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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 JasonMick on 5/20/2011 11:42:01 AM , Rating: 5
I'd like the see them cut the Ethanol (Corn) subsidies too. I have found that crap to make me loose 1-2 mpg overall per tank in my car when I use gas with any Ethanol in it.

Absolutely agree there. Ethanol as a fuel source for America is very problematic on a number of levels.

First, ethanol blends hurt the engines of none Flex-Fuel vehicles. And on Flex-Fuel vehicles you get reduced mileage/performance vs. gasoline. People often mistake ethanol as giving better performance, but that's only possible with optimized engines and pure ethanol blends as they run in Brazil.

Secondly, there's a fundamental problem with using CORN ethanol. Corn is a food product, so pushing for it to be made into ethanol drives up food prices. And there's nowhere near enough corn to provide for America's fuel needs. And last, but not least, from a cost and pollution standpoint perspective corn is the WORST kind of ethanol -- it raises NOX/Sulfate emissions.

At the end of the day it takes almost as much gasoline (mileage-wise) to create corn ethanol and bring it to the pump as equivalent mileage you get out of the resulting ethanol itself. In that regard it's just a big shell game to pay off millions in taxpayer money to commercial corn farmers.

Not surprisingly corn ethanol bills or additions are always pushed by Senators/Congressmen from farming states, whose campaigns were funded by wealthy corn growers. Politicians from other states aren't the biggest fan of the idea, but once the corn politicians (e.g. Sen. Franken) agree to endorse their favorite brand of pork (whatever happens to be in their state), they agree to vote in favor of it.

And at the end of the day they try to pass off the measure as "green" and "progressive", when in fact it's just robbing from the taxpayers and giving to the corn farmers, and destroying the environment in the process.

See how great government intervention is, kids?

RE: But then again.....
By Solandri on 5/20/2011 1:29:49 PM , Rating: 4
While I agree corn ethanol has become perverted by the corn lobby, it didn't start off that way. The reason we have so much corn everything (ethanol, HFCS, foreign aid, etc) is because the government subsidizes corn production. The reason the government subsidizes it is so that there won't be food shortages in the event of a crop failure or natural disaster.

This means that every year that there isn't a crop failure or natural disaster, we have an oversupply of corn. The question then becomes, what do you do with all that extra corn? Some is turned into cattle feed (thus effectively subsidizing the beef and dairy industry). High fructose corn syrup is another result. Most of the foreign food aid we send overseas is excess corn and grain.

Some clever people were trying to think up other things we could do with all this excess corn. One of them noticed our heavy dependence on foreign oil, and proposed turning it into ethanol. This is why we ended up focusing on corn ethanol instead of crops with higher energy yield like sugar beets or switchgrass.

It's a fine idea, as long as you convert only the excess corn into ethanol. But once the market for fuel and the market for food become intermingled, that becomes impossible. So as long as corn is subsidized, corn producers should be prohibited from selling their corn for ethanol. The government (which buys up the excess corn) should be the only ones allowed to sell corn to corn ethanol producers. It's far from ideal, but it's the sort of heavy intervention you have to do to the market to fix things if you skew it with things like subsidies.

Unfortunately, since this would only benefit the American people, and not some big pocket constituent who will contribute to a politician's campaign, it will never happen.

RE: But then again.....
By icrf on 5/21/2011 9:42:36 AM , Rating: 2
I've heard the "don't make fuel from food" argument many times before and have always been confused by it. I know the concern is displacement of food for fuel, but the fact that the fuel is made from food seems secondary to the more simple re-purposing of arable land from food to fuel, regardless of what's grown on that land.

Even if we were using switchgrass, which grows on more marginal land, eventually the price of fuel could be high enough to convince a corn farmer to grow switchgrass instead of corn, achieving the same displacement without using a food product. It always struck me as a bad way to make a decent argument.

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