In light of the sometimes strident, more often obscure and low-key debate over the effect of the oil and gasoline’s monopoly of American fuel markets and its simultaneous impact on the economy, the environment, climate change and security, I often wonder if and what pictures might attract an individual’s and the public’s attention and generate a more vigorous national dialogue. In the past year, we have seen clear, telling pictures in the media of signs posted by gas stations showing rising fuel costs; of U.S. servicemen continuing deployments to foreign countries to preserve America’s (and the world’s) capacity to secure oil; and low and moderate-income people unable to pay the price of gasoline for their commute to work.

We have also seen vivid pictures of melting glaciers, resulting from rising temperatures; destructive damage to coastlines in California and the East Coast, resulting from incredibly intense storms; and EF5 level tornadoes that make cities and towns in the Midwest look like bombed-out ruins.

Precise cause and effect relationships are not always easy to discern concerning the economic, environmental, security and climate change impact of gasoline as America’s favored fuel. But in light of the relatively large GHG emissions from gasoline, the relatively high price of gas, a tepid economic recovery, and the placement of U.S. soldiers in the Middle East, consensus by most scientists, economists and military experts suggest there is a strong causal link.

So how do we interest the American public in a commitment to supporting opening up fuel markets and the use of replacement fuels? Should we seek more frequent publication of pictures covering the severe problems caused by America’s addiction to oil and the monopolistic characteristics of the transportation fuel markets? Sure! But I expect the results will be modest.

Americans have almost become immune to repetitive pictures in the media that relate to human problems or tragedies. They occur almost every day now. We see them on our cell phones, conventional TV, cable TV, YouTube and the Internet. Yes, we sympathize with those in trouble from storms, droughts and high gas prices. Some of us even send money to help those in need. But the very pervasiveness of the pictures and downside stories makes us turn inward, a phenomenon likely exacerbated by America’s economic woes. Individual and family well-being, in these times, are understandably paramount. No one is marching to end gasoline addiction or to support replacement fuels. If they did, I bet many Americans would think the marchers were kooks. Similarly, the negative impact of our reliance primarily on gasoline to fuel our vehicles (it’s a dirty, expensive fuel), despite the pictures, has not captured the hearts and emotions of most Americans. Regardless of pictures, addiction to fuel is not like Vietnam, civil rights, the women’s movement, or gay rights. It hasn’t reached our gut levels — even for most folks who are involved in advocating change. It’s still mostly an intellectual issue.

The key question is whether somewhere near the surface of the American psyche is an awareness or concern, perhaps deepened in the past by pictures in the media, that there is now, and will be in the future, extensive national and local problems if our cars continue to “drink” only gasoline. Maybe the development of a strong coalition of business, environmental, academic and nonprofit organizations could work together to develop a coherent, robust strategy that could result in a push for cleaner, cheaper, transitional replacement fuels (e.g., natural gas, ethanol and methanol) as competitors to gasoline. At the same, the coalition could generate support for the development of renewable fuels and flex-fuel vehicles that could satisfy the needs of low and moderate-income Americans.

But right now, the different competitive agendas of some possible key coalition groups, often ideologically driven, impede development of a collective coordinated replacement fuel and flex-fuel vehicle strategy and voice. If they take a bit of time to understand the pictures and the narratives the pictures tell, with or without accompanying words, they might be able to dig deeper than the often cursory public opinion polls and so-called expert reads of the American political mind. Perhaps, using focus groups, they just might be able to secure insight into the public’s subliminal, inchoate concerns about the negative relationship of gasoline addiction to the environment, the economy, security and climate change; perhaps even enough to gain the public’s support for policies that would reduce oil dependency. Remember that the successes of the civil rights, women’s rights, antiwar and gay movements were not based on country-wide public opinion, but on the persistence of small groups of advocates who were able, at least for a short time, to work together and, with the support of pictures, to convince the American public to do what’s right.

The late, much-respected, public policy scholar and friend, Dr. Aaron Wildavsky, once indicated to me that big policy changes require big crises, and that we are fated to incrementalism. It was Wildavsky’s big bang theory. Incrementalism provides a level of confidence that when uncertainty as to impact and costs exists, and when no immediate problems seem apparent that threaten the republic, the nation will not make big mistakes — only cumulative small ones. While I am not sure, American political history bears Wildavsky out entirely, major crises do stimulate political leaders to act boldly. But, despite the gas-related environmental, economic, security and climate change problems we face now and will face in a more dramatic and intense way in the future, the outlook for boldness among leaders is not very good.

