America's public energy conversation

boils down to this question:

Would you rather die of A) oil wars,

or B) climate change,

or C) nuclear holocaust,

or D) all of the above?

Oh, I missed one: or E) none of the above?

That's the one we're not normally offered.

What if we could make energy do our work

without working our undoing?

Could we have fuel without fear?

Could we reinvent fire?

You see, fire made us human;

fossil fuels made us modern.

But now we need a new fire

that makes us safe, secure, healthy and durable.

Let's see how.

Four-fifths of the world's energy

still comes from burning each year

four cubic miles of the rotted remains

of primeval swamp goo.

Those fossil fuels

have built our civilization.

They've created our wealth.

They've enriched the lives of billions.

But they also have rising costs

to our security, economy, health and environment

that are starting to erode, if not outweigh their benefits.

So we need a new fire.

And switching from the old fire to the new fire

means changing two big stories about oil and electricity,

each of which puts two-fifths of the fossil carbon in the air.

But they're really quite distinct.

Less than one percent of our electricity is made from oil --

although almost half is made from coal.

Their uses are quite concentrated.

Three-fourths of our oil fuel is transportation.

Three-fourths of our electricity powers buildings.

And the rest of both runs factories.

So very efficient vehicles, buildings and factories

save oil and coal,

and also natural gas that can displace both of them.

But today's energy system is not just inefficient,

it is also disconnected,

aging, dirty and insecure.

So it needs refurbishment.

By 2050 though, it could become efficient,

connected and distributed

with elegantly frugal

autos, factories and buildings

all relying on a modern, secure

and resilient electricity system.

We can eliminate our addiction to oil and coal by 2050

and use one-third less natural gas

while switching to efficient use

and renewable supply.

This could cost, by 2050,

five trillion dollars less in net present value,

that is expressed as a lump sum today,

than business as usual --

assuming that carbon emissions

and all other hidden or external costs are worth zero --

a conservatively low estimate.

Yet this cheaper energy system

could support 158 percent bigger U.S. economy

all without needing oil or coal,

or for that matter nuclear energy.

Moreover, this transition needs no new inventions

and no acts of Congress

and no new federal taxes, mandate subsidies or laws

and running Washington gridlock.

Let me say that again.

I'm going to tell you how to get the United States

completely off oil and coal, five trillion dollars cheaper

with no act of Congress

led by business for profit.

In other words, we're going to use our most effective institutions --

private enterprise co-evolving with civil society

and sped by military innovation

to go around our least effective institutions.

And whether you care most

about profits and jobs and competitive advantage

or national security, or environmental stewardship

and climate protection and public health,

reinventing fire makes sense and makes money.

General Eisenhower reputedly said

that enlarging the boundaries of a tough problem

makes it soluble by encompassing more options and more synergies.

So in reinventing fire,

we integrated all four sectors that use energy --

transportation, buildings, industry and electricity --

and we integrated four kinds of innovation,

not just technology and policy,

but also design and business strategy.

Those combinations yield

very much more than the sum of the parts,

especially in creating deeply disruptive business opportunities.

Oil costs our economy two billion dollars a day,

plus another four billion dollars a day

in hidden economic and military costs,

raising its total cost to over a sixth of GDP.

Our mobility fuel goes three-fifths to automobiles.

So let's start by making autos oil free.

Two-thirds of the energy it takes to move a typical car

is caused by its weight.

And every unit of energy you save at the wheels,

by taking out weight or drag,

saves seven units in the tank,

because you don't have to waste six units

getting the energy to the wheels.

Unfortunately, over the past quarter century,

epidemic obesity has made our two-ton steel cars

gain weight twice as fast as we have.

But today, ultralight, ultrastrong materials,

like carbon fiber composites,

can make dramatic weight savings snowball

and can make cars simpler and cheaper to build.

Lighter and more slippery autos

need less force to move them,

so their engines get smaller.

Indeed, that sort of vehicle fitness

then makes electric propulsion affordable

because the batteries or fuel cells

also get smaller and lighter and cheaper.

So sticker prices will ultimately fall to about the same as today,

while the driving cost, even from the start,

is very much lower.

So these innovations together can transform automakers

from wringing tiny savings

out of Victorian engine and seal-stamping technologies

to the steeply falling costs

of three linked innovations that strongly reenforce each other --

namely ultralight materials, making them into structures

and electric propulsion.

