This article highlights the dependence on petroleum and its products for the major share of the world’s transportation fuel create special dangers in our time. These dangers are all driven by rigidities and pot entail vulnerabilities that have become serious problems because of the geopolitical realities of the early 21st century. Those who reason about these issues solely on the basis of abstract economic models that are designed to ignore such geopolitical realities will find much to disagree with in what follows. Although such models have utility in assessing the importance of more or less purely economic factors in the long run. The attractiveness to the consumer of being able to use electricity from overnight charging for a substantial share of the day’s driving is stunning. The average residential price of electricity in the United States is about 8.5 cents per kilowatt-hour.


Four years ago, on the eve of Sept. 11, 2001, the need to reduce radically our reliance on oil was not clear to many and, in any case, the path of doing so seemed a long and difficult one. Today, both assumptions are being undermined by the risks of the post-9111 world and by technological progress in fuel efficiency and alternative fuels.

A single well-designed attack on the petroleum infrastructure in the Middle East could send oil to well over $100 per barrel and devastate the world's economy. That reality, among other risks, and the fact that our current transportation infrastructure is locked in to oil, should be sufficient to convince any objective observer that oil dependence today creates serious and pressing dangers for the United States and other oil-importing nations

Dependence on petroleum and its products for the lion's share of the world's transportation fuel creates special dangers in our time. These dangers are all driven by rigidities and potential vulnerabilities that have become serious problems because of the geopolitical realities of the early 21st century. Those who reason about these issues solely on the basis of abstract economic models that are designed to ignore such geopolitical realities will find much to disagree with in what follows. Although such models have utility in assessing the importance of more or less purely economic factors in the long run, as Lord Keynes famously remarked," In the long run, we are all dead."

The current transportation infrastructure is committed to oil and oil-compatible products. There is a range of fuels that can be used to produce electricity and he at and that can be used for other industrial uses, but petroleum and its products dominate the fuel market for vehicular transportation. Neither the use of natural gas in buses and other fleet vehicles nor the addition of corn-derived ethanol to gasoline in some states has appreciably affected petroleum's dominance of the transportation fuel market.

That dependence leaves us vulnerable. The Greater Middle East will continue to be the low-cost and dominant petroleum producer for the foreseeable future. The region is home to around two-thirds of the world's proven reserves of conventional oil. Almost half the world's reserves are in just Saudi Arabia, Iraq, and Iran. The Greater Middle East will inevitably have to meet a growing percentage of world oil demand. This demand is expected to in crease by more than 50 percent in the next two decades, from 78 million barrels per day in 2002 to 118 MBD in 2025, according to the U.S. Energy Information Administration. Much of the increase in demand is expected to come from China and India.

One need not argue that world oil production has peaked to see that this puts a substantial strain on the global oil system. It will mean higher prices and potential supply disruptions and will put considerable leverage in the hands of governments in the Greater Middle East-as well as in those of other oil-exporting states, such as Russia, Venezuela, and Nigeria. Deep-water drilling and other opportunities for increases in supply of conventional oil may provide important increases in supply, but are unlikely to change this basic picture.

Other production, perhaps from unconventional sources such as tar sands in Alberta or shale in the American West, may come on line. But these are relatively costly. Low-cost producers, particularly Saudi Arabia, could increase production, drop prices for a time, and undermine the economic viability of the higher-cost competitors. This occurred in the mid-1980s. For the foreseeable future, as long as vehicular transportation is dominated by oil as it is today, the Greater Middle East, and especially Saudi Arabia, will remain in the driver's seat.

In addition, the petroleum infrastructure is highly vulnerable to terrorist and other attacks. The radical Islamist movement (including but not exclusively al Qaeda) has, on a number of occasions, explicitly called 'for worldwide attacks on the petroleum infrastructure and has carried out some in the Greater Middle East. A well-planned attack could take some six million barrels per day off the market for a year or more, sending petroleum prices over $100 per barrel and severely damaging much of the world's economy.