Can our leaders in government, business, universities, nonprofit and community group close the ideological divide that poisons our body politic? Can they find a way to reach needed consensus concerning policies to substitute replacement fuels for gasoline and increase the number of flex-fuel cars, through both conversion of existing vehicles or amendments to new cars on the production line? Can they, perhaps, using pictures that clearly suggest compelling narratives and/or words that do the same, convince the public to join them? Can they raise the level of their own intellectual understanding and emotional commitment and convey to the public that real quality of life issues would result from failure? I have my doubts concerning a positive answer to each of these questions. But hope springs eternal!

“Innovation is the ability to see change as an

Are we running out of oil? Are fuel alternatives overrated? Can fossil fuels become irrelevant? The recent surge in so-called “energy” discussions is astounding. From top news outlets like National Geographic’s “Great Energy Challenge” and The New York Times’ “Wheels” to niche sites like The Energy Collective and Oil Price, proponents have consciously delegated a space to discuss solutions to some of the most important transportation, electricity generation and environmental issues of our time.

An article by a contributing editor to The Atlantic, Charles C. Mann, is among those believing in the economic significance of fossil fuels. He claims that “Americans will be less likely to spend trillions on fancy no-oil cars if cheap petroleum is in abundant supply,” which is debatable for two reasons:

First, new oil is harder to find, takes longer to develop and requires a lot more capital. We are not running out of oil. Although supply is indisputably important, the amount of oil that can be extracted at a reasonable cost should be more of a concern. Oil must be in the range of $50 per barrel to sustain economic growth, far below the current level of over $100 per barrel. Even when the price of oil in the U.S. (the WTI) dips, the price of gasoline does not decrease because it is determined by the international market (Brent Price).

Second, modern technologies to save or displace oil cost far less than oil. Alternatives become highly attractive when considering the entire cost of relying predominantly on oil for transportation, from individual wallets to economic and political stability. Here are some facts:

• In 2012, the U.S. spent $291 billion on imported oil.
• Oil accounts for over half of the nation’s trade deficit.
• The bulk of our national security budget is spent on protecting oil routes in oil-rich regions.

And the list goes on.

Presently, the number of oil rigs operating in the U.S. is at its highest level in almost 30 years. We should reduce our dependence on foreign oil by utilizing our substantial petroleum reserves. Yet, our domestic oil supplies alone cannot satisfy our present or future transportation needs. Another error in Mann’s article, along with many others that attempt to tackle our so-called “energy” problem, is lumping electricity and transportation fuels together under one synonymous and interchangeable category — energy. When discussing the topic of oil consumption, it is imperative to distinguish electricity from transportation because approximately 71% of our oil supply fuels transportation.

Lastly, Mann is not wrong to be concerned of costly car conversions and the potential need for new car manufacturing to accommodate abundant replacement fuels. But why not consider fuels that can be easily transported with existing infrastructure, directly used in flex-fuel vehicles with minor engine modifications and blended with gasoline? Most cars that have been produced over the last five years are already capable of being flex-fuel vehicles that can run on ethanol and gasoline.

However, to enable the cars to run on multiple fuels, slight modifications to fuel line seals and other parts and computer reprogramming in the vehicle are required. Ethanol and gasoline flex-fuel capable cars could be converted to support a blend of up to 60% methanol by merely replacing fuel system seals and o-rings. Support for higher methanol blends can be achieved by modifying an automobile’s spark tables. Late model year non-flexible fuel cars could be converted to flex-fuel by reprogramming their on-board computers to recognize alcohol fuels. Altogether, there are an estimated 50 million cars and trucks that could be converted to run on ethanol, methanol and gasoline blends. In addition, it is not costly to convert vehicles. Most of the associated costs are for the labor that is required to replace the seals with alcohol-compatible products.

Because the role of government in capitalism is to enable markets, our goal should be simply to facilitate an open market that encourages fuel competition. New businesses will compete, prices will fall and innovations will drive efficiency and quality. How do we know such a transformation is possible? Because it has happened time and again as our free market system has evolved and thrived over hundreds of years. By disregarding the power of competition we are running away from a great opportunity.

originally published on oilprice.com

Boasting 903 hp and 664 lb-ft of torque, McLaren reports that the powerful P1 can reach 62 mph in under 3 seconds, 124 mph in under 7 seconds and 186 mph in under 17 seconds. Those impressive numbers not only beat out the records previously set by the groundbreaking McLaren F1, they are also dangerously close to the top speeds of the world’s fastest car, the Bugatti Veyron (which, by the way, runs on gasoline only).

