Wednesday, April 14, 2010

Toyota's Bill Reinert on Peak Oil


I was fortunate to have the opportunity to hear University of Colorado graduate Bill Reinert speak at last week's 62nd Annual Conference on World Affairs at CU. Reinert is the national manager of advanced technology for Toyota Motor Sales, USA. His primary function is to coordinate Toyota's various research, development, and marketing activities related to alternative fueled vehicles and emerging technologies. Before taking over Toyota's North American fuel cell efforts, Reinert and his team were responsible for product planning of the current generation Prius.

Since I have been following the subject of peak oil fairly closely for a number of years I found this talk to be surprisingly, refreshingly, and frighteningly candid, as I'd categorize this brilliant man as an overall "doomer" after listening to his presentation and his answers to audience questions about the timing of peak oil and prospects for alternative energies. He stated that Toyota has researched and understands peak oil as well as anybody. To follow, is my summary of his talk.
--Kalpa


"Everything you know is wrong"
by Bill Reinert - April 6, 2010


"People drive an amount equivalent to their dispensable income."



Demand destruction
Reinert expects gasoline demand destruction to hit at about $6/gallon. At $3.50/gallon behavior begins to change, and even more so at $4.20/gallon. When the price of gas went up in 2008 Prius sales increased as much as SUV sales declined and then when it went back down, SUV sales increased even more.

Peak Oil
He said we are at or near "peak oil," and that it will hit the second half of this decade. At Toyota they don't discuss peak oil, they discuss peak liquid fuels. A half barrel of oil goes towards the production of gasoline.
  • In 2015-20 demand starts to exceed supply.
  • OECD has peaked and is in decline.
  • In '09 USSR production started declining which has geopolitical implications.
  • The lowest cost-to-produce oil is in the Middle East (at $13-30/barrel. They manage their fields better than we do.)
  • Of the above, Iraq & Saudi are the two biggest and stablest areas of production.
  • Our U.S. oil is some of the most expensive to produce ($60/barrel and we run our fields to exhaustian).
  • OPEC and Iraq won't meet India, China, and Brazil's demands.
  • If we don't buy the oil produced, somebody else will.
Reinert expects our government to eventually regulate activity to control use when there is limited oil availability. Since China and India subsidize their energy they will have a real problem down the road. He poses the question of whether governments will hoard oil. And he warns us that we haven't seen noth'n yet when it comes to environmental degradation to go after remaining fossil fuels.

Trucks and overnight air freight (think out-of-season foods) will be hit hard when peak oil arrives. Our current food system will "become too expensive for the lifestyle we're used to." Cheap transportation allows access to many goods at reasonable prices.

Corn Ethanol
He explained why corn ethanol is a political game and not a rational choice because the amount of gasoline it offsets after inputs is minimal. He does think bioplastics make more sense since they offset another part of oil use. He has some hope for algae.

His concerns
Reinert's number one concern is that the government is not putting money into oil development or upstream refineries. (Refineries are shutting down due to currently low profit margins.) Within a few years we'll have lost 30% of our refining capacity while other nations have built or kept theirs up.

His best hope is
It was clear that Reinert's vision of the most reasonable solution for auto transportation lies in efficiency gains. "The I.C. engine is not dead," he said. The Prius engine is 38-44% efficient. He pointed out that vehicle efficiency gains in saving gas are on the lower end (20-30mpg) vehicles more than what is gained on the higher end (40mpg to 50mpg) range.

One audience question was about on-board catalytic reformer action producing incredible efficiency with the ability to take a 30mpg vehicle and turn it into a 130mpg vehicle by converting a hydrocarbon stream to a reformate fuel stream. His response was that platinum based catalytics have a sulfide poison problem, and also said that he was not at liberty to talk about the subject.


platinum mine processing at Rustenberg, South Africa


Fuel Cell technology
Reinert is bullish on hydrogen fuel cells, on which the government has turned its back. He said that we could get the hydrogen technology infrastructure set up in six years on the amount of money given to the ethanol industry (at a scale equivalent to diesel now). He likes the idea of hydrogen combined with biomass.

Toyota has hydrogen fuel cell technology ready to roll in 2015. They'd like government policy to support it. Manufacturers have developed technology but there is a platinum problem. Every oil company has a hydrogen plan but there is no government support. The car companies are building hydrogen stations in California now. Hydrogen from natural gas can be transitioned renewably.

His view of Electric Vehicles
He pointed out that fueling EV's charged with our current grid is dirtier than a high efficiency car. EV's are way more expensive than hybrids, beyond what the consumer is able and willing to pay. (See Bloomberg article linked below for more on his negative outlook on electric vehicles '09). He especially doesn't think the grid infrastructure upgrades required are realistically attainable.

Alternative energies
Alternative energies need to be "life cycle efficient." A windmill only operates 20% of the time. One coal mine in Kentucky produces the energy equal to all of the alternative energy we have today. Coal is getting the most subsidy, for carbon sequestration, followed by wind and solar, while natural gas gets nothing in subsidies. Due to the lack of achievable scale for alternatives as compared to the energy density in fossil fuel, conservation and gain in efficiency is the most logical goal.

Natural Gas cars and other car comments
There are problems with cars fueled by natural gas such as the tank requirements and danger of collisions. There is no infrastructure or government support for it. Using natural gas in cars has been accomplished in Italy.

The reason that mileage isn't much higher on newer cars than fifteen years ago is partly because heavy safety features add mass to cars making them less efficient. He also noted that diesel cars which are generally more fuel efficient have trouble meeting environmental standards.

Lithium batteries
There are 3-4 types of lithium batteries and several types of packaging. There are carbon nanotube batteries. Toyota is looking at lithium air batteries. He predicts that in 3-4 years the supply of lithium batteries will exceed demand, resulting from current government subsidization. Even so, manufacturers have been unable to bring down the costs of lithium batteries.

What we need
  • Serious political discussions.
  • To educate everybody about peak oil.
  • He advised the audience to help spread the word and email everybody "you know." Do your part.
  • Hold your politicians accountable at the state and local level.
  • We need good electrochemical storage.
  • We need the U.S. to manufacture PV.
  • We need a carbon tax.
  • We need to ramp up manufacturing again in this country since jobs have gone offshore.
  • We need to train engineers and qualified workers for manufacturing (a millwrights average age in the US is 60).
  • We need to switch from a service based economy to a production based economy.

Nuclear
He is open to small scale nuclear plants.

Politics
We lack political will. Reinert is pessimistic, cynical and skeptical about politics doing anything about a problem until we face a crisis.

In response to another audience question about what to invest in, Reinert said that he has no idea what to invest in for the future as he personally has squandered his own money in old cars.

The audience questioning concluded when a young audience member begged of Reinert to give some hope for future technology. Reinert rephrased the question by saying, "You mean will there be a magic bullet?"

"I'm out of bullets," Reinert said.

~~~~~~~~~~~~~~~


Also, see:
Toyota Questions Cost, Batteries of Plug-In Hybrids (May 18, 2009), Bloomberg

And here is more on his view of Toyota's Prius Plug-in Hybrid. (4/15/2010)

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