Energy Victory | Dr. Robert Zubrin | Talks at Google

All right, well, good afternoon, everybody, and welcome to another Great Authors at Google event. Today, I'm very honored to welcome Dr. Robert Zubrin. Dr. Zubrin is a highly successful aerospace engineer and author. His list of accomplishments are endless, so I'm going to try my best to summarize here. Dr. Zubrin holds a BA in Mathematics from the University of Rochester, a master's degree in Aeronautics and astronautics, and a Master's and a PhD in nuclear engineering, all from the University of Washington. He's the author of several books, including the Case for Mars Entering Space, the Holy Land, Mars on Earth First Landing, and the list goes on and on. He was also the driving force behind the Mars Direct proposal at Martin and Marietta Astronautics, and as of yet, still argued to be the most viable plan for Mars exploration, settlement, and terraformation. And today he'll be talking about his latest book titled Energy Winning the War on Terror by Breaking Free of Oil. We'll be hearing about flex fuels, ethanol, the Middle east, all of which I'm sure will spark up a lot of questions. So please use the mics if you have any questions at the end of the talk. And with that, please join me in welcoming Dr. Zubrin.

Okay, so thank you all for. Well, thank you for inviting me, and thank you all for turning out to hear what I have to say. I'm going to talk about the problem of energy. Now, everybody knows we have an energy problem. People talk about the energy problem all the time. But actually, there's a whole bunch of different energy problems that people talk about. They're somewhat interrelated, but they're also distinct. Broadly speaking, they break down into a multitude of areas, including national security, economic, environmental. And even within those, it breaks down further into somewhat distinct problems. For example, within the national security area, there is the problem that our oil dollars are going to fund jihad. Okay, there's a different national security problem in that the United States is no longer secure in its energy and fuel supplies in the sense that it was, for example, during World War II, when the United States produced 60% of the world's oil and its allies produced most of the rest. And that was a factor which, as I'll discuss briefly, was actually decisive in determining who would win the Second World War. And then there's the economic problem, which people talk about $3 a gallon gas approaching $4 a gallon gas. That gets people mad, and the prospect of $8 a gallon gas. But you can go much deeper than that. The macroeconomic problem of what does it Mean, you know, this year the United States is going to import 5 billion barrels of oil at $100 a barrel. That's 500 billion taken out of our economy by foreign governments. You know, Congress just passed $150 billion economic stimulus package where they are taking money out of the United States government treasury to put in the pockets of Americans, hoping they'll spend it on stuff to try to stimulate the economy. Meantime, you have OPEC governments taking $500 billion out of their pockets. The. Okay, so what is the effect on that? And what is the effect, if one even thinks more globally on the third world of high oil prices? I mean, it's one thing to pay $100 a barrel for oil when you're in a country where the average person makes $40,000 a year. It's another thing when you're in a country where the average person makes $700 a year. Okay? The effect of this on third world countries, Africa in particular, can be practically genocidal. And then there's the environmental problem, which includes both conventional pollution of both air and water, and then global warming. And then finally, I guess there's an additional problem, the existential problem. What do you do when it all runs out? Okay? And now these problems are different and they operate on different time scales. Now, we encounter a similar array of problems in daily lives. I mean, for example, in our daily lives, we have a multitude of problems we have to solve. I mean, crudely put, you have to breathe at least once a minute. You want to drink water perhaps at least once a day. You need to eat food at least once every few days, okay? You need to pay your rent every month, okay? You need to land a job more or less on a yearly basis. You know, you need to put aside money for your retirement and your kid's college education. And that's a problem you solve over decades. And now these are all important problems, okay? The fact that you need to breathe every minute does not negate the fact that you need to eat every week, okay? But nevertheless, if you are underwater and you're running out of air, you would do well to address the problem at hand rather than dwell on how you're going to deal with your retirement fund, okay? The. And a solution to the problem at hand is valid if it addresses the problem at hand, period. Okay? And it's more valid if it addresses the problem at hand without making the longer term problems worse. And it is still better if it addresses the problem at hand and perhaps makes the longer term problems more solvable. But it doesn't have to also solve the long term problem. So for instance, if you're that scuba diver and you're running out of air, one solution might be surface, that solves the problem. Another solution that's not as good is kill the other scuba diver and steal his tank because that's going to create problems for you when you do surface. So even though solution one does not solve your retirement, doesn't solve your rent, it's still ok. We don't have to constrain the set of solutions to the immediate problem to those that also solve the long term problem. Okay? Provided they at least don't make the long term problem materially worse. Okay? And this is very important because this discussion tends to get confused. Okay, so in this talk, well, and within this array, okay, that I've mentioned, okay, the national security problems and the economic problems tend to be more or less immediate. Some of the environment, the problem of conventional pollution is also pretty immediate. Global warming is a longer term problem. The existential run out of all the oil supply is still a longer term problem. So in this talk I'm going to address primarily the immediate crisis while showing how the solution that I'm going to propose to that will, will also make the longer term problems more solvable. Although by their nature it will take longer to solve them. Okay? All right, so let's talk about our favorite subject, money. Okay? There's a person who was once famous. Famous and actually no longer is Marshal Trivulzio. Just as well, he's obscure, he deserves to be forgotten. He was one of the wreckers of Renaissance Italy. But he, while making no contribution to humanity in his life, he did at least one great aphorism, which is to wage war, three things are necessary. Money, money, and yet more money. So let's talk about it. 1972, the United States paid $4 billion for oil imports, okay? In 2007 it's 342 billion. Okay? That's up by the way, from 90 billion in 2001. Okay? And as I mentioned, it's looking like 500 this year. That's how fast it's growing. But there it is. In the same period of time, Saudi oil revenues from exports, okay, not counting internal sales, went from $2.7 billion to 235 and this year will exceed 300. Okay? The payout for oil imports in 1972 was 1.2% of our defense budget for that year. The payout last year was more than half. Okay? And this year it's looking like it's going to be 80%, okay? And this trend can be expected to continue unless something is done to change it, radically change the situation. Because what we've got is increased demand on a global scale from industrialization of China, India, a number of other countries, and the OPEC oil cartel is able to exploit that to radically ratchet up prices. Oil prices have been going up on average since 1999 at a rate of 30% a year. 30% a year. You know, in January 2007, President Bush gave a speech where he says, I've got this great, bold vision. I'm going to replace 20% of of our oil supply with ethanol in 10 years. If that program had been realized in its entirety during 2007, not over 10 years, we'd still be paying more for oil at the end of the year than we were at the beginning. That's how severe the situation is. Or once again, the recent CAFE standard bill that was passed just at the end of last year to increase mileage standards for automobiles some 30% or so over the next 13 years, okay? If those standards had gone into effect immediately and every consumer had been compelled to turn in his car for a new car with 30% more better mileage, we'd still be paying more for oil at the end of the year than at the beginning, okay? So these are not adequate solutions. Now, there's an additional problem here, okay, which is somewhat alluded to indirectly in this chart. That is, it's not just that we're paying out money, it's who's getting the money, okay? In most things in life, when you buy something, all you really care about is the quality of product that you get and how much you have to pay for it, okay? That's it. Okay? But in this case, when you're talking about such large sums of money, hundreds of billions, in fact, trillions of dollars, there's also the issue of who's getting it, because this amount of money isn't just money. This is power. Power to do good, power to do evil, okay? Who is getting this money? Well, the largest single recipient of international oil revenues by far is Saudi Arabia now received several trillion dollars in oil revenue since they ran up the price in 1973. And some of it they've just wasted on the most incredible narcissistic expenditures. Palaces, racehorses, concubines, cocaine, whatever, okay? But hundreds of billions have been spent to promote Wahhabism, okay? Which is a violently intolerant form of Islam that requires death or enslavements of Christians, Hindus, Jews, Buddhists, Taoists, atheists, Scientologists, Wiccans, you know, I mean, we've got this great culture war here in this country between the people that want to teach Darwood in the schools and the teacher want to teach the Bible. They'd both be killed if they were trying to do it in Saudi Arabia. But this is not just for. Within Saudi Arabia, they have funded an entire Alphabet, super front organizations to promote this worldwide. They have funded over 20,000 Wahhabi madrasses around the world, not counting those inside of Saudi Arabia that teach young boys that the way to go to heaven is to kill these various kinds of infidels. And they've organized terrorist movements based on this doctrine. And not just in Afghanistan, though. That was also their project. Absolutely. But everywhere from Biafra in Nigeria, where they're killing Christians, and Algeria, where they're killing secular Muslims. Of course, the Sudan, where they're killing non Wahhabi Muslims and previously Christians and Animists, and Israel, where they're killing Jews. And Iraq, where they're attacking our troops as well as Shiites. And then, yes, former Soviet Central Asia, where they're killing Christians and Afghanistan and then India and Kashmir, Hindus and Thailand and Indonesia, Buddhists and the Philippines, Catholic and 9, 11 in this country. And if you add up the global death toll from this jihad, it numbers millions of people. But in point of fact, the death toll resulting from the high oil price is probably two orders of magnitude worse. Okay. You know, I mean, Hugo Chavez poses as the great hero of the world's poor. There could not be a more deadly enemy to the