Book Review of "Turning Oil into Salt," a book by Gal Luft and Anne Korin
If you believe in global warming, you believe we need to get off of fossil fuel. If you believe we need to reduce the strategic value of oil, it is a somewhat different calculation. People get these issues confused. Reducing our dependence on fossil fuel is generally considered the province of "Green Liberals," "Al Gore Disciples," "Tree Huggers," "Global Warming Alarmists," etc. That isn’t totally true as evidenced by the video at made by unlikely partners, Newt Gingrich and Nancy Pelosi.
But reducing the strategic value of oil is something everyone should be able to agree on, even for those who are skeptical that a global warming hazard even exists. The following video was made by ex CIA head James Woolsey: http://www.youtube.com/watch?v=3mWeyREivdk
So why are you reading this in an auto publication? Because according to Gal Luft and Anne Korin, the authors of "Turning Oil Into Salt," MORE government intervention into the auto industry is required to reach a solution. Many of us are rolling our eyes at even the thought, but the stakes couldn't be higher. "We ARE engaged in a war against fundamentalist Islam, and we ARE paying for both sides of the war," say the authors.
Today, roughly two-thirds of the world's oil is used for transportation, and most vehicles are able to run on nothing but. Oil's strategic status stems from it=s virtual monopoly over fuel for transportation, which underlies the global economy and our way of life. To understand the implication of an over dependence on a strategic commodity we can look at history. At one time, salt had a virtual monopoly on food preservation. Wars were fought over salt. Finally, Napoleon, who's army "traveled on it's stomach," had had enough and offered a significant sum of money to the person to eliminate his army's reliance on salt. Within a few years, a French chef invented food "canning." After canning, electricity, and refrigeration, salt has lost its strategic status and we no longer go to war over salt.
How can this be accomplished with oil? According to Luft and Korin it only requires Congress to mandate that from a specific date forward, all or most vehicles sold in the U.S. must be manufactured as Aflex fuel@ vehicles, capable of running on gasoline and/or a variety of alcohols and blends. This has already been done in Brazil where 80% of new vehicles purchased in 2008 were flex fuel. The additional cost to produce a flex fuel vehicle is about $100., which includes the cost of premium fuel system components, a fuel sensor and computer chip reprogramming. The first Model T Fords ran on gasoline OR alcohol. There are a variety of alcohol fuels available. Alcohol does not mean just ethanol, and ethanol does not mean just corn, a particularly bad fuel feed stock. Other alcohol based fuels include methanol made from coal and ethanol from almost anything. And speaking of coal, Germany fueled its WW2 war effort with diesel fuel made from coal. A lot of this technology is old, having been rendered unnecessary when we had cheap oil spurting out of the ground.
According to the authors the average vehicle in the U.S. is in service for 16.7 years. Once 15% - 20% of the total vehicles on the road are flex fuel, the market will take over. Refueling infrastructure will develop and additional alcohol production will come to market with coal/methanol probably eclipsing corn as a feed stock, much to the chagrin of Midwestern farmers and Senator Charles Grassley.
Add in additional vehicles operating on compressed natural gas and electricity, plus additional conservation based on increased fuel efficiency “encouraged" by CAFE, and dependency on oil could be reduced 35% in 10 years, the exact amount we import from OPEC. We would also be less dependent on oil in general and all of our oil could be sourced from North America, including Mexico and Canada. There is even a "Drill Baby Drill" component to the Luft/Korin plan, although the U.S. has some disadvantages. It costs OPEC less than a dollar per barrel to lift their oil from the ground, while it costs us almost $10. They have about 78% of the world=s known reserves, but only produce 40% of the world's supply, as they work to maximize the price of each barrel they sell. OPEC produces less now than they did in 1973, despite having more cartel members.
In the meantime, we have less than 5% of known reserves but consume 25% of the world's production. And the lower the American price at the pump, they more we consume and the more pressure we put on the world market price of oil to rise. Unfortunately, we don=t get a discount for our volume purchases.
A bill called the "Open Fuel Standard" (OFS) is pending before both the House and the Senate. Of course, it has been pending for months. The bill ensures that 50% of new vehicles sold in the U.S. with an internal combustion engine would be warranted to run on gasoline, ethanol, or methanol. Diesel vehicles would also be warranted to run on bio-diesel.
In 2009 there were no fewer than 33 Make/Models warranted to run on up to 85% ethanol, but no warranty for methanol. Expanding this to more models and including blends of methanol should be easy. Brazil has done it and at one time, auto manufacturers and oil companies in this country considered using methanol as an octane booster, but chose lead instead.
There are currently 8 million flex fuel vehicles on the road out of 200 million total vehicles but we have not yet reached the critical mass necessary for the market to respond with refueling infrastructure and additional investment in alcohol production. In light of the increased price of fuel at the pump, the Open Fuel Standard bill needs to be rapidly advanced while the issue of high fuel prices is fresh in people’s minds.
Some say the expansion of alcohol fuels and the OFS bill is being held hostage by agribusiness lobbying efforts. along that same line, for some reason, we place a 54 cent per gallon tariff on imported Brazilian sugar cane ethanol. A barrel of oil is 42 gallons. You can do the math. Brazil can produce rivers of sugar cane sourced ethanol. Wouldn’t we prefer to buy ethanol from Brazil than Oil for OPEC? It would certainly decrease our reliance on oil, but corn farmers and Midwestern politicians object.
"Turning Oil into Salt" is must reading for auto industry professionals. And it's a quick read, making it's points in only 138 pages.
David Ruggles, written for WARD's Dealer Business