Why did McLaren develop a plug-in hybrid supercar when its gasoline-fueled competitor is still in the lead? With a base price of a steep $1,150,000, the lucky few who get their hands on the steering wheel of one of the only 375 P1’s probably aren’t too concerned about saving money, so the cost of fuel isn’t the reason. Perhaps McLaren realized that focusing on new technology to distance us from oil is the key to getting ahead of the curve. Executive chairman Rod Dennis affirms that creativity and innovation are company priorities with his frank statement, “I don’t think [other] people spend enough time thinking.”

That thinking is exactly what has enabled the cutting-edge automaker to make the bold claim that it has developed a battery with the highest power density of any automotive battery on the market today. The P1 battery can be recharged in just two hours when plugged in. Or, a driver on the go can use special settings to speed up the process to a quick 10 minutes by charging from the gas motor, allowing just enough time to stop into Starbucks to pick up his or her favorite caramel macchiato and return to a fully-charged car.

Furthermore, unlike other hybrids, the P1 doesn’t alternate between gas and electric modes — the car runs in either full-electric or full-hybrid mode, so the gasoline engine doesn’t switch back and forth while driving. While its full-electric range is short (McLaren estimates a 6-12 mile range), P1 owners can feel good about cruising around town without depending entirely on oil.

McLaren’s newest supercar is far from a practical (or remotely affordable) consideration for the average American, but the technologically advanced P1 serves as an example of what can be achieved when creative minds come together and think outside of the pump. American automakers should take note and continue to add more advanced features to their hybrid fleets, so we can continue toward a better future where gas isn’t the only option for fuel.

I believe America is an exceptional nation with respect to its historical commitments to improve economic opportunity, extend civil rights, steward the environment and reform education. It is probably exceptional with respect to innovation and technology-at least for the time being. The American creed supports constant change and it implicitly, if not explicitly, suggests that we are not perfect, but perfectible. This is a tough concept to put forward in a political campaign where perfection is a comfortable state of mind for many Americans, and imperfection is sometimes difficult to contemplate by folks still remembering Parson Weems, George Washington and the tale of the cherry tree.

Now you’re likely wondering how American exceptionalism relates to the serious, current debate over the Saudization of America. You have heard the phrase, I am sure. While at first, some thought the term related to the expanding deserts in this country (perhaps because of changing weather patterns), the etymology relates to America’s newfound ability, in light of its real and specific technological exceptionalism, to drill for shale oil in hard-to-get-at areas. Fracking and horizontal drilling, it is said by some in the oil industry, scholars, and the media, will save us from dependency on Middle East oil, including oil from Saudi Arabia, that is, assuming we could reason together and agree on environmental regulations. Reaching consensus through the democratic process remains another part of the American creed although not presently illustrated in the nation’s political life. If we succeeded in developing consensus regulation and lots of oil, the White House would need to make fewer calls to Saudi leaders, pleading to keep OPEC production at steady levels to avoid increased gasoline prices. America could and would be able to survive the politics of, and tension in the Middle East. Further, one respected oil leader recently said, “U.S. oil production is at its highest level since 1972. More importantly, the U.S. oil production surge will help tamp down the possibility of chronically recurring oil supply shortages and help keep a lid on oil price spikes for the foreseeable future.”

Clearly, the list of the number of existing and possible new oil shale developments is expanding, often reading like Expedia’s website, for seekers looking for less expensive tourist areas. Exotic names, such as the Bakken Shale, Monterey Shale, Cline Shale, Arctic Circle, Three Forks, Tuscaloosa, the Gulf of Mexico, Marine Shale and more, entice many to believe that good times are just around the corner.

The IEA and the EIA, generally, agree with oil company projections. They are bullish on U.S. oil production and its positive impact. If we wait just a short time, oil nirvana will be our good fortune. America will be economically stronger and its security will be enhanced considerably. Agreement about fracking and horizontal drilling will allow the nation to secure the environment and lower GHG emissions. More oil and less harm…the new American Dream!

Maybe! But, the data is not so simple or as convincing as the rhetoric. It is clear that environmental concerns relative to fracking and horizontal drilling will delay production in some key proposed fields. Likely court cases, as well as community opposition, for example, in the Monterey Shale, may well reconfigure and diminish the size of key proposed drilling sites. Consensus probably will be achieved concerning drilling regulations, consistent with reasonable environmental concerns and the public interest. However, new or amended regulations will increase production costs.

