[This is a really interesting House session that discusses U.S. energy policy, the need for consumers to be educated about why they should buy more fuel efficient cars, and push-back from the auto industry (see the full 140 pages for more testimony from auto makers to avoid making fuel-efficient cars). Their opposition for 30 years was successful – only now are we re-instituting CAFE standards. Not that it matters: now that gasoline is cheap, consumers are buying less fuel-efficient cars and trucks — is the attention span of the public about one second long from too much TV? Alice Friedemann, www.energyskeptic.com
Excerpts from: U.S. House. February 9, 2005. Improving the nation’s energy security:- can cars and trucks be made more fuel efficient ? Committee on science, House of Representatives, Serial No. 109-3. 140 pages.
Committee on Science Chairman BOEHLERT
Fuel economy is not just an energy issue, it is not just an environmental issue, it is, first and foremost, a national security issue.
Our nation is ever more dependent, stunningly dependent on the world’s most unstable region for the energy that is the lifeblood of our economy. Could anything be more critical? We are like a patient in critical care who needs a daily transfusion and can only hope to get it from an iffy, black market supplier. And yet we act as if everything will be healthy forever.
We are doing next to nothing to reduce our reliance on foreign oil. About 60% of the oil we consume each day is used for transportation; 45% just for cars and light trucks. We can not reduce our oil consumption meaningfully unless we address transportation. That is a simple, unarguable fact. And yet while many areas of the economy have been significantly more energy efficient over the past three decades or so, our nation’s fuel economy is worse than it was 15 years ago. That ought to be unacceptable.
It ought to be especially unacceptable, intolerable, really, when we have the technology to improve fuel economy without reducing safety, without harming the economy, and without reducing the options people have in the automobile showroom. There really is no debate about whether we have the technology we need to improve fuel economy. The only debate is whether we are willing to do something about it. I want everyone to remember the costs of inaction: they can be measured in dollars, particularly in the funds we spend on the military and homeland security, and they can also be measured in lives, as we can see in daily news reports. We need to consider the very real costs of being utterly dependent on unstable regions to carry out our most basic daily tasks.
In our view, CAFE increases provided the largest demand reduction by far. New technologies like hybrids and diesels will enter the fleet slowly and be used, we believe, in large part to increase power, weight, and other performance attributes instead of fuel economy absent increases in CAFE.
William K. Reilly. co-chair of the National Commission on Energy Policy.
Over the next 20 years, the United States and the world at large anticipate a 50%-plus increase in oil demand. That is a very large number. The 20 years from 1980 to 2000 was a time of tremendous innovation in technology, and new development capacity in the oil industry when the amounts of hydrocarbons obtained from a field were increased from 20% to 50%. It was a period when deep-water oil exploration and development more than 5,000 feet deep became possible in the Gulf and other places. It was a period when there was a lot of new technology that allowed drilling from one well to go out into several fields from that single point.
Yet despite all that innovation, all that new technology, and all that effort, the oil industry worldwide experienced only a 20% increase in production over that 20-year period. As we look ahead to the next 20 years, seeing a 50% expected demand increase, it just isn’t there. The energy sector has for several years experienced a consistent and growing gap between oil production and the discovery of replacement reserves.
House Representative Michael M. Honda, California
I continue to be amazed by the response of many people in this country to the prospect of conserving energy. We know that fossil fuel supplies both here and abroad are limited—they are fossil fuels, remnants from biological processes that took place [a long time] ago but aren’t occurring now. These fuels will run out eventually. There may be legitimate debate about exactly when that will happen, but the fact is that they will run out. Since our nation is nearly completely dependent on a finite source of energy, it seems to me that what we need to do in the short-term is reduce our levels of consumption of our finite energy supplies to make them last longer. CAFE standards are an excellent way of improving fuel economy in vehicles. By requiring vehicles to be efficient, the government can stand up for the long-term health of our nation and planet.
GAL LUFT Executive Director, Institute for the Analysis of Global Security (IAGS).
I would like to address the strategic context of our current dependence on imported oil and its implications on national security and offer new approaches to the fuel efficiency debate.
China’s demand for energy and other raw materials and its hunt for steady oil supplies in areas where the U.S. has strategic interests could undermine Sino-American relations. The U.S.–China Economic and Security Review Commission warned in its 2004 report that China’s growing dependence on imported oil is a key driver of its relations with terrorist-sponsoring governments. The report said: ‘‘China’s approach to securing its imported petroleum supplies through bilateral arrangements is an impetus for nonmarket reciprocity deals with Iran, Sudan, and other states of concern, including arms sales and WMD-related technology transfers that pose security challenges to the United States.’’ There is growing recognition within the oil industry that the rise of China will bring about a bidding war for Middle East supply between East and West. Dave O’Reilly, chief executive of ChevronTexaco warned recently against alliances formed between Asian countries and Middle East entities, calling for the U.S. Government to recognize and understand the implications of such a geopolitical shift. Without a comprehensive strategy designed to prevent China from becoming an oil consumer on par with the U.S., the U.S. might find itself in the future facing aggressive competition from China over access to Middle East oil with grave implications for global security.
The Strategic Impact of Our Oil Dependence
In 2004 oil prices have grown by close to 40%. As a result, the United States spent more than $18 million per hour on foreign oil. In the same period, OPEC’s oil export revenues grew by 42% to $338 billion. According to the U.S. Energy Information Administration (EIA) throughout 2005 oil prices will continue to stay high and OPEC will rake $345 billion in revenue. This transfer of wealth [to the Middle East) is of historical proportions and not only exacting a hidden tax on the American economy but also undermining our national security and the security of the world at large. It is unfortunate that most major oil producing countries are either politically unstable and/or at odds with the U.S. Some of the world’s largest oil producing nations are sponsors of or allied with radical Islamists who foment hatred against the U.S. The petrodollars we provide such nations contribute materially to the terrorist threats we face. In time of war, it is imperative that our national expenditures on energy be redirected away from those who use them against us.