world's poor because the high oil price is an incredibly regressive tax against the world's poor. Okay? Okay. It has genocidal effects in Africa. In other words, for you, it's going to soon mean you're paying $5 a gallon for your gas. You know, you, you fill up, it's going to cost you $45. It's going to piss you off, but it's not going to affect your life directly in that sense. But for a farmer in Kenya, it's the difference being able to pay for the truck fare to take his crop to market or not. That's much more serious. Now, there's another aspect to this. Here's some interesting quotes. This is from an official Saudi Arabian government newspaper, Al Watan. Actually, all newspapers in Saudi Arabia are controlled by the government, but this is an official one. Okay. Here they're discussing the activities of the United States army in Iraq. And they say the following. They say a Secret team of American physicians follows the troops during their attacks to ensure quick operations for extracting some organs and transferring them to private, private operating rooms before they are transported to America. For sale, These teams offer $40 for every usable kidney and $25 for an eye. Okay. This is Saudi propaganda against the United States. This is why the majority of foreign fighters coming to Iraq to attack our troops, as well as blow up pet markets and shrines and cause murder and mayhem in every way possible, are Saudis. And the rest of them are other Arabs who have been affected by this propaganda onslaught. Okay, and yet what's the response? Here's President Bush. Pakistan and Saudi Arabia have become some of our most valuable allies in the war on terror. Now, Colin Powell was Secretary of State when this article and many similar articles were printed. Why was there no response from the US State Department demanding that this stop? Okay, I don't know. But I will tell you this. That a week after Colin Powell retired as Secretary of State, Prince Bandar, the Saudi ambassador, showed up at his front door with a Jaguar to give him. Now, that gift was legal because it was given to him after he left office. But as Prince Bandar explained to the Washington Post, when the word gets around how good the Saudis can be to their friends after they leave office, you'd be amazed at how much more friendly they can be while they're in office. And they are. Colin Powell, of course, is not the only one. James Baker iii, previous Secretary of State and the author of the Baker Hamilton Report on Mideast policy. His law firm is on retainer with the Saudi royal family. $4 million to pay them to defend them against the claims of the families of the 911 victims. Okay? Spencer Abraham, who was President Bush's Secretary of Energy during his first term of office and who pushed this hydrogen hoax. And it is a hoax. Totally unworkable energy policy as the basis of American energy policy during the four years following 9 11. He is now a paid lobbyist for the Saudi Arabian government. Patton Boggs, the largest lobbying law firm in Washington with 400 attorneys on staff, is registered with the U.S. department of justice as an official agent of the Saudi government. Aiken Gump, a leading Democratic Party law firm headed by Vernon Jordan, very close to the Clintons. Okay? They also take Saudi money and the list goes on. And the point is, when you have this kind of money, you have the ability to corrupt corrupt individuals and institutions. Most of the major think tanks in Washington, D.C. have accepted grants from the Saudis so that for politicians who cannot be bought Directly. The Saudis have the ability to affect their ideas at its source. And then there's corporate takeovers, okay? Prince Bin Talil recently bought 5% of AOL Time Warner, which owns Time magazine and CNN. And he bought 5, 0.6% of News Corp. That owns Fox and the Wall Street Journal. And the number of media purchases in Europe have been much larger. And for example, the editor of Parisoie, a French newspaper which reprinted the Danish cartoons, was fired because he discovered that his newspaper was owned by a consortium of Arab investors. This has the ability to affect political dialogue within the west and it's getting much bigger. Okay, so we're talking here about really a threat to the integrity of the Republic. I'm going to skip this. You guys know about supply and demand. Let's look at the real data, okay? The price of oil. Oil is not a free market, okay? We don't have an open market in fuel. The oil market is effectively controlled by an international cartel of totalitarian governments known as the opec. And they do in fact control the price. And these graphs will show you how. Okay, first, what you have here, this one is non OPEC oil production. And this is opec, okay? And the red is production. So let's look at this. Let's look at non OPEC oil production from 1973 to the present. And that's the red line. And what you can see there is that over time, it's had some ups and downs, but it's basically grown in conjunction with the world economy, okay? From 25 million barrels a day in 1973 to 44 or so now. Okay? All right, so that's that now. But look at OPEC over here, the red line. It's up, it's down, it goes every which way. It in fact, has not increased at all in aggregate since 1973. They've held production down, okay? But not only have they held production down as a whole, okay, they've done various willful manipulations, as you can see. I mean, let's look at this, okay? Here we are, 1999. This is the black line, is the price of oil. $11 a barrel, okay? OPEC cuts production by 3 million barrels. That sends the price of oil up to, to $30 a barrel. So then they raise production in order to harvest money at the higher price. That sends the price of oil back down to 15 or $16 a barrel, okay? So then they cut production by 5 million barrels, and then that sends the price again all the way up to, well, continually to 50 or more. And it's at 100 now. So that's the game they play. They can pump the oil price by dropping production, sending the price up, then they raise production in order to get money at the higher price. And so it goes. Now the situation is actually worse than you might think because as strong as they are now, they're getting stronger. Okay, this is from the International Institute for System strategic analysis. Okay, 2002 World Oil Reserve. 71% were in the Middle East, 4% were in North America. Projected on the basis of current use. By 2020, 83% will be in the Middle East, 1% in North America. So, you know, I saw on the Internet, a blogger who was hostile to my book said, oh, he doesn't know what he's talking about. It doesn't matter. This, that let the Saudis have their day. When their oil is done, then we will move in and they'll be out of poop and we'll have all the cards. It's exactly the opposite. Okay, where are the ones running out first? So their relative strength is actually increasing over time. Anyone here play bridge? One person. Ok, well, in bridge, the game of bridge, you play with two teams of partners. And the beginning of the game you have a process known as bidding, which is through a series of conventions, you and your partner try to bid for control of the game. And what you want to make happen as part of this process is for the suit of cards in which you and your partner have the most for that to become the trump suit. Okay, the trump suit, if spades are trump, for example, then the little 33 of spades can beat the ace of hearts or the king of diamonds. Okay, Any spade can beat any other card if spade's a trump. And so it's tremendously to your advantage if there's a suit. Say in this instance, spades, where maybe you've got six of them and your partner has four. So between the two of them, you've got 10 out of the 13 for that to be the trump suit. It'd be tremendously to your disadvantage if your opponent's long suit was the trump suit. Okay, Then you're in a very bad position. Okay, well, there's also four suits of fuels, okay? Oil, coal, natural gas and biomass. And right now, oil is the trump suit. The reason why oil is the trump suit is because while there's any number of ways to generate electricity, one can generate electricity from any fuel or from solar power, nuclear power, hydroelectric power, wind power. The only practical way to propel vehicles at this point is from petroleum derived products. Cars, trucks, aeroplanes, and even things that used to be driven by coal like trains and ships are now all driven by petroleum derived products. And these are the things that move goods, these are the things that move the economy. And they're also the fundamental instruments in military strength. So oil is Trump and oil is the suit in which the enemy has overwhelming dominance. Okay? And that's why we're losing the game. If we need to win this game, we have to change the game out of oil. See, this is why I'm not that excited about drilling in anwr. Alaska. People say, well, wouldn't you quit? Why don't we just drill where we can? Well, we're importing 5 billion barrels of oil a year. There's only 16 billion barrels in ANWR. Okay. So yeah, it'd be a good thing from an economic point of view to be able to drill there, but it's hardly a solution. It's one of the few strong cards we have left and to simply have it pulled out of our hand. Playing the game in oil leaves us lost the now I should add in bridge. There's also a way to play the game in what they call no trump in which there is no trump suit or all the suits are equal. That would also be much better than playing the hand in the enemy's long suit. Okay, okay. Now, for example, coal. The United States has more coal than anybody else by far. Saudis have none. We'd be in a much stronger position if coal was Trump, but it isn't biomass. We have great agricultural potential. So do many other countries. The Islamists don't have very much. That would also be better. And of course no Trump would be better. So how do we get the game out of oil and into either one of our strong suits or at least into no trump. Okay, there's one way to do it, and it's counterintuitively simple. It's a one point program. Congress should pass a law mandating that all new cars sold in the United States, not made sold in the United States be flex fueled. Okay. Now what is a flex fuel car? Okay, Flex fuel cars are cars that can run on any combination of alcohol or gasoline. They are omnivorous with respect to either gasoline or alcohol, and the alcohols can be either methanol or ethanol. This is not a future technology. They've been around since 1986. And this year Detroit is marketing 24 models of cars with a flex fuel option and they only cost $100 more or so than the same car in Non flex fuel form, but they only comprise around 3% of the auto market because in most places in the country there's no upside to owning one because you can't find a methanol pump or even an ethanol E85 pump anywhere. And the reason why you can't, of course, is that if you own a gas station and you have three pumps, it doesn't pay you to put one of them in for a kind of car that only is 2 or 3% of the market. Now by the way, I should add it's a very interesting story behind the flex fuel car which is discussed in the book, was invented by Roberta Nichols, who was quite a character. She was a race car driver and a racing boat driver. She won the world speed record with a methanol powered speedboat called the witch in the 1960s. A record store stood for a couple of years and she became head of alternate fuel cars at Ford. And she was from California, from the LA area. Her dad was an engineer at Douglas and she had a lot of friends