Used Oil: Fuel vs. Revenue

Waste stream management within the operations of the lube and carwash industries has improved significantly during the last 15 years as a direct result from regulations implemented by the Environmental Protection Agency. The biggest strides relate to the proper collection and management of used oil.

Many lube and carwash businesses, as well as other used-oil generators, have now installed used-oil fired furnaces and boilers in order to make use of the energy contained in used oil and to reduce their dependency on conventional energy, such as natural gas or fuel oil.

The adoption of used-oil fired technology has become popular since Congress passed the Used Oil Recycling Act in 1980. The act established a mandate for the EPA to ensure that used oil recycling is “consistent with the protection of human health and the environment.” The act also recognized the effects and benefits of used-oil recycling for small businesses and others that generate small quantities of used oil.

The primary rules adopted by the EPA for the operation of used-oil heating systems stipulate that operators may burn only used oil generated on-site or collected from do-it-yourself generators and that the furnace or boiler must be vented to ambient air. In addition, the capacity of the furnace or boiler cannot exceed 500,000 Btu.

These simple rules have been adopted by most states, and similar guidelines are in place in some Canadian provinces. The EPA reaffirmed these rules in 1992.

One of its primary considerations for the regulations is based upon the energy content of used oil. Many are surprised to learn that used oil contains, on average, 140,000 Btu per gallon.

This is equivalent to 1 gallon of fuel oil, which at press time was more than $3 per gallon. It also is equivalent to 1.4 therms of natural gas, which on average costs $2.20.

With this type of energy value, it is easy to see why used-oil fired recovery devices have experienced widespread success during the last 15 years. It also explains why used-oil haulers are paying generators significantly more since the natural gas spike after hurricane Katrina.

Although natural gas prices have retreated back to pre-Katrina levels, used-oil prices paid by haulers have not followed suit. This may suggest there were significant margins being made or that perhaps the values may soon drop back down. In either case, the used-oil generator is still in a good position to leverage the value of used oil.

Many business owners that generate used oil are completely unaware of the energy value of the oil. Even though they may receive 50 cents to 75 cents per gallon from a hauler, many do not realize they are giving up $1.45 to $2.25 worth of Btu content, relative to conventional energy sources.

This savings can add up, particularly for those businesses operating hot water carwashes year-round and utilizing used oil to heat the water. The increase in used-oil prices, on average, may increase the payback period for the investment of used-oil fired equipment; however, most often it is still less than a two-year return.

Operators should perform energy-savings calculations to see what works best for their businesses.