Technology Review
Falling oil prices could cause some alternative-fuel startups to fail.
The price of oil has dipped to levels that could be far too low for many advanced-biofuel startups to succeed, especially those that attracted investment this summer, while oil was well above $100 a barrel. Tight credit markets will also make it difficult for advanced biofuel companies to move ahead with plans for scaling up technologies and building commercial-scale production plants.
Attempts at developing alternative fuels in the 1980s largely failed after oil prices plummeted, and the recent drop in oil prices has many concerned that something similar could happen today. On Friday, the price of oil had fallen to $40.81 a barrel, down from a high of $145 in July. Those earlier high oil prices led venture capitalists to invest in many companies that would require high prices of oil to compete, says David Berry, a partner at Flagship Ventures. This summer, he says, "people were very happy to say, 'We're targeting $80 a barrel for oil, and we think we're going to make a ton of money.'"
This September, at the EmTech08 conference, Berry predicted that if oil prices were to fall, many of these companies could fold. His own company, Flagship Ventures, has invested only in biofuel startups whose breakeven requires oil prices of $45 or lower. "When we thought about investments, we said we're not going to make a single investment in something that has its break-even point above $45 a barrel," he said, speaking in September. "In that way, we think we can be pretty insensitive to what the price of oil will be over time. If the price of oil falls to $60 or $50, from our perspective, we're going to sit here and say, this is where we thought things might end up."
Berry now says, however, that most of the companies that Flagship has invested in will still be able to hit the break-even point with oil prices lower than $45. One of these companies, Boston, MA-based Mascoma, could still make a profit with oil at $20 a barrel, says Bruce Jamerson, Mascoma's CEO, but only because current government incentives help them compete with gasoline. These include a $1.01 subsidy for every gallon of advanced biofuels, fuels made from nonfood crops, as well as federal regulations that require oil companies to sell certain amounts of advanced biofuels.
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Oil Price Impact on investment in Biofuel technologies
Human behavioral pattern has emerged as a critical
factor in modern economics in market forces decision making operations.It is interesting
to keenly observe a steady oil price decline,
but sadly enough to accept that this same human behavioral pattern is producing devastating
negative effects in economies of Russia, Iran,
etc, that are oil and crude oil producing
nations.
Government advisers, apparently, believed to
be experts in their fields, often miss the mark
and fail to read system problem in manner to
guarantee definitive solution.
Congress and Government's support for biofuel
technological growth is sound and appropriate
and must always be done with clear understanding
that crude oil and its derivative product applications in society are not and must
never be totally replaceable with biofuel
multivariate production.
(martin@mpgatechnology.com)
Falling oil prices might proove good in the long run.
I think that the current financial pressure over bio-fuel producers will make them think twice on each spend penny.
The right question isn't
"Can I compete with the current market price?" but
"How can I lower my production price the most?"
I'm sure both questions where in the minds of the producers, but the low price of natural oil will make all of them think harder on the second one.
Subsidizing in the short run might be crucial for some technologies that have potential of (great) improvement.
Re: Falling oil prices might proove good in the long run.
I don't have a problem with biofuels. I have a problem with government taxdollar subsidies. Let the free market decide whether they are efficient. We are throwing bad money after more bad money just to appease farmers.
Re: Falling oil prices might proove good in the long run.
And I don't have problem with free market. That's why I said that tax money should be spend only for developing renewable energy sources that are promising, and this should be done in short term.
After some time if the technology is not enough mature let it die.
I'm not talking about spilling the money into some abyss.
(I would not like for this to become a new thread) But are tax money wisely spend on invasion for stealing middle east oil, or any warfare? I mean that there might be much bigger holes in the budget.
The time for easy great breakthrough in this area might be over already. Hence we might really need some wise investment in developing technologies.
Have you read about "Peak Oil" ?
http://en.wikipedia.org/wiki/Peak_oil
Cheap or expensive the oil extraction will pass trough it's peak. The big question is "When?". And when the time comes the new big question will be "Are we ready?"
Regards,
Dimtar Vlasev
Wood, grass, and high-biomass cane to gasoline and chemical feedstocks
Non-food biomass can be converted into saturated hydrocarbons, as opposed to conversion to alcohols...
Wood, grass, and high-biomass cane consist of cellulose(glucose), hemicellulose(pentose), lignin(phenylpropane), and chlorophyll(diesel fuel). With the use of hydrogen and a catalyst, the cellulose(glucose) is converted into hexane, which is then isomerized into 2,2-dimethylbutane, an 89 octane gasoline at a cost of $1.20 per gallon; the hemicellulose(pentose)is converted into pentane, which is then isomerized into 2-methylbutane, a 99 octane gasoline at a cost of $1.20 per gallon, and 2,2-dimethylpropane, a 100 octane gasoline at a cost of $1.20 per gallon; the lignin(phenylpropane)is isomerized into propylbenzene, a 127 octane gasoline additive and chemical feedstock at a cost of $1.20 per gallon.
The required hydrogen for the above process is supplied by an on-site steam reformer using excess hexane and pentane produced by the process.
The non-food biomass available growing in the 14 Southeastern states along with Miscanthus grass will supply enough feedstock for the United States to become energy independent and to achieve national security. The current economic turmoil would not be happening if the United States had been producing non-food biomass energy for the past 10 years.
Jon F. Freeman
President
SUCRON
P.O. Box 8095
Clinton, Louisiana 70722
www.yataheyella@aol.com
Biofuel grown from crops will not be viable until either the whole world goes vegetarian,freeing up land used for meat production, which uses 10 times the land to produce similar food value to crop farming; or the world's population is reduced to about half what t is now. We don't have enough land to grow enough food for the people of this planet now...what's it going to be like if 50% of the world's farmers start growing food crops for fuel? A disaster, that's what! And electric cars are no better because they do NOT run on electricity...they run on COAL ! !
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mfolbe
49 Comments
biofuels
Amazing how Congress won't give a loan to the big 3 saying it is a bad business model, but they continue to support and subsidize this failed technology. I have a problem with the subsidy. How is it helping us? If it can stand on its own merit and be competitive in the marketplace, bring it on. But if it needs artificial price supports that only raise the cost of corn and other grains, let it die. The science of biofuels just doesn't stand up either. There is not enough energy tied up in the fuel to make it worthwhile to put into cars. Ethanol is tops (or bottoms) on the list of bad ideas.
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MITBeta
43 Comments
Re: biofuels
The free market has failed us quite a bit recently, as has the inability to see beyond the next quarter's profits. Investment for the future is necessary even if the products aren't viable today.
With that said, using corn to make ethanol is a bad idea. But that doesn't mean that ethanol is bad. A good engineer begins with the end in mind -- or starts at the end and works backwards. There are lots of crops that we can grow to make ethanol that have much better energy balances than corn. The same is true on the biodiesel side: soy is one of the worst crops you can use for this, but we do so because we have lots of soy. Grow Palm Oil or algae and we'll be much better off.
But don't condemn biofuels in general because the current approach is a bad one.
Reply
gr8tfate
1 Comment
Re: biofuels
Well said mfolbe. For MITbeta, commonsense is that you never turn food into fuel. Biofuels have always been dead, and never brought further than "concept". Let's take a step forward and move to battery operated automobiles which is the obvious future.
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MITBeta
43 Comments
Re: biofuels
I don't believe I suggested that it WAS a good idea to turn food into fuel. Rather I was suggesting that there are many other crops that one could grow if one's goal was to produce net energy positive biofuels. Biofuels are certainly not dead, and they will undoubtedly play some role in the future of energy. There is no single technology (battery powered cars for example) that is going to solve our energy crisis.
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