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Psst, Ask Jimmy-two-mums this Question

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One Little Problem With The “All-Electric” Auto Fleet: What Do We Do With All The “Waste” Gasoline?

By Paul Homewood

Back in the early days of the oil industry (1880s and 1890s), the product that the industry could sell at a profit was kerosene for lighting and heating. Since there was no automobile industry yet, gasoline was a waste product that was dumped into streams.

Why couldn’t the refiners produce only kerosene? Why did they end up with “worthless” gasoline?

The answer is a barrel of oil produces a variety of products. While there is some “wiggle room” to produce more diesel and less gasoline, etc., it isn’t possible to turn a barrel of oil into only one product.

John D. Rockefeller became very wealthy by cornering much of the oil market in the 19th century. But he didn’t become fabulously wealthy until the 20th century, when the rise of automobiles created a market for all the “waste” gasoline.

Rockefeller became super-wealthy when all the products of each barrel of oil could be sold at a premium rather than just a portion of the products.

This reality has been forgotten: the price that can be fetched for a barrel of oil depends on the demand for all the products, not just a few of the products.

Those demanding an all-electric auto-truck fleet as a “green” alternative will re-create the dilemma of what to do with the “waste” gasoline. The world will still want fuel for all those container ships bringing all the goodies of a consumerist society, all those cruise ships visiting ports of call, jet fuel for all those exotic vacations enabled by 550 mile-per-hour aircraft, and oil-based lubricants, plastics and petro-chemicals, and so oil will still be pumped and refined, and almost half of it will be gasoline.

 

This is a topic worthy of your understanding, so grab a vat of your favorite beverage and turn off all distractions.

Longtime readers know I’ve focused on energy-oil markets for 15 years. Despite ups and downs in price, the oil market has been remarkably stable.

This stability is about to transition to chronic instability: wild swings in price, shortages, and social chaos in both producing and consumer nations.

Let’s start with the most basic dynamics in the cost of producing oil, refining it and selling the products at a profit.

1. As a general rule, a barrel of oil (42 gallons, 196 liters) yields a range of heavier and lighter products.

The price the producers can charge for each product–gasoline, diesel fuel, heating oil, jet fuel, propane, etc.– depends on demand for each product.

If the price for one product falls drastically, the oil producer can’t increase the price of some other product to compensate for the loss of income unless demand for the other products will support higher prices.

Consider the huge decline in demand for jet fuel as a result of global air travel dropping in the pandemic. Oil producers can’t just raise the price of gasoline to compensate for the drop in the price of jet fuel.

If gasoline demand continues declining (due to fewer commutes, etc.) then producers can’t charge more for diesel to make up the drop in the price of gasoline.

In other words, there has to be strong demand for all the products in a barrel of oil for producers to get enough money to extract, refine and transport the products globally.

Unlike the old days when producers could afford to throw away some petroleum products because their costs of extraction and refining were so low, now producers need more than $45/barrel just to break even.

The crucial issue, which I have highlighted, is that the world still needs oil, even if demand for petroleum and diesel is curtailed.

Oil refineries in the UK and elsewhere in the West will be faced with a situation where their economic viability is shattered by the loss of half their business. If they are to survive, that can only be on the back of huge price increases for the rest of their produce, which will of course in turn hit consumers hard.

But it is much more likely that oil refineries elsewhere in the world will simply take over the business, as they will be based in countries which have not turned their back on petroleum. Domestic based refiners won’t be able to compete against this.

Even then supplies of many oil based products are bound to be in short supply, by definition.

Meanwhile, oil producers will face wild swings in prices, as supply and demand adjust to the new global realities. This will inevitably lead to more economic dislocation.

Is it all worth it?

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17 COMMENTS

  1. You can’t ask Jimmy two mums anything for another 4 weeks the lazy C—T is one of the chosen 120 that has 6 weeks off on full pay and benefits.

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    • all the greens live in a cloud of smug and us minions know nothing, so are not worth their time
      remember they know what is best for us

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  2. I doubt very much that you would get any type of an answer from jimmy two mums anyway as he is unable to answer even the simplest questions. He is just like the rest of the 120 c—ts who are paid to represent us but think they have special sky fairy power over us even though we pay their salaries. I still can’t believe that the ptpm and co won by such a huge majority. Its beyond belief

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    • It is beyond belief Lizzie. Honesty and integrity are not things the left bother with. As power hungry authoritarians why wouldn’t they ensure a little election fixing. It’s for our own good apparently.

      Like all of Cindy’s other decisions, cancelling the oil and gas industry was done on feelz and for headlines on the world stage.