Beyond the underwriting of terror, our present dependency creates unacceptable vulnerabilities. As we have learned from Osama bin Ladin’s messages, al Qaeda terrorists know that oil is the Achilles heel of the world economy and disrupting the world’s oil supply is central to their efforts to defeat the U.S. and its democratic allies. In Iraq and Saudi Arabia, America’s enemies have demonstrated that they can advance their strategic objective by attacking critical oil infrastructure and personnel. In Iraq alone there have been more than 200 attacks against pipelines and oil installations in the past 20 months. These targets are readily found not only in the Mid East but also in other regions to which Islamists have ready access such as the Caspian Basin and Africa. Over time, these attacks are sure to become more sophisticated and their destructive effects could be difficult, costly and time-consuming to undo.
In the longer run America’s national security can be adversely influenced by China’s growing demand for oil. Chinese oil consumption is increasing seven times faster than that of the U.S. and its imports have grown by over 35% per year for 2 consecutive years. All signs indicate that China’s appetite for oil will continue to grow in the years to come. According to the International Energy Agency, by 2030 China will import more oil than the U.S. does today. There is no doubt that China’s robust economic growth has already been felt on the global energy scene and has been a major contributor to last year’s spike in prices.
U.S. Approach to Oil Dependence
In light of intensifying military involvement in the Middle East, terrorist attacks on oil infrastructure, persistently high global oil prices, and the rise of China, oil dependence has become an incipient national security emergency. To address the problem of our dependence on volatile suppliers, the U.S. has pursued a 3-part strategy: • Diversifying sources; • Managing inventory in a strategic reserve; • Increasing the transportation sector’s energy-consumption efficiency
Diversifying resources is no more than a stopgap solution. In May 2001, when the Bush administration released its National Energy Policy, it proposed to reduce dependence on Middle East oil dependence by targeting alternative oil-supplying nations for government investment and closer alliances, including Angola, Azerbaijan, Colombia, Kazakhstan, Nigeria, Russia, and Venezuela. All of these nations are undemocratic, vulnerable to global terrorism and face significant political and social instability. Increasing U.S. reliance on these states would do little to address U.S. security and economic threats stemming from oil dependency. Given the integrated nature of the world economy we accomplish nothing if we merely shift our own purchases of oil from one of the world’s regions to another. An oil crisis will affect all our economies, regardless of the source of our own imports.
Furthermore, non-OPEC reserves are being depleted almost twice as fast as OPEC’s. This will ensure that our dependence on OPEC will only grow as time goes by. With OPEC countries sitting in the driver’s seat with respect to the world’s oil supply and oil prices, the world’s economic and political future will be compromised. Inventories are a critical element of energy security. But they are limited in scale and only useful to address a short term supply disruption. However, at this moment most major oil consuming nations do not have significant strategic petroleum reserves. This means that a supply disruption will still send international oil prices to the roof regardless of how much stock is kept in the U.S. Though over time it would be advisable to see more countries developing robust strategic petroleum reserves, such action at the point of high oil prices would only create additional demand and hence drive prices up even further.
Improving fuel efficiency in U.S. vehicles is the only course of action which carries no negative consequences. On the contrary, studies show that by reducing demand for oil in the transportation sector and transitioning the economy into an economy based on next generation fuels and automobiles, the U.S. could generate millions of new jobs and billions of dollars worth of investment opportunities.
New Approach to Fuel Efficiency
In the past three decades the debate on improving fuel efficiency has focused mainly on the tension between auto manufacturers, consumers and the government. Though everybody agrees that the U.S. should reduce its oil bill, neither Detroit nor the American consumer is willing to do so for the greater good. The U.S. auto industry shies away from embarking on revolutionary changes in its designs and production lines and by and large resists significant rise in CAFE standards. The American consumer is not willing to accept compromise on cost, comfort, power or performance.
To end the stalemate in the fuel efficiency issue we need to change the terms of the debate. Today when it comes to CAFE the auto industry shoulders the entire burden. But long-term security and economic prosperity depends on technological transformation not only at the vehicle level but also in the fuel that powers it. In other words, to get people to travel more miles per gallon of gas one need not focus only on redesigning the car, making it lighter or improving its engine. We should think in terms of gallon stretchers—making our fuel more efficient. For example, a number of commercially available fuel additives can enhance combustion efficiency by up to 20%.
Apply efficiency standards for heavy-duty trucks. Most of our effort to improve fuel efficiency is focused on light-duty vehicles. But improving the fuel economy of heavy-duty trucks offers no smaller opportunity for oil savings. The heavy-duty trucks sector is responsible for the consumption of close to three million barrels per day of oil. Over two-thirds of this energy is consumed by the heaviest trucks, such as tractor-trailers weighing over 33,000 lbs. Technology assessments by the American Council for an Energy-Efficient Economy (ACEEE) found that conventional technology improvements including enhancements to aerodynamics, weight reduction, improved engine fuel injection and the introduction of hybrid gasoline-electric or diesel-electric drive trains can achieve truck fuel-efficiency advances of 26 to 70 percent at cost-effectiveness. Congress should therefore begin to apply some of the standards for the small cars to the larger vehicle classes especially heavy trucks from 8,500 to 10,000 lbs.
