Oil Requires Stiff Competition
Oil’s status as strategic commodity must be stripped
to keep travel and tourism healthy
Radnor, PA, May 20, 2009--Business Travel Coalition (BTC) today endorsed the Open Fuel Standard Act of 2009 (OFS) (H.R.1476, S.835) introduced in the House by Representatives Eliot Engel (D- NY) Bob Inglis (R-SC), Steve Israel (D-NY) and Roscoe Bartlett (R-MD), and in the Senate by Senator Sam Brownback (R-KS), Maria Cantwell (D-WA), Amy Klobuchar (D-MN), John Thune (R-SD), Joseph Lieberman (I-CT) and Susan Collins (R-ME). This legislation would require 50% of new vehicles manufactured or sold in the U.S. to be flex-fuel enabled by 2012 and 80% by 2015 and thereafter.
Under the terms of OFS, these vehicles would be warranted to operate on gasoline in a mixture of up to 85% ethanol or methanol, and likewise be warranted to operate on biodiesel. This law would codify automakers' existing non-binding commitments to Congress and provide investors, refiners and gas station operators with the confidence necessary to make investment and business decisions based on the real-world usability of alternative fuels.
There is virtually no competition for oil-based transportation fuels, an untenable situation that puts the entire travel and tourism industry at grave risk. U.S. cars and trucks are 97% fueled by oil-based gasoline and there is currently no commercially available substitute for oil-based kerosene as a jet fuel. OPEC is a supply-constricting, price-fixing cartel that sits on 78% of the world’s known oil reserves. Unreliability of oil supply and extreme price volatility poses a strategic security threat for the U.S. and great risk to the airline industry and all the other dependent travel and tourism segments. Short-term oil supply increases and demand decreases will not materially reduce our industry’s strategic vulnerability. This monopoly in the marketplace for transportation fuels confers a “strategic commodity” status on oil much like a monopoly in the marketplace for food preservation did for salt hundreds of years ago.
For $100.00 per vehicle, automobile manufacturers can produce flex fuel vehicles warranted to use any combination of gasoline and alcohols, such as ethanol and methanol.These alcohols are made from a variety of feedstocks including agricultural material, waste, coal and sugar. Through provisions in OFS, flex fuel vehicles would in effect provide the platform for alternative fuels to compete with oil-based fuels. Consumers would choose among fuels and feedstocks that can be cheaply and economically produced throughout the world.Reduction of the heavy demand for gasoline in automobiles would have the beneficial effect of stabilizing the price of oil-based jet fuel.Airlines and their customers would further benefit when alternative jet fuels currently being tested are certified for use in aircraft engines and put into commercial production.
OFS allows the U.S. to leverage existing innovative transportation technology to eradicate oil’s monopoly and status as a strategic commodity. Plug-in hybrid electric vehicles can reach 100 miles per gallon of gasoline without compromising size, safety or power. If these hybrids were also flex fuel vehicles, powered by 85% alcohol and 15% gasoline, they could be capable of up to 500 miles per gallon of gasoline used.
An important part of stripping oil of its strategic commodity status is electricity, since only 2% of it is generated from oil in the U.S. Using electricity as a product-substitute to oil-based fuels (via plug-in hybrid electric vehicles) enables a full range of sources for electricity production (nuclear, coal, flowing water and wind, solar photovoltaics and geothermal) to provide effective competition to oil. Ideally, these plug-in hybrid electric vehicles would be charged at night when there is excess electricity capacity.
The strategic commodity status enjoyed by oil and its producers can be eliminated by the introduction of competitive product substitutes in the way canning and refrigeration as product substitutes stripped salt of its monopoly position and status. We no longer fight wars over salt and we should insist that no more wars be fought over oil, nor should we allow oil to hold our industry hostage.Competition is the key to success.
Some 66% of overall U.S. oil consumption is in the transportation sector, which is 97% dependent on oil-based fuels. This makes the substantial introduction of competitive product substitutes, enabled by OFS, a highly leveraged opportunity to break oil’s monopoly and in so doing bring fuel supply and price predictability to commercial aviation, automobile users and other important sectors of the U.S. economy.
Since the U.S. accounts for about 25% of the world’s oil demand, enacting OFS in the U.S. could have an outsized impact on the global price of oil. Effective U.S. leadership would likely cause governments worldwide to replicate our policies and hasten the day that we turn oil to salt.BTC encourages corporate travel buyers to let their elected representatives know that they support H.R. 1476 and S. 835.