The sales can grow and the prices fall even faster

with temporary feebates,

that is rebates for efficient new autos

paid for by fees on inefficient ones.

And just in the first two years

the biggest of Europe's five feebate programs

has tripled the speed of improving automotive efficiency.

The resulting shift to electric autos

is going to be as game-changing

as shifting from typewriters to the gains in computers.

Of course, computers and electronics

are now America's biggest industry,

while typewriter makers have vanished.

So vehicle fitness

opens a new automotive competitive strategy

that can double the oil savings over the next 40 years,

but then also make electrification affordable,

and that displaces the rest of the oil.

America could lead this next automotive revolution.

Currently the leader is Germany.

Last year, Volkswagen announced

that by next year they'll be producing

this carbon fiber plugin hybrid

getting 230 miles a gallon.

Also last year, BMW announced

this carbon fiber electric car,

they said that its carbon fiber is paid for

by needing fewer batteries.

And they said, "We do not intend to be a typewriter maker."

Audi claimed it's going to beat them both by a year.

Seven years ago, an even faster and cheaper

American manufacturing technology

was used to make this little carbon fiber test part,

which doubles as a carbon cap.

(Laughter)

In one minute -- and you can tell from the sound

how immensely stiff and strong it is.

Don't worry about dropping it, it's tougher than titanium.

Tom Friedman actually whacked it as hard as he could with a sledgehammer

without even scuffing it.

But such manufacturing techniques

can scale to automotive speed and cost

with aerospace performance.

They can save four-fifths of the capital needed to make autos.

They can save lives

because this stuff can absorb

up to 12 times as much crash energy per pound as steel.

If we made all of our autos this way,

it would save oil equivalent to finding

one and a half Saudi Arabias, or half an OPEC,

by drilling in the Detroit formation, a very prospective play.

And all those mega-barrels under Detroit

cost an average of 18 bucks a barrel.

They are all-American, carbon-free

and inexhaustible.

The same physics and the same business logic

also apply to big vehicles.

In the five years ending with 2010,

Walmart saved 60 percent of the fuel per ton-mile

in its giant fleet of heavy trucks

through better logistics and design.

But just the technological savings in heavy trucks

can get to two-thirds.

And combined with triple to quintuple efficiency airplanes,

now on the drawing board,

can save close to a trillion dollars.

Also today's military revolution in energy efficiency

is going to speed up all of these civilian advances

in much the same way that military R&D

has given us the Internet, the Global Positioning System

and the jet engine and microchip industries.

As we design and build vehicles better,

we can also use them smarter

by harnessing four powerful techniques

for eliminating needless driving.

Instead of just seeing the travel grow,

we can use innovative pricing,

charging for road infrastructure by the mile, not by the gallon.

We can use some smart IT to enhance transit

and enable car sharing and ride sharing.

We can allow smart and lucrative growth models

that help people already be near where they want to be,

so they don't need to go somewhere else.

And we can use smart IT

to make traffic free-flowing.

Together, those things can give us the same or better access

with 46 to 84 percent less driving,

saving another 0.4 trillion dollars,

plus 0.3 trillion dollars from using trucks more productively.

So 40 years hence, when you add it all up,

a far more mobile U.S. economy

can use no oil.

Saving or displacing barrels for 25 bucks

rather than buying them for over a hundred,

adds up to a $4 trillion net saving

counting all the hidden costs at zero.

So to get mobility without oil,

to phase out the oil,

we can get efficient and then switch fuels.

Those 125 to 240 mile-per-gallon-equivalent autos

can use any mixture of hydrogen fuel cells,

electricity and advanced biofuels.

The trucks and planes can realistically use

hydrogen or advanced biofuels.

The trucks could even use natural gas.

But no vehicles will need oil.

And the most biofuel we might need,

just three million barrels a day,

can be made two-thirds from waste

without displacing any cropland

and without harming soil or climate.

Our team speeds up these kinds of oil savings

by what we call "institutional acupuncture."

We figure out where the business logic

is congested and not flowing properly,

we stick little needles in it to get it flowing,

working with partners like Ford and Walmart and the Pentagon.

And the long transition is already well under way.

In fact, three years ago mainstream analysts were starting to see peak oil,

not in supply, but in demand.

And Deutsche Bank even said world oil use could peak around 2016.

In other words, oil is getting uncompetitive even at low prices

before it becomes unavailable even at high prices.

But the electrified vehicles

don't need to burden the electricity grid.