The Flex Fuel Solution

This article has been corrected.

Drive smaller cars. Drill more. Many such solutions have been proposed to wean the United States off of our dependence on foreign oil, but -- at least according to Dr. Gal Luft, the executive director of The Institute for the Analysis of Global Security -- flex-fuel vehicles are the only plan of action that will yield lasting results. According to Luft, the U.S. government needs to mandate the manufacture of cars that will run on not only a combination of gas and ethanol but also other alternative fuels such as methanol and butanol.

Luft has gained widespread recognition for his advocacy. Newsweek deemed him a "tireless and independent advocate of energy security," and Esquire included him in its 2007 list of "America's Best and Brightest." Last week, Luft launched Citizens for Energy Freedom, a coalition to introduce competition to the fuel market, making the widespread use of alternative fuels more than a pipe dream. 

Rachel Stern: You have been a fervent supporter of "flex-fuel vehicles" as a way to reduce foreign-oil dependence and bolster national security. Can you explain just what these vehicles are and how far-reaching of an effect they may have?

Gal Luft: Flex fuel allows drivers to use any combination of gasoline and alcohol. Now, alcohol fuel is ethanol, methanol, butanol, and many other various alcohols out there. All of these alcohols can be met at various rations based on your discretion to power the car without any compromise. The reason why we think that this is a very important part of the solution to our oil dependency is because today, petroleum is the only source of energy in the transportation sector. So it's basically a monopoly. We're trying to use fuel choice to break the monopoly by introducing competition.

RS: You say that it costs an extra $100 per vehicle to convert it to flex fuel. How would this eventually affect the auto industry economically?

GL: If you look at the cars that GM and Ford are making in Brazil, for example, almost all the cars are flex-fuel. American automakers have already said that they'd be willing to make 50 percent of vehicles flex-fuel by 2012. Which is good. We want to make this into a law. We want this to be codified. I think that no industry likes to be told what to do, but considering that the cost is pretty low, and considering that the technology is mature, I think that this is something they can live with.

RS: Considering that our economy is not doing so well right now, do you think there will be any reluctance on the part of the government to mandate this extra fee?

GL: Yeah, but it's only $100. Think about it this way: Let's say the car is $100 more expensive, which is not significant. Methanol today sells for about $2 dollars a gallon. So right there, you're saving almost 50 percent on your fuel expenses. You're going to be able to recoup this charge pretty quickly. It's not like a hybrid car that costs you an extra three or four thousand dollars. Here, we're talking about basically a tweak. Not anything major. The important thing is once you have the flex-fuel mandate, you basically incentivize the entire supply chain, because within three years there will be 50 million new cars on the road that are flex-fuel cars. At that point, it makes sense for gas station owners to retrofit their pumps. And then the supply chain will begin to follow. So it's sort of like you gotta deliver the chicken in order for it to lay an egg. Otherwise, you're going to be waiting for the egg forever.

RS: So then it needs to take on a basic supply-and-demand model of economics?

GL: Yes, I believe that free markets work when you really let them work. And what I think we need to do is remove the tariff on imported alternative fuels. We still have a 54-cent tariff on Brazilian ethanol. If we want to have more alternative fuels, we need to remove those tariffs. That's page two though. First we need to focus on getting the cars out there.

RS: Are there still any downfalls to flex-fuel vehicles, and how do you think these can be overcome?

GL: Well, when you give people choice, it doesn't mean that you force them to exercise that choice. If you have a flex-fuel car, you can use gasoline. But this is what we view as an insurance policy against future supply disruptions or against geological problems later. We want to make sure that the transportation sector is fully diversified and there is healthy and free competition in this sector in such a way that we gradually collapse the price of oil and break the oil cartel.

RS: What do you think about the bad rap that ethanol has been getting lately? Is it all media hype, or is there any truth to it?

GL: Ethanol is now all of the sudden threatening gasoline at the pump. [Because of this] the oil lobby is coming up with all kinds of stories that ethanol is starving the poor, that ethanol creates food problems. There's a whole propaganda machine there that is trying to get people to believe in this.

How do you explain the fact that rice prices are going up? We don't use ethanol for rice. Nobody does. Clearly there are other factors. I think the main reason food prices are going up is because oil prices are going up. Think about transportation or food packing. On average, our food travels 1,500 miles from food to plate. Think about how much petroleum it takes just to transport food. Think about how much money it costs to fly our asparagus from Chile. That's because they're increasing the price of oil, not because of ethanol. On the contrary, ethanol actually keeps oil prices from being much higher than they are today. Oil prices would be about 15 percent higher today if not for ethanol.

RS: Both you and T. Boone Pickens testified at a Senate hearing this week. Pickens spoke about his own plan to reduce dependence on foreign oil by creating a larger infrastructure for wind power and powering automobiles by natural gas. You called the latter "a spectacularly bad idea." Why doesn't natural gas -- which many environmentalists and politicians hype up as a cleaner-burning, domestically produced alternative to petroleum -- fit into your own list of energy alternatives?

GL: Well, because most natural gas comes from the same countries that supply oil. Most of the natural gas in the world is in the hands of Iran, and Russia, and Qatar, and Saudi Arabia. So I don't think it's a good idea to jump from the frying pan to the fire by shifting from one source of energy that we don't have to another source of energy that we don't have. From a national-security standpoint, it's not going to solve any of our problems.

RS: Speaking of plans, in a Washington, D.C., speech last week, Al Gore seemed adamant that America could turn completely to renewable energy such as solar, wind, and geothermal in a mere 10 years. Just how realistic do you think this is?

GL: It's completely unrealistic to say that we can end our dependence on fossil fuels within 10 years. It's completely outrageous and deceiving to say that something like this is possible. It doesn't mean that we should not begin to do it, but the expectations should be much more realistic. What is important to understand is that we no longer produce electricity from oil in this country. So if we use wind or solar, that may be useful if you want to displace coal or natural gas. But it's not going to be useful if you want to displace oil. If your problem is oil dependence, those sources of energy are irrelevant to the problems.

RS: Last, but not least, do you currently own a car and, if so, is it a flex-fuel or any sort of alternative-energy one?

GL: I use the Metro. I use public transportation. I do own a car which is not flex-fuel, and I hardly use it at all. And, most important, I work from home, so I don't have to commute anywhere. When you work from home, it doesn't really matter what kind of car you own, or what kind of fuel you use.

[But] you gotta look at, "What is it that I am required to do?" If all you do is sit in front of a computer and phone for eight hours a day, then you can probably telework. At least part of the time. It's not about the cars we drive so much as how we do business. So in this respect, I think people need to think about what I call "outside of the barrel" solutions. It's not only the car and the fuel. It's also how you operate in your daily life; it's what your petroleum footprint is.

Due to a transcription error, this article originally quoted Gal Luft as saying that "on average, our food travels 15,000 miles from food to plate." In fact, he said 1,500 miles.