Getting off Oil

by Amory B. Lovins

The world uses a cubic mile of oil a year, costing almost $2 trillion. Oil and cars are the world's biggest and most entrenched industries. Yet an inexorable half-century transition beyond oil has begun, squeezing oil between efficient use and alternative supplies.

Lamp oil from whales lit most American homes in 1850. Yet in the next nine years, just before Drake struck oil in Pennsylvania, five-sixths of whale oil's lighting market fled to cheaper competitors. Likewise in 2007 powerful ways to save and replace oil, which have been quietly emerging for 30 years, will visibly start to rout oil from its strongholds.

Fleet turnovers take time: putting the first half-million hybrid cars on the road took nearly a decade. Yet in 2007 20 new hybrid models will enter the American market, and operating efficiency will finally become entrenched as carmakers' top design priority, locking in oil savings for decades. Biofuels, too, will continue double-digit growth as Brazil's 2006 oil independence and Sweden's 2020 off-oil goal spur emulation.

Some 94 percent of the world's oil reserves are held by governments that don't know or won't reveal the size of their holdings. But no matter how much oil there is, we should save it whenever doing so is cheaper than buying it, and nowadays that is always. Unlike short-term behavioral changes, efficiency investments are irreversible: you don't scrap fuel-frugal furnaces or remove roof insulation when fuel prices drop, so efficiency ratchets up. And elegant frugality will outdo incrementalism: efficiency often yields expanding returns.

Each day a modern car burns fuel derived from 100 times its weight in ancient plants; yet a mere 0.3 percent of that fuel moves the driver. Tripled-efficiency, ultralight gasoline-hybrid SUVs were designed in 2000, paying back in one year at European and Japanese fuel prices or two years at America's much cheaper pump prices. In 2007 the Automotive X Prize will start moving such designs to market. Just in America, they will ultimately save 8 million barrels of oil a day — equivalent to finding a new, secure, and inexhaustible Saudi Arabia under Detroit.

In 2007, too, Toyota will emerge as the leader in superefficient plug-in hybrid cars: electric for short commutes, gasoline-hybrid for long trips. This could double the already doubled gasoline efficiency of a Prius (pictured). Next, make that car ultralight and its gasoline efficiency redoubles. Biofuel it and you quadruple gasoline efficiency again, to 30 times today's norm. Sound like the whale-oil story yet? Oil prices will drop — but efficiency will remain cheaper still.

Full practical use of the best 2004 efficiency technologies in all applications would halve American barrels burnt per dollar of GDP, to a quarter the 1975 level.

The average cost: $12 per saved barrel. Saved natural gas and advanced biofuels could replace the remaining oil for $18 per barrel. Thus eliminating American oil use by the 2040s costs $15 per barrel — one-fifth its 2006 price. It surely follows that getting off oil — thus abating 42 percent of global carbon-dioxide emissions — will be led by business for profit.

That transition already shapes competitive strategy. Wal-Mart's new heavy trucks will be a quarter more efficient in 2007 than in 2006. By 2015 they will be twice as efficient, saving more than $300 million a year. Next will come trebled efficiency, which yields a 60 percent internal rate of return.

In 2007, Boeing's 20-percent-more efficient but same-price 787 will take flight. In Detroit, Schumpeterian "creative destruction" will accelerate as smart money favors leapfrogs; markets will change managers or their minds, whichever happens first. Ford's new chief executive, Alan Mulally, whose efficiency-based Boeing strategy is beating Airbus, will bring to Ford Boeing's focus on ultralight materials (the 787 is 50 percent advanced composites), systems integration, and breakthrough design.


The Greening of the Pentagon
In Washington, D.C. a surprisingly strong voice in 2007 for getting off oil will be the world's biggest buyer both of oil and of renewable energy — the Pentagon. This is not just because oiligarchs tend not to be freedom-loving democrats and sometimes foment instability and conflict. Rather, the risk and cost of vulnerable fuel convoys, easy prey to roadside bombs, will persuade military leaders that only superefficient platforms dragging dramatically slimmer fuel logistics tails, or none, can fight persistent, dispersed, affordable wars.

This strategic shift will not just save hundreds of lives and tens of billions of dollars a year. It will also speed key technologies, like ultralight materials, that can triple the efficiency of civilian cars, trucks, and planes — just as military R&D created the Internet, GPS, and the jet and chip industries. Thus the Pentagon will start to lead America, and the world, off oil so nobody need fight over it.

A vision will form of a United States that can treat countries with oil the same as countries without oil, and gives others no reason to suppose it is motivated by oil. The bet of Russia's President Vladimir Putin that he could hold fuel customers to ransom will eventually turn sour. China's 2005 adoption of energy efficiency as its top development priority will start paying off. Decisive evidence will emerge that stabilizing the earth's climate is in fact not costly but profitable (because saving fuel costs less than buying it). And as we all drill for wasted oil to power our buildings, factories, and vehicles, the market- and community-driven rise of energy saving — or "negabarrels" — will begin laying visible foundations for a richer, cooler, fairer, and safer world.

Amory Lovins is Cofounder and CEO of RMI.
This article is reprinted with permission from The Economist.