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New discoveries of natural gas threaten to overturn many assumptions about energy supplies and may also bring big changes in the way cars are powered.
When the conventional wisdom had it that supplies of oil were going to run out sooner rather than later, it made sense for automobile manufacturers to embrace government campaigns to quickly ratchet up fuel consumption rules for cars and light trucks.
You didn’t need to believe that unless the world curbed emissions of carbon dioxide, the climate would be devastated by global warming and coastal towns wiped out because the sea levels were rising as icecaps melted. The automotive industry found itself pointing in the same direction as environmental zealots because everybody agreed that scarce energy resources needed to be carefully husbanded. Both sides of the argument could agree about the need to drastically cut fuel use, although they wanted it for different reasons. Environmentalists wanted to save the planet. Many industrialists didn’t buy this link between carbon dioxide and climate change, but went along with it because they could see that as the oil ran out, cars had to be use less and less fuel.
But now there’s a couple of reasons why this marriage of convenience might be about to break up; gas fracking, and new ideas about oil availability.
Over the last 20 years, law makers in Europe and the U.S. have gradually tightened the rules on fuel consumption. European politicians have been more proactive, making sure that prices at the pump were driven higher to their current, barely believable height. In Europe It now costs about $130 to fill up the gas tank of a small car with 60 liters of fuel. Taxation is often over 70 per cent of the pump price. The American equivalent – 15.9 U.S. gallons – would cost less than half that; say $55. Not surprisingly, European cars have a much better average fuel consumption, which was 40 miles per U.S. gallon in 2010, according to Brussels-based environmental lobby group Transport and Environment. According to European Union legislation, this will rise to 43 mpg in 2015 and 62 mpg in 2020. In the U.S., average fuel consumption for cars was about 25 mpg in 2010, which Washington has decreed must reach 35.5 mpg in 2016, and 54.5 mpg in 2025.
Twice as much natural gas
America is leading the exploitation of “unconventional” gas, or shale gas. In 2000, shale gas amounted to about one per cent of U.S. supplies and it imported a huge amount of natural gas. Now shale gas accounts for about 30 per cent of the market in the U.S., and exports are rising. Britain has big potential supplies of shale gas, as does China, France, Poland and Australia.
Assumptions about the outlook for oil supplies are also changing.
Ricardo, the British-based automotive engineering consultancy, said demand for oil may well peak before 2020 at no more than four per cent above 2010, falling back to about three per cent below 2010 demand by 2035. This will be because of changes in global security policies, technology, demographics, and the regulations restricting fuel use.
Gasoline use may decline because of increasing engine efficiencies and more bio-ethanol use. Natural gas fracking may make a big impact too.
“Improved supply prospects for natural gas (is) likely to lead to decoupling of oil and gas markets,” the report said.
“The improving outlook for natural gas, with the potential for the surge in shale gas production in North America to be replicated elsewhere over time, and a gradual introduction of a more competitive market pricing dynamic in world gas trade is likely to drive an increasing disconnect of the gas price from the oil price, encouraging substitution of oil in both stationary and on-road transportation (i.e natural gas vehicles) sectors,” (my italics) the report said.
So will we see lots of natural gas vehicles on our roads any time soon? Not for the next 10 years, according to Max Blanchet, partner at automotive consultant Roland Berger’s Paris office, but their numbers might burgeon after that.
Not much change until 2020
“After 2020 you might see natural gas and hydrogen too. Natural gas makes sense. It’s not renewable but it’s a low cost solution,” Blanchet said.
Alex Woodrow, marketing director at British automotive consultancy Knibb, Gormezano and Partners reckons there will be a solid core of natural gas powered cars and trucks, and sooner rather than later.
“In the next five years we’ll see a lot more. Trucks too. Over five per cent (market share) for trucks and could be five per cent plus by 2015 to 2020; cars too, as CO2 legislation kicks in. It’s not going to be mainstream because you have to compress it or liquefy it and that is quite expensive and time consuming. You can’t just plug into the national grid, it has to be compressed. Home conversion takes seven or eight hours for a tankful which will get you about 200 miles. Better than electric but not as good as diesel or gas(oline),” Woodrow said.
Modern engines can run on either natural gas or diesel, so it’s easy to switch back and forth.
Five per cent by 2025
“We will see in the next 10 years a rise in use of natural gas because it saves 20 per cent in CO2 emissions compared to regular fuel, is a lot easier to supply compared with diesel, which is likely to become scarcer. We can easily go to bio-gas, and that increases supply,” he said.
Dudenhoeffer said Volkswagen, Europe’s biggest car manufacturer, is designing future cars so they can use natural gas.
“Thus if CO2-regulation becomes stronger, natural gas will become more popular. It is the most easy and economical approach to reduce CO2 emissions,” said Dudenhoeffer.
New discoveries of natural gas also mean that far from curbing carbon dioxide emissions, this will increase CO2, which some believe is linked to global warming.
But according to an article in the Wall Street Journal at the end of January, signed by 16 scientists including Richard Lindzen, professor of atmospheric sciences at MIT, there’s “No Need to Panic About Global Warming”. The article said there is no compelling argument for drastic action to “decarbonize” the world’s economy. Next day, the Wall Street Journal published a letter from 38 scientists including Michael Mann, Director, Earth System Science Center, Pennsylvania State University which begged to differ.
Expect to heard more of this argument, if energy supplies are not as scarce as first thought. And if natural gas becomes a niche player, this will also torpedo any remote chance that battery-only cars might be viable.
Neil Winton – February 2012
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