Fueling the future: volatile oil prices and new technologies are helping the effort to diversify transportation fuels.

• Author: Andersen, Glen
• Position: ENERGY - Essay

The oil shocks of the 1970s led to long gas lines, spiraling fuel costs, and an awareness that America's economic success is highly dependent on affordable oil. Forty years later, oil remains a volatile commodity, rattling the world economy with each price spike.

When fuel prices jump, higher costs ripple through the economy causing instability, and often recession. Experts forecast that ongoing tensions in the Middle East and rising global demand mean the days of cheap oil are likely over forever.

Transporting people and goods affordably is vital to the nation's economic health. But the country's exclusive reliance on a single transportation fuel resource runs counter to the advice of any prudent financial adviser: diversify!

New technologies are offering what some say are compelling reasons to develop a variety of transportation fuels, and many policymakers are encouraging this effort.

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"Fuel diversity is a driving factor in this," says Representative Stacey Fitts (R) of Maine, who authored a bill to reduce the state's consumption of oil that passed last year. "The cost of moving people and goods in our region is overly dependent on oil."

Ninety-five percent of the country's transportation is powered by oil, leaving few alternatives when prices climb. In contrast, a wide variety of fuels are used to generate electricity and can be adjusted when costs fluctuate. This makes electricity prices relatively stable, compared with oil.

Nearly half of the oil used in the United States is imported, some from unstable regions where government-owned oil companies participate in collusion and market manipulation. Turmoil and political unrest in regions with the richest oil reserves drives price instability, posing a constant threat to the nation's energy security and requiring vast military investments in the Middle East.

Although these concerns have been acknowledged for decades, recent hikes in oil prices have given policymakers and manufacturers a new sense of urgency to diversify--and innovative industries the opportunity to help the nation do so.

Although the federal government has often played the greatest role in transportation energy policy, the growth of technologies such as electric vehicles, alternative fuels and new natural gas extraction techniques provide state lawmakers greater opportunities to shape transportation energy policy in their states.

Across the county, lawmakers are looking for ways to tap their own energy assets and protect their governments, citizens and businesses from the economic hardships created by volatile fuel prices.

Their efforts have taken on a variety of approaches, from promoting oil exploration and drilling to creating incentives for alternative fuels and vehicles.

The Price of Fuel Uniformity

The United States is responsible for about 9 percent of the world's oil production, but it consumes 20 percent of the oil produced globally. That's more than double the amount China, the second largest oil consumer, uses. Canada, Mexico and Saudi Arabia provide most of our imported oil.

The nation's oil imports have been declining however, thanks to an increase in domestic oil production, rising vehicle...