among California environmentalists. And in the early 70s, these Jerry Brown people, they set up this outfit, the California Energy Commission to deal with the problem of smog. They were not global warming was not on the chart, but smog, conventional air pollution. This was the problem to be addressed. And it became very clear that methanol alcohol fuels burn much cleaner than gasoline. They cause much less particulate pollution. And so they said, well, let's build a bunch of methanol cars for California government. And they did, and they ran great. Methanol in fact, is 105 octane. So the thing's just wonderful. But while the program was a technical success, they realized there was no way this was going to go anywhere. There was no way anyone but the California state government was ever going to buy these cars. Because where are you going to fill up except at these few stations that the California government had set up for its own fleet. So they realized that if an alternative fuel car was ever actually going to break into the market, it also had to be able to run on existing gasoline. This was a terrific challenge, technical challenge, because I mean it'd be one thing if you just said, well, I want a car that will run on 50, 50 methanol gasoline, that would be straightforward. But to have a car that could fill up in the morning on 100% methanol and then it's out in the middle of nowhere and it's got to go and fill up on unleaded when it's 75% empty. So now it's running on 25 methanol 75 gasoline. Then it fills up somewhere else on something else, and it's going unpredictably from one fuel to another. That was hard, but they figured out how to do it. Okay, and this is Roberta Nichols filling up in 1986. And the point here is that the flex fuel cars have gone through a number of generations. Today, the only difference between a flex fuel car and an ordinary car is in the programming of the electronic fuel injector. Okay. Which senses the exhaust. It has a sensor. It senses the exhaust and it senses whether you're running rich or lean and dep, depending upon the fuel mix, you may be running one or the other and adjust the inputs to the engine so as to get the right air fuel mixture for the kind of fuel that you've got. And you also have to have a higher quality materials in the fuel line to resist somewhat more corrosive properties of ethanol and methanol. But that's why it's a $100 differential. And actually, if it was made universal, it'd probably be about a $30 differential because the programming doesn't cost anything. And, and the fuel line materials are $20 or $30. And the lack of a price differential is what makes a mandate practical. Now, this is not like a hybrid that might cost $5,000 more than a conventional car of comparable mileage. Okay, you couldn't possibly mandate that. But something that only costs $50 or $100 more, that's like mandating seat belts. Okay, now, now what? All right, so we had such a mandate or A standard within three years of such a mandate, there's 17 million cars sold every year in the United States. Within three years of enactment, you'd have 50 million cars on the road in the United States capable of running on high alcohol fuels. And under those conditions, you'd see E85 and M85 pumps at every 711 because the market would drive it if the cars can use it. Any gas station owner can put up an alcohol pump. It's not beyond their resources. And any medium sized group of local entrepreneurs can build an alcohol plant, as we have seen with the ethanol boom in the Midwest. But only really big companies can change the nature of automobiles. So that's where you have to affect this thing. At the demand end, then you open things up. So under those conditions, these pumps would appear rapidly, but not just in the United States, all over the world. Because if we had a flex fuel standard in the United States, it would become the International standard, okay? It would be the United States playing the same game to the world that California frequently does with respect to the United States. You set a standard here, the whole international supply will adjust to conform to it because the Japanese carmakers are not about to walk away from the American market, okay? Means all the Japanese auto cars, autobakers would just switch their lines right over to flex fuel, just like that European, the Volkswagen, the rest of them. What it means is that every car being marketed in any serious way internationally in the world would be a flex fuel car. And what that means is that gasoline would be forced to compete at the pump against methanol and ethanol produced in any number of ways all over the world. Not just in Iowa, but in Argentina and in India and in Kenya and in Poland and everywhere, okay? And that's how you destroy the oil cartel, okay? Through creating fuel choice internationally. All right? So now, okay, I've discussed the first couple bullets. Now, another impact of this policy is that you'd create a huge advanced sector market for Third World agricultural produce, okay? Because it's quite true. Within a couple of years of such a standard, you'd have a market for ethanol, for instance, in the United States, vastly larger than American farmers could possibly meet. What that means is that we could drop our trade barriers against Third World ethanol. You know, right now we're tariffing Brazilian ethanol to keep it out of the country, okay? We don't tariff Saudi oil, we tariff Brazilian ethanol. Because the ethanol program as it's being run now is only marginally a program designed to contribute to energy security. It's mostly an alternative means of foreign price supports, which, by the way, is an efficient way. It's actually much cheaper than conventional price supports. For every 50 cents spent in a subsidy to the ethanol program cuts out a dollar in crop price supports and $3 in foreign oil purchases. But be that as it may, The sugar ethanol is cheaper and they have to keep it out if they're going to do this. But if we had this situation, the American farmers would be able to sell all the ethanol they can grow and there'd still be plenty of room left over. And what that means is you're creating market share for especially tropical agricultural countries and they could secure income for development. You know, this is a tremendous problem worldwide. I don't know if people here know about the Doha Trade Talks. International trade is somewhat esoteric subject, but the international trading system right now is unfair. It's known to be unfair. It discriminates against agricultural imports. It was liberalized against manufacturing for manufacturing imports after World War II. And that has allowed Europe to rebuild, Japan to rebuild and industrialize. Taiwan, Korea, and several other countries that were able to get into the industrialization game. But those that have not been able to get into the industrialization game, who have been substantially dependent upon farm products, have been discriminated against. So they, in order to remedy this, they instituted a round of trade talks called the doha round in 2001. And these talks went on for a couple of years, but eventually broke down last year completely. Because at the end of the day, the Americans, the Europeans, and the Japanese simply would not give an inch on agricultural trade barriers, okay? And the reason why they wouldn't do that is not because they were evil, but because they all had domestic farmers that they wanted to protect. This would remedy that. And basically, what you're talking about doing here is taking hundreds of billions, actually trillions of dollars that are now going to OPEC and sending it to the world agricultural sector instead. About half going to the advanced sector farmers and half going to the third world. So you're talking about, like, $500 billion a year that's now going to the oil cartel. Going to countries like this be a tremendous engine for world development, okay? And at the same time, your terrorist funding would be tremendously curtailed. The price of oil would be forced back down to around $50 a barrel, because that's where the alcohol fuels become competitive. Threat of superpower confrontation in the Middle East. What am I doing here? Perhaps not halted, but certainly mitigated. And as I'll discuss, global warming will also be countered, and conventional pollution will also be reduced. All right, now, I've talked about methanol and ethanol, okay? Ethanol currently can be made from food crops. Ethanol historically has been made from a variety of food crops with fermentation. Grapes, okay, very famously. But potatoes, vodka, okay? Honey mead, okay? And in fact, pretty much any thing that contains sugar or starch can be fermented into ethanol. And of course, right now for industrial ethanol, the most common stocks are corn in the United States and sugar in Brazil. Now, there is research underway to. Because the fact that ethanol currently needs to be made from food puts a floor under its minimum price, okay? And doesn't put an absolute limit on its availability, but it puts constraint. And so there's research now into cellulosic ethanol, a means of making ethanol not just from sugars and starches, but from cellulosic e material, which basically means waste biomass. You know, the leaves that fall from trees in the fall, whatever the roughage left over after the harvest. If that research, which is coming along fairly well, is successful, the potential for ethanol will greatly expand. Methanol can already be made from all kinds of biomass, without exception. Okay? Swamp plants, fallen leaves, crop roughage, algae. Okay? It can be made also from recycled urban trash. It can be made from coal as well, from natural gas and from oil, for that matter, if you wanted to. But that would not make sense. Okay? Methanol is cheaper. The price unsubsidized last fall was 96 cents a gallon. Ethanol has more energy per gallon. Both will work in flex fuel cars. And if the flex fuel car, if the parts of the fuel line are made to the methanol standard, which is a more rigorous standard than the ethanol standard, then they'll also be compatible with ethanol as well as gasoline. And that's what should be done if you actually are doing this to pursue energy security as opposed to just support corn market. Though, don't get me wrong, this would be a very fine thing as far as the corn growers are concerned, too. But this will allow a lot of other resources to play as well. All right, now there's a canard that was circulated that still gets circulated vis a vis the ethanol program. The ethanol program is unpopular in certain circles. It costs the international oil cartel $20 billion of our money last year. And so you have propaganda against it. And the canard was put into circulation by an insect ecologist from Cornell named David Pimentel, who claimed that it takes more energy to produce the ethanol than the energy represented by the ethanol. This is untrue. It's been refuted in the refereed scientific literature. Here's the relevance of citation from Science magazine, January 27, 2006. And what you see here is the total amount of petroleum input to produce a given amount of either ethanol, which is these various estimates here, or gasoline, okay? A given amount of fuel in the form not of gallons, but of energy. So it's apples and apples, because ethanol has less energy per gallon than gasoline, but per megajoule of liquid fuel it takes, if you actually even take Pimentel's numbers, the way he counts things, it takes five times as much petroleum to produce a gallon of gasoline. If you use most of the researchers, it's more like 10.

