Energy Security Current Issue National security experts call to reduce dependence on oil A group of national security experts and representatives of prominent Washington think tanks and public policy organizations released an open letter to Americans and an accompanying blueprint for energy security called "Set America Free," calling for an immediate action toward reduction of America's demand for oil. The document spells out practical steps which can be undertaken over the next four years and beyond to dramatically improve America's energy security. Members of the group called upon America's leaders to adopt the plan, with a view to rapidly expanding fuel choice in the U.S. transportation sector beyond petroleum while exploiting currently available technologies and infrastructures. If the plan is carried out in full, U.S. oil imports would drop by as much as 50 percent.
Terrorism Goes to Sea New evidence suggests that piracy is becoming a key tactic of terrorist groups. In light of al Qaeda's professed aim of targeting weak links in the global economy, this new nexus is a serious threat: most of the world's oil and gas is shipped through pirate-infested waters. In a recent Foreign Affairs article, IAGS' Gal Luft and Anne Korin analyze the situation and recommend policies to mitigate the risk.
Radical Islam and LNG in Trinidad and Tobago Trinidad and Tobago alone account for 80% of all U.S. LNG imports. Security analyst Candyce Kelshall warns that Islamist terrorist groups are active on the island and might find LNG shipping an attractive target.
Chinese Quest for Crude Increases Focus on Africa Leading oil sector analysts have warned of growing conflict between Western and Asian countries as they seek to outbid each other for key hydrocarbon assets in Africa. These forecasts have been largely based on the expectation that China will become the major player in nontraditional oil and gas producing regions on the continent. IAGS Associate Fellow Cyril Widdershoven discusses.
Terror's Big Prize Since September 11, pipelines, tankers, refineries and oil terminals have been attacked frequently. Except for a sharp increase in maritime insurance premiums in these regions these attacks had marginal strategic consequences. But in at least two cases oil terrorism could have rattled the world.
Needed: Three 1-billion-barrel oil banks
The lesson from the recent oil price jump is that the oil market has too little wiggle room to deal with supply disruptions. It's time for consuming nations to think about providing their own liquidity mechanisms.
On the technology front
Fuel Cell power plant installed at NJ College
The fuel cell will provide 250 kilowatts of electric power as well as heat, to several buildings on the campus.
The enzyme costs of converting cellulosic biomass into sugars for fuel ethanol production have been reduced approximately twenty-fold with technology developed by the National Renewable Energy Laboratory (NREL) and Denmark based Novozymes, biotech-based leader in enzymes and microorganisms.
EU study: Methanol from biomass - competitive with gasoline
A study of a new patented Swedish technology concluded that the alchohol fuel methanol can be produced from biomass via black liquor gasification at a cost competitive with that of gasoline and diesel.
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Hybrid Cars: The Slow Drive to Energy Security
The hybrid car market is slowly ramping up. In the past five years the number of hybrid sales numbers in the U.S. grew tenfold from 9,500 in 2000 to 100,000 in 2004. By the end of 2005, the number of hybrid cars on American roads will grow to 300,000, represented by about seven or eight hybrid models, including the two-door Honda Insight, which will have sales of about 2,000 in 2005.
The increasing sales numbers are encouraging, but must be viewed in the context of the overall car market. The 100,000 hybrid car sales in 2004 represent about one-half of one percent of the 17 million new cars sold this year. If every new hybrid driver effectively (and optimistically) doubled fuel economy from 20 mpg to 40 mpg for 40 miles of daily driving, then a gallon per hybrid car would be saved every single day. That's a whopping 100,000 gallons per day chalked up to hybrid car drivers. But, we've only reduced our daily U.S. consumption from 360 million gallons to 359,900,000 gallons.
Market forecasters predict a continued annual doubling of hybrid car sales for the next few years. We could reach the major milestone of one million hybrid cars on American roads somewhere in the 2007 or 2008 timeframe. Again, this is cause for celebration, until you consider that there are approximately 200 million cars in America today—and over 700 million vehicles worldwide. If car numbers keep increasing at the present rate, there will be more than a billion cars and trucks on the road across the world in 20 years. Vehicles are now driven two trillion miles each year in the U.S., and there are more cars than adults.
