do their gasoline equivalents, but on balance, biodiesel burns cleaner than petroleum diesel or gasoline. Plus, the biodiesel crops take carbon dioxide from the air as they grow and release the same amount back into the atmosphere when they burn. Biofuels are thus said to be “carbon-neutral” fuels.

Which doesn’t mean, I soon learned, that they are perfect.

Just before this summer of $70 fill-ups began, a story broke that had a lot of biofuel enthusiasts quaking in their Earth Shoes. Biofuels, we were informed, were robbing the world of its food. Crop prices were soaring; hungry people were rioting in the streets of Haiti; fertilizer runoff streaming down the Mississippi had doubled the size of the dead zone in the Gulf of Mexico—all because farmers were racing to cash in on the bonanza by planting biofuel feedstock.

At first, I blamed corn. Corn-based ethanol, which benefits from congressional mandates and a generous production tax credit, takes almost as much energy to produce as it yields. An article in the journal Science last winter claimed that all the carbon dioxide emitted during its production makes corn-based ethanol more polluting than gasoline. Biodiesel made from soy or palm oil may hasten climate change too: Amazonian rain forests have been leveled to grow those crops to satisfy biofuel-crazy Europe.

I nearly took a razor to my “BioPowered” bumper sticker.

Perplexed, I called up Kent Bullard, one of the founders of the Los Angeles Biodiesel Co-op, which dispenses biodiesel from stationary trailers parked in Torrance and Silver Lake. Bullard assured me that no rain forest suffers for the co-op’s 126 members—all of its fuel comes from used cooking oil. “We get a certificate of analysis for every batch of fuel delivered, like a birth certificate for our fuel. We know how it’s made and how far it’s coming from.”

That’s great, but there’s only so much used cooking oil to go around—what about the rest of us? Since my former supplier stopped home deliveries, I fill up at Conserv Fuel in Brentwood. On the phone, owner Kris Moller offered little in the way of guilt relief. “Our supplier won’t tell us exactly what the blends are,” he said. “Probably most of it is virgin soy.”

Moller admitted that soy-based biodiesel has “some minuscule effect” on the world food supply. “But what are we going to do? Just say we’re completely dependent on petroleum and leave it at that? We’re on the first generation of biofuels. When the first IBM mainframe came out and used up an entire room, did we throw it out? No. We evolved it. We’re learning how this fuel works.”

And, he said, learning how to make it greener. Bullard and Moller contribute ideas to the Sustainable Biodiesel Alliance, a collective effort to define a standard for small-carbon-footprint fuel. Both anticipate progress on feedstock—finding new lipid-rich plants that require little water and space to produce enormous vats of grease.

Solutions loom. Stanford University biology professor Chris Somerville suggests producing ethanol from Miscanthus, a perennial grass that yields twice the biomass per acre of any other grass. Mark Edwards, a professor at Arizona State University, thinks an even better source might be algae. It’s Edwards who makes me feel smug again.

There was a time when algae proponents like Edwards were considered a little crazy. Even though “algae needs no fresh water, doesn’t displace any cropland and eats nitrogen and carbon dioxide,” Edwards told me, industry gave it no respect as a fuel source. Now that we’re hurtling toward a food-and-fuel catastrophe, however, pond scum is looking pretty good. Chevron has teamed up with a San Francisco-based company, Solazyme, to research algae-based biodiesel; Royal Dutch Shell is hard at work on an algae test facility in Hawaii.

And I helped get us here. As a conscientious car owner in search of better fuel, I helped “people understand the value proposition for renewable transportation fuel,” Edwards said. “You’re educating a whole wave of consumers. Once algae becomes available, they’ll be eager to use it, because they’ll understand that it’s possible to fuel their cars with something other than petroleum.”

I’ll look forward to the day when Moller can sell me fuel from green slime grown in his backyard brine pond. In the meantime, I’ll drive my soy-powered Bug a little less smugly, knowing that another cure for our ills is simply to spend less time behind the wheel. No fuel in the world can break the monotonous isolation of the sedan-encased commuter. As the collective owners of the BioFuel Oasis in Berkeley like to say: “Driving still sucks.”

Judith Lewis is a freelance writer specializing in energy and the environment.

Proposition 10 would put California taxpayers on the hook for his natural gas plan.

By Anthony Rubenstein
July 29, 2008

Texas oil billionaire T. Boone Pickens is pushing a national campaign to make the U.S. “energy independent” through wind power and vehicles that run on natural gas. His blitz of TV ads featuring his own down-home voice has picked up a lot of admiring news coverage. To date, Pickens has yet to explain whose dime will pay for this.

Well, Californians can clarify exactly whose dime it will be: Ours. Along with being the country’s biggest wind power developer, Pickens owns Clean Energy Fuels Corp., a natural gas fueling station company that is the sole backerof the stealthy Proposition 10 on California’s November ballot. This measure would authorize the sale of $5 billion in general fund bonds to provide alternative energy rebates and incentives—but by the time the principal and the interest is paid off, it would squander at least $9.8 billion in taxpayer money on Pickens’ self-serving natural gas agenda.

The initiative deceptively reads like it’s supporting all alternative-fuel vehicles and renewable energy sources. But a closer read finds a laundry list of cash grabs—from $200 million for a liquefied natural gas terminal to $2.5 billion for rebates of up to $50,000 for each natural gas vehicle.

Much of the measure’s billions could benefit Pickens’ company to the exclusion of almost all other clean-vehicle fuels and technology. Engines that run on compressed natural gas have a place in pollution reduction, especially for heavy trucks and public buses. But natural gas is a nonrenewable fossil fuel that we import from foreign sources, and it is no better (and in some cases worse) when it comes to emissions and fuel efficiency compared with the best hybrid cars or the new ultra-clean diesel engines. Most insidiously, Proposition 10’s lavish rebates for natural gas-powered cars and trucks could crowd out superior technologies from taking root in California, the largest transportation market in the United States.

Even worse, private trucking and delivery companies could buy 5,000 natural gas trucks, collect California taxpayer-funded rebates of $200 million or more and immediately send those fleets out of state. There’s nothing in Proposition 10 to prevent that. It’s like asking California voters to finance a new bridge with taxpayer dollars, without mentioning that the bridge could be in Ohio.

Pickens is selling Proposition 10 to green-minded, high-gas-price-paying Californians under the official name of “The California Renewable Energy and Clean Alternative Fuel Act.” If the name rings a bell, that’s because it’s intentionally similar to the “California Clean Alternative Energy Act” of 2006, also known as Proposition 87. Proposition 87’s rebates and incentives would have been funded by fees on the oil industry for petroleum extracted in California, not by taxpayers.

Proposition 87 lost after the oil industry spent more than $100 million campaigning against it. I was the founder and chairman of Californians for Clean Energy, the force behind Proposition 87, and am disgusted that Pickens’ lawyers and natural gas sales team have lifted Proposition 87’s language and twisted it into such a deceptive, counterproductive initiative.

Pickens’ raid on California’s general fund comes while Gov. Arnold Schwarzenegger and the Legislature are racking their brains trying to make state ends meet. The payments over the 30-year life of the Pickens bonds would deprive Californians of at least $325 million a year to fund schools, fight wildfires and keep emergency rooms open.

Yet in the paragraph of Proposition 10 titled “Accountability,” there isn’t a word about requiring proof that the billions of dollars spent would result in one less ounce of petroleum used or one fewer wisp of greenhouse gases emitted in California.

I’ve met Pickens, and I’ll vouch for his patriotic intentions to get the U.S. off of foreign oil—but not for funding his interests on the sly with billions of dollars from California’s taxpayers. In fact, I’d prefer to believe that he’s being ill-served by his lawyers and political consultants, because it’s clear that the shortcomings of Proposition 10 could ultimately hurt his energy independence message.

Given that Pickens can also play rough—he was a funder of the nasty “Swift boat” campaign in the 2004 presidential election—it’ll take guts to challenge him. California’s governor, attorney general and treasurer should be the first to say no, because there’s certainly a case against a $5-billion bond that results in almost no lasting infrastructure, could siphon taxpayer money out of state and would distort the clean-vehicle market. The makers of hybrid and biofuel vehicles, and California teachers, hospitals and firefighters, who would be on the losing end of Proposition 10, should also think hard about what Pickens’ plan would do to them.

Anthony Rubenstein consults on clean technology, eco-sustainability and corporate social responsibility.

By Terry Gardner, Special to The Los Angeles Times
11:21 AM PDT, July 11, 2008

Travelers, you’ve made your voices heard. Whether you want to lessen your pain at the pump or reduce your carbon footprint (or both), you can find more hybrid and biofuel-powered rental cars these days.

Just remember, though, that you may be going green, but you won’t necessarily be saving green.

If you’re in L.A., San Diego, San Francisco, Seattle, Dallas, Chicago, New York City, Washington, D.C., Atlanta or Miami, you’ll have a good shot at finding a hybrid.

Here’s who’s doing what:

* Enterprise, National and Alamo rent Ford, Toyota and Saturn hybrids, and they offer carbon offsets through TerraPass, a company that strives to reduce the negative effects on the climate of driving a car.

Renters contribute $1.25 per rental, and TerraPass uses funds for an emissions-offset project. It includes clean energy, such as wind farms; creating energy from farm animal waste; or capturing methane from landfills.

Enterprise’s luxury division in West L.A. rents Lexus hybrids, and Fox offers Honda Civic hybrids and Toyota Camry, Highlander SUV and Prius hybrids.

* Hertz says it will have 3,400 Toyota Priuses to rent with guaranteed reservations by year’s end.

* Avis and Budget rent the Prius, the Nissan Altima and Ford Escape hybrids and guarantee reservations.

* Avis, Budget, Enterprise, National and Alamo offer flexible-fuel vehicles, which run on E85 fuel, a blend of 85% ethanol and 15% gasoline. However, E85 stations are scarce in California, with stations in Carlsbad, Oceanside, San Diego and Los Angeles (Conserv Fuel in Brentwood, http://www.conservfuel.com) open to the public.

Meanwhile, about 85% of Toyota dealerships participate in a rental car program, which may be another source of hybrids, said Sam Butto, a spokesman. For more info, go to http://www.toyota.com/rental.

