 Okay, we're back. We're here together. And as you can tell, it's not me alone. I'm Jay Feidell with Think Tank. It's the other fellow. That fellow. That's Lou Pugliarisi. He joins us from Washington, D.C. He's the CEO of E-Print, which is an energy policy research tank, Think Tank. And we're going to talk today about a program that he put on where he and Jeff Kissel presented to a group in Washington. And that was about the subject of transportation fuels, which is so important these days. So Lou, how did the program go between you and Jeff? That's a lot of horsepower. How did it go? Yeah, so we were just the ringmasters. And we brought in some of the best experts on kind of the range of transportation fuels policy focusing on sort of big policy debates. So we had a session on automobiles, corporate average fuel economy, and electric vehicles. We also discussed renewable fuels and liquid renewable fuels, I guess and all. And then we had an afternoon session dedicated to the International Maritime Organization's new rule to reduce the sulfur content in bunker fuel. Bunker fuel is the fuel used to power most of the world's big ships. Well, let's unpack that a little bit. So this was a one day conference or a two day conference. It was a one day workshop, one day workshop, invitation, invitation only, of course. And I and I had hoped I could come, but I'm sorry I couldn't. You had an invitation, you get it. So how many people showed up and well first let's talk about your, you know, your speakers. So who were they? I mean, where they come from? What was their expertise? So people came from like three to four categories. We had sort of the policy makers, people from the government, people from Capitol Hill. We had some think tank folks. We had people who are specialists in the field like Baker, O'Brien, Turner Mason, they are refining engineers and fuels policy guys. We had stakeholders, you know, refiners, oil company executives, things like that. We were about 50 folks. It was a we were supposed to be a little bit higher. It was a snow day. And because there was two inches of snow, the government shut down. We went on with the program. No, that's great. That's great. Yeah, I mean, I, you know, I think these programs are so important to bring the, you know, most advanced thinking together. And what was your, I guess your title was highlights or rather the future of US transportation fuels? Is that what you called? Right. And I'm just exactly, and I'm going to sort of talk because it's a little bit, it's a little bit of, well, I didn't know that, you people have a certain idea about what what the existing policies can and can't do. What's really happening, what the nature of the debate is over stricter or looser standards. And we try to illuminate that with the facts, which is not generally where this debate takes place in the press and a lot of other form. So okay, so here you are, and you have to evaluate every fuel against every other fuel and see where it fits now and in the future. This is not, this is not simple. And you have to look into the future to know where it'll all go. So how did you approach it? How did you divide the material? So our approach, our approach always is to use what we use a standard public finance model that is we look at costs and benefits, we say, okay, is this a good idea? That's not a good idea? Why isn't it a good idea? Is the existing policy working? Should it be tweaked in some way? We sort of, we try to live in the real world. Many people in the fuels world, like the renewable world, they live in, they live in Disneyland, but we can't live in Disneyland because we have to use numbers. Well, absolutely. I mean, you know, the thing is that you know, to me, it's very interesting, this kind of conference, because you have government that could do this, but actually doesn't very often. And then you have think tanks like yours, where you bring everyone in and you create a, you know, a collective, a collaborative discussion. And that becomes the way to policy. I mean, I think that's the way things work in Washington. They do, but sometimes it takes a long time, you know, you, you might come up with something which makes a lot of sense. But that doesn't mean that's what the government wants to do, because they've been doing something else for a long time, right? And they have politics rather than economics to guide them. Absolutely, they have politics. Some of our presenters even haven't asked to grind, you know, we have to use an eye on them. Of course, we have to watch out for that. So you have you have slides and you have a progression of speakers and suggestions on this reality. Why don't you go through them? Yeah, let's start. So let's start. So let's start with the first slide. This just shows you our setup. This is a very typical, we do this in the for liquid by natural gas and a lot of things. We try to get about 50 to 60 people around a big table, maybe some tables along the side. We keep the presentation short, and we keep the discussions long. So we want basically, we don't need to really lecture to the people. Most of the people in the room have a lot of knowledge, right? So they just need the kind of fundamentals to get the discussion started. And we have posted all the full press, you just see in a few 1% of some of the discussion in the slide, but all the all the presentations have been posted on our website for your audience. Let's go to the next slide and your website is E print dot org. Yes, anyone goes there that can click through and get all the presentation. Okay. So this first picture is called United States, Mexico, Canada, crude oil and petroleum product trade balance. Okay. So what this tries to show is how you know, what has happened to North America? And I'll tell you a little bit about the US. They became 2006 and 2008 to the present. And actually, you think about the US, we both import and export crude oil, imported export product, petroleum