“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.

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.

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.

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.

What if all that old stuff you no longer have a need for suddenly becomes very valuable, and you could actually make a great deal of money by selling it? Not only would holding a yard sale be worth your time and effort, but you may even put in extra effort to collect more old things to sell to increase your potential profit. You may even spend some of your own money in getting all this together so that you’ll have more to sell and could make even more money.

That’s a lot like what’s going on in the oil market. In recent years, the price per barrel of oil has skyrocketed and now, we’re looking at extracting and selling oil that once wasn’t worth our time or effort. Arctic drilling, deep-sea drilling, tar sands, shale oil, etc., are all coming online in greater numbers because they are now worth the time, effort and expense to bring them to market. If the price of oil keeps rising, who knows what other oil, or oil-like reserves, may be extracted.

This whole notion may run contrary to what most people believe. On a simple supply and demand curve, usually if the price of a good goes up, demand goes down. However, as the price goes up, supply also goes up, much like in the illustration below. And since we all still need to drive, for the most part, the demand curve for oil is relatively inelastic, meaning prices don’t affect our demand that much (sorry for reverting to all these “Econ 101” terms).

In short, the higher the cost of oil, the more oil there is. After all, if you had a product that kept selling even after you tripled or quadrupled the price, wouldn’t you want to try and sell more of it?

This doesn’t mean that for oil consumers (i.e., the average driver) hope is lost. Just as oil became more valuable, more of it became available for sale, the same could happen for other fuels.

Take, for example, “gas flaring” in oil wells, a particularly acute problem in North   Dakota. A common byproduct of oil drilling is that gas, embedded deep in the ground alongside the oil we extract, also rises to the surface. This gas is often flared because harnessing it and bringing it to market may not yield a profit for oil companies since there is less demand and less value for it. Essentially, we’re wasting a non-renewable resource because it’s not profitable.

So what if we were able to give it value? What if we made it so that our cars could have the option to use that wasted gas? One way to do this would be to convert that flared gas into methanol. This would have the many benefits of giving us a choice of what to fuel our cars with (back to our “Econ 101” thinking, choice means more competition which helps drive down prices), not wasting a finite resource, and reducing emissions including significantly reduced drill-site emissions of methane, which is a much more potent greenhouse gas than CO2.

Why should we give so much value to oil when we have the proven technology to use other fuels that we are currently wasting? By giving value to other fuels we would reduce the value of oil, lower prices and even out the playing field in a true open market.

But how much of a boom is this really? How much can it actually influence the price of oil and America’s decades-old quest to become “energy independent?” To answer this, let’s take a brief look at the facts. U.S. oil production levels have recently surpassed 7 million barrels per day (mbpd) for the first time since 1990, while oil imports in the first three months of the year averaged 7.7 mbpd. This means that despite the new American oil boom, we are still not producing enough oil to meet even half of our demand.

In fact, it’s not just America that is consuming more oil than it can produce —the entire world is exhausting the commodity. The U.S. Energy Information Agency (EIA) estimates that global oil consumption is outpacing supply by 1.1 mbpd. With demand for oil so high, coupled with rapidly growing and modernizing populations in India, China and other countries, perhaps we shouldn’t focus on how long we can enjoy this ephemeral lull in oil prices, but instead worry about how fast and how high oil prices are guaranteed to rise once the calm has come to an end.

Let’s also not forgot that the U.S. economy, while still not stellar, is growing. This means more people are on the roads, almost all of whom are using transportation powered by oil. So even as our own oil production may or may not continue to rise, our appetite for oil most surely will.

That is, unless we look to ways to replace our need to rely on oil for our transportation needs. It seems that not only are we unable to sustain such a disconnect between oil consumption and supply, but we also cannot afford to maintain this, or any greater such disconnect in the oil market. In short, we cannot drill our way out of this.

The only way to fill the gap between the demand for transportation fuels and the supply of it is to use other fuels, besides oil, that can be produced in large quantities to safely and reliably (and preferably cheaply) power our transportation.

Although the recent decrease in gas prices has felt like a minor blessing ($3.50/gallon nationwide and $3.87/gallon in California) and I’ve found myself quietly gasping in excitement every time I realize that a gallon of regular has decreased by a few cents, in reality, gas prices are still too high. Let’s do some math.

Every week, I drive about 270 miles during my commute in my ‘99 Acura Integra (which achieves about 27 mpg on the highway — not bad for a 14-year-old car), or 14,040 miles per year. If California gas prices are able to miraculously maintain an average of $3.87/gallon, the 520 gallons of gas I burn up this year will come to a staggering total of $2,012. Suddenly, those few cents I’ve been saving at the pump are no longer what takes my breath away.

