How CA might undermine US energy security

April 19th, 2009

Next week, the California Air Resources Board, or CARB — the same agency that only five years ago gained notoriety for its role in “killing” the electric car — could be in a position to deliver another crippling blow to the United States’ effort to achieve energy independence. Here is Gal Luft’s take on this.

The perils of bowing to kings

April 19th, 2009

In light of President Obama’s shameful bow before one of the world’s most corrupt and dictatorial leaders, Set America Free’s Gal Luft was asked by Foreign Policy Magazine to toy with the idea of a world without Saudi Arabia.
Here are some of his thoughts.

Abu Dhabi to buy big piece of Daimler

April 6th, 2009

Abu Dhabi will buy a big piece of Daimler as the German carmaker announced that it will do a special issue of shares and sell them to the oil-rich Emirate’s Aabar investment arm for $2.6 billion. On conclusion of the deal, Aabar will hold about 9.1% of Daimler.
“Daimler is an iconic brand and a financially strong company with a reputation for excellence worldwide” said Khadem Al Qubaisi, Aabar’s chairman, in the announcement. “We believe that our future cooperation will be beneficial for Aabar and create social and economic benefits for Abu Dhabi and the United Arab Emirates.” Abu Dhabi is not the only Middle Eastern nation to own some of Daimler: Kuwait has held a piece since 1974 that, following the latest issue, will total 6.9%.

Newt Gingrich supports the Open Fuel Standard

April 6th, 2009

Former Speaker of the House, Newt Gingrich endorsed in a Newsweek article the introduction of an Open Fuel Standard:
“We should also pass an open-fuel standard for 95 percent of the new cars sold in the United States, allowing the construction of flex-fuel vehicles (FFVs) that can run on a variety of fuels, including ethanol.”

Hukuna Matata Nano

April 6th, 2009

Environmentalists may be horrfied by the appearance of the Tata Nano, the world’s cheapest car, but as Gal Luft claims: “Micro-cars can be engines of prosperity in more ways then one. But only if they offer the world’s poor more than the false hope of indefinite cheap gasoline.”

Saudi sheikh: ethanol is sinful

February 26th, 2009

News from Saudi Arabia, whose royal family owns 25% of the world’s oil reserves:

A prominent Saudi scholar warned youths studying abroad of using ethanol or other fuel that contains alcohol in their cars since they could be committing a sin, local press reported Thursday.

Truly a case of life imitating parody. The biodiesel/bacon sin alert can’t be far behind.

Forgetting Fungibility

February 5th, 2009

I have a great deal of respect for MEMRI (as you can see on the sidebar we recommend it as a resource) however the recent MEMRI brief on Middle East oil by Dr. Nimrod Raphaeli leaves a great deal to be desired.

Raphaeli’s argument rests on several faulty premises.
He argues that the problem of U.S. oil dependence is overstated since the U.S. imports under a quarter of its supply from the Middle East.
Firstly, oil is a fungible commodity. Think of the oil market as a swimming pool – producers pour oil in, consumers take oil out. Thus the provenance of the oil the U.S. or any other nation purchases is not particularly important. For example, the US does not purchase oil from Iran, but anything that impacts supply from Iran affects the entire market, not just those that buy directly from Iran. In a global market, it does not matter from whom oil is purchased. What is important is who controls the bulk of global oil reserves. Unlike the oil cartel OPEC and within OPEC primarily Saudi Arabia, non-OPEC producers do not have the ability to move the market. They do not have swing capacity, the ability to expand production and exports on a dime.

OPEC, comprised primarily of Middle Eastern producers, sits on 78% of world conventional oil reserves yet accounts for but 40% of global production. Thirty five years ago OPEC produced 30 million barrels a day (mbd) of oil, and, despite the doubling of global oil demand and non-OPEC production in the interim, at the height of oil prices this past summer OPEC’s production was just 32 mbd (today it is some 27 mbd.) No better illustration can be had for OPEC’s deliberate policy of constraining supply, a policy which directly contributed to the run up in oil prices, precipitating a massive transfer of wealth from oil consumers to exporters, reducing disposable income, and adding a straw to the camel’s back of our economy helping lead to the current downturn. As is clearly seen today, OPEC responds to reduction in global oil demand the same way it responds to increased non-OPEC production: by throttling down its own production in an effort to drive prices back up. When non-OPEC countries drill more, OPEC drills less. When we use less, OPEC drills less.

The second missed concept in Raphaeli’s article is the fact that oil’s uniqueness in terms of its power to impact international relations and world affairs, the reason oil dependence is such an important issue, stems from its status as a strategic commodity. This status derives from the fact that oil has a virtual monopoly over transportation fuels, and transportation, of course, underlies the global economy. Looking back to history, oil is most comparable to salt. Salt also once determined the course of world affairs and the status of nations on the world stage because it was the sole means of preserving food. Canning, electricity, and refrigeration stripped salt of its strategic status and turned it into just another commodity –one that is used and traded but no longer influences global affairs to any perceptible degree. Stripping oil of its strategic status will require breaking its monopoly in the transportation sector via fuel competition. That is why an Open Fuel Standard, which will ensure that new cars are platforms on which liquid fuels from a variety of feedstock can compete, a feature that costs but $100 per car, is so critical. That is why speeding up deployment of plug in hybrid vehicles, vehicles in which electricity and liquid fuels can compete, is so critical.