On Maui, Bio-Beetle’s (http://www.bio-beetle.com) 17-vehicle fleet runs on fuel made from renewable resources, such as vegetable oil recycled from restaurants. Its Jetta sedans can go more than 400 miles on one (14.5-gallon) tank.

Biodiesel costs $3.99 a gallon versus $4.63 for unleaded. (Biodiesel is less expensive than gas on Maui because of strong state and county government support of the alternative fuel.)

Your greenness will come at a price, however: Renting a Bio-Beetle begins at $37.36 a day; that compares with as little as $20 a day for a compact from a “regular” car rental company.

Simply Hybrid, a Los Angeles company launched last fall, rents only hybrids and emphasizes customer service. Co-owner Salah Alansary says its growing fleet includes Camry, Prius and Highlander hybrids, the Escape, the Civic, the Lexus RX and the GMC Yukon (which doesn’t get great mileage, but emissions are vastly reduced).

All are fully equipped luxury models with factory-built navigation. Simply Hybrid offers free delivery and pickup at locations including downtown Los Angeles, LAX and Bob Hope Airport in Burbank with a three-day minimum rental.

Enterprise recently opened WeCar, a car-sharing service in St. Louis, and Hertz now offers hourly rental options in Boston and Manhattan.

Renting green may help the environment, but it may not help your wallet. Orbitz can help you keep an eye on prices. Its “Go Green, Save Green” link on its eco Web page allows you to search for hybrid rentals from Hertz, Avis, Budget, National, Alamo and Fox.

You can save through discounts from Better World Club, which bills itself as an environmentally friendly auto club, or coupon websites such as FatWallet and RentalCarMomma.com.

Members of the Automobile Club of Southern California receive discounts and special deals on all Hertz Green Collection vehicles as well as from other companies renting hybrids.

By JAD MOUAWAD
Published: July 1, 2008

The record storms and floods that swept through the Midwest last month struck at the heart of America’s corn region, drowning fields and dashing hopes of a bumper crop.

They also brought into sharp relief a new economic hazard. As America grows more reliant on corn for its fuel supply, it is becoming vulnerable to the many hazards that can damage crops, ranging from droughts to plagues to storms.

The floods have helped send the price of ethanol up 19 percent in a month. They appear to have had little effect on the price of gasoline at the pump, as ethanol represents only about 6 percent of the nation’s transport fuel today.

But that share is expected to rise to at least 20 percent in coming decades. Experts fear that a future crop failure could take so much fuel out of the market that it would send prices soaring at the pump. Eventually, the cost of filling Americans’ gas tanks could be influenced as much by hail in Iowa as by the bombing of an oil pipeline in Nigeria.

“We are holding ourselves hostage to the weather,” said John M. Reilly, a senior lecturer at the Massachusetts Institute of Technology and an ethanol expert. “Agricultural markets are subject to wide variability and big price spikes, just like oil markets.”

Three years ago, Americans discovered that the vicissitudes of the weather could have a powerful effect on energy prices when two hurricanes struck the Gulf Coast. Hurricanes Katrina and Rita interrupted a quarter of the nation’s oil production and closed dozens of refineries for weeks. Lines formed for the first time since the 1970s as gasoline spiked above $3 a gallon, a record at the time. The nation’s increasing dependence on crops for motor fuel adds another level of vulnerability from the weather.

It is still too early to estimate damage to corn crops from the recent floods, or their impact on ethanol output. Iowa, the biggest corn state, may have lost as much as 10 percent of its harvest, according to preliminary estimates.

But concerns that the floods could tighten corn supplies this year have pushed up both corn and ethanol prices. Ethanol, which was already rising before the floods, has nearly doubled from its low of $1.50 a gallon in September.

Unexpected interruptions in oil supplies have been a factor driving oil prices above $140 a barrel lately. Given the tight oil market, there is little untapped capacity that can be brought online to make up for sudden supply interruptions, whether of oil itself or of the biofuels that are increasingly substituting for oil.

In the 1980s, the oil capacity cushion peaked at around 20 percent of global consumption. Today, it represents only about 2 percent — less than Iran’s petroleum exports. Analysts have warned that such record-low levels of spare capacity pose unprecedented risks to the stability of oil markets and introduce a significant premium in the price of oil.

“There is now a vulnerability to perfect storms, not just in a metaphorical sense, but increasingly in a literal sense,” said Daniel Yergin, the chairman of Cambridge Energy Research Associates, a consulting firm. “In addition to geopolitical risks, you must now add weather risks.”

While storms, torrential rains and hurricanes have always been a part of energy production, the areas where most of the nation’s new oil and ethanol supplies are coming from — the corn belt and the Gulf of Mexico — are especially vulnerable to hazardous weather.

“Our energy policy is like playing Russian roulette with every chamber loaded,” said Lawrence J. Goldstein, an energy analyst at the Energy Policy Research Foundation, a group backed by the oil industry. “We’ve doubled up on the weather risk.”

Both the government and the ethanol industry recognize the risks of tying fuels to crops. The secretaries of energy and agriculture, in a joint letter to the Senate, recently said: “If we assumed a supply disruption of ethanol, we would expect a fairly large increase in the price of gasoline until ethanol supply were re-established or new market equilibriums were achieved.”

Backers of biofuels contend that growing ethanol supply is keeping gasoline prices from rising even higher than they have, by anywhere from 35 cents to 50 cents a gallon, in their estimation. They also point out that the government’s ethanol mandate, which requires oil companies to blend ethanol into motor fuel, can be suspended in an emergency. Finally, they say that future ethanol supplies will be derived from materials like switchgrass or wood chips that are resistant to bad weather.

Bob Dinneen, the president of the Renewable Fuels Association, the industry’s main trade group, said only two out of 160 ethanol refineries nationwide shut down because of the storms. Both will reopen soon, he said.

“There is a lot of overblown concern that is not really justified by the facts on the ground,” Mr. Dinneen said. “Certainly the weather is going to have an impact on all sorts of industries. It had an impact when Katrina wreaked havoc on the refining industry. It has an impact on ethanol production, but it has been minimal.”

In recent years, corn ethanol has been one of the few sources of supply growth in transport fuels. Indeed, biofuels have become the single biggest source of new fuels produced outside of countries belonging to the Organization of the Petroleum Exporting Countries.

Production worldwide is expected to grow by 330,000 barrels a day this year, to 1.4 million barrels a day, according to the International Energy Agency.

In the United States, bipartisan public policies have driven the rise of the ethanol industry. Congress has set rising requirements for oil companies to blend ethanol with gasoline, backed with generous subsidies that should total $12 billion this year, according to estimates by Barclays Capital.

The ethanol mandate is set at nine billion gallons for 2008 and is scheduled to rise to 36 billion gallons a year by 2022. By various estimates, that would represent 20 to 25 percent of the nation’s gasoline consumption by then.

Corn ethanol is capped at 15 billion gallons from 2015 onward. The rest is supposed to come from advanced biofuels. They would not require food crops, but bringing them to market depends on perfecting techniques that are still experimental.

Farmers who support the government’s ethanol policy argue that truly disastrous weather in the corn belt does not happen often.

“The last time we had real weather problems in the corn belt was 1988,” said Tom Buis, the president of the National Farmers Union. “That’s pretty rare.”

Emerson D. Nafziger, a professor of agronomy at the University of Illinois, said farmers still had time to recover this year, to some degree. But he said this year’s storms were the first real test for the nascent ethanol industry.

“We may end up feeling we dodged a bullet this year,” he said. “We’ve had a run of fairly favorable weather in recent years. But there is no guarantee it will stay that way.”

Think $4 per gallon gas is bad? Try $6 per gallon biodiesel. While the prices for gas and diesel have been climbing higher and higher, biodiesel prices have been rising, too, crunching biodiesel makers and making large diesel purchasers rethink making the switch to biodiesel. Seattle-based biodiesel maker Imperium Renewables has had a 2 million gallon deal with King County Metro Transit put on “an indefinite pause” because the price has jumped so much since the agreement was signed less than a year ago, the Seattle Times reports.

Biodiesel prices are being pushed up by a confluence of events. With oil nearing $140 a barrel, all of the petroleum-powered biodiesel processing steps have become that much more expensive. Increased demand, including municipal contracts like that of King County, have pushed up prices. Also, farmers have been increasingly turning to the more profitable business of producing corn for ethanol, as opposed to growing soybeans for biodiesel, which has been shrinking the biodiesel supply. The Seattle Times estimates it takes $4.66 worth of soy to make one gallon of biodiesel, which doesn’t include any processing costs. Meanwhile, petro-diesel prices are around $4.80 a gallon.

Such market fluctuations will wreak havoc on young startups that don’t have the capital to weather the storm. Imperium’s move to withdraw its IPO earlier this year was likely a good one. (Even if Imperium’s former CEO, Martin Tobias, doesn’t think so). But unless diesel prices start climbing even faster or soy prices drop, the gulf between petro- and biodiesel could continue to grow. We’ll keep an eye out for more large contracted fleet customers backing out of their biodiesel deals.

[Article Source]

Published: May 21, 2008

Arjun N. Murti remembers the pain of the oil shocks of the 1970s. But he is bracing for something far worse now: He foresees a “super spike” — a price surge that will soon drive crude oil to $200 a barrel.

Mr. Murti, who has a bit of a green streak, is not bothered much by the prospect of even higher oil prices, figuring it might finally prompt America to become more energy efficient.

An analyst at Goldman Sachs, Mr. Murti has become the talk of the oil market by issuing one sensational forecast after another. A few years ago, rivals scoffed when he predicted oil would breach $100 a barrel. Few are laughing now. Oil shattered yet another record on Tuesday, touching $129.60 on the New York Mercantile Exchange. Gas at $4 a gallon is arriving just in time for those long summer drives.

Mr. Murti, 39, argues that the world’s seemingly unquenchable thirst for oil means prices will keep rising from here and stay above $100 into 2011. Others disagree, arguing that prices could abruptly tumble if speculators in the market rush for the exits. But the grim calculus of Mr. Murti’s prediction, issued in March and reconfirmed two weeks ago, is enough to give anyone pause: in an America of $200 oil, gasoline could cost more than $6 a gallon.

