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Fuel for thought

The fuel cap is being thrown open to "alternative fuels", after world oil prices recently topped $US40 a barrel. The higher fuel prices reflect strong international demand, especially in China, as well as the effect of terrorist bombs in Saudi Arabia and Iraq - which together account for about 36 per cent of the world's oil reserves.

Oil prices have drifted back to about $US36 a barrel, but there are reasons to fear they may rise again and stay up in future. Short term, it is no great leap to imagine Iraq collapsing into a bloody civil war, or even a crisis in Saudi Arabia.

As petrol prices in New Zealand have risen above $1.20 a litre (before easing slightly), drivers have been winding the clock back 20 years and converting to lpg, at more than $3000 a time.

LPG Association executive director Peter Gilbert says "hundreds" more people are now looking to change to lpg, after petrol prices became "painful". The association is not targeting everyone.

"The people who get the most benefit are the ones using the most fuel - taxi drivers and fleet vehicles, and a large number of four wheel drives," Mr Gilbert says. If you drive a big car like a taxi or a van about 60,000 kilometres a year, the payback may come in a year or so he says.

Anything after that is gravy - fuel savings of about $3000 a year if petrol prices stay about $1.20 a litre.

As well as high-mileage sales reps, company car fleets and the like, owners of big and thirsty vehicles are also feeling the pinch from high petrol prices.

For example, a gas guzzling Jeep Cherokee rips through about 15 litres of fuel to travel just 100km and costs more than $80 to fill, so conversion to lpg may be worthwhile.

PROS AND CONS TO LPG

At first glance, the running costs on lpg look much lower than petrol - about 76 cents a litre, compared with about $1.12 for petrol yesterday. But lpg does not have as much energy content as petrol - so add about 25 per cent to equal the score - about 92c a litre.

Automobile Association public affairs director George Fairbairn says he doubts there will be a widespread return to lpg. Most car users will get a pay back only after at least three years of normal running, he says.

"The motorist is not going to go back down that path unless there are good incentives to do so."

And the resale value on lpg cars can be lower because some people do not like to have a "huge tank" in the car boot.

If oil prices rise, there will be much more interest in "hybrid" cars, already available from Toyota (the Prius) and Honda (hybrid Civic), which run partly on batteries and then switch to petrol when going up hills.

But those cars are currently expensive, in the low $40,000 range, as opposed to about $30,000 for a standard model.

"We suggest that is where people will start to lean to, if they want to save some dollars," Mr Fairbairn says. And they are highly fuel efficient, at less than 5 litres for each 100 kilometres - three times more fuel efficient than some big four-wheel-drive cars.

There is also a longer-term concern about world oil supplies and, as a result, prices.

Some think the "peak oil production" level has been reached or will arrive soon, driving oil prices up permanently and dramatically.

Australian scientist John Wright says international studies suggest that global oil production has reached its peak or will peak in the next decade and then production will run downhill.

"I suspect that a price over US$40 a barrel of oil is opening the door to a heap of new technology in transportation," he says.

Energy Efficiency and Conservation Authority senior transport adviser Liz Yeaman says biofuels, made from animal fats or vegetable oils, are "just about there", but they depend on costs of the feed stocks.

There is enough waste animal fat or tallow to provide about 5 per cent of all diesel use and the price of tallow has fallen in the past few weeks.

"So biodiesel would be economic on its own grounds," she says - but only because oil prices are high and tallow is cheap.

Generally, it is more expensive, so banks are unlikely to lend the tens of millions of dollars needed to set up a processing plant.

But biodiesel does have advantages: it lowers the amount of black smoke from diesel engines and it also comes from a renewable source.

Gull Petroleum's Alan Mountford says the company is "actively pursuing" an ethanol blend fuel, made with waste whey from the dairy industry, and it could become widely available around Christmas.

"We are doing some demonstration vehicles with Anchor Ethanol," Mr Mountford says. A fleet of Anchor dairy company cars is expected to use the fuel in Bay of Plenty in the next couple of months.

With higher petrol prices, using ethanol as a blend is now price competitive, but it will not lower the cost of fuel. The other advantage is a higher octane, cleaner-burning fuel with lower carbon monoxide emissions.

The AA's Mr Fairbairn expects hesitation among drivers to use biofuels till they are proven to be good fuels.

But Ms Yeaman says: "Ethanol is just about ready to go right now? with a 5 per cent mix with existing fuel.

"It would mean every car in the country could fill up with them straight away, without having anything done to the car." That makes the process much simpler than converting cars to lpg.

The ethanol blend can be expanded to a 10 per cent mix, but Japanese car companies have balked at that prospect in a "Catch 22" problem, according to Mr Mountford.

"Because it is not tested (in Japan) it is not approved, and because it is not approved, they won't bother testing it.

"We believe we will have a resolution by the end of the year, most likely in favour of 'E5' – petrol with 5 per cent ethanol."

Further down the track, ethanol could be made from the cellulose in grass in New Zealand – even the native toetoe, Ms Yeaman says.

"It is basically cutting out the cow in the grass-to-ethanol process – rather than going through the milk stage – but using New Zealand expertise in enzymes to break down grasses to ethanol." That technology remains under development, she says.

HYDROGEN CARS FOR THE FUTURE

Beyond that, hydrogen fuel cell cars are the great leap forward.

Australian scientist John Wright is the director of the Energy Transformed Flagship Program that aims to develop low-emission energy technologies and systems which lead to the widespread use of hydrogen as an energy carrier across the economy.

He believes there will be a big shift from fuel oil and natural gas to hydrogen.

"There seems to be a leap across, based on the technology using high-purity hydrogen. . . as the fuel of choice."

Hydrogen fuel cells combine hydrogen and oxygen to produce electricity.

Their only emission is water, which steams out of the tail pipe.

As the "holy grail" of fuel, it would cut both greenhouse gases and reliance on foreign oil.

There are many test cars around, but widespread hydrogen fuel cell cars may be years away.

Hydrogen is expensive to produce. In addition, fuel cells are not cheap, and new pump stations need to be built.

"The barriers to introduction are quite enormous – it is a real chicken-and-egg (situation)," Dr Wright says.

Initially, hydrogen will probably be made using natural gas and, possibly, by using coal gasification.

"Making hydrogen from natural gas is not that far off," Dr Wright says.

There is potential, in Australia at least, for making hydrogen with solar or wind power.

Big technological problems come with hydrogen, however. Most storage systems lose about 1 per cent a day, leaking through walls.

"You just can't contain such a small molecule," Ms Yeaman says.

"There are technical issues with hydrogen. It is a bit of a holy grail," she says.

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