Woolsey: Any Detroit Bailout Must Break US Oil Dependence
A mounting chorus of voices -- including President-elect Obama's -- are linking any economic stimulus or any related bailout of Detroit to environmental and energy independence objectives. Here, James Woolsey, a former CIA director an the energy adviser to John McCain during the campaign, adds his two cents a mile to the debate. There may indeed be a "green lining" to resolving America's economic crisis.
Nathan Gardels: After Citigroup, the next bailout crisis in the U.S. will involve the Big Three automakers in Detroit. What kind of deal should the government make with Detroit to ensure a retooling of the industry that puts America on the path to clean energy and energy independence?
James Woolsey: Any bailout money for Detroit should be used to maximize the speed of a shift toward the use of electric hybrids and flexible fuel vehicles. Both are necessary in breaking oil's monopoly on transportation in the U.S. Both would utilize existing infrastructure such as electric power grids and filling stations, and the technology is already there, and in use, for the engines themselves. So it can be done relatively quickly.
When I say electric, I don't necessarily mean all-electric cars. With an electric hybrid, you only need a battery than can take you 30-40 miles on an overnight charge -- along the lines of what the Chevy Volt (scheduled for 2010) can do. Three quarters of the cars in the U.S. go less than 40 miles a day. On three days out of four, you can use all electricity. For anything beyond that, with a hybrid, you'd have liquid fuel to take you the rest of the way where you need to go.
Flexible fuel vehicles should have an "open standard," which means they can use not only ethanol but methanol, butanol or other alcohol-based fuels. This can be done quickly. Brazil went in only three years from having 5 percent of its news cars using flexible fuel to 75 percent.
Putting this shift front and center will not only help save jobs in the auto industry but create news jobs -- for example in the production of batteries for electric hybrid vehicles. It will create a whole new set of suppliers.
Gardels: America has been through this cycle several times where we pledge to free ourselves from Mideast oil -- the first OPEC oil shock in the 1970s, the first Gulf War, 9/11 and the rise of oil to $140 a barrel a few months ago. What will be different this time?
Woolsey: First of all, the apparent need for an industry-wide restructuring in Detroit is an opportunity for intervention to set fuel and vehicle standards that we've not seen before.
Second is the cheap cost of electricity. If you are driving a car fueled by electricity and stored in batteries the cost is between 2 and 4 cents a mile. The electric hybrid car I have costs me 2 cents a mile on an overnight charge because my utility company charges less for energy use at night than at peak hours during the day.
No matter how cheap a barrel of oil becomes, it will never match this price of electricity. Last summer, gas was up to 10 cents a mile; perhaps it is now in the high single digits. This was not true in the past for alternatives like synfuels or hydrogen, which were even more expensive than oil.
Ultimately, this is why I believe electricity is the resource that will wean us from oil. For the average family, electric hybrid cars can reduce their fuel bill by one-third or more. That is a pretty good deal. And this is true independent of its other benefits -- reducing carbon output that causes climate change or stemming our indirect subsidy of terrorism in the Middle East by hemorrhaging cash to the likes of Saudi Arabia for their oil.
Gardels: In World War II, the U.S. retooled the auto and other industries in a matter of months to produce tanks, planes and other weaponry. Is there any reason we can't shift that quickly today from gas-guzzlers to electric and hybrid fuel cars as part of the managed bankruptcy of the auto industry?
Woolsey: As we geared up for World War II, the U.S. became a command economy under FDR. He simply ordered industries in the name of national security to mobilize for war after the attack on Pearl Harbor.
It would be more complicated today, and I think we'd want to preserve as much of the market as possible in a crisis, but not wartime, environment. But I do think that by changing the incentives for both the industry and consumers we can rapidly create a large enough market for electric and hybrid fuel vehicles that will challenge and then override oil-fueled transportation.
We need to make it easier for people to buy flex fuels and electric hybrid cars. There is already a $7,500 tax credit available.
And we need to mandate the automakers retool for flex-fuel capacity -- a minor manufacturing shift that costs only $100 per car or so, much simpler than the mandate for seatbelts or airbags. The government might even want to let the automakers write off capital expenditures for any move toward oil independence.
Gardels: The Japanese have spent years refining hybrid vehicles, including the Toyota Prius, which is widely driven in the U.S. If we want to be free of Middle East oil, why not just import Japanese cars or buy cars made in the U.S. by Japanese companies?
Woolsey: The health of the U.S. economy over the long run is tied up with having a viable auto industry. We can certainly be open to giving the Japanese or others incentives to locate their production in the U.S. -- perhaps with tax write-offs -- if they moved rapidly to electric drive.
This would reduce their transport costs of shipping from abroad and create jobs in the U.S. But that is in addition to, not as a substitute for, an American industry.
Gardels: The incoming Obama team has been talking a lot about a "green stimulus" for the economy. Perhaps the bailout or managed bankruptcy of the Big Three can be linked to that stimulus -- for example, the construction of electric fueling stations around the country for consumers who shift to electric cars.
