Former NATO Commander Calls Americans to Action on Oil Dependence

Wednesday, October 31, 2012

General Wesley Clark (ret.), former NATO Supreme Allied Commander Europe, made an impassioned case for the Open Fuel Standard Act as a policy that will strengthen U.S. national security and stimulate economic growth. Included is a summary of his speech on Capitol Hill.  Please forward it widely to military friends and family.

When we’re dealing with energy policy, we’re dealing with the essence of national security policy in the 21st century. If we don’t get our energy policy right, all the strength of the United States Armed Forces won’t be enough to keep America safe and strong in the world. 
We’re looking at 42 years of tragic policy failure. Since the day when the United States became an oil importing country until this day in February 2012, we’ve spent trillions of dollars, paid thousands of lives, given up billions and billions of dollars every year in foreign deficits.  We’ve funded dictators and corruption and enemies of the United States.  We’ve turned over the hard-won income of Americans to those who don’t have our country’s best interests at heart.... 
We knew it would distort American foreign policy, we knew it would cause additional military expenditures, we knew we would eventually deploy troops and fight wars to protect foreign sources of energy.  But nobody writing in the early 1970s would have believed how far it’s gone over these 40 years.  They wouldn’t have believed Iraq and Afghanistan and improvised explosive devices and what’s happening now with Iran and the rise in the price of oil. 
Make no mistake about it — if we want to keep America strong we have to fix our energy policy. 
Why haven’t we fixed it? Because the very participants of this market place see it as a zero sum game. We can’t have that and have a strong America. 
That’s why I’m so proud to be with this bi-partisan effort. It cuts across parties, industries, states, interest groups and brings Americans together. This is our country’s future.   
This year we’re importing about 9 million barrels of oil a day.... It’s maybe $500 billion a year of lost income we’re exporting.... That’s our money. We have to take it back.... 
In the 21st century, it’s not enough to have a strong military. It’s not enough to have nuclear deterrence.  It’s not enough even to have the best special forces in the world.... We have to have a growing economy and to do that, we’ve got to take back control of our energy policy. We’ve got to work together. We’ve got to get this open fuel standard moving.... 
Ladies and gentlemen, it can’t be done without all of your help. This is a nationwide effort to mobilize American public opinion to take back control of America’s future. It starts with energy. If we fix this, our economy will grow. If we fix this, we’ll create jobs. If we fix this, we’ll have a secure future.  It’s up to us.


Help Inform People About the Open Fuel Standard

Saturday, October 27, 2012

In an article this week in Forbes entitled, Jobs In a Ripple-Out Economy Come From Oil, Gas, Coal, and Then the Cloud, someone made the following comment, and reminded me that this is a very good way to help reach and educate others about the Open Fuel Standard: Make comments on articles. Too few people even know about the Open Fuel Standard. We need to change that. Here was the comment:

Jobs can not and will not be created by keeping oil and electricity prices artificially high. For every job gained in the oil business or from “green jobs”, 3 are lost to the high cost of oil and/or electricity.

Conventional clean coal generation is essential for economic strength. The EPA needs to stop waging war on coal.

The OPEC cartel has engaged in taxation without representation for 40 years. This can be stopped by passing the Open Fuels Standard Act (OFS) which counter-mandates the limitation on our cars by limiting them to gasoline. The OFS requires cars sold in America to burn gasoline, ethanol and (most important) methanol in any mixture.

This OFS law brings our natural gas supplies on line as automotive fuel since that’s the easiest way to make methanol. The convenience of mixing three different fuels in one tank is unsurpassed by the “Pickens Plan” and the Chevy Volt and others. The cost of the technology is about $100/car; much less than the Volt or “Pickens Plan” which require two separate fuel systems.

With the OFS, no subsidies are necessary. Supply and demand rule the day. Consumers are free to choose the fuel that is most economical on any given day. Since fuel prices fluctuate, flex fuel cars are a natural response.

The OFS protects America from a cutoff of Persian Gulf oil. Should such a cutoff occur, the United States will have plenty of domestic feedstock to keep our automobile fleet rolling with two other fuels that can be made from a variety of feedstocks; not just oil.

Wanna see American jobs grow? Pass the Open Fuel Standard Act and get Americans making our own automotive fuels. The article above represents a drop in the bucket.


Three Statewide Reports Prove: Ethanol is an Economic Powerhouse

Monday, October 22, 2012

By Bob Dinneen

The Renewable Fuels Standard has laid the foundation for private investments in the domestic biofuels industry that are reaping a rich harvest of returns. That’s why with 209 plants in 29 states, the industry supports more than 400,000 jobs, contributes more than $24 billion to the economy, and provides $29.9 billion in household income.

