Generally speaking, it’s not good business strategy to refer to your customers as the spawn of Satan. But President Hugo Chávez’s public labeling of U.S. President George W. Bush as "the devil" was included with his Venezuelan oil at no extra charge. Just this January, Chávez reiterated his Marxist vision for Venezuela, punctuating his point by shouting to U.S. officials, "Go to hell, gringos! Go home!" Not to be outdone, President Mahmoud Ahmadinejad of Iran entertained his country’s television audience by telling the United States and the United Kingdom that "the collapse and crumbling of your devilish rule has started." 

In addition to receiving such lambasting from these major oil suppliers, the United States is also being blamed for global warming and fingered as the largest polluter on the planet. We are seen as the planetary bully and the culture of greed.

The reaction of the United States? Look insulted, buy even more of their oil, continue to apologize to the global community for our carbon emissions and show absolutely no leadership in actually addressing any of these issues. Is something amiss here? The United States is the largest consumer on the planet. We also happen to be the biggest economy and the leader in philanthropy, technology, education and many other categories. Along with Western Europe and other industrialized nations, we are a consumer bloc that should be courted, not demonized. 

The twin goals of energy security and energy independence are often voiced on Capitol Hill. This year, climate change will probably become a very real debate as well. As the largest consumer on the planet, the United States should be leading this debate, not hiding from it. Contrary to common belief, energy independence and climate change can be connected, and the United States can affect both without arguing the merits of global warming science or adversely affecting its economy. To do this, the country must recognize two things: First, that its purchase of oil is providing the funding for those who would destroy the country. Second, that the direct cause of carbon emissions is not the oil but the form in which it is burned. Fortunately, a very real answer comes from another debate that Congress has pushed in recent years: energy diversity.

In January 2007 the Energy Information Administration (EIA) released an analysis of a highly detailed proposal meant to regulate and reduce greenhouse gas emissions. The findings: Mandatory steps to reduce greenhouse gas emissions can be achieved at very low cost to American households and without harming the U.S. economy. The sentiment is correct, but the plan is flawed. In its analysis, the EIA states that no attempt was made in preparing the report to address transportation emissions. However, if both the geopolitics of oil and emissions related to global climate change are to be affected, transportation is where efforts must be focused. This is where diversity comes in: By applying the principles of diversity to the energy equation, we can aggressively affect both the emissions issue and energy geopolitics.

The United States used almost 5.59 billion barrels of oil in 2005. Of this, imports made up more than 3.69 billion barrels. These figures are well known, but what is not so well known is that 60 percent of the total is used for transportation, as opposed to manufacturing or other sectors. That works out to roughly 3.35 billion barrels used exclusively for transportation. While the two figures are not connected, one can see that the United States uses almost as much oil for transportation as it imports. Since the economies of our detractors are fueled by oil exports, and because a large amount of carbon emissions comes from the transportation sector, the goals of political stability and pollution reduction are aligned in an unusual way. 

Iran, Venezuela, Syria, Libya and Russia have among them some of the top 10 largest oil reserves. However, their policies toward the United States and Western Europe are less than positive. Other oil-exporting countries have much more favorable positions. Canada, Mexico, the United Kingdom, Norway, Nigeria, Australia, Brazil, Chile and others have shown themselves to be much more politically friendly. Looking at pollution, private transportation adds around 1.23 billion metric tons of carbon dioxide, as well as 8 pounds of water vapor per gallon, among other pollutants related to climate change. We propose that by diversifying its transportation fuel mix and purchasing whatever oil it needs from friendly nations, the United States can positively affect its energy security while addressing both the political and environmental issues.

The possibility of affecting both politics and the environment becomes clearer if we understand how much of the oil the United States imports comes from offending countries and how much of the country’s transportation fuel would need to be displaced to make a difference in both climate change and global geopolitics. If Americans reduced the amount of imported oil consumption by even 5 percent (or 184.5 million barrels), the country could break the stranglehold of the Middle East and Venezuela, rendering Chávez, Ahmadinejad and their cronies, for want of a better word, impotent. Further, by reducing imports from the Middle East, the United States could concentrate its investments on friendlier countries. 

