Winning the Oil Endgame Kansas State University January 4, 2006 Lena Hansen lhansen@rmi.org Rocky Mountain Institute
Over the next few decades, the United States can get completely off oil and revitalize its economy led by business for profit.
Over the next few decades, the United States can get completely off oil and revitalize its economy led by business for profit.
Over the next few decades, the United States can get completely off oil and revitalize its economy led by business for profit.
Over the next few decades, the United States can get completely off oil and revitalize its economy led by business for profit.
Over the next few decades, the United States can get completely off oil and revitalize its economy led by business for profit.
Over the next few decades, the United States can get completely off oil and revitalize its economy led by business for profit.
Book and technical backup are free at: www.oilendgame.com This work was cosponsored by OSD and ONR. The views expressed are those of the authors alone, not of the sponsors. Copyright 2005 Rocky Mountain Institute. All rights reserved. Hypercar and Fiberforge are registered trademark of Hypercar, Inc.
What s the problem? 3
The U.S. oil problem in a nutshell Americans use 26%, produce 9%, and own 2 3% of the world s oil so we can t drill our way out Fungible in world market; issue is use, not imports The next barrel is cheaper abroad than at home Security is an issue at 70% import dependence, with Saudi Arabia as the only significant swing producer Three basic approaches to oil strategy Ostrich Conventional supply emphasis Substitute, innovate and revitalize cheaper, safer, surer; our focus
Whalers ran out of customers before they ran out of whales even before Drake struck oil in 1859!
Photo copyright Colani DAF
Photo copyright Boeing Image Licensing
Our energy future is choice, not fate U.S. petroleum product consumption and net petroleum imports, 1950 2025 24% of U.S. oil imports coming 30 from Persian Gulf Total Petroleum Use million barrels/day 25 20 15 10 Practice run 1977 85: GDP +27%, oil use 17%, oil imports 50%, Gulf imports 87% You are here Conventional Wisdom + Drift Conventional Wisdom + Coherent Engagement State of the Art + Coherent Engagement Net Imports Conventional Wisdom + Drift Conventional Wisdom + Coherent Engagement Plus Biofuels and Biomaterials Plus Saved Natural Gas Substitution State of the Art + Coherent Engagement 5 Plus Biofuels and Biomaterials Plus Saved Natural Gas Substitution 0 195 0 195 5 196 0 196 5 197 0 197 5 198 0 198 5 199 0 199 5 200 0 200 5 201 0 201 5 202 0 202 5
Winning the Game: restoring competitiveness and eliminating oil dependence National competitiveness and national security at risk Why should we care? Japan, EU, China will eat Detroit s jobs for lunch Energy insecurity, price volatility, and climate concerns, perhaps depletion Save net $70 billion/y by 2025, create 1 million net jobs How do we win? 1. Efficient end-use can save half the oil at $12 a barrel 2. Biofuels substitute for another fourth 3. Saved gas can displace the rest, preferably via hydrogen
How do we capture this prize? Invest $90 billion in transportation equipment industries, plus $90 billion to build an advanced biofuels industry Creates 1 million good new American jobs (3/4 rural) Preserves 1 million jobs Returns >$150 billion/year Business should lead, but needs acceleration, while expanding customer choice and reducing business risks Support, not distort, business logic with new policies Market-oriented without taxes Innovation-driven without mandates Reduce federal deficit Broad political appeal Federal government: lead, follow, or get out of the way Needs little or no Congressional action Can be administrative, or done by the states
Challenging a basic assumption in Detroit and Washington QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. Efficiency assumed to be a tradeoff against price, size, performance, safety, Hence policy intervention needed to induce customers to buy the compromised vehicles
How many people still buy phonograph records? QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture.
