In the second half of the 19th century, a young entrepreneur from Cleveland, Ohio, named John D. Rockefeller discovered the enormous potential in refining crude oil. The American oil industry was still in its infancy and most other entrepreneurs were looking to drill – but not refine. Because of Rockefeller’s sharp business instincts and the innovative new methods of refining he developed with his partners, his company, Standard Oil, became a huge and aggressive monopoly that, at its height, controlled over 90% of the U.S. oil market, and charged consumers excessive prices.
While Standard Oil was still at the peak of its power, another young man, named Henry Ford, built a car company that also created a technological revolution of its own. Ford believed that biofuels were the future for transportation, and designed the engine of his Model T – his flagship model and the first car to be mass produced – in such a way that it could run on ethanol as well as gasoline products. Ford saw how the United States could produce fuel from corn, potatoes and other agricultural crops as needed.
Rockefeller’s bid to control the market, however, was boosted hugely by the Prohibition era. From 1919 to 1933, sales of alcohol in the United States were completely banned, including for biofuels. Ford’s fuel of the future was sidelined, and oil remained the only real alternative available to U.S. drivers. At the same time, car makers and oil companies, including General Motors and Standard Oil, saw the American electric public transportation system – the world’s best and cheapest at the time – as a competitor, and chose a creative way to fight it. The oil companies and car manufacturers established a cartel and a jointly owned firm that bought up a large part of the beloved electric tram system, destroyed it and converted the lines to buses. Buses powered by oil, of course.
Some 150 years after Rockefeller’s first steps, the United States now spends $700 billion a year on oil, making it the world’s largest consumer of the commodity. The country is being held captive by oil, and its fate at any moment depends on the price of black gold. Oil has led the country to a number of crises over the past decades, the largest coming in 1973 after the OPEC oil embargo following the Yom Kippur War. It has also led to wars, and made American foreign policy dependent on the goal of guaranteeing the continued free flow of the black stuff that runs the world economy.
These stories partially explain how the United States – and the rest of the world behind it – has become addicted to oil. They appear in the new documentary film “Pump,” which was released last month in the United States. The movie, directed by the couple Joshua Tickell and Rebecca Harrell Tickell, tries to explain the details behind this addiction; the economic and cultural causes of it; and to describe its destructive implications on the American environment, economy and foreign policy over the past 100 years.
Destructive dependence on oil
Behind the film is an Israeli investor and philanthropist, Joseph (Yossie) Hollander, the founder of New Dimension Software, which he sold to BMC for $650 million in 1999. Hollander, 57, produced and financed the movie. For him, this is just another stage in his battle over the past 10 years to free the United States from its destructive dependence on oil.
“Oil is in everything we touch, in everything we do,” said Hollander, now living in California, in an interview with TheMarker. Oil is what runs the economy and there is no economy without fuel. This expresses itself in all sorts of things: In expenditures on health, in the air we breathe and the diseases it causes, and the cost of everything we buy includes a huge component of oil, argues Hollander.
The price of oil is a weight on the entire economy. The value of all the gold in the world is estimated at $8 trillion; all the publicly traded countries in the world are worth together $65 trillion. All the government bonds are worth a total of $102 trillion – and the value of the world’s oil reserves is $180 trillion. “We don’t have enough money to buy all the oil in the world. Oil is bankrupting us,” he says.
At the beginning of the millennium, after his exit from New Dimension, Hollander started being involved in philanthropy. He gave, among other things, for goals such as commemorating the Holocaust and advancing scientific research, and founded an Israeli institute for economic planning.
At the same time, he began to be involved in an issue that interested him more and more: alternative fuels. “The more I looked and learned, I understood that solar and wind energy are not the story. They are small numbers. The big numbers are in oil. Oil is the number one source for greenhouse gas emissions, but most green energy is dedicated to replacing coal. So I say: We don’t have an energy problem; we have an oil problem,” said Hollander.
Two years ago he established the Fuel Freedom Foundation, a nonprofit organization whose goal is to break American dependence on oil by smashing the oil monopoly and increasing competition, such as other fuels, cheaper and less polluting for the transportation sector.
Hollander believes that high oil prices are the result of a systematic monopoly that preserves the role of oil as the sole fuel available for transportation. This monopoly is disastrous for the environment, the world economy and politics, he argues. It creates economic crises, worsens climate change, and pays for the support of extremist regimes in the Middle East and Russia, which, thanks to the high price of oil, can do whatever they wish. And all this does not include the growing demand for oil in China, which should lead to further increases in oil prices in coming years.
“We can have oil for 1,000 [more] years, but at the price of $1,000 per barrel,” he says. The demand for oil has grown faster than the ability to increase the supply, he explains. “What we are trying to do is lower the price of oil to $50-$60 per barrel within only a few years, and to replace it with competition from cheaper but cleaner fuels.
“I am not against oil,” he continues. “Today, we have no way to replace oil completely.” He also does not advocate a specific solution, only competition. He wants to make three or four types of fuel available and let consumers choose. “What I say is this: Why should you or I decide what others need to put in their cars? If someone does not like ethanol, then they shouldn’t buy ethanol. There are 100 types of breakfast cereal in the supermarket, and nonetheless the only choice we have for fuel is between 95 and 96 octane [gasoline],” said Hollander.
The Brazilian revolution, coming soon to the U.S.?
Hollander says he went over every word and frame in the movie 10 times. It is the biggest public exposure the Foundation has made to explain to the U.S. public why it is addicted to oil, what this addiction is doing to it, and how the power to change it is in its own hands. The production is narrated by actor Jason Bateman (“Arrested Development”) and features a long list of interviewees as “stars,” including former Brazilian President Lula da Silva and Elon Musk. The film deals only with the United States, but since the story of the United States is the story that was repeated time after time around the world, it shows how almost all the entire world missed out on the opportunities to free itself from oil.
The model Hollander wants to imitate is that of Brazil, a country similar in size to the United States. Brazil freed itself from foreign oil a number of years ago, without having its economy collapse. Already in the 1970s, after the first major oil crisis, the Brazilian government decided to put an end to its dependence on foreign oil – which at the time made up over 90% of its oil usage. It replaced gasoline with ethanol made from sugar cane, and since the late 1970s, Brazilian gas stations have provided ethanol. Today, drivers in Brazil have the option in every gas station of ethanol or gasoline.
Demand for ethanol in Brazil only really started to compete with gasoline in the 1990s, when Brazilian engineers developed technology for cars allowing them to run on both fossil fuels and ethanol, called Flex Fuel. Brazilian cars can now run on either gasoline or ethanol – and the ethanol revolution also helped jump‑start the Brazilian economy.
As for Israel, the country can switch to Flex Fuel tomorrow morning, says Hollander. What needs to be done is to convert natural gas to fuel for vehicles. Instead of exporting gas to Europe, Israel should use it to act smartly and replace oil‑based fuels. This would create a huge technological flowering in Israel, but for now the Israeli bureaucracy is blocking it, he says. As for smaller gas exports to Jordan and the Palestinians, that is something else, he says, since that is a strategic interest for Israel.
(Article Credit: Asher Shnechter, Haaretz)
(Photo Credit: Ofer Vaknin, Haaretz)