This progress translates into success stories in a growing number of states and communities across the country. That’s the clear message of three recent studies of the industry’s economic benefits in the nation’s fifth largest ethanol producer, Minnesota, as well as two states where the industry is only beginning to grow, Ohio and Georgia.

In a study released in October, the Minnesota Department of Agriculture reports that the ethanol industry supported more than 12,600 jobs and generated more than $5 billion in economic activity during 2011.

With 21 plants – 10 of which are farmer-owned – and 11,000 farmers supplying feedstocks, the ethanol industry offers an economic lifeline to Minnesota’s farmers and rural communities. By processing corn into feed and fuel rather than simply selling corn as a raw commodity, the state’s ethanol industry added $912 million to the value of corn last year alone. Moreover, the report continues, “Minnesota’s ethanol industry has a ‘multiplier effect’ that benefits many economic sectors across the state, including agriculture, manufacturing, transportation, services, construction, and trade.”

Assessing the biofuels industries in Ohio and Georgia, two other studies found similar current and potential economic benefits. In its study, the Ohio State University Extension Community Development concludes that ethanol production has brought economic and employment benefits to the Buckeye State.

With Ohio’s ethanol industry continuing to grow, new construction and additional upgrades of Ohio’s six ethanol plants have attracted $825 million in capital investment. Just operating these plants supports 273 fulltime jobs, with an annual payroll of $9.36 million. When the total impact of plant construction – as the economists put it, “direct, indirect, and induced” – is taken into account, the industry contributes $1.1 billion in economic activity in Ohio, supporting 12,975 jobs and generating $607 million in income.

Meanwhile, in Georgia, a recent study by the University of Georgia’s Selig Center for Economic Growth, takes a new look at biofuels as part of the state’s fast-growing “life sciences industry,” also including agriculture, pharmaceuticals, biotech and bioenergy. Jobs in this industry increased by 1.5 percent from 2007-2010 in Georgia, while statewide employment dropped by 7.9 percent during the same period. Wages paid by companies in this sector also increased at a faster rate (4.4 percent) than those for other companies within the state (4.2 percent).

While ethanol production has yet to reach its full potential in the state, the report identifies eight biofuel companies active within Georgia, with six having been in business for 10 years or less. Currently, ethanol production accounts for 206 jobs within Georgia, while the industry’s total generates $105.32 million in economic activity directly and indirectly supporting a total of 1,026 jobs.

From Minnesota to Ohio and Georgia, American ethanol is driving forward to a promising future. Don’t let the biofuelsbashers put speed bumps in the way of growth and progress.


How to Strip Oil of Its Strategic Status Permanently

Sunday, October 21, 2012

The following was written by Robert Zubrin and published in National Review Online here.

Tripling America's Fuel Production
Most alternatives to oil are pipe dreams. This one is not.

The United States currently produces 8 percent of the world’s liquid fuel but uses 25 percent, making up the difference by importing 5 billion barrels of oil annually. With prices currently near $100 per barrel, this dependency will cost us $500 billion this year, an amount equal to the nation’s entire trade deficit. Furthermore, at a time when Congress is seeking to keep taxes light in order to boost job creation, our dependency will impose a tax on our economy equal to 20 percent of what Americans pay the IRS. Except, of course, that these revenues will go to the treasuries of foreign governments instead of our own.

During the 1940s, the United States produced 60 percent of the world’s liquid fuel. This advantage proved to be a major factor in securing the Allied victory in World War II. Had we been as weak in energy security then as we are today, we might well have lost the war, as enemy submarines could have collapsed our economy, and with it our war effort, simply by cutting off our oil supply.

If we are to break free of the crushing economic burden and national-security threat that oil dependency imposes, we need to triple our liquid-fuel production. There is no realistic way that this can be done through expanding domestic drilling for oil, multiplying the yield of corn ethanol (which now accounts for 20 percent of domestic liquid-fuel production), or a combination of the two. Rather, we need a new source of liquid fuel, one that can be produced easily and economically, from resources available to us, and on the vast scale required to address the deficiency.

Fortunately, such a fuel is available. It is methanol, also known as wood alcohol. In contrast to algae oils and cellulosic ethanol, methanol is not a futuristic pipe dream touted by researchers seeking funding. Rather, it is one of the world’s top five chemical commodities, with an operating global annual production capacity of 27 billion gallons, and a current spot price, without any subsidies, of $1.28 per gallon. While methanol contains only about half the energy per gallon of gasoline, its excellent octane rating of 105 allows it to be burned more efficiently, making $1.28-per-gallon methanol equivalent to $2-per-gallon gasoline. All in all, a very competitive price.