Well, you switched it because the first item you said is how much energy that is you produce. Now you switch to how much gasoline it takes.

How much petroleum? Petroleum, yes. Well, in fact. Okay, well, now, in fact, The petroleum metric is the more relevant metric if you're talking energy security the question is, how much petroleum do you need to make the fuel? Okay, in terms of energy, there's more energy in the petroleum than the gasoline that you get out of it. Making gasoline is energy negative. The question is, how much fuel do you get? Okay. In other words, how much petroleum does it take to make a given amount of fuel of effective energy in liquid fuel form? That is the relevant question.

The other one is relevant for global warming.

Well, that's a separate question. And if you look at this paper, it goes over that now. Now, in that case, the ethanol advantage is not an order of magnitude. It's only an advantage of a factor. No, it's not negative. No, it's according to the current science. Yeah, I'll discuss that paper in a minute. Okay, that's a bad paper. No, it is. Well, I'll discuss it now. Okay, first of all, I refer you to this one, which is the classic reference on the direct effects of ethanol vis a vis global warming. And using ethanol produces around 75% as much global warming as gasoline in terms of its direct effects. Okay? Now what this recent paper in Science magazine did was they said, yes, that's true, but what about the indirect effects, okay, in terms of promoting market share of third world farmers? Okay, now this, by the way, is a bizarre point of view, because what they're actually saying is helping the third world is called causing global warming, and therefore we should not do it. No. Well, the same argument could be made that Google causes global warming not because of the electricity that you use in your building, but by your spreading of information which contributes to economic growth and thus causes global warming. Okay? And in fact, much more global warming than the corn ethanol program, I dare say. Okay, so it was not a valid form of analysis. You actually have to look, if you really want to look at it. You say, how much global warming did I cause by doing this? Not speculating on how that will cause the rest of the world to act. And then credit those actions to your program. If Google spreading information causes someone to build a. A power plant in China or a factory or something, okay, you evaluate the global warming effects of that factory, not of the spreading of the information.

Google didn't double food prices. Ethanol did.

No, it didn't. That's another fallacy. Yeah, there's a lot of this stuff going around. Okay, first of all, the oil cartel's line is that the ethanol program is driving up food prices. Well, world food prices are going up at a rate of 4% a year. Oil prices are going up at a rate of 30% a year, World food prices are going up because of high oil prices and because of increased demand from China and India. They're not being driven up by the American corn ethanol program. In fact, American corn exports have held steady. Our exports have not decreased due to the corn ethanol program, and our exports of other crops are actually up 23% this year. So it's just nonsense. The thing that is driving the increase in world food prices right now, the thing that's driving the increase of fish prices is fuel prices, not the corn ethanol program.

