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“Mideast Oil Forever” — Part III: Abandoning the Solution

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"“Mideast Oil Forever” — Part III: Abandoning the Solution"

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After the Introduction and an explanation of “The Coming Oil Crisis,” the next part of “MidEast Oil Forever?” (subs. req’d) begins the discussion of the technology-based solution — and how the Congress is working to block it. Yes, long before Shellenberger & Nordhaus claim to have pioneered the positive technology message that everyone else supposedly never tried, many of us were waging a public death-match (without their help) to save those technologies — especially since the Gingrich Congress was dead set against a regulatory approach, such as tougher fuel economy standards.

Even back in 1996, we understood the promise of cellulosic ethanol and hybrid gasoline-electric vehicles — though after years of trying, we could never get Detroit to give them any more than lip service. Back in the mid-1990s, I still had some optimism for hydrogen fuel cell cars — but the inability to make key breakthroughs over the past 10 years, and the realities of the alternative fuels market, have since persuaded me it is a dead end, especially from the perspective of global warming.

Here is what we wrote:

Abandoning the Solution

What is the appropriate national response to the re-emerging energy-security threat? Abroad the Department of Energy has been working hard to expand sources of oil outside the Persian Gulf region–in the former Soviet Union, for example–and to encourage the privatization of the oil companies in Mexico and other Latin American countries.

At home the DOE is encouraging greater production by providing royalty relief in the deep waters of the Gulf of Mexico and similar incentives, so that the industry can drill wells that otherwise would not be cost-effective. The DOE is working to reduce the cost for the industry to comply with federal regulations. Finally, the department is spending tens of millions of dollars a year to develop new technologies that will lower the cost of finding and extracting oil–for example, using advanced computing to model oil fields. Still, few expect to reverse the decade-long decline in U.S. oil production. Some would open the Arctic National Wildlife Refuge to drilling, a plan the Clinton Administration has opposed on environmental grounds, but not even that would change our forecasted oil dependency much. This is true even using earlier, more optimistic estimates that the refuge could provide 300,000 barrels of oil a day for thirty years. The EIA projects that within ten to fifteen years the United States will probably be importing thirty times as much–some 10 million barrels of crude oil a day, even if the decline in other domestic production levels off in the next few years.

Increasing domestic supply, although it may help to slow the rising tide of imports, cannot itself reverse the major trend. And reversing the nation’s ever-increasing demand for oil would be difficult. The country is in no mood to enact higher energy taxes in order to bring our energy markets into better balance. To most people, an increase in gasoline taxes of even a few cents a gallon–let alone the amount needed to have a noticeable impact on consumption–is anathema. Similarly, Congress is in no mood for a regulatory approach, such as mandating increased fuel efficiency for cars.

That leaves one solution for reducing consumption: the technological approach, which draws on America’s traditional leadership in research and development. Here tremendous progress has been made. Given the uncertain nature of long-term, high-risk R&D in leapfrog technologies, the prudent approach is to explore a number of possibilities. The DOE has invested in the development of cars and trucks that are highly fuel-efficient, along with cars that run on electricity, on liquid biofuels from crops, crop waste, and municipal solid waste, or on natural gas.

Consider biofuels. In 1994 research sponsored by the DOE created a genetically engineered organism that enhances the fermentation of cellulose, increasing the rate of conversion and the yield of ethanol. This achievement, described in the journal Science (subs. req’d) was named one of the hundred most significant technological advances of the year by R&D magazine. This and other federally supported research has brought the cost of making ethanol from $3.60 a gallon fifteen years ago to about $1.00 a gallon today. If biofuels R&D were funded at current levels for five to ten years, ethanol from fast-growing dedicated crops, crop waste, and wastepaper could be produced for as little as sixty to seventy cents a gallon by 2005. In a country with excess cropland, such as the United States, the potential for biofuels is enormous. Rather than paying some farmers not to grow anything, we might in the future pay the same farmers to grow dedicated bioenergy crops. In a country where cropland is scarce, such as China, bioenergy could come from municipal and agricultural wastes.

Technologies are also being developed to make possible a superefficient hybrid vehicle that has both an internal-combustion engine and some kind of energy-storage device, such as a battery or a flywheel. A very advanced hybrid has been described by Amory B. Lovins and L. Hunter Lovins (see “Reinventing the Wheels,” January, 1995, Atlantic, subs. req’d). Supporting technologies include lightweight, superstrong materials and advanced engines, among other things. This research has been undertaken by the Partnership for a New Generation of Vehicles, a collaboration among several federal agencies, the DOE’s national laboratories, and the auto industry. The goal of the partnership is to design and construct by 2004 a prototype clean car that has three times the fuel efficiency of existing cars and very low emissions, and also comparable or improved performance, safety, and cost. Such a car would allow domestically produced advanced technologies to replace oil imports.

