The price of gas is going up. I guarantee it. The price being below $3 per gallon is a temporary “feel good” blip. Ten years of data shows that fuel prices takes dips and always bounce back.
If you drive an electric-powered Nissan Leaf, or a Tesla, you probably personally don’t care if gasoline sinks below $3 per gallon. The reason is that you made a fuel choice to break free of oil. Mind you, an electric car is not fuel free. You are increasing your electric bill to charge your car, but it is less than gas. Electricity, by and large, is about $1 a gallon.
Time and again, we declare that we have a goal of energy independence but then we lose the courage to follow through because Saudi Arabia sucks us back in by temporarily reducing the price of gas. But remember, it is just that – temporary.
We are still paying much more for gasoline that in 1999. In fact, transportation is one area where we have not created efficiencies and driven down the consumer cost with choice. Compare transportation to long-distance calling. Today, we expect to make a long distance call for free, or close to free. In 1999, it was reported that AT&T it was cutting its long distance to $5.95 per month for access and 7 cents per minute. A gallon of gas in 1999 was $1.30.
In communications technology, we now have choice with mobile phones, Skype, IP phones, traditional landlines and more. Choice has driven costs down.
With autos, we have very little fuel choice. And fuel choice can actually fuel our economy.
Fuel Choice Technology is 20-Years Old
However, the sad truth is that the technologies necessary to achieve true fuel choice have been around for 20 years, but we seem incapable of deploying them at scale. Six years after the Pickens Plan, our pathway to a natural gas trucking fleet still seems a decade away. How is it that we seem to have lost the ability to actually plan and implement this transition at scale? Figuring out how to achieve this represents the largest wealth creation opportunity of our time.
Generally, these technologies fall into two categories: alternative fuels and efficiency technologies. Alternative fuels make fuel choice possible with flex-fuel technologies. An example today can be seen with the heavy truck-maker Peterbilt. The company is already building about 33 percent of its new trucks equipped to run on natural gas.
For existing trucks, duel-fuel upgrades replace about 55 percent of diesel fuel consumption with lower-cost domestic natural gas. The cost of these upgrades is less than $30,000, generating a payback in about 18 months. More than 280,000 trucks could be retrofitted by 2018—but probably won’t be. Together, both approaches (retrofitting and building new trucks) would save about 14 billion gallons of diesel fuel.
The Government Has To Step In To Drive Fuel Choice
Other alternative fuels can also be scaled up profitably. The reason: we have invested 30 years of research to develop these alternative fuels, and conventional fuels like diesel are still above $3.40 per gallon. Fuel choices like methanol, hydrogen, ethane, electricity, and other renewable fuels are cheaper. However, the Government has not systematically put a plan in place to give American’s access to these fuels at local refueling stations. In fact, the Government regulations in place today make it difficult to add these fuel choices.
Just like with solar and wind energy, getting the existing alternative fuels to scale requires mandates like the U.S. Renewable Fuels Standard. That requires gas stations to have a particular percentage of their fuels be renewable. Today, that standard needs to be updated to an “open fuels standard” to include non-biofuels like electricity, natural gas and hydrogen. Expediting availability of these fuels is not only possible, but also necessary to meet our goals to eliminate our dependence on foreign oil by 2025.
In addition to alternative fuels, vehicle efficiency technologies offer another off-the-oil-ramp towards energy independence. With only one out of every seven gallons of gas being used to move the car forward, it is time to stop waging war in the Middle East and start the war against vehicle inefficiency (more on that later).
Pushing The Extra Mile
Fuel efficiency and enhancement technologies, including improved engine design and aerodynamics for heavy trucks, can push us the extra mile. One exciting fuel enhancement technology is NanoVit. The nano particulate (i.e. very small), amorphous, formless powder interfaces between small moving surfaces to provide protection against extreme pressure, thereby reducing friction, decreasing wear, and increasing the life of components. Combustion engines that use this type of fuel enhancement could save up to 29 percent of the fuel burned.
Another way to make vehicles more efficient is by simply making them lighter. Following the oil-crisis in the 1970’s, average fuel efficiencies more than doubled. However, that increase has been nearly offset now that more people drive heavier cars like SUVs. Carbon fiber and aluminum offer a means of increasing fuel efficiency through a 50 to 70 percent weight reduction compared to existing car materials.
BMW has been a trailblazer in commercializing carbon fiber. In 2013, it built a $100 million manufacturing facility outside of Spokane, WA and is now tripling the plant’s production. BMW aims to make carbon fiber as cheap as aluminum by reducing the price by a factor of ten. Through the use of carbon fiber, BMW’s sleek i3 electric car weighs 20 percent less than the Nissan Leaf allowing it to accelerate from zero to 60 up to four seconds faster than the Leaf.
The technologies to conserve and displace oil save money, yet not enough people are willing to invest upfront to eliminate oil—even if the savings pay off the up-front investment within a few years. It is time to use financial innovation to cost-effectively deploy the technological innovations we already paid to discover.
It’s time we had a choice.
Protecting The Right Priorities
Since 1976, we may have had the wrong priorities.
A study at Princeton University estimated that the U.S. spent $6.8 trillion dollars from 1976 to 2007—three percent of its total GDP—defending oil shipments in the Persian Gulf. If the U.S. government hadn’t spent that money defending Middle Eastern seaways and instead invested far less than the average $225 billion per year at home, we would be oil independent.
With a little courage, imagine what we could have done with the $6.8 trillion we spent in the Persian Gulf because of our oil dependence. Now that we have cost-effective alternatives, there is no reason why we have to make that mistake again. When we look back from 2045, we should see a fuel-choice economy that Americans built—not more warships and tankers in the Middle East.
Chart: Ten-year USA average gas price: GasBuddy.com