Why the Ethanol Import Tariff Should be Repealed

Repeal Would Enable Ethanol Demand to Move Beyond Being Just a Blending Component in Gasoline to a Truer Transportation Fuel Alternative
By Brian J. Donovan
Renergie, Inc.

Gainesville, FL (Originally Published on August 3, 2008) – The question is whether the 54 cents per gallon tariff the United States places on imported ethanol should be eliminated when:

(a) U.S. farm acreage is being diverted from the production of food crops to energy crops and record high corn prices are impacting the agriculture, food and beverage industries;

(b) American families and businesses are paying record high prices for fuel;

(c) U.S. oil companies are using ethanol merely as a blending component in gasoline rather than a true alternative transportation fuel;

(d) The renewable fuels standard (“RFS”) requires that gasoline sold in the United States contains a renewable fuel, such as ethanol, and the expanded RFS specifically requires the use of an increasing amount of “advanced biofuels” – biofuels produced from feedstocks other than corn; and

(e) U.S. oil companies, due to a loophole in the Caribbean Basin Initiative, are currently allowed to import tens of thousands of barrels of ethanol every month without having to pay the 54 cents per gallon tariff.

The Ethanol Import Tariff of 1980
Since 1978, in order to stimulate an increase in U.S. ethanol production and consumption, producers of ethanol-blended gasoline have received a subsidy, or tax credit. This incentive, known as the Blender’s Tax Credit, is currently valued at 51 cents per gallon of pure ethanol used in blending.

Ethanol imported into the United States is subject to two customs duties: an ad valorem tariff rate of 2.5 percent and a secondary tariff of 54 cents per gallon. The Ethanol Import Tariff of 1980 imposed the 54 cents per gallon tariff on imported ethanol. A key motivation for the establishment of the tariff on imported ethanol was to offset the Blender’s Tax Credit incentive for ethanol-blended gasoline. Unless imports enter the United States duty-free, the tariff effectively negates the incentive for those imports.

Food Prices
Corn is used as the feedstock for approximately 98% of the ethanol produced in the United States. Brazil uses sugarcane as a feedstock, while China is focusing on using cassava and sweet potatoes as feedstocks for ethanol production. USDA estimates that 3.2 billion bushels of corn (or 24% of the 2007 corn crop) will be used to produce ethanol during the September 2007 to August 2008 corn marketing year. In January, 2002, the price for a bushel of corn was $1.98. In July, 2008, the price for a bushel of corn was $5.61.

Corn is a significant ingredient for meat, dairy, and egg production. However, while increased ethanol production is partially responsible for the increase in corn prices, the real factors driving up retail food prices are: rising demand for processed foods and meat in emerging markets such as China and India; droughts and adverse weather around the world; commodity market speculation; export restrictions by many exporting countries to reduce domestic food price inflation; the declining value of the dollar; and skyrocketing oil prices.

Record high prices for diesel fuel, gasoline, natural gas, and other forms of energy affect costs throughout the food production and marketing chain. Higher energy prices increase producers’ expenditures for fertilizer and fuel, driving up farm production costs and reducing the incentive for farmers to expand production in the face of record high prices. Higher energy prices also increase food processing, marketing, and retailing costs. In 2005, the most recent year for which data are available, direct energy costs and transportation costs accounted for roughly 8 percent of retail food costs. These higher costs, especially if maintained over a long period, tend to be passed on to consumers in the form of higher retail prices.

Increased demand for farm commodities could outstrip existing production capabilities, straining food supplies and boosting prices. Moreover, population growth and rising incomes are altering global food consumption patterns and boosting the demand for food, further supporting higher prices. Demand for bio-fuels, especially in the United States, has led to a decline in corn inventories, despite a record corn crop. This increase in U.S. corn acres limited the production of other crops.

Historically, food prices have surged during times of higher crude oil prices. Moreover, research shows that energy prices are quickly passed through to higher retail food prices, with retail prices rising 0.52 percent in the short-term for every 1 percent rise in energy prices. As a result, a 10 percent gain in energy prices could contribute 5.2 percent to retail food prices.

Fuel Prices
Gasoline is one of the major fuels consumed in the United States and the main product refined from crude oil. Consumption in 2007 was about 142 billion gallons, an average of about 390 million gallons per day and the equivalent of about 61% of all the energy used for transportation, 44% of all petroleum consumption, and 17% of total U.S. energy consumption.