Think of U.S. energy policy as an equation: fuel + vehicles + consumers = policy. If we choose the right fuel, add the right vehicles and satisfy consumers, we can effect sound policy.

Finding a Way Out

Eco-aware California recently took a step toward the goal of energy independence and environmental stewardship. Governor Arnold Schwarzenegger announced an initiative aimed at shifting the state’s 26 million cars and trucks off petroleum-based fuels and toward alternatives. "Our cars have been running on dirty fuel for too long," Schwarzenegger said in his State of the State address in January. The governor urged consumers to "use the freedom and flexibility of the market" to create and adopt home-grown ethanol, biodiesel or biobutanol, or to purchase "credits from producers of lower-carbon fuels, such as electricity for plug-in electric gas hybrids," reported an Inside Bay Area article.

Schwarzenegger’s initiative is certainly well intentioned and rightly aimed at transportation, but unfortunately, the goals and the strategy to get there are not aligned. Directly targeting the transportation issue requires two variables in the equation: the fuel and the car. The governor needs to realize that equating "petroleum-based" with "dirty fuel" is a formula for failure. Unless he can concentrate on the fuel and the vehicle without bias, the comments from the governor’s mansion are pure hype.

So what are the most likely candidates to reduce our dependence on foreign oil? Currently, a car, truck, bus, tractor or other vehicle runs on a limited number of fuel sources. Gasoline, diesel fuel, ethanol, liquefied petroleum gas (LPG) and electricity are the current dominant fuel sources.

Gasoline is the supreme fuel source in the United States – we used approximately 170 billion gallons of the stuff in 2005 – and its primary feedstock is oil. Because of our thirst for gasoline, we import a large supply of oil from unfriendly countries. Our gasoline-powered cars and trucks, meanwhile, add significantly to greenhouse gases. Currently, the only technologies being actively deployed to help improve these statistics are hybrid cars and, to some degree, ethanol. The former increases mileage, the latter reduces carbon emissions by 20 percent, and both should decrease the need for imported oil. But these alone will never be sufficient to remedy our fuel or environmental problems. The scale is just too big. Recognizing this, we need to see which alternatives are viable.

The country also needs to be able to target its purchasing ability to individual countries. Last year, the United States imported 452.9 million barrels of crude from Venezuela. Syrian imports were 4.41 million barrels. From Russia we bought 72.6 million barrels, and from Ecuador, 100.7 million. 

To reduce U.S. consumption of imported oil, the country would need to replace a number of gallons of gasoline with a domestic fuel source to make a difference. With that in mind, let’s look at our alternatives.

Ethanol. Brazil famously reduced dependence on foreign oil with E-100, or 100 percent ethanol fuel. Of course, that country’s demand is significantly lower than that of the United States, but after years of production, ethanol accounts for about 40 percent of Brazil’s transportation fuel. In the United States, the Energy Policy Act of 2005 mandates that ethanol production be raised from today’s 3.5 billion gallons per year to 7.5 billion gallons by 2012. Because of this, ethanol needs to be considered as part of the mix – keeping in mind that its impact is limited. 

Total ethanol capacity – current, under construction or planned – is 11.39 billion gallons a year, or 271.2 million barrels a year. This would, if generated, replace only 7.937 billion gallons of gasoline due to the reduced energy content of ethanol. To displace 100 percent of our current gasoline needs, we would need 221 billion gallons of ethanol, which is 19 times the maximum planned and existing capacity. At today’s ethanol yield per acre of corn, just over 330 gallons an acre, we would need nearly four times the land area of Texas, all planted in corn, to produce this volume. 

There are also significant challenges with regard to distribution of ethanol. Transport is limited to trucking, as ethanol is hydrophilic and cannot be piped. Ethanol still has limited availability in many states, and none at all in some states where corn is not a major agricultural crop. For example, Houston has seven public E-85 stations in a 50-mile radius. Dallas has three stations in a 50-mile radius. Interestingly, distribution is being championed mostly by large grocery chains, such as Kroger and HEB in Texas. 

