Fuel For Thought
December 2013

US CO2 emission dropped by 3.8% in 2012

▪ US C02 emission dropped by 3.8% in 2012

Information released by the U.S. Energy Information Administration (EIA) shows that energy-related carbon dioxide emissions have hit their lowest level since 1994. The 3.8% drop puts levels at 12% below their peak in 2007, and has continued the downward trend in five of the last seven years.

Energy intensity, measured in British Thermal Unit (BTU) per dollar of gross domestic product (GDP) helps explain the decline in emissions despite economic growth. GDP grew by 2.8% in 2012, and energy consumption declined by 2.4% (2.4 quadrillion BTU). This decrease in emissions is the largest in a year with a positive growth per capita, and the only year to show a decrease when per capita increased by more than 2%.

Other factors for this decrease include a relatively warmer year, where the cumulative heating-degree days (HDD) were 19% below the 10-year normal by the end of March, and 22% below 2011. Although cooling-degree days (CDD) were higher than 2011, and 10% above the 10-year average, the 3.4% decline in residential electricity consumption implies an increase in energy generation efficiency.

A greater prevalence in energy-efficient vehicles has also played a large role in the decline, as the number of vehicle miles traveled remained static from 2011. The increase in natural gas-fired generation substantially reduced the carbon intensity of electricity generation in 2012.

▪ China begins survey to monitor fuel quality upgrades

The National Development and Reform Commission (NDRC) have started conducting surveys of their domestic refineries' adherence to current industrial standards. The surveys began in September and are set to last through November and cover all refineries in China.

Sinopec and PetroChina have led the country's charge in upgrading refineries to comply with sulfur limits of 50 parts per million (ppm) in gasoline set forth by the National Phase IV standards. Both companies have begun the transition towards producing fuels that are compliant with the new standards.

"We plan to fully comply with the government deadline and will move to upgrade our refineries to produce Phase IV gasoil before the end of 2014," a spokesman from PetroChina said.

The Phase V standards are set for implementation by 2017 though they are already in place in Beijing and a few other cities.

▪ Air pollution is a leading environmental cause of cancer

The International Agency for Research on Cancer (IARC), a specialized research group within the World health Organization (WHO), recently classified "outdoor air pollution as carcinogenic to humans," under Group 1. The group's researchers have found sufficient evidence to tie outdoor air pollution as a cause of lung cancer, as well as a factor for an increased risk of bladder cancer.

Furthermore, the danger is not static as the risks for lung cancer increases with higher levels of pollution. Particulate matter, which is a large component of air pollution, has also been classified as carcinogenic to humans (Group 1). Other common components of air pollution include engine exhaust, solvents, metals and dusts.

According to Kurt Straif, head of the IARC Monographs Section, "The air we breathe has become polluted with a mixture of cancer-causing substances." He added, "We now know that outdoor air pollution is not only a major risk to health in general, but also a leading environmental cause of cancer deaths."

IARC Director Dr. Christopher Wild ended the report by saying, "There are effective ways to reduce air pollution and, given the scale of the exposure affecting people worldwide, this report should send a strong signal to the international community to take action without further delay."

▪ OPEC bumps 2014 forecast for oil demand

The Organization of the Petroleum Exporting Countries (OPEC) has announced its revised predictions for crude oil global demand in 2014. In a statement released in mid-October, OPEC predicts that global demand will increase by one million barrels per day (bpd) up to 90 million bpd. According to the agency, signs of improvement in the European economy support the upward revision."

The agency added that, "the shutdown of Japan's entire nuclear power park in early September is expected to affect Japanese oil demand this winter and in 2014 in a big way."

▪ Study finds that air pollution causes over 2 million deaths per year

According to research from the University of North Carolina at Chapel Hill, air pollution causes roughly 2.1 million deaths a year, most of which likely occur in South and East Asia. The East Asia region is hit the hardest because of pollution from the ozone and PM 2.5, with 203,000 and 1 million deaths respectively. India experiences around half a million deaths each year from the same causes, and Southeast Asia sees around 180,000 deaths.

Jason West, co-author of the study, said that, "Air pollution is an important problem. It's probably one of the most important environmental risk factors for health." He also explained how the study looked at climate change in conjunction with pollution, adding, "Very few studies have attempted to estimate the effects of past climate change on air quality and health. We found that the effects of past climate change are likely to be a very small component of the overall effect of air pollution."

The study used various climate models to estimate the concentration of air pollution throughout the world, and focused on the pre-industrial era (1850) and 2000 in order to get a fair estimate of human-caused pollution.

▪ Malaysian government to cut fuel subsidies

The Malaysian government announced plans to cut fuel subsidies to both fund welfare and reduce the country's budget deficit. The move will save 3.3 billion ringgit (US$1 billion) each year.

