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Reduced Dependency on Oil?



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Some envision time when oil won't be king
By Tom Carter
THE WASHINGTON TIMES

When Saudi Sheik Ahmed Saki Yamani uttered those words last year he
surely
did not have Rep. Constance A. Morella in mind, but the Maryland
Republican
is a revolutionary. She recently bought and now drives a
60-miles-per-gallon
Toyota Prius, a hybrid vehicle using both electric and gasoline power.
     "Technology is the real enemy," the sheik warned members of the
Organization of the Petroleum Exporting States (OPEC). "It will reduce
oil
consumption and increase production from other areas.
     "The Stone Age came to an end not for a lack of stones, and the oil
age
will end but not for a lack of oil," said Sheik Yamani, a former Saudi
oil
minister, a founder of OPEC in its present form and now a private
consultant
in London.
     Mrs. Morella, for her part, relishes her role as an iconoclastic
crusader to end U.S. dependence on foreign oil.
     "You should see my little green car. It is green just like the
technology it represents," she said. "It is so good, technologically and
in
terms of saving gas."
     Mrs. Morella is one of five members of Congress who have either
bought
or are on a waiting list for one of the innovative gasoline-electric
hybrids, the first such car to be widely marketed. Christine Todd
Whitman,
the new chief of the Environmental Protection Agency, has looked into
buying
one.
     Adds Mrs. Morella: "It's spacious, has trunk space. It's quiet and
it
gets better mileage in the city than on the highway. Everyone who sees
it
loves it."
     Toyota this year expects to sell Americans 12,000 of the vehicles,
which are powered by a hybrid electrical and internal combustion engine
with
almost zero emissions. Another 50,000 already are on the roads
worldwide,
mostly in Japan, and a hybrid minivan is about to go into production.
     Not far behind, Honda has introduced its 70-mpg Insight, also a
gasoline-electric hybrid. Ford is rolling out its hybrid 40-mpg Escape
sport
utility vehicle as well as a fuel-cell car in 2003. And DaimlerCrysler
expects to have its hybrid - the HyPer - in commercial production before

2005.
     "It is not here yet, but the oil endgame has begun," said Jason
Denner
of the Rocky Mountain Institute, an alternate technologies research and
development company. "If everyone drove [a fuel-efficient car], we
wouldn't
have to import oil from OPEC."
     Sheik Yamani "is right; it is going to happen," said Ed Porter,
research manager of the American Petroleum Institute. "The question is
when.
The time frame is what is important. Even if there were a breakthrough
today, it would take 10 to 20 years to make a difference in the market."

     Brendon Prebo, a spokesman for the Ford Motor Co., said it is
generally
accepted that the automobile industry will be able to sell 100,000
low-emission, fuel-efficient vehicles a year in the United States by
2010.
     The United States consumes almost 20 million barrels of oil a day,
more
than half of that - some 13 million barrels - for transportation. If
60-to-80-mpg vehicles ever win a significant share of the market, it
will
mean serious trouble for oil-producing nations.
     "The real victims will be countries like Saudi Arabia with huge
reserves, which they can do nothing with - the oil will stay in the
ground
forever," Sheik Yamani predicted.
     Mr. Denner agreed, saying OPEC leaders like Saudi Arabia and
Venezuela
"are making their last play to make some money" before the age of oil
comes
to an end.
     Others in Washington, especially those responsible for short-term
energy concerns, are skeptical.
     A three-year study by the Center for Strategic and International
Studies concluded in February that U.S. dependency on foreign oil is
growing
along with consumption, and an energy-dependent United States will be at

increasing risk of economic blackmail from hostile nations like Iraq and

Iran.
     While some 60 percent of the world's oil supply now comes from
non-OPEC
nations, the study predicted that by 2020 half of the world's petroleum
needs "will be met from countries that pose a high risk of internal
instability."
     The study said a crisis or a military conflict is "highly likely"
in
one or more of the world's key energy-producing countries.
     But a growing number of oil industry executives and analysts,
environmentalists, technology gurus and futurists consider the sheik's
soothsaying on the mark.
     William Ford Jr., chairman of the Ford Motor Co., has said
alternate
technologies - in particular the fuel cell - will replace the internal
combustion engine within 25 years.
     "I believe fuel-cell vehicles will finally end the 100-year reign
of
the internal combustion engine as the dominant source of power for
personal
transportation," he said last October. "Fuel cells could be the
predominant
automotive power source in 25 years." He said his company would have a
test
fleet of fuel-cell vehicles on the road by the end of this year.
     The U.S. Department of Energy and the Department of Defense (DoD)
have
for years been spending millions on research and development of
alternative
technologies to heat and cool buildings and to run everything from
Bradley
Fighting Vehicles to motor-pool cars.
     The Defense Advanced Research Projects Agency (DARPA), the DoD unit

that, in conjunction with private enterprise, created the Internet and
numerous silicon-chip innovations, is betting on the hydrogen fuel cell
and
other alternate technologies.
     "Currently, there are several technologies that are being
demonstrated
on a large scale," said Robert Kripowicz, acting assistant secretary for