Sir, I think a better analogy of.

What you're trying to make here is can you blame the Holocaust on the surge of what state out of it? Yeah, right, exactly. Another thing is all these comparisons. Is there any number on the actual mileage comparison? So if I want to drive a car for one mile, how much global warming do I quantity if I use as an compare against. Yeah, that's the standard they use because they rate these things in terms of not gallons, but megajoules of ethanol versus megajoules of gasoline. And in terms of the direct effect of global warming, and this, by the way, is corn ethanol, which is hardly. I mean, I would agree with. This is not the optimal way to make ethanol. Once we can make ethanol from cellulosic material, for example, where you're getting a lot more ethanol per effort, so to speak, in terms of fertilizer and other agricultural activity, then the numbers then, in fact, you do get an order of magnitude improvement in drastic reduction, then in fact, you get the true. You know, intuitively you would think if I'm making a fuel out of biomass, then I should be global warming neutral. Okay? But if you have an intensive cultivation effort, you have to then count up that versus the fuel that you produce. In the case of corn ethanol, it is still a positive trait. But in the case of cellulosic ethanol, it's a markedly positive trait. Yeah.

Where would methanol fit? Where would methanol fit on that graph?

Well, the. Well, methanol is off the chart in terms of you don't need any petroleum to make methanol, okay? So in terms of the petroleum trade, methanol is just way ahead. This is really just looking at the corn ethanol program in terms of global warming. It depends how you make the methanol, okay? If you're making the methanol from biomass, it's global warming neutral. If you're making it from recycled urban trash, okay. Which, if left to its own devices, would simply decay into CO2 through bacterial action, you're to going global warming neutral. If you're making it from natural gas, which is stranded natural gas in which it would otherwise be flared, then you're global warming neutral. If you're making it from coal, you're not global warming neutral. If you're making it from commercially viable natural gas, you're not global warming neutral. Okay? So it depends how it goes. Now if you make methanol from coal, and you can make it very cheaply that way and mix enough of that in with your more expensive methanol to bring the price of it below gasoline so that the methanol in bulk gets bought in preference to the gasoline, you can also contribute to fighting global warming indirectly that way. But you would want the. If you're, if your primary concern is global warming, you'd want at least the bulk of the alcohol to come from global warming neutral sources. Now when I circulated the proposal for this book, one of the editors from a liberal publishing house who rejected the manuscript, rejected it saying, oh, I could never print this book. This is such a mean spirited and reactionary book. Look at all the harm you're going to do to these poor Arabs by taking their money away, okay? And, well, let's look at this from the point of view of social justice, okay? In 2006, okay, Saudi Arabia, with a population of 24 million people received $200 billion in foreign exchange for oil exports. And I should add by the way, that only one in six of those people work, okay? The rest are all on welfare at the same year. Kenya, with a population of 36 million people earned 2.5 billion in foreign exchange from a variety of exports across the board. So they had 2.5 billion to buy imports with, including substantially overpriced oil distributed elsewhere. The Saudi oil profits would double the foreign exchange of 80 countries, comparable to Kenya. And by the way, I mentioned, Kenya is not a particularly poor third world country. It's not one of the 50 poorest countries in the world. It's sort of a run of the mill, average workaday third world country. Okay? So I'm not taking an extreme basket case here, okay? This is sort of a typical member, okay? So distributed elsewhere, the 800 billion, when I wrote this chart, it's now 1.3. Now going to OPEC, 1.3 trillion. Excuse me, you're talking the total foreign aid of the entire world of all advanced sector countries combined, both public and private sources of funds. You know, the US Government foreign aid money. You know, the Norwegian and the Scandinavians, they got big foreign aid budgets The Catholic Church, Oxfan, Christian aid, this and that. You take them all. $60 billion a year, okay? The United Nations, UNICEF, all that, okay? You're talking about an order of magnitude more money able to support third world development if you were to redirect half of this OPEC money towards third world agriculture. So you're talking about creating a huge engine for world development. A really serious, serious. See, I personally believe that the biggest problem in the world today is not terrorism and it's not global warming. I think it's poverty, okay? That is what is hurting the most people in the world today is poverty, okay? And what we're talking about here is a huge financial engine to lift people out of poverty. Not, you know, nominal efforts that make people feel good by contributing some money to the, you know, charitable organization of your choice, but a very substantial macroeconomic engine. So instead of selling media corporations to Saudi princes, we could be selling tractors to Africa. Now, there's an example of a country which has undertaken a serious initiative in this direction. And that of course, is Brazil, okay? Brazil had a military oligarchy through most of the period in question here. And they decided, following the first oil shock, they had to do something about the foreign oil. Brazil was in the 1970s, 80% dependent on foreign oil and was paying an enormous bill once the oil price went up after the, the first oil shock in 73. So the government there, they started passing laws. You have to mix 5%, 10% ethanol and gasoline. That all happened. Then they started an initiative to create ethanol powered cars which were then available by the late 70s, but nobody bought any because there were no ethanol pumps. So they ordered all the gas stations in Brazil to install an ethanol pump, but still no one bought any because ethanol cost more than gasoline until the second oil shock in 1979. And once that happened, it took off. Okay? And what you see here is, okay, these, the blue line here, these are not flex fuel cars. These are ethanol only cars. Flex fuel cars did not yet exist, okay? So 1979, they're a tiny percent of the auto market, okay? But as soon as the oil shock hits it, it goes up. Within a couple of years, it's over. 90% of all auto sales in Brazil are ethanol cars. Because the ethanol is cheaper than gasoline and the pumps are there and the car is there. Why not do it? Okay? So until the mid-80s, the ethanol cars dominated the market in Brazil. Then in 1986, OPEC dropped the price of oil. Bang. And very quickly the ethanol car sales went to nominal oil. The pumps stayed in business, both because of the government commitment to ethanol in general, and also because there was a certain number of ethanol cars on the road as a result of this previous period of high ethanol car sales. It kept them busy. Okay. Although as this wore on through the 90s with low oil prices, it was a lot of pressure on Brazil from the IMF to abandon their ethanol program. The government refused to do it. Okay. Late 90s flex fuel cars become available in Brazil, but they don't take off until 2002, because when the price of oil went up again over $20 a barrel, and they have now completely taken over the market. And as far as the ordinary Brazilian is concerned, there's no reason to buy anything else, because even though, in fact, right now ethanol is cheaper than gasoline in Brazil, it might not be in the future in principle. But if you have a flex fuel car, you can't lose whichever fuel is cheaper, that's the one you can buy. So once people understand that, there's nothing further to say, they don't have to bet on one fuel or the other. And the net result of this, in macroeconomic terms is shown here. Okay, this is the red line is Brazilian dependence on foreign oil went from 80% in 1979 to zero in 2006, and it's less than zero now. They're exporting ethanol to Japan. United states was actually 30% oil dependent in 1973, and it's now 60. So this is the difference between having a policy and not having a policy. Okay? And I should say, because people say, well, you know, how can you compare Brazil to the United States? United States has an economy 10 times the size of Brazil. This is a country with much less money to spend on things like setting up ethanol pumps when there's no market for them. Yet all the advantages in this trade, in terms of a capacity to implement a decisive program, favor the United States. What this really is here is a difference between having leadership that's committed to a policy and having one that has no policy. All right, let's talk about the environment. The initial imperative for the development of flow flex fuel cars here in California was pollution. And they certainly burn cause much less conventional air pollution than gasoline. And in fact, there's been a marked improvement in the air quality in the major Brazilian cities as a result of the switch to ethanol. They're less toxic. Okay. Ethanol, of course, has the distinction of being the only fuel that is actually edible. Okay, okay. Now, methanol is not edible. And sometimes people, especially ethanol people who are trying to make a Big case why you should really want ethanol and forget methanols. Oh, methanol is toxic. Well, it's toxic, but so is gasoline. It's not particularly toxic. It's not toxic in minute quantities. It is, after all, present in fresh fruit, okay? It also, aspartame, which is contained in all diet soft drinks, is converted to methanol inside of the human body. So methanol, okay, you don't want to drink a gallon of methanol. That would be bad. But also you don't want to drink a gallon of gasoline. That would also be bad. But neither ethanol nor methanol are carcinogenic. Gasoline is heavily carcinogenic. It has all kinds of aromatic compounds, benzene, toluene, things like this in it that are carcinogens. They are not alcohols. This is not the case. Both ethanol and methanol are soluble in water, okay? And what that means is there's no permanent consequences from tanker spills, okay? You know, Exxon Valdez, okay, It's been a quarter century since Exxon Valdez and the sea otters are still dying from the oil slick, okay? If that had been carrying an alcohol within a week, it would have been essentially undetectable in the environment because it just would have dissolved into the world ocean and be gone. Okay? So it is impossible to have a permanent environmental impact from a spill of transported alcohols. The. Okay, now we've discussed the global warming. If you're making it from biomass or otherwise flavor, natural gas or urban trash, then they are counter to global warming. I should add that