Considering the mandate from the Energy Policy Act, the potential of ethanol is significant. Whatever one might think of the technology, it can replace 7.937 billion gallons of gasoline.

Diesel fuel. For many years this cousin of gasoline has been used for transportation and seen as a "dirty fuel" – one that produces a thick cloud of smoke and is best used for the heavy engines of construction, buses and trucks. However, diesel fuel is proving to be viable for transportation with some notable upside. First, it is more efficient than gasoline. A car running on diesel will travel up to 30 percent farther than a car running on gasoline. In addition, newer low-sulfur diesel produces significantly fewer emissions than gasoline. Best of all, there are multiple sources from which to make the fuel. Diesel can be made successfully from oil, natural gas, coal or biological sources, with varying cost advantages. There is also an extensive fuel distribution system in place to bring diesel to market.

In the United States, 63 billion gallons of diesel fuel are sold annually, approximately 3 percent of U.S. automobiles burn diesel fuel, and five states that adhere to the California standards are not selling any new diesel vehicles. Diesel makes up 25 percent of the fuel used for transportation, a distant second to gasoline’s 60 percent. Still, the impact of converting some of the U.S. automobile fleet to this fuel could be huge. The U.S. Department of Energy estimates that if 30 percent of U.S. passenger cars and light-duty trucks were switched to diesel, U.S. crude net oil imports would decrease by 127.8 million barrels a year. Imagine the effect if this net reduction were targeted at Venezuela. However, converting 30 percent is a tall order. Let’s run the numbers based on the European model of converting 2 percent of the vehicle fleet per year for five years, giving us a target of 13 percent. This would result in 2.32 billion gallons on a one-to-one basis, but as diesel contains more energy and yields one-third more miles per gallon (mpg) on average, the total volume of gasoline displaced is 3.02 billion gallons.

An argument can be made that diesel fuel is less expensive if it is made from cheap imported oil. However, the U.S. economy has shown that it can handle gasoline prices as high as $3.50 without a negative impact. It’s a good bet the American consumer can come through by agreeing to pay more to shut out supply from U.S. enemies. However, current technology allows very clean diesel fuel to be produced from coal right here in the United States at competitive prices, so no premium is necessary. Strategically placed coal-to-liquids (CTL) plants can produce the fuel for direct use or blending at prices comparable to those we see at the pump today.

Other advantages abound. For example, no new technology must be developed for the refining process, the distribution or the vehicles. The carbon dioxide (CO2) emissions created in production can be sequestered and given to the domestic oil industry for enhanced oil recovery. And we can make as much as we can use.

Liquefied petroleum gas. Will the United States follow in the footsteps of Australia and New Zealand, where high gasoline prices made LPG the go-to fuel? The clean-burning alternative is attractive "particularly among commercial users," says the New Zealand Herald, "who enjoy a faster payback than most private motorists for LPG conversion costs ranging from $3,000 to $5,000." According to the Melbourne-based Age, "Qualified LPG tank fitters are racing to fulfill the demand from Australians who want to convert their vehicles, and training institutions are turning out new tank fitters as fast as they can. The $A2,000 rebate available to vehicle owners who convert to LPG has helped spark demand. The Australian LPG Association expects to do … well over 100,000 [conversions] in 2007."

Australia, in fact, leads the way in LPG consumption per capita, with 115 liters per person per year. The country has set an admirable example in replacing fossil fuel with a domestically produced, environmentally sound alternative. Australia’s goal is to have LPG absorb a total 10 percent of its transportation fuel demand by 2010. Currently, it is in the neighborhood of 5.4 percent, while powering 500,000 vehicles.

LPG gets about 30 percent fewer miles per gallon than gasoline, but depending upon location, it can be up to 50 percent cheaper than gasoline. This puts the mileage for the price a bit better than gasoline. LPG vehicles, which in the States are usually confined to fleets, can also be run on gasoline if both fueling systems are in place. Many times this is possible as the LPG system is completely separate from the gasoline system, so the vehicle can be retrofitted with an additional system as opposed to having the gasoline equipment replaced. A trip in an Australian taxi is illustrative of this. Many taxis Down Under have both systems and can run on either fuel, depending upon price and availability.

