Tuesday, June 05, 2007

'Just One Word...Biobutanol'

There's a famous scene in the classic movie the Graduate where Benjamin gets the following sage advice:

Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.
Biobutanol may turn out to be the updated word for this century; if DuPont and British Petrolueum have anything to say about it:
Today, biofuels account for less that 2% of global transportation fuels but this could increase to 30% in key markets in the future...
Author Bill Paul (Future Energy) has also come to a similar conclusion. Paul was interviewed on Consuelo Mack's WealthTrack (transcript (see text below), podcast: both free for two weeks...check for June 1, 2007 broadcast) and discussed the benefit of biobutanol over ethanol. The one primary benefit is that biobutanol can be produced from waste biomass. One of the downsides of corn ethanol is that demand for it may drive up food prices.

More benefits of biobutanol detailed here.

Text of Transcript:
CONSUELO MACK: So there is a solution that exists today to reduce healthcare costs. That is if you’re healthy and live in the states where low cost individual healthcare policies are offered.
When it comes to lowering energy bills, particularly prices at the pump, unless oil prices fall significantly it’s out of your control, right? Wrong according to our next guest! Long time energy and environmental journalist Bill Paul says solutions are right around the corner. Paul maintains that a bright, clean and abundant energy future is within our grasp. In his recently published book, Future Energy: How The New Oil Industry Will Change People, Politics And Portfolios, he describes the energy technology revolution that he says will bring us lower prices and energy independence. I asked Paul to tell us about the “new” oil industry.

BILL PAUL: We're going to move away from a single source transportation system, otherwise known as crude oil, into a multi-source system, that takes advantage of all of the domestic fuel sources that we have available to us. In one fell swoop, we introduce diversity, and competition. The second point's very important. There has never been competition for the fuel that we put in our cars. Oil has always been it in our lifetimes.


In the future, we will have choices. Those choices will serve as competitive pressures, the marketers of these new technologies will be pushing them on us, in part through their environmental friendliness, so it all starts to come together. The consumer wants a cleaner car that gets better gas mileage, that costs less to fill up. And that's what's going to be behind all this.
We basically reached a tipping point a couple of years ago, when we hit three dollars a gallon gasoline, and when we started to see crude oil prices climb above $70 a barrel because of hurricanes and the constant geopolitical concerns out of the Middle East. Big money is now backing the brains in the new technology and we are now leading into an area where, in my opinion, we will move progressively over the course of the next ten years, from a system which is today crude oil to a system, about five years down the road, that is crude oil plus bio-fuels ...

CONSUELO MACK: And explain what bio-fuels are.

BILL PAUL: Well, bio-fuel is literally gasoline alternatives. It is a liquid transportation fuel that you make with things that grow. Most people are familiar with corn ethanol, or sugar cane ethanol. Corn ethanol, frankly, was a very bad politically motivated choice out of Washington. They've learned the error of their ways down there, and they have started to make a strong push towards the next level of bio-fuel, which is called cellulosic bio-fuel.

CONSUELO MACK: So what are the bio-fuels?

BILL PAUL: It's corn ethanol is the first, the second is cellulosic ethanol. Cellulose is that hard fibrous plant matter- think of corn kernels, then think of corn stalks, the latter is that cellulose. We can use cellulose, which today pretty much is waste product from forests, from agriculture, even your household garbage- literally talking about a scene from the movie "Back to the Future", where he pours the banana peel into the car and it takes off. We are reaching a point where, five, six years from now, we will be able to take our household garbage, truck it over to a plant on the outskirts of our city, and turn it into liquid transportation fuel, that runs our cars. It doesn't replace gasoline, it complements gasoline, and it competes with gasoline. So we have a synergism, and at the same time we have a competitive market place. Hello, that's the American way, which we've never had in transportation.
My book maintains, and it's backed up by who are the people developing this, that the third generation of technology in bio-fuels will be something called bio-butanol. Bio-butanol is a bio-fuel that, unlike ethanol, can be mixed with petroleum and piped through the existing infrastructure, and sold by Exxon Mobil at the corner gas station. Bio-butanol becomes a bio-fuel that big oil falls in love with. It becomes an oil field that can never dry up, as long as we have garbage, and can never be nationalized by somebody like Iran or Venezuela. Let's just stop to think about this. Everybody has garbage, everybody has wild grasses, and by that I mean every nation on Earth. We are now getting to the point where, within five years or less, we should have developed the technology to the point where the productivity and the efficiency of turning these waste products into bio-butanol makes it possible for literally every nation on Earth to develop an indigenous alternative to get to imported gasoline.

