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Two Words for Michele Bachmann and the $2 per Gallon Gasoline Pledge

By: Steve Maley (Diary)  |  August 19th, 2011 at 03:00 PM  | 

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Natural Gas.

I’m as bullish on domestic oil as the next guy, but I’m also a realist. I don’t see any way to solve a problem with the scope and breadth of our nation’s dependence on foreign crude oil during a president’s term of office. It is simply not an overnight solution.

Yes, the national average gasoline price was below $2.00 per gallon when President Obama took office. It stayed there for all of four months. That was a time when we were all reeling from the economy’s precipitous decline, coupled with a historic collapse in the crude oil price from $140 to $36 per barrel.

We can’t find and produce oil and bring it to market for $36 per barrel. Not from the sources you name – the eastern Gulf, ANWR. It will take many years to bring on new oil from those sources anyway. The only way I see prices getting back to $2 per gallon is with demand destruction — a collapsing economy. Personally, I’d prefer not to see the Dow below 7,000 again in my lifetime.

But there is a solution, and one that could make you look like a genius: natural gas. Good American natural gas, right here, today, is less than $2.00 on a gasoline-equivalent basis.

We’re blessed with an abundant, domestic resource base of natural gas. It is a clean transportation fuel that would directly put a dent in oil imports. A strategic focus on natural gas would create jobs almost immediately. The flow of royalties, severance taxes, sales and income taxes would benefit private and public coffers alike.

A strategic commitment to natural gas as a transportation fuel is the one thing that might get us $2.00 per gallon gasoline (equivalent).

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  • juumanistra

    Better to have a hypothetical Pres. Bachmann made a fool of than deal with the negative consequences of “a strategic commitment to natural gas as a transportation fuel”.

    The problem with natural gas as a transportation fuel is that it would be the ethanol boondoggle writ large: By exposing the natural gas supply to the insatiable demands of the motor fuels sector, you invariably guarantee knock-on price inflation for the existing users of natural gas. And while ethanol was bad enough, the effects of natural gas displacing sizable chunks of the motor fuels market will make the burning of corn in one’s fuel tank look like peanuts by comparison. Natural gas is, after all, the feedstock of more or less every major petrochemical product that is produced today, as well as a major — and growing — fuel source in the electricity and heating markets. So instead of inflation simply being confined to food prices, now it will be spread around to your electricity and heating bills, as well as everything you purchase that uses any kind of plastic. I suspect the negative unintended consequences would rather quickly outweigh the benefits of lowered transportation fuel prices. (Though motor fuel prices wouldn’t drop as much as advertised, given the newfound stresses on supply.)

    The only way such a strategic commitment can work if it’s matched by an equally robust commitment to phase-out natural gas-fired generating capacity for power, heating, and work as a hydrocarbon feedstock. Which is a rather daunting mandate, which can only really be met by a return to state support for nuclear power that’d make the AEC blush, and for nuclear-fired direct coal-liquefaction or some other coal-to-liquids program that uses nuclear-powered electricity or waste heat to power its chemical processes. While I would support such wholeheartedly, I suspect I am in the minority on that, even amongst those on the Right.

    • http://stevemaley.com Steve Maley


      That’s 20% growth in supply in just 5 years.

      • juumanistra

        To borrow from that wonderful Lawrence Livermore graph you’ve routinely linked to showing, in flow-chart form, America’s energy consumption, total natural gas consumption is 23.37 quads. Total transportation sector energy consumption from petroleum is 25.34 quads. Lets be conservative and call a “sizable” displacement of petroleum-based motor fuels on order of 25%, so we would be looking to increase natural gas’s output by 6.25 quads.

        A quad amounts to 1.015 x 10^18 joules of energy. A cubic foot of dry natural gas contains 1,087,000 joules. This equals out to ~9.34 x 10^11 cubic feet per quad: Multiplied by our target of 6.25 quads, we’re looking at increasing total natural gas consumption by the equivalent of 5.83 x 10^12 cubic feet of gas.

