Book Discussion: Winning the Oil End Game: Innovations for Profits, Jobs and Security
The United States can and should terminate its reliance on oil within the next few decades while increasing its global economic competitiveness, argued Anthony Lovins, president and CEO of the Rocky Mountain Institute. Presenting the findings of his book, Winning the Oil End Game: Innovations for Profits, Jobs, and Security, Lovins maintained that business-for-profit and military innovations to increase fuel efficiency and to utilize energy alternatives could greatly benefit U.S. security and economic interests.
Lovins asserted that pure economic incentives will sharply reduce the use of oil in the United States in coming years, since "it is cheaper to substitute oil than to keep buying it." He also cited two additional reasons for eliminating U.S. use of oil. First, national security is threatened by a variety of oil-related factors, from supply instability and geopolitical competition to the environmental costs of oil use. Second, U.S. competitiveness in the global transportation market is at stake, so long as other countries continue to produce cheaper and more fuel efficient vehicles and airplanes. Therefore, there are sound economic, and well as political and environmental reasons to stop using oil.
In order to compete in the global marketplace successfully and reduce security threats, the United States must double the efficiency of oil use and increase its reliance on alternatives sources of energy, such as biofuels and natural gas reserves. The average cost of ending the use of oil would be $15 per barrel, significantly lower than the official Energy Information Administration's (EIA) forecasted cost of $26 per barrel by 2025. The cost of making the transition from an oil-based economy would be about$180 billion; however, the transition would entail 2 million new and preserved jobs and it would generate $150 billion in gross returns per year. This process can be accelerated through favorable policymaking at the federal, state, and local levels, as well as by educating industry leaders about the economic advantages of making the transition.
Reducing oil demand in the United States depends on the ability of the U.S. transportation sector to adapt to global competition by maximizing energy efficiency. As much as 70 percent of U.S. oil consumption is used by its transportation industry—cars, trucks, and airplanes. Measures to reduce fuel consumption include designing lighter and more aerodynamic cars, trucks, and airplanes with less energy externalities. Taking the example of a Sport Utility Vehicle (SUV), Lovins argued that the combination of these efficiency-increasing measures would reduce fuel usage by up to about 70 percent. At the same time, recent engineering developments with carbon-fiber composites make ultralight vehicles both safe and easy to manufacture. A number of large car and airplane manufacturers have already began initial tests with carbon composites-based manufacturing.
Meanwhile, producing higher volumes of biofuels, especially lignocellulose, would create a cheap alternative to oil. Combined with saved natural gas—three quarters of the nation's supply could be saved by increasing efficiency in electricity production and in industry—the EIA's projected energy demand for 2025 can be reduced by more than 25 percent.
When the decreased demand for energy is juxtaposed with new supply sources, the need for oil, and particularly imported oil, is sharply reduced. The remaining balance can be eliminated through various means, including extracting hydrogen from saved natural gas or utilizing wind power in North and South Dakota.
Mr. Lovins proposed that this transition would be beneficial for the oil industry, as well as the Department of Defense, and U.S. security and economic interests. Worried about increased costs of oil production, oil corporations can make a profitable transition to biofuel and hydrogen production. Lighter armored vehicles that require less gas would improve the mobility of U.S. armed forces during combat and lesson the need for costly and dangerous resupply convoys. Finally, eliminating the use of oil would unfetter the United States from its dependence on the volatile Middle East while increasing its economic competitiveness and creating more jobs.
Governmental policies can remove obstacles to market efficiency in the energy sector through a number of cost-free measures, such as creating market-based incentives for purchasing hybrid vehicles; promoting R&D with military financing; and rescinding counterproductive policies and subsidies.
Questions from the audience centered on additional energy alternatives, including coal, nuclear energy, and electric cars. Mr. Lovins claimed that coal and nuclear power are not as effective and energy efficient as hydrogen, biofuels, and wind power. In the case of electric cars, he noted that certain aspects of their production and battery maintenance raise questions about their energy efficiency.
Drafted by Amir Stepak.