Aren’t there alternatives to oil?
MSNBC.com answers your questions on business, personal finance
By John W. Schoen
The relentless rise of gasoline prices has readers asking about a variety of solutions to the problem — including alternative energy sources. Michael in Virginia thinks it’s time for a crash program to convert to a "hydrogen economy." Marian in Arkansas thinks tax breaks for hybrids will help. And Jerry in Washington says it’s time to start pumping some of those U.S. oil reserves onto the market.
For more on alternative energy, check our series: After Oil.
WHAT ABOUT HYDROGEN?
You and others continue to say the replacement fuels (e.g., hydrogen) are "decades" away due to costs. Is it not worth it to subsidize the start-up costs of, say, a hydrogen economy, given the price of the alternative? Maybe not, but that is the debate we should be having… Kennedy, after all, spent on the order of $100 billion to beat the Soviets to the moon. Where was the economic incentive there?
Michael A. – Fairfax, Va.
The economic incentive for going to the moon was to develop all manner of technologies that would produce new materials, processes and products would help give the U.S. economy a shot in the arm. But economics weren’t the main reason the U.S. space program got off the ground. In the midst of the Cold War, it was a hugely popular thing to do politically. Among other things, it was designed to scare the Bejeezus out of the Kremlin — and any other regime that might have harbored a desire to challenge the U.S. militarily.
Times have changed. Today, every politician alive remembers what happened to Jimmy Carter when he put on a sweater, sat by the fire, and told Americans to turn down the thermostat. In the recent political climate, proposing that people conserve fossil fuels — let alone consider alternatives — has largely been a non-starter. (If gas prices keep rising, that may change.)
So far, the best our Congress can come up with is a $14.5 billion energy bill that lavishes tax breaks on oil companies that are already drowning in so much cash they don’t know what to do with it. And then there’s the $286 billion transportation bill, which never met a road project it didn’t like -– including a quarter-billion-dollar bridge from Ketchikan, Alaska, (pop. 8,000) to Gravina Island (pop. 50) that will be longer than the Golden Gate Bridge and higher than the Brooklyn Bridge.
But, okay, let’s assume that the money is there to jump start a hydrogen economy, and you were crowned King of America. You fund a Manhattan Project to develop an economically viable process for making hydrogen and the transportation technology needed to replace petroleum. (We’re assuming you’ve already solved the problem of generating the massive amounts of electricity needed to make the hydrogen and figured out how to make a hydrogen airplane.)
Now: how long do you suppose it would take to build an entire fleet of hydrogen-driven cars, trucks and commercial airplanes? Let’s assume you already have them: you still need to build a hydrogen distribution system to fuel them — a project on the order of, say, the U.S. Interstate highway system. With a lot of political support and no significant new technology required, construction of that road network took more than two decades (and counting: see aforementioned Transportation Bill.) So even if the U.S. government could afford it — on top of the multi-trillion-dollar spending that be required over the coming decades to pay for Social Security and Medicare — it would still take at least as long to build a hydrogen distribution system.
Even more modest networks have required huge amounts of money, materials, and labor — all of which takes time. Look at cable television: a "utility" that most American families can no longer do without. It took cable companies 20 years to build out a network to where they could offer universal service. And that involved stringing wires on poles. Same with the mobile phone networks. And they didn’t even need to string wires.
Now think in terms of burying tens of thousands of miles of pipeline underground. Or outfitting over 100,000 gas stations and convenience stores with the tanks and pumping facilities needed to top off your hydrogen car — which isn’t even being manufactured yet by the auto industry.
That’s why some people working on the problem think that even "decades" may be an optimistic forecast for the arrival of a hydrogen economy.
GIVE US A BREAK
I wonder if the President or Congress will offer a tax break for the purchase of hybrid cars?
Marian P. — Little Rock, Ark.
You’re in luck, Marian. The $14.5 billion energy bill just passed by Congress and signed by the White House – the Energy Policy Act of 2005 – is mostly made up of tax breaks for oil and gas companies to spur them to produce more oil and gas. (With the industry reporting record profits, it’s not clear why they need these billions in tax breaks. And an amendment to require car makers to sell more efficient vehicles – which would cut gas consumption and price – got shot down.)
Still, the package did include a few crumbs for consumers, including a tax credit of several thousands dollars for people who buy hybrids — the new technology that companies gasoline and electric motors to save fuel.
One problem with hybrids is that car makers are using the electric motor to give these cars more power and pickup, so many owners have been disappointed by the mileage improvement they were expecting.
And there’s another catch. Only the first 60,000 hybrids sold by each car maker qualify for the credit. Since there are something like 17 million cars and light trucks sold in the U.S. every year, that’s not going to go very far. So if you want to get the tax credit, you’d better head down to the hybrid dealer soon.
OIL RESERVE RESERVATIONS
Why do we not use gas from the national reserves to ease the rise in gas prices?
Jerry — Bellingham, Wash.
The Strategic Petroleum Reserve is basically a bunch of large holes in the ground in Texas and Louisiana filled with oil. It’s now holding about 700 million barrels of oil, which is just about topped off.
It’s been used in the past to try to push oil prices lower, but President Bush has said he doesn’t want to do that. He says it’s there in case we have actual shortages of oil, and so far that hasn’t happened.
In any case, there’s just not enough oil to make a difference. American consumers would burn through that 700 million barrels of oil in about two months. So trying to flood the market with oil from the SPR might send prices lower for a few weeks, but they’d start rising again once the reserves were used up.
And then we’d have nothing to fall back on if our supplies of imported oil ever do get cut off.
IS OIL PEAKING?
How likely do you think it is that we are sitting on top of peak oil production right now? And independent of when that is going to happen, what do you think will happen to the US Dollar in the face of the long run energy (underlying driver of the economy) supply crisis peaking would provide.
David H. — Palo Alto, CA
Our personal opinion is that the answer is unknowable. The size of oil reserves are notoriously difficult to estimate. And the governments of oil producing nations guard those numbers very closely.
But those who believe that “peak oil” is near point to the level of daily oil production. The price behavior of oil seems to confirm the peak theory, but a lot could happen to extend the peak forward – among them sharply greater efforts at conservation. (Oil consumption actually fell in the early 80s as greater efficiency kicked in.)
For example, if you doubled the gasoline mileage of the U.S. fleet of cars and light trucks, you would cut gasoline consumption dramatically. And that would almost certainly lower prices and extend the lifespan of gasoline as a transportation fuel.
As for the dollar, it’s hard to separate the impact of energy prices from a number of other influences on its value. Trade imbalances, federal budget deficits, the strength of competing economies all play a role. But there’s no question that the rising price of dollar-denominated oil erodes the global purchasing power of US currency.
Of the million barrels of oil the U.S. consumes daily, how much is burned in trains, planes and autos (non stationary) versus in homes, industry, power plants etc. (stationary energy consumption) that could be hooked to a power line and use electricity produced by other means?
Of the roughly 16 million barrels a day of crude oil consumed in the U.S., about two-thirds of it ends up being used as a transportation fuel. And until we can figure out a way to run cars on electricity, or make the cars and trucks we drive go further on less fuel, we’ll have a hard time weaning ourselves from oil.
That’s why alternate energy sources like wind and solar – which are used to make electricity – aren’t replacing nearly enough oil fast enough to kick our addiction to crude.
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