Gasoline: The Un-elected President

I would like to thank the Brazilian-American Chamber of Commerce for the opportunity to address this distinguished audience. When I talk about getting off the dependence of oil on television and radio, I am trying to educate my fellow Americans on a timeframe to release itself from the stranglehold of foreign oil, but also the benefits of alternative energies. I would not have to do this if I were in Brazil. Brazil has already set their course.

Brazil is thirty years ahead of America in getting off the dependence of foreign oil. Not only is Brazil off the dependence of foreign oil but also in the process it has paid off it’s International Monetary Fund (IMF) debt early. Whether Brazil wants to stick with ethanol, go to bio-diesel or introduce electric cars, with electricity produced from bagasse, they are way ahead of America.

According to Lisa Margonelli’s book, “Oil on the Brain,” we buy 1/9 of all the crude oil produced in the world daily importing nearly sixty percent of oil and petroleum products. We consume about 10,000 gallons of oil and petroleum products a second, which equals almost 21 million barrels a day, or nearly 322 billion gallons per year. 97 percent of the cars Americans drive are gasoline vehicles. Gasoline accounts for 140 billion gallons out of the 322 billion gallons of total oil and petroleum products that we consume each year. We import approximately 12 million barrels of oil and petroleum products a day. Illinois’ Governor Rod Blagojevich’s office translates that to $800,000,000 a day that Americans spend on imported oil and petroleum products.

America is a driving dichotomy. Our conspicuous consumption is epitomized in our gas stations. We suck up the sweet hydrocarbons as if they were a supersized slushie that we buy inside the convenience store where we empty our wallets to pay for the gas we have pumped into our supersized SUVs. Or conspicuous consumption flows over with road rage that is five lanes wide, each car fighting for space while going 80 miles per hour in a supersized vehicle with engines burning our fuel at a rate of 10-15 miles per gallon.

Gasoline is the common denominator that bonds us. We stand at the water cooler lamenting about the price of gasoline as we discuss where we are going to drive to have some fun on the weekend. It is as though gasoline is the President that none of us voted for, but since it won, we collectively complain about it.

Consumers want it both ways “ they want to be angry and complacent at the same time. They want to blame the auto companies and the oil companies, but they don’t want to be inconvenienced by conserving. Our political system thrives on the immediate gratification of the American people, and Congress is complicit because for them to get re-elected they need satisfy us immediately.

The best our Congress has been able to do is mandate that the auto manufacturers raise miles per gallon on vehicles in a lame effort to get off the dependence of foreign oil. We need only look at the sprawl of suburbia, and one can tell this has not worked. But facts speak just as loudly, since 1973; there has been a 5.3-mile increase per gallon per vehicle. Americans used 146 gallons less in 2005 than they did in 1973 the reason for the increase is attributed to the number of miles driven; Americans now drive 1,985 miles more per vehicle per year than they did in 1973.

Since the Corporate Average Fuel Economy (CAFE) was established back in the mid-˜70s Americans, have nearly doubled their use of foreign oil. In fact, CAFE has allowed people to live further away from where they work because they can travel further on one gallon of gas. How will we ever get off the dependence of foreign oil and continue to drive as much as we want to? Jose Carlos da Silveira Pinheiro Neto, Vice President, General Motors of Brazil, will speak today about flex-fuel vehicles in Brazil. What it took to import them and how flex-fuel vehicles have changed the market from one choice to many “ Brazil now has a competitive market.

Congress has hinted, not mandated, to the oil companies that they would like oil companies to start putting ethanol pumps in their gas stations. They have even given oil companies an incentive of a $30,000 tax credit to install or convert a pump to E85. On April 2nd Laura Meckler, of the Wall Street Journal wrote an article entitled “Fill up with Ethanol? One obstacle is big oil companies”. In the article Ms. Meckler sites restrictions such as gas station owners being required to buy all their fuel from the oil company that franchises them, oil companies not allowing consumers to purchase their oil company credit card, oil companies not allowing E85 to be publicized, and oil companies not allowing the E85 pump itself under the coveted canopy.

Sillas Oliva Filho, Manager of Ethanol, Petrobras, will discuss how Petrobras works as an oil company and as an ethanol company and still makes money.

There is a public outcry when oil companies make exorbitant amounts of money. We import approximately 1.1 million barrels per day of gasoline and gasoline components. The cost of gasoline is higher than crude oil because one must refine the oil to get gasoline. Gasoline would cost $15 to $20 more per barrel compared to crude oil. Yet, there is another outcry when oil companies suggest building a refinery, which could reduce the trade deficit by roughly $18,000,000 a day. Our gasoline vehicles can take up to ten percent ethanol. Ten percent ethanol by volume means 14 billion gallons of ethanol per year. This can replace 9.3 billion gallons of gasoline per year or 0.61 million barrels of gasoline per day, which would further reduce our trade deficit by $46,000,000 a day. Yet, some of the same people that denounce gasoline refineries denounce ethanol refineries in their backyard and yet they say they want us to get off the dependence of foreign oil.

We have analysts that tell us how great the economy is doing and how low the unemployment is. Other analysts are telling us how corn ethanol is economically hurting the poor people. Other analysts say that corn ethanol is not the most efficient way to make ethanol. Indeed, President Bush himself has said that cellulosic ethanol is the optimum process. Does President Bush realize he is acknowledging that the corn we eat will not be part of the end result of ethanol forever? There are about 170 corn ethanol producers that will not be able to produce cellulosic ethanol without serious technological advancement. According to the Deputy Secretary for the Environment of São Paulo, Brazil, Suani Teixeira Coelho, sugar cane producers must show technological progress to have their licenses renewed. Will the United States make these same requirements?

Cosan is one of the worlds largest producers, growers, and processors of sugar cane. Sugar cane is the raw material used to produce sugar, alcohol, ethanol, and electricity from bagasse. Paulo Diniz, Chief Financial Officer, Cosan, S.A., will join us today to talk about Assessing opportunities & planning for future growth

The ensuing discussion is based on the premise that the United States is trying to free itself from its dependence on foreign oil, but it is not the only objective. Brazil didn’t stop with just getting off the dependence of foreign oil; they have created competition between oil and ethanol. They have done it by diversifying their engines and their energy.

There is an elephant in the room, and the question is begging to be asked; how can Brazil become part of America’s solution? Many of our farmers were barely making ends meet five years ago. Some farmers sold their property to developers because they could no longer afford to be farmers. The farmers that are left are creating energy that oil companies don’t own. They are creating competition in a market that has had virtually no competition for years.

Most people agree that we need more ethanol and we need it now. The United States is close to the production of cellulosic ethanol. Funding for research and development to produce ethanol from garbage was just given to a California company. Brazil is a friendly nation to the United States and trade between the two countries should be increased. Certainly, if we can find a way to trade with politically troubled Venezuela, we should be able to find a way to trade with Brazil. But the question remains, how do we take the tariff off Brazilian ethanol and still keep competition between ethanol and oil alive at the gas station? Brazil diversified their energies to include their farmers. How will Brazilian importers import their ethanol to the United States and be part of the solution, part of the competition?

These are issues that need to be addressed if we are to go forward.

Thank you very much.

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a founding member of the Women's World Car of the Year #WWCOTY, and the Concept Car of the Year, and former member of the North American Car and Truck of the Year #NACTOY. She is a guest contributor for Via Corsa magazine and Vicarious magazine.

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