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  3. It came as a bit of a surprise to some lefties I spoke to in the weekend, when they learned that their EV’s were running on coal.
    Virtue-signalers can only see what’s in front of their eyes. They don’t think of the flow-on effects. That’s why their policies result in so many unintended, negative consequences.

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  4. Posted this late the other night. Fits in better here. When you look at these figures, there’s no way we’re going full electric vehicles any time soon.

    “To replace all UK-based vehicles today with electric vehicles (not including the LGV and HGV fleets), assuming they use the most resource-frugal next-generation NMC 811 batteries, would take 207,900 tonnes of cobalt, 264,600 tonnes of lithium carbonate (LCE), at least 7,200 tonnes of neodymium and dysprosium, in addition to 2,362,500 tonnes of copper. This represents, just under two times the total annual world cobalt production, nearly the entire world production of neodymium, three quarters of the world’s lithium production and at least half of the world’s copper production during 2018. Even ensuring the annual supply of electric vehicles only, from 2035 as pledged, will require the UK to annually import the equivalent of the entire annual cobalt needs of European industry…

    “There are serious implications for the electrical power generation in the UK needed to recharge these vehicles. Using figures published for current EVs (Nissan Leaf, Renault Zoe), driving 252.5 billion miles uses at least 63 TWh of power. This will demand a 20% increase in UK generated electricity.

    “Challenges of using ‘green energy’ to power electric cars: If wind farms are chosen to generate the power for the projected two billion cars at UK average usage, this requires the equivalent of a further years’ worth of total global copper supply and 10 years’ worth of global neodymium and dysprosium production to build the windfarms.

    “Solar power is also problematic – it is also resource hungry; all the photovoltaic systems currently on the market are reliant on one or more raw materials classed as “critical” or “near critical” by the EU and/or US Department of Energy (high purity silicon, indium, tellurium, gallium) because of their natural scarcity or their recovery as minor-by-products of other commodities. With a capacity factor of only ~10%, the UK would require ~72GW of photovoltaic input to fuel the EV fleet; over five times the current installed capacity. If CdTe-type photovoltaic power is used, that would consume over thirty years of current annual tellurium supply.

    “Both these wind turbine and solar generation options for the added electrical power generation capacity have substantial demands for steel, aluminium, cement and glass.”

    I imagine though, that under the pretext of global warming, and the impacts of a flu, we will soon enough be paying a shitload more for fuel at the pump.

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  5. The questions that should be asked is, What will happen to all the used lithium batteries when they fail as only about 5% of used lithium is recyclable. And what will the emergency services do when people crash these electric vehicles and the batteries catch fire, I doubt they are equipped for dealing with a chemical reaction fire. as the batteries in these things will burn and keep burning, you can put it out and it will start again when the next cell reacts.

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  6. That article shows the lack of thought behind the ideological impulses that the current government jerks along with. Questionable that the pertinent points of refining and the market realities were considered at all. The Oil and Gas brain burst is a great example of not thinking through or abiding by sound process.

    I like the advances made as a consequence of understanding and engaging in refining. We are collectively better off but that seems not to matter to the supposed eco warriors who are loud in their advocacy to go backwards. Cost of living increases are not going to assist those who are already struggling.

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    • Pete ,Cindy banning gas exploration will come back to bite us ,at present apparently gas has 50% of the polluting capacity of petroleum but within 5 years it will be down to 15% because of emerging technologies ,OH DEAR …

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      • Moderation ? and here I was using the best of goobley gook.
        It can not be Amen as balanced with Awomen.
        Got it, the “gook” word. ?
        Well thanks in ‘gooking’ advance Ed, 🙂 “So be it”

        Sorry revtech120, she saved us from a 50% pollution factor but nor is 15% any good either.

        After all they are going for “Zero Carbon Emissions” or sort of defined as goobley gook as =
        “Net Zero GHG emissions can be confused with net-zero carbon emissions, but when accurately used, net zero GHG emissions means all greenhouse gas emissions decline to zero, as opposed to just carbon dioxide.”
        Just the sort of Ardern explanation.

        “So be it”;- “Amen & Awomen” over us will the political oligarchy rule over us.

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  7. In the 80’s the popular alternative to petrol was a tank of CNG fitted in the boot of petrol powered vehicles. We could switch back to petrol if the CNG ran out. We got rid of our alternative fuel CNG tank after being stranded in the middle of State Highway 1 in the dark as the changeover failed to work immediately. Luckily the problem happened while the road was empty but it could have been lethal.

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  8. I have a background in the fuel industry. It is very interesting what you can get out of a ‘barrel of oil’ from the cracking process. If you ever get the chance take a tour of Marsden Point Refinery. You’ll be blown away.

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