        Scientific notation isn’t really doing it justice, however. By your graph, total American output of natural gas for 2010 was 2,400,000mncf. A single quad contains 934,000mncf, while our target of displacing 25% of the motor fuel used by the States would require an additional 5,870,000mncf. That would require tripling natural gas output, and even then, it would only account for 25% of motor fuels.

        I sincerely doubt you could undertake that kind of spike in demand without having massive knock-on effects. I also doubt that, despite the abundance of shale gas reserves, that you could increase output to match such demands. Though if I have screwed up the math, kindly let me know: I would very much like to be proven wrong.

      • YnotNOW

        is not that we couldn’t supply the demand. It is that “Strategic Commitment” from government implies government subsidy. Like the NAT GAS act, which would subsidize converstion of commercial trucks at something like $50k each, and coversion of gas stations at around $1M each. At taxpayer expense.

        If Natural Gas is a good transportation fuel (and I believe you that it may well be), then the risking of capital to seek those profits needs to be PRIVATE. Not corporate cronys with a hand out for taxpayer dollars.

        Bachman and other Repub candidates need to emphasize the correct kind of energy policy – get the EPA and burdensome permitting rules out of the way, so that private development of our domestic sources of ALL types can be allowed to proceed on their own.

        • juumanistra

          We, as a general policy goal, want cheap motor fuel. The most economic choice for such is gasoline and diesel derived from petroleum extracted from the Persian Gulf, Bay of Guinea, and other Third World petrostates where marginal extraction costs remain in the single digits. (Lets ignore that we get the bulk of our oil imports from Canada and Mexico: There geographic proximity makes shipment cheap, in spite of their higher marginal production costs.) At the same time, there is a desire to lessen imports from unsavory actors around the world who mean to do harm to America’s interests. Under such circumstances, the only hope at reconciling the two wildly divergent policy goals is government sponsorship and subsidization of various non-economically optimal fuels.

          Whether such is a good idea or not is an open question, one that I suspect I’m rather more open to than yourself. But one cannot, at least while maintaining an iota of intellectual consistency, demand that the government “let the free market work” in the development of the motor fuels market and then bemoan American energy dependence. (Not to imply you have done so, YnotNOW. Merely that I have seen that behavior a couple of times from others on the Right, and felt it needed pointing out.)

          • Common_Cents

            that do need to be estimated that aren’t rolled into the price per barrel or gallon of gasoline.

            We do have military costs in the middle east that are related to energy. Depends on who you ask, could be extremely high or low depending on how you allocate military costs and other costs directly to energy needs in foreign hostile lands.

            Without looking at these, a nat gas comparison or domestic drilling cost comparison are harder to look competitive. the devil is in the details.

            the question is, if we were largely energy independent from domestic or friendly country supply and nat gas etc… how much of a savings could we achieve in overseas military? An interesting discussion.

          • YnotNOW

            The “war for oil” cannard has been refuted so many times I will not get into it now. Suffice it to say we don’t have any oil revenue coming from Afghanistan.
            The US Military might that ensures a world open to free trade among peaceful nations is about all trade, not just oil, and about all allies, not just some economic gain.

            And the “subsidy” of oil is a pittance compared to other energy sources, such that oil (and mostly Natural Gas) is a big payer of revenues to the govt (taxes, royalties and even corp/income on companies/workers). Almost all subsidies are essentially the same write-offs that other companies get for their business expenses.

            To put Natural Gas back on the “subsidy” bandwagon is a hugely bad idea.

  • rowdydfw

    My father was a distributor of Butane. And he had a 50′s model GMC pick up for a work truck for trouble calls if people had problems with heir heaters or lines. He hooked that truck up to a small butane tank in the bed of the truck. It ran perfectly and even had a switch to run on gasoline should it run out. The only thing you had to do was adjust the choke on it, or it would cough and spit when you slowed down for corners. We nick named the truck ‘Asthema’. I had a blast driving that old truck around on his ‘free’ gas as my friends and I could take road trips in it and not have to pay the whopping .25 cents/gallon for the gasoline.