Woolsey: Any stimulus that moves us toward a green economy should be structured so it can operate even if credit markets are frozen up for a time. A direct fiscal stimulus can be aimed at weatherizing buildings so they are more energy efficient or installing solar units. That would employ people. The more we can move toward distributed generation of energy and away from central power plants the better we are. That kind of decentralization of power production will create jobs.
Denmark, for example, gets a third of its electricity from co-generation -- the recycling of waste heat in homes, offices and factories. In the U.S., co-generation is a tiny source of electricity.
Moving to Denmark's level on this front alone could employ those very people who have lost their jobs because of the downturn in the housing construction industry.
In many states and localities, simply changing the rules set by the public utility commissions, which favor the large centralized producers of energy, would allow this to go forward. No big, huge government program from Washington is required.
Gardels: So there may be a "green lining" to America's economic crisis?
Woolsey: Yes, possibly so.
Read More:
Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In
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The biggest thing that is wrong with Detroit is that it's in Detroit. How can this part of the country be the focal point for innovation, cutting edge technology, world-class marketing and inspired design?
California should be the headquarters for all new car design and manufacture. The Standards set by the state of California are always far ahead of the rest of the nation. The innovation capabilities of the Left Coast are beyond question. ("Silicone Valley" isn't in Minnesota by accident). The green revolution started in California. (guess where the "Sierra" in Sierra Club came from)
The car culture of Southern California is legendary, prompting whole schools of design thought and practice. There still is enough aerospace workers ready to transfer skills. The ports of Los Angeles and Long Beach are right there, waiting to export what we produce.
The agreement between GM and Toyota (NUMMI) in California is a prototype for a new age of labor agreements and forward thinking.
California is the nations largest market for cars. Build them where the most customers are. Design them for the most progressive, environmentally aware market in the world...Ca
Move the auto industry from the Rust Belt to the Sun Belt and stimulate a whole new way of doing business.
Things definitely are not working out in Detroit.
I perhaps understated the relationship between Silicone Valley and a potential move for the auto industry to California.
The innovation that is required in new technology vehicles needs a point of genesis. I would proffer that California is totally unique in it's potential to innovate a new paradigm of car manufacturing.
combine the assembly line mentality of Detroit with forward vision of California and we could rewrite all of the rules concerning international competition and national pride.
Does the world hunger to visit the United states JUST so they could tour Detroit? Or, do they yearn to see Hollywood, San Francisco and the coast of California?
California has ALWAYS led the way. We do it first here better than anywhere else. The car industry needs an infusion of creative energy. Where better than to get it the Land of the Golden Bear?
Sorry to burst your bubble joe, but Cali simply doesn't have the water resources for such a huge manufacturing undertaking. It takes a lot of water to manufacture most things in America and Cali simply can't afford it.
It's not a matter of water. Detroit uses very little water in comparison to CA farms. But the cost for the workforce would put companies out of business twice as fast as in Detroit. Cars are a low margin business. Semiconductors are a high margin business. That's why they do semiconductors in Silicon Valley and not rubber wheels.
water for industry doesn't have to be potable. So, with an ocean lying at your feet, the water shortage becomes no shortage.
This is a bit off topic, but am I crazy to think that the Big Oil companies have been manipulating the gas prices for years? It seems like everytime there is serious discussion in the U.S. about creating an energy independant society with green technology, or manufacturing more energy efficient vehicles..
Wow, so much nonsense here... take for instance:
"No matter how cheap a barrel of oil becomes, it will never match this price of electricity. "
1 barrel of oil contains about 1000kWh worth of electrical energy. At 8 cents/kWh industrial electricity price, that barrel has an energetic value of $80. To a residential end user in the near future (once the price of electricity will go up because or rising demand), this will be double or even triple and we will see equivalent prices to $160 or even $240/barrel based on energy equivalent. What most commentators do not realize is that the price of anything is driven by supply and demand. And electricity is no exception. So by linking transportation to the electric grid we will move some of our transportation fuel cost over to the electric sector and thus increase prices dramatically.
That's not so bad, by the way, because it makes renewables more competitive. But to say that oil will never be as cheap as electricity is incorrect. It was cheaper for the longest time, we were just not making good use of it.
The flaw in your thinking is the many ways in which electricity can be produced. There is only ONE way to produce energy from oil...refi
Rethink your numbers with that factored in and get back to us.
"There is only ONE way to produce energy from oil...refi
You are completely mistaken. Refining is a process we need to make our small ICEs happy. For external combustion engines like power plants the quality of the fuel is of almost no importance. Whatever burns can go in there if the burners are properly designed for it. Of course you have to spend serious money to clean up the gases that are the result of the combustion to remove bad stuff like mercury and sulfur dioxide, but that's a matter of keeping the environment clean, not one of actual fuel processing.
After refining only a portion of each barrel of oil is usable to produce gasoline.