The bottom line is whether oil prices are high or low, and whether oil producers are richer or poorer at any given moment, should not distract us from the fundamental need to divorce oil from global affairs and insulate the the global economy from the ability of the oil cartel to effect mischief.

Slow down and check the details

February 4th, 2009

Alan Boyle at MSNBC’s Cosmic Log writes:

Anne Korin, who is co-director of the Institute for the Analysis of Global Security and chair of Set America Free, has a different kind of worry: In the rush to pass a stimulus bill that makes billion-dollar bets on future energy technologies, some of those bets may end up being misplaced.

Like Cantor, she pointed to the vehicle purchase plan as an example. “When you look at that, that may on the surface sound good, but the devil is in the details,” she said. Would the vehicles have to be purchased before the next generation of plug-ins hits the market? Should the money go toward buying the whole vehicle, or should it be stretched out to cover only the extra cost of going with the greener technology? Should the tax breaks being given for new [plug in] hybrid vehicles be extended to plug-in conversions as well?

“It would be desirable to slow down and make sure there’s a chance to actually analyze these expenditures,” Korin said.

Rep. Engel calls on President Obama to support Open Fuel Standards

January 28th, 2009

Congressman Eliot Engel:

“As a senior member of the House Energy and Commerce Committee, I believe achieving energy independence for our nation is of the utmost importance. Dependence on foreign oil is one of the greatest challenges that our nation has ever faced — our national security, economy and environment are all tied to it.

“I encourage President Obama to build upon these measures by supporting the Open Fuel Standards Act, which I introduced last year with my colleagues Reps. Kingston, Israel, and Inglis. The United States transportation sector is 97% reliant on oil, and it accounts for two-thirds of our nation’s overall oil consumption. Every year, 17 million new cars are sold in the U.S. and, almost exclusively, they run only on petroleum.

“To remedy that, The Open Fuel Standards Act would require 50% of new cars sold in the United States by 2012, and 80% by 2015, to be flex fuel vehicles. Flex fuel vehicles are automobiles that can use as fuel any combination of gasoline and alcohol – such as ethanol and methanol. It is important to note that alcohol does not mean just ethanol, and ethanol does not mean just corn.

“Flex fuel vehicles already exist. They only cost about $100 more than the same car in a gasoline-only version. An influx of flex fuel vehicles on America’s roads would increase competition and consumer choice, strip oil of its strategic status, and protect consumers from price hikes at the pump.”

Set America Free’s Jim Woolsey on turning oil into salt

January 28th, 2009

Watch.

Jim Woolsey and Anne Korin have an article in the fall 2008 issue of MIT Innovations titled How to Break Both Oil’s Monopoly and OPEC’s Cartel. An excerpt:

The reality is that neither efforts to expand petroleum supply nor those to crimp petroleum demand will be enough to materially address America’s strategic vulnerability, although they can help on an interim basis with such issues as the effects of our huge balance of trade deficit. But such solutions do not address the roots of our energy vulnerability: oil’s monopoly in the transportation sector as the reason oil is a strategic commodity. This monopoly gives intolerable power to OPEC and the nations that dominate oil ownership and production over the consuming nations’ economies. Policies that only perpetuate the petroleum standard, doing nothing to address the lack of transportation fuel choice, would therefore guarantee a worse future dependence on the oil cartel as the non-OPEC nations’
share of the world’s oil reserves and production further shrinks.
Not long ago, technology broke the power of another strategic commodity. Until around the end of the nineteenth century salt had such a position because it was the only means of preserving meat. Odd as it seems today, salt mines conferred national power and wars were even fought over control of them. Today, no nation sways history because it has salt mines. Salt is still a useful commodity for a range of purposes.We import some salt, so if one defines independence as autarky we are not “salt independent”. But to most of us there is no “salt dependence” problem at all — because canning, electricity and refrigeration decisively ended salt’s monopoly of meat preservation, and thus its strategic importance.
We can and must do the same thing to oil. When the British Navy made the shift from coal to oil, then First Lord of the Admiralty Winston Churchill famously remarked, “safety and certainty in oil lies in variety and variety alone.”To diminish the strategic importance of oil to the international system it is critical to expand the Churchillian doctrine beyond geographical variety to a variety of fuels and feedstocks.

Ensuring that new cars sold in the U.S. and, by extension, the rest of the world, are platforms on which fuels can compete will spark a competitive market in fuels made from a wide array of energy sources, thus breaking oil’s transportation fuel monopoly and eventually stripping oil of its strategic status.