In January, 2002, the price of oil was US$18.68 per barrel. As of the date of this article, the price of oil is US$125.10 per barrel. In January, 2002, the average U.S. retail price for a gallon of regular grade gasoline was US$1.11. As of the date of this article, the price for a gallon of regular grade gasoline is US$3.96.

The price of crude oil is set through the interaction of world demand and supply. The following factors are driving up crude oil and gasoline prices: (a) increased world demand for crude oil as witnessed by the sharp increase in imported crude oil by China and India; (b) instability in oil-producing regions, including Iraq and Nigeria’s delta region; (c) limited U.S. refinery capacity to supply gasoline; (d) a decline in the value of the dollar compared to other currencies has increased the dollar price of oil on futures markets; (e) the continuing possibility of a supply disruption from natural disasters like Hurricanes Katrina and Rita in 2005; (f) speculators, who have entered the commodity markets in large numbers looking for ways to increase their monetary investments rather than to trade in oil and oil products, are causing an unacceptable upward pressure on prices; and (g) governments in developing countries are subsidizing energy, blunting the incentive to conserve by keeping prices low. China is expected to spend about $40 billion this year in subsidies. Venezuela and Egypt are forecast to spend more than 5 percent of their total economic output on subsidies this year. As a result, while demand for oil in the developed world is expected to fall about 1 percent this year, consumption in emerging and developing countries is forecast to rise 3 percent, according to estimates by I.M.F. economists.

World demand for crude oil grew by 1.3% in 2007 to 86.0 mbd. It is forecast to grow by 1.5% to 87.3 mbd in 2008. World supply was 87.3 mbd in March 2008, leaving relatively little excess supply to draw on if the market were disrupted by natural or political disasters. When excess supply on the market is low, prices tend to rise and become more volatile.

Higher prices for crude oil tend to translate directly into higher prices for gasoline. Currently, crude oil accounts for about 72% of the cost of gasoline. Refining, distributing, and marketing account for about 16% of the cost of gasoline, and taxes account for about 13%. However, until recently crude oil’s share of the cost of gasoline has been more typically in the range of 45% to 55%. In May 2007, for example, with gasoline at $3.15 per gallon, crude oil contributed 46% of the cost; refining, distributing and marketing 41%; and taxes 13%.

On July 31, 2008, Exxon Mobil Corp. reported second-quarter earnings of $11.68 billion, the biggest quarterly profit ever by any U.S. corporation. On August 1, 2008, Chevron reported record oil prices drove second-quarter earnings up 11 percent to $5.98 billion, its highest-ever profit.

Imported petroleum does not pay a tariff, yet clean, renewable ethanol from our own hemisphere is assessed a 54 cent-per-gallon tariff.

Lack of Ethanol Infrastructure
U.S. oil companies are using ethanol merely as a blending component in gasoline (in the form of E10) rather than a true alternative transportation fuel. There is not an oversupply of ethanol. The major obstacle to widespread ethanol usage continues to be the lack of fueling infrastructure. Only 1,528 of the nearly 180,000 (or 8/10 of 1%) retail gasoline stations in the United States offer E85. These E85 fueling stations are located primarily in the Midwest.

While alleging an oversupply of corn ethanol, U.S. oil companies still import thousands of barrels of ethanol from foreign sources every month without having to pay the 54 cents per gallon import tariff. Can ethanol provide any relief at the pump to the U.S. driving public? Renergie, Inc. believes that ethanol can significantly lower the pump price if it is produced from a non-corn feedstock and marketed directly by the producer as E85. Ethanol must compete against, rather than be an inexpensive blending component in, gasoline.