products. So what you really want to know, in terms of dependent, which may or may not be a good measure of vulnerability, is what are your net imports? You know, how much of the world crude oil production are you taking into the country and consuming? And if you go back to 2006, 2008, net imports were pretty close for North America, 8 million barrels a day. For the US, they were over 13. By November of this year, right, for North America, they are between one and two million barrels a day. Actually, for the US, it's only a half a million barrels a day. So between 2006 and 2008 to the present, United States went to a net importer of 13 million barrels a day to a half a million barrels a day. So North America has revolutionized the world oil market. And it is the reason why oil prices are closer to $50 a barrel than 100. That's just one piece of background information. Now that's very right. And remember, lots of policies were based on US dependent on expenses and insecure import. That world has gone away. Let me ask you, what does this suggest for the future? Because clearly the trend in that chart is that we are importing less and exporting more. And where we go on this, what do you expect in five or 10 years? So the energy formation agency says between the next 10 to 15 years, the US could expand its oil production five to 10 million barrels a day. So we will be a major exporter to the world oil market. And we will not be therefore import nothing. We will not be importing that right? Of course, we will import but we will export more than we import because these products and crews come on different characteristics and different types. And you're always solving a logistical we are a large continent landmass. So you're always solving for transportation efficiency. But when you do the balances will be we will not be a net buyer of crude oil from the Middle East. Okay, and that's contributor. And as you said, we will we will not be concerned about dependency anymore. We will not be concerned about dependent. We're not concerned now actually. They were so close. If you go to the net, that's the production side. But what I think a lot of people don't understand is what how much more you think about petroleum or crew are most of it used in the transportation sector. So if you go to this next slide, right, you can see what has happened to US consumption of gasoline. This is transportation fuel. This includes diesel as well. But what I wanted you to just take away from this slide is if you go back to 2005 2007, the projection was that blue line, right? That's where we thought we were going. But where did we actually go? And that's the red line. And so US even though the US at the same time the US production is burgeon US consumption in the primary user of crude oil, which is processed into gasoline and diesel fuel jet fuel, or our consumption is actually declined. So it's kind of a double whammy, right? We're producing more and we're using less. So this is another fundamental change in the energy outlook for the United States. Let me ask you this little why? Why is this happening? Why do we not meet our own expectations? So why do we use so much less? One is I think the fleet began to turn over fuel efficiency and cafe standards began to work. And we had shifts in demographics. All these things were not so easy to predict. And then your future is uncertain. So we got happy, happy news in a way here. We're using a lot less. Yeah, but we're traveling almost as much right? Well, would you say Lou that that the advent and the increase, however modest of electric cars in the market has any significant effect on that chart? The answer is no. And I'm going to show you a chart to demonstrate that. Okay. Okay, but it's unequivocally. No, very very interesting and regrettable in many ways. Maybe not, but you see the full story. So let's go to the next slide. Okay. So this shows you I think it's kind of interesting. This slide shows the corporate average fuel economy, US fleet, combined car and truck. And you see the red line is the standard. So that's the standard promulgated by the government that says this is what the whole fleet has to meet miles per gallon, right? And the blue line shows you the performance. So from about 2012 to 2015 and a half 2016, the automobile fleet outperformed the standard, right? But after that, it is no longer output. The standard is is binding. It can it's not producing a fleet that can meet the standard. Okay. And that is a kind of fight we're having now. The administration has as a result of this, the Trump administration has proposed a new standard. And if we go to the next slide, you can see that new standard. Okay. And the next slide shows you I'll wait for that to come up. Okay. This shows you the corporate average fuel economy. 2018 to 2026 model year, US fleet combined car and truck. And you see the red line that goes get that around 2020 is very steep and goes up to 46 miles per gallon. Yeah. And then you see the flat red line that says NITSA EPA proposed standard. So right now, there is a proposal by the Trump administration to hold the fuel economy standard at 37 and not move it to 46. Okay. And basically, they have decided to do this because in the 1000 plus page analysis of the regulatory impact assessment by the National Highway Transportation and safety administration, which is the main agency regulating miles per gallon, they have said the juice is not worth the squeeze. Okay, that we cannot that whatever we're going to do to get to this higher number, the cost of it is too high. And we should not do that would raise the price of automobiles too much. It raises safety concerns and other things. And this is the big kind of discussion underway because some states have the right to set their own standards, maybe because there's a legal fight over that. And California wants to continue with a stricter standard. That is going to be worked out either through negotiation or in the