Perspective: Ending Oil’s Monopoly—a Blueprint for Mobility Choice

16 December 2009

Perspective by Deron Lovaas, Federal Transportation Policy Director, Natural Resources Defense Council

Oil is a strategic commodity second to none—it underlies the global economy and even the American way of life. Of course, other countries benefit from this fact, with about $900 million flowing out of the US to buy foreign oil every day, and about 40% of that going to OPEC. [1] Our dependence on oil also means that America must support military engagements in regions, such as the Persian Gulf, to defend energy sources, such as pipelines and sea lanes. As a result, America continues to be entangled with unfriendly or shaky regimes, which compromises the safety of our troops and our foreign policy objectives. Volatility hurts us too, for as we’ve learned the price of oil can rise sharply in a short period of time. This means our economic stability is at stake because of our reliance on oil. In fact, four of the last five recessions were started by an oil price spike. [2] Furthermore, our environment cannot continue to bear the brunt of carbon emissions stemming from our heavy use of oil. We must fight against the increasing amount of carbon pollution entering our atmosphere if we are to leave our planet in better shape for generations to come. How do we go about tackling the economic, environmental and national security threats posed by oil’s strategic status in America? We need to work together with government, business, non-governmental and national security experts to develop smart policies that will strengthen fuel economy standards, shift us to alternative fuel development and increase transportation infrastructure investments. One of the current focuses of Congress is the clean energy and climate bill. Part of that debate has been about the squeeze such a bill would put on oil imports by saving oil through increased development and deployment of cleaner, more efficient vehicles such as plug-in hybrids as well as increasing domestic production. That last fact may be a surprise to some but analysis conducted by NRDC does indeed show that targeted capture and sequestration of emissions underground can do double-duty: Safely disposing of pollution, while using the proven technique of injecting carbon dioxide into dry wells to recover more of the remaining oil. [3] So a strong clean energy and climate bill will unleash investment in clean energy sources and help cut our dependence on oil.  The transportation sector accounts for about 70% of petroleum use in the US. Source: EIA. Click to enlarge. Further progress requires that policymakers pay attention to “the other energy bill”—the transportation authorization, which will be taken up by Congress in 2010. Thanks to higher fuel economy standards currently proposed and to key provisions in legislation like the recently-passed House American Clean Energy and Security Act, we can expect to cut our nearly 20-million-barrel-a-day petroleum habit by more than one-fifth by 2030. We can, and must, do more for the sake of national security and the environment. And since about 70% of the oil we use goes to transportation (see diagram at right) that’s exactly where we should focus additional policy solutions. Thankfully, federal transportation policy is up for renewal. Making it a tool for getting us off oil requires boosting mobility choices for consumers to give them exits from oil dependence and the gas-price rollercoaster we’ve been subjected to in recent years. The recently released Blueprint for Mobility Choice [earlier post]—sponsored by the Institute for the Analysis for Global Security (IAGS) and supported by Anne Korin and Gal Luft of IAGS, Jim Woolsey (former CIA Chief), Bud McFarlane (former National Security Adviser), Cliff May (President of the Foundation for Defense of Democracies), and yours truly—follows four guiding principles that will move America’s transportation sector to a competitive market and help strip away oil’s status as a strategic commodity: Aligning price signals for consumers, basing investments on performance criteria including oil savings, pushing responsibility to the metropolitan level where most oil is consumed and deploying technology to improve transportation operations. From these principles we derive a ten-point plan which would yield results, unlike much of our current pork-barrel transportation policy (some may remember the emblematic example of such spending, Alaska’s costly “bridge to nowhere” debated in the last federal transportation bill). This plan can be accessed by clicking on http://www.mobilitychoice.org/, and its adoption would yield three big results: 1. First, there would be more, viable choices for consumers of transportation services. More rail, more buses, as well as innovative options for ride-sharing such as bus-rapid transit and jitneys—small buses popular in other countries and used in some metropolitan areas. These investments would also be better targeted to places where they stand a better chance of being fully loaded. 2. Second, technology would help make our travel more efficient, by giving consumers real-time information about traffic and transit, making connections more seamless, improving traffic flow and reducing trips entirely via increased telecommuting. Technology has transformed communications, isn’t it time for it to do the same for transportation? 3. Third, paying for transportation services would become more rational, by more accurately accounting for the costs of securing oil resources (an oil security fee), wear-and-tear on roads (high-occupancy toll lanes) and the risks of driving (pay-as-you-drive insurance). Our representatives in Washington must act to implement policies that bode well for energy security and climate stability. This means tackling oil’s monopoly over the transportation fuel sector by focusing more on transportation policy. We need to develop cleaner, renewable sources of energy as well as alternative means of getting around. In short, we need mobility choice. Deron Lovaas is the Federal Transportation Policy Director at the Natural Resources Defense Council. You can read more about the Blueprint for Mobility Choice at http://MobilityChoice.org. [1] US Imports by Country of Origin (US EIA) [3] NRDC Policy Brief Comments This is why I favor FFVs and cellulose E85. Instead of 3 million FFVs we should have 30 million in the next 5 years. We should have an all out program to make cellulose E85 available in all 50 states and all major cities. I know some will say it should be EVs, PHEVs and HEVs, but the penetration rate will be too slow to safe guard us from disruption from OPEC and others. I would like our oil to come from the Americas and do without middle eastern oil all together. Anyone with half a brain could have said the same thing 30 (40?) years ago. I'll belive it when I see it. The presence of Bud McFarlane in this group gives me chills. He was the original war for oil guy. Former CIA guy Woolsey is for PHEVs. He can see the strategic benefit to reducing imported oil from the middle east. It does not take a genius to add two and two in this matter. Corn ethanol is not the way, but cellulose E85 and FFVs are. Do all the HEV, PHEV and EV that you can, but if we really want to reduce imported oil cellulose E85 and FFVs are the quick and easy way. Well, McFarlane certainly seems to have changed his stripes. Maybe seeing the fiasco in Iraq converted him. - I laud any voices that pinpoint the oil monopoly and it's disasterous effects on the U.S. Use more CH4 for transportation--we seem to have a lot of it within our borders. Oil monopoly is the case, try to get E85 and NG into fueling stations owned or franchised by the big oil companies. They do not produce it and would not want it, lobbying would go into high gear. Exxon's recent bid for that large natural gas company has more to power plants than cars. Oil monopoly is the case, try to get E85 and NG into fueling stations owned or franchised by the big oil companies. It's the franchise part that the real problem. Because the oil companies control the price of gas, the simple fact is a franchised station owner will make more money selling you a single can of pop than he will from selling you a tank of gas. With ANG, the owner can now sell natural gas he buys at$1 per GGE for $2. Those are much higher margins than the 10 cents per gallon on gasoline. This will not be allowed for obvious reasons unless there is a law mandating it as a nation energy security issue. This blueprint makes sense albeit without much surprise. The recommendations are all logical - impediments formidable. ai-vin notes that the franchise structure of filling stations prevents entry of E85 or NG in near term - without legislation. Might not a requirement for a single NG/H2/E85 pump in a fraction of gas stations be warranted?? On a national security basis alone? Exxon appears to be prepared to transition to NG. That creates an opening for a requirement for diversified energy sources at the gas station. The recommendations do not emphasize cellulosic as a new primary liquid fuel - it should. And item 3. "oil security fee" is aka "carbon/gas tax." SJC - FFVs and Electrified vehicles could easily co-exist during the transition period, for at least 2 to 3 decades. One type would progressively be phased in while the other would be phased out. Many may be surprised to learn that Canada is by far the number one supplier of crude oil to USA, with an average of 2.5 million barrel per day and potentially going up. When NG and Electricity are added, the total energy imported from Canada becomes even more important. How long can USA keep importing energy at the rate of over$1B+/day without affecting the value of the USD?