Fuel subsidies have cost the country up to 24.8 billion ringgit (US$7.6 billion) annually. According to Najib Razak, Malaysia's prime minister, the cuts are a necessary move towards decreasing the budget deficit and strengthening investor confidence. "It's a process of fiscal consolidation. The market will feel more confident if we can bring down our fiscal deficit," he explained. The savings will also help fund handouts for people living on low incomes.

Malaysia is faced with rising domestic debt and decrease in its growth forecast to 4.5-5% as well as an 8% decline in the value of the U.S. dollar vis-à-vis the Malaysian Ringgit. However, Najib was quick to explain that, "It is not giving us any undue stress for the time being. What we believe in is to focus on strengthening the fundamentals of the economy."

On September 3, the government reduced gasoline subsidies by 20 sen (6 US cents) to 63 sen (19 US cents) per liter, and diesel fuel by 20 sen (6 US cents) to 80 sen (25 US cents).

▪ Indonesia to mandate 10% biodiesel blends

Indonesia recently passed a new regulation requiring a higher percentage of biodiesel, and the move is expected to cut fuel imports by approximately 100,000 barrels per day (bpd). Rida Mulyana, Energy and Mineral Resources Ministry's director general for renewable energy and energy conservation, said that the import of diesel fuel "has partly contributed to the widening of the current account deficit and thus the new ministerial regulation on biodiesel is expected to help reduce it."

The new regulation mandates at least 10% content of biodiesel from September onwards, aiming to limit the country's imports at around 15,800 kiloliters per day (4,718,918 gallons)

The move has met with some mixed reviews however. Pri Agung Rakhmanto, executive director of the think-tank ReforMiner Institute, said "It is impossible to meet all the requirements needed to realize the plan. Furthermore, the new rule will not significantly reduce diesel fuel imports." Pri Agung recommended that the government focus on completion of the oil-processing plants currently under construction rather than on limiting imports.

Chrisna Damayanto, processing director at Pertamina, explained that the company could save up to 90,000 bpd by mixing 10% of fatty acid methyl ester (FAME) to its diesel production.

▪ Philippines boosts coco-biodiesel blend to 5%

The Philippines has launched an improved coco-biodiesel blend that will help in reducing carbon emissions, expand the local coconut industry, and reduce the country's dependence on imported fuel.

Shortly after getting the approval of the National Biofuels Board (NBB) to increase the mandated biodiesel blend from 2% to 5%, the Philippine Coconut Authority (PCA) and the University of the Philippines-National Center for Transportation Studies (UP-NCTS) launched an on-road test of B5, a diesel fuel that contains 5% biodiesel, in public transport vehicles.

Seven jeepneys are being road tested using a B5 diesel fuel blend over 25 days. PCA Administrator Euclides G. Forbes said that in the first five days of the 25-day test, jeepney drivers will use the current 2% coco biodiesel blend with 98% petroleum diesel. In the succeeding 20 days, the jeepneys will be using B5.

A staff member of the UP-NCTS will accompany each participating jeepney driver to compare the emission performance of B2 and B5 biodiesel fuel blends. After the 25-day test, the participating jeepneys will be tested for fuel economy and power efficiency.

Forbes said the mandated use of coco-biofuels will boost local consumption of coconut oil and increase farmers' incomes. He added it will reduce dependence on imported fuel, protect public health and promote sustainable growth.

He estimates that raising the blend to 5% will create more than 37,000 jobs, boosting demand for workers on farms, at coconut milling plants, and at biofuel manufacturing companies.

Coconut farmers will also benefit from the PHP4.83 million (US$109,015) per year from the lien collected through the Social Amelioration and Welfare Program. "As to the B5 blend, the visible cloud of black smoke consisting of carbon and sulfur particulates is reduced by as much as 80%," Forbes said.

The passage of the Biofuels Act of 2006 mandating the blending of coconut methyl ester (CME) in all locally distributed diesel fuel aims to promote the country's desire to reduce dependency on imported oil by making use of indigenous and abundant sources of energy, such as coconut oil. The Philippines is a key coconut producer and exporter. In 2012, it exported more than 850,000 tons of coconut oil.

In 2007, the Philippines implemented a mandatory 1% blend (B1) of coco biodiesel, increasing that amount to 2% (B2) in 2009. In 2013, following agriculture officials' assurance that the local industry can supply enough coconut oil to power the transport sector, the NBB approved the mandatory biodiesel blend to 5% (B5).

▪ U.S. DOE awards $45 million to deploy advanced transportation technologies

Building on U.S. President Obama's Climate Action Plan to build a 21st century transportation sector and reduce greenhouse gas emissions, the U.S. Department of Energy announced more than US$45 million for 38 new projects that accelerate the research and development of vehicle technologies to improve fuel efficiency, lower transportation costs and protect the environment in communities nationwide.