    Today that old truck is still used on our farm to pick up feed, haul some hay bales out to the pasture and fence posts around and such. It’s like a green tank that can only be stopped with a mortar. Being the female sister I haven’t a clue, but I’m told by my brothers that the engine is in such great running shape because of the clean burning, first butane, and now natural gas we’ve used in it.

    It’s like a prize to me now, still in good shape and I think I’ll get it fully restored just for the memories.

  • evilleramsfan

    As far as domestic crude is concerned, the new Canadian oil sands to be sent via pipeline as well as oil shale in North Dakota EACH contain more petroleum than the rest of the world’s oil reserves and can keep our production going for a long time. That, coupled with methane. butane, and other gasses, can make us virtually energy independent.

  • JimmyGee

    There is a great line from the movie, “The Social Network,” where Mark Zuckerburg says to the plaintiffs during a deposition, “If you invented Facebook, then you would have invented Facebook.”
    The reason we use gas is:
    1. Because that the gasoline infrastructure has been established for the past approximately80 years. It would cost TRILLIONS to change the infrastructure.
    2. BTU’s or British Thermal Units, which is the amount of energy in a fuel. Gasoline has the most BTU’s, in the smallest package. Natural gas does not have the BTU’s of Gasoline, AND….
    3. Natural gas storage in a small confined space such as a car is really problematic. In a gasoline fueled car, you can form a gas tank to pretty much whatever shape you need. Pour the gas in, and let gravity take over.. In a natural gas car you have to have a pressure cylinder. And in a car accident/car fire, ask any firefighter they would rather fight a gas fire at 1 atmosphere, than a PRESSURIZED fuel system. Really bad things happen when pressurized fuel cylinders burn…they explode. Big difference.
    4. Free market systems are a lot like evolution. They choose the winners and losers. For 80 or so years, gasoline has been the winner. There is a reason for that.
    I agree that there are many benefits to using Natural Gas for autos. Engines burn cleaner, less emissions, etc. The problem I have with your idea is that once again, political leaders are choosing the winner.

    • Xasteius

      My money’s on political hokey rather than specific policy aims.

      Thanks for the reality check, Vlad.

      • http://stevemaley.com Steve Maley

        ~

    • http://stevemaley.com Steve Maley

      Nat gas may have technical deficiencies compared to gasoline as a motor fuel, but the price is at a historic low compared to oil.

      The infrastructure is being built out.

      There are nat gas fueled vehicles all around you: buses in major cites and industrial fleet vehicles.

      I don’t think there has been a ruptured fuel tank in about a decade.

      It’s not so much about choosing a winner as in deciding as a society that something is worth doing & knocking down the regulatory barriers.

      • unclefred

        Shell is on record saying that they are convinced that they will be able to produce crude from oil shale, using in ground techniques and once they have it in large scale production make a profit if the price of a barrel of oil is $36 in 2006 dollars.

        There is something between 1 and 2 trillion barrel equivalents under the US rockys alone. There is more in other parts of the nation. If not for highly obstructionist actions by the Senate we’d be well along to an initial post prototype plant. It would be small but would solve real world problems on a small production scale.

        I fully realize there are issues with oil shale and that there are significant problems to be resolved. There are commenters here with real world petroleum experience that I do not have. Still does anyone really believe that given the opportunity and a stable regulatory environment, the problems can’t be solved?