Can USA produce enough liquid fuel energy locally and produce enough food for a growing population at the same time?

Accellerated electrification of vehicles and HVAC may become a neccessity to correct the current huge trade deficit, reduce the cost of Oil Wars and GHG.

Ultra high efficiency (26+ SEER) cold weather air-air heat pumps and improved insulation could do a lot to reduce the energy used to heat and cool residences by up to 50%.

Of course, the massive introduction of HEVs, PHEVs and BEVs + electrified trains could reduce liquid fuel consumption by up 70%.

All the technologies required are available to replace crude oil with clean electricity for up to 66% of all current uses.

With enough electrification, USA, Mexico and Canada could produce enough Crude oil, Agro-fuel, Bio-fuel, NG and clean electricity for all their needs and stop importing Crude oil from outside North America.

The collective will to do it is still missing in USA and Western Canada but, when more Americans and Canadians realize that their current addiction to Oil produced extended endless costly wars, they may (hopefully) start to change their mind.

GHG, climate change, increased health care are more reasons to react but they are not the only one.

An H2 pump could cost upwards of $250,000 each when you add the cost of the NG reformer or electrolyzer. An E85 pump has been estimated to cost around$50,000 and even less if you replace midgrade with E85. NO auto maker recommends 89 octane midgrade. ANG on the other hand uses 500 psi so the compressors are 1/4 the cost of CNG. It might only cost $20,000 for an ANG pump. The point being, we need to get the solutions out there in the coming years to head off major problems. We can convert some recent car models to FFV, but unless we have E85 available, they do no good. ALL new cars sold should be FFV in a few years, it is much more cost effective to do it at the factory. The market system will not get us there in the time frame required and I think we all know or at least suspect that. An important thing to remember sjc.. The h2 group doesnt actauly plan to put reformers at all that many of its h2 pumps early on. They only need a tank and dispencer until local demand gets large enough to warrent a h2 generation system on site. I am not an H2 believer, but I can not see transporting 10,000 psi hydrogen 100 miles down the highway, not in any quantity. Unless they make it at point of dispensing, I do not think it will be viable. They transport H2 for special small users, but even refineries produce their own H2. Um most of the current h2 filling stations are in fact supplied by trucks. Over the long run they will make the trucks better and install pipelines and on site reformers and electrolyzers but for now a simple tube truck is realy all they need. When I see 100,000 H2 filling stations I may believe. There are SO few H2 vehicles out there that it does NOT matter. You are arguing that it does not cost all that much to put in an H2 pump that NO one will use. I only mentioned H2 because a previous poster mentioned it, it is not even worth discussing as a REAL solution, so I won't. "In California, for instance there are over 9,500 retail gasoline stations, but some public agencies are calling for as few as 500 hydrogen stations (the same amount as current diesel stations) needed to cover the state. If only 500 stations are needed then the total cost for those stations would be around$126 million..."