That would be fine with Mr. Murti, who owns not one but two hybrid cars. “I’m actually fairly anti-oil,” says Mr. Murti, who grew up in New Jersey. “One of the biggest challenges our country faces is our addiction to oil.”

Mr. Murti is hardly alone in predicting higher oil prices. Boone Pickens, the oilman turned corporate raider, said Tuesday that crude would hit $150 this year. But many analysts are no longer so sure where oil is going, at least in the short term. Some say prices will fall as low as $70 a barrel by year-end, according to Thomson Financial.

Experts disagree over the supply of oil, the demand for it and whether recent speculation in the commodities markets has artificially raised prices. As an energy analyst at Citigroup, Tim Evans, reportedly put it, trading commodities these days is like “sticking your hand in a blender.”

Whatever the case, oil analysts like Mr. Murti have suddenly taken on the aura that enveloped technology analysts in the 1990s.

“It’s become a very fashionable area to write about,” said Kevin Norrish, a commodity analyst at Barclays Capital, which began predicting high oil prices around the same time as Goldman. “And to try to get attention from people, people are coming out with all sorts of numbers.”

This was not always the case. In the 1990s, oil research was a sleepy area at banks. Many analysts assumed oil prices would hover near $15 to $20 a barrel forever. If prices rose much above those levels, they figured, consumers would start conserving, suppliers would raise production, or both, causing prices to decline.

But around the turn of the century, oil company after oil company started missing predicted production. Mr. Murti, who covers oil companies like ConocoPhillips and Valero Energy, decided to study the oil spikes of the 1970s.

Since starting his career at Petrie Parkman & Company, a Denver-based investment firm acquired by Merrill Lynch in 2006, he had been conservative in his calls on oil. But by 2004, he concluded the world was headed for a long supply shock that would push prices through the roof. That summer, as oil traded for about $40 a barrel, Mr. Murti coined what has become his signature phrase: super spike.

The following March, he drew attention by predicting prices would soar to $105, sending shock waves through the market. Angry investors questioned whether Goldman’s own oil traders benefited from the prediction. At Goldman’s annual meeting, Henry M. Paulson Jr., then the bank’s chief executive and now Treasury secretary, found himself defending Mr. Murti.

“Our traders were as surprised as everyone else was,” Mr. Paulson reportedly said. “Our research department is totally independent. Our trading departments have no say about this.”

Over time, Mr. Murti was proved right again. Oil crossed $100 in February. Mr. Murti’s forecasts now feed into many of Goldman’s economic and corporate forecasts, affecting research of companies like Ford and Procter & Gamble. His research is distributed widely among investors.

“Even if you disagree with their views, the problem is that Goldman does carry so much credibility,” said Nauman Barakat, senior vice president for global energy futures at Macquarie Futures USA. “There are a lot of traders who are going to buy based on their reports.”

His sudden fame unsettles Mr. Murti. He rarely grants interviews, citing concerns about privacy, and he declined to be photographed for this article. He is not the bank’s only gas prognosticator: Jeffrey R. Currie predicts oil prices out of London.

Mr. Murti, for his part, discounts suggestions that his reports affect market prices. “Whenever an analyst upgrades a stock or downgrades a stock, sometimes you get a reaction that day, but beyond a day, fundamentals win out,” he said.

Mr. Murti falls into the camp of oil analysts who believe that supply is likely to remain tight because of geopolitical factors. These analysts predict higher prices because production is declining in non-OPEC countries like Britain, Norway and Mexico.

The analysts who predict lower prices say there are supplies of oil that the bullish analysts are missing. “This year will be a year in which supply will be put into the market by stealth by OPEC and by countries we call black-hole countries,” said Edward L. Morse, chief energy economist at Lehman Brothers. China is one example, he said.

But while oil and gas prices have been rising for a while now, Americans have only just begun to reduce gasoline consumption, so their efforts to conserve have not dragged down oil prices.

“The fact that the U.S. gasoline demand can be down and that the U.S. gasoline consumer is no longer driving world oil prices is a monumental event,” Mr. Murti says. He spends most of his time talking to money managers and analysts, many of whom keep asking him if oil prices will stay high if speculators abandon the market, and says he applauds investors for driving up oil prices, since that will spur investment in alternative sources of energy.

High prices, he says, “send a message to consumers that you should try your best to buy fuel-efficient cars or otherwise conserve on energy.” Washington should create tax incentives to encourage people to buy hybrid cars and develop more nuclear energy, he said.

Of course, if lawmakers heed his advice, oil analysts like him might one day be a thing of the past. That’s fine with Mr. Murti.

“The greatest thing in the world would be if in 15 years we no longer needed oil analysts,” he says.

[Article Source]

By Carola Hoyos and Javier Blas in London and Geoff Dyer in Beijing
Published: May 20 2008 19:06 | Last updated: May 20 2008 20:07

The fear of a global oil shortage within five years on Tuesday propelled oil futures prices to well above $130 a barrel, further stoking inflationary pressures in the global economy.

Investors rushed to buy oil futures contracts as far forward as December 2016, pushing prices as high as $139.30 a barrel, up $9 on the day. Veteran traders said they had never seen such a jump. The spot price hit a new record of $129.60 a barrel.

Contracts to be delivered at the end of 2012 have soared almost 60 per cent while near-term prices have risen by 35 per cent since January.

Anne-Louise Hittle, of Wood Mackenzie, said investors were shifting their focus from the short to medium term where supply fears are dominating the thinking. “For example, we know Iraq has the oil but we don’t know if it will be able to bring the needed supplies into the market,” she said, referring to the political uncertainty in the country which has the world’s second largest conventional oil reserves.

This comes as demand, especially from China, is set to continue to grow. Adam Sieminski, chief energy economist at Deutsche Bank, said: “The price is going to go up until governments that subsidise oil consumption in Asia and the Middle East can no longer afford it.”

Goldman Sachs, one of the Wall Street’s most influential voices in the energy market, last week advised its customers to buy oil contracts for 2012.

T. Boone Pickens, the influential oil investor who believes the world’s oil output is about to peak, warned oil prices would hit $150 a barrel by the end of the year.

“Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87m,” Mr Pickens said in an interview with CNBC. “It’s just that simple.”

Mr Pickens’ view is still in the minority but concerns over future oil supplies are fast moving into the mainstream. Even some industry executives have warned that geopolitical supply constraints will mean oil production will not be able to match demand as early as 2012 to 2015. Those are the years that saw the greatest jump in oil prices on Tuesday and have rallied since the start of the year.

The nervousness about Chinese energy demand was exacerbated when officials said 32 power plants had been forced to close because of coal shortages, the second time this year the power industry has run short of coal.

PetroChina and Sinopec, the two largest domestic oil groups, have diverted fuel supplies to the quake-hit Sichuan region in the past week, while China’s State Reserves Bureau has released oil products to ensure supplies in the area. But PetroChina, which has substantial natural gas facilities in Sichuan, said that 99 per cent of production had been restored to pre-earthquake levels.

[Article Source]

Published: May 18, 2008

AFTER years in the automotive wilderness, largely exiled to the smoky borders of truck stops, diesel is coming home. Americans may not recognize its freshly scrubbed face.

A 19th-century invention by Rudolf Diesel, the diesel engine has always been known for outstanding fuel efficiency, with better mileage (by 25 percent to 40 percent) than gasoline. But the kerosenelike fuel and the engines that burn it were dirty, noisy, dawdling and even deadly, linked to increased risk of cancer and respiratory disease.

That has all changed, in part because of cleaner-burning fuel — its 2006 rollout had been mandated in 2000 by the Clinton administration — that has 97 percent less of the sulfur responsible for diesel engines’ sooty particulates.

The low-sulfur fuel, hailed by the Environmental Protection Agency as a historic advance, has opened the door to sophisticated emissions controls that let diesel engines meet the strict pollution standards of California. Those rules, the world’s most stringent by far, require 2009-model diesels to be as green as gasoline or even hybrid models.

In the meantime, advances like turbocharging and high-pressure fuel injection have transformed diesel cars from soot-belching slowpokes with a telltale clickety-clack sound to smooth, tidy and powerful machines that many Americans would have a hard time distinguishing from gasoline models.

With technical and environmental hurdles overcome — and facing tougher mileage standards that call for a 35 m.p.g. average by 2020 — automakers are rushing in with clean-diesel cars.

Two sets of emissions rules — a very strict set for California and four other states, another for the remaining 45 states — had kept most diesel cars out of the United States until now. In contrast, fuel-sipping diesels were embraced in Europe, where they account for half of passenger car sales.

But starting with the 2009 model year, several automakers have developed diesels clean enough to pass muster in all states, including — at last — the big California and New York markets.

Volkswagen says it will be the first to market, with Jetta sedans and wagons arriving in August. Mercedes will follow in October with diesel versions of its GL-, ML- and R-Class sport crossover utilities. BMW is preparing a mighty twin-turbo 6-cylinder diesel for sale this fall in the 335d sedan and X5 35d sport wagon.

Audi’s Q7 3.0 TDI utility wagon goes on sale early next year. That automaker has been vividly demonstrating modern diesel’s one-two punch by dominating recent runnings of the 24 Hours of Le Mans with its R10 racers, which are not only fast, but are the quietest, cleanest and most fuel-efficient cars in the field.

The new diesel disciples are not just the usual German suspects. Three Japanese companies — Honda, Nissan and Subaru — are ramping up the technology. Long known for efficient gasoline engines, Honda will offer its first American diesel next year, as an option on the Acura TSX sedan. A similar diesel Honda from Europe that I recently tested achieved a wallet-friendly 53 m.p.g. on the highway.

Honda also plans to offer a diesel V-6 around 2010 that may find its way into the Acura TL sedan, the Acura MDX utility or the Honda Odyssey minivan.

Nissan will install a Renault-designed diesel in its Maxima sedan for 2010; Subaru will counter with a diesel the same year, probably in a Legacy sedan or Outback wagon. A Jeep Grand Cherokee diesel arrives in 2009, and General Motors, Ford and Dodge all plan 50-state diesel versions of their light-duty pickup trucks in 2009 or 2010.