The IEA and EIA numbers in the past seem to have suffered from oil industry optimism. They still do! The latest analyses play down the influence of falling demand, disruptive technology, the problems with infrastructure, the uncertainties concerning the output of oil shale production, the competitive quality of light oil and the higher costs of tight oil. Both the IEA and the EIA also seem to forget that oil prices are only one variable affecting production, oil costs to the consumers and oil spikes (or declines). Most of the trading in Wall Street is done by investors as well as speculators, many times only peripherally related to the oil industry. Neither the IEA nor the EIA really considered the suspicions of several analysts and some political leaders that the oil industry, itself, appears adept at managing prices and supply, thus blurring the numbers concerning supply and demand.

But assume for the minute that America soon reflects Saudization and its technical exceptionalism in drilling enables it to meet or surpass the Saudis in oil production (and lessen the influence of OPEC). Will these facts limit American imports and reduce oil costs and the costs of its derivative gasoline? Probably not, at least not significantly. The Saudis and OPEC will still be key players in determining supply and, to some extent, demand. The Saudis have the largest agreed-upon reserves in the world. They alone, without other OPEC members, can influence oil prices by lowering or raising them, depending on their perceived wellbeing. If all or even most OPEC participants and the Saudis agree on strategy, they would be able to affect both the magnitude of U.S. oil exports as well as imports and the production as well as price of oil in the U.S. Indeed, because Saudi Arabia and most other OPEC nations use their oil money to pay for social welfare subsidies and buy political stability, their skittishness about using oil as leverage in lowering prices to strategically undersell competitors redounds to the benefit of U.S. oil producers. But things could change relatively quickly, as they have over the last five or six decades.

Remember, despite arguments that increased oil production will make America secure, oil companies have one legitimate objective: to make a profit. Oil exports and imports will continue to reflect increases and decreases over time, depending at least in part on the perceived relationship between costs of production and distribution in the U.S. compared to the price of oil and its derivative gasoline in the U.S. and globally. If global and U.S. oil prices fall, the oil company’s ability to sustain costs to gain access to tight oil for domestic consumption or, indeed, export will face rigorous opportunity costing. To prove my point, last week’s headlines indicated oil executives decided to pull out of the Arctic, in an area supposedly holding 13% of the world’s undiscovered oil. Why? The Arctic presents high risks and high costs in drilling. It is a very sensitive environmental area and the drilling regulations are tough. The global and U.S. price of oil is not predictable or high enough to cover the costs and allow a significant profit.

Introducing competition into the transportation fuel market with replacement fuels, like methanol, would both lower the price of oil and help stabilize fuel prices, perhaps as well or better than the ethereal Saudization. Besides, replacement fuels as transitional fuels would be better for the environment, GHG emissions, costs to the consumer and American dependency on oil. They would serve the nation well before specific American technical exceptionalism leads to competitive renewable fuels and vehicles for low, moderate and middle-income Americans.

The authors of the study developed a logarithmic formula to help determine the impact of any given factor that contributes to food prices through a regression analysis. (You can review the full report for a detailed explanation of the formula and the study in general.) The study looked at five different internationally traded food commodities (corn, wheat, rice, soybean and palm oil) and examined the impact of the contributing factors to each of them.                        

The researchers used the formula to determine the impact of oil prices, exchange rates, interest rates, stock-to-use ratio, GDP and the price of manufacturing exports on each of the five food commodities. This method led the World Bank researchers to conclude that for all of commodities studied, corn included, oil prices had the biggest impact. In fact, the analysis showed that oil prices were significantly more influential than the next-most influential factor, the stocks-to-use factor (a ratio of the available food stocks compared to consumption), and were even found to account for a full two-thirds of the rise of the price of wheat.

This last point handily dispels one of the main reasons that the “blame ethanol” crowd uses in its bashing of the fuel — that using corn for ethanol diminishes the supply available for human and animal consumption, thus raising its prices. As the report shows, even if stocks of corn do decrease because of ethanol production (which, given rising corn yields, doesn’t seem to be the case), that would only have a secondary effect on corn prices.

Finally, the report concludes that the implications of its findings are significant for developing policies to control food price inflation. It notes that increasing available food stocks is unlikely to control prices, and rather, controlling “energy price movements” would be a more effective way to tame food prices. By “energy price movements” I’m assuming the authors are mainly referring to the price of oil and not to other forms of energy, such as coal or solar power, because oil is the only source of “energy” that was examined in this study.

In the production and distribution of food, oil is used in everything from fertilizer production to powering farm equipment and transporting the food to consumers. In such context the World Bank report suggests that to stem rising food prices, the widespread famine inflicted on the world’s poorest countries, and the economic hardship exacted on the poor and working-class within the developed world, we must control oil prices.

