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FedEx CEO Frederick Smith (right), a former U.S. Marine, says that America's oil "addiction" is costing American lives and jobs.  (Source: AP Photo/Mark Humphrey)

Many have claimed that America's invasion of Iraq, costly in American lives, was driven by a desire/need to safeguard the nation's oil supplies.  (Source: AP Photo)

Mr. Smith says electrification -- and government intervention -- are the only workable solution as there's no "free market" in oil (FedEx EV delivery truck pictured)
Company says failing to transition to EVs would be disastrous for America

Oil prices may be easing for a minute, but it's fresh off new record highs, having reached $4.30 USD across many parts of the U.S.  Yet despite enthusiasm by industry figures and the government, there's still much debate about whether electrified vehicles like hybrids, battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEV) are really going to be viable.  Some analysts and customers say they are turning the corner -- others say electrified vehicles still don't make sense [1] [2].

FedEx Corp. (FDX) joined the fray, when its Chairman, President, and CEO Frederick W. Smith published an editorial in The Financial Times, which FedEx later reprinted on its own site.

In the article Mr. Smith firmly throws FedEx's support behind electrification, which he characterizes as vital for U.S. security and financial stability.

Regarding the financial costs, he writes:

Every American recession over the past 35 years has been preceded by – or occurred concurrently with – an oil-price spike. The last time this happened, just a few years ago, the average retail price of gasoline in the US increased from $1.46 to $3.27, costing typical households $2,115 a year in increased fuel expenses. That price spike contributed greatly to the recession and financial crisis which the world is still struggling to recover from.

And Mr. Smith, who served as a U.S. Marine from 1966 to 1970, also complains that America's "addiction" to foreign oil is also costing the lives of servicemen:

This addiction has also led the US to commit its young men and women in uniform to protecting the world’s oil infrastructure. And it means that western diplomacy is handicapped by the need to placate oil-producing nations, including those that do not share America’s views or values. 

II. What Should be Done?

Mr. Smith says that given that the U.S. spent $260B USD last year on foreign oil, the "wisdom of producing more [oil] domestically becomes clear".  He praises stricter safety and environmental standards regarding oil exploration, but complains that some environmentalists and government bureaucrats are acting as obstructionists.

Fuel economy improvements are another vital mechanism, according to Mr. Smith.  The CEO praised former U.S. President George W. Bush and current President Barrack Obama for passing updates to the CAFE standards, which are actively forcing automakers to improve fleet wide efficiency.

But he complains that oil drilling and fuel economy improvements are only "interim measures".  He comments that the only real way to save the U.S. is through electrification, stating:

Only electricity can give the transport sector the flexibility to switch fuels when one or more become too expensive. Electricity from homegrown sources – wind or solar, coal or hydro, natural gas or nuclear – would free America’s mobile economy from dependence on a single source. And unlike some alternatives, the infrastructure backbone for “refueling” electric vehicles already exists in the US national grid, which offers significant spare generating capacity at night, when it is needed for this purpose.

He says he's not one usually for government intervention, but that the government must intervene to push electrification as there's no free market on oil.  He writes:

I am not someone who tends to advocate for increased government involvement in the private sector. Free-market solutions to these economic threats would be ideal. But there is no free market for oil. To the contrary, today more than 90 per cent of proved conventional global oil reserves are held by national oil companies that are either fully or partially controlled by foreign governments, whose interests often have as much or more to do with geopolitical considerations than free-market principles. 

The issue is one that hits close to home for FedEx.  FedEx has attempted some modest electrification projects, but the majority of its fleet runs on gasoline.  And as a business heavily driven by ground shipping, the company is very vulnerable to gas price fluctuations.

The company's CEO remains optimistic that America can electrify and kick America's "addiction" to foreign oil, but warns, "The time to do so without truly calamitous consequences is rapidly running out."

DailyTech has raised similar thoughts, in some regard, in past editorials about transition America's economy to an all-electric infrastructure driven by clean nuclear power.

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He should get serious
By aromero78 on 5/20/2011 9:47:53 AM , Rating: 1
I agree that the real benefit isn't in the cost analysis of gas vs. the alternatives, nor is it in the environmental benefits, it's in giving the middle finger to the middle east. But if this guy was serious he would convert all, not just some of his fleet to something other than gasoline. Electricity, hydrogen, or even natural gas. Personally I think natural gas would be the way to go. We have some of the worlds largest supplies of natural gas and existing vehicles can be made to use it with some minor changes. Some states (California comes to mind) have already started the process of converting garbage trucks and bus to natural gas with some success. The major caveat to that of course would be that he would have to build the infrastructure to support such a fleet. I'm sure he could partner with other companies or investors to foot the bill. I'm just sayin'; he should put his money where his mouth is.

RE: He should get serious
By StanO360 on 5/20/2011 10:17:45 AM , Rating: 2
Remember, if we don't force it, just encourage it. The infrastructure is fundamentally there already. Major pipelines are all over the country and city.

I love the free market and hate taxes and government. But why don't they tax foreign oil. Not for the government to choose what's best, but as a source of revenue. Price will eventually go up to where alternatives from the market will become feasible.

RE: He should get serious
By aromero78 on 5/20/2011 10:35:25 AM , Rating: 2
You're right fundamentally it is, but at the moment fueling stations are few and far between. This represents a huge obstacle to natural gas. I'm not a natural gas shill but if we have it in abundance we might as well use it.

RE: He should get serious
By ketchup79 on 5/20/2011 11:21:36 AM , Rating: 2
But if this guy was serious he would convert all, not just some of his fleet to something other than gasoline.

This will not happen, because the cost to the company would dramatically increase, which would drive up their prices, which would cause the companies that use FedEx to look for other options. Sure there are people out there who would respect their decision to get away from foreign oil, but they will be greatly outnumbered by those who want to save money.

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