Renergie’s “field-to-pump” strategy is to produce ethanol locally and market ethanol locally. The day of building 100 MGY corn-to-ethanol plants in the Midwest corn belt, for the sale of E10 to consumers on the U.S. East Coast and West Coast, is over! Renergie is focusing its efforts on locally growing ethanol demand beyond the 10% blend market. Initially, Renergie will directly market E85, a blend of 85 percent ethanol and 15 percent gasoline for use in FFVs, to local fuel retailers under the brand Renergie E85. Renergie’s unique strategy is to blend fuel-grade ethanol with gasoline at the gas station pump. Currently, ethanol providers blend E10 and E85 at their blending terminal and transport the already blended product to retail gas stations. Once state approval is received, Renergie’s variable blending pumps will be able to offer the consumer a choice of E10, E20, E30 and E85. A recent study, cosponsored by the U.S. Department of Energy and the American Coalition for Ethanol, found E20 and E30 ethanol blends outperform unleaded gasoline in fuel economy tests for certain autos. Via capturing the Blender’s Tax Credit, Renergie will be able to ensure that gas station owners are adequately compensated for each gallon of fuel-grade ethanol that is sold via Renergie’s variable blending pumps at their gas stations.

Renergie will further grow ethanol demand beyond the 10% blend market by being the first company to test hydrous ethanol blends in the U.S. As provided for in Act No. 382, the use of hydrous ethanol blends of E10, E20, E30, and E85 in motor vehicles specifically selected by Renergie for test purposes will be permitted on a trial basis in Louisiana until January 1, 2012. The hydrous blends will be tested for blend optimization with respect to fuel consumption and engine emissions. Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions.

Imported ethanol is especially important for coastal states since almost all domestic ethanol is produced in the Midwest and is costly to transport because it cannot be moved through a pipeline. Elimination of the ethanol import tariff would provide the U.S. with sufficient ethanol to: (a) move ethanol demand beyond being just a blending component in gasoline to a truer transportation fuel alternative; and (b) create the required fueling infrastructure.

Renewable Fuels Standard (“RFS”)
The Energy Policy Act of 2005 established the Renewable Fuels Standard (“RFS”) which directs that gasoline sold in the U.S. contain specified minimum volumes of renewable fuel. The Energy Independence and Security Act of 2007 (“H.R. 6”), which became law on December 19, 2007, sets a new RFS that starts at 9.0 billion gallons of renewable fuel in 2008 and rises to 36 billion gallons by 2022. Of the latter total, 21 billion gallons of renewable fuel in U.S. transportation fuel is required to be obtained from advanced biofuels. The term “advanced biofuel” means renewable fuel, other than ethanol derived from corn. Brazil uses sugarcane as a feedstock for its ethanol production.

The CBI Loophole
U.S. oil companies, due to a loophole in the Caribbean Basin Initiative (“CBI”), are currently allowed to import thousands of barrels of ethanol every month without having to pay the 54 cents per gallon tariff.

The CBI was established in 1983 to promote a stable political and economic climate in the Caribbean region. The CBI allows the imports of most products, including ethanol, duty-free. While many of these products are produced in CBI countries, ethanol entering the United States under the CBI is generally produced elsewhere and reprocessed in CBI countries for export to the United States. The U.S.-Central America Free Trade Agreement (CAFTA) would maintain this duty-free treatment and set specific allocations for imports from Costa Rica and El Salvador.

Duty-free treatment of CBI ethanol has raised concerns, especially as the market for ethanol has the potential for dramatic expansion under P.L. 109-58 and P.L. 110-140. In the United States, fuel ethanol is largely domestically produced. A value-added product of agricultural commodities, mainly corn, it is used primarily as a gasoline additive. To promote its use, ethanol-blended gasoline is granted a significant tax incentive. However, this incentive does not recognize point of origin, and there is a duty on most imported fuel ethanol to offset the exemption. But a limited amount of ethanol may be imported under the CBI duty-free, even if most of the steps in the production process were completed in other countries. This duty-free import of ethanol has raised concerns, especially as U.S. demand for ethanol has been growing. Further, duty-free imports from these countries, especially Costa Rica and El Salvador, have played a role in the development of the U.S.-Central America Free Trade Agreement (CAFTA).

The main steps to ethanol production in the U.S. are as follows:

a. The feedstock (e.g., corn) is processed to separate fermentable sugars.

b. Yeast is added to ferment the sugars.

c. The resulting alcohol is distilled.

d. Finally, the distilled alcohol is dehydrated to remove any remaining water.

This final step – dehydration – is at the heart of the issue over ethanol imports from the CBI, as discussed below.