What’s even more maddening is the amount of fuel I waste while sitting on the heavily congested 405 Freeway, waiting as patiently as possible for traffic to slowly lurch forward. A study done by traffic and navigation service provider INRIX estimates that Americans burn 2.9 billion gallons of gas annually while sitting in traffic. Another recent study reveals that commuters in the Los Angeles megalopolis (which includes Orange County) spend an average of 61 hours per year trapped in traffic, equating to $1,300 in wasted time and gasoline per person.

Although low and middle-income individuals and families (including commuters) are affected the most by high gas prices, the amount of money I squander each year on fuel actually mirrors the typical spending in America. In 2012, U.S. households paid an average of $2,912 to fill up at the pump (4% of pretax income), the highest percentage it has been in three decades. Basic economics suggest that when the price of something increases, people make the decision to use less of it or switch to an alternative, but because of the monopolistic grip that oil has on the fuel market, it’s not that easy.

Will we ever be relieved of high gas prices and traffic? Let’s be frank — the severity of traffic congestion in major cities like Los Angeles won’t be alleviated anytime soon (unless Elon Musk’s recent 1-405 improvement contribution was only a down payment), but we can change how much we spend on fuel. It won’t be easy, but it can be done, by opening the fuel market to viable replacement fuels that are available today. Let’s take all that pent-up road rage and channel it toward some good — Americans have a right to drive for less.

“Creating competition in the fuel market will drive gasoline prices down,” said Eyal Aronoff, Fuel Freedom Foundation co-founder. “I am more than pleased that [former] Governor Richardson is joining our board of advisors and has dedicated a portion of his time to help us fight this battle and end the monopoly on oil.”

Richardson’s accomplished career in public service will be instrumental as the foundation works to streamline regulations facilitating competition and choice in the fuel market. He served two successful terms as governor of New Mexico, beginning in 2002, through January of 2011. He also served for fifteen years representing the third congressional district of New Mexico in the U.S. Congress.

During his leadership as governor, New Mexico earned the title of a “Clean Energy State,” by implementing laws requiring utilities to buy their energy from renewable sources, and established a Renewable Energy Transmission Authority to deliver New Mexico’s renewable resources to the market. Richardson’s experience with renewable energy will translate well to Fuel Freedom’s mission of achieving a fuel market that’s based on renewable replacement fuels, such as ethanol, methanol, natural gas and electricity.

“Ending the oil monopoly is critical for the United States,” said Richardson. “Introduction of replacement fuels into our economy will not only lower the price of fuel at the pump, but will create much-needed jobs here at home. I am looking forward to using my experience in public service to help make this a reality.”

With an increased focus on its fuel-sipping EcoBoost engine, Ford hopes to not only attract more customers who are environmentally conscious or weary of high gas prices, but to meet rising Corporate Average Fuel Economy (CAFE) standards. In fact, the urgent need to improve engine efficiency has reportedly united the company with its historic archenemy, GM, in an agreement to develop a new 9-speed transmission engine that could reduce fuel consumption with more seamless gear transitions.

But are these moves enough? Do consumers, or at least a sizeable subset of consumers, want something more? GM’s success with the Volt plug-in hybrid car, and its recent announcement of expanding its plug-in offerings with the Cadillac ELR hybrid, suggest that the market may actually be fostering the growth of more environmentally friendly and efficient technology than CAFE standards do. Increasing sales of all-electric cars like the Nissan Leaf and Tesla’s Model S seem to reinforce this notion as well. Even the electric vehicle manufacturer Fisker had growing sales before its recent difficulties, which incidentally seem to stem more from supply issues than demand issues.

CAFE standards may prove successful in lowering gasoline consumption in the U.S.; however, this approach could backfire by encouraging people to drive more, thereby negating any gains achieved via increased efficiency. This may be exactly what early adopters of alternative fuel vehicles are catching on to. The thinking goes like this: “I can afford to spend X amount on fuel. So with a more efficient engine, I can take more road trips, drive to farther places for entertainment and dining and so on, with the same fuel budget.” However, early adopters may have figured out that by driving a car on a fuel that is cheaper than gasoline, they can have their cake and eat it too — drive farther and spend less.

IEA predictions of oil reaching $135 a barrel by 2025 and $145 a barrel by 2035 (which may even prove to be conservative), make it seem like using cheaper fuels, such as electricity, is the smarter bet for consumers. America’s vast, new natural gas reserves are likely to keep a lid on electricity rates for now, and can even provide us with cheap feedstock for producing methanol, a fuel that many flex-fuel cars can run on with an easy conversion. If oil prices keep rising, but electricity, ethanol, methanol and natural gas either remain flat or decrease in price, consumers will be better off taking advantage of simple technology, already in existence for decades, to allow them to make use of these replacement fuels. The rapidly rising sales of alternative fuel vehicles suggest that consumers are beginning to do just that.

Photo credit: Yaromir / Shutterstock.com