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| Opportunities & Exposures: Energy |
Striking Oil
Amory B. Lovins
12/01/2005
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Pentagon R&D to create fuel-frugal military platforms can accelerate the
shift to advanced materials, transforming civilian industry to lead the country
off oil (so we need not fight over it) just as earlier military R&D created
the Internet, GPS, jet engines and microchips. An oil-efficient civilian base
would take an investment of about $180 billion—half to retool the American car,
truck and airplane industries, half for biofuels. This investment would return a
gross $155 billion every year (if the world oil price were only $26 a barrel),
save 1 million at-risk American jobs in manufacturing, create a million new jobs
and cut carbon dioxide emissions by 26 percent.
To help business lead these
shifts, public policy should support, not distort, the economic logic. The most
important tweak is “feebates”: For each size of new light vehicle, people who
choose to buy an inefficient model would transfer some wealth to others who
chose an efficient model—a fee on the former would pay a rebate to the latter.
The less we align public policy with business logic, the harder it will be to
reduce oil dependence, and the more likely it is that we will be buying Chinese
fuel-efficient cars and Brazilian ethanol instead of making our own.
During
the Carter presidency, we had a largely sensible and balanced policy framework
that let markets work. Even after Carter left office, consumers paid attention
to fuel efficiency, and the result was a 5.2 percent per year decline in barrels
of oil consumed per dollar of real GDP from 1977 to 1985. Our GDP grew 27
percent, oil use fell 17 percent, oil imports fell 50 percent and Persian Gulf
imports fell 87 percent. Halving OPEC’s sales broke its pricing power for a
decade. Colliding with the consumer quest for efficiency, however, was the
change in policy when President Reagan came into office in 1981 and turned his
efforts to boosting the supply of energy. Increased supply in the face of
judicious demand led to an energy glut in 1984 and 1985, which sent prices
crashing and bankrupted many producers. Today a repeat of those failed 1980s
energy policies threatens all over again. But we now have far more potent
technologies for saving and displacing oil that could give us a lasting outcome:
a safer and more prosperous world beyond oil.
Art by Matt Mahurin.
Amory B. Lovins is cofounder and
CEO of Rocky Mountain Institute,
and
has been a global consultant
to the energy industries for over
three
decades. |  |
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