      • steve010

        It costs about 5K to convert a car, RV or pickup to CNG. 1500 for the tank, 1500 for the kit and 1500 for the labor. You can do it yourself, but not recommended. Right now about $1.10 equivalent to gasoline gallon, in CA more and cities about 2.50. You have to give up some room in the trunk, but the tank is pretty small, holds about 5 gallons. you fill the tank usually from a nozzle under the hood. The vehicle runs on CNG or gasoline. many drivers like to start up the car and get it going on gasoline, then switch to the CNG tank, pretty seemless. Mileage about the same. An engine can get about double the use and only change oil every 10K miles.

        The safety factor is remarkable. http://youtu.be/irvktfQvu4M

        • JimmyGee

          Not that I am trying to be a smart alack…never been accused of that…LOL The reason that you so so many cars in Utah is because there (according to my on-line research) is ONE station that will convert your car in that state. I tried to find a station that could install a system for my pathetic little car. I live in Wisconsin and I would have to go to Utah, or Louisiana, or Texas.
          Then I have to cough up 5 grand, and if I really want the sweet set-up and be able to fill up at home, another 4-5 K for the filling system.
          I the long haul, it would be worth it in many ways, fuel costs, cleaner burning engine, etc, but who has that kind of money?
          If this were to become a reality, there needs to be an program to get service stations to become certified CNG system installers. And a tax-break for people to have the systems installed in their car to offset the costs. Do we really want to go that way?
          But again, politicians are picking winners and losers. After 3 years of BHO, no matter how noble or worthy the cause, I am fed up with politicians picking what is “Best” for me.
          Call me stubborn….

          • steve010

            for instate residents to convert to CNG and a skilled car mechanic can install the fuel injection kit, so that is why you don’t see too many shops online, because many mechanics offer the service. There, CNG makes sense and is cost effective. Most other states right now, gasoline is king. But that doesn’t mean that CNG is a poor alternative to middle eastern oil products, if people started to use the product on a wider scale, it would snowball. Keep the fed govt out of it though.

          • acat

            You’re in Wisconsin, right? Head out of the cities to farm country and find a big propane supplier, and ask them about conversion kits.

            Farmers have been running dual-fuel with propane since after the 1973 oil crisis.

            Mew

          • JimmyGee

            I never thought of that, thank you. And to be clear, I think that CNG is a good way to go. As a firefighter, I do worry about car accidents, and car fires. You would not believe what a threat air bags are to us! What I am saying is the right now our economy is based on gasoline. It is going to take a lot to move from gasoline to CNG. God I am starting to sound like an environmentalist!

            P.s And I know that it is the Mechanic/technician that does the work….LOL

  • Common_Cents

    TBoone Pickens or an Elon Musk. Moneyed entrepreneurs?

    What are the impediments?
    the pressurized cylinder hazard?
    refill/tank exchange?
    regulatory hurdles?

    I’d think if there were an oppty, someone would be pursuing it pretty hard around the edges and on a regional basis like they are doing w/ electric cars.

    What do current conversion kits cost now?

    Thanks for your informed articles, they are always a read for me.

    • http://stevemaley.com Steve Maley

      …in Oklahoma & N. Louisiana, among other places.

      There is an in-home overnight refueling option as well.

      • acat

        as far back as the 1970s, Steve. Natural gas is definitely a feasible alternative.

        Just how many gas stations use something other than natural gas to heat the building? Point being, the infrastructure may need a rebuild/upbuild, but it’s already *there*.

        Mew

  • scottinsc

    I was at one of the South Carolina events where she made this statement. The press said she didn’t say how she would accomplish this – and she did not address it directly – but it was addressed indirectly. Natural gas was a component, as was restoring the value of the dollar, further utilizing fuel resources in the US, and decreasing regulation.

    Regarding natural gas and alternative fuels – I do not think that this will catch on in the general public – at least not for a long time. Where it can make a difference – and is – is with fleet vehicles. It’s much easier for companies like UPS to adopt alternative fuels because they have their own fuel supplies there as well as mechanics who can work with it. The general public doesn’t typically have these resources and that renders many alternative fuels impractical. When you consider how many vehicles are fleet vehicles – both private and public – it can make a big dent in the demand for conventional fuel.

