An Energized Outlook

ARTIFICIAL HIGH? If recyclers make long-term plans based on competing in an era of high-priced oil, can they be assured that expensive oil is here to stay?

Economists and other analysts have predicted looming scarcity in the past, only to be tricked by the roller coaster nature of commodity supply, demand and pricing.

Oil has been particularly volatile in the post-World War II era, with a unified effort by producers to restrict the market in the 1970s resulting in a notable price spike. This was followed by an eventual glut of the black liquid that brought oil down to as low as $9 per barrel in the late 1990s when the economies of East Asia cooled in unison.

If conditions are truly different this time, the factor most often cited is the growth of consumerism and economic development in the BRIC countries (Brazil, Russia, India and China).

These four nations and other nations adjoining each of them are, through various combinations of state initiative and free-market expansion, adding millions of people each year to non-agrarian, urban and even middle-class styles of living that consume more petroleum than previous rural lifestyles.

The soaring global demand for oil from the BRIC nations—added to the already robust demand from North America, Europe and Japan—has recently been coupled with turmoil in key oil producing regions, most notably the Middle East and Nigeria.

The result in 2006 has been oil prices that have topped $70 and even $75 per barrel and predictions by some analysts that per barrel prices in the triple digits are not out of the question.

But analysts and futurists seldom speak as one, and theorists who see a looming oil glut are also stepping forward. Analysts such as CNBC’s Jim Jubak note that heavy sour crude oil is trading much lower than its light sweet crude counterpoint, and that refiners are adjusting to handle this more abundant grade.

Exploration and new drilling efforts have been re-kindled throughout the globe, which to some analysts indicates that supply may be able to catch up with demand even if the economies of the BRIC countries continue to advance.

Even if oil prices settle back below their current soaring levels, today’s pricing has caused manufacturers and buyers all through the supply chain to consider their energy costs. Such thinking should benefit energy-efficient production processes, which recyclers claim as a selling point.

SECONDARY ENERGY. Among the recycling segments that claim an overwhelming energy-efficiency advantage are secondary aluminum producers.

While using scrap paper can save from 25 percent to 45 percent in energy consumption, and steel scrap can save 60 percent on energy, users of aluminum scrap claim a 95 percent energy savings over the mining, screening, smelting and refining processes used to make primary aluminum.

On its Web site, the International Aluminium Institute, London, states, "The recycling of aluminum requires only 5 percent of the energy to produce secondary metal as compared to primary metal and generates only 5 percent of the green house gas emissions."

The figure is uniformly cited by aluminum companies, trade groups, recycling trade associations and environmental advocacy organizations.

With such energy savings, the market for clean aluminum scrap has never been an issue. Sustained high energy prices only bring the additional question of whether aluminum producers, rather than paying a discount for scrap because of contaminants and reduced melting yield, will in the future be paying a premium because of the energy savings.

Other secondary commodities are also positioned to save energy for manufacturers, with researchers at Oak Ridge National Laboratories claiming that one ton of paper made from recovered fiber saves some three of four barrels of oil compared to logging and chipping trees.

The use of iron and steel scrap also saves several steps vs. the mining and screening of iron ore, resulting in energy savings often calculated in the 60 percent range. Even though many of the new steel mills coming online in China have not been of the scrap-intensive electric arc furnace (EAF) variety, the decision is probably because of a perceived lack of available material rather than a calculation that iron ore and basic oxygen furnaces are more energy efficient.

An increased interest in plastics recycling from manufacturers, recyclers and entrepreneurs of all types seems to point to the double savings aspect of using more plastic scrap.

PLASTIC EXAMPLE. With its reliance not only on fossil fuels as a production cost, but also petro-chemicals as an ingredient, plastics manufacturing has been ripe for increased recycling attention.