|
|
 |
|
| Opportunities & Exposures: Energy |
Striking Oil
Amory B. Lovins
12/01/2005
|
America’s 10,000-gallon-a-day oil habit diverts $1.4 billion from more productive
uses each day and funds both sides of the war in Iraq. The other burdens of oil
insecurity—price volatility, geopolitical rivalry, military costs, subsidies,
depletion and pollution—continue to mount.
But enough about the oil problem.
Here is the solution.
 Over the next four decades (or fewer, if we get
serious) the U.S. could completely phase out oil and save money. Even if oil
still cost only $26 a barrel—as the Energy Information Administration’s January
2004 price forecast said it would in 2025 (converted to 2000 dollars)—we would
still pay $70 billion a year less in 2025 by saving and displacing all of the
oil we use, rather than buying it.
My team at RMI published a
Pentagon-cosponsored, peer-reviewed roadmap for this business-led, market-based
solution titled Winning the Oil Endgame in September 2004. The study documents
how smart business strategies can wean the U.S. off oil without new federal
laws, mandates, taxes, subsidies, lifestyle changes or market
distortions.
Redoubling the efficiency of our oil use (which has already
doubled since 1975) will cost only $12 per barrel. It would cost only $18 per
barrel to replace oil with natural gas and cellulosic ethanol, an alcohol fuel
made from woody, weedy, nonfood plants. Cellulosic ethanol has twice the yield
of costly and heavily subsidized corn ethanol, a lower capital cost, up to eight
times better net energy yield and no need for farmland.
Cars, pickups and
SUVs can combine hybrid-electric propulsion with new light-but-strong metals or
carbon composites. Carbon auto bodies can halve the weight and fuel use, yet
cost the same to build, and increase safety by absorbing 6 to 12 times the crash
energy of steel per pound. (I am chairman and a small shareholder of Fiberforge,
a firm commercializing such composite structures.)
The result would be 92
mpg cars and 66 mpg light trucks, all uncompromised in size, performance and
safety. A high-end midsize SUV would have a $2,500 higher pretax sticker price
(again in 2000 dollars) than the most nearly comparable SUV on the market today.
At current gasoline prices, that extra cost would be earned back in two years.
|
|
|
|
|
|
|
