Picking up where I left off in Friday's posting addressing the issues raised by ABC's recent "Over a Barrel" report, concerning what Americans ought to know about oil, let's turn to the products that we get from it. Over the course of a century and a half of production--this month marks the sesquicentennial of Drake's well--petroleum has provided us with a cornucopia of fuels, lubricants, and raw materials for industry, many of which grew out of the search for substitutes for other, scarcer commodities or the availability of low-value byproducts from earlier, less-sophisticated refining techniques. In recent years, however, we've acquired a greater awareness of oil's adverse consequences, and it has attracted its first serious competition in many decades in its primary transportation fuels market.

The gasoline we put in our cars, the diesel that fuels trucks and buses and heats many homes, especially in the Northeast, and the jet fuel we can sometimes smell when the plane on which we're traveling has just refueled together accounted for 74% of the 19.5 million barrels per day of petroleum products consumed in the US last year. Throw in propane, lubricants, asphalt, petrochemical feedstocks and solvents, and you're up to around 90%, with most of the remainder coming out as heavy fuel oil for ships, petroleum coke (a solid, coal-like fuel,) and the fuel used by refineries in their processing. The average US refinery is 90% efficient, meaning that 90% of the energy that goes into it comes out in the products it sells, while the other 10% is consumed along the way. Greenhouse gas emissions follow a similar pattern, with the majority occurring not during processing but in the subsequent use of the products.

That's a crucial factor in the effort to reduce emissions. In the recent estimate of last year's US CO2 emissions, nearly 80% of oil's 42% share of the CO2 emitted by fossil fuels came from the combustion of transportation fuels. That means that by far the largest opportunities to reduce emissions from oil are associated with vehicle efficiency, not changes in refinery processes, which are already quite efficient. So while reducing direct refinery emissions by 1/3 would only cut total oil-related emissions by about 3%, increasing the efficiency of cars, trucks and planes by 1/3 would reduce those emissions by 26%. That is a realistic possibility, because most of our vehicles use these fuels so inefficiently. Although we can't easily reduce the 20 lb. of CO2 emitted from the combustion of each gallon of gasoline, we can certainly reduce the number of gallons we burn per mile.

If you asked most people why gasoline has been such a successful fuel for the last century, you'd get a variety of answers, including some entertaining conspiracy theories, but relatively few would zero in on the fuel's remarkable capacity to deliver lots of energy in a compact and easily portable form. Every gallon of E10 gasoline (10% ethanol blend) you put into your car carries roughly 110,000 BTUs, compared to 82,000 BTUs for the E85 ethanol/gasoline blend, or 66,000 BTUs for an 85% methanol/gasoline blend. Those extra BTUs translate into range and convenience, even though the typical internal combustion engine vehicle throws away roughly 80% of them as waste heat and other losses. That's why there's such a big opportunity for hybrids, advanced engines and transmissions, and other technologies to improve the fuel economy of most cars, if consumers are willing to pay the higher up-front costs. It's sobering to think that the advanced battery pack for GM's highly-anticipated Volt plug-in hybrid will hold the energy equivalent of just a half-gallon of gasoline, though the car's electric motor will use that energy much more efficiently than an internal combustion engine would.

So what are you buying when you fill up at the pump? If you watched "Over a Barrel", you probably got the impression that you are paying for an entirely generic fuel, a moderate slice of taxes and dealer margin, and a whole bunch of advertising and other marketing expenses. That's misleading on a couple of levels. It's true that the basic fuel is indeed generic--"fungible" in industry parlance--for the very good reason that this facilitates efficient pipeline shipment and inter-company purchases and exchanges to cover refinery problems and demand fluctuations, while reducing bulk transportation costs. However, there are real differences in the additives injected when the tank truck picks up a load of fuel at the distribution terminal, when the fuel becomes some company's branded product. If you own a newer car with a sophisticated engine, spending a little more to get a major oil company's additive package could pay off in better performance and reduced maintenance costs down the line.

But while the company from which you buy your gas might not have refined every gallon themselves, they must still stand behind it, and in my estimation that's the most important extra you're paying for. If you get a tank of bad gas or one blended with 20% ethanol instead of 10% and need to have your car's entire fuel system rebuilt, you stand a much better chance of getting compensated for the repair by a major gasoline brand than an independent or discount station. I consider myself fairly thrifty, but that's worth an extra 5-10 cents per gallon to me. I'll admit to a bias against buying gas from even a big supermarket chain for the same reason.

Finally, in terms of competition, it's ironic that the most viable competitor to gasoline at the moment is another petroleum product, diesel, which has captured half the new-car market in Europe and is getting a closer look here, thanks to some new technology. While biofuels hold great promise, they are still only available in relatively modest quantities, as explained in Friday's posting, and more as "hamburger helper" for traditional fuels than as fully independent alternatives to oil. While ethanol advocates would doubtless take issue with the characterization of E85 as a failure, so far, its sales have probably been hampered more by its poor value proposition--offering fewer miles per dollar than conventional fuels--than by infrastructure constraints and limited numbers of flexible fuel vehicles. In the long run, electricity looks like the strongest challenger, assuming battery prices come down and mainstream consumers find the trade-offs involved in recharging in hours rather than refueling in a few minutes acceptable.

If "Over a Barrel" accurately reflected Americans' frustration at being dependent on a commodity they feel they no longer control, it also highlighted oil's continuing indispensability. Petroleum and its products aren't about to disappear any time soon, though their dominance is starting to slip. From all indications, US oil demand has peaked, and the industry's remaining growth prospects are centered on developing Asia. The pressure to reduce oil consumption in developed countries is growing, and alternatives that were once dismissed will soon erode oil's share of the transportation energy market. However, absent a technology breakthrough, that transition seems likely to stretch out for decades, and it's a virtual certainty that the economics and geopolitics of oil will continue to frustrate us for many years to come.

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