LPG’s other benefit is decreased emissions. LPG vehicles produce roughly 20 percent fewer ozone-forming pollutants, about 10 to 15 percent fewer greenhouse gases and one-fifth the air-toxic emissions of gasoline-powered equivalents. 

Though not as convenient as gasoline vendors, public LPG stations are generally available nationwide. Following the Australian model, replacing about 1 percent of U.S. gasoline with LPG would, over the next five years, displace an additional 5 percent of the country’s total gasoline demand. Although it would require 1.3 times as much LPG to offset this gasoline, the CO2 reduction of 20 percent provides an extra incentive to make the switch. This adds up to 5 percent of total U.S. gasoline demand after five years, or 3.87 billion gallons of fuel reallocated.

Electricity. Electric cars have been standing on the periphery of our transportation industry for years. As a fuel source for personal transportation, electricity has been limited by battery-storage capacity and the inability to create cars that are equivalent to today’s automotive favorites. Electricity could have an impact on imported oil because the United States does not use oil for electricity generation, which reduces considerably the money that might otherwise be spent on governments that do not like us. On the emissions side, one must consider the pollutants produced to generate the electricity, but the emissions from driving the car are essentially nullified as compared to gasoline-powered cars. Unfortunately, the demand for an all-battery, plug-in vehicle is small, especially given current technology prices. However, if a smattering of sports stars, Silicon Valley sharks and Hollywood elites traded in their Hummer H2s for all-battery two-seaters – and if we figure 3,000 people ditch their 14-mpg Lamborghinis for a plug-in electric, driving an average 12,000 miles annually – we could add, say, 2.5 million gallons to the list.

The grand total. Lining up the alternatives, it is fairly easy to see that the most bang for the buck on both oil imports and emissions standards is likely to come from diesel fuel, followed by ethanol, LPG and electricity.

Tallying up the opportunity given the supply yields 7.937 billion gallons from ethanol, 3.02 billion from clean diesel, 3.87 billion from LPG and, let’s say, 2.5 million from electric cars. This gives the country 14.85 billion gallons to play with, or 353.5 million barrels that can be reduced. Even if we cannot completely tell Señor Chávez to take his oil elsewhere, 353.5 million barrels is worth quite a lot to the man, even at $50 a barrel. In fact, it amounts to more than $17.67 billion we are guessing he would like to have, and money we could give instead to more favorable trading partners. Of course, the more we push in this direction, the more impact we can have. By providing the consumer with an opportunity to choose American, the energy industry can greatly affect the stability around the world – all while reducing transportation-related emissions.

Coming to a Dealership Near You?

It’s one thing to produce and market leading-edge fuel sources. It’s another to create and sell the vehicles that will use those fuels. Here the solution is far from the energy industry and lies in the hands of the automotive manufacturers and the consumer. Incidentally, automakers can be influenced to create the cars and market them long before the presence of any significant market demand or widespread availability of the necessary fuel. Good examples of this can be seen in the deployment of hybrid technology and flex-fuel vehicles. Both show the ability of the manufacturer to provide cars for potential demand.

The world’s big automakers are stepping up to the plate with a variety of models and technologies that show some new directions for the industry. Of the current crop of concept and production vehicles, these stand out: 