there's another mechanism, by the way, whereby plants counter global warming that goes beyond CO2 and that is evapotranspiration. The plants greatly multiply the surface area available for water evaporation from the surface of the earth and then that the heat of vaporization is then transported with the vapor from, from the surface of the earth into the stratosphere, where when it condenses, that heat is released and half of it goes away into space. And this is why, you know, Birmingham, Alabama and Baghdad are at the same latitude. But Birmingham is much cooler because it is foliage there, whereas in a relative desert there isn't that much of that kind of thing going on. So if you want to fight global warming, you want to promote agriculture, and to promote agriculture you want to shift to alcohol fuels. Finally, I should add that while biomass based biofuels can replace petroleum in the short and medium term, I mean, there's enough crop residues in the world right now. Not crops, crop residues, garbage left over from harvest. But if you turned it all into method, you can replace all the oil of opec. Okay, in the short and medium term, we can address it this way. In the longer term, if we were to assume continued worldwide economic growth and perhaps population growth as well, we're going to need to go beyond that. But then if you're talking about. If we're thinking about the future, the world of the future, and if you think about perhaps solar energy being cheap or nuclear energy or fusion energy, take your choice. If you have some form of way of producing electricity that has no relationship to carbon, the easiest fuel to make if you're starting from just electricity, carbon dioxide and water, is methanol. So the point is, by doing this, we create a consumption infrastructure that is compatible with fuels that have the minimum global warming impact and eventually no global warming impact. Now, there's another side to this, and this has to do with power, okay? And it needs to be discussed because ultimately, oil is not about money. It's about power. Oil business involves an enormous amount of money, that's true. But what's ultimately at stake here is power. Power to decide what happens in the world and who controls the world. And if you look at the history of the 20th century in particular, and for instance, World War II, what you see is that the control of oil supply was absolutely decisive in determining the outcome. Okay? The World War II, 60% of the world's oil production was in the United States. Another 15% was in the Soviet Union. Okay, another 10% in Latin America. Another 10% in the Middle East. Only 5% or so left between Indonesia and Romania. That is to say, the place is accessible to the Axis. And for instance, Nazi Germany was dependent for its oil supplies on its own synthetic fuel plants that it built in Leona in central Germany and the Romanian oil fields at Plesty. And, you know, the Stalingrad campaign was an effort on the part of the Germans to seize the Russian oil fields in the Caucasus. And when that failed, they were left with just Plesty and the synthetic fuel plants. And it really took a long time for the Allied brass to catch on to this. But finally, on August 1, 1943, there was an epic raid. American bombers flying from North Africa flew all the way to Romania to hit Plesty. 180 bombers went, B24 Liberators. They came in no fighter escort because no fighter could fly that flight. They flew in an altitude of 30ft. The German 88s on the towers surrounding the field had to shoot down to hit them. But they had 200 fighters in the air to meet them. They destroyed 40% of Plesty in a single raid. But only 79 bombers made it back. Okay, five guys won the Congressional Medal of Honor that day. But it was a strong blow against Plesty, but it was not repeated because of the enormous losses. However, by 1944, the Americans had the P51 Mustang fighter, which long range fighter. And with that we were able to hit Leona in bombers leaving England. 935 bombers hit Leona on May 12, 1944, and that strike knocked Germany out of the war. Albert Speer, the German armaments and industry minister, he wrote a book after the war, after he got out of prison inside the Third Reich. And he writes in that book, I'll never Forget the day, May 12, 1944. On that day, the war was decided. You know, they hit Leona, 935 bombers. The place was totally destroyed. As you can imagine, oil production facilities are extremely vulnerable to bomber attack. And within three months, there was virtually no fuel available in Third Reich. And their last panzer offensive in the Bulge literally ran out of gas on the battlefield. And in fact, they had scrimped and saved every bit of gas they could in an effort to try to seize the American fuel depot at Stavelot. And they were stopped by an American engineering battalion who poured a bunch of gasoline into a ditch in front of the dump and set it on fire. They tried to go around it and ran out of gas. And that was it. And Japan, Japan actually went to war to try to seize oil in Indonesia. But they were cut off from that oil by American submarines sinking Japanese tankers. And so that Japan, you know, in 1945, Japan totally on the ropes, actually produced 10,000 fighter aircraft. But they couldn't get one into the sky to challenge the Enola Gay when she showed up over Hiroshima. No gas out of luck, you know. So whoever controls the world's oil supply controls the human future. And the question is, can we really afford to leave this kind of power in the hands of totalitarian cultists? I don't think so. All right, so one could compare approaches. A flex fuel mandate. What I'm advocating here won't cost the Treasury a dime. Okay. And it will create a market to drive research and production and distribution of high alcohol fuels. It's going to promote world trader development and will reduce pollution and global warming. The approach that we've had from time to time in this country in the period since the first oil shock has been various politicians getting up and saying I want energy independence. And that's why I'm going to increase funding to the Department of Energy and a miscellaneous assortment of energy R and D programs, none of which ever reached fruition. And even now, okay, where there's money going to cellulosic ethanol, okay, both private money, in fact, I think some of the Google people are involved in that. And also Department of Energy money. It doesn't do that much good to create cellulosic ethanol if the cars on the road can't use it. Now it's true that if we had unlimited supply, cellulosic ethanol, you could use it. You could mix it 10% in conventional gasoline and conventional cars could run on that and that would reduce your oil consumption by 10%, but it would not attack the price of oil. It's only if you have cars that can choose between oil and an alternative product do you actually put a price constraint on oil. That's why this has to be handled at the consumption end. And then finally, conservation through price increases being advocated by certain people, people that will simply depress the economy and it will actually increase the power of tariff financiers. Conservation, you can't beat these people with conservation for a couple of reasons. First of all, conservation programs on any kind of global scale is completely impractical. You can't do it. But even if somehow you could, even if you could have an international agreement of all the consuming nations that they all going to reduce their oil consumption by 5% and they all actually met those commitments, OPEC could deal with that just by cutting production to match. So it's only by having fuel choice that you can beat these people. Unless there is something else that people can go to. And I must say it would take an enormous increase in oil prices to get people to conserve through that mechanism. But it only takes a slight price differential to get someone to switch from one fuel to a different fuel. So some questions for the reluctant. Because sometimes I get opposition from libertarians who say I am against this because this is a mandate. Well, ask yourself a question. In whose interest is it that the cars not be flex fueled? Okay. Clearly in the interest of the American public that they have a choice. Even if you choose that you want to run on gasoline, it's in your interest that other people have a choice because that will force down the price of the gasoline that you buy. Okay, okay. It's only in the interest of the oil cartel that you don't have a choice. Okay. Should their interest be allowed to prevail or should ours? Okay. So policy energy Policy in the United States for 35 years has been a scandal. I mean, we were put on notice in 1973 that the world's oil supply was controlled by people who did not have our best interests in mind. Okay? But we've done nothing about it, okay? And I should add, and there are people here who can probably remember the chaos that was caused in 73 when the oil was cut off, okay? We were only 30% dependent on foreign oil in 1973. We're 60% dependent now. If it was cut off now, the effects would be far more catastrophic. But there is a way to win this. If we mandate flex fuel cars, basically, you can break the oil cartel's vertical monopoly on the world's fuel supply, okay? That will protect consumers not just here, but worldwide against unconstrained OPEC price increases and take our fate out of the hands of terrorism's financiers. If you're talking about taking the world off the petroleum standard, putting it on the alcohol standard, increasing global trade and development, helping the environment, helping world peace, protecting liberty, okay. You know, I would imagine that in this audience, there's a lot of people who are highly critical of the measures that the Bush administration has taken to. On behalf of security against terrorism, many of which are offensive to the Constitution. And I'm with you there, but you have to realize that it's an axiom of political science that liberty cannot survive in a state of siege. Okay? If major terrorist incidents were to Repeat, okay, additional 9 11s or biological warfare attacks or whatever, it wouldn't matter whether it was Bush or Obama in the White House, you would see more and more of these national security measures, because the only way fundamentally to protect liberty is to knock out the threat. And this is Frank, frankly, my greatest complaint against Bush. It's not Abu Ghraib or Guantanamo. It's the fact that when we were attacked in 2001, we were paying $90 billion for imported oil. And today, seven years later, we're paying 500. That. That's been the nature of his response. To allow the threat to increase. The fundamentally moving from petroleum to alcohol takes shifts power from people who basically take their wealth out of the ground and therefore do not need the human potentials of their citizenry, okay? To those who make their wealth and therefore need the industry, skill, creativity of their populations and must enhance it through education and freedom, so forth. And that's the path forward. The bard gets the final word. Thank you.