Invest in Public Education. Consumers still rank fuel efficiency way below power, performance, cost and safety in their car buying considerations. As a result the Nation’s fuel efficiency standards have remained stagnant while our oil dependence continues to grow. Barring a catastrophic oil disruption this could only change if the public is to become more aware of the huge impact oil dependence has on our national security. Reduction of our oil bill should be viewed by consumers as a patriotic duty, not pure economic calculation. There is clear need for public education program to connect the dots between our behavior on the road and our national security, between the number of Hummers on the road and the number of Humvees in the Persian Gulf. Another issue on which public education is desirable is the true cost of oil. The most recent estimates suggest that in a non-war year the United States spends $20 to $40 billion in military costs to secure access to Middle East oil supplies, which means that the American taxpayer is paying at least an additional $4 to $5 a barrel for crude oil above market price. These extra dollars are being paid by consumers through their income tax but are not reflected at the price at the gas station. If Americans were more aware of what they pay outside the gas station it would be politically easier to introduce legislative efforts to transfer that tax burden from an indirect mechanism such as income tax to a direct pay-as-you-go tax at the pump.
America takes pride in offering choice in every aspect of our lives. Yet, when it comes to transportation fuels we are offered nothing but petroleum products. We must embark on an effort to diversify our fuel market by introducing domestically produced fuels that are made from waste products or other resources the U.S. is rich in, and that are clean and affordable. The U.S. is no longer rich in oil or natural gas. It has, however, a wealth of other energy sources from which transportation fuel can be safely, affordably and cleanly generated. Among them: hundreds of years-worth of coal reserves, 25 percent of the world’s total (especially promising with Integrated Gasification and Combined Cycle technologies); billions of tons a year of biomass, and further billions of tons of agricultural and municipal waste. Vehicles that meet consumer needs like ‘‘plug-in’’ hybrids can tap America’s electrical grid to supply energy for transportation, making more efficient use of such clean sources of electricity as solar, wind, geothermal, hydroelectric and nuclear power.
Because of the national security imperative we have no time to wait for commercialization of immature technologies such as fuel cells. Far too much focus is being placed on them at the expense of more quickly available solutions. We should focus on real world solutions and implement technologies that exist today and are ready for widespread use. We also don’t have the time and money to embark on massive infrastructure changes. The focus should be on utilizing competitive technologies that do not require prohibitive or, if possible, even significant investment in changing our transportation sector’s infrastructure. Instead, we should permit the maximum possible use of the existing refueling and automotive infrastructure. We need to remember that oil dependence is a global issue which should be addressed internationally. Even if the U.S. was no longer dependent on foreign oil, if the rest of the world still remains beholden to the small club of oil producers the national security problems discussed before will not go away. Only a global effort led by the U.S. to reduce demand for petroleum by distributing the above-mentioned technologies will bring about prosperity and strengthen global security.
The average new car fuel economy rose from 12.9 miles per gallon (mpg) in 1974 to 27.6 mpg in 1985—slightly more than the 27.5 mpg required by the CAFE standards that year. (The average for new light trucks, the category that now includes pickups, SUVs and mini-vans, rose to 19.5 mpg over the same time period.) Today, the standards stand at 27.5 mpg for cars and 21.0 mpg for light trucks.
The average fuel economy of new vehicles sold in the U.S. has declined since reaching a peak in 1987. The major reason is the explosive growth in SUVs, mini-vans, and pickup trucks, which must meet a fuel economy standard that is lower than that for passenger cars. The number of light trucks sold has more than tripled since 1980, while the number of passenger cars has declined slightly over the same period. Today more than half the new cars sold are light trucks. At the same time, CAFE standards have remained stagnant. The fuel economy standard for new cars has not changed since 1990. And until this year, the standard for new light trucks had not changed since 1996. In 1974 cars got 12.9 mpg, in 2005 the café standard was 27.5. In 1985 light trucks, SUVs and mini-vans got 19.5 mpg, now 20.7.
Any improvements in fuel economy in a particular model have been offset by declines in fuel economy in other models (or by increased sales of models with lower fuel economy), allowing the average—which is based on sales of all makes and models—to drop. Proponents of CAFE standards argue that government action is the only way to raise the average by pushing improvements across automakers’ fleets.
CONSUMERS ARE NOT BUYING FUEL EFFICIENT CARS
K.G. DULEEP. Managing Director at Energy & Environmental Analysis (EEA). The consumer side of the equation should also not be neglected. Consumers appear to value other attributes, notably size, luxury features and performance over fuel economy, and the appeal for SUV models has not diminished much even at the current gasoline price of $2 per gallon. The market share for light trucks continues to increase and reached a record of almost 55% of the total light vehicle market in 2004. Cars and light trucks with astounding horsepower ratings of 400, 500 and 600 HP are in demand in a country where the national speed limit rarely exceeds 70 mph. These trends will serve to eventually erase the benefits of any amount of technology introduction. Hence, future fuel economy related efforts should include efforts directed at consumer motivation to purchase more efficient rather than more powerful or larger vehicles. This has always been a difficult area for Congress, as any restriction on consumer choice appears politically unacceptable.
The auto industry today makes over 100 models that achieve 30 or better miles per gallon on the highway, yet the sales of these vehicles are very low.
Automaker PUSH-BACK to café standards
Automakers point out that they have made cars and trucks more efficient, pound for pound, by significantly increasing the power and size of vehicles without much change in fuel economy. And they argue that customers prefer power, size and luxury over fuel efficiency. As a result, average vehicle weight has increased by 24% since 1981 and average horsepower has increased by 93%.
Automakers question whether consumers will be willing to pay for efficiency technologies. Even if the technology pays for itself in gasoline savings over the life of the vehicle, they say, many consumers do not consider those kinds of long-term benefits when choosing a vehicle.
