5.25.2007

Gas Prices and Biofuels: How Lean Can Help

Gas prices are setting new highs, concern is growing over environmental effects and the movement to produce ethanol and other alternative fuels is snowballing.


            A strong dose of lean strategies could help.


            The latest news reports include an intriguing article in The New York Times. In this piece, oil industry executives are quoted as saying that gas prices are likely to remain high for some time since they are cutting back on plans to increase refinery capacity. Why? Because of the movement to increase the supply of biofuels like ethanol.


            That may be understandable. But the article, written by Jad Mouawad, also notes that the biofuel movement is not the reason for the current, short-term rise in prices. Mouawad says that reasons cited by experts include:


 


            …many oil companies are doing maintenance work on refineries; new federal rules make fuels cleaner but costlier; and a string of delays, fires and accidents in the industry have reduced supplies just when drivers are starting to hit the road for summer vacations.


 


            Consider the first and third reasons cited in that paragraph. Maintenance work should be ongoing, not something that requires you to shut down or scale back production. It sounds like the oil industry needs a good total productive maintenance program. And while bad things do happen sometimes to even the best processes, if the industry is experiencing “a string of delays, fires and accidents,” I can’t help but believe that the efficiency and safety of their processes leave something to be desired. An army of cross-functional kaizen teams should be sent to do battle with these problems.


            Regarding alternative fuels, this is the perfect time to build lean approaches into that industry, as it is just getting off the ground. I hope that at least some of the entrepreneurs building ethanol plants have lean in their backgrounds.


            By the way, one of the more fascinating efforts in that regard was described in another Times article, published about a week before the article cited above. It noted that several business leaders in Hawaii – which relies on imported oil for nearly 90 percent of its energy needs – want to build plants in the state to produce ethanol from sugar cane. (Hawaii has passed a bill requiring that 20 percent of all highway fuel demand by 2020 must be provided by renewable fuels.) Plant construction won’t begin before 2010, but the goal is to produce as much as 28 million gallons of ethanol a year.


            The situation is complex, being shaped by both market and political forces that are sometimes in conflict. However, there is no downside to taking a lean approach, and significant benefits could result from such an approach. Is anyone involved listening?


 

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