The resources available to support expanded methanol production are vast. In contrast to gasoline — which can be made economically only from petroleum — or ethanol — whose mass production requires the use of sugars or starches — methanol can readily be made from any carbon-containing material. To list a few of methanol’s potential sources: oil, natural gas, coal, urban garbage, or any kind of biomass without exception.

The United States possesses around 4 billion metric tons (29.5 billion barrels) of proven oil reserves. This would barely be enough to support a fully fuel-independent America for four years. In contrast, our proven coal reserves exceed 270 billion tons, and our natural-gas reserves may be nearly as great. North America currently produces about 40 billion metric tons per year of biomass, of which 2 billion tons are harvested as farm and forestry products and 1 billion tons discarded as agricultural and forestry waste. We also discard approximately a quarter-billion tons per year of carbonaceous urban trash. Thus, taken together, our resources for methanol production not only are up to fully replacing our current oil imports, but are up to supporting the growing demands of an expanding economy for decades or centuries to come.

Methanol burns cleaner than gasoline, causing much less particulate pollution. It is also safer — it is much less likely to catch fire in the event of a crash, and its fumes contain none of gasoline’s rich mixture of carcinogens. While, unlike ethanol, methanol is not edible, it is not especially toxic. In fact, windshield-wiper fluid is one-third methanol, and, because it is readily biodegradable, it has been handled by the public and released onto roads worldwide in vast quantities for decades without any impact on public health or the environment.

If we could convert our auto fleet to run on methanol, the $500 billion per year we are now paying foreign potentates for oil could go instead to American businesses and workers to produce our fuel right here at home. On average, it takes $100,000 of GDP to create one job. At that rate, the $500 billion spent here instead of abroad would create 5 million American jobs directly, and millions more indirectly from the construction, retail, and service industries that would be supported by the methanol workers’ paychecks. This would help address our critical national and state deficits as well, as millions of people would go from the unemployment rolls to the tax rolls.

But can we readily open our vehicle-fuel market to methanol? The simple answer is yes, and quickly. The large majority of cars sold in the U.S. today (and for at least the last five years), including all GM and Ford vehicles, have been equipped with computers and chromated fuel lines that make them potentially capable of flex-fuel operation. If provided with the right software, and with methanol-impervious Buna-N rubber seals (costing less than 50 cents per vehicle) for their fuel system, every new car sold in the U.S. could be fully flex-fuel, capable of running equally well on methanol, ethanol, or gasoline.

There is currently a bill before Congress — the Open Fuel Standard bill (HR-1687), co-sponsored by a bipartisan group including Reps. John Shimkus (R., Ill.) and Eliot Engel (D., N.Y.) — that would require flex-fuel capability of the majority of new cars sold in America. If the bill passes, a market for methanol would be created that would very quickly call into being expanded production and distribution facilities, both in the U.S. and elsewhere. This would force gasoline into competition with methanol at the pump worldwide, thereby putting in place a permanent global competitive constraint on the price of oil. Thus owners of older cars, which are incapable of methanol operation, would also benefit, since their gasoline would be cheaper. And once methanol pumps become widely available, many drivers would see the benefit of spending a few hundred dollars to have their seals replaced and cars reprogrammed to obtain fuel choice. The switch to a predominantly methanol-fueled vehicle fleet could thus take place very rapidly.

The Open Fuel Standard bill would unchain the Invisible Hand, creating a true free market in vehicle fuels. Those reluctant to embrace it need to answer the following question: In whose interest is it that Americans should continue to be denied fuel choice?

We can break our fatal dependence on foreign oil, but Congress needs to act.

— Robert Zubrin is the president of Pioneer Astronautics, a fellow with the Center for Security Policy, and the author of Energy Victory: Winning the War on Terror by Breaking Free of Oil.


OPEC wants 'economic terrorism' complaint dropped

Thursday, October 18, 2012

By Bob Unruh
October 15, 2012

Filled up your car with gasoline lately? Bet you’re glad you don’t live in California, where Forbes reported today the average price is $4.66 a gallon.

But you’re also probably not happy with OPEC, the Organization of Petroleum Exporting Countries, and Larry Klayman, founder of Freedom Watch USA, is on your side.

He filed a lawsuit against OPEC, accusing the organization of “economic terrorism,” and he just recently filed an argument against OPEC’s demand that the lawsuit be thrown out.

Klayman’s claim of conspiracy against American consumers by OPEC is contained in the lawsuit he filed in federal court in Washington. Freedom Watch USA, a public interest organization, charges that the Organization of Petroleum Exporting Countries engages in illegal price fixing and market division by artificially inflating crude prices.

Klayman said the member nations “specifically and intentionally limit barrels of oil that each country produces,” causing the price to rise.

His latest filing explains that OPEC’s “restraint of trade, which directly extends to American soil and has been perpetrated in a blatant violation of U.S. antitrust laws, must finally be ordered to cease and desist.”

