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Financial Times Op Ed: McFarlane & Woolsey

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  • Felix Kramer
    http://us.ft.com/ftsuperpage/superpage.php?news_id=fto012320061604484392&referrer_id=yahoofinance America must end its dependence on oil By Robert McFarlane
    Message 1 of 1 , Jan 25, 2006

      America must end its dependence on oil
      By Robert McFarlane and James Woolsey
      Monday, January 23, 2006
      Posted: 03:55 PM EST (20:55 London)

      Alittle over a year ago we helped organise an
      effort among a wide range of groups in the US to
      draw public attention to the potential for two
      emerging trends to bring down the global economy.
      These trends, which affect the price and
      availability of energy, are the
      greater-than-expected pace of increased demand
      for oil in China, India and other emerging
      markets and the threat of disruption of Persian
      Gulf supplies by a terrorist attack. They have
      helped push the price of oil to more than $60 a
      barrel with forecasters seeing little prospect of
      it ever going below $50 again.

      The sober awakening to these two trends by
      governments and the oil industry was underscored
      by a new round in the debate concerning the
      "peak" of oil reserves ­ the top of the
      bell-shaped curve that represents the world's oil
      reserves and the lower production and higher cost
      of oil products that lie ahead when the peak is
      reached. Most experts agree that we will reach the peak within 25-30 years.

      Because the impact of growing demand and
      dwindling supplies is long-term, it is not
      surprising that there has been only a cautious
      response to these factors from governments, with
      no noticeable action. It is less understandable
      that political leaders from Tokyo to London and
      Washington have failed to deal with the threat of
      a disruption in oil flows from the Gulf.

      This is not alarmist speculation; it approaches a
      consensus view among oil industry experts and
      among governments. So why is the US government
      not charting an aggressive course towards a
      solution? To be fair, President George W. Bush
      has spoken candidly of the risks of our reliance
      on foreign oil and has proposed some measures to
      deal with it. The core of these have thus far
      concerned the supply of traditional petroleum;
      that is, to increase US production in the Arctic
      National Wildlife Refuge and other known oil and
      gas deposits off US shores. But those measures
      alone will not come close to getting America off foreign oil.

      The good news is that there is a large family of
      proven technologies available that could entirely
      eliminate US reliance on foreign oil within 20
      years and sharply limit other oil importers'
      reliance as well. Specifically, America should
      take four steps towards energy independence.

      First, we must move away from reliance on petrol
      towards a mixture of alcohol (ethanol and
      methanol) and petrol. Brazil has demonstrated
      that ethanol produced from sugar cane is
      competitive at the pump when oil is above $45 a
      barrel. Most Brazilian vehicles are today running
      on a mixture of ethanol and petrol that costs
      roughly $1.75 a gallon to produce. Methanol can
      be made from coal ­ and the US is the Saudi
      Arabia of coal ­ at a cost of roughly 50 cents a
      gallon. Diesel engines should use diesel produced
      from renewable sources and coal. Second, cars and
      trucks should be made to burn a variety of fuels.
      This technology has been available for
      generations. Half the new cars sold in Brazil now
      are flexible fuel vehicles. A vehicle can be
      given this capability for roughly $150.

      Third, we should move to using hybrid-electric
      vehicles. Half of the 150m cars and trucks on the
      road in America drive only 20 miles a day. Equip
      the hybrid with a more capable, but still
      state-of-the-art, battery, plug it in at night to
      "fill up" with electricity for the equivalent of
      as little as 25-cent-per-gallon petrol, and it
      will take you 20 miles with no loss of
      performance before any petrol is needed. Fourth,
      we should retool Detroit ­ the carmaking capital
      of the US ­ to use lighter, stronger carbon
      composite materials. Transforming all US vehicles
      over the next 20 years to be made of largely
      carbon composite materials could cut oil imports
      by 52 per cent and provide stronger, lighter and safer vehicles.

      Predictably there has been resistance towards
      such technologies within the automobile and
      energy industries, but their concerns over safety
      and cost can be answered. Alternative fuels are
      affordable and the practicality of the vehicle
      technologies is being shown in Japan by Toyota
      and other manufacturers. Odds are there will be a
      plug-in hybrid from Japan within two years and it
      will take away even more market share from Detroit.

      Even if all these measures were adopted it would
      take 20 years to replace the 150m vehicles on the
      road in the US. But the cost of not taking action
      could be catastrophic. In the past year, an
      impressive bipartisan spirit has emerged in the
      House and Senate in favour of implementing most
      of the above ideas. Such a spirit presents a
      favourable climate for a corresponding
      presidential initiative in next week's State of the Union address.

      Robert McFarlane was President Reagan's national
      security adviser and now heads an energy and
      environmental development firm. James Woolsey,
      vice-president of Booz Allen Hamilton, was
      director of central intelligence, 1993-95

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      Felix Kramer fkramer@...
      Founder California Cars Initiative
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