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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: But then again.....
By TSS on 5/20/2011 11:35:15 AM , Rating: 2
China is so predictable, that based on their shutting down of the rare earth metals, as soon as they have an important position, maybe even a monopoly, on the lithium market they will shut it down and gouge prices too.

You cannot replace reliance on foreign countries with a reliance on a foreign country and say "well we are alot safer now". Especially if your moving your dominant superpower business to a emerging superpower's country. That sounds like it'll end well.

China is stimulating domestic demand like crazy. They even had a monthly trade deficit this year - the first one in 7 years including during the crisis! The only thing they lack now is advanced western technology, but once they have that (and their law designs and cyber attacks show their hard at work) they won't *need* the west.

They'll drop the US like a stone. Why? Because the chinese look out first and foremost for chinese interests. And once the US is no longer of any use to china, not as a market nor a source for technology, they will dump their dollars and become the new dominant super power. They won't even need to worry about being invaded, the US cannot afford it!

If you want to beat china at their own game theirs really only one thing you can do, stimulate domestic production of something you need, but the chinese will desperatly need as well. And the awnser might be simple, Hydrogen technology.

Making hydrogen costs alot of elecriticy, but so far that's the only thing the US has plenty of because your sitting on huge coal reserves. The grid might be outdated, but power generating wise, you're fine. The benifit of hydrogen over EVs is you don't need a big electrical grid, you simply build the hydrogen plants close to power plants. Once it's been generated you can move it around in liquid form, possibly even take advantage of the current oil infrastructure.

But here comes the kicker: Electricity cannot be exported, Hydrogen can. The Chinese will have MASSIVE fuel demand the next few years and after that. They simply cannot stick to a single source: if they choose oil, they'll use up all the oil in the world in record rates. If they go EV they'll burn through their own coal and even nuclear fuel in no time. Even combined it'll be a stretch.

Get GM to sell hydrogen based vehicles over there and *let* them steal that technology, let them produce millions and millions of cheap hydrogen based cars. Then closely guard your secret of hydrogen generation, and sell them the hydrogen fuel. Do the same to India.

Heck a plan like that might even turn your budget deficit into a surplus in a decade, even with future liabilities. Do not underestimate the resource hunger of nearly 3 billion people in those 2 countries alone.

RE: But then again.....
By yomamafor1 on 5/20/2011 12:41:52 PM , Rating: 2
The only problem is that hydrogen vehicles are not even close to being deployed in an economically feasible matter. The only hydrogen cars being deployed in relatively large numbers, the Honda FCX Clarity, cost nearly 120k for Honda to produce, and have around the same range as a Tesla Roadster.

On to the hydrogen itself. The hydrogen storage is still the largest obstacle towards hydrogen vehicle adoption. It is still very costly, and does not store enough hydrogen to justify the cost. Most experts agree that hydrogen vehicle is at least 20~30 years out before it is feasible, and that is a big IF. Putting all the hopes on hydrogen vehicle is like putting all the hopes on nuclear fusion power generation. Both are beautiful and great if true, but the risk of them ever becoming a reality is high.

At least with the battery EV, it is on the brink of becoming a viable alternative to regular gasoline cars.

RE: But then again.....
By grant2 on 5/22/2011 5:52:56 AM , Rating: 2
"Then closely guard your secret of hydrogen generation"

Ah yes, those foolish chinese will never decrypt the secret of electrolysis!! mauhaah grade 9 science experiments will forever be outside their grasp!!

RE: But then again.....
By Zingam on 5/22/2011 7:16:57 AM , Rating: 3
Wow! You people speak as if China and India are on another planet. Dude, we all live on a small planet, a very, very small, tiny planet called Earth. If a country destroys its environment we all will get it.
If a nuclear power plant blows up in Japan we'll all swallow the radioactivity. And if everybody goes on polluting on a massive scale and we all try to steal each others lands, goods, food, wives and stock we will destroy the planet and ourselves.
As long as we live in a single house we have to find a way to live together in harmony.

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