As outlined earlier, the price of oil is high and rising because world demand is outrunning supply, and will continue to do so in the foreseeable future. There are many reasons for this, but one rules over all others: China. As long as the achievement of 10% economic growth per year remains the primary policy of the Chinese government, China will sweep world markets clean of every spare barrel of oil to be found.  

There is much talk about developing a variety of "alternative" energy sources, and some of these may indeed represent valid solutions for the long term. None of them, however, will have any significant impact in the near future. For the moment the US economy runs on oil, and in order to even begin a shift to other energy sources we need a petroleum supply cushion to support ongoing economic activity over the next few years. Since oil and its derived products are mainly used in transportation, "energy security" in the immediate translates into a larger and more secure supply of fuel.

There are two ways to achieve this: increase supply and/or reduce demand. We have already reviewed the potential for additional oil exploration and production in US territory, but this option will at the very best keep domestic production from falling down further. There is however another potential source: synthetic fuel made from coal. This process, developed in Germany in the 1920's and significantly improved since, is competitive with petroleum at prices between $60 and $80 per barrel. It produces fuel which is chemically pure and burns cleanly, can be blended with petroleum-based products and (unlike ethanol) can be stored and shipped using the existing infrastructure of pipelines and tank farms. Synthetic kerosene made by this process has been certified as aviation fuel by the FAA and has been extensively (and successfully) tested by the US Air Force for several years.

Because the technology is well developed and the US has large and highly accessible coal reserves, a high priority program to build a synthetic fuel production base can be initiated immediately. The psychological impact on oil prices of such a decision would be immediate, and the material impact could follow within two or three years - depending on the level of priority and urgency given to the program. At an estimated (initial) cost of $ 5 billion for an 80,000 barrels/day plant, an expense of $150 billion will result in the supply of 2.5 million barrels of ready-to-use fuel per day. Since the technology is already in use on an industrial scale, there are no major surprises to be expected; A program of this magnitude will on the contrary result in many improvements in process and efficiency.

The other side of the coin is demand. Our current vehicle fleet has very poor fuel efficiency and often incorporates engine and other technologies which are decades old. At the same time there is an array of developed and tested technologies which can improve vehicle fuel efficiency by a factor of 30 to 40 % with no reduction of comfort or performance. What is lacking is a coordinated, high priority effort to incorporate these innovations into complete vehicle designs, and then put the designs into production.

A national program to provide additional domestic production of fuel (petroleum-based or synthetic) should thus be paired with a parallel effort to redesign our vehicle fleet for maximum efficiency in using that fuel. Both programs must be coordinated and will require extensive cooperation between government and private industry in planning, funding and execution. Such a paired effort will not only launch the country on a path to improved energy security and self-sufficiency, but will completely renovate the US automotive industry and provide it with a competitive advantage which the industry, in its current sorry financial state, cannot afford to develop.

Industry-government cooperation on that scale, under the pressure of circumstances and with the national interest as the dominant goal, has been implemented with huge success in the mobilization effort of WW II. At the time it resulted in an extraordinary increase in production and a parallel advance in production techniques; in extraordinary progress in engineering and design, and in the development of the science of logistics. It pulled the country out of the Depression, allowed to win the war in less than four years, and laid the basis for US industrial world dominance.

There is no reason whatsoever for a similar effort not to be equally successful today. Just as in the case of WW II it would get the nation out of its current funk, generate employment and economic activity, renovate our political life, and provide for the nation's basic needs. What is needed is leadership strong enough to transcend party ideology and pursue the national interest as the primary goal.

For more analysis see http://voyons-potsdemiel.blogspot.com /