According to House Rep Michael M. Honda, Café Standards have not increased over the years because of industry insistence that increased standards would make U.S. manufacturers less competitive and would make vehicles less safe (which the National Academy of Sciences says is NOT TRUE). House Rep Sheila Jackson Lee added that the possible shift of large car manufacturing off-shore raised concerns of domestic job losses.
HOW MUCH COULD LIGHT-DUTY BE IMPROVED?
The Academy identified technologies that in combination, would allow fuel economy increases of 12 to 27 percent for cars and 25 to 42 percent for light trucks without any reduction of safety, and would pay for themselves in fuel savings.
The National Academy of Sciences panel concluded that CAFE standards have played a leading role in preventing fuel economy levels from dropping as much as they otherwise would have as fuel prices declined in the 1990s, and that fuel use by cars and trucks today is roughly one-third lower than it would have been had fuel economy not improved since 1975.
How much oil would an increase in fuel economy save? According to the National Commission on Energy Policy, improving car and light truck fuel economy by 10, 15, and 20% by 2015 would result, by 2025, in an estimated fuel savings of approximately two, three, and 3.5 million barrels of oil a day respectively. Such savings represent a 25 to 40% reduction in the additional amount of oil by which U.S. demand is currently projected to grow by that time, absent other policy interventions.
William K. Reilly. I am one of 3 co-chairs of the National Commission on Energy Policy. My Co-chairs are John Rowe, CEO of Excelon, and John Holdren, a professor at the Kennedy School at Harvard. We are an independent bipartisan group of 16 who came together in 2002 with support from the Hewlett Foundation and foundations: The MacArthur Foundation, Packard Foundation, and the Pew Charitable Trusts.
The Commission released a report at the end of last year entitled “Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy Challenges”. The first chapter of this report is about enhancing oil security. The placement of oil security first among all issues reflects the Commission’s view that improving our nation’s oil security is the most significant near term energy challenge we face.
We are going to have to find new efficiencies, new opportunities to be more productive in our use of liquid fuels, alternative fuels, and try to put an economy together, for transportation particularly, that respects a new energy environment.
We recommended that Congress should instruct the National Highway Traffic Safety Administration to significantly strengthen automobile fuel requirements. New standards, we propose, should be phased in between 2010 and 2015.
Our proposal is specifically designed to address political and technical objections to traditional CAFE increases which are: (1) impacts on competitiveness of domestic manufacturers; (2) impacts on domestic jobs; and (3) safety concerns. These are the big 3 that are raised as objections to increases in CAFE.
Spare capacity to compensate for supply disruptions has fallen to a mere 2% of global demand. Left unchanged, these factors suggest that the U.S. economy will continue to suffer from high and volatile oil prices and is at risk of more frequent and serious supply disruptions. Second, the rate of improvement in U.S. oil economic intensity has slowed in recent years. Oil economic intensity is a measure of how much oil is required for the U.S. economy to produce a dollar of economic output. This measure is important because the ability of the U.S. economy to weather oil price shocks improves as oil’s share of our economic output decreases. Since 1970, the U.S. oil economic intensity has dropped by half—a tremendous achievement—largely due to CAFE standards in the late 1970s and early 1980s, and to a shift in the electricity sector away from the use of petroleum. Further improvements would further insulate the U.S. economy from oil price shocks.
Hybrid and passenger diesel vehicles hold the promise for dramatic improvements in vehicle fuel economy. But historical trends suggest that potential fuel economy gains may be undermined unless government acts to reinforce the need for improved vehicle fuel economy. Although U.S. fuel economy has been stagnant since 1987, the vehicle industry has made considerable strides in efficiency. However, these efficiency improvements have been used to increase vehicle horsepower and weight, while still complying with Corporate Average Fuel Economy (CAFE) standards.
This trend—favoring horsepower, weight and other attributes over fuel economy improvements—is likely to continue absent government action. If we as a nation are serious about addressing our dependence upon oil, we must seize the opportunity presented by hybrids and passenger diesels to improve the fuel economy of our vehicle fleet.
During its deliberations, the Commission considered a variety of both major and minor transportation policy measures. These included many of the usual suspects: a gasoline tax, a CAFE increase, alternative fuels, as well as some new ideas: heavy-duty tractor trailer fuel economy, efficiency standards for replacement tires, congestion charges in urban areas. We examined these policy measures against four criteria: (1) the ability to save 1 million barrels per day of oil by 2025, (2) the cost per barrel of oil saved, (3) administrative complexity, (4) political feasibility. Of all the policies reviewed by the Commission, passenger vehicle fuel economy improvements represented the largest opportunity for oil savings over the next 20 years.
K.G. DULEEP. Managing Director at Energy & Environmental Analysis (EEA). The available conventional technologies have been extensively researched and I can state that there is a consensus among engineers regarding these technologies and their costs and benefits. Table 1 (attached) provides such a listing and is restricted to conventional technologies that are sold in at least one mass-market model in the U.S. as of 2005, to avoid any controversy about technology readiness for the market place.
The data in the table suggests that a total fuel economy improvement of about 26% in small cars to 28% in larger cars and light trucks is possible for much of the new car fleet with no weight reduction whatsoever. These estimates are a little lower than the ones derived by the National Academy of Sciences for two reasons. First, the choice of only those technologies already in the market as of 2005 is more restrictive than the definition used by the NAS. More importantly, I also believe that all of the cost-effective technology in the table could be adopted under free market conditions in most vehicles by 2015 if gasoline prices do not decline significantly, simply due to the fact these technologies pay for themselves. We estimate that about half of the improvement will counterbalanced by consumers buying more luxurious and larger vehicles, SUV models and four-wheel drive
HYBRID & DIESEL TECHNOLOGY. Both technologies offer the prospect for fuel economy improvements of 40 to 50%, more than double the total available from all cost effective conventional technology.
