Week of October 26

Cheap oil…atomic airplanes…cellulosic ethanol…hybrids, hydraulic and otherwise….

Sharply reduced oil prices are obviously the big news in the fuels business, alternative and otherwise. We predicted prices as low as the $70 range, but not below that point. So we were wrong.

Obviously, demand collapse is the only plausible explanation because production certainly isn't increasing. Oil is a lot cheaper because people all over the world, and not just in the U.S., have curtailed their driving due to a massive financial crisis that has frozen credit markets around the world and is precipitating a major economic downturn.

So let's examine that predicament further and see if we can ascertain what it might portend.

I believed that an economic crisis has been in the offing since 2005, and in fact I thought it was likely to begin in 2006. I was off by a year. What I didn't predict was the gradual nature of the cataclysm, the slow motion panic or sequence of panics which has taken place over a period of more than a year. Busts of the past have always been fairly sudden because that is the nature of a loss of confidence. This is the first one I know of to steal over us by degrees like the turning of a screw.

Frankly, I never really factored in the effects of such a bust on future energy prices. I figured that demand would be fairly inelastic and that that would ensure that prices remained elevated. Obviously, that wasn't the case.

President Bush has confidently asserted that he will fix the economy before he leaves office in January of 2009. Whether such an assertion is credible is a matter of dispute. Some have suggested the President's deregulatory zeal combined with his unwavering dedication to deficit financing have much to do with our present economic circumstances, and that he is therefore unlikely to foster those fundamental changes required to resuscitate the financial sector. But his many admirers think otherwise and I hope that they are right.

My guess is that fuel prices will remain depressed simply because the demand collapse itself is likely to be sustained. We shall see.

On Wings of Thorium

On a lighter note I will mention that the notion of atomic aircraft has been receiving some coverage of late in the U.K. press, and advocates have come forward offering this as the solution to sustained high jet fuel prices.

In reading such proposals I am thrust back into the days of my childhood in the nineteen fifties when atomic energy was deemed as transformational as the Internet was forty years later. Atomic aircraft and even atomic automobiles were discussed with some regularity in the popular press as if either might happen in the midterm. And such notions were taken seriously by the U.S. Air Force—very seriously—as they were by the Russian military as well.

In America atomic propulsion systems for aircraft were actually constructed though never flown, while in Russian they were not only manufactured, they were installed in functioning aircraft. So how did they work if they worked at all?

In a fairly straightforward manner actually. One obviously can't detonate an atomic bomb and use the expanding gases to power a rocket. Instead one has to figure out some way of harnessing the energy of a controlled nuclear reaction such as is used in a nuclear power plant. The solution, as it happens, is to make fission reactor as small as possible and use the thermal energy it produces to heat air. The hot air is then made to expand through a jet nozzle thus providing thrust.

The nearly insurmountable problem is the amount of lead shielding required to ensure that reactor can operate without irradiating the crew. Less lead means less protection and dangerous doses of ionizing radiation. More lead means more weight, weight that must be added to the extreme weight of the fissionable material itself. The whole concept is just not very tenable, but that didn't stop the Air Force from pursuing it up until the mid sixties.

More recently atomic propulsion proponents have proposed the use of an energy amplifier, also known as a triggered isomer reactor, to provide the heat source. This type of device uses a relatively small amount of fissionable material—radioactive thorium is the most frequently proposed candidate—which, upon being vigorously irradiated with X-rays, will produce considerably more energy than is going into the X-ray machine and will produce significantly less radiation and radioactive weight than a conventional fission reactor. Moreover, the technology can be scaled down to very small form factor because no critical mass of fissionable material is required. It sounds wonderfully simple in principal and it is but the truth is that such energy amplifiers have not progressed beyond the experimental stage nor are they likely to for at least a couple of decades if ever.

So no atomic flights are at all likely until well into this century.

Cellulosic Ethanol Again

The famous Max Planck Institute in Germany announced a new method of cellulosic ethanol production just when many in the alternative fuels investment community have begun openly despairing of anyone ever making celluosic ethanol economically. The folks at the institute have disclosed little of the new technique except to say that the process involves a pretreatment with an ionic liquid followed by the application of a solid acid resin. So evidently this is a new variant of concentrated acid processing the oldest technique extant and one that was coincidentally developed in Germany. Researchers caution that the current high cost of the ionic solvent is apt to prevent any early commercialization.

Hydraulic Hybrids

Not all hybrid vehicles are hybrid electrics. Other energy storage media have been proposed as well including compressed air, high pressure hydraulic systems which are really a variant of the first, high velocity flywheels, and even superconducting magnetic energy storage.

Last week UPS announced that it was equipping a portion of its fleet with a hybrid internal combustion hydraulic system manufactured by Eaton Corporation and Navistar. The hydraulic auxiliary power setup is essentially a combination automatic transmission and regenerative braking system.

The Federal Government performed some studies years ago suggesting that a hydraulic hybrid would be more cost effective than an electric version, but by then a significant portion of the auto industry had already decided that the future belonged to electricity and that today's electric hybrids would serve as bridges to any of three possible futures, one populated by fuel cell cars, another by plug-in hybrids using vestigial internal combustion engines, and another by pure electric cars using batteries or super-capacitors or both in combination.

So what does this announcement mean? I think the market has already spoken and that the other types of hybrids are essentially out of contention. You simply can't make as deep a hybrid using hydraulics as you can with an electrical power plant and that limitation will prove critical.

On a similar note, I received an announcement honoring one Alex Severinsky, a Russian American identified as the inventor of the hybrid electric car in the early nineties. Wrong by about thirty years. Hybrid electric cars were introduced in France in the nineteen thirties. They lacked the sophisticated engine management systems developed by Severinsky and other pioneers, but they existed, and were probably inspired by the hybrid-electric propulsion systems that were ubiquitous in the world's navies at the time and which are still the norm in nuclear submarines and supertankers.

As I post this item, I am awaiting the results of U.S. Presidential election and speculating on its impact on alternative fuels. Barack Obama appears to be prevailing, but the night is young, as they say, and McCain's team have vowed to contest the election in court where they could very well prevail. In any case, don't expect a coherent energy policy to emerge. We've never had one in the past and we probably lack the fortitude to develop one now.