For years, the American public has been clamoring to end oil dependency from unstable parts of the world, with limited success. In 2008, oil magnate T. Boone Pickens struck a chord with the country when he presented "The Pickens Plan," that called for investing in domestic renewable resources and switching from oil to natural gas as a transportation fuel. Pickens was quoted at the time saying, "You can’t keep paying out $600 billion a year for oil." Then the BP Oil spill in the Gulf visibly pushed our environment to it limits, but the U.S. didn’t pass a single law in response to the disaster.
Despite an overall lack of action, both the Bush and Obama administrations have made progress decreasing our dependence upon imported oil. We now have stated goals to steadily increase U.S. fuel economy standards to keep pace with the goals set in Europe, China, and other countries, and both administrations have significantly supported increases in domestic oil drilling. The result: today we have more oil drilling in the United States than we had since the TV show Dallas went off the air in 1991. It’s not enough—we need oil independence.
We have to replace over $300 billion in oil imports with local solutions that create local jobs. This means accomplishing President Obama’s stated goal of reducing 50% of imported oil by 2018 ( about$150 billion at today’s prices), and reaching T. Boone’s goal soon after that ($300 billion). To stave off the worst impacts of climate change, we must reduce our vehicle emissions by 95% by 2050.
Today, we import about 8 million barrels of oil per day. Meeting President Obama’s goal means a reduction of about four million barrels a day, or 50% of our total imports. The current increase in fuel economy standards will get us part way there, and the predicted increase in oil drilling in the U.S. and Canada will get us even closer to the goal. But no matter how we slice the data, we will still be short of the ultimate goal of energy independence.
The sad truth is that the technologies necessary to meet the fuel goal have been around for 20 years, but we seem incapable of deploying them at scale. Figuring out how to achieve this represents the largest wealth creation opportunity of our time.
Generally, these technologies fall into two categories: alternative fuels and efficiency technologies. Alternative fuels make fuel choice possible with flex-fuel technologies: An example today can be seen with the heavy truck-maker Peterbuilt. The company is already building about 33% of its new trucks equipped to run on natural gas (NG). This number should be increased to 100% by next year, leading to more than 160,000 new NG trucks by 2018. For existing trucks, duel-fuel upgrades replace about 55% of diesel fuel consumption with lower-cost domestic natural gas. The cost of these upgrades is less than $30,000, generating a payback in about 18 months. More than 280,000 trucks could be retrofitted by 2018. Together, both approaches (retrofitting and building new trucks) would save about 14 billion gallons of diesel fuel.
Many alternative fuels could also be scaled up profitably. The reason: we have invested 30 years of research, and gasoline and diesel are now hovering at around $4 per gallon. Fuel choices like methanol, hydrogen, electricity,Fischer–Tropsch synthesis, and other renewable fuels are competitively priced. So, just like solar and wind energy, getting the existing system to scale requires mandates like the U.S. Renewable Fuels Standard. Today, that standard needs to be updated to include non-renewable fuels, better known as the open fuels standard. Increasing these fuels faster is not only possible, but necessary to meet our goals by 2018.
Fuel efficiency and enhancement technologies, including improved engine design and aerodynamics for heavy trucks, can push us the extra mile. One exciting fuel enhancement technology is NanoVit, a nano particulate (i.e. very small), amorphous, formless powder that interfaces between small moving surfaces to provide protection against extreme pressure, thereby reducing friction, decreasing wear, and increasing the life of components. Combustion engines that use this type of fuel enhancement could save up to 18% of the fuel burned.
So, the technologies exist to conserve and displace oil. Yet people are not willing to invest upfront to eliminate oil—even if the savings pay off the up-front investment within a few years.
There are a few ways to overcome this challenge. One way is to provide tax credits and incentives; but with the U.S. Congress practicing extreme budget austerity, this is unlikely to happen. The other way is to encourage "service" contracts. This is where private funds are used to upgrade vehicles to become flex-fuel capable and investors are paid back through the savings. This could open a competitive market for consumer fuel choices.
Deploying these proven technologies would lead to a reduction in poverty, increase in jobs, and a significant reduction in greenhouse gas emissions. It is time to use financial innovation to cost-effectively deploy the technological innovations we paid to discover.