Nevertheless, with the proven success of the Toyota Prius, which won every possible accolade in 2004 (including Motor Trend’s Car of the Year, and the European Car of the Year), the hybrid makers are rolling out new models. Honda recently introduced the Accord hybrid. Ford became the only American automaker so far to join the hybrid market with the introduction of the Escape Hybrid, which won the North American Auto Show’s Truck of the Year Award. Ford is expected to sell about 4,000 Escape Hybrids in 2004, and has targeted total sales for the 2005 Ford Escape Hybrid SUV at 20,000. In the next few years the hybrid bandwagon will be joined by GM, Daimler-Chrysler, Nissan, Hyundai, Volkswagen, Mercedes, and even Porsche.
Power trumps efficiency
A study released in September 2004 by Kenneth Kurani and Thomas Turrentine of UC Davis’s Institute of Transportation Studies indicated that fuel economy is “only one feature of an expensive, complex good which has many implications for lifestyle and image goals.” Kurani and Turrentine add that consumers might value fuel economy more highly if it were “more like shiny paint or a bold body style—an attribute with some emotional punch.” The lineup of new 2005 hybrids shows what carmakers think will pack the emotional punch that greater fuel economy apparently lacks:
Ford Escape (Sept. ’04) – the utility of an SUV at a relatively modest price.
Honda Accord Hybrid (Dec. ’04) – family sedan with power.
Lexus SUV Hybrid (By March ‘05) – luxury and power in an SUV.
Toyota Highlander Hybrid (Summer ’05) – a blend of utility and power with a slightly reduced price tag from the Lexus.
Sierra and Silverado Hybrid Pickups (Summer ’05) – power outlets to run auxiliary devices.
Marketing strategies barely mention the benefits of savings at the pump, savings for the environment, or reduced global threat; instead, we are offered “no compromise” or “guilt-free” messages. In other words, “You don’t have to drive a puny little 1.3 liter shoebox in order to save the world. You can drive a $50,000, luxurious, and screaming fast hybrid SUV.” This marketing strategy will certainly move hybrids past the early adopters into the next layer of the mainstream who may talk the talk about oil dependency issues, but will not give up any creature comforts to walk the walk.
The New York Times points to the Lexus SUV Hybrid to declare, “the hybrid is about to enter the latte generation’s comfort zone.” Edmunds.com calls the Ford Escape Hybrid the automotive equivalent of the iPod. You see, hybrids aren’t the solution to world problems; they’re fast and cool.
The net: don’t expect the new hybrids to reach the 60-70 mpg range of the Insight, or the 50s and 40s of the Toyota Prius or Honda Civic Hybrid. You’ll get some incremental improvement raising the SUVs out of the teens and into the 20s, and the family sedans will get bumped up from the 20s to the 30s—but nothing significant enough to even counterbalance the increase in consumption resulting from more driving, and more cars on the road (leaving aside emerging markets in Asia).
Lack of batteries
The carmakers are clearly opening up new segments of the hybrid market with their “no compromise” marketing strategy. If this expansion comes at the expense of maximizing increases in efficiency, then perhaps overall collective gains can be made up by volume of sales. Lopsided supply and demand have produced hybrid waiting lists of six months or longer.
Earlier this year, Dave Hermance of Toyota told Hybridcars.com: “You’ve got to walk a pretty fine line. You don’t want to rush out and do something foolish, especially since there will be a bunch of new players in the market over the next 12 months. They’ll be a lot of new products. We need to watch that sift out, and see how it goes, see what fraction of that we can get, and what unmet demand there might be then.”