Since the Big Three can't even comprehend the idea that Americans might use anything except gasoline in their cars, this means that you should only count the percentage of that barrel of oil that makes gasoline in that equation.
And since the market is driven by supply and demand, as the cost of electric goes up, so will the amount of electric being developed by wind, water, solar & geothermal. As more research is done in these areas the price per watt being developed by them will continue to drop.
One does not need to refine oil to burn it in a conventional (normally coal or gas fired) power plant and convert it's caloric value to electricity. And that is the one and only correct comparison of the "intrinsic physical" (rather than "market") value of an energy carrier: how much work can it do if we extract the max. amount that's thermodynamically possible. And that's about 1000kWh per barrel of oil.
Now, I agree that this is a highly technical way of looking at it, but that is exactly why I keep talking about it, so people get an objective measure of what a barrel of oil does, rather than having to make up subjective economic proxies.
It also highlights the problem: burning the same fuel in a car is so much less efficient than burning it properly in an industrial facility that we pay 90% of the price of gas for heating the environment and at best 10% for something useful like moving heavy loads (or just ourselves).
"And since the market ..."
Water... not really. We are geologically basically tapped out with dams in the developed world. Solar, wind and geothermal have a long way to go, but they are not a panacea. People have to understand that none of these technologies can offset the kind of wasteful uses that we consider "normal". "The American Way of Life" is on it's way out and no technology will keep it alive for much longer.
Infrastructure?
Many gas stations had to be built before the auto took off in sales. Not to mention roads to drive them on.
Look, people keep claiming that if the big three fail it will be the death of the American Auto industry. This is absolutly not true. There are many small little companies building electric and feul efficient cars in this country. Whats keeping them small is the fact that they can't get any distribution for their products because the big three won't let them, or fights them, or tries to buy up the pantents that they need. As far as I'm concerned, these aging dinosaurs going away or shrinking may be the best possible thing to happen to the American Auto Industry in decades. Instead of three companies that insist on pretending that it is still the 1950's we will have many smaller agile companies that will build products American actually wants and needs.
That's a crock. The problem is that they don't know how to scale for volume, which is what Detroit does best, and most of them wouldn't meet US safety and environmental regulations. There's a lot more to being a major automaker than designing a prototype that might or might not work.
Exactly. These big three need to buy up a few electric/e
There's lots of others besides the Aptera. Try http://ven
Centrally planned, communist countries have a political leadership that defines the products that the masses should purchase.
In the United States of America, the market determines what will be demanded and therefore produced.
President-elect Obama is the commander in chief, he is not the chief automobile product planner and neither is anyone in his cabinet nor in Congress.
If you want a better Detroit then dump CAFE which is a failed first step at centralized planning for auto manufacturers and renegotiate labor contracts.
Yes!!!
We see how the 'free' market has made a huge success of Detroit.
Get rid of those CAFE standards which are still set at what we could achieve back in the 70s!!!
We don't need to dump CAFE, we should strengthen it. Detroit is in it's current fix in large part because they don't have enough fuel-efficient products. Not one dime should go to propping up the current infrastructure. You market purists haven't learned a thing. And the unions should be flexible, but they should not buy into the Wal-Mart-ization of the labor market. Ask most Americans now working in all those $8/hour jobs if they would join a union if freely given the opportunity, with no intimidation from management. Big boxes spend big bucks to keep unions out. They talk about being a 'family' and that a union interferes with that 'relations
Incresing CAFE actually favors the oil companies.
That's how it used to work. Now the government is seizing the means of production, comrade. Don't be openly critical, or you may have to visit a political correctness gulag.
GO ON BAIL THEM OUT !
BUT ALL THE TECHNOLOGY THEY HAVE BEEN HIDING TRANSFERS TO THE GOVERNMENT !!!!
All the battery patents, the engine patents, and the transmission patents.
Great point. Not sure if you've seen the documentary "Who killed the electric car?" (2006), but there is mention of battery technology that will allow a totally electric car to travel up to 300 miles on a single charge.
Are the Japanese, European, and Korean automakers in on this conspiracy too? Is that why they haven't released a 300-miles range all electric car?
YESSSS!!!!!! This is what needs to be demanded..
"Flexible fuel vehicles should have an "open standard," which means they can use not only ethanol but methanol, butanol or other alcohol-based fuels"
Detroit started rolling out flex-fuel cars for ethanol based E85 in 1997. The problem has been fuel availability to teh public. The Midwest has respectable E85 availability but there is virtually none on the coasts. Why? Two reasons: the oil companies control the fuel distribution system in the US and there's an oilman in the White House. Had the path to alternatives started under the previous administration proceeded apace our oil consumption for personal transportation would have been greatly reduced by now.
Without government intervention to force distribution of alcohol based fuels (which would require minimal changes to the existing system) the current struggle to move to pure electric vehicles is the only way to get around the fuel distribution problem without rebuilding an entirely new distribution infrastructure.
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