Includes comment on PHEVs from former head of Ford's hybrids program.

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startribune.com
U.S. racing the clock to find alternate fuels
Greg Gordon, Star Tribune
November 23, 2005

WASHINGTON - Former CIA Director James Woolsey paints a dire scenario: A terrorist attack causes a months-long, 6 million-barrel reduction in Saudi Arabia's daily petroleum output, sending the price of oil skyrocketing past $100 a barrel.

Industry banker and author Matthew Simmons says the kingdom's oilfields are deteriorating anyway. And a recent New York Times story cited an intelligence report suggesting the Saudis lack the capacity to pump as much oil as they boast they can.

Even if nothing disrupts the projected flow of Middle East petroleum, Energy Department consultants warned earlier this year that "the world is fast approaching the inevitable peaking" of global oil production -- a problem "unlike any faced by modern industrial society."

They wrote that the United States and other nations are in a race with the clock to find alternative sources for oil, "the lifeblood of modern civilization," and avoid potential economic disaster.

After years -- or even decades -- of sitting on the fringe of the world oil debate, the issue of what to do when production dwindles is starting to get attention in Congress.

Last week, a bipartisan group of eight U.S. senators, including Minnesota Republican Norm Coleman, proposed legislation to accelerate the nation's shift to new energy sources in the nation's transportation sector, which guzzles 14 million barrels of oil each day.

Warning of a potential crisis, they proposed billions of dollars in tax incentives to spur development of vehicles powered by electric batteries, diesel, Minnesota-manufactured ethanol and exhaust-free hydrogen fuel cells. In the House, Rep. Gil Gutknecht, R-Minn., and 15 co-sponsors want all U.S. gasoline to contain a 10 percent blend of renewable fuel, as only Minnesota requires now.

If peaking production or rising demand lead to shortfalls of oil before a shift to alternative sources occurs, the global effect could be huge, the Energy Department consultants wrote. Developed countries would face inflation, rising unemployment and recession, they wrote, while Third World nations "will likely be even worse off."

U.S. companies and government agencies are already exploring the energy alternatives proposed by the senators, but progress has come at less than breakneck speed.

Experts say that high startup costs, technological hurdles, tepid consumer demand for pricier, fuel-efficient vehicles and other obstacles likely will prevent such products from significantly reducing U.S. oil imports for a decade or more without government intervention.

For example:

• Toyota, Honda, Ford and other auto makers are rolling out electric-and-gas hybrids, some advertised to get 60 miles per gallon.

Mary Ann Wright, chief of Ford's hybrid program, said the company's hybrids produce virtually no emissions or smog-forming gases. But based on their production schedule today, it will be years before hybrids comprise more than a small percentage of the U.S. fleet of 225 million cars and trucks.

Ford's Wright said no plug-in yet has enough durability, but they should in coming years.

Critics say the energy bill that Bush signed into law last summer will only modestly reduce U.S. dependence on foreign oil. It offers tax credits ranging up to $3,000, beginning Jan. 1, for early buyers of hybrids or diesel-powered vehicles, but it does not toughen 25-year-old fuel efficiency standards for cars and trucks.

U.S. isn't moving swiftly

Woolsey said in an interview that the administration is no longer "just asleep on these issues," but that the government still isn't moving swiftly enough to bring new technologies to full-scale production.

"We have done very little really, as a country, to promote the development and marketing of energy alternatives," said Sen. Mark Dayton, D-Minn., a former state energy and economic development commissioner. "We've given lip service to them."

Minnesota auto buyers' requests for hybrids such as the Toyota Prius and other fuel-efficient cars have accelerated since hurricanes Katrina and Rita sent gasoline prices temporarily soaring past $3 a gallon, said David Luther, chairman of Rudy Luther Automotive, one of the Twin Cities' largest dealerships. "I wouldn't call it a flood," he said.

Luther said some buyers of low-mileage SUVs seem to have the attitude that "they didn't save any buffalo for me."

Not everyone agrees that oil production is nearing a peak. "I don't think the evidence is there," said Daniel Yergin, founder of Massachusetts-based Cambridge Energy Research Associates.

His team of geologists and petroleum engineers has done an oilfield-by-oilfield analysis and concluded that world oil production capacity will increase by nearly 20 percent between 2004 and 2010, and that since the 1990s discoveries of new oil reserves have exceeded production.

The U.S. Energy Information Administration (EIA) has projected the year 2037 as the most likely date for a global oil production peak, but the Energy Department consulting team led by Robert Hirsch said it found another EIA scenario for a peak in 2016 to be "much more credible."

"Whatever you think about peak oil," Woolsey said, "you need to be concerned about the possibility that in the very near term at any point ... regime change, government policy change or terrorist attacks could put a major, and perhaps even a long-duration spike on oil prices. ... We need to move away from oil in either case."

Greg Gordon is a correspondent in the Star Tribune Washington Bureau.