According to the United States International Trade Commission, the majority of all fuel ethanol imports to the United States came through CBI countries between 1999 and 2003. In 2004, imports from Brazil to the United States grew dramatically, but in 2005, CBI imports again represented more than half of all U.S. ethanol imports. With an increase in ethanol demand in 2006 due to voluntary elimination of MTBE – a competitor for ethanol in gasoline blending – imports grew dramatically, roughly quadrupling imports in any previous year. Most of this increase was in direct imports from Brazil. Historically, imports have played a relatively small role in the U.S. ethanol market. Total ethanol consumption in 2005 was approximately 3.9 billion gallons, whereas imports totaled 135 million gallons, or about 4%. Imports from the CBI totaled approximately 2.6%. In 2006, total imports represented roughly 13% of the 5.0 billion gallons consumed in 2006; ethanol from CBI countries represented roughly 3.4%. In 2007, total imports represented roughly 6% of U.S. consumption (6.8 billion gallons); ethanol from CBI countries represented roughly 3.6%.

As part of the initiative, duty-free status is granted to a large array of products from beneficiary countries, including fuel ethanol under certain conditions. If produced from at least 50% local feedstocks (e.g., ethanol produced from sugarcane grown in the CBI beneficiary countries), ethanol may be imported duty-free. If the local feedstock content is lower, limitations apply on the quantity of duty-free ethanol. Nevertheless, up to 7% of the U.S. market may be supplied duty-free by CBI ethanol containing no local feedstock. In this case, hydrous (“wet”) ethanol produced in other countries, historically Brazil or European countries, can be shipped to a dehydration plant in a CBI country for reprocessing. After the ethanol is dehydrated, it is imported duty-free into the United States. Currently, imports of dehydrated ethanol under the CBI are far below the 7% cap (approximately 3% in 2006). For 2006, the cap was about 270 million gallons, whereas about 170 million gallons were imported under the CBI in that year.

Dehydration plants are currently operating in Jamaica, Costa Rica, El Salvador, Trinidad and Tobago, and the U.S. Virgin Islands. Jamaica and Costa Rica were the two largest exporters of fuel ethanol to the United States from 1999 to 2003. Despite criticisms in the U.S., new dehydration facilities began production in Trinidad and Tobago in 2005 and the U.S. Virgin Islands in 2007.

If there is such an over-abundant domestic supply of ethanol in the U.S., why are U.S. oil companies purchasing ethanol from foreign sources? As domestic ethanol consumption continues to grow, so will the volume of imported duty-free ethanol under this CBI loophole.

Conclusion
As discussed above, the Ethanol Import Tariff should be repealed for the following reasons:

(a) Record prices for gasoline are increasing the costs of producing, transporting, and processing food products. Research shows that energy prices are quickly passed through to higher retail food prices, with retail prices rising 0.52 percent in the short-term for every 1 percent rise in energy prices. As a result, a 10 percent gain in energy prices could contribute 5.2 percent to retail food prices.

(b) Imported petroleum does not pay a tariff, yet clean, renewable ethanol from our own hemisphere is assessed a 54 cent-per-gallon tariff.

(c) Elimination of the ethanol import tariff would provide the U.S. with sufficient ethanol to move ethanol demand beyond being just a blending component in gasoline to a truer fuel alternative and create the required fueling infrastructure.

(d) The Energy Independence and Security Act of 2007 sets a new RFS that starts at 9.0 billion gallons of renewable fuel in 2008 and rises to 36 billion gallons by 2022. Of the latter total, 21 billion gallons of renewable fuel in U.S. transportation fuel is required to be obtained from renewable fuel, other than ethanol derived from corn.

(e) U.S. oil companies, due to a loophole in the CBI, are currently allowed to import tens of thousands of barrels of ethanol every month without having to pay the 54 cents per gallon tariff.

At a time of record high gas prices, repeal of the 54 cents per gallon import tariff on foreign ethanol would create market competition by allowing U.S. blenders to purchase cheaper ethanol from foreign sources, which could help lower gas prices, increase the supply of ethanol to coastal markets, and ease the economic strain that is impacting the agriculture, food and beverage industries.

U.S. oil companies, corn farmers and fertilizer producers are benefiting from the 54 cents per gallon import tariff on foreign ethanol at the expense of the average American consumer. At a time when our own government’s Federal Reserve Chairman is saying food inflation and fuel costs are contributing to our dangerous economic condition, working toward eliminating this barrier to free market competition is more needed than ever.

