The New Petroleum

Richard G. Lugar and R. James Woolsey

From Foreign Affairs, January/February 1999

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Summary:  America's addiction to Middle Eastern oil forces dangerous foreign policy compromises, worsens global warming, and strengthens unreliable Persian Gulf countries. Instead, the United States should get its energy from biomass ethanol, a new fuel that can be produced at home from almost any type of plant or even from agricultural waste. Ethanol is environmentally friendly, compatible with the U.S. transportation system, and as potent a fuel as gasoline. Recent scientific breakthroughs have sharply lowered its production cost. Now Washington must step in with tax breaks and other incentives to encourage further research and development into this homegrown alternative to a dangerous dependence.

Senator Richard G. Lugar (R-Ind.) is the Chairman of the Agriculture, Nutrition, and Forestry Committee and a member of the Foreign Relations Committee. R. James Woolsey, an attorney, was Director of Central Intelligence from 1993 to 1995. He serves on the boards of several corporations, including BC International, which is expected to open the first commercial biomass ethanol plant in the United States in 2000.

WHY CHANGE?

Oil is a magnet for conflict. The problem is simple -- everyone needs energy, but the sources of the world's transportation fuel are concentrated in relatively few countries. Well over two-thirds of the world's remaining oil reserves lie in the Middle East (including the Caspian basin), leaving the rest of the world dependent on the region's collection of predators and vulnerable autocrats. This unwelcome dependence keeps U.S. military forces tied to the Persian Gulf, forces foreign policy compromises, and sinks many developing nations into staggering debt as they struggle to pay for expensive dollar-denominated oil with lower-priced commodities and agricultural products. In addition, oil causes environmental conflict. The possibility that greenhouse gases will lead to catastrophic climate change is substantially increased by the 40 million barrels of oil burned every day by vehicles.

Ethanol has always provided an alternative to gasoline. In terms of environmental impact and fuel efficiency, its advantages over gasoline substantially outweigh its few disadvantages. But until now it has only been practical to produce ethanol from a tiny portion of plant life -- the edible parts of corn or other feed grains. Corn prices have fluctuated around $100 a ton in the last few years, ranging from half to double that amount. Ethanol has thus been too expensive to represent anything but a small, subsidized niche of the transportation fuel market. In spite of recent reductions in the expense of ethanol processing, the final product still costs roughly a dollar a gallon, or about double today's wholesale price of gasoline.

Recent and prospective breakthroughs in genetic engineering and processing, however, are radically changing the viability of ethanol as a transportation fuel. New biocatalysts -- genetically engineered enzymes, yeasts, and bacteria -- are making it possible to use virtually any plant or plant product (known as cellulosic biomass) to produce ethanol. This may decisively reduce cost -- to the point where petroleum products would face vigorous competition.

The best analogy to this potential cost reduction is the cracking of the petroleum molecule in the early twentieth century. This let an increasingly large share of petroleum be used in producing high-performance gasoline, thus reducing waste and lowering cost enough that gasoline could fuel this century's automotive revolution. Genetically engineered biocatalysts and new processing techniques can similarly make it possible to utilize most plant matter, rather than a tiny fraction thereof, as fuel. Cellulosic biomass is extremely plentiful. As it comes to be used to produce competitively priced ethanol, it will democratize the world's fuel market. If the hundreds of billions of dollars that now flow into a few coffers in a few nations were to flow instead to the millions of people who till the world's fields, most countries would see substantial national security, economic, and environmental benefits.

PAYING FOR ROGUES

Energy is vital to a country's security and material well-being. A state unable to provide its people with adequate energy supplies or desiring added leverage over other people often resorts to force. Consider Saddam ...

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