Kicking The Gasoline & Petro-Diesel Habit

Avoiding Inflationary Pressures By Kicking The Petroleum Habit

July 30, 2008

By Charles Cresson Wood

A recent front page story in the Wall Street Journal* reported how Dow Chemical had raised prices on a wide variety of its products, some as much as 20%. Dow blames its soaring costs for energy, noting its oil and gas costs grew by 42% in a single year. Dow blasted Washington for policies that have led to higher energy costs. But the blame does not rest solely on the shoulders of government. Businesses and individuals have also been dragging their feet when it comes to transitioning to petroleum substitutes. With increasing demand and decreasing supply, the market price of petroleum is now signaling that it’s important that all these parties rapidly transition to alternatives.

For years, the International Energy Administration (IEA) projected optimistic numbers about increasing supplies of petroleum. It assumed supply would continue to match increasing demand. But, recently, the IEA has significantly revised its oil supply numbers to reflect a much more pessimistic situation.

Faith Birol, the IEA’s chief economist stated, “This is a dangerous situation.” These days, even the conservative IEA is beginning to recognize that the world’s supply of oil cannot keep up with increasing demand. The predictable result from market-based economics is that prices will continue to rise. Reflecting this new reality, the price of crude oil has risen 95% over the last year. Whether or not the world is now at, or will soon reach the zenith of its oil production capacity, a concept known as the “peak oil theory,” it is clear that producers cannot keep up with world demand as it stands today, which is increasing at about 2% per year.

Some say this is a political problem. President Bush’s recent visit to Saudi Arabia, where he requested more oil production, is an indication of this viewpoint. Others say it is a logistical and investment problem — that producers have not sufficiently invested in exploration and infrastructure. And it is true that much of the existing infrastructure is old and needs replacement or upgrading. This also explains part of the problem, but it is not the major driver of higher prices. Still others say the U.S. must exploit the oil found in environmentally protected places, such as the Arctic National Wildlife Refuge. But all of these suggestions simply postpone an inevitable reckoning with the truth, and do not fix the fundamental problem: that petroleum is not an infinite resource and supplies are now unable to keep up with increasing demand.

If Fortune 500 businesses such as Dow Chemical are serious about containing rising costs, they must now switch to other sources of energy. There are for example eleven commercially-available fuels today that can be used instead of gasoline and petro-diesel: hydrogen, ethanol, butanol, bio-methane, natural gas, propane, bio-diesel, straight vegetable oil, di-methyl ether, electricity, and synthetic liquid fuel. In many cases, according to a three-year study done by the Energy Management Institute, these fuels are now cost-competitive with petroleum-based fuels.

It is time for business leaders, such as those at Dow, to stop looking to the government for a quick fix to the petroleum problem. A reality-based, market-driven approach should involve organizations, as well as individuals, taking this matter into their own hands, converting to the viable alternatives that are now available. It is now possible for a business to make its own fuel, store and distribute its own fuel, and maintain and manage its own vehicles using alternative fuel technology. This is for example possible with bio-methane, which can be manufactured from agricultural by-products, animal excrement, municipal garbage dumps, and other waste streams. Even if you aren’t concerned about global warming carbon emissions, improving air quality, reducing toxic chemicals in the environment, reducing the skewed balance of trade, reducing military and political conflicts over oil, or even the prospect of shortages and rationing, the possibility of containing rapidly increasing costs should now prompt us all to initiate a rapid transition away from petroleum.

Charles Cresson Wood is an alternative fuels management consultant with Post-Petroleum Transportation in Sausalito, California. His most recent book is entitled Kicking The Gasoline & Petro-Diesel Habit: A Business Manager’s Blueprint For Action (

* See the 29 May 2008 issue, p. A1, “Chemical Prices Jump, Fueling Fear Of Inflation,” by Ana Campoy and Leslie Eaton


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