fossil fuel in the Department of Energy.
     "Commercial-scale technology will be introduced in the next two or
three years. The technology is there. The problem is the high cost.
There
will be market penetration when the price comes down."
     Control Risks Group (CRG), a private international security firm,
recently warned its Fortune 500 business clients that the introduction
of
high-tech vehicles will change the world, possibly at the expense of
their
diversified investment portfolios.
     "There is little doubt that the [U.S. federal alternative
technologies
program] will succeed in its initial aim. Widespread introduction of
80-miles-per-gallon vehicles, say from 2010, would have a major impact
on
world oil demand," said a CRG report released in October.
     Should that happen, the report cautioned that foreign investors,
the
ruling families in the Middle East, who tend to buy their public support

with oil revenues, "could lose crucial support and be removed."
     In a domino effect, migrant laborers in the Middle East from
Pakistan,
India and the Philippines - who depend on oil and ancillary work to send

remittances home -would be out of work, the report added.
     On the positive side, reduced demand for oil could force Saudi
Arabia
and other oil-dependent economies to tighten their tax systems and
liberalize their economies.
     In an article in Foreign Affairs magazine, Amy Meyers Jaffe, senior

economist for Petroleum Intelligence Weekly, and Robert A. Manning of
the
Council on Foreign Relations argued that cheap and abundant oil portends

instability throughout the world.
     "This scenario of plenty could destabilize oil-producing states,
especially those in the ellipse stretching from the Persian Gulf to
Russia,"
they wrote.
     Several analysts noted that developing countries are embracing the
newest technologies, for instance, by adopting cell phones and satellite

communications without ever going through the stage of telephone lines
strung on telephone poles.
     "China is skipping 100 years of Alexander Graham Bell technology.
That
could happen with fuel-cell technology, too," said Sheila Lynch, of the
Northeast Advanced Vehicle Consortium, which is funded in part by DARPA.

     Another research paper, from the Thunderbird Graduate School of
International Management, concludes "oil will cost $5 a barrel in 2010,"

compared with about $28 a barrel at present.
     "The price of oil might be $5 a barrel in 2010 or $40, nobody
really
has any idea, but, the effect [of a price drop] for Venezuela would be
catastrophic," said Norman Bailey, a senior fellow at the Potomac
Foundation
who specializes in Latin American oil.
     The price of oil is determined by supply and demand. Global demand
today is at about 73 million barrels a day. The world has an enormous
supply - more than 1 trillion barrels of "recoverable" reserves, and
while
demand is growing, it is not growing fast enough to outstrip supply for
at
least 40 years, according to the American Petroleum Institute.
     Add new discoveries, which are being found every day, and the
ability
to use newer, cheaper technologies to extract more of what is already
known
to be in the ground, and the estimate of recoverable reserves balloons
from
1 trillion barrels to more than 4 trillion barrels.
     "For all practical purposes, oil is abundant and inexpensive," said

Ibrahim Owiesz, a professor of economics at Georgetown University who
has
studied the oil industry for 50 years.
     That is why OPEC has been doing everything in its power for 30
years to
control the supply. For the first 70 years of the 20th century, until
the
advent of OPEC, the price of oil was fairly constant, at under $2 a
barrel.
     Since then OPEC has managed, for the most part, to keep a handle on

supply. It costs an OPEC nation between $1 and $1.50 to produce a barrel
of
oil. If OPEC nations can stay in agreement and dictate the amount of oil

available on the world market, it can keep the price fairly high, in the

range of $25 a barrel.
     This cycle of oil scarcity and glut has been repeated at least
three
times in the past 30 years, causing wild price swings from a low of $8 a

barrel in 1998 to $35 a barrel last August.
     U.S. refineries, which turn the oil into heating oil, gasoline and
other products, are producing at near capacity. No one has invested in
building new ones for 20 years because environmental regulations make
new
refinery construction both expensive and risky.
     The Prius, which sells for about $20,000 fully loaded, is three
times
as efficient as the average car powered by a gas-burning
internal-combustion
engine. The hybrid technology is seen by most experts as an interim
technology that will be replaced when hydrogen fuel-cell technology
becomes
cheaper and more accessible.
     Car enthusiasts, who find identity and spiritual succor in the
rumble
of a V-8 with a 400-horsepower engine, dismiss the "green cars" as
appliances.
     "The Honda Insight gets 70 miles per gallon and it costs only
$18,500.
The car gets zero gas emissions. The problem is nobody is buying them,"
said
Jerry Taylor, director of natural resources at the Cato Institute, who
recently went car shopping. "Nobody cares about fuel economy when fuel
is
relatively cheap."
     Still, a lot of people are betting on hydrogen fuel cells as the
power
for future transportation.
     "People won't accept vehicles that are not better than what we have

today, but they will buy them - for the same reason people buy CDs
instead
of record albums. They are better. That time is coming, sooner than most

people think," said Mr. Denner.




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