Anne Korin, co-director of the Institute for the Analysis of Global Security, presented a keynote address at the ACE Ethanol Conference on the topic of energy independence through fuel choice.
She began by mentioning the recent mandate by the U.S. Congress that all television switch over to a digital signal – we have a real problem with our leadership, she believes, if this is what they are willing to focus on instead of real problems like oil.
“We need to change the focus of our leadership,” Korin said. “We need to make it clear what the problems are we’re trying to solve.”
National security issues really relate to oil, she said, stating that three-quarters of world oil reserves are in places where radical Islam is on the rise.
“It’s very unlikely that we’re going to win this war if we continue to fund both sides,” Korin said.
Korin believes there is confusion in Congress about the issue of energy and how to solve the problem.
“When it comes to oil, the national and economic security vulnerabilities that we face do not stem from our level of consumption – not even our level of imports,” she said. “Oil is a strategic commodity.”
Oil’s status as a strategic commodity is discussed in her recent book with co-author Gal Luft, “Turning Oil into Salt: Energy Independence through Fuel Choice.”
In centuries past, salt was a strategic commodity as oil is today. Salt was the only method for preserving food, and was therefore extremely important to society. But when other methods of food preservation were developed – canning, refrigeration, etc. – salt’s status as a strategic commodity was broken because people now had other options. Korin noted that the world consumes way more salt today than in the past, but it’s not important to anyone where we get it or who holds the reserves.
“Oil’s status as a strategic commodity is because of its monopoly over transportation fuel,” Korin said.
Korin believes the solutions on both sides of the energy debate are completely irrelevant and completely tactical – they don’t address the core issue. On one side you have “drill, baby, drill” (produce more) and on the other you have calls for conservation and increased efficiency (use less).
“These are essentially useless tactics when it comes to energy independence,” Korin said.
She notes that we are facing a cartel, OPEC, that sits on three-quarters of the world’s oil reserves, yet only accounts for 40 percent of the world’s oil supply. During the Arab oil embargo, OPEC produced 30 million barrels a day; today, OPEC produces 29 million barrels a day, even though global demand has dramatically increased.
What does OPEC do when we drill more or use less? When oil went to $147 a barrel and gas was $5 at the pump, she noted that people drove less and consumption dropped by 1 million barrels a day. In response, OPEC cut production by 4 million barrels a day. “We use less, they drill less,” Korin noted.
Every time non-OPEC countries increase production, OPEC drops production. If there’s a net increase in production, OPEC reduces supply to drive prices up.
“The same old tactics are not going to work to change the playing field,” Korin said. “OPEC is literally in the driver’s seat. We need to open the market to fuel competition.”
Specifically, what can be done? According to Korin, it must start with the cars.
“Vehicles have to be platforms on which fuels can compete,” she said.
Korin believes that Flexible Fuel Vehicles (FFVs) and an Open Fuel Standard are key. If FFVs were tweaked slightly to allow the use of methanol in addition to gasoline and ethanol, she believes we could form an undefeatable coalition. Methanol can be made from coal and natural gas, and bringing these interest groups into the fold with the traditional agriculture and biofuel supporters would strengthen the coalition by gaining us key votes in U.S. Senate leadership. For example, any FFV bill gets referred to the Commerce Committee in the Senate – Sen. Rockefeller from West Virginia, a coal state, and Sen. Hutchinson from Texas, a natural gas state, would look upon the bill much more favorably if it benefited their constituents as well.
“If you start to put these producers together, all American producers of energy, it’s very hard to argue against that kind of political clout,” Korin said.
Gasoline became an alternative fuel in Brazil in 2008, she noted, and we can do the same here.
“We want an open and competitive fuel market,” Korin said. “You should have the right to choose, just as consumers in Brazil choose.”
The first step, in her mind, is an Open Fuel Standard. She urged ethanol supporters to focus Congress’ mind on this.
Near-term liquid fuel choice is “very, very doable,” Korin said. “If producers had an incentive to expand capacity, if only they weren’t facing a blend wall, if vehicles actually enabled there to be a market.”
Korin believes this emphasis on flex-fuel vehicles and fuel choice integrates very well with new technologies like plug-in hybrid vehicles – flex-fuel plug-in hybrids.
“We’re going to go back to three-digit oil, there’s no doubt in my mind,” Korin said, if we emerge from this recession and oil consumption grows again. The economy is going to decline again, she believes in a series of “w” shapes instead of an upward swing.
Energy is the second-largest household expense, and a spike in oil prices affects our entire economy. “Everything we buy has an oil component to its price,” Korin said. “A spike in oil prices affects our entire economy.”
She called fuel choice a “cheap insurance policy” against the economic and national security damage that oil is and can do against the United States.
“Until we do this, we are at the mercy of countries who hate us and will do everything in their power to weaken us,” Korin said.
For more information about Anne Korin, visit the website of the Institute for the Analysis of Global Security:
http://www.iags.org/staff.htm
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