    Last, in response to many critics who said her claim is ludicrous – perhaps it’s simply not possible to get the fuel below $2 again. But I’d rather have a president who will at least try and make an aggressive goal than one who simply doesn’t care and – many would argue – actually WANTS the cost to be high to further his own agenda.

    More power to her!

  • mixitup

    RedState – JimmyGee nailed it. Not to rehash what he said, but it would cost so much time and money to retrofit the gas stations of America, it would be decades before you could service the millions of cars necessary to make it cost effective. Called economies of scale. As to his explosion point, that is so accurate. Just consider all the MARTA buses you see in Atlanta, why do you think thay put the pressure tanks on the TOP of the bus. Certainly not for the looks.

    As for getting the oil, my contacts in that industry have assured me that given the go ahead they would have crude at the refineries rather quickly. The big problem in the USA is the huge shortage of said refineries. Michelle is right – if the markets(crude & stock) just thought that more supply would be coming soon, gas/oil futures would plummet, prices at wholesale would drop, and at the pump we would revert back to the $1.75 to $2.25 levels. She is correct, and not pulling a G. Bush Sr. moment. In fact, it would be very easy to get prices to the $2.00 range.

    • Common_Cents

      wouldn’t rolling back regulation on new refineries and cutting down the number of special blends required by states go a long way to reducing gasoline prices?

    • steve010

      selling CNG for 1.25. www.cngprices.com. lots of stations in NV and CO, AZ and CA. More and more cng stations popping up all the time in these states. Around LA, Cng is about half the cost of gasoline.

  • dmacleo

    how many here deal with -25+ weather?
    ever start and work the ng/lpg forklift then?

    its something to include in a sound energy policy but theres a reason gasoline/diesel works so well….cause it works so well throughout a range of environments.

    • acat

      Ask any trucker whether they want biodiesel or straight dinosaur diesel in January in the upper Midwest.

      That said, only a fraction of the country deals with sub-zero temperatures .. and a smaller fraction deal with the -25 and below you mention.

      If 50% of the cars in South Carolina, Florida, Georgia, Alabama, Louisiana, Mississippi, Texas, Arizona, New Mexico, Nevada south of I-80, and California south of Sacremento were converted to natural gas, that’d free up quite a lot of dino-juice for the northern climes.

      Mew

      • dmacleo

        but was not sure of extent.
        but thats why I say it should be a part of the whole plan and not something to pin everyhting on.

        • acat

          Encourage construction of more nuclear power stations, using designs improved over the last 40 years. McCain in 2008 called for something like 45 new ones. Oh, and fire Harry Reid’s sorry {behind} and finish Yucca Mountain.

          Encourage building/converting cars to run on natural gas, they market well in Utah, they’ll work in the whole southern 2/3 of the country. If Cali were to offer a tax incentive – cheaper license plates – to get them into the L.A. basin faster, air quality would improve.

          Frack, baby frack!

          Hydro where it makes sense, geothermal where it makes sense. (Imperial Valley, CA, IIRC has tremendous geothermal potential, with the extraction of dissolved minerals as a side-business)

          There’s no werewolf, we don’t need silver bullets, just a lot of them….

          Mew

  • victrola

    I’m amazed a GOP Presidential candidate hasn’t incorporated it as a major plank in their campaign. If we could get just get a majority of municipal vehicles to start using natural gas, it would go a long way to bringing it mainstream.

    When the economy does recover, gas prices are going to once again be a major shock to our system.

    Natural gas burns something like 90% cleaner (but the greenies still hate it because it might benefit Big Oil), we have zero supply problems for the next 100 years, and it’s almost exclusively produced right here in the US. Until we have the technology to AFFORDABLY go for electric cars, natural gas buys us a lot of time and allows Americans to drive the types of vehicles we actually want to drive (not golf carts)

    • wonkish1

      Nat Gas has been the most promising for quite some time.

