Here They Come…There They Go…

 

Dr. Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS), a Washington-based think tank focused on energy security.  He is also co-founder of the Set America Free Coalition, an alliance of environmental, labor, national-security and religious groups promoting ways to reduce America’s dependence on foreign oil.  He is a board member of the Center for Energy Defence and a member of the Society of Industry Leaders, the Committee on Present Danger and other non-profit groups. Newsweek called him a “tireless and independent advocate of energy security,” and Esquire included him in its 2007 list of America’s best and brightest.

After squandering the $17.4 billion in loans that they received in December, GM and Chrysler asked Washington for further life support.  This time, a bailout—and restructuring plans that include job cuts, factory closures, and plans to eliminate models and dealers—a move that could cost American taxpayers more than $20 billion.  Ford is hoping to turn things round on its own; but the other two face the prospect of tighter and tigher federal control. 

Pumping more money into the ailing auto industry would be a  bad idea unless the money—our money—provides not only a reasonable chance that the automakers will recover, but also assures us that they’ll use the funds to usher in an era of global transportation that is no longer exclusively tied to oil.

While oil prices are low in comparison to last summer’s peak, a glimpse at the recent International Energy Agency (IEA) World Energy Outlook confirms that we are just enjoying a temporary respite.  Sooner or later, oil prices will rise to their old level.  The IEA report examined the world’s top 800 oil fields and reported an average annual depletion rate of 5.1%, increasing to 8.6% in 2030.  The report stated that in order to meet future demand for oil, the world will need the equivalent of four new Saudi Arabias.  Even if such a gigantic amount of oil exists, using it will require trillions of dollars in new exploration and recovery.

But the current credit crunch and falling oil prices hinder such investment.  Due to low prices and the slowdown in demand, OPEC members have delayed 35 new oil projects. This means that once the world pulls out of its recession and the demand for oil returns to its previous level, an oil crisis of much bigger proportions could ensue.  As a result, additional auto bailouts should require that the auto manufacturers do their part to insulate the global economy from high oil prices by making cars that can handle a choice of fuels.

Hybrids, plug-in hybrids and solely electric vehicles are part of the solution, and the industry is genuinely committed to making them in growing numbers.  But these vehicles are not enough.  Much of the battery-manufacturing chain essential to mass-produce such cars—including 95% of the rare-earth elements and other battery raw materials—is in Asia and out of Detroit’s control, no matter how much money Detroit throws at it.

But the auto industry can deploy one technology that is mature and cheap, and in which the Big Three enjoys an edge against their Asian competitors—flex-fuel vehicles.

For under $200 per car, Detroit can enable every new vehicle to run on any combination of gasoline and alcohol. Alcohol doesn’t mean just ethanol, and ethanol doesn’t mean just corn.  More than 80% of new cars sold in Brazil in 2008 were flex-fuel vehicles, many made by GM and Ford.  After oil prices flew so high in 2008, energy companies in Brazil sold more sugarcane ethanol than gasoline.

An open fuel standard requiring that new cars sold in the U.S. have flex-fuel capability will reward American taxpayers with fuel choices at the pump when gas prices soar.  It will also break oil’s virtual monopoly over transportation fuels, a monopoly that allows corrupt and dictatorial oil exporters to accumulate inordinate power.

True fuel flexibility should require cars to run on methanol as well as ethanol.  Unlike ethanol, which is only made from agricultural feedstock, methanol can be produced from a broad array of feedstocks such as wood waste, municipal solid waste, natural gas (attention, Mr. Pickens), coal, and in the future, carbon dioxide (attention, Mr. Gore).  Methanol compliance will also open  a large market in China (where methanol is emerging as the alternative fuel of choice) for our very own Big Three.

Adding flex-fuel capability to every car made by Detroit would cost the industry a small fraction of the total bailout, and would position the Big Three as leaders among automakers in alternative fuel technologies. Through an open fuel standard, oil’s biggest users could help to bring about the end of the oil era.

By Gal Luft

For more information visit:

Set America Free Coalition: 

www.setamericafree.org