Where does a car s gasoline go? 13% tractive load 87% of the fuel energy is wasted 0% 20% 40% 60% 80% 100% Braking resistance Rolling resistance Aerodynamic drag Engine loss Idling loss Drivetrain loss Accessory loss 6% accelerates the car, <1% moves the driver Three-fourths of the fuel use is weight-related Each unit of energy saved at the wheels saves ~7 8 units of gasoline in the tank (or ~3 4 with a hybrid) So first make the car much lighter! (safer, ~free)
Critical insight: light weight before aerodynamics and powertrain 956 461 US gallons per year 105 111 279 Baseline Vehicle (2004 Audi AllRoad AllRoad 2.7T) 2.7T) Gal/Y 51% Mass Reduction ** Reduced Power From Better integration, Integration, Aero, Aero, Tires, Powertrain Tires, Powertrain Hybridization Gallons Per Year Used used by Lightweight Lightweight Hybrid Vehicle Hybrid Vehicles Issues: crashworthiness and manufacturing cost
Decompounding mass and complexity also decompounds cost Only ~40 50 kg C, 20 45 kw e, no paint?, radically simplified, little assembly,... Exotic materials, low-volume special propulsion components, innovative design
Today s concept vehicles will become main-stream PLANES: save 20% now (787), 45% @ 46 /gal QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. CARS: save 69% at 57 /gal QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. BLDGS/IND: big, cheap savings; often lower capex TRUCKS: save 25% free, or 65% @ 25 /gal
New biofuel technologies could provide 3.7 Mbbl/d cheaper than oil without subsidies Biofuels Substitution Supply Curve Net million barrels per day (Mbbl/d) 2000 $/bbl at Biofuel Refinery Gate $90 $80 $70 $60 $50 $40 $30 $20 $10 Old technologies (e.g., corn- ethanol): not economic without subsidies Conventional Wisdom Net Mbbl/d New lignocellulosic technologies potential: 2 2 yield, lower capex, far lower energy input State of the Art Net Mbbl/d $26/bbl $0 0.00 1.00 2.00 3.00 4.00 5.00 Biofuel Supply (Net Mbbl/d) + 1 Mbbl/d in biomaterials/biolubricants
It pays to be bold Cost of Saved Energy (2000 $/bbl RAC on the short-run margin) $50 $30 $10 -$10 -$30 -$50 -$70 Oil Saved by Full Deployment in 2025 (million barrels/day) EIA 2025 Crude Oil Price Conventional Wisdom (Avg. CSE = $6/bbl) 0 5 10 15 25% of 2025 Baseline Use 50% of 2025 Baseline Use Hypothetically assuming full deployment in 2025; actually we realize half the savings by then State of the Art (Avg. CSE = $12/bbl) Although CW technologies can save 26% of oil use cheaply ($6/bbl), State of the Art technologies can (if fully used) save 52% of 2025 oil for only $12/bbl
2025 demand-supply integration Demand or Supply (Mbbl/d) 30 28.1 25 20 15 7.7 by 2025 after 2025 Petroleum Product Equivalent Supply & Demand, 2025 20.4 5.7 7.0 10 5.2 1.6 7.8 5 0 EIA 2025 Demand SOA & Coherent Mobilization Net 2025 Demand Biofuels Natural Gas Domestic Oil Balance
What s taking so long? Oil is priced below its societal cost Most customers are very short-sighted Most customers have poor information Most managers resist disruptive innovations
Four ways government can help 1) Stimulate demand for very efficient vehicles 2) Build vibrant 21 st Century industries by sharing R&D risk and deploying faster than the private market 3) Lower risk of investment for new manufacturing plants through loan guarantees to automakers 4) Support development of domestic energy supply infrastructure (hydrocarbons carbohydrates)
Mobilization: Accelerating Change 4.5 Mbbl/d saved, $391 billion in retail fuel savings Vehicle stock (millions) 400 300 200 100 0 2005 2015 2025 2035 2045 State Average of the Vehicles Art Conventional Wisdom Average State of Vehicles the Art (rather like today s cars) (27% more efficient, 1-y payback) (ultralight hybrids)
U.S. Consumers want uncompromised efficiency (better cars, better fuels, more choices) U.S. consumers want both their choice of vehicle type, but with greater efficiency Hybrids are the fastest growing, best selling vehicles in the U.S., far surpassing expectations
Military fuel efficiency & advanced materials: keys to warfighting capability & lower cost QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. Efficiency dramatically improves warfighting capability Moving fuel dominates military logistics Strategically, some of of our military force is protecting oil in places we may not want to be
Military fuel efficiency & advanced materials: keys to warfighting capability & lower cost Efficiency dramatically improves warfighting capability 3 areas for military focus: Requires repeat of semiconductor success: create an advanced materials industrial cluster Immediate insertion opportunity (2Q05): lightweight composite ballistic panels for up-armoring HMMWVs Platform design Design for superefficiency Shift R&D Focus on development of advanced materials industrial cluster National Defense Energy Savings Act (fix CBO); reexamine single-fuel doctrine Diversify fuels Re-consider single fuel doctrine
Winners and losers: U.S. oils are underinvested in non-oil growth options Growth Options For Oil Companies Renewables and Biofuels Dormant Testing Options Business Built Substantial Earnings Hydrogen Growth Options Cleaner Use of Fossil Fuels Energy Marketing Power Mobility Knowledge Technology Ventures
Big, fast changes have happened U.S. automakers switched in SIX YEARS from 85% open wood bodies to 70% closed steel bodies and in SIX MONTHS from making four million light vehicles per year to making the tanks and planes that won World War II
A profitable U.S. transition beyond oil 35 U.S. oil use and imports, 1950 2035 Petroleum product equivalent consumption (million barrels/day) 30 25 20 15 10 5 0 government projection (extrapolated after 2025) end-use efficiency @ $12/bbl plus supply substitution @<$26/bbl plus optional hydrogen from leftover saved natural gas and/or renewables (illustrating 10% substitution; 100%+ is feasible) Petroleum use Petroleum imports ) 1950 1960 1970 1980 1990 2000 2010 2020 2030
Why should you care enough to act?
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