The situation seems to defy the conventional wisdom that saw diesel cars heading to history’s scrapyard. As late as 1982, Mercedes relied on diesels for 80 percent of its American sales. But aside from their strong presence in heavy-duty trucks, diesels have been relegated to a small but loyal fringe.

The diesel revival takes its cues from Europe, where the engines power everything from tiny microcars to luxurious autobahn cruisers. Strikingly, hybrids have grabbed less than 1 percent of the European market. Yet automakers acknowledge that mending diesel’s foul reputation in the United States remains an enormous challenge.

Johan de Nysschen, executive vice president at Audi of America, estimates that diesels might eventually account for 15 percent of Audis sold here. But first, he said, Americans must learn that modern diesels are not only clean and fun to drive, but more efficient than hybrids for many consumers.

“In stop-and-go city driving like Manhattan, the hybrid is a good solution,” Mr. de Nysschen said at the New York auto show this spring. “But we need to convey the message that hybrids are not the definitive solution.”

Under the hood, there is little to distinguish diesel engines from those that burn gasoline. Both use pistons, valves and electronic fuel injection, but the differences go beyond the form of petroleum that goes in the tank. Today’s gasoline engines ignite their fuel with a high-voltage spark; diesels, also known as compression-ignition engines, light the fire with the heat generated by squeezing the air in the cylinders to a far greater degree. This is one of their main advantages: a compression ratio of nearly 20:1, compared with a maximum of about 12:1 for gasoline. This means that diesel engines extract more power from their fuel.

The compression of a gasoline engine can’t simply be cranked up higher — the gasoline would burn erratically. Diesel fuel, a petroleum distillate, will tolerate those high cylinder pressures.
Another reason diesels get better mileage: the fuel contains 12 percent more energy a gallon.

Largely because they burn less fuel, the engines produce up to a third less carbon dioxide than gasoline models — compelling some environmentalists to reverse their longstanding opposition. Diesel’s drawback had been high levels of smog-forming nitrogen oxides and carcinogenic soot.

The greening of diesel involves the new ultra-low-sulfur fuel, cleaner-burning engines and a suite of emissions equipment.

Filters trap sooty particulates while catalysts use ammonia to convert nitrogen oxides into harmless nitrogen and water in the exhaust.

“There’s a little chemical processing plant in there, and some pretty amazing chemistry,” said Thomas Hinman, vice president for diesel technologies at Corning, a leading supplier of cellular ceramic filters for diesel engines.

For many models, including those from BMW, Mercedes and Audi, there is a catch: their S.U.V.’s will carry six- to eight-gallon tanks of urea, an ammonia-rich solution injected into the exhaust to neutralize smog-forming pollution.

And to ensure that consumers don’t let the urea run dry, Mercedes is installing a dashboard alert that warns consumers when the urea level drops below one gallon. From there, owners will be on a countdown until the tank is topped off: the cars will start just 20 more times before they cannot be operated. That countdown is a concession to federal regulators, who demanded technical assurances that these groundbreaking systems would work continuously to keep emissions below legal levels.

The smaller 4-cylinder VW and Honda diesels, in contrast, meet 50-state standards without requiring urea tanks that would have to be replenished every 12,000 miles or so.

Yet as automakers dress up diesel for its coming-out party, one unexpected development is threatening to spoil it. For decades, diesel fuel cost less than gasoline, amplifying the advantage of its higher mileage. But over the last year, diesel has soared to a record average of $4.33 a gallon nationwide, compared with $3.72 for regular gasoline.

George Peterson, vice president of the AutoPacific consulting firm, said that diesel cars traditionally offset their higher prices through both fuel savings and higher resale value. But higher-price diesel fuel puts both those financial incentives at risk.

“Given the price of diesel, you can’t get the cars to pay you back, so it doesn’t make as much sense,” he said.

While diesel currently costs 16 percent more than gasoline, that premium is more than offset by mileage gains of 25 to 40 percent. Consumers would still save money with a diesel car, and they would fill it less frequently.

The Mercedes E320 diesel sedan, for example, can cover roughly 700 highway miles on a tank. Clean-diesel models may also become eligible for federal tax credits of up to $3,400.

Consumers will also pay more for diesel technology, with manufacturers estimating that diesel engines and emissions gear add from $1,500 to $3,500 to their costs for each car. Mercedes is charging only $1,000 extra for its diesel models, compared with the equivalent gasoline versions, though some analysts suggest that Mercedes is partly subsidizing diesels to win converts. Steve Keyes, a spokesman for Volkswagen, said the Jetta diesel sedan and sport wagon would cost less than $2,000 over the gas versions, a price that he said would cover the additional costs.

Automakers also note major differences between European and American markets. European nations have long subsidized diesel by taxing gasoline at higher rates. Additional taxes on large engines also drove consumers into small but relatively powerful diesels.

Finally, diesel isn’t as widely available as gasoline, though 42 percent of service stations nationwide offer the fuel, according to the Diesel Technology Forum, a trade group.

Many analysts expect diesels to blow past hybrids in popularity. J. D. Power & Associates estimates that diesel will explode from its 3 percent market share to 11.5 percent by 2015, exceeding hybrids at 7 percent. Continued high diesel prices could force an adjustment in that projection.

“People will definitely get sticker shock at over $4 a gallon,” said Mike Omotoso, the powertrain analyst at J. D. Power. “But we see the huge price gap between gasoline and diesel as a relatively short-term spike.”

And as the industry hedges its bets on which fuels and technologies — including gas-electric hybrids, diesels, plug-in hybrids and ethanol — will catch on, some automakers are publicly at odds over diesel’s chances.

General Motors’ advanced propulsion strategy is to develop a full range of alternatives to gasoline, including hybrids, ethanol, hydrogen and its Chevrolet Volt plug-in electric car. As part of that strategy, G.M. is developing new diesels, including a 4.5-liter V-8 that it will offer on 2010 models of the Chevy Silverado and GMC Sierra pickups.

Yet while GM is already selling 1.3 million diesel models a year worldwide — and is readying a diesel-powered Cadillac CTS for Europe — it sees diesel’s American future in pickups and S.U.V.s, not in affordable cars.

G.M. engineers say diesel can raise the mileage of a trailer-towing truck by 70 percent, making it a smart buy. But, they say, for a gasoline car that already gets 35 m.p.g., diesel’s gains don’t justify the added costs.

Some automakers prefer to squeeze higher mileage from gasoline-burning engines without the expense of diesel engines and emissions gear. “There’s no question that we can get to the 35 m.p.g. standard with gasoline,” said John Krafcik, Hyundai’s vice president for product development.

As technologies vie for supremacy, the diesel-versus-hybrid debate has been especially fierce. But diesel devotees don’t have to be hybrid haters, or vice versa. With petroleum expected to dominate the automotive landscape for several more decades, the hybrids and diesels that burn it are central technologies in the transition to alternative fuels and the drive against global warming.

As if to prove the point, some automakers are marrying diesel and hybrid for the best of both worlds. Mercedes has shown a diesel-hybrid prototype of its big S-Class sedan that the company estimates would achieve 44 m.p.g. VW has shown a 69 m.p.g. diesel-hybrid Golf, though Mr. Keyes said the technology was years away from production.

Johannes-Joerg Rueger, vice president for diesel engineering at Robert Bosch, a major manufacturer of diesel systems, said: “If you’re looking at the carbon dioxide and mileage goals that have to be met, it doesn’t really matter whether it’s diesel or hybrid. Let the consumer choose.”

[Article Source]

Published: May 9 2008 19:50 | Last updated: May 9 2008 19:50

It is about 125 years since shipping oil in wooden barrels became obsolete. An oil price above $125 a barrel, however, and speculation that the price could hit $200 are reminders that we have become ever more dependent on the black stuff. Oil is unlikely to hit $200 and remain above it any time soon – but economies would suffer if it did.

The underlying reason for oil’s tenfold price rise in less than 10 years is that demand, not least from China and India, has risen rapidly while supply has not kept pace. That dynamic is different to the supply shocks of the 1970s, but because truck drivers and commuters cannot easily stop travelling, even a small deficit in supply can cause large moves in the oil price.

Tight supply and demand have made markets volatile. The spot price of oil for immediate delivery remains above the price for delivery in future months. This suggests particular fear about short-term supplies, while there is some evidence that speculation and worried buyers laying in stocks have pushed up prices. Spot prices could surge or plunge in the short-term, but seem unlikely to return to levels that are low and stable for some time.

Expensive oil has economic effects. Net oil exporters become richer at the expense of net oil importers: Middle Eastern producers can buy more German cars, French clothes and US Treasury bonds in exchange for each barrel. Importers must buy less of everything else in order to keep up their consumption of oil.

Higher oil prices can, but need not necessarily, cause sustained inflation. A rise in the price of oil should be offset by falls in the prices of other goods for which there is now less demand. But if prices do not adjust smoothly, or if workers try to compensate for the cost of oil by demanding higher wages, it can ignite inflation.

Oil-intensive capital equipment may have to be scrapped: the useful life of all of sports utility vehicles, farm equipment and gas-fired power stations, for example, may be shortened. Such shifts cause real economic losses.

So far the world economy has shrugged off higher oil prices. So far the argument has been that, because rich countries now produce far more goods per barrel of oil than they did in the 1970s, a rise in the price does less economic damage. That is correct, but the further the price rises, the less true it becomes. The share of economic output that importing countries must spend on oil has risen dramatically.

For rich countries, the $125 oil price will be a noticeable drag on economic growth; for poor countries, when combined with higher food prices, it will mean more poverty. Oil supply should grow in response but if it does not, $200 oil is just about conceivable. It would cause serious economic disruption, international tensions and currency crises for some poor nations.

Copyright The Financial Times Limited 2008

[Article Source]

The rising price of soybeans is putting the squeeze on biodiesel producers, leading some to close down operations.

The prices of soybeans and soybean oil have more than doubled in the last two years, according to the National Biodiesel Board.

For producers, that sharp uptick in price is forcing them to either close down or go to different sources of oil, such as animal fats or fry grease from restaurants.

Most biodiesel in the United States is made from soy. Soybean oil is around 60 cents a pound, while at the beginning of 2007 it was under 30 cents a pound.

Producers need 7.5 pounds to make one gallon of biodiesel, according to one industry estimate, so even with a federal subsidy, biodiesel manufacturers are seeing their profit shrunk or eliminated.

