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Electric Cars: Leaving the Middle East Behind?

Electric Cars: Leaving the Middle East Behind?

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By Alex Milona During the Cold War, the United States formed alliances and positioned military forces across the Middle East to ensure that our economy, and those of our allies maintained access to the region’s vast oil supplies. American policymakers remembered that Japan embraced expansionist imperialism to secure natural resources and export markets. The lasting defeat of fascism in Europe and Asia depended on access to oil. America’s power rested on the bedrock of a guarantee—a promise that our allies could buy primary inputs necessary to grow their economies and access foreign markets to sell their exports.[1] Our nuclear umbrella, blue water navy, strategically placed bases, and strong economy underlined that guarantee at great cost to U.S. taxpayers. This strategy proved effective as Japan and Western Europe remained steadfast allies during the Cold War, throughout which the United States had a clear, direct strategic interest in maintaining Middle Eastern stability. Today, while the United States remains firmly committed to maintaining the free flow of oil from the Middle East, the strategic reasoning for our security posture has become more complex in large part due to China’s rapidly increasing demand for oil. China went from being a net oil exporter in the early 1990s to the world’s largest net importer of crude oil and petroleum products in 2013.[2] This means that China benefits from our security investments in the Middle East even though it is not a strategic ally. Since oil is fungible, and global market forces control its price, our protection of Middle Eastern oil subsidizes its cost for anyone who desires to buy it. This expense was justifiable so long as it purchased the steadfast loyalty of key allies, yet China now numbers among the key beneficiaries. This would not be an issue if China upheld a responsible role in promoting good governance, human rights and free trade in the international community—the bedrock principles of peace and prosperity in the post-Cold War order—but it does not. Its investment in developing countries is untrammeled by such concerns.[3] Even so, if China was small and insignificant this activity could be overlooked. Yet the IMF has determined that China’s GDP as measured by purchasing power parity is now the largest in the world. In addition, its authoritarian political leaders have made alarming moves to establish a sphere of influence in East Asia to the detriment of our allies in the region. Why does the United States continue to subsidize China’s oil supply by paying for security in the Middle East? The most straight-forward way to pressure China to help pay for our security policy in the Middle East would be to threaten to cut off their oil supply. Unfortunately, there is no easy way to exclude China from buying oil on the world markets. Plus, China would declare war on us like Japan did in 1941 if they suspected we were attempting to cut them off. If the threat of exclusion is not a viable policy, could we simply withdraw from the region and force the Chinese to move their troops in to deal with the mess? This is certainly a tempting solution. In the past twelve years we have spent massively to ensure our influence in the region. The wars in Iraq and Afghanistan cost roughly two trillion dollars, and the ultimate price tag may come to as much as four trillion as medical costs for veterans keep rising in the coming decades.[4] The opportunity cost of this expenditure is mind-boggling. Suffice it to say that 100 billion dollars alone could have paid the medical costs of every person in the United States without healthcare in 2007 (pre-Obamacare).[5] Unfortunately, pulling out of the Middle East is a horrible idea. Firstly, this policy ignores the reality that we still import a great deal of oil from the region to power our transportation sector and cannot afford to trust the Chinese to continue providing security for global markets in our absence. Secondly, our pullout would set off an unpredictable chain of events in the ensuing power vacuum. Among the likely scenarios are war between Sunni countries including Egypt and Saudi Arabia against Shiite Iran, not to mention a race among Japan, South Korea, Western European countries and China to secure their own access to oil. Our alliances in East Asia and Europe would suffer irreparable harm as countries realign away from the United States to guarantee their access to oil. And lastly, Turkey, on NATO’s southern border, would face unknown security threats from its Middle Eastern neighbors to the south. Our withdrawal from Iraq and reluctance to engage more forcefully in Syria has created a power vacuum that ISIS has been more than willing to fill. If we were to pull troops out of the Persian Gulf, Islamist extremist groups such as ISIS would face a weakened and divided opposition. Our oil problem ultimately calls for an engineering solution rather than a political solution. Firstly, it is important to acknowledge that the United States produces the third-most oil of any country on earth.[6] The issue is that we consume a lot of oil, much more than we produce. Electric vehicle technology is the answer, as it allows cars to refuel using energy from the electricity grid rather than gas stations. Since the vast majority of America’s electricity grid runs on a mix of domestically produced coal, natural gas, nuclear and hydro power, once we stop using petroleum for use in motor vehicles approximately 60% of our petroleum demand vanishes.