Mr. PORTNEY. If I have a car that gets 50 miles per gallon, but I drive that car 50,000 miles per year, I use more gasoline than if I have a car that gets 10,000— or 10 miles per gallon that I only drive 5,000 miles per year. So it is not just the fuel economy of the car, it is also the number of vehicle miles traveled that the—that determine how much gasoline we use, and therefore how much we are contributing to the greenhouse gas burden in the atmosphere or how insecure our energy supply is becoming. And so, while no one likes to vote for tax increases, just requiring that cars be more fuel-efficient only gets at part of this. And when cars become more fuel efficient, it becomes cheaper to drive each mile, so you lose a little bit, because people cheat and drive more miles, because they have more fuel-efficient cars.
Typically, people don’t take into account the fact that the gasoline that they use is contributing to the atmospheric burden of carbon dioxide. They don’t take into account, in their own purchase decisions, this dependence on imported oil, and that is why, in a case where you wouldn’t get involved if there weren’t these external costs, that there is a good reason for economic efficiency that you can justify some form of government involvement in the fuel economy—in the case of fuel economy. We can certainly argue about what is the best way to do it, but I think there is a case there that, because there is a form of market failure, that you need some kind of government intervention.
Chairman BOEHLERT. You know, I watched the Super Bowl, and I must confess, a lot of people did. I will tell you, when you talk about consumer demand, I would say I have to commend your industry, one member of it, that ad that Ford put on for the new Mustang was one of the stars of the whole commercials. And I think a lot of people watch the Super Bowl just to watch the commercials, and they don’t give a darn about the Patriots or the Eagles. But it seems to me that the auto industry drives by your marketing and advertising approach. And I don’t know if there are any examples of members of your Alliance selling safety or selling fuel efficiency. But I will tell you this, I have been around this town long enough to remember when a hot shot young vice president from Ford came to town and told the Congress, and I was on the staff at that time, ‘‘If you mandate seat belts, that will have a devastating negative impact on the industry I represent.’’ Fast forward several years, that guy then was chairman of the board of another automobile company and was on saying, you know, ‘‘Buy our product. We have got airbags to protect you, and no one requires it, but we are concerned for your safety.’’ So I would suggest that a lot of this has to do with your marketing approach. And we all have to be sensitive to your industry. It is a very vital part of our overall economy. And for us to put undue burdens on the auto industry is counterproductive.
Mr. Miller: This committee had hearings on hydrogen fuel cells in the last Congress and there seemed to be a great deal of skepticism that there is not an ample supply of hydrogen out there, that, in fact, the hydrogen has to come from other fossil fuels, has to be stripped out, that it is not a particularly clean process to do that. It doesn’t really free us from our dependency on foreign—on fossil fuels. We seem to be pursuing hydrogen to the exclusion of other alternative fuels, and we have some massive amount of money tied up in transporting liquid fuels. Where would the hydrogen come from if we really dramatically changed from a fossil to a hydrogen economy?
Mr. STANTON. Somewhere down the line it has got to come from renewables if we are going to work our way out of this.
Mr. PORTNEY. Everyone is optimistic about anything that has the potential technological promise of hydrogen of being a completely clean energy source, but I think we need to do something sooner than the time frame in which hydrogen will become the major propulsion for motor vehicles [which is] 15 or 20 years away. I would love to be more optimistic than that. I think we can’t wait 15 or 20 years before we try to do something, regardless of what it might be, to try to improve the fuel economy of the overall fleet, whether it is through higher taxes or technological fuel economy requirements or whatever. I would hate to put all of our eggs in the hydrogen basket and not do anything for 20 years in the hopes that that will be available and to solve the problem.
Mr. EHLERS. I would like to comment about market forces. A number of people have talked about this as if somehow these are some magic, independent things that automatically lead to good results. [Auto companies keep] talking about market forces. ‘‘We are just making what the people want.’’ And I simply remind them of their advertising budget. How much do you spend advertising SUVs compared to how much do you spend advertising low-cost, high fuel economy vehicles? It is very disproportionate. And we are not talking peanuts here. If I buy a new car, I am paying about $400 for the advertising that they bought to persuade me to buy the car. And so market forces don’t operate in a vacuum. I think the auto industry has taken a pass on that. They can greatly influence the choices consumers make through education, through advertising. A part of the problem, and part of the reason market forces don’t work very well is the public simply does not understand energy. They can’t see it, they can’t touch it, they can’t taste it, they can’t feel it, and it is frustrating to me, as a physicist, because that is one thing I do understand. But I have often said I wish energy were purple. If energy were purple and people could see it and they are driving down the highway and a Toyota Prius comes by with just a little purple around it, and it is followed by an SUV with a big purple cloud, people are going to say, ‘‘Hey, you know, I am going to get one of those Prius,’’ because they could see it. They could see the impact. As it is, their only tie to reality, in terms of the energy, is the price at the gas pump. And that is a little too ephemeral to directly affect their purchases. I wish the automobile companies would try to influence purchases.
Chairman BOEHLERT. I think it is a national security imperative to reduce oil demand, and I think we all can accept that. Can we just rely on market forces to do that? We prefer market forces, but if market forces aren’t doing what needs to be done, and we have a national security imperative to reduce demand for oil and look at the emerging giants in India and China, the demand, you know—there is not an unlimited supply of oil around the world.
