While we are debating if rising oil prices leads to less freedom or vice versa, the point of truth is that, oil prices are rising. The price of crude is going up and the price at the pump is moving faster. Various businesses have decided to pass on the the rising costs directly to the consumer. Since consumers are already struggling to make ends meet, they probably may not notice this slight increase in price for almost everything. The situation is so bad that President Bush raised the CAFE standards, which sets the fuel economy for vehicles.
Meanwhile American car makers are seeing their cars sitting on the lot, while Toyota cannot make enough Prius for American consumption. Is there a way to get rid of the oil dependency and at the same time boost the slowing sales of American cars? Tom Daschle and VInod Khosla seem to have a solution. Their proposal is to give automakers incentives for making vehicles which can run on gasoline or E85 fuel, a blend of ethanol and gasoline.
First, it could set America free from its dependence on foreign oil. As Brazil’s “energy independence miracle” proves, an aggressive strategy of investing in petroleum substitutes like ethanol can end dependence on imported oil.
Second, switching from gasoline to ethanol produced from perennial energy crops like switch grass can slash our carbon dioxide emissions.
Third, it could build on a comparative advantage of American automakers. American auto manufacturers are churning out hundreds of thousands of flex-fuel vehicles. Their foreign competitors make far fewer. Promoting these vehicles will help our automakers build on their already strong market share.
And fourth, by encouraging the production of ethanol and new renewable fuel technologies, this new CAFE standard could invigorate rural communities in America’s heartland and innovation and research centers along its coasts. [Miles Per Cob]
When the Wall Street Journal agrees with New York Times, then you know either an asteroid is going to hit the earth or something serious is going on. Currently US imports ethanol and there are tariffs and duties on it making it not so competitive. A bill has been introduced to suspend taxes on imported ethanol till 2007
Ethanol based cars are not without issues for this fuel results in lower fuel economy. This would result in the driver paying more and currently it is not cost effective compared to regular gasoline based vehicles. According to Business Week “it would cost around $3,368 per year to run a Dodge Ram 1500 pickup on regular gas and $3,615 on E85.” Even if you want to buy a flex fuel car, there are not many choices right now. If you own one, then you don’t have many fueling stations.
A lot has to happen before E85 becomes a viable alternative to oil. Atleast people are thinking about it.