Breaking Oil's Expensive Grip

Brian Hicks

Updated March 8, 2007

Peak oil or not, the price of crude continues to climb. Driven by increasing worldwide demand and a supply pipeline that is both more costly to produce and found more and more in the hands of our enemies, oil seems destined to edge higher over the coming years.

As a result, it probably won’t be too long before oil breaks the $70 mark once again, sending the price of a gallon of gas back over $3.00.

But the sad truth is that even at the high price of $70 a barrel, oil’s market price does not really express what the black gold really costs us. That’s because unlike all of the rest of our energy sources, the free flow of oil also manages to consume a painful and growing share of both our blood and our treasure.

Now what all of this protection money adds up to, of course, is anybody’s guess. After all, given the massive toll of dollars and the lives lost spent defending oil on the Middle East, the figure is practically unknowable.

We do, however, at least know this: If it wasn’t for oil, we wouldn’t really care what happened in the Middle East and we wouldn’t spend another nickel there.

I mean, let’s face it, we really only defend democracy as long as oil is somehow involved. And more to point, without our longstanding national addiction to oil, the region would likely be a lot less volatile.

But let’s consider what we do know about a small slice of those numbers, because they are simply staggering.

At present, our country imports roughly 853 million barrels per year of crude from the Middle East. At the same time, the Pentagon budget for FY 2007 is roughly $532 billion dollars.

Now if we consider that only a third of that budget is directly related to defending oil in the Middle East, that means we will spend about $176 billion ensuring the flow of crude this year. Every nickel of which adds to our true costs.

That means for every barrel oil we get from the Middle East, $206.00 is spent in defense dollars to ensure that it gets here safely. ($176 billion divided by 853 million barrels-you do the math.) That leaves us with a figure of about $266 per barrel, or over four times the spot price.

Add the cost in blood, tension and broken lives, and the real price of oil is absolutely off the charts.

I bring this up, of course, to illustrate how simple-minded most people have become in regard to the price of a gallon of gas. We fret and wail when gas crosses the $3 dollar mark but we are blind to the fact that each gallon really costs us three times that amount, or $9.00 a gallon. Which, to be truthful, is absolutely insane.

So instead of hoping that oil somehow falls ot a mere $10 a barrel, as a nation we really ought to be thinking about eliminating that $206-per-barrel overhead in defense dollars. That means, of course, making a real effort to end our dependence on foreign oil.

Part of that effort involves hydrogen, the most radical departure from the energy norm.

In a perfect world, hydrogen would be the perfect fuel. It’s abundant. It’s clean. And best of all, it would end oil’s stranglehold on the world.

But it’s also not without its critics. Production, storage and distribution problems, they say, will effectively keep hydrogen from fulfilling its promise.

Despite these naysayers, the hydrogen economy and its entrepreneurs continue to work the lock.

A recent sample from February’s automotive headlines only underscores their progress.

  • General Motors has announced plans for serial production of a hydrogen powered vehicle by 2010 as part of its strategy to push alternatives to conventional fuels.
  • Ford has introduced its radically-styled "Airstream" concept car at the Detroit auto show. The car combines a Ballard hydrogen fuel-cell generator with a 336-volt lithium-ion battery pack.
  • Honda has introduced is FCX. It’s a fuel-cell car that can get the equivalent of 65 miles per gallon of gas. An FCX with 8.8 pounds of hydrogen can go about 270 miles.
  • DaimlerChrysler has launched the second phase of its F-Cell Global Programme Partnership, and predicts that if all goes according to plan, fuel-cell cars will be commercially available by 2012.
  • Ten European partners have completed the Hy-ICE project–Optimization of the Hydrogen Internal Combustion Engine–three years after the project first began. The project has resulted in a combustion engine fueled by hydrogen that offers clear advantages over other propulsion systems in terms of performance and costs.

These stories, of course, are just a very small sample of the advances that are taking place within this fledgling industry. Numerous companies and groups all over the world continue to make progress in solving hydrogen’s innate problems.

And while the "Hydrogen Economy" is still something of a dream today, their efforts may tell an entirely different story tomorrow. In fact, given its promise, a quantum leap in this technology would hardly be surprising.

And when it comes, it won’t be a moment too soon. Oil, after all, is more costly than we think it is–even when we can get our hands on it.


Wishing you happiness, health, and wealth,

Steve Christ, Editor

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