During my travels, from 2005 to 2012, Shai Agassi, founder of Better Place, was often the subject of dialogue, whether on the street or at fancy lunches and dinners. Contrary to Israelis’ general habit of disagreeing (generally without being really disagreeable) about most things, Agassi was lionized by the Israeli public and its political, professional and intellectual elites. Almost single-handedly, through vision, intelligence, wisdom, charisma, tenacity and a bit of hubris, he produced a new idea and a related product that he and others thought could revolutionize the structure of the auto industry and simultaneously save humanity from its dependency on oil as well as increased greenhouse gas emissions. Many thought him the Thomas Edison of Israel.

Agassi won deserved applause as well as a chapter or more in the best-selling book, “Start-up Nation: The Story of Israel’s Economic Miracle” for his invention: an electric car that allows drivers to charge simply at home or work to drive relatively short distances, or quickly exchange batteries that are low on power at swapping stations for longer drives (over 100 miles). Consumers would buy the car, but lease the battery. Because gas and automobile prices in Israel are high, Agassi believed his package would provide a better shake for owners while doing well by the public interest.

Society needs more people like Agassi to challenge our oil dependency and to consider feasible replacement fuels. We need thinkers who talk and, more importantly, “do.”

Regrettably, Agassi’s grand idea only worked technically, in itself a real accomplishment. Just this week, Better Place failed financially. The company issued the following statement, which says it all, “This is a very sad day for all of us. We stand by the original vision as formulated by Shai Agassi of creating a green alternative that would lessen our dependence on highly polluting transportation technologies. Unfortunately the path to realizing that vision was difficult, complex and littered with obstacles, not all of which we were able to overcome.”

Could Better Place have succeeded? Cause-and-effect relationships are often difficult to define with certainty.

Agassi, likely, was a better founder than he was a manager. His vision, idea and charisma captured the hearts and minds of early venture capital folks, the executives of Renault who built the first and only car able to switch out batteries, and President Shimon Peres of Israel, who helped him meet potential investors and opinion makers around the world.

But Agassi’s financial model assumed reasonably rapid sales. He had no realistic long-range strategy to fund the relatively expensive infrastructure associated with switching stations, even in a small nation like Israel. Nor was he able to convince automakers, other than Renault, to produce cars that could switch out batteries and provide potential owners a model choice.

The mini-charging stations to allow owners to charge their vehicles for brief trips were not easy to build and place, given lack of suitable electrical outlets in high density areas relying on garages for parking. Combined with the absence of model options and the relatively high costs of the car and battery leasing arrangements, Better Place cars were competitive only at the margin for price conscious Israelis.

Perhaps a carefully defined marketing strategy could have built more sales to help cover early high-burn rates. But innovative products are sometimes their own worst enemy, if potential customers cannot be convinced that they work for them.

Steve Jobs knew this well. To market Apple’s iPhones, iPads and iPods, he had to find a way to make consumers want products that were often not on their personal radar screen. According to observers, Agassi was unable to grant the need for a “Jobsian” marketing effort his priority attention. This is understandable, perhaps, in light of his need to raise capital to keep the company afloat and his need to respond to the range of responsibilities required by even conventional startup companies. Better Place was not a conventional company!

Agassi’s celebrity status also reduced his ability to grant full-time managerial attention to Better Place. Being chosen as one of TIME Magazine’s 100 Most Influential People in the World and the subject of books and articles led Agassi to conferences, forums and speaking engagements. He spent lots of time away from operations in Israel and the company’s California headquarters. Further, Better Place’s dual primary locations (which I could never quite understand) and its effort to expand into other nations, perhaps too fast, seemed to lead Agassi to cut corners concerning his onsite availability.

But the role of a critic is easier than the role of an innovator and doer. Niccolo Machiavelli once said, “There is nothing more difficult to take in hand, more perilous to conduct or more uncertain in its success, than to take the lead in the introduction of a new order of things.” Agassi took us far beyond where we were concerning the ability to power cars by electricity and reduce at least some range anxiety.

Agassi’s genius, even if he focused 24/7 on Better Place, probably could not have sustained the company beyond a relatively short time period.

I believe the model was flawed. Being small, Israel was a great lab. Yet many Israeli consumers still feared running out of power at an inopportune time. Buying a car, after a home, is often the largest acquisition most people make in their lives. Making the purchase without a permanent battery in the car requires a psychic and value change that really necessitates convincing people of what they need or their country needs.

Agassi overestimated sales and underestimated front-end development and infrastructure costs. While President Peres was gracious and helpful, his help was not translated into actions by the government, which could have monetized Better Place when it needed early cash. Prime Minister Benjamin Netanyahu, supported by the Knesset, could have guaranteed fleet sales by government departments and encouraged the same by municipalities and the military.

