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Make Oil Obsolete by Turning It into Salt

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In response to President Obama's Oval Office address on the Gulf oil spill which pivoted to clean energy legislation, Senator Lindsay Graham stumped for "expanded offshore drilling cause we're gonna need more domestic supply to break our dependency on foreign oil."

Little problem: the ballyhooed link between domestic drilling and breaking our dependence on foreign oil is a myth.

Here in Boulder, oil industry veteran Anita Burke describes the delivery of oil as being set by "complex set of politics, back door deals, highest profit and market considerations - it has little to do with where the oil was drilled."

Once oil is drilled it belongs to the driller not the nation of origin, and from there it's on to a market dominated by players like OPEC. In that market we're a mouse among big cats, and according to Burke our domestic drilling gives us a stake but no assurance in trade outcomes.

Domestic drilling give us no leverage over world affairs, no oil to call our own, no leverage over price, plus all the risk of drilling here. It does net us domestic jobs, some royalties, profits for oil companies leading to tax revenue (and politicians' campaign coffers), as well as the important softening of our nation's trade imbalance. But it does not bring energy security.

Miscasting this market truth so brazenly, as Newt Gingrich did in asserting that drilling in Alaska would reduce prices at the pump, politicians' rhetoric is as responsible as BP's care over drilling. The truth to memorize is this:

Experience over the past three decades shows that whenever non-OPEC producers increase their production, OPEC decreases supply accordingly, keeping the overall amount of oil in the market the same - if we drill more OPEC drills less.

This quote comes from Gal Luft and Anne Korin of the Institute for the Analysis of Global Security in their seminal book, Turning Oil into Salt.

The figure of salt could be a play on Lot's wife being stuck in the past, but the comparison with oil is grimly contemporary. The authors retell the history of salt as a once strategic commodity for having had a monopoly on food preservation. This made salt an "irreplaceable enabler of economic, geopolitical and cultural behavior." Nations were built on access to salt and wars waged for it. Sound familiar?

Salt's monopoly now is lost to refrigeration, canning and jarring. We still buy and enjoy salt, even for industrial purposes, but we don't build foreign policy around it.

And that's where we need to get with oil.

The point of Turning Oil in Salt is not to exit world oil markets (a ruse they deride as autarky) but to develop a dynamic market of many oil alternatives -- both alcohol fuels and electricity -- so that we may import oil for the mix if we want but stay resilient to the shocks that oil markets provide.

The vision is completely like a diversified stock portfolio which makes investors stable in rough economic times. Sound familiar?

The answer is to be independent not just of imported oil but oil generally. But how to get there?

One key tactic to sidestepping OPEC is through electricity; it's too cheap for OPEC to compete with and that pricing also attracts investors toward electric drive systems. To avoid the threat that grid events can bring to an all electric transportation sector, the authors explore and commend a wide range of alcohols for flex fuel plug-in hybrid electric vehicles. They mightily defend ethanol and in particular emphasize methanol which can be made from a wide host of fuel stocks including algae and the natural gas toxically flared at oil drilling rigs.

The key is for Congress to mandate that cars sold in the US be flex fuel ready the way cars are already sold with seat belts and air bags, by legislating an Open Fuel Standard. Also key is to welcome all competitors to critical alcohol and biodiesel markets by establishing blend specifications, as well as dicing the heavy tariff on ethanol imports from friendly countries. Also key is for environmentalists to accept mining for the minerals needed for high performance car batteries.

Flex fuel plug-in hybrid electric vehicles could reach 500 miles per gallon of gasoline, while allowing consumers to make choices for environmental and national security concerns.

Price per gallon of oil is the pivotal metric, because oil doesn't just give us price shocks with devastating economic downturns as in 2008, and now threatens lasting damage to the economy in the Gulf of Mexico, it also runs our politics and foreign affairs. Secretary of State Condoleezza Rice pointed out that the politics of energy has warped diplomacy around the world, reducing otherwise free nations of all sizes into kowtowing to oil producers that harshly restrict human rights, so they can keep access to oil. That humdrum purchase at the corner gas station now has lethal leverage.

Shunning both the drill-baby-drillers of the right and the conserve-your-way-out enviros of the left, the authors clarify, "Neither efficiency nor drilling will strip oil of its strategic status." And one politician who understands flex fuel plug-in hybrids sponsored a bill for their development when he was Senator from Illinois: Barack Obama. Let's help him get back to this goal by letting Congress know we're not fooled about drilling and energy independence.

For a great 8-minute intro to the oil-to-salt case, watch Anne Korin on Energy Independence. Here, she take a big stab at politicians who allege that energy independence can be found by way of renewables or nuclear power, as if new forms of electricity cannot be fungible with oil. Well, that's true in a narrow near-term sense but as she makes the case for electrical transportation, she shows that indeed electricity can be significant at pushing back at oil demand. Her sharp criticism would be better aimed at politicians who pander about drilling our way out of oil -- the shibboleth of this new century.

A version of this column appeared in the Boulder Daily Camera