court. Let me let me let me ask you this. So yeah, yeah, this was these standards were were last boosted by the Obama administration. And yes, I suppose that the automobile makers were not thrilled about that. But they did not have any any effect of changing the standards during the Obama administration. And it's calling for this reduction in standards. Now am I right? You're absolutely correct. It's even better than that. And 2000 and the when we had the financial crisis when President Obama entered the presidency, right? The companies one company particular General Motors needed to be bailed out. And the companies were generally in pretty bad shape. So they, you know, because of government motors and because of the leverage the Obama administration, they just agreed to whatever he said. And but the interesting thing about it is that the standard was very back loaded. It really does if you remember that chart. It doesn't get steep until Obama leaves office. Yeah, and you know, part of the problem is, well, maybe they could have met it with more electric car or high grids, but these were too expensive. And the consumers are not going for it. Okay. Well, let's let's this more here in terms of more here because the electric car, you know, is upon us now. And here we have a situation where if we go to the old standards, it will not be efficient. It'll cost too much to make a car. But we're going to take a short break, Lou. I will be back in one minute. You'll see. Okay. Hello, my name is Andrew Lening. I'm the host of Security Matters Hawaii airing every Wednesday here on Think Tech Hawaii live from the studios. I'll bring you guests. I'll bring you information about the things in security that matter to keeping you safe, your co workers safe, your family safe, keep our community safe. We want to teach you about those things in our industry that, you know, may be a little outside of your experience. So please join me because Security Matters Aloha. Aloha. This is Winston Welch. I am your host of Out and About where every other week, Mondays at three, we explore a variety of topics in our city, state, nation and world, and events, organizations, the people that fuel them. It's a really interesting show. We welcome you to tune in and we welcome your suggestions for shows. You got a lot of them out there and we have an awesome studio here where we can get your ideas out as well. So I look forward to you tuning in every other week where we've got some great guests and great topics. You're going to learn a lot. You're going to come away inspired like I do. So I'll see you every other week here at three o'clock on Monday afternoon. Aloha. Okay, we're back with Lou Pugliarisi. He's in Washington, DC. He is the CEO of E-prink. And by the way, you want to see the presentations in this conference. That was what a week or two ago entitled the future of US transportation fuels. You can find them all on E-prink.org. Okay, so let's go back to where we were. We had we had this intersection. The current administration is saying we don't have to go as high as the Obama administration wanted to go. So where are we then going forward? So with that, let's have to talk about the basic alternative, of course, would be greater reliance on electric cars, right? So let's go to the next slide. So the first question is, you know, will electric cars take over the combustion combustion engine, right? And what if the electric vehicle optimists? All right, now this is very courtesy of Mark Mills at the Manhattan Institute at a fantastic presentation. And you can see from this chart here the number of cars per thousand people in the US. And you can see here that if you go back to like 1900, right, and compare the growth of automobiles, EVs, right, with cars, when cars first came. And they, you know, they're growing actually growing faster than when cars were first introduced. If you see in the lower left hand corner, right, at least per capita, right? And and basically, there's one thing you have to ask yourself is, you know, okay, what's the limit? What's the limit calculation look like? So if we had 100 times the EV growth that we had in automobile growth, right, how much oil would it actually displace? And actually only would displace about 10% of world oil. And people forget, right, that we went from horses to cars because they were 10 times safer and 100 times more useful. That's why we did that. Okay, so that, you know, EVs have a kind of certain appeal, but they're not going to wipe out petroleum use, right? So the oil guys don't need to go away. But let's take a look why. If we go to the next slide, why batteries will never replace hydrocarbons, right? This is the big question. This is the one that catches your eye. This is really important. All you people out there take notes on this one. Yeah. So the question is, why will batteries never replace hydrocarbons? First, a 2% improvement, right? And an internal combustion engine is about equivalent to a 20% improvement in battery. And remember, it takes 100 barrels of oil equivalent, right, to fabricate one barrel of oil equipment in a battery. Okay. So the amount you have to, the amount of energy to make a battery is colossal, right? And you can see here that if you look at the energy density per, you know, by weight, you can see that oil is up at a density of about 10,000 megawatt per kilogram. And you can see where lithium batteries are. So this is a big problem. You see energy, people can make the batteries work better. They might maybe even double their stuff, but they're just very expensive energy intensive energy intensive to make. Well, given that analysis, and imagine an advocate for electric cars or hydrogen cars. And if you don't mind, Lou, make yourself that advocate. Somebody who's advocating for electric and hydrogen cars. Well, I don't, I did have enough, unfortunately we don't have enough time, but I did have the presentation from a group called SAFE. And it's on