Mr. REILLY. If the question is “could not use higher prices as a way to create demand for more fuel efficient vehicles?”, I do think that there is an appropriate role for the government, through tightening CAFE standards. I do, but there I would come back to the point that I made before, that I would only do that if I gave up on the use of market forces, which I am not prepared to do, and it is so important that car makers be given sufficient time to do this, rather than be required to get unrealistically high improvements in unrealistically short periods of time, because then we are back to downsizing and down weighting, which was a counterproductive way to go about this in the first place.
Chairman BOEHLERT. And we established the fact that it is not necessary to downsize and down weight to get the increased fuel efficiency that we are looking for. We have established that fact.
Hon. William K. Reilly, answers questions submitted by Representative W. Todd Akin
Q1. If the CAFE program has been successful, could you please explain why we are more dependent on foreign oil today and consuming more gasoline in our vehicles than we were when the program was originally put into place? And if that is the case, how will increasing the CAFE requirements to higher levels reverse this trend and accomplish the original goals of CAFE?
A1. Was CAFE successful? In a study published in 2002 entitled ‘‘Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards,’’ the National Academy of Sciences found that fuel use by passenger vehicles is roughly one-third lower today than it would have been had fuel economy not improved since 1975. CAFE was identified as a ‘‘major reason’’ for the fuel economy improvement. The NAS estimated a 2.8 million barrel per day savings between 1975 and 2000, or 14 percent of current U.S. consumption (20 million barrels per day).
If CAFE was successful, why are we consuming more oil? We are consuming more oil because vehicle miles traveled (a function of increasing numbers of vehicles on U.S. roadways and the trend towards driving greater distances each year) have outstripped the oil savings achieved by improved fuel economy in the late 1970s and 1980s. Vehicle miles traveled (VMT) has been increasing steadily since 1966. Fuel use declined between 1978 and 1983 due to improved vehicle fuel economy and a decline in the use of oil by electric utilities, but has risen steadily since then as passenger vehicle fuel economy levels have stagnated.
Responses by K.G. Duleep, Managing Director of Transportation, Energy and Environmental Analysis, Inc. Questions submitted by Chairman Sherwood L. Boehlert
Q1. In your testimony you called the demand for 400, 500, and 600 horsepower engines ‘‘astounding’’ since the speed limit in this country rarely exceeds 70 miles per hour. What effect do you believe this increase in horsepower will have on fuel economy? On safety?
A1. Large increases in horsepower do affect fuel economy and safety if vehicles. Typically a 10% increase in horsepower decreases fuel economy by 2.5% if the vehicle technology level is unchanged and the horsepower gain is achieved by engine upsizing. Larger increases in horsepower of 20% or more also require improvements to the brakes, tires and the drive line, thereby increasing vehicle weight and causing additional losses in fuel economy over and above the effect of engine upsizing. The doubling of horsepower that has occurred over the last 20 years has led to an implied loss in fuel economy of about 30 to 35 percent.
The CAFE standards for cars set in 1975 by Congress are still in force today at the same level of 27.5 mpg while light-truck CAFE standards have also continued for the last 20 years with almost no change. Hence, the benefits of these standards have long since been swamped by population growth, increases in car ownership, and increased driving per car.
Q2. You suggest in your testimony that to advance the adoption of new technologies to improve fuel economy, the government should enact tax credits for the purchase of advanced technology vehicles. However, if CAFE standards were to remain constant, since they are based on a fleet-wide average, the purchase of advanced high efficiency vehicles could be off-set by the sale of more fuel inefficient vehicles or the deployment of these technologies for greater power or size, resulting in little or no change in the overall consumption of fuel by the fleet. How do we avoid this outcome when supporting incentives for the purchase of advanced vehicles?
A1. Your question gets to the heart of one of the problems of the CAFE program. There is nothing that says the consumer must purchase ‘‘fuel economy.’’ The CAFE program only says that vehicle manufacturers must produce a fleet that averages a certain fuel economy level regardless of what consumers want or choose to purchase. The auto industry today makes over 100 models that achieve 30 or better miles per gallon on the highway, yet the sales of these vehicles are very low.
We can’t change consumer-purchasing habits, but we can make some of these advanced technology vehicles in the most popular vehicle lines. There are already two hybrid-electric SUVs available and more are planned for production. There is also a diesel-powered SUV available. It is the manufacturers task to introduce advanced technologies in vehicles that consumers want to purchase.
Petroleum use increased to 18.8 million barrels per day in 1978, the first year in which the CAFE standards were in force. From that level, U.S. petroleum consumption decreased to 15.7 million barrels per day in 1985, for practical purposes the last year in which the CAFE standards increased. The reduction in petroleum consumption from 1978 to 1985 was achieved despite a 15% increase in miles traveled by light-duty vehicles over the same period (from 1,426 billion vehicle miles in 1978 to 1,637 billion in 1985).2 Because it takes more than 10 years to turn over most of the stock of light-duty vehicles, the benefits of higher new vehicle fuel economy persisted beyond 1985 even though the rate of growth in vehicle travel exceeded the rate of increase in fuel economy. By 1992, the turnover of the stock of vehicles was nearly complete and on-road light-duty vehicle fuel economy reached a plateau of approximately 19.5 miles per gallon. Had light-duty vehicle fuel economy remained at the 1978 level of 13.6 mpg, the 2,078 billion miles traveled by passenger cars and light trucks in 1992 would have required 46 billion gallons (three million barrels per day) more petroleum than it did.
U.S. SENATE March 7, 2006. Energy independence S. HRG. 109-412. Committee on energy & natural resources.
DIANNE FEINSTEIN, U.S. SENATOR from CA (raise fuel economy, close SUV/light-truck loophole)
The amount of oil imported into the United States has climbed from 6 million barrels of oil per day in 1973 to 12 million barrels per day in 2004 (Energy Information Administration). And the percentage of foreign oil consumed in the U.S. has climbed from 35% in 1973 to 59% in 2004.
