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Making A Bold Case For Moving Our Economy Beyond Oil

By: Glenn R. Pascall
Puget Sound Business Journal
September 12, 2008


Original link to column

Transportation is the lifeblood of the U.S. economy. And energy is the lifeblood of transportation. As a result, our nation’s economy is threatened by the risk to our energy security from both natural causes and human misdeeds.

“With energy you have malignant problems that nobody’s trying to create, and malevolent problems that are deliberate,” said R. James Woolsey, former CIA director under President Clinton. “Malignant problems range from the impact of CO2 on the ecosphere to the vulnerability of the power grid to chance accidents,” he added.

“Malevolence arises from the leverage our $2 billion per day oil import bill provides autocratic and hostile regimes.”

Woolsey spoke Sept. 5 at the third annual conference on transportation and technology organized by the Discovery Institute’s Cascadia Center for Regional Development, which drew 450 attendees to Microsoft’s Redmond campus.

Woolsey noted that two-thirds of U.S. oil consumption is related to transportation, and transportation is 97 percent reliant on oil. “The Middle East is becoming ever more dominant as the source of production. The long-term solution is to move away from oil as quickly and as decisively as possible,” he urged his audience.

Woolsey currently is an adviser to the John McCain presidential campaign. But his message sounded a lot closer to candidate Barack Obama’s description of domestic drilling as a “short-term stop-gap measure that won’t get us there - not even close” than to the chant of “Drill, baby, drill” heard at the GOP convention. There is a timely alternative, Woolsey noted.

“Being able to move toward electricity as the power source for transportation is a remarkable breakthrough. We can offer drivers a 90 percent reduction in fuel costs - on top of energy security and environmental benefits.”

Woolsey’s message confirmed presentations by experts in battery technology, alternative fuel corridors, and computer-aided transportation systems. But what roused the audience to a level of enthusiasm comparable to the political conventions was the keynote address of Shai Agassi.

Agassi is spearheading a bold initiative to make Israel the first nation on Earth to move off oil as an energy source by 2020, and do it in a way that is replicable elsewhere.

The challenge: “How do you run an entire country without oil, not as a gift from government but in a way that is economically logical, reflects consumer choice, and utilizes available technology?” Agassi said.

Electric-powered cars are suddenly feasible due to advances in battery life, power and smart thinking about the design of recharging infrastructure using standard electrical outlets. Even with today’s mix of electricity generation, an all-electric fleet would sharply reduce CO2 emissions compared to gasoline-powered vehicles. For long trips and long commutes, Agassi goes a step farther: “exchangeable batteries” with a one-minute transfer time at the service station. Moreover, “you never buy a battery. You pay for miles like paying for minutes on your phone” each time you exchange a battery.

Agassi argues for consumer incentives to speed adoption, including multiyear fixed prices and an “all you can drive” package aimed as the 25 percent of long-distance commuters and rural residents whose cars consume 60 percent of the gas. “These are the vehicles we want to get off the road first” - yet perhaps because of battery range limitations, electric car proposals have been aimed at city dwellers who use 10 percent of the gas.

Israel is building solar power capability equal to the energy demand for cars. “We’re drilling up instead of drilling down,” Agassi said. Israel offers rebates and lower taxes on electric cars, and Denmark and France have followed suit. Renault-Nissan will soon make hundreds of thousands of electric cars annually. “Detroit must wake up,” Agassi warned. “If they miss this cycle, they will be gone.”

He believes the government should offer guarantees of economic return to U.S. companies that invest in making vehicles, batteries and other parts of electric car and truck technology. The cost of rebates, guarantees and other incentives is modest compared to the $700 billion annual tab for U.S. oil imports, Agassi notes.

For example, he estimates the cost of an infrastructure for battery-swapping at $100 billion, 80 percent of which is labor costs. “We not only create a solution for oil, we create the next wave of industrial jobs,” Agassi urged. “This is an economic stimulus package in itself.”

The weight of Woolsey’s warning plus the hope contained in Agassi’s vision roused the audience with the prospect of a time “beyond oil” that enhances energy security and environmental protection at the same time it preserves the range of personal mobility choices.

It’s a powerful example of a problem created by technology - vehicles dependent on liquid fuels - that is on the brink of being solved by technology. What is required now is the political will to accelerate the process through incentives for the new and penalties for persistence in the old.

GLENN PASCALL’s column appears regularly in the Puget Sound Business Journal. Pascall is an economist who has taught and done research for the Evans School of Public Affairs at the University of Washington. He has directed economic impact studies for the aerospace and wood-products industries, among others, and developed strategies for state economic vitality and affordable housing.






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