In September, OPEC celebrated its 50th birthday. A perfect opportunity for America to deliver a painful blow to the cartel that for decades has manipulated oil prices and constricted supply to the detriment of our economic well being.
Until the 19th Century, salt had a position similar to that of oil today because it was the only means of preserving food. Salt-rich countries had the same inordinate power on the world stage that OPEC members enjoy today. Today, salt is still a useful commodity for a range of purposes, but canning, electricity and refrigeration decisively ended its monopoly over food preservation and eliminated its strategic importance.
To neutralize OPEC, we must turn oil from a strategic commodity second to none as salt once was into just another commodity as salt is today. Oil’s strategic importance derives from its virtual monopoly over transportation fuel (contrary to the rhetoric of many a politician, today only 2 percent of US oil demand is due to electricity generation.) The nearest term and least expensive means of breaking this monopoly and opening the transportation fuel market to competition is the flex fuel vehicle. This technology, which, according to GM costs an extra $70 per new vehicle, enables cars to run on any blend of gasoline and alcohol fuels.
An Open Fuel Standard ensuring that every new car sold in the U.S. be flex fuel will enable Americans to make their own fuel choices at the pump. In some parts of the country ethanol would be the alcohol of choice, in others it would be methanol, made from biomass, natural gas or coal. The market for alternative fuels will be large enough for every alcohol producer to compete and profit.
Since no automaker can give up on the U.S. market, the Open Fuel Standard will essentially become an international standard, opening a gigantic global market for alcohol fuels in numerous countries where alcohol fuels currently play no role. If most cars sold around the world were flex fueled, OPEC would face competition from fuels made elsewhere, including in poor countries in Africa, Latin America and South Asia.
An Open Fuel Standard will also eliminate once and for all the perpetual need to recalibrate the blend wall – a major policy priority of the U.S. ethanol industry. Ethanol groups are currently lobbying hard to lift the blend wall from 10 percent to 15 percent, but a few years after they succeed the industry will again hit the new wall. Then what? With flex fuel vehicles and blender pumps consumers will be able to make a daily choice at the pump among E10, E15, E50, E85 or any other blend. To paraphrase President Ronald Reagan’s 1987 Berlin speech: it’s time to “tear down this wall” altogether.
President Obama has expressed several times his support for flex fuel vehicles. So have Secretary of Energy Steven Chu and Secretary of Interior Ken Salazar. A bipartisan bill, the Open Fuel Standard Act (S.835 and H.R.1476), which requires that 50 percent of new cars be flex fuel by 2012, was introduced before both the House and the Senate. It’s time to ensure Congress adopts this simple policy and thus removes OPEC from the driver’s seat of the world’s economy. After all, it was former OPEC leader Sheikh Ahmed Zaki Yamani, himself who pointed out that “technology is a real enemy for OPEC.”
Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS). He is co-author of Turning Oil into Salt: Energy Independence through Fuel Choice (2009)