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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 12:38:56 PM , Rating: 5
Jason, that would be disastrous for America. There are only thousands of EV cars in America. Your idea would make gasoline prices rise astronomically, impacting hundreds of MILLIONS of American's, not to mention the trucking industry. Which would raise the cost further on EVERYTHING in the country.

Oh yes, the U.S. economy is far too weak to support free capitalism. Poor us. We have to subsidize our businesses, by handing pork down a long government chain.

Are you honestly that naieve/stupid? You're paying twice as much to funnel your tax money down the government supply chain as you would be if you were paying more at the pump.


I can't believe you're promoting socialism and big government! Because that is PRECISELY what oil subsidies are. In effect, it's the government exerting a degree of ownership/sponsorship of what SHOULD be a private institution.

I'm glad we've at least been able to establish that you're not a conservative except when it suits your interests.

Also the federal government makes hundreds of billions in tax revenues from oil companies and gasoline taxes, making the oil subsidies almost a wash. How much tax money do EV's bring in again?

Was I suggesting EV subsidies?

No, if you had read the one sentence (I know, so long, must be hard on you) that you quoted, you would see I was suggesting EV subsidies be cut.

For the record I also suggest removing the high gas taxes. (Oil should be taxable similar to other domestic goods, on a state by state basis, imo.)

But to claim that gas taxes make up for gas subsidies is MORONIC. If the government was taking away the same amount of money it was giving to oil companies, they'd be getting no net monetary gain.

So there'd be no benefit to them and removing the subsidy and high oil taxes would have no net impact, if what you claim is true.

In reality you just have a very poor knowledge of the situation and bafflingly are supporting government pork and bloated bureaucracy. Have fun paying that bill, my friend.

RE: But then again.....
By Reclaimer77 on 5/20/11, Rating: -1
RE: But then again.....
By Zoridon on 5/20/11, Rating: -1
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