The Oil Deficit and Electric Cars

The Bush Administration's plan behind letting the US dollar devalue -- if there can be said to be any real plan -- is that it will shrink our trade deficit. Let's see how that's working ...

The United States trade deficit widened slightly in October as a record price for imported oil outweighed the export-spurring benefits of a weaker dollar, the Commerce Department reported on Wednesday.

Rising oil costs also pushed import prices 2.7 percent higher in November, the largest gain in 17 years, raising concerns about inflation, according to a report from the Labor Department.

The monthly trade gap widened 1.2 percent to $57.8 billion, as the average price for imported oil jumped nearly 6 percent to $72.49 a barrel. Minus petroleum, the deficit was its lowest since March 2004.

Now there is some good news. America’s overall trade deficit has shrunk more than 8% in the first nine months after hitting a record of $785.5 billion for 2006. However, in the big picture, it just isn't enough. Here's the big picture ...The bottom line is America is shipping about $1 trillion in wealth overseas each and every year. That's a good way to go broke.

Oil imports accounts for half the trade deficit. Well, other countries must have this problem too, right? They do, but they're also improving their railway systems and electrifying those railroads as quickly as possible. They can see Peak Oil coming, and they're preparing for it.

Meanwhile, Amtrak can't get all of the $1.53 billion it requested. President Bush wanted to cut its funding to zilch, but the House of Representatives recently agreed to boost Amtrak's federal funding to $1.4 billion while a Senate panel has endorsed spending $1.37 billion. Bush vows to veto any such spending increase.

Here's part of my energy plan to deal with the energy crisis that is bearing down on us like a runaway freight train: Refurbish and beef up railroads across the country and electrify them. Also build ahigh-speed light rail system for all medium and large cities and for inter-city travel of less than 200 miles. And do it with government money.

Railroads are alone among our transportation systems in having to pay for their own infrastructure. How many airlines do you think we'd have if they had to build their own airports? How many car manufacturers if they had to build their own highways? Build the rail infrastructure, which is incredibly efficient, and half of our trade deficit goes away.

Maybe the next President will see the real opportunities in this crisis.

But what about cars? Well, there is new breakthrough battery technology from Stanford that makes pure electric cars possible and practical. Silicon and lithium are plentiful, lightweight and cheap, so this new technology could drastically reduce the size, weight and cost of battery packs for electric vehicles. You can plug this electric car in at night and then run it all day -- hundreds of miles.

At the same time, there is other new battery technology that allows you to recharge a battery almost immediately. So, this would allow "gas stations" for electric cars.

Even without this new technology, there are electric cars rolling off the assembly line in Norway right now that have a range of 116 miles (maximum speed, 62 mph). With this new technology, we'll be able to put an electric car in every garage. And that, I believe, is the potential happy ending to the energy crisis.

In the meantime, I expect oil to soar as high as $150 per barrel. There is still plenty of money to be made from internal combustion vehicles.

Check out my new gold and energy blog at MoneyAndMarkets.com