Domestic infrastructure in the West is not immune from such disruption. We are now experiencing the many tragedies caused by Hurricane Katrina. The devastation includes significant damage to the oil infrastructure in the Gulf of Mexico with consequent shortages, whose duration is as yet unclear. The recent accident in the Texas City refinery-producing multiple fatalities- points out potential infrastructure vulnerabilities. The Trans-Alaska Pipeline has been subject to several amateurish attacks that have taken it briefly out of commission; a seriously planned attack on it could be far more devastating.

In view of these overall infrastructure vulnerabilities, we do not suggest that policy should focus exclusively on petroleum imports, although such infrastructure vulnerabilities are likely to be the most severe in the Greater Middle East. It is there that terrorists have the easiest access and the largest pro portion of proven oil reserves, and low-cost production is also located there. Nor do we hold the view that by changing trade patterns anything particular is accomplished. To a first approximation, there is one worldwide oil market and it is not generally useful for the U.S., for example, to import less from the Greater Middle East and for others then to import more from there. In effect, all of us oil-importing countries are in this together.

The possibility also exists, particularly under regimes that could come to power in the Greater Middle East, of embargoes or other disruptions of supply. It is often said that whoever governs the oil-rich nations of the Greater Middle East will need to sell their oil. This is not true, however, if the rulers choose to try to live, for most purposes, in the eighth century. Osama Bin Laden has advocated, for example, major reductions in oil production.

Even if one is optimistic that democracy and the rule of law will spread in the Greater Middle East and that this will lead after a time to more peaceful and stable societies there, substantial risk exists that for some time the region will be characterized by chaotic change and unpredictable governmental behavior. Reform, particularly if it is hesitant, has in a number of cases been trumped by radical takeovers-witness the Jacobins and the Bolsheviks. There is no reason to believe that the Greater Middle East is immune from these sorts of historic risks.

Wealth transfers from oil have been used, and continue to be used, to fund terrorism and its ideological support. Estimates of the amount spent by the Saudis in the last 30 years spreading Wahhabi beliefs throughout the world vary from $70 billion to $100 billion. Furthermore, some oil-rich families of the Greater Middle East fund terrorist groups directly. Whether in lectures in the madrassas of Pakistan, in textbooks printed by Wahhabis for Indonesian school children, or on bookshelves of mosques in the U.S., the hatred spread by Wahhabis and funded by oil is evident and influential.

It is sometimes contended that we should not seek substitutes for oil because disruption of the flow of funds to the Greater Middle East could further radicalize the population of some states there. The solution, however, surely lies in helping these states diversify their economies over time, not in perpetually acquiescing to the economic rent they collect from oil exports and to the uses to which these revenues are put.

The dangers listed above in turn give rise to two proposed directions for government policy in order rapidly to reduce our vulnerability. In both cases, we believe that existing technology should be used; that is, technology already in the market or that can be so in the very near future and is compatible with the existing transportation infrastructure. To this end, government policies in the United States and other oil-importing countries should encourage a shift to substantially more fuel-efficient vehicles, including fostering battery development for plug-in hybrid vehicles; and encourage biofuels and other alternative fuels that wherever possible can be derived from waste products.

Three currently available technologies stand out to improve vehicle mileage: diesel engines, hybrid gasoline electric drivetrains, and lightweight carbon composite construction. A modification to hybrids now on the market could permit them to become "plug-in hybrids," drawing power from the electricity grid at night and using electricity for short trips.

According to Peter Huber and Mark Mills in their recent book, The Bottomless Well, the "vast majority of the most fuel-hungry trips are under six miles," which can be handled by current nickel-metal hydride battery capacity. Other experts, however, emphasize that any battery used in a plug-in hybrid must be capable of taking daily charging without being damaged and be capable of powering the vehicle at an adequate speed. By most assessments, some battery development will be necessary.

Such development should have the highest research and development priority because it promises to revolutionize transportation economics and to have a dramatic effect on the problems caused by oil dependence.

With a plug-in hybrid vehicle one has the advantage of an electric car, but not the disadvantage. Electric cars cannot be recharged if their batteries run down at some spot away from electric power. But since hybrids have tanks containing liquid fuel (gasoline, ethanol, diesel, or renewable diesel), plug-in hybrids have no such disadvantage. Moreover, the attractiveness to the consumer of being able to use electricity from overnight charging for a substantial share of the day's driving is stunning. The average residential price of electricity in the United State s is about 8.5 cents per kilowatt-hour. Taking into account the different tank-to-wheel efficiency of liquid-fueled and electric propulsion, 8.5 cents per kWh electricity is roughly equivalent to gasoline at $1 per gallon. Moreover, many utilities sell off-peak power for 2 to 4 cents per kWh- the equivalent of gasoline costing 25 to 50 cents per gallon.