      The other one of course is to try drive down energy prices on the grid first(Nuclear, Coal, etc.) and then find a cell to store it like a hydrogen battery cell. If there is a large enough price drop on the grid then it the energy loss in the transfer becomes a mute point.

      Given the choices I would agree that Nat Gas is probably the better choice.

    • Adjoran

      The natural gas industry doesn’t want to pay for the necessary infrastructure to deliver the product, the auto companies don’t want to beat the cost of designing and developing systems to use it, everybody want the federal government to subsidize them, and Uncle Sam is done subsidized plum out.

      Until somebody decides to pay for all that, it’s just smoke rising from a Paulbot’s bong.

  • steve010

    some shovel ready jobs, they’d take their INFrastrucTure money and add a CNG pump at as many stations as possible. But everytime a real economist talks about worthwhile investments in oil/gas, the “policy wonks” eyes glass over and they change the subject to fixing schools or building pyramids.

    • Adjoran

      More than half of American households are either hooked up to natural gas lines or are close enough to tap in if desired. If it’s such a great thing, they could start it regionally in the northeast and mid-Atlantic areas where there are plenty of lines, and see if it worked.

      So why is it necessary to do a test run by building the infrastructure for the whole country right away?

      It’s all about who pays for it – IF it really works as promised.

  • DerKrieger

    Methanol http://methanol.org/

    Coal gasification http://www.fossil.energy.gov/programs/powersystems/gasification/index.html

    These fuels and even natgas can be converted into room temperature liquid fuels that burn cleaner than refined gasoline http://finance.boston.com/boston/news/read?GUID=19134983

    We could be a net exporter if we had the political will to destroy the eco-Marxists.

    • http://travismonitor.blogspot.com Freedoms Truth

      Today, nat gas is cheaper, much cheaper than oil on a $/joule basis.
      The more cars converted the better.
      The Govt has a simple lever: Much of the mass transit and govt fleets can be converted and it would be cost effective.
      2. Drill here, drill now. Now that fracking is proven, go to next step: Extract oil shale. It can be done.
      3. Coal gasification is not economical.
      But clean coal can be, if we take the cloud of EPA vs CO2 away.
      4. Methanol / ethanol is a boondoggle. Make a level playing field for the alt fuels.
      5. A cheaper electric grid will make PHEV vehicles more effective.

      There won’t be one answer, the right answer is all-of-above on any economical energy source.

      It was not wise to promise $2 / gallon gas, but expensive energy and the anti-energy policies are hurting our economy, and it’s right to propose changes.

  • Adjoran

    I get why T. Boone Pickens is out for billions from Washington. I just don’t see why we should give them to him.

    Making the argument right now is pretty slick – natural gas is at a low point relative to oil or gasoline. Of course, there is no guarantee that will last the winter, much less survive a huge government-subsidized demand curve shift.

    OR that the end result will be a net benefit for America.

    It would certainly be a net benefit for those who reap the subsidies, of course. Nothing like a fat, juicy, bloated government teat to suck on, eh, lads?

    For the rest of us, not so much. No sale.

    Do it on your own dime, then we can talk, mmmkay?

    • audax

      ….BEFORE all the new NG fracked fields came on line. Not only will NG prices stay low THIS winter, but many winters to come if we can keep government out of the way and thanks to fracking!

      http://futures.tradingcharts.com/historical/NG/2011/0/continuous.html

  • skip21al

    The pendulum doesnt have to swing all the way to the other side in order for oil/gasoline prices to become affordable. Simply an announcement by the US administration that we would start an aggressive oil exploration and natural gas vehicle subsidy would rattle speculators and cause oil to drop 20% over night. I am a commuter and love my bi-fuel CNG car! Steady gas prices for me each month. I learned some good info about emissions and legal stuff from www.skycng.com. They dont sell things, purely information. Check it out.

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