If Robert Zubrin’s program to convert us to an alcohol economy is in fact adopted, it raises a serious question for the rapid development of domestic oil resources. Given the huge cost and long time frame to develop the domestic resources the advantage of alcohol could render oil development a very risky venture.

Perhaps the time is soon coming to short the oil companies.

I just finished reading ‘Energy Victory’ by Robert Zubrin. I was most impressed by his presentation at AIPAC and was equally impressed with his book. While I recommend you buy and read the whole book (270 pages) here is the quick summary.

We need to convert to an alcohol economy over an oil economy. The primary reason is for national security; it is just suicidal to transfer the amount of wealth that we do to regimes that are bent on our destruction. Radical Islamic forces that terrorize the world are funded by the oil revenues, primarily to Saudi Arabi.

The secondary reason is the benefit to our economy by drastically reducing our trade deficit. It would also benefit the poor in the third world by giving them an incentive to produce organic commodities to convert to fuel. Instead of funding people who hate us we could help the poor become more self sufficient and less dependent on foreign aid.

The third reason is environmental. While he acknowledges that global warming is real, it is not the urgent crisis that many of its advocates propose. Weaning us of oil would reduce the man made impact.

Zubrin is an engineer and he gives a lot of technical data to support his points. He disposes of the hydrogen based fuel cell technology as technically inneficient. He also describes in detail why alcohol is superior to wind and photovoltaic production as a broad solution. Alcohol fuels do not require a dramatic increase in the production cost of cars or require a new electric infrastructure as battery hybrids require.

He proposes more nuclear energy for the electric grid and his hope for fusion nuclear development would be a huge advancement of epic proportions that would dwarf the benefits of all other fuel sources.

He devotes a chapter to Brazil and how their emphasis on alcohol technology has made them independent of imported oil. In fact they export both oil and the alcohol they produce to replace it. Brazil supported alcohol production even after OPEC lowered prices, making it uncompetitive. The IMF even pressured them to cease the subsidy to help with their debt repayments. Brazil resisted and benefited handsomely.

While admiring Brazil’s long term solution, Zubrin’s critical idea is not to subsidize the production and distribution as they did, but to mandate that all cars SOLD in the US be flex fuel compatible. Flex fuel mean the cars are built to use both methanol and ethanol blends as well as gasoline. It requires very little extra cost and would create such a demand incentive that the private fuel distribution network would create the supply to satisfy demand.

By demanding that all cars sold, not just produced in the U.S., be flex fuel compatible we would in effect force this standard on the world, and deal OPEC a fatal blow.

Killing OPEC for good is Zubrin’s ultimate goal. I’m OK with that.

Just to show you how open minded I am, Jimmy Carter deserves credit for one successful energy policy.

In 1974 about 17% of U.S. electricity was produced by by burning oil and 18% came from natural gas. Carter’s Fuel Use Act discouraged this and by 1985 oil generators supplied only 4.1% of our electricity. Today oil is down to 3%. Nuclear power went from 4% in 1973 to 20% today.

The success was because the policy focused on substituting a better fuel rather than conservation. During that period energy consumption increased substantially.

While the Fuel Use Act was a success, most of the rest of Carter’s energy policies were substantial failures.

from Energy Victory by Robert Zubrin

by Henry Oliner

Nancy Pelosi and Newt Gingrich want the president to draw down the strategic reserve of oil to help lower oil prices. When these two agree on anything it may be time to be suspect.

Newt argues it would drive the speculators out and further decrease prices. I am concerned that if it fails to accomplish that goal that prices would rise even further when the reserve is depleted. It would seem to me that the mere existence of the reserve should be enough to hold prices down.

According to Oil Voice we import a little over 20 million barrels a day, down about 475,000 barrels or about 2.4% since last year.

The US Department of Energy Website maintains current data on our reserves. It says we have a strategic reserve of 706 million barrels with an average cost of only $28.42 per barrel. It contends that is equivalent to 58 days of imports, although that only calculates to only 12 million barrels a day. So I would conclude the 58 days is on the high side. We are capable of only drawing down 4.4 million barrels a day.

Using the reserve to punish speculators is a gamble I would not take. With Iran rattling sabers and much of the world’s production in the hands of unstable regimes that hate us, the reserve is just too valuable to squander. If the effort to crush speculators fails, and I think it would, the results could be economically catastrophic with even higher prices and a supply shortage.

On the other hand, if we annouced that we would quickly and aggressively pursue coastal reserves and shale oil reserves as well as require all of our cars to become flex fuel compatible, then the price would drop and stay down.

But it seems that Congress is opposed to every good long term solution, and desperate to take short term very risky solutions. Or they could do the really ridiculous and just sue OPEC to do on their land exactly what they refuse to do on our land- produce more oil.

Could they possibly propose a more ridiculous policy?

Obama wanted to levy an excess profits tax on oil companies. Our last experience with this was with Jimmy Carter and it was a disaster.

He then proposed to crack down on speculators who are driving up the market. For a man whose financial disclosures showed few investment securities, how does he know that speculators are driving this market? What evidence exists? Can’t speculators drive down a market as well? They may amplify a market direction, but they are usually prone to the boring forces of supply and demand.

I would propose that special tax breaks for the oil companies be allowed to expire or be eliminated, just as I would like to see the special breaks for the farmers expire. I see no problem with profits, but they do not require tax subsidies as well.

I would also like to see a requirement that all oil liscenced from federal properties be restricted for domestic consumption.

HKO