GM Thrives in Latin America

Fuel-efficient Vehicles from its Brazil Unit and Strong Sales in Latin America Look Promising for the Battered Carmaker's Future
By Chris Kraul and Ken Bensinger
The Los Angeles Times
July 4, 2009

Reporting from Bogota, Colombia, and Los Angeles — For all its miscues at home, General Motors Corp. has built a powerhouse operation in Latin America, where its fuel-efficient vehicles could play a crucial role in returning the battered company to health.

Since it filed for bankruptcy a month ago, the automaker has been striking deals to shed much of its operations, including its Hummer, Saturn and Saab brands and its Opel division in Europe. GM is closing more North American factories, laying off workers and slashing its U.S. dealership ranks.

But despite rumors this spring, GM's thriving Latin America operations are likely to escape the ax, analysts said.

The region is an important, low-cost manufacturing platform for the U.S. market. And to Latin American consumers, GM remains a respected brand with the highest market share -- 21% -- of any carmaker, said Guido Vildozo, an auto analyst with IHS Global Insight in Waltham, Mass. While GM's sales declined 23% last year in the U.S., they rose 3% in Latin America, and thanks to some timely government support, this year's sales are on track to match 2008's.

The automaker has been in the region for decades, opening its first factory in Argentina in 1925. It has kept ahead by continuing to invest billions of dollars, including on a new assembly plant in San Luis Potosi, Mexico, and a design center in Sao Jose dos Campos, Brazil, that the automaker hopes will become a source of cutting-edge know-how for gas-sipping cars it may someday sell in the United States.

"Latin America will keep its strategic role in the new GM," said Michel Pardal, chief Latin America market forecaster for J.D. Power and Associates in Troy, Mich. "GM has a good image, has been there for many years, and their engineers' capabilities are impressive."

In May, Italian automaker Fiat was said to be in negotiations to acquire GM's operations in the region as part of its bid to buy Opel. Fiat ended up gaining control of Chrysler -- and has plans to expand that automaker's undersized reach in South America -- but did not haul in Opel or GM's Latin America unit.

Perhaps because of those rumors, however, GM Brazil chief Jaime Ardila took the trouble last month to assure employees that not only would the unit remain part of GM, but slated investments totaling $1.5 billion would also go forward. Much of that money is going into a flex-fuel motor plant under construction in the southern state of Santa Catarina.

GM's Brazil operation, second only to its China outfit in foreign unit sales, has helped keep Detroit afloat. The company has "repatriated" annual profits of up to $800 million in some years this decade, at a time when GM's U.S. operations were bleeding cash, informed sources said.

Brazil has become a crucial stop on the career paths of company brass. GM Chief Executive Fritz Henderson and his predecessor Rick Wagoner both headed operations there earlier in their careers, and both have said that because of the region's size, complexity and importance, it's an invaluable training ground.

"The Brazilian operation of GM is one of the most successful in the world," said Alexandre Andrade, an economist at Tendencias, a Sao Paulo think tank.

Analysts expect GM to make Brazil, a world leader in vehicles that use ethanol and other biofuels, a key element of its survival plan, particularly in light of new fuel efficiency requirements being laid down by the U.S. government.

The first flex-fuel car model developed at the Sao Jose dos Campos research center is called the Prisma and will soon be in showrooms in Brazil. It is also slated for export, although GM has not said where. GM's Brazilian cars, including the Chevrolet Astra and Corsa models, are exported to Mexico and other Latin countries, though not to the United States. But with low labor costs compared with North America's despite a unionized workforce, that could change before long, analysts said.

"The Brazilian government wants its car industry to become a global exporter of 1 million cars a year and is working toward that goal," IHS Global Insight's Vildozo said. Overall exports from Brazil peaked at nearly 900,000 cars in 2005.

One element of uncertainty is that GM's Brazil operation has licensed the right to produce several small car models from the company's Opel unit, which was recently sold to a consortium of bidders led by Canadian auto parts maker Magna International Inc.

But because GM will retain 35% of Opel and is likely to retain control over much of the intellectual property developed at the European division, the Brazilian operation will probably still have the right to those designs, said Jeff Schuster, J.D. Power's global forecasting director.

GM has also invested big in Mexico, where it has 13,000 employees and four assembly plants. The newest is the $1-billion facility that opened in San Luis Potosi last year, which makes the Chevy Aveo subcompact for the Latin American market.