“The numbers are impossible,” said Fred Tennant, vice president of business development at PetroAlgae, which intends to make biodiesel from algae.

The situation is puzzling to people in the industry because the stock of soy is at an all-time high.

One explanation is that biodiesel is becoming more closely linked to the rising price of petroleum-based diesel oil. When sold commercially, biodiesel is usually blended with diesel.

“It’s not following any linear economic path,” said Amber Pearson, a spokesperson for the National Biodiesel Board. “Maybe some of the (price increases) are due to speculations and futures markets.”

Despite the squeeze on biodiesel feedstocks, the demand is there. That’s been aided by federal mandates to increase the amount of biodiesel consumed in the U.S. from a minimum of 500 million gallons next year to 1 billion gallons a year by 2012.

In 2007, consumption of biodiesel was already up to 500 million gallons, more than double the amount in 2006.

Pearson said there are 170 biodiesel plants in the U.S. and said there are a small number that have gone offline, at least temporarily.

“The plants that are built to be multi-feedstock, meaning they can produce with more than just soybean oil are faring better,” she said.

New tech to the rescue?
In one case, SoyMor Biodiesel in Glennville, Minn., stopped producing biodiesel last month because of high soy prices and the low dollar.

Gary Pestorious, the chairman of the SoyMor Board of Governors, told the Albert Lea Tribune newspaper that soybean oil prices are about 10 cents too high for the plant to operate viably. It is looking into making biodiesel from corn oil or animal fat.

The growing challenges in biodiesel come during an economic boom in biofuels, but one that is being more closely scrutinized by policy makers and consumers.

The World Bank earlier this month said that demand for ethanol made from corn is one factor in rising food prices, a situation that is causing social unrest in poor countries.

Corn-based ethanol is also under fire from environmentalists who argue that it does not improve greenhouse gas emissions substantially compared to gasoline, while consuming a lot of water. Meanwhile, the rising price over the past few years has made crimped profit margins for ethanol producers.

In biodiesel, there are great hopes for making oil from algae because it not a food crop.

Although commercial-grade biodiesel has been made from algae, there are a number of technical and production challenges before it can be done at commercial scale.

Higher soy prices aren’t good news for venture capitalists who have invested in biodiesel.

Imperium Renewables, which shelved plans to go public last year, is a high-profile new entrant into biodiesel which funded its technology development and part of its production facility through clean tech venture capitalists. Traditionally, refineries and other energy-related plants are funded from project finance and private equity, rather than venture capital.

The National Biodiesel Board expects there to be a “price correction” at some point, although where the price will settle is hard to predict. “Every biodiesel producer using soybean is definitely feeling the pinch,” Pearson said.

[Article Source]

Mon Apr 28, 2008 5:05pm EDT

By Mark Weinraub

CHICAGO (Reuters) - New technologies can boost production of environment-friendly biofuels without threatening the world’s food supplies, industry leaders said at a trade conference on Monday.

The biofuels industry has been demonized by higher food prices, the biotech industry executives said in interviews on the sidelines of the fifth annual World Congress on Industrial Biotechnology and Bioprocessing.

“You have to look at what all the factors are that go into rising food prices,” said Steve Fabijanski, president and chief executive of Agrisoma Biosciences Inc, a Canadian company that engineers oilseeds with oil content that is tailored for biodiesel manufacturers.

Commodity costs are only one component of higher prices at the grocery store. Other factors, such as soaring crude oil prices and fertilizer costs that cut into farmers’ profits, also contribute.

Additionally, growing worldwide demand for meat could cause some food shortages if higher percentages of corn, wheat and soy are used to feed livestock.

Agrisoma’s crops, which are specifically tailored for biodiesel refiners, also produce an oil byproduct that can be used as animal feed, Fabijanski said.

GROWING BACKLASH

There has been growing criticism against government mandates on the use of corn to make ethanol because of the resultant rise in food prices.

The U.S. government has projected that nearly 25 percent of the U.S. corn crop will be used for ethanol this year, up from 20 percent last year and roughly up 14 percent two years ago.

Texas Gov. Rick Perry last week asked the U.S. government to cut “skyrocketing” food prices by waiving half of the renewable fuel standard for ethanol made from grain.

In the Midwest—the so-called Corn Belt of the United States—Missouri is considering rolling back a mandate supporting ethanol production amid growing outrage over rising prices for food and livestock feed.

“They missed the fact that it has been biotechnology that has expanded the productivity of farmers by 30 percent,” said James Greenwood, president and chief of executive of the Biotechnology Industry Organization.

Developments in cellulose technology, which produces ethanol from non-food sources, are ready to be used in refining plants now, said Tjerk de Ruiter, chief executive officer of Genencor.

Genencor, a unit of Denmark’s Danisco A/S (DCO.CO: Quote, Profile, Research), is developing a system that uses enzymes to break down cellulosic materials in the production of biofuels. But Genencor’s process, which can be used on leftovers of agricultural products such as corn, still needs to be tested on a large scale to see if it is profitable.

“It needs to be produced in plants (that can process) up to 1 million gallons, de Ruiter said. “That will truly tell us what the efficiencies are.”

(Reporting by Mark Weinraub; Editing by Marguerita Choy)

[Article Source]

By DAVID STREITFELD
Published: March 31, 2008

Strong worldwide food demand, and the accompanying higher prices, are beginning to influence American farmers.

A government report released Monday indicated that farmers intended to make significant cuts in corn acreage in favor of soybeans. That could help ease shortages of cooking oil, which have hit poor countries hard.

The shift also signaled at least a temporary decline in the appeal in farm country of the renewable fuels boom, much of which is based on corn. High corn prices and low ethanol prices have turned ethanol production into a difficult business.

It will only get tougher. Corn prices shot higher on the planting report, going over $6 a bushel for the first time. Joe Victor, an analyst with the market research firm Allendale, said he expected corn to rise as high as $7.50 by the summer.

Farmers are not necessarily planting less corn for economic reasons, Mr. Victor said.

“They’re going back to a more normal crop rotation,” he said. “They needed to give their corn acres a bit of a rest.”

Next year, he predicted, the ratio will shift again, and farmers will cut back on soybeans in favor of corn.

In the Department of Agriculture’s prospective plantings report, released Monday morning, farmers indicated that they would plant 74.8 million acres of soybeans, up 18 percent from last year and just below the record high in 2006.

Corn growers said they would plant 86 million acres, down 8 percent from last year.

The soybean number was slightly higher than analysts had been predicting, while the corn number was slightly lower. The 2007 corn crop was the biggest since 1944 as growers rushed to capitalize on the government-mandated demand for ethanol. Three years ago, before the ethanol mandates, the price was less than $2.50 a bushel.

“In February, we were thinking farmers would plant as much as 90 million acres of corn,” the agriculture department’s chief economist Joseph Glauber said.

Mr. Glauber cautioned that the new report, based on surveys of farmers early this month, did not necessarily reflect actual plantings, which are barely beginning.

“It’s a snapshot in time,” he said. “Farmers can change their intentions.”

Wheat farmers said they planned to plant 63.8 million acres, up 6 percent and about what the commodities markets had been anticipating. Cotton plantings are expected to fall 13 percent to 9.39 million acres. Cotton farmers have been abandoning the crop for corn and wheat.

The agriculture department said farmers would devote 323.8 million acres to 19 principal crops this year, up 3.8 million acres from last year and 7.8 million acres from 2006.

Some of the increase has come from land pulled out of conservation programs, some from pasture, and some from the double-cropping of wheat and soybeans. Despite the back-to-back increases, the number of acres under cultivation is still about six million acres under the level of a decade ago.

[Article Source]

BY DONNELLE ELLER • REGISTER BUSINESS WRITER • MARCH 30, 2008

The new $63 million biodiesel plant in Algona is a “great, big, beautiful facility,” says Kenneth Clark, president of the East Fork Biodiesel board. It’s also idle.

The plant hasn’t run since construction ended in December, except for a test. The reason: The price of soybean oil, a common raw material used to make biodiesel, has tripled in cost over the past two years.

“We’re beyond frustrated. There’s nothing we’d like more than to run the plant and make money for our investors,” Clark said. “But no one in their right mind would run now. You’d lose money on every gallon you made.”

Signs of distress in the biodiesel industry are visible across the country: Plants are idle, production reduced, construction halted, investment dwindling.

“In 2007, most U.S. biodiesel plants found that they could not cover their operating expenses,” wrote Bruce Babcock, an economics professor at Iowa State University. As a result, only about 500 million gallons were expected to be produced in 2007, he wrote. That’s only about 20 percent of the U.S. capacity, according to the National Biodiesel Board.

Babcock calls biodiesel’s outlook “dismal,” even with a federal mandate that pushes annual consumer use to 500 million gallons next year and ramps up to 1 billion gallons by 2012.

Producers and others call high commodity prices a temporary challenge. They point to new, cheaper feed stocks being developed, as well as higher-value uses of byproducts such as glycerin.

“The biodiesel industry is relatively new compared to its ethanol brother. So one would expect to see some growing pains,” said Randy Olson, executive director of the Iowa Biodiesel Board. “There’s been a global commodity bull market, and that has affected producers of biodiesel in Iowa,” and elsewhere.

About 20 of 170 plants nationally have been idled, officials say. Others have reduced production.

Daniel Oh, chief operating officer for Renewable Energy Group, or REG, said some plants will likely not restart. “Some won’t work economically,” said Oh, whose company helps investors build and operate biodiesel plants, in addition to its own.

REG this month halted construction on a 60-million-gallon plant in Emporia, Kan., citing difficulty finding capital to finish the plant. The Ames-based company has invested $18 million in the plant so far, and Oh said he expects REG to finish the Kansas plant.

Last week, REG also halted a $150 million initial public offering. “In general, the capital markets are not open,” Oh said.

Two plants REG manages - SoyMor in Glenville, Minn., and Algona’s East Fork - also have been idled.

Babcock says the biodiesel industry is overbuilt, which has resulted in “low or zero returns to investors.” He expects little to change that. “Low feedstock prices will trigger production. But feedstock prices will be bid back up to break-even levels that do not allow for a return on capital,” he said. “It’s a Catch-22.”