OPEC has argued a technicality, claiming that it wasn’t served properly with the notice of the lawsuit.

However, Klayman personally traveled to Austria to ascertain that officials at OPEC were served, and he said the procedure followed all ordinary rules and requirements.

“Defendant now claims that service of process was not proper in an effort to escape liability. Yet defendants cannot be allowed to immunize themselves from U.S. antitrust law. If defendant chooses to play ball in our court, it must play by our rules. Foreign law cannot – and does not – trump U.S. law,” Klayman said.

He said he delivered to Frederick Luger, intake officer for OPEC in Vienna, a copy of the summons and complaint.

“Defendants concede that a summons and complaint were received by hand at OPEC’s headquarters, but mistakenly believe it was by Larry Klayman, counsel for plaintiff. … Defendants were served by someone who is not a party to this action,” Klayman explained to the court.

That OPEC got timely notification was documented, because some two weeks later, it asked for another two months to respond to a motion, he said.

“This court must … look to nothing but the facts of the case to determine whether OPEC is in violation of U.S. antitrust laws as plaintiff alleges. In order to do so, this case must respectfully be heard on its merits.

“Here, OPEC has been conspiring with its member companies and the distributors and sellers of gasoline within the United States in order to fix the price of gasoline, as well as divide markets, within the United States. Defendant sells crude oil and conspires with distributors and retailers within the United States in order to artificially inflate the price of oil and gasoline by limiting production, hampering distribution, fixing prices, and dividing markets,” Klayman wrote.

Klayman alleged in the original complaint that member nations of OPEC “specifically and intentionally limit barrels of oil that each country produces,” causing the price to rise.

“This amounts to illegal price fixing,” he said, as well as antitrust law violations.

“These artificially inflated crude oil prices fall hard on the backs of Americans, many of whom cannot afford to buy gasoline during these severely depressed economic times,” said Klayman, a former Justice Department lawyer.

As a government attorney in the Antitrust Division, Klayman participated in breaking up AT&T. Now he and Freedom Watch have launched a campaign against the 12 nations that work together on oil prices and production.

Klayman alleges leaders of both major U.S. political parties “line their pockets from big oil interests and are just sitting back and not doing anything.”

He also noted the federal government is not allowing the U.S. to increase its own oil production, and Barack Obama’s policies have discouraged oil discovery and drilling.

“This has led to more speculation on oil prices, causing them to rise. And the president’s policies regarding Iran also have contributed to the spike,” he said.

The complaint argues that without OPEC’s anti-competitive agreement, more oil would be in production, and the result would be lower prices.

“Even when OPEC members produce to the full extent of their capacity, they produce far less oil than they would were they operating in a competitive market, because they artificially restrict their production capacity as part of their price-fixing scheme,” the complaint alleges.

“The … nature of OPEC’s price-fixing conduct is further confirmed by its course of dealing with non-members. OPEC has met with these non-members and has secured their agreement to limit production and has thereby increased the price of gasoline and other petroleum products over competitive levels,” the complaint says.

Klayman previously brought legal action against Venezuelan President Hugo Chavez and Iranian President Mahmoud Ahmadinejad on behalf of torture victims, advancing the case against Iran to the point of obtaining a default judgment.

Klayman also won a nearly $2 million unpaid judgment against Cuban interests in 1996 over the shooting down of an airplane.

The new claim against OPEC alleges that “as a form of economic terrorism,” OPEC’s actions “are designed to severely harm the economics or strategic interests of the United States and Western Europe in particular.”

“The illegal conduct of the defendant, and its constituent members and co-conspirators, is thus intended at this time to also influence the American presidential and congressional elections of 2012 by destabilizing the economy to further their pro Islamic and communist agendas,” the complaint says.

For an interview with Mr. Klayman, contact 310 595 5317 or email See also


Will the Price of Gas Ever Return to "Normal?"

Saturday, October 13, 2012

The following was written by Gal Luft:

Clearly, OPEC could produce more oil if it wanted to. But it won't.

The reason is that OPEC countries produce almost nothing but oil. Their population is growing by leaps and bounds, and because Saudis pay no income tax, the House of Saud will need more and more money to keep its citizens happy, and avoid the fate of toppled leaders in Libya, Egypt and elsewhere.

Since the beginning of the Arab Spring, Saudi King Abdullah almost doubled his Kingdom's budget, committing billions in subsidies, pensions and pay raises in an effort to keep his subjects from storming the palaces.

This expensive response effectively raised the price of oil needed for the Saudis to balance their budget from under $70 a barrel before 2011 to at least $110 a barrel by 2015.