Shai Agassi took us to a better place concerning our collective understanding of the wisdom of replacement fuels, including electricity. I am sure that the demise of Better Place is not the last time we will hear from him. He has made, and will continue to make, many contributions to Israel and the world with respect to the quest for a zero- to low-emission electric car. I am positive he will not be in need of a job. But I have some suggestions for his human resource counselor or whoever is advising him. Agassi, given his background and talent, could foster efforts to extend battery efficiency and amend battery chemistry to secure more mileage on a single charge. Maybe, given his work over the past several years, he could lead an effort to develop super-fast chargers and a dual automobile battery capable of storing unused power to use for utilities.

Finally, in light of Agassi’s multiple talents, it would be a mitzvah (blessing), if he helped make Israel, in light of its new natural gas discoveries, the pilot nation for the increased use of replacement transportation fuels, like natural gas and its derivative methanol. If this were done simultaneously with Agassi’s efforts to make electrically powered automobiles competitive for and desired by middle-class and lower-income Israelis, the country would demonstrate to the world that it is capable of developing and using cleaner, safer, cheaper, and environmentally better fuels than gasoline. If I were theological, I’d say that Israel would become a beacon unto nations with respect to the critical need for an alternative to oil. Agassi’s statement that “the end of the oil era will not come because we ran out of oil — it will come because we don’t want to use any more oil to drive,” is true. God may have helped Moses part the Red Sea quickly — building the fastest GHG proof and efficient thoroughfare ever, and history’s only disposable highway. No accountant would have approved the cash flow. Israel, if it becomes a replacement-fuel pilot and demonstrates success, will become a good junior partner. It will show how God’s progeny can and hopefully will become wonderful stewards of a cleaner, safer universe.

The authors note that policy has not yet caught up to this alarming shift. The stubborn “myth of suburban prosperity,” along with the more “segregated” nature of these communities, has made it an easy problem to ignore. And while the socioeconomic and political impacts of this shift may indeed be monumental, the significance of this change for American’s energy policy is lost in the media frenzy surrounding this alarming new report.

Currently, American households spend more on transportation than on clothing, healthcare and entertainment combined. It’s no secret that gasoline expenses are a significant portion of any household budget. In fact, fuel expenditures are often so high that it has been likened to a “regressive tax,” an obligatory expense that disproportionately affects the poor and middle class. Now that we know that a greater portion of the poor are living in suburbs, communities that exist thanks to the invention of the automobile, they are likely to be even more vulnerable to the “regressive tax” that is high gas prices.

The negative impact of gas prices on these communities is not just expressed through more money spent on driving; rather gas prices affect every aspect of their lives through increased inflationary pressures on all goods and services, and have been linked to declining home values in communities that are farther from city centers. A 2008 study by Joe Cortright found that a gas price spike helped to precipitate the bursting of the housing bubble and led to a disproportionally large drop in housing prices in suburbs and other far-away communities. The impact of high gas prices was so pronounced that the study found the farther away the suburb is from a city center, the more housing prices dropped.

Combine the findings of these two reports and the picture begins to look bleaker. Cortright’s study concluded that since “the era of cheap gas is over,” housing demand will continue to shift from the suburbs to urban areas, meaning more poor will be living in the suburbs due to higher urban housing prices. Of course, this also means that the absence of “cheap gas” will make it ever more difficult for the poor to live in their new suburban homes. And thus a vicious cycle of high housing prices and high gas prices is likely to entrap even more people in a life of poverty.

While there is likely a plethora of policy solutions that can help ease this alarming situation, the most obvious issue suggesting itself is high gas prices. Successfully achieving lower gas prices, or conversely, enabling the use of cheaper fuels of any kind that can safely and effectively power our vehicles, may help achieve dual benefits on this issue. Lower fuel expenditures can help to restore suburban home values (thus creating a lot of new wealth) and make it easier for the poor to continue living in these communities while having the mobility necessary to do such basic things as commuting to work, taking the kids to school, grocery shopping and so forth.

What happened to natural gas as a fuel? Cheap oil (and the power of oil companies) overpowered it during World War II and became the primary consumer fuel choice. Decades of repetitive oil shortages combined with concern over U.S. oil dependency and growing environmental sensitivities to increased pollution and GHG emissions continue to make natural gas table conversation among advocates for alternative fuels. Regrettably, Detroit has not really joined the dialogue in a serious sustained way — a fact probably related to fear of consumer interest and related natural gas vehicle costs as well as profitability. Detroit’s historic alliance with oil companies also played a role in the U.S. hesitance to support open fuel markets.

