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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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RE: Will he pay for it?
By StevoLincolnite on 5/20/2011 10:32:10 AM , Rating: 2
It wouldn't occur "naturally" if you're slapping a $2-4 tax on the product in order to artificially manipulate prices and demand.

The US does tax it's fuel, see here:

Gasoline prices around the world - most notably Europe where it is most expensive - is not that way because of demand, supply, or refining. It's because they tax the hell out of everything to pay for nationalized/socialized healthcare. I guess if it was up to you, we'd all just keep writing blank checks to the government so they can "invest" in boondoggle after boondoggle, pad the wallets of special interest groups who fund their campaigns, give us more dept...and then somehow con the people of the need to tax the rich and socialize industry. Sounds pretty sheepish to me.

Most countries that heavily tax fuel are also in less debt, the United States debt level is simply incredible with it in the Trillions, not that there is a clear link between the two.

Here in Australia, Petrol/Gasoline is taxed higher than the USA, but I ended up getting LPG Gas installed on my vehicle.
With LPG at half/third of the price of Petrol/Gasoline it was a no brainer, it's cleaner to with only just slightly worse economy and power.
It probably helps that we have significant deposits of natural Gas though to keep prices stable. (The Government might have a helping hand in that to.)

RE: Will he pay for it?
By mdogs444 on 5/20/2011 11:24:17 AM , Rating: 1
The US does tax it's fuel, see here:

The fuel is taxed to pay for road upkeep and maintenance (at least as far as we are told). The taxes on fuel in the US are not to manipulate markets, demand, supply, or to fund some boondoggle venture that can't be done efficiently in the private market.
Most countries that heavily tax fuel are also in less debt, the United States debt level is simply incredible with it in the Trillions, not that there is a clear link between the two.

Are you being purposely obtuse? Of course our debt is higher than other countries - because our national wealth and GDP are also higher. Debt to GDP ratio is what really matters, and the short term and long term outlooks on that debt. We are in major debt crisis, but the democrats don't want to cut down the debt. They want to keep spending at the current rate, make new programs, and just tax people more.
It probably helps that we have significant deposits of natural Gas though to keep prices stable.

We have enough of that in the US as well to keep us running on our own for about 100 years. Then again, we have enough oil in the shale to last over 100 years and coal to power every home for over 100 years. But the people on the left keep trying to find ways to make the wind blow...

RE: Will he pay for it?
By Solandri on 5/20/2011 2:09:55 PM , Rating: 2
Most countries that heavily tax fuel are also in less debt, the United States debt level is simply incredible with it in the Trillions, not that there is a clear link between the two.

Say what? The U.S. has substantially lower debt as a percentage of GDP than most Western countries which tax their fuel heavily.

Japan: 225.8%
Italy: 118.1%
Belgium: 98.6%
Ireland: 94.2%
France: 83.5%
Portugal: 83.2%
Germany: 78.8%
U.K.: 76.5%
Austria: 70.4%
Netherlands: 64.6%
Spain: 63.4%
U.S.: 58.9%
Norway: 47.7%
Finland: 45.4%
Mexico: 41.5%
Sweden: 40.8%
Switzerland: 38.2%
Canada: 34%
South Korea: 23.7%
Australia: 22.4%

Countries in italics are major net oil exporters. Incidentally, this is why I don't buy the doom and gloom stories about the U.S. dollar due to U.S. debt. If debt is really that big a problem, the Euro is in far, far worse shape than the USD.

"I modded down, down, down, and the flames went higher." -- Sven Olsen

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