Like it or not, the bill for keeping the Persian Gulf monarchies in power is now being footed by every American. Every time we fuel our car we send an extra 35 cents per gallon, or roughly $6 per fill up, to the Save the King Foundation. Since oil goes into everything we buy from food to plastics, this adds about $1,500 annually to the expenditures of the average American family.

Paradoxically, we are forced to fund social programs for other nations at the very same time we are engaged in a heated debate about cutting social services and entitlement programs at home.

Read more:
How Saudi Arabia controls the world price of oil
What you can do about it


Energy Self-Sufficiency: A Realistic Goal or a Pipe Dream?

Friday, October 12, 2012

Western publics seem to believe that energy self-sufficiency is an ideal response to those who attempt to wield the ‘energy weapon’. As Gal Luft argues, however, no state will be able to achieve full energy independence, let alone avoid future spikes in prices, in an economically globalized world.

By Gal Luft for the International Relations and Security Network:

The desire for self-sufficiency has always been a common trait of human society. After all, no one likes to be dependent upon others, especially for vital commodities and services. From a geopolitical perspective, this sentiment is arguably at its strongest when it comes to energy. The Arab Oil Embargo, Russia’s gas supply cutoffs to Europe and Venezuela’s and Iran’s threats to use the ‘oil weapon’ have all reinforced importing nations’ urge for energy self-sufficiency. No country is more preoccupied with this than the United States, where for the past four decades achieving energy self-sufficiency has been the mainstay of Washington’s energy policy. The only difference between Republicans and Democrats is that the former emphasize supply side solutions (‘Drill Baby Drill’) whereas the latter call for an ‘oil diet’ that uses less oil through taxation or increased fuel economy standards. The result is that the overwhelming majority of Americans believe that energy self-sufficiency will improve national security, alleviate the debt and budget crisis and yield lower and more stable gasoline prices. This worldview is based on myths and poor understanding of how the modern global energy market actually works. True energy security requires both uninterrupted energy supply and affordable prices. In today’s globalized world, energy self-sufficiency guarantees neither.

Is self-sufficiency really possible?

A nation’s energy basket is usually comprised of several commodities. Coal, natural gas, biomass and uranium are responsible for most nations’ electricity generation while petroleum and its products dominate the transportation sector. Some countries can reach self-sufficiency in one of the two sectors. For example, the United States’ electricity sector is practically self-sufficient. Other countries are not far behind when it comes to electric power: nuclear power generates 78% of France’s electricity, and renewables are responsible for 82% of Brazil’s power. But of the world’s 195 countries, very few are truly self-sufficient. Even energy-rich countries like Russia, Saudi Arabia, Venezuela, Brazil and Canada which are well endowed in hydrocarbons import some of their energy in the form of refined petroleum products due to insufficient refining capacity.

With some effort and investment in new refineries, this dependency can be eliminated, but most countries are not that fortunate. Of the world’s top ten economies, only two, Brazil and Canada, can theoretically reach self-reliance. The rest – China, Japan and Germany to name a few – are poor in resources in relation to their needs and their dependency on energy imports is growing by leaps and bounds. This means that as long as hydrocarbons dominate both our electricity and transportation systems, most nations will never be able to achieve self-sufficiency and will continue to rely on the global energy trading system.

Neither reliable nor affordable

While the pursuit of energy self-sufficiency lends itself to tactical solutions - such as increased domestic production or fuel economy mandates - that may have a positive effect on a nation’s trade balance and the environment, it would not have a profound impact upon the global price of crude and geopolitics. The reason is that oil is a fungible commodity whose price is being determined in the world market on a minute-by-minute basis. A price of a barrel of oil is more or less equal to every consumer, and when the price spikes, it does so for everyone regardless of where their supply comes from. (This is not always the case for natural gas: unless it is traded in the form of LNG, its price is pre-determined in long-term contracts)

In 2008, for example, the United Kingdom was virtually self-sufficient in oil. Yet, in keeping with other import-dependent economies, British motorists were affected by a sharp rise in crude prices that led to protests over the rising cost of petrol. Over the past decade, both US oil production and vehicle fleet fuel efficiency have increased sharply. Consequently, US oil imports have decreased from 60% in 2005 to 42% in 2012. Yet, despite the fact the US is the world’s top oil consumer, none of this had any noticeable impact on the price of crude. On the contrary, the burden of imported oil on the US economy has roughly doubled and the share of oil imports in the overall trade deficit grew from 32 percent in 2005 to 58 percent in 2011.