Hi. Thank you for that. That was really interesting.

Is this.

Okay, So I was Wondering, based on the fact that diesel has approximately, say, twice as many BTUs per gallon as methanol or ethanol, why you don't advocate using straight vegetable oil or biodiesel more than more than you seem to be.

Okay.

And they can be made from the same feedstocks roughly.

Well, not exactly biodiesel. Okay, I have nothing against biodiesel. I'm all for it. But it's a marginal resource. The amount of biodiesel being made in this country right now is two orders of magnitude less than the ethanol, which itself is only 3% of the gasoline supply. So ethanol is out there as a measurable but marginal impact on the fuel supply. Biodiesel is two orders of magnitude less now because it's made from the vegetable oils. It's not just made from miscellaneous starches and sugars as ethanol can be. Now it is, however, the case that we can make synthetic diesel fuel from methanol, and that's discussed in the book. And since we can make methanol from anything, if we can establish a methanol economy, then we can greatly expand diesel supplies through that route. The reason why I put the greatest emphasis on the flex fuel car and the flex fuel mandate is this is something, you know, because people say, well, why not plug in hybrids, okay? Or flex fuel plug in hybrids, okay? Which I'm for. But as admirable as a flex fuel plug in hybrid would be, there's no possibility of it gaining large market share anytime in the near future. And even diesel cars, okay. Whereas the difference between a flex fuel internal combustion car and an ordinary internal combustion car is trivial. And in fact, it's entirely realistic for the car makers just to switch over. And I'm working with a coalition of people. There's a group called the Said America Free Coalition. It's a bipartisan group. You can find out about it@setamerica free.org you'll see it's quite an array of national security people and foreign people and environmental people are all involved in this thing. We're going to be introducing legislation this year for a bill that will make it a requirement that all new cars sold in the US be flex fueled by the 2011 model year. And. Getting that much market share on that timescale for an alternative fuel vehicle is not possible any other way.

Okay. I should just comment that my 78 Mercedes is already flex fuel because it can burn SVO right out of the box. And in 1982, 80% of all Mercedes were diesel in this country.

So that can happen most People drive Mercedes.

They only cost $3,000.

Hey, I'd like to first off commend you for really attacking the problem at its source, which I do agree is opec. One of the concerns I have goes back to what you were saying about the 30% rise in oil and the 4% rise in the food prices. And I'd like to revisit the topic of monetary policy and inflation because as I understand, one of the key leveraging points in United States and OPEC relations is the dollar and the fact that they trade in the dollar. And if they were going to decide to trade in euros and throw those $500 billion back at us, then our currency would lose value so fast that 30% for oil and 4% for food would look like nothing. So I was wondering if you could share some thoughts on that.

Well, I'm not an expert on monetary policy, but I am aware in general terms of the concerns that you've just voiced, and I think they're valid. I myself am actually very concerned about one problem that I just discussed briefly, which was the petrodollars and their ability to do corporate takeovers. I mean, you got to realize, okay, this year they're going to take $500 billion from us, 1.3 trillion from the world, because OPEC is not just taxing the United States, they're taxing many countries. $1.3 trillion. How much would it cost to buy the New York Times? 5 billion? I don't know, some number on that order. Okay, how about the New York Times and the three major networks and to get majority shares of CNN and whatever? I mean, $50 billion for the package. So you're talking about extremely formidable financial power here. And yes, to change the world financial system. This is a real threat. I actually believe that the United States right now is in the greatest peril it's been in since 1863, because that is greater than World War II. See, because Americans understand how to respond to Japanese zeros coming down over Hawaii and bombing battleships, okay? They say, oh, they attacked us. Blow them away, no problem. Okay? But they don't know how to understand, perceive an enemy when he walks into a boardroom and offers twice as much much for a company as the thing is trading for on the stock exchange. Say thanks. Okay, so this is a threat.

So China is using a different approach, which is that they have a lot of reserves of coal and are converting it to plain petroleum using plants. Wouldn't that be an even faster approach to energy independence? We have a lot of coal, too. Couldn't we do the same thing and not require every gas station to upgrade every car to upgrade?

Synthetic gasoline can be made from coal. It's much more expensive than making methanol. Because what you have to do to make synthetic gasoline, first you turn the coal into synthesis gas, then you turn it to methanol. So far the steps are the same, but now you have to take additional steps. You got to take the methanol and turn it into dimethyl ether, and now you got to turn the dimethyl ether into propylene, and then you turn that into gasoline. So it's a much more expensive process. So the point is, viewed in the broadest terms, if the car is omnivorous, if it can use the maximum possible alternative fuels, then whatever the cheapest way to make the fuel can win. And if indeed someone can make gasoline through some new process that is cheaper than methanol, by all means, let's use it. But the. But by opening up the array of potential fuels, you're opening up your solution space. Okay, on both the economic front and also on the global warming front as well.

