How to Reduce Oil Prices

[Valin]

National Review:

Approve the Keystone pipeline, and mandate flex-fuel vehicles.
Robert Zubrin
1/16/12



The United States is by far the world’s leading oil importer. Thus, when the price of oil goes up, our economy is severely taxed. At the beginning of 2011, many economists were talking about an emerging U.S. economic recovery. Yet by spring, as oil prices climbed above $100 per barrel, it became apparent to all who were paying attention that no escape from recession was in sight.

The economic impact of oil prices on the American economy is shown on the graph below, which compares oil prices (adjusted for inflation to 2010 dollars) to the unemployment rate from 1970 to the present. Every oil-price hike for the past four decades, including those in 1973, 1979, 1991, 2001, and 2008, was followed shortly afterwards by a sharp rise in American unemployment.



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In summary, then, what is at stake in the Keystone pipeline is not 20,000 jobs, but more like half a million jobs. Congressional Republicans are thus entirely correct in linking approval of the payroll-tax cut and the unemployment-insurance extension to approval of the pipeline, as without the revenues that come from economic growth, such benefits are unaffordable.

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Natural gas can, however, be readily and cheaply converted to methanol, which in turn can be used in flex-fuel cars. This is a much faster and cheaper way to get natural gas into the vehicle-fuel market than converting cars to run on natural gas directly, as no high-pressure vehicle fuel tanks or costly compressor filling stations (which would require massive subsidies) are needed. Rather, the large majority of cars sold in the U.S. today (and for at least the past five years), including all GM and Ford vehicles, have been equipped with computers and chromated fuel lines that make them capable of flex-fuel operation. If provided with the right software, and methanol-impervious Buna-N plastic seals (costing less than 50 cents per vehicle) for their fuel systems, every new car sold in the U.S. could be fully flex-fuel, capable of running equally well on methanol, ethanol, or gasoline.

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Keystone pipeline YES. I do however have some problems with mandating flex-fuel.