"GASOLINE TODAY: WHICH FUELS WILL YOU SELL TOMORROW?"
COLORADO-WYOMING PETROLEUM MARKETERS ASSOCIATION CONVENTION AND TRADE SHOW
JACKSON HOLE, WYOMING, AUGUST 21-24, 1999

We're looking at gaseous fuels and liquid fuels. Natural gas and LPG. There is some potential for hydrogen in the future. Of the liquid fuels, we're looking at reformulated gasoline and reformulated diesel, ethanol and methanol. We're also looking at electrical — battery storage and fuel cells.

The internal combustion engine is reliable, easy to operate, and powerful. It will be around for a long time.

The problem is how to get the same octane rating without MTBE. The problem with ethanol is it also increases vapor emissions and volatility. This is problematic. They're trying to see if, in fact, they're trading one bad actor for another.

It's interesting to me that they didn't care that there were a lot of other things getting in the water supply for a lot of years but all of the sudden they care that MTBE is getting in the water.

The customer buys what he wants to buy. As you know, trucks and SUVs are what we're manufacturing now.

The biggest problem is affordability. It is possible to make a vehicle that has three times the fuel economy as a 1993 vehicle. But not at the same price.

Nobody wants to get rid of diesel. It is very practical. It is very efficient. The NOx trade-off is very different for engine manufacturers.

Natural gas is probably limited to limited markets. The high pressure storage of fuel is inherently more expensive. You need to have a customer who drives enough miles to amortize the cost of the equipment. That's generally not true of most consumers. You have to look at fleets.

Another problem with gaseous fuels is the very expensive refueling station — approximately $400,000 each are what I hear. An order of magnitude more expensive than a liquid fueling station.

To get maximum benefits and power you must have a dedicated vehicle. If you don't do that, you get power loss of 5-15%. However, most manufacturers are concerned that there are no customers for a dedicated gaseous fuel vehicle, so they're building two-fuel vehicles and that means two-fuel systems and greater expense.

You need a dedicated vehicle for equal performance.

LNG has the advantage of offering a greater driving range for the operation of the vehicle. It has the same engine technology but the storage technology is different. It's cryogenic storage where it is stored at very low temperatures. If it is stored for a week and not driven, it needs to vent and that's a problem. You need highly trained personnel to dispense LNG because there is a risk of significant tissue damage from the low temperatures. This is not going to be at retail any time soon.

Natural gas comes from different gas fields and has different CO2 contents. We have better controls now but consistent chemical composition is still an issue. Temperature compensation in refueling is still an issue.

LPG is 95% propane. It operates similar to a natural gas engine. It is much easier to refuel because of campgrounds and recreational use. Propane's driving range is about as good as a gasoline vehicle. There are already over 4,700 propane retailing outlets across the U.S. There is less cost with storage because it's not at a high pressure and it's not cryogenic. However, it's a by-product. It's stripped out of natural gas. It's a refining by-product in many cases. Our estimate was it could supply 2-3% of the vehicle market because of supply — not technology — limitations.

There is opposition to the use of LPG from the agricultural community because they're afraid it will make the fuel more difficult to find or more expensive for their needs.

LPG also has a seasonal fluctuation. There are supply and demand issues because cold weather puts pressure on supply.

Hydrogen. We have a real perceived safety problem with hydrogen. People remember the Hindenberg. It is difficult to deal with. You have to make it from something. If it is prevalent in the future, it would be made from water through an electrolysis process.

The jury is still out on how you would carry hydrogen around on a vehicle. Would you carry it as hydrogen gas or liquefied? Or you can carry it around in the form of methanol or gasoline, even. It means there's a little chemical plant on board the vehicle which will be working to make fuel for the fuel cell. The jury is still out as to how this will all evolve.

There is no infrastructure for hydrogen. With natural gas at least we have pipelines across the country.

Hydrogen is very costly. Fuel cell technology has come down in price but it's still not competitive with the internal combustion engine.

Diesel is going to be very different in the future. It will be highly refined or will be a gas-to-liquid procedure like Fisher Tropes that will take the sulfur out all together.

Methanol is BTU-challenged. It has high octane and can burn safer. We have extensive experience in California with methanol and M-85. M-85 acts more like gasoline and has a flame you can see in daylight that you can't with straight methanol. But it has poor cetane, so it is a bad diesel replacement.

Biomass. Methanol can be made from biomass just as well as ethanol

A problem with methanol is if the vehicle sits, it forms rust. The next time it sits, the rust scrapes off on a piston and there goes part of your engine block wall. You must change oils to counteract the acidity of the fuel.

There are 33 stations in California currently dispensing M-85.

Ethanol has a harder cold start. When you try to start an ethanol vehicle in Minnesota, it's pretty hard to do at -40 degrees F. We had some success in Brazil, but it's much warmer there.

Battery-powered vehicles have a very limited range. It was 50 miles — for $32,000 — on a truck. Now we're up to 80 or 90 miles. It is a very tough proposition to get a battery with enough range that anyone will be willing to pay for.

When you include the cost of battery replacement, it's not competitive with gasoline at all. No battery technology has met the 10-year lifespan goal. When you add in the cost of battery replacement, it's equal to operating a vehicle that runs on gasoline that is $4.00 a gallon.

There is the infrastructure because electricity is everywhere. But there is not necessarily the capacity there to fuel a battery. If you live in an apartment building and every body in the building all got an electric car and they all try to plug in — you can see how you would have a problem.

Ethanol. If the subsidy went away, it would probably destroy the ethanol industry.

There is a difference between price and cost. The price is whatever the market will bear.