Both case studies suggest that the move towards greater self-sufficiency does not necessarily lead to cheaper energy prices. All countries, irrespective of whether they are importers or producers, are part of the global energy market. This also casts doubt over the popular assertion that energy self-sufficiency could, in turn, weaken oil-exporting Middle Eastern states that are hostile to the West. OPEC member-states – who control nearly 80 percent of global conventional reserves -- need a certain breakeven oil price in order to keep their economies afloat. Any increase in non-OPEC oil supply or reduction in demand invites a reciprocal cut in production by OPEC aimed at restoring the price to the level OPEC governments would like it to be.

Equally tenuous is the argument that oil exporters can punish or target their clients with effective embargos for geopolitical reasons. Suppose that for some reason, Saudi Arabia decided to cut its oil exports – currently at 1.3 million barrels a day – to the United States. The effect on the US economy would not be more noticeable than the effect on any other economy. The US government has approximately 700 million barrels in its Strategic Petroleum Reserve (SPR), enough to cover for 18 months of lost Saudi supply. But even without tapping the SPR, the US economy would do just fine. Being dependent on oil for 90 percent of its export revenues, Saudi Arabia would have to sell the oil to someone else, say China. Beijing would possibly forgo some of the oil it brings in from Angola, for example, that may eventually find its way to the US market. On the whole (albeit not without some logistical adaptations) market forces would quickly adjust the supply-demand balance in such a way that all importers receive more or less the amount of crude they need. As long as the commodity is fungible no exporter can target a specific importer for more than a few weeks.

A new paradigm is needed

While achieving energy self-sufficiency remains unrealistic, this does not mean that states should sit idly by in the face of the global economy's vulnerability to oil price spikes. High oil prices wreak havoc in the ailing global economy, and the potential for conflict over access to oil seems to be growing as Asia’s thirst for crude grows. But instead of rooting for energy self-sufficiency, the goal should be to diminish the strategic importance of oil. In the book Turning Oil into Salt: Energy Independence through Fuel Choice (2009), the argument is made that oil today has the same strategic importance that salt held for most of human history. As the sole means of food preservation, salt once determined the course of world affairs. Wars were even fought over it. Competing means of food preservation such as canning and refrigeration stripped salt of its strategic status, turning it into “just another commodity” that no longer has geopolitical leverage. Similarly, the strategic importance of oil does not stem from the amount of it we use or import but from its virtual monopoly over transportation fuel. For the most part, automobiles sold throughout the world can run on nothing but petroleum fuels and thus energy commodities from which competitive fuels can be made are effectively barred from competing against oil. Because of this oil is not substitutable, so consumers cannot shift on the fly to competing products when oil prices become too high.

To achieve true and lasting energy security we must replace self-sufficiency with a competitive fuel market paradigm. This can only be done by opening vehicles to fuel competition. Just as the grid is agnostic as to what type of energy was used to generate the electricity it transmits, our cars and trucks as well as our fuel distribution system should be open to a diversified fuel mix. A variety of liquid fuels like ethanol, methanol and butanol can be made from natural gas, coal, biomass and municipal waste. Some, like methanol, are significantly cheaper than gasoline on an energy equivalent basis. Such fuels, in addition to gasoline, can power flexible fuel vehicles (FFV), which cost manufacturers an extra $100 or less to make compared to gasoline-only cars. Electricity can be stored on board automotive batteries and power pure electric vehicles and plug-in hybrid electric vehicles. Natural gas can be used onboard dedicated vehicles (and of course converted into methanol for use on FFVs). Each of those competitors has pros and cons. Some involve a higher premium on the vehicle side, others require costly infrastructure, and some are not cost-competitive except when oil prices are high. However, the uncertainty over future oil prices requires that the transportation sector opens up to these options as a shield against the economic and security challenges posed by a volatile oil market. This, not elusive self-sufficiency, should be our course.

Gal Luft is co-director of the Institute for the Analysis of Global Security (IAGS) and senior adviser to the United States Energy Security Council. He is and co-author of the books Energy Security Challenges for the 21st Century (2009), Turning Oil into Salt (2009), and Petropoly: the Collapse of America's Energy Security Paradigm (forthcoming 2012).


Why You Should Support the Open Fuel Standard Even if You Are Against Mandates in Principle

Thursday, October 11, 2012

The Open Fuel Standard says that if you're going to sell a car that can burn gasoline, then it must be capable of burning methanol and ethanol as well. Cars will no longer be limited to burning gasoline only. It's not a big change to the car. GM says it adds about $70 to the production cost of a car (and they ought to know because they've made more flex fuel cars than any other American car company).

But this is a mandate. And for some people, that's a deal breaker. If it is for you, below is a list of reasons to reconsider. None of them are good enough to justify changing your mind on something as important as the mandate principle. But all of them together are more than enough to justify making an exception for the Open Fuel Standard. Here they are:

1. The United States is in a Catch-22. Automakers don't want to make cars for which there are no fuel stations. And fuel stations don't want to add pumps for a fuel cars can't use. The Open Fuel Standard gets around this impasse, and makes it happen quickly. As soon as the bill passes, the whole industry will be confident there will be a growing market for alternative fuels, and infrastructure will begin appearing within three years. When these new fuel stations appear, and people can see that there is fuel available for their car that is cheaper or that puts that money into the pockets of American workers, they will start converting their cars to flex fuel by the millions.

