In 1850, most homes in the United States were lit by lamps that burned whale oil. As demand rose, supply dwindled-whales became shy and scarce-and prices for whale oil climbed. Then alternative fuels such as smokeless, odorless coal-kerosene began to sweep the market. By 1859, when Edwin Drake struck oil in Pennsylvania, five sixths of all whale-oil lamps had switched to the new fuels. The astonished whalers, who hadn't heeded the competition, ran out of customers before they ran out of whales.
Oil may now be poised to repeat that history. With prices exceeding $50 a barrel, the world's oil habit now costs $4 billion a day. Some experts warn that output will soon peak and prices will reach $100, but nobody really knows for sure (94 percent of reserves are owned by governments, which generally keep the data secret). Fortunately, it doesn't matter: With cheap oil-saving technologies and alternative fuels already at our disposal, the sooner we get off oil, the sooner we'll start making bigger profits. That's right-profits. The conventional wisdom is that $50-a-barrel oil has made alternatives to fossil fuels economically viable. But the truth is that they were viable back when oil was $25 a barrel. The arguments in favor of phasing out oil have now merely become overwhelming.
That's true everywhere-but nowhere more so than in America, the world's biggest oil consumer. It's entirely possible to cut projected U.S. oil consumption in half by 2025, and eliminate it completely by 2050, without compromising rapid economic growth. Demand could be halved simply by using oil twice as efficiently over several decades; the other half could be replaced with saved natural gas and advanced biofuels. According to a U.S. policy analysis we published last year at Rocky Mountain Institute ("Winning the Oil Endgame"), the cost of these changes would average $15 a barrel.
Even if, as the U.S. government forecasts, oil comes down in price by 2025 to $26 a barrel, the net saving in the United States would still be $70 billion a year, and the rest of the world would benefit proportionally.
Burgeoning economies like China and India have the most to lose from falling into a U.S.-style oil trap, and the biggest opportunity to avoid it by making their vehicles, buildings and factories efficient from scratch.
Doubling oil efficiency wouldn't be hard. A backlog of powerful ways to save and substitute for oil, amassed since the 1973 oil embargo, remains mostly untapped, even in the most energy-efficient countries. Automakers for instance could profitably increase fuel mileage to 66 mpg (3.6L/100km) for light trucks and 92 mpg (2.6L/100km) for cars. Doing so would cost an extra $2,550 for a midsize SUV, but would pay for itself in fuel savings in two years in the United States and in one year in Europe.
This would require combining hybrid-electric propulsion with new lightweight steels or, in a few years, carbon composite parts that absorb six to 12 times more crash energy per kilogram. New manufacturing processes could then make cars big, protective and comfortable with halved weight and fuel use at no extra cost. The U.S. military could pioneer such ultralight, ultrastrong vehicles to modernize its forces.
Modern aerodynamics, tires, engines and materials can cheaply double or triple the efficiency of 18-wheel heavy trucks and jetliners, too. Boeing's new 787 consumes 20 percent less fuel per passenger mile than its predecessor. Retooling the U.S. car, truck and plane industries would require a $90 billion investment. That may sound like a lot, but spread over a decade, it's worth about three weeks of U.S. oil imports a year. Other countries' retooling would typically yield at least as handsome profits in both money and security.
Once the United States has saved half its oil, it can cost-effectively replace an additional 20 percent with advanced biofuels, and the rest with saved natural gas. Biofuels (based on woody, weedy plants-not corn) will need a $90 billion investment, too, but they'll beat $26 oil, revitalize farming, protect topsoil better and preserve food crops' land and water.
Harvesting biofuel crops, carbon credits and wind power all from the same land, much of it now unproductive, can also double or triple net farm and ranch income. Again, details will differ in other countries, but the opportunities are broadly similar-even in Japan, which lacks the Great Plains but is 70 percent forested and could substainably harvest both fiber and biofuels there.
Eliminating oil demand in the United States would thus require a $180 billion investment, half for efficient vehicles, half for advanced biofuels.
By 2025, that would save $155 billion every year, create a million new jobs, save a million current jobs and generate 26 percent less carbon emissions.
Benefits in Europe, Asia and Latin America are proportional or better. Even oil-exporting countries could benefit: oil may well ultimately be worth more for its hydrogen content than for its hydrocarbons.
Mandates, subsidies and taxes aren't needed to implement these changes.
What's needed are smart business strategies and enlightened government policies that remove barriers to adopting new technology. The most important would be to offer "feebates"- a charge on inefficient vehicles that would be rebated to buyers of efficient ones, within each size class. Government would also play a role in helping retool car plants, retrain workers, scrap gas-guzzler planes and cars, and so forth. Customers would have more choices, workers more jobs, everyone more profits. In only two generations, oil-once the foundation of our strength but now a source of weakness-could become as obsolete as whale-oil lamps.
New energy sources and efficiency could make petroleum obsolete.
By Amory B. Lovins
Aug. 8, 2005 issue
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