Alternative fuels downplayed


Recent studies from ExxonMobil Corp. and the U.S. Energy Information Administration on future energy consumption appear to underestimate the future demand for natural gas and methanol. Both reports found that natural gas use is 1 percent of the total fuel used in vehicles. By 2040, that portion will rise only to about 2 to 5 percent.

The EIA report indicates that the agency doubled its outlook on natural gas use in 2011, with increased production of liquefied natural gas and use in the trucking sector. However, automobile owners will not rush to natural gas because of its low density and lack of pumping stations. EIA administrator Adam Sieminski said, “What really holds natural gas back is the infrastructure to refuel, and how much energy you can put into a vehicle is limited.”

ExxonMobil's annual report parrots EIA's on a global basis: “Globally, ExxonMobil expects to see growth in plug-in hybrids and electric vehicles (by 2040), along with compressed natural gas and liquefied petroleum gas powered vehicles. However, these will account for only about 5 percent of global fleet in 2040, their growth limited by cost and functionality considerations.”

EIA's report, contrary to ExxonMobil's, says repeatedly that its projection is dependent on most current laws, policies and regulations remaining intact, with respect to the production, distribution and sale of oil and natural gas. ExxonMobil recommends that natural gas development occur without government involvement or support, despite the fact that it receives billions of dollars in tax subsidies for oil and benefits from government regulations that help create a near-monopolistic market for gasoline.

But ExxonMobil's study does not reveal its assumptions concerning the price of gasoline versus natural gas. Both ExxonMobil and EIA suggest that gasoline prices will peak in the next decade and begin to decline because of energy efficiency, CAFE standards and the increased use of alternative fuels, particularly powered by electricity. Neither explores in depth the impact of price differentials on efficiency. Though gasoline is denser and gets more miles per gallon gasoline equivalent (MPGe), technology has reduced the differential, and the price of gasoline remains comparatively high. Natural gas and its derivative methanol are likely to remain cheaper than gasoline and attract many cost-conscious consumers.

Neither report discusses the impact on the demand for natural gas and methanol, should Congress decide to end the laws and regulations that generally restrict the transportation fuel market to gasoline and discourage the production of flex-fuel automobiles. Neither report grants great weight to the probable development of policies and legislation to curb GHG emissions from cars and trucks, which would increase the demand for natural gas and methanol-fueled automobiles as they emit far less GHG emissions than gasoline-powered cars.

Most oil companies have a vested interest in limiting demand for natural gas and retaining outmoded government regulations. Even though many, like ExxonMobil, have bought natural gas fields, their main stake is in oil, and production of natural gas appears focused mainly on business and utilities. To some extent, ExxonMobil's projections reflect their company's fiscal objectives. Conversely, why EIA's primary projections portray a miniscule demand for natural gas from the transportation sector over the next three decades, despite the fact that policies and regulations are likely to change, remains a mystery.

In the past, these annual reports have underestimated natural gas and oil supplies and made misjudgments concerning prices and demand.

By the way, the national average price for a gallon of self-serve regular gasoline recently hovered around $3.68, compared to around $2.10 for the gallon equivalent of natural gas.

Marshall Kaplan is an adviser to Fuel Freedom Foundation.

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