2. Our government has a legal responsibility to break up monopolies that harm its citizens. Certainly OPEC qualifies as such. We should sue them because what they're doing is illegal — a monopoly that harms the public good is against the law. If OPEC was an organization inside the United States, our government could and would break up that monopoly. But they are an organization outside our borders, so we can't. Even if we could, I don't know if we would because we need their oil.

And why do we need it so badly? Because 97 percent of all transportation relies on oil. So our entire economy rests on oil. We can't risk disrupting our fuel supply (OPEC would certainly retaliate with another oil embargo; their first one in 1973 devastated our economy).

However, our government could break up this monopoly in another way — with the Open Fuel Standard. Right now most of us, when we want to drive, have only one choice: gasoline. It's an artificially-induced monopoly. And the only reason we have no choice is that our cars can only burn one fuel.

3. Automakers are slowly shifting over to flex fuel vehicles already, and we should just let the market move at its own pace, but we are under a time pressure. Astonishing amounts of Saudi oil money is being used against America as Saudis buy up corporations, spend lavishly to gain influence in our media, universities, and government, and build mosques that insist upon Wahhabi Islam, an extremist, fundamentalist Islamic ideology. Because of Saudi billions, 90 percent of all Islamic institutions in the world are controlled by Saudis. It is not in America's best interest to allow this to continue as automakers take their time.

4. Taxpayers bailed out the car companies when they were in trouble. They owe us. And this is a very small thing for them to do. In fact, Ford and GM already make plenty of flex fuel cars which they sell to China and Brazil.

5. Brazil had a flex fuel mandate awhile ago and it has been good for their economy and made them significantly less vulnerable to the recessions caused by OPEC's destructive manipulaton of oil prices. And Brazil went from an oil importing country to an oil exporting country.

6. The purpose of preventing the government from interfering with business is so the free market can decide. But the free market is not deciding, because OPEC is functioning as a monopoly in two different ways: First, it is a large enough cartel that it can force (or mandate) the worldwide price of oil. It can make the whole world pay whatever price per barrel of oil it wishes. And second, at the pump there are no options. The reason there are no options (except oil) is because our cars cannot burn anything but gas.

So this Open Fuel Standard "mandate" is actually a counter-mandate. It introduces freedom by law where there is at present no freedom (if you want to drive, you have to use oil in most places and for most cars, and when you buy gas, you have to pay what OPEC decides).

What OPEC does is illegal and their monopoly should be broken up. This counter-mandate is the next best thing, and it won't cost taxpayers a dime.

7. Automakers are receiving subsidies already. Automakers get money from the government if they sell a fuel-efficient car, but not if they sell a flex-fuel vehicle. Without meaning to, we have set things up in a way that keeps us limited to gas-only fuel stations.

8. This bill would not take away anything you now have, and it will give us all something we now don't have. If you want to continue to use only gasoline in your car, you will be free to do so, and the higher-quality fuel lines and fuel sensors automakers install will not interfere with the normal operation of any cars, even if they burn only gasoline.

9. The next time OPEC decides to cut its production to raise global oil prices, as it did in 2007 (and as it has done many times) we will be ready and capable of responding in a way that will prevent a recession. We will have infrastructure in place and American industries ready to ramp up to meet the demand.

10. The principle that government should not interfere with the free market is important and valuable, but not absolute. Child labor is a good example. Government intervened because companies were taking advantage of children, exploiting them, to the detriment of the children's health.

And women's rights. There was a time when sexism ruled and when a woman walked into a drafting firm, for example, they didn't even look at her resume because, "We don't hire women." Government intervened, mandating that businesses are not allowed to discriminate against women. This was a good thing.

What about smog regulation? Los Angeles used to have terrible smog. Several times a year, the news would announce a "smog day" and everyone was warned to stay indoors because the air quality was so unhealthy. Government intervened and the air is much cleaner now. They don't have smog days any more.

The principle of being against mandates is important to maintain because it is a tendency of well-meaning (or not) elected officials to add more and more laws that limit freedom, but it is also true that some values are more important, or that exceptions should be made. I would say, for example, "You should never drive 100 miles per hour on a public road. It's dangerous." But if I'm in an ambulance, bleeding profusely, I would tell the driver to make an exception to my firm principle — to turn on the siren and step on it.