Another direction that research is taking is toward advanced batteries for use in electric cars–among them the nickel metal-hydride battery–which promise to double the range achievable with existing lead-acid batteries. In conjunction with advances in clean power generation, described below, these batteries hold the prospect of replacing imported oil with domestically produced electricity.

The technology that most experts would agree has the best chance over the long term of replacing petroleum use in the transportation sector is fuel cells. These are compact modular devices that generate electricity and heat with high efficiency and virtually no pollution. They run on hydrogen converted from natural gas and other fuels. The National Aeronautics and Space Administration developed early versions of fuel cells for use on space missions. Over the past two decades the DOE has spent tens of millions of dollars on several types of fuel cells that will soon be used to power cars, trucks, utilities, commercial buildings, and industries. The Japanese government has been increasing its fuel-cell budget by an average of 20 percent a year for the past five years, and Japanese companies are less than five years behind U.S. companies in this technology. The Europeans are considering significantly increasing their fuel-cell funding. Sustained federal support might well give America the lion’s share of a multibillion-dollar global market.

Fuel cells are one of many advances that may increase the use of natural gas as a transportation fuel over the long term. Since 1992 the DOE has significantly increased its budget for research and development related to enhancing the supply and the efficient use of natural gas. It is seeking to encourage a wider use of natural-gas vehicles, to establish a nationwide infrastructure for fueling those vehicles, and to develop gas-turbine engines for light-duty vehicles.
Current DOE programs–unlike those of the late 1970s, which required oil to cost $80 a barrel if they were to be competitive–are aimed at making alternatives competitive even if oil prices decline. The likely outcome of all the programs mentioned above should not be overstated: we will not achieve energy independence in the next fifteen years. What this investment portfolio does offer is a chance in the years thereafter to blunt any foreign threat to raise oil prices dramatically and to limit the economic and geopolitical impact of Persian Gulf oil in particular. At the same time, domestic jobs will be created if money that might have gone overseas to buy foreign oil goes instead to manufacturing superefficient cars and trucks or domestic biofuels.

What’s more, the rapid population growth and urbanization of developing nations, coupled with the harsh pollution that characterizes most major urban centers in those nations, ensure a tremendous market for low-emission, superefficient automotive technology. Our industrialized competitors have one inherent advantage in the race to develop the supercar: gas prices of $3.00 or $4.00 a gallon. Fuel efficiency matters more in their economies, and vehicles that use alternative fuels will be cost-competitive in their markets sooner. The primary counterbalance to that advantage is U.S. technological leadership in most relevant areas, stemming in part from historically higher levels of R&D spending.

That counterbalance is about to disappear. Congress has cut the proposed fiscal year 1996 allocations for the DOE’s advanced-transportation-technology budget by 30 percent. Moreover, the multi-year balanced-budget plan approved by the House and Senate would cut the budget for such technology by 6080 percent in real terms.

The fact that the DOE has been collaborating with the auto industry in the Partnership for a New Generation of Vehicles gives some in Congress a thin excuse to label the partnership’s programs “corporate welfare.” Yet Detroit’s car makers agreed to match federal spending while coordinating their corporate research with the DOE’s national laboratories in order to address the pressing national problems of oil imports and urban air quality. The last time America ignored the warning signs of growing dependence on imported oil, the Japanese were able to seize a significant share of the U.S. auto market with fuel-efficient cars.

Congress’s own Office of Technology Assessment released a report last September acknowledging that the DOE’s “strategy of pursuing several different [vehicle] technology options is advantageous for a variety of reasons.” Congress is ignoring the advice of the office it set up, staffed, and funded to provide independent advice on technological issues of national importance. Indeed, it apparently no longer wants to hear any advice on such issues.Late last year Congress closed the Office of Technology Assessment for good.

That the nation’s and the world’s dependence on Persian Gulf oil will grow over the next decade seems inevitable. This is particularly true since most projections assume continuing significant technological progress in bringing down the cost of domestic production, in developing alternatives, and in using energy and oil more efficiently. But those projections have not factored in the federal government’s plans to withdraw from its role in fostering the development and deployment of those technologies.

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3 Responses to “Mideast Oil Forever” — Part III: Abandoning the Solution

  1. Ron says:

    Hurray for new technologies! And hurray for the cuts in government spending!

  2. Jay Alt says:

    Next to last paragraph – ‘The Office of Technology Assessment’- I seem to remember them.
    Now why would Congress want to be advised on technical matters by nonpartisan experts? Especially when they can learn “all they need to know” from lobbyists, contributors & influence peddlers and just make up their own minds. chuckle.

    OTA, Gone (contracted out by Newt) but not forgotten:

    http://jya.com/otapub.htm

  3. Joe says:

    Jay — thanks for the link. The OTA did great work.