Even if it becomes crystal clear to Toyota and all the other current and future hybrid makers that there really and truly is overwhelming unmet demand, the manufacturers might not be able to respond so quickly. A November story in USA Today explains that the makers of the hybrid’s rechargeable nickel metal hydride batteries could be in very short supply for several years. There are only three major suppliers of the batteries — Japan's Panasonic and Sanyo and U.S.-based Cobasys — and they appear unable to quickly add production. The battery production lines require heavy and specialized tooling. Similar issues may exist for other hybrid components. In sum: the hybrid revolution is coming, but not any faster than the safe and sober business plans of Toyota, Honda, and Ford, who look at the market — not the need to mitigate attacks against Iraqi pipelines or to change the melting rate of polar ice caps — to guide their production plans.
Moving hybrids to the mainstream
Unless the U.S. is hit by a major energy crisis, the prospects for significantly increasing Corporate Average Fuel Economy (CAFE) are unlikely, due to the vociferous public opposition to CAFE, the strength of Detroit lobbyists, and the political consequences for legislators who show interest in raising fuel economy levels. The prospects are similarly dismal for a national tax on gasoline, which would quickly reduce driving, roads, and the size of our vehicles, as well as raise the necessary funds to create a new transportation energy infrastructure.
Perhaps the most sensible policy is to build on what is already in place to encourage the hybrid market: tax incentives. Hybrid buyers in 2004 and 2005 will benefit from a federal tax deduction of $2,000. This deduction was recently and temporarily resurrected from a four-year phase-out. There seems to be a political willingness to support minor tax benefits to purchasers of hybrid vehicles, while CAFE increases, a gas tax, and ultimatums from NGOs, go nowhere. There are a number of legislative packages, including the CLEAR Act, Jobs Bill, and Energy Bill, which contain tax credits (not the less valuable tax deductions) roughly equal to the premiums reflected in the extra cost of purchasing a hybrid versus its conventional sibling. Very few people wouldn’t buy the hybrid version if it reflected no additional up-front cost, and it allowed the consumer to save money at the pumps. The idea is not to encourage more buyers per se; the demand already far outweighs the supply even without such incentives. The idea is to give the manufacturers the confidence to produce at much higher production numbers, and to encourage fuel savings over speed. At the same time, tax loopholes for SUV purchases need to be shut down.
Another way of forcing the market adopt fuel efficient cars is to activate state governments. Backed by Governor Arnold Schwarzenegger, the California Air Resources Board (CARB) has approved a plan to drastically reduce vehicle emissions in California over the next 11 years. The new regulation, which could affect as much as 30 percent of the U.S. market, would phase in from 2009 to 2016. It would require the auto industry to cut the car emissions from its new fleets by approximately 30 percent. The response from automakers has been unenthusiastic, to put it mildly. In early December, a lawsuit was filed in U.S. District Court in Fresno by 13 California car dealerships and the Alliance of Automobile Manufacturers, which includes GM, DaimlerChrysler, BMW, Volkswagen, and even hybrid-makers Ford and Toyota, seeking an injunction to halt California from enacting the plan. It is yet to be seen who will prevail but the CARB initiative reaffirms the need for state governments to take the lead where the federal government falters.
Hybrid drivers unite
While the auto manufacturers are looking at the bottom line and ignoring the pending geo-political crisis, and legislators are focusing on what’s politically expedient instead of what’s really needed, the legions of hybrid car drivers are getting bigger and bigger everyday. In some small way, every hybrid car on the road is slowly driving toward a feasible, marketable, dramatic, and critically important change. Consumers of hybrid cars have demonstrated, with their pocketbooks, their commitment to reducing oil dependency. In marketing lingo, they are considered “influencers” — the segment which is more educated, more affluent, and older — and which shapes the buying decisions of the rest of America. Hybrid owners sit behind the wheel of their hybrid everyday, and wonder what more they could do.
Unfortunately, hybrid drivers and alternative energy supporters are now splintered and their efforts are diffuse. In order to put enough pressure on the automakers to stop resisting the change that must come, hybridcars.com is trying to galvanize hybrid drivers and develop partnerships with advocacy groups to develop the most effective strategies for promoting greater fuel efficiency in our cars and trucks. The environment, the economy, and our national security hang in the balance.
Bradley Berman is editor of Hybridcars.com.