[7] [8] When one considers that only a net 30% of U.S. petroleum is imported, the significance of these numbers becomes clear. If the United States rapidly converts to electric vehicles, we will have 30% of our domestic production capacity available to export to world markets. [9] This political impact is profound when considering that our allies can convert to electric vehicle use as well. This progress would leave us well on the way to establishing independence from the need to police the Middle East. The trick then, is to figure out how to move our own motor vehicle industries and those of our allies away from petroleum fuels. Now for the bad news, we are not close to being able to move our transportation industry away from petroleum. There are two main issues with the electric cars currently available on the market. Firstly, the mass-market (sub $40,000) options do not have sufficient range to appeal to a broad base of consumers.[10] The most popular electric vehicle in the United States, the Nissan Leaf, costs around $30,000, but only has an average range of 84 miles.[11] Industry experts consider 200 miles of range-per-charge the magic number where electric vehicles begin to assuage concerns about range anxiety.[12] The Tesla Model S offers more than 200 miles of range, but it costs at least $70,000.[13] Secondly, there are insufficient charging stations to make Americans feel secure in taking road trips in their electric vehicles, meaning that most vehicles are used for daily commutes and errands around town.[14] Fortunately there is good news on the horizon; Nissan, GM, and Tesla have all publically announced plans to release electric vehicles with 200+ miles of range for ($30,000-35,000) in 2017.[15] These are solid plans backed up by real investment. The key to reducing the price of EVs is to reduce the cost of their batteries. Tesla has teamed up with Panasonic to build a “Gigafactory” in Nevada that will double the worldwide production of lithium ion batteries. Not coincidentally, the factory is slated to begin production in 2017. Elon Musk, the firm’s CEO, says that the cost of a Tesla battery should be reduced by 30% due to economies of scale alone.[16] GM has contracted with LG Chem to match Tesla’s improvements by using technical innovation rather than scale.[17] The U.S. federal government already provides a $7,500 tax credit to subsidize the purchase of electric vehicles.[18] It needs to be bolder; in fact the real action needed to spur the adoption of these vehicles in 2017 is a roll out of a nation-wide network of charging stations to put-to-rest any concerns about range anxiety. If businesses and consumers can make the switch to electric vehicles, our foreign policy priorities will be transformed. Ultimately, it is not necessary to pull out of the Middle East entirely, nor is it desirable. Yet, a Middle East policy liberated of the need to protect oil production and transportation in the Persian Gulf provides much more flexibility to US policymakers. We can shift our focus to combating Islamic Extremism and ensuring the stability of key allies. This change in priorities will allow our armed forces to shift resources to other strategic priorities. Undoubtedly, China will find it necessary to increase its security investment in the Middle East until it too can wean its transportation sector away from petroleum. So go ahead, drive your Nissan Leaf because ‘Murica! [1] Lind, Michael. "The Wars That Really Are about the Oil." The Spectator. August 27, 2014. Accessed March 27, 2015. http://www.spectator.co.uk/features/9298552/the-wars-that-really-are-about-the-oil/. [2] Dunn, Candace. "U.S. Energy Information Administration - EIA - Independent Statistics and Analysis." China Is Now the World's Largest Net Importer of Petroleum and Other Liquid Fuels. March 24, 2014. Accessed March 27, 2015. http://www.eia.gov/todayinenergy/detail.cfm?id=15531. [3] "One among Many." The Economist. January 17, 2015. Accessed March 27, 2015. http://www.economist.com/news/middle-east-and-africa/21639554-china-has-become-big-africa-now-backlash-one-among-many. [4] Londoño, Ernesto. "Study: Iraq, Afghan War Costs to Top $4 Trillion." Washington Post. March 28, 2013. Accessed March 28, 2015. http://www.washingtonpost.com/world/national-security/study-iraq-afghan-war-costs-to-top-4-trillion/2013/03/28/b82a5dce-97ed-11e2-814b-063623d80a60_story.html. [5] Leonhardt, David. "What $1.2 Trillion Can Buy." The New York Times. January 16, 2007. Accessed March 28, 2015. http://www.nytimes.com/2007/01/17/business/17leonhardt.html. [6] "2014 Key World Energy Statistics." International Energy Agency. January 1, 2014. Accessed March 28, 2015. http://www.iea.org/publications/freepublications/publication/KeyWorld2014.pdf. [7] "Energy and You." EPA. February 19, 2014. Accessed March 28, 2015. http://www.epa.gov/cleanenergy/energy-and-you/. [8] "What Are the Products and Uses of Petroleum." US Energy Information Administration. May 27, 2014. Accessed March 28, 2015. http://www.eia.gov/tools/faqs/faq.cfm?id=41&t=6. [9] "How Much Petroleum Does the US Import and from Where." US Energy Information Administration. March 11, 2015. Accessed March 28, 2015. http://www.eia.gov/tools/faqs/faq.cfm?id=727&t=6. [10] Zhang, Benjamin. "Three Things Tesla Must Deliver For The Model 3 To Succeed." Business Insider. July 29, 2014. Accessed March 29, 2015. http://www.businessinsider.com/tesla-model-3-success-2014-7. [11] "Nissan Leaf Review." 2015 Nissan Leaf Reviews, Pictures and Prices. August 14, 2014. Accessed March 29, 2015. http://usnews.rankingsandreviews.com/cars-trucks/Nissan_Leaf/. [12] Shahan, Zachary. "One Thing I Think Elon Musk Is Wrong On." CleanTechnica. March 28, 2015. Accessed March 29, 2015. http://cleantechnica.com/2015/03/28/how-much-electric-car-range-do-you-need/. [13] Ibid. [14] Voelcker, John. "Cross-Country Electric-Car Trips: Reality For A Few, Getting Closer For Many." Green Car Reports. October 24, 2014. Accessed March 29, 2015. http://www.greencarreports.com/news/1095087_cross-county-electric-car-trips-reality-for-a-few-getting-closer-for-many. [15] Ramsey, Mike. "Battery Battle: Electric Cars Glide to 200-Mile Range." WSJ. August 11, 2014. Accessed March 28, 2015. http://www.wsj.com/articles/lg-chem-working-on-battery-to-rival-teslas-range-1407776312. [16] Ibid. [17] Ibid. [18] LeVine, Steve. "Battery Powered." Global. March 1, 2015. Accessed March 28, 2015. http://www.foreignaffairs.com/articles/143065/steve-levine/battery-powered.

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