October 24, 2011“Achieving $2 Gas”—and protecting our
national security at the same time
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Robert Zubrin recently penned a compelling column (see below,
highlights added) about how we can get back to $2 a gallon gasoline.
This has enormous implications—for our wallets, our economy, and our
national security.
It’s why the Open Fuel Standard Act is one of our
high priority pieces of legislation in Congress. Because, as Zubrin notes so
well, there currently is NOT a truly free, competitive market for oil.
We believe in pursuing EVERY option, from “drill baby drill” to
alternative fuels such as methanol, in order to break the back of the OPEC
cartel. Small wonder the Saudis are vigorously opposed to the Open Fuel Standard
Act.
Break the OPEC cartel, and we’ll have a free market in
transportation energy. A truly free market will reduce the cost of energy,
drastically reduce our dependence on foreign oil, and cut funding for terrorism
and stealth jihad. Great for us. Bad for Saudi Arabia, Iran,
Venezuela…
http://www.nationalreview.com/articles/277246/achieving-2-gas-robert-zubrin
NATIONAL REVIEW ONLINE
Robert Zubrin
Achieving $2 Gas
It’s possible, with
the right policy.
Republican presidential contender Michele Bachman has said that if she is elected, gas
prices will fall to $2 per gallon. Such promises have understandably been
greeted with considerable skepticism. But $2 gas is exactly what America needs.
The question is, how can we get it?
We can’t do it just by
expanded domestic drilling. In order for gasoline prices to fall to $2 per
gallon, oil prices must be cut to $50 per barrel. And oil prices are set
globally, with the dominating influence being the OPEC oil cartel. Since 1973, this cartel, which controls 80 percent of
the earth’s commercially viable oil reserves, has refused to expand production,
thus keeping petroleum prices artificially high. While, with a more
pro-business government, the United States might conceivably be able to expand
its production by a million or two barrels per day, OPEC could easily counter by
cutting its production to match, or more likely, by simply continuing its
non-expansion policy and letting increased Chinese demand take care of the
slack.
If we are ever to get $2 gas, the power of OPEC to control oil
prices needs to be broken. The United States Congress could do this with a
stroke of the pen, simply by passing the bipartisan Open Fuel Standard bill
(H.R. 1687). This act would effectively destroy
OPEC by requiring that all new cars sold in the USA be fully flex fuel, able to
run equally well on gasoline, ethanol, and — most important — methanol. This
latter capability is critical because methanol can be, and is, made cheaply in
large quantities from coal, natural gas, or any kind of biomass without
exception. The United States has only 4 billion tons of oil reserves, but
we have 270 billion tons of coal, vast amounts of natural gas, and an enormous
capacity to produce biomass. By requiring that all cars sold here (and thus all
cars made worldwide) be compatible with methanol, the act would force oil to
compete with a fuel whose sources are not controlled by the cartel, and that we
and our allies possess in abundance.
Methanol has only about half the
energy per gallon as gasoline, but is 105 octane, which means it can be burned
more efficiently. Taken together, these two factors make methanol’s current spot
price of $1.38 per gallon roughly competitive with $2 gasoline.
Of
course, the passage of the OFS bill would not cause gasoline prices to crash
instantly. While it would no doubt hit oil futures hard, and thus cut the
speculative premium on petroleum prices, the most immediate result of allowing
methanol to compete against gasoline in the vehicle-fuel market would be to send
methanol prices up, perhaps by as much as 60 percent. This situation would not,
however, last for long. Methanol can be made and sold profitably today for $1.38
per gallon. At a 60 percent markup, its manufacture would be super-profitable,
and massive amounts of capital would rush in to expand production. This would
drive the price of methanol down, dragging gasoline and oil down prices with it,
until methanol reached a price point where its production offered no greater
profit than that prevailing in the economy at large. The fact that methanol
would reach this price — what Adam Smith would term its natural price —
follows from the fact that the sources to make methanol are plentiful and
diverse, so that no cartel can artificially limit its production.
This underscores the key issue. There is not a free
market in oil. Adjusted for inflation, the price of oil has increased eightfold
since 1973, but OPEC production has not increased at all. In a free market, such
a price increase would spur increased investment, with subsequent expanded
production driving the price right back down again. That is why the
inflation-adjusted price of coal, and nearly every other industrial commodity,
has not risen in four decades. But because of the cartel, oil production has not
responded to price increases in the way that it should in a properly functioning
capitalist economy. In order for the free-enterprise system to do its work and
deliver the cheap fuel the world needs, the ability of this cartel to limit the
world’s liquid-fuel supplies needs to be broken. The Open Fuel Standard bill
would accomplish that.
High oil prices are wrecking our economy.
Since the United States imports 5 billion barrels of oil per year, the current
price of nearly $90 per barrel will hit us for $450 billion this year alone, a
huge tax on our economy. As a result, millions of jobs and thousands of
businesses are being lost. If this wealth-draining process is allowed to
continue, fiscal necessity will require us to withdraw the military forces
protecting our national interests abroad, without a shot being fired.
Instead of seeking to exploit this catastrophe by placing its blame on
their opponents, or posing with empty promises of salvation contingent upon
their promotion to higher office, politicians need to take action. Two-dollar
gas is not just a nice idea for inclusion in a campaign speech. It’s a critical
necessity for economic recovery.
Either we break the cartel, or the
cartel breaks us. The Open Fuel Standard bill needs to be passed.
—
Robert Zubrin is a member of the Board of Advisors of Americans for Energy and author of Energy Victory: Winning the War on Terror by
Breaking Free of Oil. |