http://www.hydrogencarsnow.com/blog2/index.php/infrastructure/cost-of-hydrogen-fueling-infrastructure/

So about 250,000 per, which was my estimate. Considering that almost NO one would use them in the time frame that we need a solution, I would not call it a solution. Happy to see this piece sparked so much discussion. Also that the blueprint contains some items that are familiar to some. We will keep building the coalition and pushing it in the policy arena to align our transportation policy with energy security goals. Also, I notice there's a lot of talk of what goes into the tank or battery of our vehicle fleet. Advanced biofuels and PHEVs are good bets, IMHO. The mobility choice blueprint complements these technological options by bending the demand curve so they become more scalable. The challenge is huge, yet surmountable. The 2007 energy bill chipped away at it via the CAFE and RFS programs. Now we need to build on those advances to finish the job. Right now H2 IS trucked to the few stations that there are and the use is small with few vehicles that can use it. You really do NOT want to truck nor pipe large quantities of H2 long distances to the stations, when ever they will arrive. It is not a problem of too little H2 for sale nor too few H2 vehicles. Burning H2 does not seem like the way to go and fuel cells are a LONG ways away in any significant numbers. NG as CNG or ANG is more viable, but FFVs and biofuels are easier yet. Get trucks, buses and cars off of gasoline and diesel ASAP at the lowest cost and best benefit. "Anyone with half a brain could have said the same thing 30 (40?) years ago. I'll belive it when I see it. The presence of Bud McFarlane in this group gives me chills. He was the original war for oil guy." Any questions.. I think it's important to have a "Security Fee" and to call it such. People need to know that every gallon they burn contributes to what our military has to do. It doesn't matter whether you're a liberal or a conservative, it is a simple FACT that we have to guard pipelines and spend troops in the middle east because we use that oil. Calling it a "carbon tax" or anything else is stupid. It let's people argue about whether or not we have man made global warming. Leave that as a separate tax for politicians and others to argue about. We simply DO pay for the troops and the military presence to make this oil flow possible. It should be reflected in our use of oil as openly as possible: a "Security Fee". I come from a proud, southern, military family and I'll always support our troops. But I sure would like to stop sending them in harms way when not needed. "Our military" dicks around on the other side of the world while no-bid contract oil terrorist firms get hundreds of US dollars per gallon for 'in country' fuel. The 'blue print' has been clear. We have an oil industry and dependence that is 100 years in the making, it will not change over night. It may be more inertia than a plot. Although when huge amounts of money and profits are involved we can all count on people wanting it to stay the same way. Exxon bought into natural gas for power plants and not cars. It is a hedge for them that really can not lose. They either make a ton or most of a ton. It looks like most commentors missed the major thrusts; "there would be more, viable choices for consumers of transportation services. More rail, more buses, as well as innovative options for ride-sharing such as bus-rapid transit and jitneys—small buses popular in other countries and used in some metropolitan areas." Unless vehicles become extremely efficient (like the 1 liter VW), rail, buses, and carsharing will likely be the main ways we'll deal with declining oil production. A 'dollar to surface oil' yields a few dollars per gallon market yields Bush oil buddies contracts still getting hundreds per gallon fuel delivery in a war theater that Bush invaded for creating war is not simply "100 years in the making." Now, after eight years since liberating Afghanistan(5 years since 'mission accomplished'), a new President -Nobel "Peace Prize" - doubles our invading occupying military forces and resides over "100+/month fines" to blackmail those already too poor to pay "\$1000(s) per month" to medical insurance terrorist legislation.

Are you, your kids, your parents, or your grandparents really worried more about Afghanistan than paying for 20% 'co-pay' healthcare(100% cash if uninsured) in "the land of the free"? The American 'for-profit medically insured' already account for most US bankruptcies.

Don't forget, if you have preconditions(not perfect 18 year-old-health) or miss two months of premiums - you may never be admitted to a doctor or hospital again and die.

Oil’s the small monopoly..

I did not miss the "major thrusts" I just don't agree with them. The first person that can offer 200 million people an alternative to car pooling and mass transit wins the prize. Cellulose E85 and FFVs IS that alternative.

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