the website. I recommend you look at it. I don't think they were very well thought out. Because, you know, Mark's pretty hard headed. But if we go to the next slide, I think there's another issue that no one wants to talk about. Right. And this is called magic battery. So basically, if you believe in these stories about batteries, beating hydrocarbons, you have to believe in magic because you can't get there from physics. But I thought the interesting thing is what, you know, how much how much material do you have to mine, right? To store one pound, equivalent of one pound of hydrocarbon, right? You actually to do that and making a gigafactory test by gigafactory system, you have to mine 1,000 pounds of material, right? To get the equivalent of one pound of a hydrocarbon. So that's a huge, also a huge environmental load on communities, on, you know, the environmental consequences of dealing with all these materials when you mined this all, you know, the coal ball, nickel. So I think people don't really spend a lot of time thinking about this. They just look at the pretty test, but they, oh, it must be good for the environment. Well, everything comes with an environmental cost. Sure. But let me offer you this. So when I, when I am mining material for a battery, I'm mining it once. I'm once. Then when I charge the battery, I can charge it thousands of times. Is that built into that? Well, I don't think it has, I think that just shows what it takes to make the battery now. It's true that you might get a certain life cycle of the batteries. The batteries don't last forever. They wear out. Not true. You're going to have to replace them. True. Okay. In fact, so let's go to the next chart because this one may help you understand why, why electric car sales are not taking over the world. Okay. So the answer, so the state of electric cars is not so. If you look at the new car sales, right, in 2017, for the United States, the EVs represented 1.18%. They were just about 1% of the total vehicle market. Yeah. And this is with the massive subsidies. 7,500 dollars by the federal government. Sometimes that much are more by different state governments. We have one interesting experiment. The state of Georgia eliminated subsidies for electric vehicles and EV sales in Georgia virtually went to zero. Okay. Interesting. Yeah. Okay. So let's go to one more. Now, so the question, one question is, we go to the next slide. We've got a picture there of the eponymous and ubiquitous test. Elon Musk, right? And so the question is, this was from the Institute of Energy Research. It was a great presentation. The primary driver of electric vehicles so far has been subsidies. And from 2011 to 2017, tax expenditures for the EV tax just for the federal government was about 2.2 billion dollars. And the stimulus package provided over 5 billion in, you know, infrastructure support. So the electric vehicles have had a lot of support. And under the law, when any individual manufacturer reaches 200,000 units, is the federal subsidy begins to decline. So now the people, a lot of folks in Congress say, well, you should make it bigger. Right. But there is some resistance for that. Okay. And then, you know, the, I just wanted to get to one more. And then the final slide here is when we looked at marine fuel. Right. And I think this is very interesting to get to the final slide. IMO 2020, the International Maritime Organization is, you know, passing a regulation. We've talked about this in the past. They're going to reduce the sulfur content in marine fuel from three and a half percent to 0.5 percent sulfur content. And in fact, this is probably a good idea. It might be a little expensive, but getting sulfur out of the atmosphere is the main, you know, a generator of something called PM2.5, particulate matter, which is not good for visibility, not good for human, you know, breathing. And you can see already some places, the, you see the red areas. Those areas already have very strict controls, like one percent. I mean, that's one tenth of one percent sulfur. So the U.S., parts of Europe, even China, and, you know, other parts of the world are already restricted to coastal areas. And so the next step, as you can see from the chart here, the blue line shows you what's happening to sulfur content in the open oceans, which is the blue line, and what's happening to sulfur content in the coastal areas, which is also quite low. Now, I think this is going to start to take place in 2020. It's likely to encourage installation of scrubbers or pollution control equipment on big marine vessels. It's also likely to have them to use the slower sulfur fuel or to even switch to liquefied natural gas. But it's also going to be disruptive to world shipping a bit. Yeah, and it's going to affect Hawaii, I'll tell you that, because it's a big deal. It's going to make a shortage of LSO for us. It's going to be in high demand, because the rules have changed, and everybody's going to be buying the LSO, and we won't be able to buy it at the same price we're buying it now. You may get a price break, but here's the thing. The one thing to keep an eye on is the price of crude oil, because if the price of crude oil doesn't rise too much or even falls a bit, you can tolerate this. You won't see it so much. But if the price of crude oil rises, it's going to accelerate the LSO. Well, if that happens, that's going to be very painful for Hawaii. Okay. If that happens, we're going to have to have a show dedicated to that issue. Exactly. We should have a workshop in Hawaii. There you go. I want that, and I know I will be here for that. Lou Puyarisi, the CEO of Ebrink and Energy Policy Research, Think Tank in Washington, talking about his recent conference, highlights from that recent conference on the future of the U.S. transportation fuels. Very, very interesting and elucidating. Thank you so much, Lou, for this discussion. Two weeks from now, we'll be back with more. Aloha. Okay.