CONSUELO MACK: So, why is the cellulosic ethanol going to be replaced by the bio-butanol?

BILL PAUL: It's not. Actually you make bio-butanol from either cellulosic ethanol, or from corn ethanol.


BILL PAUL: Okay? You can take, you know, you just take a screwdriver here, and a wrench there, and the...

CONSUELO MACK: So it's a new and improved, it's not a replacement?

BILL PAUL: It's a new and improved ... yes. What will happen eventually is, and it's starting to already, we will run into a situation where it's food versus fuel in terms of the corn. Many environmentalists are scared to death that we are not going to have enough food. The last thing that politicians in Washington want is food insecurity, you know, for energy security. So we push into cellulosic ethanol, and very quietly, the Bush administration has started to do that. They didn't make a big deal out of it, but they started to a quasi-Manhattan scale project last year, to develop cellulosic ethanol. They're not big on that kind of rhetoric yet, but I think that's going to be changing throughout 2007. But you move into cellulose. Now, the people who are still banking on corn ethanol, as I said, 2008, 2009, better get their money out in a hurry, because we are building something like 50 to 60 corn based ethanol plants, refineries, just in the State of Iowa right now. We don't want them, we don't need them.
What we want is a plant in every state, every city, we want a plant on the outskirts of our town to take the garbage to, to convert this stuff. This is not hard chemistry. Once companies like DuPont, and DuPont, I should add, is the leader in the bio-butanol category right now.

CONSUELO MACK: Because it's a leader how so?

BILL PAUL: It has seized upon bio-butanol as the better bio-fuel. It recognized the limitations not just of corn ethanol, but also of cellulosic ethanol. DuPont figured out which, something I really think should have been obvious, which is, you can't beat big Oil. Big Oil's got all the money. Big Oil's got all the power. You've got to have a bio-fuel that fits in with Big Oil's scheme. Bio-butanol is that bio-fuel, it is that elephantine oil field that can never be taken over. Keep in mind, Big Oil's future is really dicey.


BILL PAUL: Very dicey.

CONSUELO MACK: Especially from what you're describing to me. So what I'm trying to figure out is why is Big Oil immune from the, you know, the classic kind of boom-bust cycles or obsolescence that other industries have been in the past? Why won't it be replaced by the bio-fuels?

BILL PAUL: Because they, again, they control the transportation system. Eventually you, and this is ten to 15 years out, long term investing, you will see Exxon Mobil buy an electric utility, maybe a southern company, I have no insider information.

CONSUELO MACK: Right, right.

BILL PAUL: But what we're going to see is the destruction of the traditional blocks in the energy industry. Utilities, oil companies, that sort of thing, they're all going to start to feed in on one another, because you're going to have, quote-unquote, the energy company. You will have Exxon, whose own oil production peaks in about four years, moving to offer alternatives on its own terms. That means electricity for cars that run, that you can plug into your house. I wouldn't be surprised if Exxon Mobil buys a solar panel company. It may buy the big one out of China that's just developing. All things that may sound strange to you until you realize that once you throw open the gas tank to alternative fuel choices, all bets are off. The whole past is gone. One more thing. You don't pay three dollars a gallon when you fill up your gas tank, you pay 11 dollars a gallon. A new form of energy economics is coming up now, where all the hidden costs of filling up your gas tank are coming into play.

CONSUELO MACK: And hidden costs such as? Major ones?

BILL PAUL: Military costs. Two dollars and 70 cents a gallon to defend the oil shipping lanes and the oil fields, so that it gets here. Six dollars a gallon in what are called economic dampeners. Jobs not created, tax revenue lost, all the sales receipts that we don't have because of all that money we're spending on gas is going over to OPEC bank accounts. What you will see, especially in 2007, is a recognition that it's cheap at the price, not just do we have to have it, but when you're really paying 11 dollars a gallon, whatever we put into developing new technologies is relatively cost effective.

CONSUELO MACK: It's going to pay off, right.

BILL PAUL: It's going to pay off.

CONSUELO MACK: I hope they listen, whomever they are, the powers that be, listen to you, and read Future Energy, Bill Paul, thank you very much for joining us.

BILL PAUL: Thank you.


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