The U.S. economy is bleeding out its wealth. Should we stick by the principle no matter what? Or should we recognize where it should be overridden by an even more important principle: Self-preservation.

11. Anne Korin is a staunch defender of the free market. But she sees that an exception should be made in this specific case. In her testimony before the House Committee on Foreign Affairs, she said: "In a perfect world government would not need to intervene in the energy market, but...the United States is taking an unacceptable risk by leaving the problem to be solved by the invisible hand. This is especially true since the energy market is anything but free. It is manipulated by a cartel, heavily rigged in favor of the status quo, and, as the case of the ethanol tariff shows, riddled with protectionism.

"Every year that passes without Congressional action to ensure that new cars sold in America are flex fuel vehicles is another year in which 17 million gasoline-only cars start their 17-year life on U.S. roads, further binding us to foreign oil. On the grounds of national security and in the interest of stemming the hemorrhaging of our economy, Congress should take swift action to require that new vehicles sold in the United States are flexible fuel vehicles. Such an Open Fuel Standard would level the playing field and promote free competition among diverse energy suppliers. Choosing not to embrace an Open Fuel Standard is choosing to preserve oil’s monopoly in the transportation sector, and with it OPEC’s growing stranglehold over the global economy."

12. "What would it cost to require that all new cars should be GEM (gasoline, ethanol, and methanol) flexible — and to pay a $200 incentive payment back to the manufacturers to compensate them for this?" asks Paul J. Werbos. "If 15 million cars are sold each year in the U.S., this would work out to a cost of $3 billion per year — much less than the potential savings of oil at over $100 per barrel even when long-term national security benefits are not accounted for.

"Some lobbyists have labeled this idea a government mandate. But really, this is closer in spirit to the Open Standards for Digital Television that the U.S. Congress has ordered starting in 2009. The goal is not to mandate a choice of fuel, but to establish open fuel standards: open standards for competition in the fuel market.

"The new standards for the television industry are estimated to cost much more than the $3 billion, but it has been agreed that the value of open competition in the television industry is large enough to justify the cost and the standards.

"Is digital television really more important to national security and the U.S. economy than our dependence on oil from OPEC?"

Read more:

Does a Federal Open Fuel Standard Violate Free Market Principles?

Shouldn't We Keep Government Out of This and Let Market Forces Determine What Happens?


Two Energy Security Events in Singapore

Sunday, October 7, 2012

We are pleased to extend an invitation to our readers to the following two events during Singapore International Energy Week:


IAGS is supporting the organization of the inaugural Gas Asia Summit which will take place on October 24–25 as part of Singapore International Energy Week (SIEW).  Singapore's Second Minister for Home Affairs & Trade and Industry, Minister S Iswaran will open the event, which will bring the region's policy makers and global gas industry players together to explore opportunities and address issues faced in fuelling Asia’s demand for gas.  IAGS co-director Gal Luft will deliver a keynote address on the topic: United States LNG Exports to Asia – Major Influx or Limited Volumes?

Visit www.gasasiasummit.com more information.


On October 25, IAGS will host a roundtable discussion on the topic Natural Gas Uses in Transportation: Liquid? Gas? Electric?

Natural gas can power compressed natural gas vehicles; it can be used to generate electricity which in turn powers electric vehicles, and it can be converted into a variety of liquid fuels like methanol, diesel, gasoline and dimethyl ether (DME). The options are many, and in the face of high oil prices the economics of replacing petroleum products with natural gas fuels are compelling. What are the most economic paths forward? What are the technology challenges and market barriers facing each option and what policies are needed to overcome them? The roundtable will bring together experts and industry leaders to discuss the most optimal uses of natural gas in the Asian transportation sector.

Click here for more information about the event.


What Raises Food Prices the Most

Friday, October 5, 2012

Click image to see it larger.
Thirty percent of the cost of food is for energy, mostly petroleum. Less than one percent of the cost of food is the actual cost of the food. A box of cornflakes, for example, has seven cents worth of corn in it. The rest of the cost is for packaging, shipping, advertising, etc.

Since oil has such a significant impact on food prices, giving petroleum some competition and thus forcing OPEC to lower the world price of oil would have an enormous impact on food prices.

In other words, the best way to lower food prices might be to increase the use of alternative fuels. Decreasing it, as some suggest, would only strengthen oil's monopoly on the fuel market, making us even more vulnerable to the oil shocks of the recent recession that sent both oil prices and food prices through the roof.

Read more: Everything is Up, But Corn is Up Because of Ethanol? Get Real.


Let Them Eat Oil

Tuesday, October 2, 2012

Click on images to see them larger.

The U.S. is the Saudi Arabia of agriculture. Americans have all the capacity we need to not only grow our own food and fuel, but to teach the rest of the world how to grow theirs too.


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