	Determined to out-hybrid Honda and Toyota, General Motors is creating a stir with its Chevrolet Volt, the auto giant’s first plug-in hybrid (well, if you don’t count the ill-fated EV-1 of "Who Killed the Electric Car?" fame). Volt gets its juice from a battery that recharges on the go, using an onboard, constant-speed, 1-liter engine that runs on E-85 fuel. GM says the Volt can travel up to 640 miles without a fuel fill-up or a battery recharge.
	The Volkswagen GLS TDI, available since the 2006 model year, offers a 1.9-liter, direct-injection diesel power plant that delivers 100 horsepower and just under 200 pound-feet of torque. In this lightweight body, it produces an EPA-estimated 33 mpg in the city, 44 mpg highway, while producing fewer emissions and a quieter ride.
	DaimlerChrysler’s Chrysler Group offers its Bluetec technology, a term that refers to a combination of technologies for passenger cars and light trucks to reduce all relevant emissions. As the automaker describes it on its Web site: "The system for passenger cars includes an oxidizing catalytic converter and a diesel particulate filter, as well as innovative systems for reducing nitrogen oxide emissions. Whether a combination of Denox and a Bluetec catalytic converter, or AdBlue injection with a Bluetec catalytic converter is used will depend on the individual design concept of the vehicle. Regardless of which technical solution is used, Bluetec makes diesel vehicles in every class the cleanest diesels in the world."
	Audi has a 3.0-liter V6 diesel for its Q7 model. The engine generates 500 horsepower.
	Mercedes adds to its North American diesel portfolio the Vision GL 420 Bluetec, which, according to the Toronto Star, "will incorporate the next stage of the technology – urea injection into the exhaust after-treatment system – ensuring emissions regulation compliance in all 50 states and Canada." The company also announced the production of its first all-diesel, all-wheel-drive model. The new Bluetec 320 E-Class sedan, available now, provides the luxury expected by followers of the brand while making 300 horsepower and nearly 300 pound-feet of torque from a 3.0 diesel, and delivering 27 mpg in the city (37 highway) with the new emissions-reducing technology.
	Mazda is offering the Tribute HEV hybrid, which can run completely on electric power at speeds of up to 25 miles per hour.
	Saab’s 9-3 Biopower hybrid concept incorporates a two-mode hybrid system with a dedicated bio-ethanol engine, eliminating reliance on oil completely.
	Honda plans to sell clean diesels in the United States by 2009, according to Business Week. "These cars will likely go some 30 percent farther per gallon than gasoline models," the article noted. The 2.2 CTDi diesel-powered Honda Civic, sold now in Britain, delivers 43 mpg in town and 55.4 mpg in combined city-highway driving, besting the hybrid Civic, which manages 50 mpg in combined driving.

Looking at the fuels that make the most sense, automotive manufacturers ought to be pushing technology that utilizes diesel fuel first, hybrid technology second, ethanol third and, finally, electric power. And "alternative" isn’t necessarily a synonym for "sluggish": Le Mans last year was won by a diesel. 

Today, each of the automotive manufacturers has the technology to provide high-quality vehicles that will accomplish the goal of reducing emissions and decreasing imports.

Consumer Power

We have the fuel technology and we can build the cars. But one very important ingredient is still necessary to make this work: Consumers must decide they want the cars. Here is where the government, the manufacturers and the energy industry can really get together to help reduce the power that rouge nations have on our economy and the amount of emissions being sent into the air.

The consumer is probably the biggest weapon in reducing the power of our detractors and in reducing emissions, but the energy industry must communicate to them a message that makes sense. If one could get more mileage and have a better driving experience with a diesel car than a gasoline-powered car, surely the average American consumer would take that opportunity. If that car is also better for the environment, that would be a bonus. 

Imagine the boost that Ford or GM would receive if they had a mandate to create diesel automobiles for the U.S. market. Detroit would be employing and redirecting assets very quickly to put these options on the market as soon as possible.

Consumers will rally to the call if given the option through good products, effective marketing efforts, tax incentives and real action from the oil and gas refiners to provide the clean fuels.

Let’s revisit our formula. We have the fuels needed to make a difference, the vehicle technology exists and the consumer has been sold on similar programs. So where is the policy to take us in this direction? The policymakers have been fractured on this strategy. Fragmented pieces are coming from different directions, but without a cohesive message to the American populace. Senator Barack Obama’s (D-Ill.) introduction of the CTL bill makes sense, but it stands by itself instead of within a greater strategy. (See sidebar, "Alternatives Go to Congress.") To make the formula work, we need to recognize the potential, persuade the consumer and say goodbye to importing oil from countries that don’t like us.

© 2007 Richard R. Loomis, Brian K. Tully & Susan Salter
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