Despite alternative-fuel vehicles in production, consumers likely to stick with conventional models

Sept. 1, 2004
DESPITE the current introduction of various alternative-fuel vehicles, consumers aren't likely to trade their conventional models for them in the near

DESPITE the current introduction of various alternative-fuel vehicles, consumers aren't likely to trade their conventional models for them in the near future, said Jerry Thompson, chief operating officer, CITGO Petroleum Corp.

The comments were made at the Independent Liquid Terminals Association 24th annual conference June 14-17 in Houston, Texas.

“Gasoline will be around for the next 25 years,” he added. However, he pointed out that new products are being developed that will provide alternatives to the internal combustion engine, such as hybrid models that use an electric motor and batteries in conjunction with a gasoline engine. Several are already on the market and claim a performance of about 60 miles per gallon.

“This is very vital technology,” he said. “We are going to see more and more of this.”

Fuel-cell technology, favored by environmentalists, has its own difficulties, primarily the production of hydrogen, which requires natural gas in the process. “We will have to find more natural gas to make hydrogen,” he said.

Distribution of the fuel would be another problem. Although there would not be major demand at first, maintaining supply will be difficult as the demand grows.

“It's a tremendous burden to reduce the cost for fuel cells,” he said, noting that a car priced at $25,000 with traditional equipment would cost $50,000 if it were equipped with fuel cells.

Meanwhile, manufacturers are providing cleaner internal combustion engines that give peak performance. Thompson predicts there will be greater demand for cars with diesel engines because of their efficiency and performance.

At the same time, he said that as consumers demand vehicles that use alternative energy, and are willing to pay for it, the products will be developed. “There will be a way to provide energy in the future,” he said. Oil companies are re-thinking their identities, realizing that they are becoming energy companies in general.

Providing the energy comes at a cost, particularly as the industry wrestles with the expense required to meet governmental regulations.

Thompson estimated that the industry faces a $20-billion outlay to comply with Environmental Protection Agency (EPA) regulations between 2001 and 2006.

Reducing sulfur in gasoline to the EPA-targeted 30 parts per million is expected to increase the cost of gasoline by 4½ cents per gallon.

“This has come as a tremendous expense for our industry,” he said.

If regulations are a concern, so are the growing energy needs of other countries. Thompson said that China's hunger for energy soon will be equal to its recent appetite for steel. In addition, other parts of Asia will be competing for refined fuels produced in the area. All of that means that when there is a reduction in worldwide production, prices will soar. Refined product demand in the United States already outstrips production capability of the US refineries that are steadily declining in numbers.

“It's the smaller refiners that are really at risk because of having to remove sulfur and other products,” Thompson said.

To fill the gap, he predicted more gasoline will come to the United States from Europe because the highest demand there is for diesel. “Gasoline becomes a byproduct for them,” he said.