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Tampilkan postingan dengan label aviation. Tampilkan semua postingan
Tampilkan postingan dengan label aviation. Tampilkan semua postingan

Rabu, 12 September 2012

Jet Fuel from Trees (or Almost Anything Else)

Out of the dozens of press releases that hit my email inbox in the last week, one that caught my eye was for a gathering of a group called the Northwest Advanced Renewables Alliance (NARA) in Missoula, Montana this Thursday.  Their agenda is focused on "challenges to develop a residual woody biomass to jet fuel and valuable co-products industry in the Pacific Northwest."  Somewhat more snappily, their website calls this "from wood to wing."  With oil prices (UK Brent) persistently over $100 despite the weak global economy, the appeal of such an effort is not hard to understand.  Whether it's feasible at an acceptable price remains to be seen.

Making fuels from waste or non-food crops is an attractive idea, and aviation fuels look like an especially promising market for bio- and synthetic fuels, for several reasons.  Unlike the markets for motor fuels--gasoline and diesel--you wouldn't have to convince millions of customers of the efficacy of using a new fuel.  You'd only have to convince the fuel buyers and chief engineers of a handful of airlines and aircraft leasing companies, along with the even smaller universe of engine suppliers.  Certifying that your fuel meets all relevant specifications is a key step in that process, though in some respects that should also be easier than for gasoline and diesel engines. If you doubt that, just consider the current fuss over increasing the ethanol content of gasoline from 10 to 15%.  Of course, having your car engine fail on the interstate is a very different proposition than having both engines shut down at 40.000 ft--or during take-off.

Fortunately, turbine engines are very reliable and fairly flexible.  The best proof of the latter is that the turbine at the heart of a natural-gas-fired power plant is essentially just a bigger version of the ones hanging under the wings of a Boeing or Airbus aircraft, which burn a close cousin of kerosene, a simple distillate refined from a wide variety of crude oils. Turbines on ships burn a fuel similar to diesel. Many of the specifications that jet fuel must meet have more to do with the conditions under which aircraft operate than the specific sensitivities of jet engines.  One example of that is the temperature at which a jet fuel becomes difficult to flow, just before it freezes solid.  That's one reason that many oilseed-based biojet fuels require essentially oil-refinery levels of processing.  Stepping back from such details, however, I'm skeptical that crop-based biofuels are the long-term solution to the fuel-diversification needs of aviation, for many of the same reasons we see playing out with regard to corn ethanol during the current drought.

Supporters of various biojet efforts often focus on two main benefits of renewable jet fuel.  The first is the reduction of greenhouse gas emissions, since the principal alternative available to airlines or military aviation is further efficiency improvements, which face diminishing returns, or reduced operations.  The other benefit that I often see cited is potential cost savings versus petroleum, though I regard this as largely illusory, at least on the level of the fuel customer.  As I've described at length, the output of even a captive biojet facility is worth its price in the market--set by petroleum jet fuel--not its cost of production.  That argument should also hold true for airlines buying oil refineries.  However, to the extent that biojet could be scaled up enough to apply competitive pressure on the 6 million barrel per day global jet fuel market, or in  isolated regional markets, that would benefit both airlines and consumers. Production at that scale will require feedstocks that are readily available in large quantities.

Many companies and researchers are pursuing renewable jet fuel pathways that don't rely on food- or food-competitive crops.  The RenewableJetFuels.org website of the Carbon War Room provides a portal into some of these efforts, including fuels based on factory waste gases, algae, and various other approaches.  Some of these have progressed to demonstration-stage production and fleet certification, though as we've seen with cellulosic motor fuels, scaling up to truly commercial production represents a much higher hurdle that could shake out many of these contenders.  For that reason, it's encouraging to see the NARA effort, nor should they worry about being too late to the party.

Jumat, 11 Juli 2008

Airlines vs. Speculators

Yesterday a friend sent me a copy of an email letter she had received from an airline on which she is a frequent flyer. It made an urgent plea for public support to rein in oil market speculation, which it blamed for between $30 and $60 per barrel of the current oil price, which has been ruinous for the airline industry. Millions of Americans received the same letter--apparently I haven't flown enough, lately, to merit one--with a link to the "Stop Speculation Now" campaign website. Congress and the Commodity Futures Trading Commission have been grappling with this issue, and new energy futures market regulations should be forthcoming shortly. However, I hope that the chiefs of America's airlines are not banking on a speedy return to sub-$100 oil, and the $1.00 or more per gallon this would subtract from their jet fuel bills. Even if all speculation were eliminated tomorrow, the combination of a weak supply response and the low price elasticity of demand for oil make it unlikely that prices would quickly revert to last fall's $80-$95 per barrel price range.

For the last year, I have discussed the potential impact of speculation on oil prices. Investment in oil futures, options and derivatives as a new asset class has affected the market in ways that traditional speculation by financial players--a key ingredient of market liquidity--didn't. Even if these investors never take delivery of a single barrel of oil, they constitute a new segment of demand for oil futures and exert upward pressure on the market. I have also described at length the mechanism by which the resulting higher futures prices affect the prices that refineries pay for the physical barrels of oil they process, and why in that margin-based business, resistance to higher prices is likelier to come from end users, rather than refiners. But none of this alters the main facts governing the price of oil: The growth of global demand over the last five years has consumed most of the existing spare production capacity, and restrictions on access to resources--within OPEC and the US--combined with the time-lags inherent in bringing new supplies online have left the market balanced on a knife edge, setting up the conditions without which asset-class investments in oil futures would just be another complicated way to lose money, which may still be the ultimate result for many.

In a recent Wall Street Journal op-ed, Martin Feldstein, a former chairman of the Council of Economic Advisers, provided an exceptionally clear explanation of how small changes in supply and demand can translate into large price movements for commodities with very low short-term price elasticity, or sensitivity, of demand. Yesterday I discussed the recent demand response in the US. It took $4 per gallon pricing to halt the steady year-on-year rise of US gasoline consumption, a trend that was unbroken since 1991. And in the absence of serious refining problems, the only two paths to $4 gasoline were $130 oil or the imposition of a $1.00 per gallon surtax when oil was still under $100/bbl. Constraining the futures market now might provide some temporary relief, but it won't resolve the underlying problems that brought us to this point.

I don't blame the CEOs of the airlines for grasping at this straw. The signatories to the letter include my former boss at Texaco, Glenn Tilton, who understands the oil and airline businesses better than most. These executives know that a commercial aviation industry built on cheap fuel will emerge from a long period of sustained high oil prices as transformed as if it had been re-regulated, and that the mass access to cheap and convenient air travel that we have taken for granted could disappear. Their effort here may even pay off, but as I noted recently, the exact form of any new regulations on energy trading matters greatly, if the cure is not to be worse than the disease.