NCPA - National Center for Policy Analysis

The Case for an Open Fuel Standard

April 11, 2011

Like every president who has addressed the issue of our country's energy future since Richard Nixon, President Obama focuses on the source and level of our oil imports.  But these are not the keys to overcoming the security and economic vulnerabilities that oil causes, according to James Woolsey, a member of the Hoover Institution's Task Force on Energy Policy, and Anne Korin, codirector of the Institute for the Analysis of Global Security.

  • The Organization of the Petroleum Exporting Countries (OPEC) dominates the global oil market and sits on 78 percent of the world's conventional oil reserves.
  • But it only accounts for about a third of world oil production because it is a conspiracy in restraint of trade.
  • When non-OPEC countries drill more, OPEC simply drills less and drives prices back up.
  • If demand is reduced through a one-time improvement in efficiency, OPEC again drills less and prices zip back up.
  • Even if the United States did not import a drop of oil, we would still be vulnerable to the vagaries of the oil market and price manipulation by OPEC.

Oil is a presidential concern because its virtual monopoly over transportation fuel makes it a strategic commodity.  We must break oil's stranglehold on the global transportation fuel market by ensuring that new cars allow fuel competition.  One very good way to accomplish this is for Congress to adopt the Open Fuel Standard Act, says Woolsey and Korin.

  • An Open Fuel Standard would require new cars to include a $100 tweak that would allow them to run on a variety of liquid fuels in addition to gasoline.
  • Such fuels would include methanol, which is easily made from natural gas and biomass (and, less cleanly, from coal).

Source: James Woolsey and Anne Korin, "The Flexible Fuel Answer to OPEC," Hoover Institution, April 6, 2011.

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