"By partnering with universities, private industry and our national labs, the Energy Department is helping to build a strong 21st century transportation sector that cuts harmful pollution, creates jobs and leads to a more sustainable energy future," said U.S. Energy Secretary Ernest Moniz. "By improving the fuel economy of our cars and trucks, we can save families and businesses money at the pump and better protect our air and water."

The Obama Administration has taken unprecedented steps to improve the fuel efficiency of American vehicles, establishing the toughest fuel economy standards for passenger vehicles in U.S. history. These standards are expected to save consumers US$1.7 trillion at the pump-or more than US$8,000 in costs over the lifetime of each vehicle – and eliminate six billion metric tons of carbon pollution.

Innovative technologies and manufacturing are helping U.S. automakers achieve the goals of this historic agreement, and the investment announced in September will help provide new technologies and innovations to enable automakers to continue to improve vehicle fuel efficiency.

Through the Advanced Vehicle Power Technology Alliance between the U.S. Energy Department and the U.S. Department of the Army, the Army is contributing an additional US$3 million in co-funding to support projects focused on lightweighting and propulsion materials, batteries, fuels and lubricants.

"Working with the Energy Department, we are accelerating the development and deployment of cutting-edge technologies to strengthen our military, economy, and energy security,' said Paul Rogers, director the U.S. Army Tank Automotive Research, Development and Engineering Center.

The 38 projects announced in September span five major areas critical to advanced transportation technologies, such as lightweighting and propulsion materials as well as affordable, efficient batteries, power electronics, fuels and lubricants, and efficient heating, ventilation, and air conditioning systems.

▪ Philippines' Petron plans to complete refinery upgrade by 2014

By the fourth quarter of 2014, Philippine oil refiner Petron Corp. plans to complete its US$2 billion refinery master plan. Currently, the project is nearly 80% complete. The project will upgrade a 180,000 barrel-per-day refinery of the firm in Limay, Bataan.

Following the refinery upgrade, Petron will be the only oil company in the country capable of locally producing fuels addressing the more stringent and environmentally friendly Euro-4 standard.

According to the firm, moving away from the production of low-value fuel oil and converting it to high-value gasoline, diesel and petrochemicals instead will improve its margins.

Petron's refinery upgrade, once completed in 2014, will have capacity to produce petroleum coke that might be used as fuel for the new cogeneration power plant for the refinery.

▪ India fails to institute subsidy cuts to lower country's fuel demand

Failing to introduce a comprehensive energy subsidy cut program, India's oil minister instead called on his countrymen to embrace carpooling, public transport and cycling as well as staggered working hours in a bid to curb fuel consumption in the country.

The struggling Asian economy — the world's fourth-largest user of energy — is battling against a weak rupee that has increased the price of oil products while economic growth has halved to 4.4%, down from the 8-9% during the boom years.

Delhi is also seeking to rein in a record current account deficit that is in part fueled by energy imports.

Minister of Petroleum and Gas M. Veerappa Moily said he hoped to save US$5 billion from fuel conservation measures while he failed to entertain notions such as raising diesel and other fuel prices before the election slated for May 2014.

"As of now there is no proposal to raise prices," Moily said, referring to diesel subsidy changes.

India, where energy consumption per person is among the lowest in the world, has little room to cut fuel use as it tries to power exports and agriculture.

Diesel accounts for more than 40% of fuel demand, or around 1.4 million barrels per day, the bulk of which is used by trucks, farmers and industry.

The US$5 billion savings is part of a campaign outlined earlier in September to save up to US$25 billion in 2013, although the weak Indian currency and rising global oil prices already mean that rupee price hikes for diesel have failed to match the dollar price gains for oil.

The government realistically aims to save about US$12-15 billion, a source familiar with the plans said, after Moily's press conference.

"The biggest concern right now is inflation. Any kind of fuel hike will trigger an upside on inflation, so what they are trying to do is appealing to the people to sort of cut down on consumption," said Praveen Kumar, who leads the South Asia oil and gas research team at FGE in Singapore.

Moily was widely ridiculed for earlier plans to close petrol stations at night in a bid to curb demand, a plan that has since been dropped.

Instead Moily said he had requested, "[S]taggered office timings for government offices, which will help in decongesting road traffic" and issued a plea for Indians to drive safely, share cars, and use public transport at least one day a week. He also proposed a free cycle plan to get more people to use bicycles. A plea for safer, more fuel conscious driving in a country whose choked city roads and highways saw 138,258 people die in vehicle accidents in 2012, according to government data, looked set to fall on deaf ears.

A television campaign featuring star batsman Virat Kohli will seek to educate India's drivers to "avoid frequent application" of brakes and "avoid riding the clutch."

Despite the energy conservation measures, Kumar said he expected Indian diesel consumption growth for the 2013/14 fiscal year to be "somewhere between 3.5 and 4%" from a year earlier.

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