Clark acknowledged that investors are concerned about the idle Algona plant.

“If we’re not running, we’re not making money. ... But they understand the situation,” he said.

Clark said soybean oil was trading between 18 and 21 cents per pound when planning for the Algona plant was underway in 2006. Soybean oil for May delivery was about 58 cents a pound on the Chicago Board of Trade this week. It had risen as high as 70 cents a pound, officials say.

During the same time, wholesale biodiesel prices have climbed from $2.50 a gallon to about $4.70 a gallon.

Even with a $1-a-gallon tax break, biodiesel has been priced higher than diesel, given the skyrocketing price of soy oil and other feedstocks, industry leaders said.

Last week, diesel cost about $4 a gallon, a 131 percent increase from a year ago.

Olson said the reasons for higher soybean oil include increased demand from “a growing middle class in China, India” and elsewhere, and investor speculation that has created froth in the markets.

Joe Jobe, chief executive officer for the National Biodiesel Board, said jittery stock market investors have jumped into the commodities market: “When there’s a discussion of a recession, there’s a retreat toward commodities. It creates volatility,” he said.

“It’s difficult to pencil a plan that provides a stable level of profitability right now.”

Biodiesel plants that are able have switched to less costly animal fat to make biodiesel, Olson said. Those plants are more likely to operate than plants that rely on soybean oil.

East Fork is weighing whether to add equipment so it has more options in feedstock, such as animal fat, Clark said. It’s also weighing new feedstocks like algae oil, expected to come onto the market in about a year.

Other possible oils for biodiesel production include corn oil as an ethanol byproduct and jatropha, a weed that can be grown in marginal soil conditions. REG’s Oh said increasing the kinds of oils that can be used to make biodiesel will help producers. “In the meantime, the industry has to bridge this gap - the scarce market for raw materials - and increase availability,” he said.

Jobe said the biodiesel industry is going through a correction. “We know markets have a tendency to react to things and overreact, then correct - even in a mature industry,” he said. “We’re an emerging industry. Those things can happen in an amplified way.”

Jobe compared the biodiesel industry to the home computer industry in the 1970s.

“Some of those companies are still here today. Some are not. Some new companies are here today. Still, we still have a viable home computer market.

“Biodiesel is emerging, evolving and growing,” he said. “We’ll have disruptions, starts and stops. But biodiesel is well-positioned to be a significant part of the nation’s energy mix.”

Reporter Donnelle Eller can be reached at (515) 284-8457 or

[Article Source]

By John Baichtal March 18, 2008 | 1:06:10 PM

Courtesy of people who have a financial stake in the success of biodiesel, today has been declared the Official Biodiesel Day in the United States, in honor of Rudolph Diesel’s birthday. (Not to be confused with International Biodiesel Day, which is August 10.)

Biodiesel is getting big! Between 2004 and 2006, use increased 10 times, from 25 million gallons to 250 million gallons. Biofuel “fueling point” and advocacy company Propel Biofuels claims.

Biodiesel is a clean-burning, domestically produced fuel, that can be used in any diesel engine with no conversions whatsoever. It is derived from 100% renewable resources like soybeans, canola and mustard seed. Biodiesel delivers equivalent or better engine performance while decreasing harmful emissions by nearly 80%. Grown domestically, it also provides regional farmers with an added revenue stream while decreasing America’s dependence on foreign oil.

Typically, commercially available biodiesel is combined with regular petroleum diesel. Common mixes include B2 (2% biodiesel, 98% regular), B20 and B60, but B100 is available some places—though usually at noncompetitive prices.

However, one of the tantalizing prospects of biodiesel is the ability for ordinary citizens to create their own fuel. Not counting the hours spent, you can typically make your own for as little as 50 cents a gallon. Here’s the process as described by Rob Elam (not coincidentally the co-founder of Propel) in his article “Making Biodiesel” in The Best of MAKE.

1) Filter and de-water (and presumably, de-onion-ring) the oil
2) Determine the acidity of the oil
3) Process the oil with lye and methanol (HEET gasoline additive)
4) Allow to settle and skim off the biodiesel from the waste (glycerine)

Unbiased information might be tricky to find, but if you’re interested in learning more, check out this biodiesel basics article on the Union of Concerned Scientists website.

[Article Source]

THE fledgling US biodiesel industry may have stalled as rising prices make soybean oil too expensive.

“Two years ago soy oil was in the low 20s (cents per pound),” says Ed Ulch, a soybean farmer from Solon, Iowa. “Now it’s 52 cents per pound. The break-even price for these biodiesel plants is 43 cents.”

The industry is exploring feedstocks made from other sources, such as canola (rapeseed). Many biodiesel plants are scrambling to incorporate animal fat, or spent fryer grease from restaurants.

“We might as well face up to it - I don’t think we’re going to supply the needs to furnish all the feedstocks to the biodiesel industry,” he adds. “If we can supply enough to take care of excess soy oil and keep the price up, we should be happy with that.”

[Article Source]

By Susan Kinzie and David A. Fahrenthold
Washington Post Staff Writers
Monday, March 10, 2008; B04

A strain of bacteria accidentally found in the Chesapeake Bay more than 20 years ago—a bug that decomposes everything from algae to newspapers to crab shells—could help produce cheaper fuel, according to scientists at the University of Maryland.

Gov. Martin O’Malley (D) will tout the work of professors Steven Hutcheson and Ronald Weiner on campus today in announcing that Zymetis, a U-Md. spinoff company, will use the organism to generate ethanol.

The hope is that the bacterium can be used to produce ethanol more efficiently and inexpensively and in effect recycle junk into energy. The bacterium, which is very difficult to find in nature but easily reproduced in the lab, has turned bench scientists into entrepreneurs.

It’s a remarkable bug, Hutcheson said. “There’s nothing out there that compares to it.”

With environmental, economic and geopolitical reasons to find alternatives to gasoline, there’s a sense of urgency behind scientists’ drive to make cheap fuels out of such plants as grasses and wood. Other scientists said that the U-Md. research might mark a significant step in that struggle but that it was difficult to judge the discovery in detail without more information.

Ethanol is, essentially, fermented plant matter: Parts of the plants are broken down into sugar, which is converted into a kind of alcohol that is usable as fuel. For now, most U.S. ethanol is made from corn, but scientists want a source that isn’t also sought after for food.

They are now seeking to make fuel out of such things as wood chips, cornstalks and a prairie plant called switch grass. But the fuel in these plants is locked up chemically in such substances as cellulose, which nature has engineered not to break down, unlike the starches in grains.

“That’s the reason why you eat bread but you build houses out of wood,” said Philip Pienkos of the U.S. Department of Energy’s National Renewable Energy Laboratory.

That’s where this bug comes in. The bacterium Saccarophagus degradans, or sugar eater, can create a mix of enzymes that degrades plant matter. It has the largest known concentration of enzymes that eat carbohydrates, Hutcheson said.

“It basically is the ultimate bottom feeder,” said Jonathan Dinman, an associate professor of cell biology and molecular genetics at U-Md. “It eats what nobody else will eat—cornstalks, leftover chaff from hay or whatever—and can turn that into ethanol.”

Some researchers now use a pretreatment that softens the plants, then another treatment to turn cellulose into sugar, then a fermentation that turns the sugar into alcohol. Several scientists said that if the U-Md. research could make this process faster and more efficient, it could produce serious savings.

“If this guy’s got the answer to it, heck, yeah,” it would be the product of the year, said Mark E. Downing, of the Department of Energy’s Oak Ridge National Laboratory in Oak Ridge, Tenn.

But Bruce E. Dale, a professor of chemical engineering at Michigan State University, said he wondered how much difference one bacterium could make. “There’s never been, to my knowledge, a microorganism that, without help [from scientists] . . . can break down cell walls completely and rapidly,” Dale said.

If such an organism existed, he said, plants would probably have found a way to defend themselves. “If there’s organisms out in the world doing that,” they would be “turning all the trees into puddles.”

The bacterium isn’t a parasite or a plant pathogen, Weiner said, adding that research has shown it attacks only dead organic matter. It was found in the mid-1980s by scientists at George Mason University looking for the organism killing wild grass.

In the lab, most people just call it 240—not for the Maryland area code, but because it was the 40th sample isolated on a researcher’s second day in the salt marsh.

The bug interested a scientist at George Mason, and at a conference in the late 1980s, Weiner, who happened to sit next to him, was invited to collaborate.

The other scientist soon moved on, but Weiner was hooked. “It was unique. It was the first marine bacterium shown to degrade woody material. . . . How does CO2. . . go from a complex carbohydrate in the ocean to atmospheric CO2? . . . It was a whole missing link. This organism was absolutely the first and remains the paradigm for how that occurs.”

It was obvious, too, that it had tremendous ability to degrade all kinds of complex carbohydrates. “I started off fascinated with it,” Weiner said, “and the more we studied it, the more fascinated we got.”

In about 2000, Hutcheson joined the department and began working on 240. He drove to the salt marsh, a stretch of ecological preserve in Mathews County, Va., to try to isolate more samples of the bacterium.

In more than a dozen tries, the researchers haven’t been able to.

With the help of the Energy Department, they got its genome sequenced. Weiner worked almost straight through a few nights because he was so excited when the data came back. “That was a breakthrough,” said Larry Taylor, then a doctoral student in the lab and now at the National Renewable Energy Laboratory.

A few years ago, Weiner decided to step away from the theoretical and try an informal experiment: He snipped branches off a bunch of his wife’s houseplants and put the clusters of leaves into glass flasks with 240. In other flasks, he combined 240 with newspaper or magazine pages. Then he had a group of 10 control flasks with just the bacteria.

He came back to the lab after the holidays—a week, maybe 10 days later, and burst out, “Who the devil took our flasks?”

He looked again and counted. There were 20 there, but they all looked empty. “The plant matter had all disappeared,” he said. “I never anticipated the organism would be that efficient. That’s when we knew the organism not only did things in microculture but had the potential to be useful on a grander scale.”

They had always known the research could one day be helpful for making ethanol, but the more they found out, Hutcheson said, the more possible—and compelling—the practical applications began to seem. And when he watched President Bush talk about alternative fuels in the State of the Union speech a couple of years ago, he almost fell out of his seat, he recalled. He began to put together the company through the Technology Advancement Program at U-Md.

