Is Flex-fuel Vehicle The Answer To Opec

The global fuel market today is far from the free market that can ensure economic efficiency. The oligopolistic control exerted by OPEC has not only made the crude prices a major hindrance to global economy, it has also cast an unhealthy global political one-upmanship that finds its echoes in different forms including dictatorships, mass public protests and even terrorism. Bio-fuels and flex-fuel vehicles can free us from their clutches.
Is Flex-Fuel Vehicle the Answer to OPEC
Source - Wikimedia Commons (https://commons.wikimedia.org/wiki/File%3AArgonne_tests_Brazilian_flex-fuel_Zafira.jpg)

Flex-fuel vehicles can greatly contribute towards challenging the OPEC controlled price of crude and gas, which have been spiralling upwards almost without any breaks during the last few months.

The million dollar question, though, is "whether they alone can stop oil price escalation?"

Flex Fuels

Flex fuels or flexible fuel vehicles (FFVs) are automobiles with a multi-fuel engine that can use different fuels. The most commonly used flex fuel vehicles are adapted for use of varying mixtures of ethanol and gasoline, apart from gasoline. Another common flex fuel type is adapted to use gasoline or compressed natural gas as fuel.

The adaptation for converting

a usual gasoline vehicle in to a flex fuel vehicle does not cost too much. The approximate cost is $ 100 for a newer vehicle and about three times that for an older one.

History of Flex Fuels

Even though the first flex fuel vehicle is said to have been in use in 1908, the concept of flex fuel vehicles first gained currency after the oil shocks of the seventies that rocked the global economy. It led to the realization of depleting oil stocks, and research was accelerated to find alternative fuels as well as vehicles capable of using them.

Brazil is one country which continued with vigorous experimentation and policies to promote flex fuels even in the 1980s, though oil prices had receded. In that decade, its bio fuel economy saw the introduction and popularity of vehicles run on ethanol. However, in late nineties, it faced supply crunch while gasoline prices had hit a rock bottom. As a result, there was demand for vehicles that could be run either on gasoline or on ethanol based fuel like E85 (85% ethanol with rest gasoline).

In the United States too, ethanol produced from corn had made it the world's largest producer of fuel ethanol. Simultaneously, the demand for flex vehicles has also risen because of the lack of universal availability of ethanol based fuels like E85 which are still not very popular.

Flex vehicles involving option of using compressed natural gas (CNG) have become popular in the whole world, and they provide an additional cleaner and less polluting fuel option. However, CNG is a petroleum by-product, and though it is more widely produced than oil, it does not make us free from the oligopoly that the oil cartel of OPEC has imposed on the world.

Role of OPEC in Rising Oil Prices

In free market, price of a commodity is governed by demand and supply. So, when the price of a commodity rises relative to its cost, more suppliers produce it, and the higher supplies bring down the price. However, if the major suppliers of a product (like oil) make a cartel and are able to ensure that supplies are static while the world demand is increasing every day, then the demand - supply mismatch leads to skyrocketing of prices.

This is exactly what is happening in case of oil.

OPEC sits over most of global oil reserves, and refuses to increase supply even as the global demand has surged, thanks to booming global economy during the last few years, and the rising consumption in emerging countries like China and India.

Flex Fuel as a Counter to OPEC Monopoly on Oil

Flex fuel vehicles that allow using ethanol based fuels like E85 allow the consumers a readily available option of

shifting to alternative fuels, if the gas prices rise too high. In the current scenario, wherein gas prices are predicted to move towards the $ 7 mark, it is likely that more and more consumers may find it cheaper to shift to ethanol as fuel. If that happens, the demand for gas will fall, and that can bring the oil prices down, thereby saving the global economy from another oil shock.

The million dollar question is, as to whether sufficient ethanol can be produced at an economically competitive cost to replace oil.

While Brazil produces ethanol from sugarcane, United States used corn for the same purpose, and this diversion of corn to ethanol production, which is only half as efficient as sugarcane based production, has been blamed as responsible for global food grain price hike.

More importantly, the total global ethanol production today is miniscule compared to the total gasoline consumption. To be able to significantly bring down the demand for oil, it will need to to be raised multi fold. Neither sugarcane nor food grains are available in sufficient quantities for that much production of ethanol.

Cellulosic Ethanol Production & Other Promises of a Bright Future

Recent research has raised hopes of developing techniques of producing ethanol from cellulose which are economically and technologically feasible. Cellulose is a major component of wood and plant tissue, where it is available in ample quantities. By extracting Ethanol from Cellulose, ample amounts can be generated to replace gas with it as a major alternative fuel. If that happens, it can break the monopoly of the OPEC cartel and prevent it from manipulating global oil prices. Efforts for developing commercially viable production have been going on since more than two decades, but the costs of production are still competitive. As per a Forbes Report, over 2.2 million gallons of cellulosic ethanol was produced by commercial plants in the United States in 2015, largely working towards improving their capacity. Among the 3 or 4 companies that are in the game, DuPont seems to be the ahead of others, but it may still be some time away from really getting cellulosic ethanol to our vehicles.

Till that happens, the combination of flex fuel vehicles and ethanol-gasoline mixtures will certainly help to spread awareness about the possibility of a substitute to gasoline. Then there are other possibilities too. If countries like India, which are major producers and consumers of sugarcane, can find efficient ways of producing ethanol from molasses - a by product of sugar industry, the sustainable ethanol production may take a great leap. Same is also true of other alternative fuels like bio-diesels, which are also being experimented with across the globe, as is methanol production from waste and garbage.

All these alternative fuels, along with different types of multiple option flex fuel vehicles can pave the way for competition to gas, and contribute to breaking the monopoly of a cartel.



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