Could Alternative Fuels Compete in a Free Market? Let’s Eliminate the Barriers and Find Out

Sunday, October 23, 2011

Nicolas Loris at the Heritage Foundation wrote back in June that an open fuel standard for vehicles would “inevitably end up hurting consumers”, claiming, “The reason there are not more cars running on batteries, natural gas, methane, or other alternative fuels is the result of competition, not the absence of it.”

Do advocates of an open fuel standard want a “rigged marketplace in which they, rather than competition, dictate the outcomes”?

These claims strike this writer as disingenuous. Investors will not risk their capital on a product unless they are confident that there will be a market for it. One obvious barrier to investment in alternative fuels is an automotive market that can only run on gasoline.

The Open Fuel Standard Act offers an excellent test of Mr. Loris’s hypothesis: that “competition, not the absence of it” inhibits investment in alternative fuels. Moreover, it would test this hypothesis with negligible costs and potentially tremendous benefits to our economy, national security and environment if passed.

The Heritage Foundation should express its support for the bill on the basis of its experimental and educational value. If the Open Fuel Standard Act does not accomplish its intended purpose, we will have lost nothing and the Heritage Foundation will have taught the public a valuable lesson in economics. If the bill does accomplish its intended purpose, its patrons will have done our country a great service by accelerating our transition away from dependence on one of the most politically unstable and hostile regions of the world. It is time that we do something to alleviate sixty years of mutually antagonistic relations driven in large part by our own energy security concerns.

Thomas J. Buonomo is an Energy Policy Advocate for the Open Fuel Standard Coalition. He holds a Bachelor of Science in Political Science and Middle East Studies from the U.S. Air Force Academy and has spent the past six years researching U.S. energy policy toward the Middle East.

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