GM's Mexican division is a major supplier of cars and trucks to the U.S. market The unit exported just over 387,000 vehicles last year, most of which ended up in U.S. showrooms. Most of the automaker's Mexican exports are SUVs and trucks, including the Saturn Vue, Chevy Suburban, Cadillac Escalade, Chevy Yukon, Chevy Silverado and GMC Sierra.

Those vehicles aren't selling well at present, and exports this year have plunged. But analysts said they don't believe that GM's Mexican operations are vulnerable to sale or closure.

On the contrary, analysts said that with their low wages, high productivity and proximity to the U.S. market, those facilities stand to gain production lost in the United States.

We’ll Never Pump Enough Oil

BY GAL LUFT
Miami Herald
June 13, 2009

This week America transitioned from analog to digital television broadcasts, ushering what could be described as an open standard for television. This means that consumers will have a choice between buying a digital set or signing up to cable or satellite service and keeping their old antenna by installing a signal-dumbing converter box which allows them to get analog signal.

Without the converter, an analog TV began showing snow on the screen starting as of Friday morning. Regardless of whether the shift is a good idea or not — it probably is as it allows better spectrum usage — it is sad commentary of our priorities as a society. Strategic as Congress may imagine television is in our lives, it is not nearly as important as transportation.

Yet, the same Congress that mandated consumer choice in television reception modes denies us choice in transportation fuels: our cars, trucks, ships and planes can run on nothing but petroleum.

Such choice at the pump is neither more difficult nor more costly to achieve than choice at the screen. In Brazil, more than 80 percent of the new cars are flex fuel vehicles capable of running on any combination of gasoline and alcohols like ethanol and methanol. To make a new car flex fuel costs an automaker an extra $100 or less.

All that is needed is a chip and corrosion resistant fuel line. To convert our television, Congress has already allocated nearly $2 billion in taxpayer money to provide $80 worth of coupons per household to subsidize conversion boxes. Brazilians may not have as sophisticated television system but they can choose among fuels.

Last year, when oil prices were at their three-digit level more alcohol was sold in Brazil than gasoline, and the Brazilian economy was hardly touched by the oil crisis. At the same time, with no such fuel choice Americans shelled out hundreds of billions of dollars for foreign oil, a monumental loss of national wealth that popped the mortgage bubble and brought the United States to the brink of economic collapse.

Brazil’s success story hasn’t escaped the eyes of our leaders. President Obama pledged numerous times to pass a law that would mandate flex-fuel engines in all automobiles in order to break oil’s virtual monopoly over transporation fuel. Secretary of Interior Ken Salazar, while still in the Senate, was the lead sponsor of legislation that would have ensured new cars sold in the United States offer fuel flexibility. Energy Secretary Steven Chu has also spoken on the merits of this policy. But judging from its recent actions Congress is not on board. What seems to be the signature energy legislation of the 111th Congress, the American Clean Energy and Security Act, (also known as the Waxman-Markey cap-and-trade bill) does almost nothing to break oil’s monopoly in transportation fuels and provide Americans the kind of choice they have in choosing a television set, a cup of coffee or any other consumer product.

A provision that could have made a difference, an Open Fuel Standard to ensure 50 percent of new cars are flexible-fuel capable of running on any blend of alcohol and gasoline was watered down to meaninglessness by the House Energy and Commerce Committee. Such a standard which could enable consumers to choose a fuel alternative at the pump next time gasoline prices rise to $5 a gallon was rejected by Chairman Henry Waxman due to pressure by the automakers.

The same distressed GM and Ford that, time after time, appeared before Congress asking for taxpayer money and promising that they would make 50 percent of their cars flex-fuel vehicles by 2012, ordered their lobbyists to scuttle any legislation that would require them to do just that.

Oil prices are rising, and pain will again be felt at the pump. Saudi Arabia’s oil minister Ali Naimi has recently predicted $150-a-barrel oil within three years.

Yet, as if nothing was learned from the previous oil shock of last summer, we continue to roll onto our roads 10 million new cars annually that can run on nothing but petroleum each with an average street life of 16 years. We are in for a shock, and when it comes we’ll again be able to view Americans’ vulnerability contrasted with Brazilians’ resiliency.

Only this time, we’ll be watching on our digital sets.

Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS). He is co-author of Energy Security Challenges for the 21st Century (2009).