So while there has been a lot of talk about decreasing our nation’s dependence on foreign oil, most of it has been empty rhetoric. This week’s cover story of BusinessWeek is ‘‘The New Middle East Oil Bonanza.’’ With oil prices so high, partially due to fear of oil production disruptions in Nigeria, Saudi Arabia, Venezuela, and elsewhere, billions of dollars are going into the coffers of oil-producing nations.
I am seriously concerned about the impacts of America’s overdependence on foreign oil. This cannot continue. For foreign policy and for environmental reasons, the overdependence on oil is a real problem. With 5% of the world’s population, we cannot continue to use 25% of the world’s oil supply. Especially not with India and China developing at their current pace. There are things we could do today to reduce our dependency on oil, and yet we need the political will to get them accomplished. Specifically, we must raise the nation’s fuel economy standards. The Consumer Federation of America estimates that increasing the fuel economy of our domestic fleet by 5 miles per gallon would save about 23 billion gallons of gasoline each year, reducing oil imports by an estimated 14%. A fleet-wide increase of 10 miles per gallon would save 38 billion gallons, cutting imports by almost 20%. That is why I have introduced a very modest bill for the past three Congresses that would close a loophole in current law that allows SUVs and other light trucks to meet less stringent fuel economy standards than other passenger vehicles.
If the SUV loophole were closed, the savings would be rather dramatic. More than 480,000 SUVs were sold in the first quarter of 2005. If those SUVs achieved an average fuel economy of 27.5 miles per gallon, we would reduce gasoline use by more than 81 million gallons of a year. And that’s just for SUVs sold in the first quarter of 2005. If this bill were to pass, the United States would save 1 million barrels of oil a day and decrease foreign oil imports by 10%. Yet the automobile manufacturers continue to fight this proposal tooth and nail and for reasons I cannot understand. The technology to make these vehicles more efficient is available today and American auto companies are making vehicles to meet fuel economy standards in other countries. China, for instance, has issued fuel efficiency standards that are more stringent than ours. If American auto companies hope to make cars that will compete in China, then they will need to make them more fuel efficient. I hope the representative from Ford will be able to address this issue in her statement. If the Federal Government is not going to act, Congress should not stop the States from acting.
EVAN BAYH, U.S. SENATOR FROM INDIANA
[my comment: never happened]: The Vehicle and Fuel Choices for American Security Act (VFCASA makes significant reductions in our oil use. My bill would reduce projected oil use by 2.5 million barrels per day in 2016 and 7 million barrels per day in 2026. It also provides tools to meet these aggressive targets by improving the efficiency of vehicles
One of the lessons from September 11th is that we can no longer be so dependent on places like Saudi Arabia, Russia and Venezuela for our energy supply. Yet we are more dependent on foreign oil from hostile countries today than we were on September 11th—making us more vulnerable and putting the United States in a uniquely disturbing position of bankrolling both sides in the War on Terror. This goes to the heart of our security and our sovereignty. As the world confronts the prospect of a nuclear Iran, our leverage is dramatically limited by the fact that Iran is the second largest exporter of oil. We and our allies are vulnerable to energy blackmail. A few months ago, the Russians decided they weren’t pleased with the Ukrainian elections, so they simply decided to stop exporting natural gas to them— nearly causing an economic crisis in the region.
Decreasing the oil intensity of our economy will help us weather price shocks and make us more secure. We can reduce oil intensity by reducing our demand for oil.
The risks faced above ground by depending on unstable suppliers and good weather are too great and to a certain extent out of our control.
We must bring the same urgency to energy security that we have on the War on Terror.
[my comment: never happened] The Vehicle and Fuel Choices for American Security Act (VFCASA makes significant reductions in our oil use. We chose this title because nothing less than our national security is at stake. This bill would reduce projected oil use by 2.5 million barrels per day in 2016 and 7 million barrels per day in 2026. It also provides tools to meet these aggressive targets by improving the efficiency of vehicles and increasing the production and use of biofuels. VFCASA includes new approaches for manufacturers, the federal government, scientists and consumers, all designed to encourage greater energy security. Other Senators are Joseph Lieberman of Connecticut, Sam Brownback of Kansas, Norm Coleman of Minnesota, Lindsey Graham of South Carolina, Ken Salazar of Colorado, Jeff Sessions of Alabama, Bill Nelson of Florida, Richard Lugar of Indiana, Barack Obama of Illinois, Johnny Isakson of Georgia and Lincoln Chafee of Rhode Island. I hope that in the future we all look back on the day this bill was introduced as the beginning of a major shift in our national security strategy. I hope that history will say we saw a challenge to our national security and prosperity and then met it and mastered it.
The legislation requires that in 2012, 10% of vehicles manufactured be flexible fuel vehicles, alternative fueled vehicles, hybrids, plug-in hybrids, advanced diesels and other oil saving vehicle technologies. This percentage rises each year until 50% of the new vehicle fleet will be one of these oil saving technologies. It also provides tax incentives for U.S. manufacturing facilities to retool existing facilities to produce advanced technology vehicles which will help shift the vehicle fleet to more efficient vehicles while minimizing the job impact of an increased market share of advanced technology vehicles. The bill builds on the Energy Policy Act (EPAct) of 2005 by expanding the number of consumers that can take advantage of the tax credit available for the purchase of more efficient vehicles. It offers a tax credit to private fleet owners who invest in more efficient vehicles.