Are we on the cusp, or as some call it the “prelude” to the cusp, of change? Recently, the Wall Street Journal announced that America’s Natural Gas Alliance (ANGA), stimulated by the increased production of natural gas and predictions of a 60-100 year supply of natural gas, will publically preview several natural gas-powered vehicles in Southern California. According to the Journal, ANGA will demonstrate about a half dozen natural gas-powered vehicles to demonstrate use of CNG in retrofitted popular vehicles. As relevant, given ANGA’s episodic marketing to date, the preview will be followed by an extensive educational campaign to generate consumer interest.

Almost simultaneous with the Journal’s article, Bloomberg BusinessWeek published an almost gushing piece about how shale gas juxtaposed with rising gasoline prices is changing the perceptions of investors and producers concerning the use of natural gas as a fuel for vehicles. In sum, according to the publication, there is new enthusiasm that natural gas-powered autos and trucks are the wave of the future and the future is starting now.

Not so fast! Natural gas has many advantages as a fuel. It is safer, burns cleaner and emits fewer pollutants, including GHG emissions. It records cheaper maintenance costs, is abundant and is less expensive than gasoline. But the need for storage capacity for natural gas cars to permit them to achieve 200–250 miles on a tank of CNG limits storage space compared to similar gasoline fueled vehicles with higher mileage totals per tank. While the numbers differ from news article to article and while there is consensus that they are increasing, there seems to be only about 1,500 natural gas fueling stations in the country, some of which only service fleets. Consumer fear of running out of natural gas, while driving long distances, has placed a premium on bi-fuel vehicles — vehicles that can run on natural gas and gasoline but adding additional costs to the purchase price. Natural gas cars cost about $8,000–$10,000 more than similar conventional cars and conversion packages now on the market range from $1,000 (small tank) to several thousand dollars. The big hang-ups concerning conversion are federal regulations concerning changes in fuel composition and EPA certification.

The nation has some way to go before natural gas as a fuel becomes really popular and natural gas cars are able to significantly penetrate the auto market. But where there is light, there is hope! Yes, natural gas is a fossil fuel and not perfect with respect to emissions. But saying this, it is important to note that natural gas is much better for the environment and emits less GHG as well as other pollutants than gasoline. It is also cheaper. As part of a transitional strategy taking us to renewables, conversion of older vehicles to natural gas and the increased ability to purchase flex-fuel vehicles using natural gas are in the public interest.

I have no relationship with ANGA, but if I did or was asked for advice, (without charging), I would suggest it support the coalition of 22 states fostered by Gov. Hickenlooper (D) of Colorado and Gov. Fallin (R) of Oklahoma. The group has agreed to replace outmoded conventional state vehicles with natural gas vehicles, if Detroit agrees to find ways to lower vehicle prices. The initiative, in which Detroit carmakers recently have concurred, will generate technology and marketing innovations that will ultimately lower the cost of natural gas vehicles to consumers. I would also (nicely) suggest to ANGA that they pressure Detroit and perhaps the government to speed up investment research to lower natural gas car costs, both in terms of new vehicles and conversion packages for existing cars. Finally, if I could, I would ask ANGA to work with environmental, business, foundation, and government leaders to develop consensus and support for transitional fuel policies and needed regulatory changes.

If I were a betting person, I would bet that natural gas could play as important or a more important role, in at least the near future, as a source or feedstock for alternative fuels than as a direct competitive marketplace replacement fuel. For example, methanol, a derivative of natural gas, does not require major additional costs either for new or converted existing cars to use efficiently, and the price now is far less expensive.

Photo credit: www.musicstack.com

But what happens on the rare occasion when oil prices go down (albeit ever so slightly)? Do people continue their penny-pinching ways from the days of higher gas prices? Not really — a University of Michigan study shows that in April the average MPG of new vehicles sold actually fell from the previous month, likely due to lower gas prices. So this small drop in prices may be emboldening some consumers to buy less efficient vehicles, putting them at risk of a more restrained budget (or less driving) when gas prices inevitably go back up.

So, when gas prices go up, we all suffer and our economy lags. When gas prices go down, we position ourselves to be more at risk of rising gas prices in the future. Seems like a lose-lose situation. The chains that bind us just get heavier.

What we really need are more choices to break the iron-clad grip that oil prices have on our lives and our economy. We shouldn’t have to rely only on oil to power our transportation. Doing so gives oil a monopoly over transportation, perhaps explaining why it costs so much and why we are largely helpless to do anything about it.

