Amory B. Lovins
12/01/2005
America’s 10,000-gallon-a-day oil habit diverts $1.4 billion from more productive uses each day and funds both sides of the war in Iraq. The other burdens of oil insecurity—price volatility, geopolitical rivalry, military costs, subsidies, depletion and pollution—continue to mount.
But enough about the oil problem. Here is the solution.
Over the next four decades (or fewer, if we get
serious) the U.S. could completely phase out oil and save money. Even if oil
still cost only $26 a barrel—as the Energy Information Administration’s January
2004 price forecast said it would in 2025 (converted to 2000 dollars)—we would
still pay $70 billion a year less in 2025 by saving and displacing all of the
oil we use, rather than buying it.My team at RMI published a Pentagon-cosponsored, peer-reviewed roadmap for this business-led, market-based solution titled Winning the Oil Endgame in September 2004. The study documents how smart business strategies can wean the U.S. off oil without new federal laws, mandates, taxes, subsidies, lifestyle changes or market distortions.
Redoubling the efficiency of our oil use (which has already doubled since 1975) will cost only $12 per barrel. It would cost only $18 per barrel to replace oil with natural gas and cellulosic ethanol, an alcohol fuel made from woody, weedy, nonfood plants. Cellulosic ethanol has twice the yield of costly and heavily subsidized corn ethanol, a lower capital cost, up to eight times better net energy yield and no need for farmland.
Cars, pickups and SUVs can combine hybrid-electric propulsion with new light-but-strong metals or carbon composites. Carbon auto bodies can halve the weight and fuel use, yet cost the same to build, and increase safety by absorbing 6 to 12 times the crash energy of steel per pound. (I am chairman and a small shareholder of Fiberforge, a firm commercializing such composite structures.)
The result would be 92 mpg cars and 66 mpg light trucks, all uncompromised in size, performance and safety. A high-end midsize SUV would have a $2,500 higher pretax sticker price (again in 2000 dollars) than the most nearly comparable SUV on the market today. At current gasoline prices, that extra cost would be earned back in two years.
Pentagon R&D to create fuel-frugal military platforms can accelerate the
shift to advanced materials, transforming civilian industry to lead the country
off oil (so we need not fight over it) just as earlier military R&D created
the Internet, GPS, jet engines and microchips. An oil-efficient civilian base
would take an investment of about $180 billion—half to retool the American car,
truck and airplane industries, half for biofuels. This investment would return a
gross $155 billion every year (if the world oil price were only $26 a barrel),
save 1 million at-risk American jobs in manufacturing, create a million new jobs
and cut carbon dioxide emissions by 26 percent.
To help business lead these
shifts, public policy should support, not distort, the economic logic. The most
important tweak is “feebates”: For each size of new light vehicle, people who
choose to buy an inefficient model would transfer some wealth to others who
chose an efficient model—a fee on the former would pay a rebate to the latter.
The less we align public policy with business logic, the harder it will be to
reduce oil dependence, and the more likely it is that we will be buying Chinese
fuel-efficient cars and Brazilian ethanol instead of making our own.
During
the Carter presidency, we had a largely sensible and balanced policy framework
that let markets work. Even after Carter left office, consumers paid attention
to fuel efficiency, and the result was a 5.2 percent per year decline in barrels
of oil consumed per dollar of real GDP from 1977 to 1985. Our GDP grew 27
percent, oil use fell 17 percent, oil imports fell 50 percent and Persian Gulf
imports fell 87 percent. Halving OPEC’s sales broke its pricing power for a
decade. Colliding with the consumer quest for efficiency, however, was the
change in policy when President Reagan came into office in 1981 and turned his
efforts to boosting the supply of energy. Increased supply in the face of
judicious demand led to an energy glut in 1984 and 1985, which sent prices
crashing and bankrupted many producers. Today a repeat of those failed 1980s
energy policies threatens all over again. But we now have far more potent
technologies for saving and displacing oil that could give us a lasting outcome:
a safer and more prosperous world beyond oil.
Art by Matt Mahurin.
| Amory B. Lovins is cofounder and CEO of Rocky Mountain Institute, and has been a global consultant to the energy industries for over three decades. |  |