The Political Prospects of an Open Fuel Standard in Obama’s Second Term

At the beginning of President Obama’s first term, there was reason to believe that an Open Fuel Standard (OFS) could pass within four years. It did not, and now the OFS faces a different political climate as his second term commences. In some ways, this new climate is more conducive to OFS passage, but in others it makes such a proposal a harder sell.

The OFS is designed to address what can be called a “chicken-and-egg” problem that afflicts such petroleum alternatives as alcohol fuels, including ethanol and methanol. The market for alcohol fuels is small, in part because most drivers do not have flex-fuel cars that can utilize them. This means that filling stations have little incentive to carry alcohol fuels—which in turn discourages people from buying flex-fuel cars. Illustrating this, only about 2,250 service stations in the U.S. (excluding private stations) have ethanol pumps, out of a total of about 176,000 stations.

An OFS would address this impasse. The Open Fuel Standard Act of 2011 shows how this might be accomplished. The act was co-sponsored in the House by John Shmikus (R.-Ill.), Eliot Engel (D.-N.Y.), Roscoe Bartlett (R.-Md.), and Steve Israel (D.-N.Y.). It would require each auto manufacturer’s vehicle fleet for any particular year to be comprised of at least 50 percent qualified vehicles beginning with model year 2014, scaling up to 80% of qualified vehicles for model year 2016, and 95% beginning with model year 2017. To be a qualified vehicle, an automobile must either a) operate solely on natural gas, hydrogen, or biodiesel, b) be a flex-fuel vehicle, c) be a plug-in electric vehicle, or d) be propelled by a fuel cell that produces power without petroleum.

It is obvious how such legislation would address the chicken-and-egg impasse: since the fleet would have an increasing number of vehicles capable of being powered by alternative fuels, such fuels would find a larger market in which they could compete with petroleum. As a fact sheet drafted by OFS advocates states, “Competition and consumer choice in the transportation fuel market would, by enabling drivers to choose to purchase a different fuel on the fly should it be less expensive on a per mile basis, serve to dampen the impact of oil price volatility, and OPEC supply manipulation, on our economy.”

Some OFS advocates are hopeful that it will pass soon. A recent article about the launch party for the alternative-fuel promoting Fuel Freedom Foundation notes that those involved with the group believe the OFS can pass next year. I spoke to Roger Ballentine, president of the consulting firm Green Strategies, Inc., and a keen observer of energy politics. He noted that there are a couple of reasons for optimism about such legislation. For one thing, the auto industry is in much better shape than it was in 2009-10. “Trying to impose anything that looked like a mandate on that industry at that time would have been difficult,” he said. Further, Ballentine said that passage of difficult legislation is always more feasible in a president’s second term than his first one.

But in other ways, developments have dampened prospects for an OFS. The first major development in this regard is the perception that the U.S. will enjoy more abundant liquid fuels due to the development of unconventional oil and gas, something that is discussed in the National Intelligence Council’s Global Trends 2030 report (which I discussed earlier on this blog). There are reasons to be concerned about oil’s virtual monopoly over the transportation sector even if the U.S. is able to produce more petroleum. But the burden will be on those pushing for such changes to our energy policy as the OFS to make the case for why our dependence on oil remains a concern that should be addressed legislatively.

The second development, though, is far more significant for OFS advocates: biofuels have a far more negative reputation now than they did in 2009. Biofuels have been under attack for their impact on food prices, their effect on the environment, and because advanced biofuels have not advanced as quickly as advertised.

The past summer’s historic drought highlights the growing antipathy toward biofuels. As extreme weather conditions ravaged the country’s crops, there were loud calls for the administration to suspend the renewable fuel standard that mandates a certain amount of renewable fuel to be blended into gasoline. Perhaps due in part to the stigma currently attached to ethanol, OFS advocates have recently been emphasizing methanol’s potential to reduce the U.S.’s dependence on oil. Indeed, the public strongly perceives the U.S.’ abundance of natural gas to be a significant positive development, and an Open Fuel Standard would allow it to compete with traditional gasoline. But the growing unpopularity of biofuels will surely complicate the public debate if there is a renewed OFS push.

Hence, there are reasons to think that the prospects of an OFS passing have improved, but it also faces some more pronounced challenges. The entrenched interests that will oppose an OFS are considerable: as Ballentine said to me, the oil industry is “the most successful industry in the history of mankind.” And when likely opponents include not just oil producers, but also refiners and auto manufacturers, the objections to an OFS can proliferate rapidly.

Daveed Gartenstein-Ross is a Contributing Writer for The Truman Doctrine. He is a senior fellow at the Foundation for Defense of Democracies and a Ph.D. candidate in world politics at the Catholic University of America. He is also the volume editor of From Energy Crisis to Energy Security: A Reader.