The solution to break oil’s iron grip on our lives requires giving people more choice. For example, some people need to drive gas-guzzling, heavy-duty trucks for work, others just like driving those kinds of vehicles. Either way, when gas prices rise, these drivers have to spend significantly more money just to try to fill up their tanks. However, if they had a flex-fuel enabled engine that could run on ethanol, or possibly even methanol, they could choose to fill their tanks using fuels that, unlike gasoline, aren’t so closely linked to oil prices. If they had hybrid plug-in electric technology they could choose to “plug-in” more often and fuel up less.

These fuels would then be competing against each other for your transportation dollar. And if centuries of economic theory and real-world application are any indication of what may ensue in a competitive, open market, fuel prices will inevitably decrease.

North Carolina, the state that gave us the missing governor, is now trying to preclude the direct online sale of electric cars, including Tesla cars. Why this intrusion in the marketplace? Apparently, unless the story is a late April Fool’s Day joke, local car dealers, who are politically very strong in the state, oppose Tesla’s effort to sell cars on the Internet or directly. With lots of energy, they have secured legislative support for a bill to make it illegal for Tesla to go it alone without dealers. While there are other states with such laws or which are being pressured now by auto dealers to enact such laws, most states have made accommodation to the 20th and 21st century technological breakthroughs and online sales. I am not a lawyer, but I suspect North Carolina’s efforts will be challenged concerning restraint of trade.

Selling its models in dealer showrooms doesn’t fit the Tesla economic model. Of all the electric car startups, Tesla seems to be moving fastest toward financial viability. I’m not sure that the statement put out by Tesla’s vice president that compared a Tesla in a showroom of subcompacts and SUVs to selling Dom Perignon in the local mall’s food court reflects great political wisdom, particularly given the company’s support from the federal government. Neither did the representative of North Carolina auto dealers somewhat sarcastic comment, “You tell me they’re [Tesla’s] gonna support the little leagues and the YMCA?” Yes, they are! It is likely that the folks, who, at present, want to buy Teslas because they can afford it, include many people who give to charity, including the YMCA and the little league, because they have kids who play or played their first baseball in the little league.

Tesla’s success, likely, will generate lower-cost electric cars from its own factories and other much larger conventional car makers. Because Detroit will be operating on more traditional financial models, many franchises in North Carolina will benefit, as will large numbers of consumers who will gain vehicular and fuel choices. As important, the nation will benefit because of lower GHG emissions.

To hobble Tesla with the costs of a dealer system would certainly slow down its ability to reach sustainable profit levels and market penetration. I understand that many dealers fear the loss of sales, income and jobs. Their problems could be lessened if they were able to secure a better dollars-and-cents agreement with Detroit. They also might think about cutting a reasonable deal with Tesla for service and maintenance. Clearly, the value of competition and the nation’s ability to move to alternative fuels would be frustrated by efforts to protect special interest groups.

Canada is a wonderful polyglot of a country. Many of its French citizens in Quebec Province still want to separate from the British-dominated nation. Its natural resource minister has threatened to take the European Union to the WTO over its plans to define oil from tar sands as “highly polluting.” Although it should be, the argument among grown men and women isn’t about data and analysis. Tar sands are highly polluting, over 10 to near 25% more emissions than oil produced in Europe. It’s about perceptions of economic impact.

The Canadians have not yet called out the Royal Mounties and the European Union has not yet thought about Dom Perignon to soften the heated tar sands dialogue. Maybe to resolve the issue in good spirit, we should bring both to Tesla’s front office for extra bottles.

Obviously, the Canadians are worried that if their oil sands are tarred with the label of “highly polluting,” they will lose possible sales of oil and market share, particularly in countries that have strong environmental movements and concerns. Some worry that the label of highly polluting will add to the conflict in the U.S. over the Keystone XL pipeline.

The tension over the attribution of the phrase “highly polluting” is important to think and talk about on four grounds. One tests government’s truthfulness and the degree to which governments are willing to tell the truth or will waver when short-term economic objectives appear to intervene. The second tests the nations of the world, and regional groups, concerning their willingness to legitimately set standards and stick with them when contrary to the views of individual governments, or pressure from the private sector. The third provides insight into the difficulties in making decisions, ostensibly, involving significant competing public interests (e.g., Canada’s economic and environmental interests and European’s interest in lowering GHG emissions) when data and analysis rest on some uncertainty. The fourth and final one analyzes the ability of nations and regions to consider alternative transitional fuels when faced with environmental, social welfare, security and economic issues concerning oil.