NATIONAL AFFAIRS: by Patrick J. ByrneNews Weekly
Ethanol for strategic energy self-reliance
, May 22, 2004
The price of oil has hit US$40 a barrel. It may be a temporary spike, due to the current crisis in Iraq. However, intelligence analysts have been warning that more than 30 years after the oil price hikes of the 1970s that sent the world economy into a spin, Arab states control two-thirds of the worlds proven reserves of oil, and the West is increasingly dependent on Arab oil.
Some leading Arab oil states are unstable and facing terrorist threats. Should Saudi Arabia fall to Arab extremists and its oil supplies be curbed or a terrorist nuclear device be exploded in key oil fields, havoc could be created in the world economy.
Current supplies of oil from Alaska and the North Sea are diminishing, some alternative sources are limited or from unstable states, and Russia's oil assets are large but costly to exploit. There will be increased competition for available oil from the fast-growing economies of China and India.U.S. energy policy
Hence, one of George Bush's first presidential acts was to order a review of America's strategic oil policy. The resulting 2001 National Energy Policy
report showed that on current trends, by 2020 the US would be producing less than 30% of its oil needs.
Australia produces about 60% of its oil requirements, but faces a sharp decline over the next decade.
As Graham Barrett, a former World Bank adviser recently concluded in the Australian Financial Review
(May 11), "The task for the West ... is to do more than simply seek new sources of supply. It is to identify and pursue whatever needs to be done to reduce and eventually eliminate oil dependency ... [including] diversity into other energy sources".
Overseas, governments are incrementally augmenting fossil fuels with renewable biofuels. The technology for alternative fuels is developing rapidly.
Now, one of the world's most influential economic magazines, The Economist
, has joined the push for renewable energy development. It cited the Organisation for Economic Cooperation and Development (OECD), McKinsey, a leading consultancy, and a handful of big corporate converts, notably Dow Chemical, Cargill and DuPont, as leading this push.
The magazine said they were among the "savvy firms" that "increasingly understand that the fossil-fuel era will come to an end, and are diversifying away from such raw materials."
Notable for a magazine committed to free market economics, it emphasised that government "subsidies and regulations may be the main driving force" in this developmentThe Economist
added: "America recently published draft rules to encourage federal purchasing of bio-based industrial products in 11 categories, from lubricants to fibres, plastics and paints. It also subsidises making ethanol from maize (corn) kernels.
"To meet European Commission targets under the Kyoto treaty, some 9.3 million tonnes of ethanol will need to be produced annually in Europe by 2010. The EU has also adopted guidelines and production targets to expand the use of biofuels derived from agricultural, forestry and organic-waste products. The biofuels target for 2005 is 2% of vehicle fuel, rising to nearly 6% by 2010.
"Most bio-based products now on the market rely upon traditional chemistry. But operations such as the glimmering new Cargill Dow joint-venture 'bio-refinery' in Nebraska offer a glimpse of things to come. Cargill and Dow Chemical have invested US$300m to produce plastic package wraps and textile fibres from maize and bacteria. The firms also say that they can use maize stalks and other crop left-overs to fuel their factory machinery.
"Royal Dutch Shell and Iogen, a Canadian firm, are among those building an ethanol refinery that converts 'residual biomass'-leftover plant matter usually thought of as waste. Thanks to the creation of more efficient enzymes that cut fermentation costs, advances in genetically modified maize starch that have improved yields, and government subsidy, America's 75 ethanol refineries produced a record 2.8 billion gallons (10.6 billion litres) last year. At least a dozen ethanol refineries are now under construction in America."
Recently, Brazilian Trade Commissioner Pedro Menezes, has been touring sugar cane areas of Queensland urging Australia to become a major ethanol producer. At a recent forum organised by the Sugar Industry Reform Committee, he said that Brazil needed Australia to become a major co-producer of ethanol because Japan would only become a major biofuels importer when it had secured reliable suppliers.
Also addressing the forum was Associate Professor Ray Kearney, from the Department of Infectious Diseases and Immunology at the University of Sydney. He has shown that up to 20% of lung cancers come from carcinogenic emissions from additives to fuel. This could be greatly reduced by adding ethanol to fuel. (see News Weekly
, April 19, May 3, September 20, 2003)
A Federal Department of Transport report estimates the health costs of urban car emissions at 0.2-0.3% of the economy - i.e., $1.5-$2.2 billion annually.
The strategic, economic and health benefits from biofuels are compelling.