Although the use of off-peak power for plug-in hybrids should not initially require substantial new investments in electricity generation, greater reliance on electricity for transportation should lead us to look particularly to the security of the electricity grid and the fuel used to generate that power. A 2002 report of the National Academies of Science, Engineering, and Medicine ("Making the Nation Safer") emphasized particularly the need to improve the security of transformers and of the supervisory control and data acquisition, or SCADA, systems in the face of terrorist threats. The National Commission on Energy Policy has seconded those concerns. With or without the advent of plug-in hybrids, these electricity grid vulnerabilities require urgent attention.

If even one of these new transportation technologies is moved promptly into the market, the reduction in oil dependence could be substantial. If several begin to be successfully introduced in to large-scale use, the reduction could be stunning. For example, if a 50 miles-per-gallon hybrid gasoline-electric vehicle on the road today were constructed from carbon composites, its fuel efficiency would be doubled. If it were to operate on 85 percent cellulosic ethanol or a similar proportion of biodiesel or renewable diesel, it would be achieving hundreds of miles per gallon of petroleum-derived fuel. If it were a plug-in version operating on upgraded lithium batteries so that 20- or 30-mile trips could be undertaken on its overnight charge before it began using liquid fuel at all, one gallon of fossil petroleum could suffice for around 1,000 miles of travel.

A range of important objectives-economic, geopolitical, environmental-would be served by our embarking on such a path. Of greatest importance, we would be substantially more secure.


Many oil terminals (above) and pipelines (top) are virtually undefended.

Drive of the Future?

If Concerns About Oil security are going to remake American driving habits, then current owners of hybrid cars have a head start on their neighbors. But anyone who thinks this is going to be a grim, eat-your-vegetables experience should think again. While the original idea when I bought my Toyota Prius was to save on gasoline, getting used to driving what feels like a space capsule is another thing altogether.

Driving it is incredibly smooth and it took very little time to get used to it. I learned in a parking lot that the Prius can be too stealthy. People are apt to dart in front because they don't hear you approach. It can be a bit disconcerting to hear the motor die at a traffic light and be surrounded by utter quiet if there are no other cars around. The exchange of power from engine to electric is smooth and effortless.

Living in a small town, my driving involves a lot of stopping and going, which is where the hybrid shines. I've been able to get 55 miles per gallon, but my consistent average is 45., with the difference being travel on the freeway between towns.

Driving this car requires that the ease of starting and stopping not become too habitual. One time I arrived at home, then realized I forgot to take down my business mileage. I pushed the Power button, read the odometer and wrote it down, forgetting to push the Power to turn it off again. With a silent motor, I never noticed. For the next few hours I could hear something turning on and off, but attributed it to the next door neighbor who putters in his garage with machinery. The next morning, I realized it was the Prius turning itself on and off in anticipation of my shifting into gear. When I got into it to drive, the battery was down to the last two clicks (of eight) in the readout. However, the car took off as usual and in less than a mile, it had recovered two clicks of charge. In another mile and a half, it recovered to the top again. I started breathing again: A new battery is about the cost of the entire car.

One more difference from traditional cars is the use of brakes. In talking with Dave Hermance, chief engineer at Toyota in Los Angeles, I learned that all hybrid vehicles use regenerative energy. Toyota is a little bit more successful in capturing it than others.

The Prius is a 33 kW power machine and deceleration recaptures a significant portion of the brake energy. The brakes are a little "grabby," but that was one of the easier lessons to learn. Keep your heel on the floor and apply the brakes gently. There is a lot of get-up-and-go in the engine, as I found out when a woman pulled out in front of me and I had to brake or get out of the way faster. I opted for the latter and escaped. It was just another reason to be happy about the decision to get this hybrid car. BARBARA M. WOLCOTT


Recent hurricanes have exposed the vulnerability of offshore oil production.