Soaring Oil Price Threatens U.S. Economy
As chaos spreads through the Arab world, here's one way we can protect ourselves.
February 8, 2011 - 12:00 am
This is a fundamental threat to America and the world economy. We need to take action to protect ourselves from it now, before it is too late. How can we do this?
Looking at the data in the graph, it is clear that cap and trade plans, or alternative methods of carbon or fuel taxation, are not the answer. Indeed, by increasing the cost of energy even beyond those imposed by OPEC, they will only make the economic situation worse.
Instead, we need a policy that will keep oil prices down. The way to do this is to create a degree of diversity and competition in the global fuel market that does not exist today.
Fortunately, the technology to accomplish this is currently available. Flex fuel vehicles can be now be made, at an incremental cost of only about $100 per car, that can run equally well on gasoline, ethanol, or methanol, in any combination, thereby giving the consumer complete fuel choice.
Ethanol has already replaced seven percent of our gasoline, and having a flex fuel auto fleet would allow it to do more. But the real key here is the ability to use methanol, which can be made in nearly unlimited quantities from natural gas, coal, biomass, or recycled urban trash — resources in plentiful supply both here and worldwide. Methanol can be produced for as little as $0.50 per gallon, and its current global spot is $1.28 per gallon, without any subsidy, equivalent in energy terms to gasoline at $2.33 per gallon.
Were Congress to pass a law requiring that all new cars sold in the USA be fully flex fueled, it would change not merely the American auto fleet, but the global auto fleet, as foreign car makers would be compelled to switch their lines over to meet the standard. Gasoline would then be forced to compete at the pump against both ethanol and methanol made from any number of possible sources, all over the world, thereby putting a permanent competitive constraint on the price of petroleum at about the $50 per barrel level. This would protect us from both the greed of our “friends” and the malice of our enemies.
In the last Congress a bipartisan bill, known as the Open Fuel Standards Act, was introduced into both the House and the Senate that incorporated such a provision. As a critical national and economic security measure, it needs to be introduced again, and this time brought to a vote and passed.
The time to fix the roof is when it is not raining. It’s already drizzling. But we can see the storm clouds, and time could be running out.