I attended a seminar on Monday presented by Chief Executive and Board Member of the German Petroleum Industry Association. Clearly just by association to such a group some might cry bias, and that was my expectation going into the seminar, but I did come out of it with some insightful things.
One of the key points was that the "Dieselization" in Europe, with new Diesel passenger car registrations tipping over the 50% point, combined with the large gasoline demand in North America, is creating a large global imbalance of fuel supply. Part of this stems from the fact that a given quantity of crude oil can only yield a certain amount of the distillates that produce gasoline, Diesel fuel, heating oil, etc., before requiring secondary processes to increase production of a desired product. Relative to yield, the disproportionate middle-distillate demand (which includes Diesel fuel, heating oil, kerosene, jet fuel, etc.) in Europe, and the counterpart disproportionate gasoline demand in North America, means that massive amounts of gasoline are already being imported from Europe to the US, and massive amounts of Diesel, heating oil and jet fuel imported to Europe from -- get this -- the US and Russia.
Further Dieselization in Europe, the speaker argued, increases risks to supply shocks due to trade dependencies. Furthermore, the speaker stated that beyond a certain point of Diesel/gasoline passenger car registrations in Europe, CO2 emissions, from a well-to-wheel analysis, actually worsen, because the improved CO2 of the Diesel share of the fleet are offset with greater energy input required at refining to increase Diesel yields from crude oil through secondary processes. He stated that the current state is near that CO2 break even point, and that further Dieselization beyond that point will be worse off for aggregate, well-to-wheel CO2 production, and greater pre-tax cost for Diesel fuel. He said in the absence of interference from taxation, Diesel/gasoline market-shares should reach a well-to-wheel CO2-optimal point in Europe, and level out.
The speaker also (almost expectedly) did not have kind words for so-called "first-generation" bio-fuels like corn-based ethanol and rapeseed Biodiesel. In fact he presented a bit of a doom-and-gloom scenario of meeting the recently agreed-upon CO2 and Biofuels directive for the EU, based on current and forecast bio-fuel technology and capacity.
However, he did express somewhat unexpected optimism and praise for "second-generation" tailor-designed fuels based on the Fischer-Tropsch process which would be truly feedstock-neutral, and of which
coal, natural gas and whole Biomass from any plant- and animal sources would all be complementarily used. The consistency and properties of the tailor-made fuels would enable new innovations for engine designs that further improve efficiency and reduce emissions.
He did reserve caution that Fischer-Tropsch itself requires energy input, and if analyzed on a CO2-output basis, well-to-wheel CO2 would be highly dependent not only on the feedstock used, but also on the means in which the energy input is derived. With still a large proportion of the German electric-grid powered by brown-coal plants, this would be less than ideal. But with a larger mix coming from nuclear power and renewables, the analysis looks more favourable.
Hydrogen was mentioned in passing but I got the impression that the speaker admitted that hydrogen would play a part of a matrix of energy carriers, especially out in the longer term.