VFCASA contains robust research provisions in the areas of electric drive transportation, including battery research, lightweight materials and cellulosic biofuels. Each of these technologies hold great potential to play a key role in reducing our dependence on oil. For instance, lightweight materials, such as carbon composites and steel alloys, hold the promise of being able to double automotive fuel economy while improving safety without increasing the cost of the vehicle.
The average American automobile might remain in operation for 15 years or more. This means that it is essential that we begin immediately to deploy oil saving technologies.
JOSEPH I. LIEBERMAN, U.S. SENATOR FROM CONNECTICUT
While geologists and economists can debate when the oil supply will ‘‘peak,’’ what is indisputable is that demand is now exploding as developing nations such as India and China increase consumption.
According to the IEA, global demand for oil—now about 85 million barrels a day— will increase by more than 50% to 130 million barrels a day between now and 2030 if nothing is done. The industrialized world’s dependence on oil heightens global instability. The authors of the IEA report note that the way things are going ‘‘we are ending up with 95% of the world relying for its economic well-being on decisions made by five or six countries in the Middle East.’’
We are just one well-orchestrated terrorist attack or political upheaval away from a $100-a-barrel overnight price spike that would that would send the global economy tumbling and the industrialized world, including China and India, scrambling to secure supplies from the remaining and limited number of oil supply sites. History tells us that wars have started over such competition.
Left unchecked, I fear that we are literally watching the slow but steady erosion of America’s power and independence as a nation—our economic and military power and our political independence. We are burning it up in our automobile engines and spewing it from our tailpipes because of our absolute dependence on oil to fuel our cars and trucks. We need to transform our total transportation infrastructure from the refinery to the tailpipe and each step in between because transportation is the key to energy independence.
China is moving aggressively to compete for the world’s limited supplies of oil not just with its growing economic power, but with its growing military and diplomatic power as well. Second, today we must depend for our oil on a global gallery of nations that are politically unstable, unreliable, or just plain hostile to us. All that and much more should make us worry because if we don’t change—it is within their borders and under their earth and waters that our economic and national security lies. Doing nothing about our oil dependency will make us a pitiful giant—like Gulliver in Lilliput—tied down by smaller nations and subject to their whims. And we will have given them the ropes and helped them tie the knots.
CRAIG THOMAS, U.S. SENATOR from WYOMING
We consume roughly two thirds of the oil we use in the transportation sector. Because of its large share of consumption, policy changes affecting the transportation sector can have a significant impact on reducing foreign dependence. Increased mileage standards, elimination of boutique fuels, lowered speed limits, and greater use of alternative fuels are just a few of the many ideas that have been advanced to decrease the transportation sector’s consumption of oil. I contend that coal can make a difference in the transportation sector as well. Wyoming recently announced plans to construct a coal-to-liquids plant. The National Mining Association believes that continued use of this technology could replace as much as 2 million barrels per day of oil and 5 trillion cubic feet of natural gas per day by 2025.
James Woolsey, CIA Director 1993-1995
Energy independence for the U.S. is in my view preponderantly a problem related to oil and its dominant role in fueling vehicles for transportation.
Transportation infrastructure is committed to oil and oil-compatible products. So major investments… in electricity generation of different types… has very little impact today on oil use. And hydrogen will take too long to satisfy some of the urgency that should be attached to our current oil dilemma.
So the United States and other oil-importing countries should: (1) encourage a shift to substantially more fuel-efficient vehicles within the existing transportation infrastructure, including promoting both battery development and a market for existing battery types for plug-in hybrid vehicles; and (2) encourage biofuels and other alternative and renewable fuels that can be produced from inexpensive and widely-available feedstocks—wherever possible from waste products.
Government policies with respect to the vehicular transportation market:
Encourage improved vehicle mileage, using technology now in production The following three technologies are available to improve vehicle mileage substantially. [We should] take advantage of diesels’ substantial mileage advantage over gasoline-fueled internal combustion engines. Heavy penetration of diesels into the private vehicle market in Europe is one major reason why the average fleet mileage of such new vehicles is 42 miles per gallon in Europe and only 24 mpg in the U.S.
Hybrid gasoline-electric vehicles now on the market generally show substantial fuel savings over their conventional counterparts. Constructing vehicles with inexpensive versions of the carbon fiber composites that have been used for years for aircraft construction can substantially reduce vehicle weight and increase fuel efficiency while at the same time making the vehicle considerably safer than with current construction materials.
FRANK VERRASTRO, DIRECTOR & SENIOR FELLOW, ENERGY PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES
Analysis performed by EIA and the National Renewable Energy Lab estimates that even under optimistic assumptions, alternative transport fuels, excluding electric hybrid plug-ins, can be expected to displace or replace a maximum of 10% of conventional liquid transport fuels by 2030, leaving petroleum-based fuels, new technologies, conservation, and improved efficiency gains to deal with the remaining 90%. For purposes of comparison, a billion gallons of alternative fuels per year roughly translates to 65,000 barrels a day of conventional gasoline and maybe less depending on energy context. And we currently consume over nine million barrels a day of gas every day. In short, while contributions from alternate fuels will be helpful as a component in meeting increased consumer demand, petroleum-based fuels are likely to remain the overwhelming fuel of choice for at least the next 20 years.
At the same time, however, we cannot ignore preparations for transitioning to the inevitable post-oil world, a transition which former Energy and Defense Secretary, Jim Shlesinger, has characterized as the greatest challenge this country and the world will face outside of war.
To the extent practicable, every effort should be made to pursue policies and changes that fully take into account investment in market practices and utilize as much as possible existing infrastructure and currently available technologies.
And fuels alone are not the answer. We need radical changes to our motor vehicles, both in terms of energy and design and construction material, as well as to the way we transport goods and people.