If all cars in the US Were flex fuels today, where would the ethanol come from?

Well, if we had a mandate today that starting in 2011 model year, all new cars had to be flex fueled, that would be a major signal to private capital to start building plants to make methanol and ethanol from any number of possible approaches. Okay? Making methanol from scrap biomass, from urban trash, potentially from coal. Making ethanol from any number of food crops, not just corn, but cellulosic ethanol investments would really mobilize, you know, people would make plants, in other words, if they knew that starting 2011, in 2011, there are going to be 17 million cars on the road, in the air us that could run on alcohol. And in 2012, there'd be 34 million. And in 2000, in other words, those plants would appear and the production would appear. One thing we have learned from the corn ethanol experience is that these plants can be built on a timescale of 18 months to 2 years. Okay? And so if people knew the demand was going to be there, the capital would be mobilized to create the fuel to meet the demand.

We already have a mandate.

I'd like to take another question. Thank you.

So what's the pessimal outcome of this approach? Like, what's the. Give me your best argument against what you've done. Like, OPEC's not stupid. They see the US do this. Did all the rainforests get cut down? In other words, you painted a little bit too much of a rosy picture for me.

At a certain point, they would respond, okay? And they would respond at a certain point by dropping the price of oil below $50 a barrel, okay? As they did to abort a variety of synthetic fuel initiatives and so forth that had begun in the 70s after the first oil shocks. And at that point, we would have a question posed to us of are we going to let that happen, let them wipe out the alcohol industry? Are we going to test tariff the stuff? Okay. In other words, at that point, we'll have a debate between $40 a barrel oil or $50 a barrel oil equivalent alcohol. Okay? My own position is that under those conditions we should tariff it because the fundamental issue is we want to be our own masters. Now with respect to environmental consequences, the Estes would indeed create a much greater market for agricultural produce. Agricultural expand. Now, only around 15% of the arable land in the third world is actually being farmed, okay? And so there's plenty of land that's not rainforest that can be opened up for agriculture. You know, that is an issue that would have to be dealt with appropriately in the large. It can be because by creating exposure, expanded markets for agriculture, you make farmland more valuable, not less. In other words, the Dust bowl was not caused by successful agriculture. It was caused by unsuccessful agriculture and when land is abandoned. So you would have to encourage, in every way possible, appropriate modern land conservation techniques so as to avoid erosion, destruction and so forth. And you would try to encourage countries to preserve in their wild state those particular areas that are uniquely valuable as wild territories. But what you're talking about doing here is creating options. You're creating possibilities. You are, in the broadest sense of the term, creating freedom. Okay? And you say you're creating freedom of people to act in various ways. That's what you're doing. And you say, well, how do you know they won't abuse it? You know, well, how do you know that the child you're planning to have isn't going to be the next Hitler? You know, fundamentally, you know, at a certain point, you have to have faith that if we create expanded possibilities for human freedom, we're going to enhance human existence.

Why hasn't China or India done this already?

Well, actually, they are moving in this direction. India is moving towards, well, they're moving towards a national standard of 10% ethanol in all gasoline. China is setting up methanol plants. They're also sponsoring yam plantations in Laos to make ethanol from yams. But the, The real tough Nut to crack is the cars. Because see, look, any 711 can put in an ethanol or a methanol pump, okay? Any group of medium sized small town investors can create an ethanol or a methanol plant, okay? But to create fleets of cars that run on alternative fuel, that is something that takes a change in action on the part of a major industry. And but if you can do that, if you have the cars able to run on any kind of alcohol or gasoline, then you create all kinds of possibilities for people who can act on the second and third level.

Thank you.

Okay.

So I have a couple parts of the question. One is we mentioned power. So the people that retain the power, they probably want to maintain their position. They're not going to want the changes that you're suggesting. So what do you think would make that possible? The other part is that I guess I understand that gas companies are declaring on their taxes that it cost them $0.27 to produce a gallon of gas that they're now selling for four bucks. Seems like they also control the means of distribution and whatever. So they can pretty much delay or slow down any possible change that may come down the pike.

Well, but first of all, the American oil companies, while they have a parallel interest with oil OPEC in making more money if the price is high, they don't actually. Their parallel interest is not as deep as you would think because they don't actually own that much oil anymore. They're mostly marketing and they do make more money at the higher price, don't get me wrong. But it's these others who are having their equity inflated in enormous degree. But nevertheless, it's the case that they can't completely control everything. There are so many independent gas stations in the United States. They're not all owned by Exxon and so on, okay? I mean, you know, there's all kinds of convenience stores that own gas stations. And you know, Walmart has the capacity of putting up gas stations and if, if the cars could run on alcohol and Walmart wants to advertise freedom fuel made here in America, come to Walmart and fill up, okay? And by the way, while you're here, go into the store and drop a couple of hundred dollars. You know, they'll do it. So the real tough nut, I want to emphasize this again and again. The tough nut here to crack is at the car end. Once you do that, ingenuity will find a way. I mean, you know, when back in 2006 when oil hit $70 the first time this entrepreneur came up to me because I Had written a magazine article about this, and he says, hey, look, methanol is selling for 80 cents a gallon, which is what it was selling at that particular moment. Why don't we set up methanol pumps? What's the problem? You know, we've got $3 a gallon gas, 80 cents a gallon methanol, which even if you take into account that a fact factor of two in energy is still equivalent to $1.60 a gallon gasoline. Let's do it. Who's going to buy it? The car's on the road. Except for a few flex fuel cars can't use it. So you know this guy, I mean, he was a wealthy lawyer. He could easily have afforded to set up 10 or 20 gas stations, okay? But he can't set up an automobile company.

So all the engines made in Brazil, they are flex fuel. And a lot of the motors that are made in Brazil input in American cars such as the Taurus, I think, do have the capability, but I don't know. People don't know. Now another question I have is this. Brazil, for instance, is the most efficient country in producing ethanol because they do with sugarcane and it has a much higher whatever. So what wouldn't also if we were to open the market, because right now there's a tariff, ridiculous tariff on Brazilian ethanol. If they were to remove that to go to a free market model would mean simply not buying oil from the Middle east, but buying ethanol from Brazil, if that's where it's made cheapest, in part, sure.

That would mean that Brazilian ethanol would be able to compete directly against Middle Eastern oil in cars here, and that would help bring down the price of oil. Yeah, let me just make a point here. I may at some point in this talk have used the word energy independence. I don't really like the term. I use it sometimes because it's so conventional. It creeps into the language. And it's true that if we were energy independent, we'd be in a better situation than we are rel right now. But nevertheless, we would not be secure. If the oil cartel has the capacity to bring down the Japanese economy, they would still collapse our economy. Even if we could produce all of our own oil, it would have some military relevance to be able to make your own oil, but still, you would be economically vulnerable and they would still have all these petrodollars to use to do corporate takeovers, and they'd still have all this money used to promote jihad and all that. So the issue here is not trying to put up kind of a wall around America and say, within this castle, we will have all the oil that we need. Rather, it's going outside of the castle, going out into the world, and breaking the enemy's power. Okay? That's what needs to be done. You know, collapsing the oil price internationally. And by making it that cars everywhere can run on alcohols, you're basically stripping the armor off of the oil cartel. Their armor is their vertical monopoly. The fact that the cars must run on their product. If we change that situation, then they become vulnerable. Price goes down. Thank you.