Business Express: The (forgotten) energy policy
news.mysanantonio.com By Analisa Nazareno San Antonio Express-News Web Posted : 03/07/2003 11:37 AM Despite an Arab oil embargo that pounded the nation's economy into recession and efforts since then to curtail dependence on foreign oil, the United States imports even more oil today than it did 30 years ago.
In the late 1970s, when oil prices spiked because of turmoil in Iran, the nation's motorists and corporations consumed 17 million barrels of oil a day, with 40 percent from foreign sources.
Today, the nation consumes an additional 2 million barrels a day, and nearly 60 percent comes from foreign sources - with Middle East nations as the greatest source and volatile Venezuela as another big supplier.
And with the nation at the brink of war against Iraq, economists and environmentalists alike are calling for renewed focus on the nation's energy plan.
"We're not in an energy crisis now, but the stage is set for tragedy," said Joe Fulton, the director for research and environmental management for City Public Service. "The energy policy that the president introduced in 2001 was the beginning of an energy plan, but that's been put in the drawer, and it's gathering dust and it needs to be pulled out and discussed.
"Venezuela is on the verge of anarchy. The Middle East is in a state of perpetual turmoil. And Nigeria has its problems. Our main sources of oil are in geopolitically unstable places in this world, and there needs to be a plan that addresses this."
Fulton argued that the Energy Department needs a more coherent energy plan that includes deadlines for goals.
That plan would have to be hashed out by environmentalists and automobile manufacturers, energy suppliers and economists, who all bring different perspectives to the table.
Economists such as Milton L. Holloway argue that the only viable solution to the nation's oil dependence is the one that the market works out.
"We can create a long-term solution through the introduction of new technologies - if they pass the marketplace test," said Holloway, an Austin-based energy consultant who has advised Exxon, Ford and the Texas Department of Transportation. "Otherwise, the right answer is to let the marketplace dictate the solutions and keep the world oil market reasonably stable so that prices don't go sky high."
And environmentalists such as John DeCicco argue that the long-term solution is regulation - more stringent emissions and fuel mileage standards for new automobiles.
"If a political commitment was made, and if the government held car companies' feet to the fire, and we said, 'I don't care how you do it, just make cars cleaner,' then we would go a long way in cleaning the air and decreasing our dependence," DeCicco said. "I don't see any other way around our foreign oil dependence."
One other thing the two agree with is that the United States and its economy - because of the wide availability of gasoline and its relative cheapness - is almost hopelessly dependent on oil.
"We've got this infrastructure for making and selling gasoline built up to last 80 to 90 years It took almost a century to get gasoline on every corner in every major city," DeCicco said. "It's going to take a long time for alcohol and (compressed natural gas) or propane to develop that kind of infrastructure."
And it would take decades before the technology for cars powered by hydrogen fuel cells becomes affordable for that sort of infrastructure to develop.
Meanwhile, the Energy Department is projecting demand for oil to grow by 1.8 percent each year for the next 20 years.
This continued consumption, plus an impending war in the Middle East, has placed the nation's economy in a more vulnerable position today - even with the price and supply controls of the Organization of the Petroleum Exporting Countries.
"Before we talk about getting to freedom from oil, we have to talk about when are we going to put a cap on growth," DeCicco said.
Despite decades of developments in alternative fuels and regulations requiring automakers to produce vehicles capable of operating on such fuels, the use of them is almost miniscule.
Alternative fuels - ethanol, biodiesel, propane, natural gas, coal and battery power - make up less than 3 percent of the nation's automobile fuel consumption.
City Public Service, like many companies, started experimenting with electric-powered cars and alternative fuels during the oil crisis of the 1970s.
"The goal was to wean the United States off of imported oil," Fulton said. "It was not an environmental imperative, and it didn't have to necessarily be a clean fuel. The requirement was that the fuels just have to come from the United States."
The company's extensive experiments are like case studies in the political pitfalls and technological challenges of using alternative fuels.
The battery-powered cars the energy company used in the 1970s died out soon after charging up - in parking lots or on the street.
Its recent nine-month experiment with biodiesel seemed successful - the company fueled its 1,500 diesel engine tractor-trailers, trucks, forklifts and other vehicles with the processed vegetable and animal fat.
But the experiment came to a halt when the vehicles started sputtering because of congealed residue in the engines.
By the end of the year, the energy company plans to start using an ethanol and gasoline blend called E-85 on its 100 Ford Ranger and Expedition trucks and 30 Taurus sedans.
But the fuel is largely unavailable in Texas, although it is more widely sold in Midwestern states. City Public Service will have to dedicate a tank and station to the fuel and contract with an out-of-state supplier.
"Ethanol is not yet a big factor here in Texas, but we're trying," said Melissa Gutierrez, fleet operations engineer for City Public Service. "If we can get ethanol here and bring it to our fleet, that might bring some tread for the fuel to the city."
Federal laws require companies such as City Public Service to buy cars capable of operating on alternative fuels. And for building the cars, automakers get credits they can then use to build bigger-engine vehicles.
Because of the law, nearly 3 million cars with "flex-fuel" engines capable of running on either E-85 or gasoline are on the roads today. But because the ethanol fuel is not widely available, most fleet operators use gasoline.
And because fleet operators - with the exception of a few such as CPS - are not demanding the fuel, ethanol producers don't have the capability of supplying more than 10 percent of the nation's fuel consumption.
Environmentalists call this conundrum the "dual-fuel loophole."
"There's no requirement that any of these vehicles use any of that fuel," said Bill Prindle, the deputy director for the American Council for an Energy-Efficient Economy. "The evidence is that there's virtually no change in alternative fuel use, and what we're proposing is, if we're going to keep requiring fleets to include these dual-fuel cars, then we ought to tie the regulations to actual sales of these biofuels. We ought to give credit for credit that's actually earned and don't just give it for nothing."
Like DeCicco and Fulton, Prindle said the nation needs to discuss energy consumption and develop an energy plan that will clearly spell out goals.
Prindle said such a plan ought to include improved automobile fuel economy standards and incentives for automakers to develop the technology through tax incentives.
Ethanol distributor Jim Peeples of AAE Technologies Inc in Newark, Del., said such a policy would require fleet operators to use alternative fuels.
Fulton said he believes any energy policy would be the result of sacrifice and compromise.
Environmentalists might have to concede protection of some federal parks to get increased fuel economy standards. Automakers might have to build more expensive, energy-efficient engines if they want to continue building large trucks. Motorists might have to pay higher prices for cars and domestically drilled oil if they want more stable gasoline prices.
"We have a problem," Fulton said. "I don't have a solution, other than to say that smart people have to work together. And even if they have different objectives, they have to come up with a comprehensive, integrated energy policy. And that will not be an easy job."
anazareno@express-news.net 03/07/2003