About a year ago, Dinman joined them to help bump up the fuel yields they get from sugars using genetically engineered yeast. “Yeast has been used to make ethanol since the first caveman got a buzz off of fermenting berries,” he said.

There are still a lot of hurdles, Dinman said. There is plenty of competition, too. Weiner said the big question is whether it can be cost-competitive; Hutcheson said they reduced production costs 20-fold in less than a year.

Hutcheson hopes to have the pilot plant running this summer. And when he gets a chance, he’ll go back to the marsh. He’s still looking for 240.

Brien Bonneville
Research Manager
KSC&W, Inc.
1730 M St. NW, Suite 911
Washington, DC 20036
Tel: (202) 293-4761
Cell: (202) 316-3167
Fax: (202) 659-5760

http://kscw.com

By Juliet Eilperin
Washington Post Staff Writer
Friday, February 8, 2008; Page A05

Clearing land to produce biofuels such as ethanol will do more to exacerbate global warming than using gasoline or other fossil fuels, two scientific studies show.

The independent analyses, which will be published today in the journal Science, could force policymakers in the United States and Europe to reevaluate incentives they have adopted to spur production of ethanol-based fuels. President Bush and many members of Congress have touted expanding biofuel use as an integral element of the nation’s battle against climate change, but these studies suggest that this strategy will damage the planet rather than help protect it.

One study—written by a group of researchers from Princeton University, Woods Hole Research Center and Iowa State University along with an agriculture consultant—concluded that over 30 years, use of traditional corn-based ethanol would produce twice as much greenhouse gas emissions as regular gasoline. Another analysis, written by a Nature Conservancy scientist along with University of Minnesota researchers, found that converting rainforests, peatlands, savannas or grasslands in Southeast Asia and Latin America to produce biofuels will increase global warming pollution for decades, if not centuries.

Tim Searchinger, who conducts research at Princeton and the D.C-based German Marshall Fund of the United States, said the research he and his colleagues did is the first to reveal the hidden environmental cost of producing biofuels.

“The land we’re likely to plow up is the land that we’ve had taking up carbon for decades,” said Searchinger, the lead author. Estimating that it would take 167 years before biofuel would stop contributing to climate change, he added, “We can’t get to a result, no matter how heroically we make assumptions on behalf of corn ethanol, where it will actually generate greenhouse-gas benefits.”

Researchers said the findings applied to other forms of ethanol-based fuel as well, at emissions rates that varied depending on the nature of the land being converted and the crop being grown on it, with sugar cane ranking as the most efficient. The results of the studies are significant because industrialized countries are pushing so aggressively to boost biofuel production as an alternative to gasoline.

The recently passed energy bill mandated the production of 36 billion gallons of biofuels annually by 2022, compared with about 7.5 billion gallons today. Just last month, the European Union’s Transport Ministry proposed a directive calling on member countries to power 10 percent of their transportation with biofuels.

The studies emphasized the time it would take to pay back the “carbon debt” created by clearing land to grow biofuel crops, in the words of Joe Fargione, central region science director for the Nature Conservancy, but biofuel industry officials—as well as administration and congressional officials—said it is unfair to judge ethanol in its current form, because the industry continues to make technological advances.

“This is a good way of showing where we are, not where we’re going to be,” said Rep. Edward J. Markey (D-Mass.), who is chairman of a House global warming panel and who helped write the energy legislation. Noting that the measure set benchmarks requiring any new ethanol plants to produce a fuel that is 20 percent more efficient than gasoline, and even more stringent standards for advanced biofuels, he added, “Once you set the standard, then it’s going to drive where the investment is made, where the breakthroughs are.”

James L. Connaughton, chairman of the White House Council on Environmental Quality, said he remains convinced that many biofuels produce substantial environmental benefits.

“Like any issue, there are ways to do it right and there are ways to do things wrong, and the same is the case to biofuels,” he said. “We move as rapidly as we can to second-generation [biofuels] because those offer the best opportunity for a low environmental profile.”

Brent Erickson, executive vice president of the Biotechnology Industry Organization’s industrial and environmental section, said using renewable resources always made sense in the long run, compared with gasoline and diesel fuel.

“It makes no sense to continue burning fossil carbon, which is essentially carbon that has already been sequestered for millions of years in the Earth’s crust, and which when burned releases carbon dioxide and also creates a carbon debt that can never be paid back,” he said. “It is much more logical to produce biofuels that recycle carbon, even if a short-term carbon debt is created. Even if it’s 167 years, you’re still better off than burning oil that can never be paid off.”

But an array of senior scientists who work on climate change, including Missouri Botanical Society President Peter H. Raven and William H. Schlesinger, president of the Cary Institute of Ecosystem Studies, sent a letter to Bush and congressional leaders yesterday urging them to reconsider their energy policies in light of the new studies.

“While politicians in the U.S. and Europe have tried to craft policies dictating that new biofuels will not come at the expense of clearing land, the papers show that sometimes land conversion is often an indirect result of this expansion,” the 10 scientists wrote. “There is an urgent need for policy that ensures biofuels are not produced on productive forest, grassland or cropland.”

Alex Farrell, a professor with Berkeley’s Energy and Resources Group who concluded in 2006 that biofuels produce a net environmental benefit, said the paper by Searchinger and his colleagues changed his mind.

“The qualitative result that biofuel produced on fertile land has higher greenhouse gas emissions than fossil fuels is almost certainly true, even if it’s only by a certain amount,” Farrell said in a telephone interview. “But we can make better biofuels. The right thing to do is to give the biofuel industry the incentives and support to move to a more sustainable production method.”

One of the biggest tests will come when the Environmental Protection Agency issues its analysis of the climate impact of biofuels, which according to the energy bill must include “direct emissions and significant indirect emissions such as significant emissions from land use changes.”

Rep. Jay Inslee (D-Wash.), a member of the House Energy Committee, said policymakers would have to rely on scientists to help them sort out such questions.

“Our challenge really is to find out a way to quantify these things, so when you adopt a policy, you factor in these land use issues,” Inslee said, adding that the new findings point out that “we ought to be open to new science, but we also have to continue with upward leaps in biofuels.”

[Article Source]

By Chris Woodyard, USA TODAY

LOS ANGELES — The ethanol industry has a problem, but you wouldn’t have known it Tuesday from the line of big, thirsty vehicles snaking down the street from a single service station.
Most states still have few places that sell the industry’s highly touted E85 fuel (85% ethanol, 15% gasoline) even though there are an estimated 6.8 million cars and trucks on the road capable of burning the mixture.

Here in the motoring mecca of Los Angeles, there’s exactly one E85 station to serve consumers. It is one of just three open to the public in all of California.

Thanks to a promotion subsidized by General Motors (GM), drivers lined up their SUVs, pickups and minivans for a blessed two hours of E85 priced at 85.9 cents a gallon — a far cry from the $2.999 a gallon that Conserv Fuel in the tony Brentwood section of the city usually charges.

“I’ve been waiting to get a station out here,” said Keira Lowery, 28, of Los Angeles as she filled up her Dodge Caravan minivan. Some waited more than half an hour.

Promotions like this one have been staged around the country to raise awareness of E85, plugged as a home-grown, environmentally sound fuel. But even officials of GM, which makes the most flex-fuel vehicles that can burn E85, say they are frustrated by the slow rollout of pumps around the country.

“We’re trying to bring attention to the fact we need more stations,” said Clay Okabayashi, a GM executive who was on hand at the event.

The Corn Belt has most of the E85 pumps. Of the 1,490 U.S. stations with E85, 89 are in Iowa, 169 in Illinois and 342 in Minnesota, according to the tally kept by the National Ethanol Vehicle Coalition. But there are just four stations in Utah and one each in Montana, Massachusetts and Delaware.

The slow growth of the E85 stations contrasts with this season’s huge corn plantings and the continued opening of ethanol plants, many near the corn.

While more pumps are located near ethanol plants, red tape is also a problem. In California, the coalition blames California air-quality officials for holding up installation of E85 pumps in a dispute about permits for their vapor recovery systems.

“The problem is distribution and overcoming some laws and regulatory hurdles,” says Phil Lampert, the coalition’s executive director.

Vapor-recovery issues have been ironed out with the federal Environmental Protection Agency. Local air-pollution districts will soon be cleared to allow more E85 stations, says Dimitri Stanich of the California Air Resources Board.

That could make customers happy.

Jesse Lopez, 37, a freight manager in Los Angeles, says he’ll consider filling up his pickup more often on E85. He says he’s spending $80 a week on gasoline now. As for E85, “It depends on the price and how it burns” in the truck, he says.

And Daniel Ochoa, 30, a store clerk from Los Angeles, says he bought his truck in hopes that he could fill it with E85, but he never before had the chance to try it. He says he knew the day would come.

California has adopted ambitious goals for alternative fuels and cutting greenhouse gas emissions—and is calling on the masses to help.

By Elizabeth Douglass, Los Angeles Times Staff Writer
February 26, 2008

Ben LeBeau pulled up to the Conserv Fuel station in Brentwood on a recent Friday and started filling the tank of his black Chevy Tahoe with a liquid rarely found in California—E85, an alternative fuel made of 85% ethanol and 15% gasoline.

The station is near his office, and he’s been a regular there for more than a month. LeBeau’s Chevy, a so-called flexible-fuel vehicle, can run on gasoline, E85 or any combination of the two—and that’s one reason he bought it.

“Unless I have to, I don’t use regular gas anymore,” said LeBeau, 34, of Agoura Hills. He doesn’t mind that his mileage per gallon is lower with E85, which is usually made from corn. The fuel is easier on the environment than gasoline, LeBeau said. “It’s what you can do today.”

For LeBeau and other E85 converts, there’s just one problem: Although California leads the nation in adopting alternative fuels, there are only seven places to get E85 in the state, and only three are open to the public. New government funding and a greater sense of environmental urgency is starting to improve the outlook, though.

In 2007, California had 835 alternative fuel stations, more than any other state. Most dispense electricity (379), liquefied petroleum gas (215) or compressed natural gas (174), according to figures compiled by the U.S. Department of Energy. Sites offering liquefied natural gas, hydrogen, biodiesel or E85 were far down the list.

The disparity is largely a reflection of the state’s longtime emphasis on converting large fleets used by governments, school districts and private industry to alternative fuels, rather than changing the vehicle choices and habits of the masses. It’s also a manifestation of California’s small role in growing corn and soy beans, the primary crops used to produce E85 and biodiesel.

Now, however, California has adopted ambitious new goals for alternative fuels and cutting greenhouse gas emissions—and it can no longer afford to leave the public out of the mix.For starters, the state is going to increase the use of ethanol as a fuel additive to all gasoline sold here.

For years, California’s gasoline has contained 5.7% ethanol to boost octane and comply with federal emissions rules; starting in 2010, that will rise to 10% ethanol. For a state that consumes about 43 million gallons of gas each day, that change alone represents a huge jump in ethanol consumption.

Meanwhile, biodiesel backers have helped build a statewide roster of more than 50 sites that offer the fuel, with many selling to the public and offering blends ranging from B10 (10% biodiesel and 90% petroleum diesel) to B99, a nearly pure biodiesel fuel.

New state and federal grants will help add E85 sites. In May, the state air board set aside millions to help set up 34 public E85 stations. Most are planned for the Sacramento area, but new sites will also open in the coming weeks in Carlsbad and Oceanside in San Diego County. Separate grants will fund new E85 sites elsewhere later this year.

Persuading gas station owners to take a chance on biofuels is not easy, though.

To add E85 pumps, most station owners would have to invest more than $50,000 in an era where high fuel prices have benefited refiners but squeezed dealer profits. Even if the owner landed government grants, “that’s a big investment, and they have to be sure there’s a market there,” said Tam Hunt, energy program director for the Community Environmental Council based in Santa Barbara.

What’s more, although most stations are independently owned, the majority of California’s outlets carry major brands such as Chevron and Shell, and the oil companies impose strict rules about how those stations look and what fuels they offer.

Chevron Corp., one of California’s largest fuel retailers, participated in a one-year state demonstration project that included setting up two E85 stations for government use and studying the results. But Chevron won’t sell the fuel at stations it owns, and company spokesman Leif Sollid said, “our marketers and retailers have not expressed a widespread desire to install E85 at their stations.”

Sollid disagrees with critics who believe U.S. oil companies are dragging their feet on E85 and biodiesel to protect profits from their franchise fuels. Even so, a look at the oil giant’s U.S. retail network is telling: Out of 9,600 U.S. stations selling Chevron or Texaco fuel, 26 offer biofuels.

In an industry that has sold the same basic products for more than a century, change doesn’t come easily. Sometimes it takes prodding from a younger generation.

Family-owned Redwood Oil Co., based in Rohnert Park, Calif., operates 19 Chevron-branded gas stations. In May, the company started selling 99% biodiesel at one station and added B20 at another outlet a few months ago.

“I was the one who started the project,” said 33-year-old Julie Van Alyea, whose father, Peter Van Alyea, is the company’s founder and owner. “He probably wouldn’t have done it without me. . . . I’m an environmentalist, and I wanted to make it available.”

The story behind Brentwood’s Conserv Fuels is much the same. But the hurdles have been high.

In 2006, when Kristopher Moller persuaded his father to offer biodiesel at some of the family’s USA gas stations in Southern California, he thought the timing couldn’t have been better. After all, high gas prices were infuriating drivers, the government was pushing alternative energy sources, and more and more people were becoming convinced that petroleum-based fuels were making global warming worse.

But in early 2007, just weeks after Moller finished outfitting the fifth USA station with biodiesel pumps, his father, John, agreed to sell the USA chain to Tesoro Corp. A few months ago, Tesoro stopped offering 99% biodiesel.

It was back to the drawing board. Kristopher Moller took control of a USA station in Brentwood that was not included in the Tesoro deal and in April started selling nearly pure biodiesel made from cooking and vegetable oils. The station was renamed Conserv Fuel and hosted a visit from Democratic presidential candidate Barack Obama.

In December, the station became just the second outlet in the state offering E85 to the public. The move should have been a triumph for Moller, but he was in no mood to celebrate.

Permitting delays and other glitches had sapped his finances. “I was struggling and fighting,” said Moller, a 32-year-old Malibu resident, “but I didn’t have the pocketbook to weather the storm.”

So he handed control back to his father, who plans to give the station one year to improve its financial performance. If it doesn’t, the elder Moller intends to convert it back into a standard gasoline station with a big oil company brand on the pumps.

“His heart is into the biofuels . . . and he really wants to see it succeed,” John Moller said of his son. But his own view, Moller explained, is “show me the money.”

The younger Moller is pinning his hopes on customers like James Courtney, who on a recent Friday drove from Venice to Moller’s Brentwood station to pump the 99% blend of biodiesel into his buttercup-colored 1976 Mercedes Benz 300D, a car that’s been in his family for decades. He paid $3.799 a gallon, more than he would have for standard diesel, but Courtney didn’t mind.

“It’s expensive, but it’s worth it,” he said. “I believe in supporting the people who have the courage and the foresight to do this.”

To get the word out about its offerings, the station is hosting a special sale today, when drivers can get a bargain on E85. From noon to 2 p.m., the station will sell it for 85.9 cents a gallon. The price difference is being paid by General Motors Corp., which has sold the largest share of the 6 million cars and trucks now on the road that can run on E85—and GM gets special credits toward meeting government fuel-efficiency standards by producing the cars.

Moller and others say state agencies, fire officials and others have been slow to adapt their rules to accommodate biofuels. Confusion and extra red tape involving equipment standards and permitting have been major hurdles, especially for E85.

The Brentwood station and the two others like it, for example, had to be designated as research sites to get all the approvals for the E85 pumps because the state hasn’t finalized emissions and equipment guidelines, Moller said.

To sell the highest blend of biodiesel, stations like Conserv Fuel must secure a variance from the state Division of Measurement Standards, which regulates biodiesel as an additive and not a fuel. In addition, anyone selling biodiesel blends higher than B20 must limit sales to customers who become members of a free, loosely defined “users group,” and to submit monthly reports to the measurement division—a requirement not present in any other state, Moller said.

The market is another uncertainty. Many drivers are unaware that their vehicle can run on E85, and it’s unclear how many will make the switch, given the fuel’s higher per-mile cost.

Despite the obstacles, groups backing E85 are planning new sites in Los Angeles, Ventura and other areas. Even the elder Moller is warming up to the trend. He plans to add biodiesel to stations he owns in Santa Barbara and in San Luis Obispo, and he’s backing the construction of an ethanol plant in Pixley, Calif.

“It’s hard for me, but I’m realizing more and more that it’s the way of the future, and we have to get into it,” John Moller said. “It’s just like it’s hard for an old man to start using a BlackBerry.”

elizabeth.douglass

@latimes.com

(PressMediaWire) BRENTWOOD, Calif. – The rising price of gasoline is hard to avoid in Los Angeles, but owners of the more than 46,000 FlexFuel vehicles capable of running on E85 ethanol are about to get a break this Tuesday – paying only 85.9 cents a gallon for the cleaner, alternative fuel.

On February 26th from noon to 2:00 p.m., Conserv Fuel at 11699 San Vicente Blvd. in Brentwood will offer E85 ethanol for 85 cents a gallon.

And General Motors is paying the bill.

GM is sponsoring the promotion to help raise awareness about the first station in Los Angeles to offer E85 ethanol, and to encourage drivers of FlexFuel vehicles to use this cleaner, renewable fuel instead of gasoline.

“At GM, we believe the biofuel with the greatest potential to displace petroleum-based fuels and help reduce tailpipe carbon gas emissions in the United States is ethanol, and so we have made a major commitment to vehicles that can run on E85 ethanol,” said Susan Docherty, general manager of GM’s 16-state Western Region, which includes California.

With more than 2.5 million FlexFuel vehicles on the road today, GM is the automotive industry leader in producing vehicles that run on E85 ethanol. That number is expected to double by 2010, with annual production of E85-capable vehicles reaching 400,000. For the 2008 model year, GM offers 11 FlexFuel models, identifiable by FlexFuel exterior badging and yellow gasoline caps.

General Motors Corp. (NYSE: GM), the world’s largest automaker, has been the annual global industry sales leader for 77 years. Founded in 1908, GM today employs about 266,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM’s OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at http://www.gm.com.

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[Article Source]

Growing Gold
By Jonathan Parkinson
Thursday, February 21, 2008

At first sight, it looks like a weed — a ragged shrub bearing sickly green fruit, growing across a plot of wasteland near the dump that overlooks Highway 101. It grows on almost any soil, and with hardly any rain. Its seeds are as toxic as any poison. But this unusual plant conceals an unlikely secret: The oil from its thick black seeds can be used to power your car. And this hardscrabble patch here in Santa Barbara is a project on the cutting edge of one of the fastest-growing industries in the world.

The plant is Jatropha curcas — also known as the Barbados nut or Physic nut, and originally brought to India from South America by Portuguese sailors centuries ago for use as a “living fence” that animals and insects instinctually avoid. Indian farmers soon found that the thick oil that came from crushed jatropha seeds could fuel their lamps. But it wasn’t until very recently that researchers found the same oil could also make diesel fuel. Since, jatropha has been the rising star of the biofuels boom in countries like India, where farmers are planting thousands of acres with this weed. In June, oil giant British Petroleum announced a joint venture to invest $160 million in jatropha. And in September, investment firm Goldman Sachs reported that biodiesel from jatropha could cost just $43 a barrel to produce — far less than corn ethanol or crude oil. But, in spite of all the interest, jatropha has never before been cultivated in the United States. That is, not until now.

Growing Fuel

For a relatively young industry like biofuels, Santa Barbara resident Russell Teall has more experience than most: He’s been working with biofuels now for 14 years. A UCSB grad, he’d long been interested in environmental causes, but when he first became involved in biofuels it was partly by chance. “I had read an article in a trade publication about a guy who had gone around the world in an inflatable boat powered by biodiesel, and called an 800 number to find out more about biodiesel. They ended up hiring me to do some consulting work for them,” Teall said. A consulting stint with the National Biodiesel Bo