simply not possible for natural gas to meet the growing needs we see to improve our energy security sufficnp do you think the -- why is critical? >> it's not just elect electryfication. maximize oil and gas production in every way. in alaska, on the gulf, on federal land. we need to maximize indigenous u.s. gas and oil production. then i mentioned -- for light duty, personal and commercial vehicle. the use of natural gas for heavy and over the road and centrally fuel vehicles. renew renewed standards. you need to do all five of

those. in the case of natural gas, they both get at the fundamental problem about our oil use. and our con sumgts of oil. by the way, president eisenhower, when he was in office and he knew a thing or two about national security, said it would be a national security emergency if we imr ported over 15% of our oil needs. just a few years ago, we were up to 60%. but here's the issue in a nutshell. oil is basically transportation. of the slightly now under $19 million barrel a day that we burn per day, about 20% of world demand, 70% of it's transportation and of the 70% of oil used in transportation, you have to recognize that somewhere

around 97% is powered by oil. the light duhty sector is by far the biggest single user of petroleum. it represents somewhere around 10 million of our daily con sumts. the heavy, over the road vehicles represent around 3 million barrels a day. let me give you some gee whiz numbers here. we have 250 million light duty vehicles the united states. that's personal automobiles and small trucks, coca-cola, verizon, at&t might use. if you could wave a magic wand and convert all to battery powered and recharge those every night, there is enough energy capability, productive capability in our existing power plant system to refuel every one of those vehicles every night and they can be done in an off

peak time. now, there are lot of details here. transformers in the right neighborhood and having the 220 like you have for your washing machine in the right place to power your vehicle. but the trajectory that bob lutz knows a lot better than i do, is going to give us the potential over the next 10 to 15 years along with fuel efficiency standards that we could take 10 million barrels a day that we use for light duty trucks and personal automobiles and cut it at least in half to 5 million barrels a day r or less. of the 4 million barrels a day used in the heavy truck sector, conversion of a great percentage to natural gas, which is now possible because the engine man factturers are beginning to come

out with 12 liter engines. the equivalent price is almost $2 per gallon less. so it isn't just the one thing. it's doing all of these in order to eliminate the national security and economic risks the country faces. i'll just close with this. we're seeing in the headlines every day about the deliberations of the israelis and our government and europeans and what to do with the iranian nuclear situation. if the strait of hormuz was shot, through which 17 million barrels of oil go through per day, let's just say somehow that happened. there is no question that the price of oil in the united states would go well above $200 per barrel.

the price of fuel at the pump would go from $3.75 to $4 to $7, $7.50. the 7% of our gdp would shoot up to 10 or 12% and i can assure you, we would have an economic contraction that would make the one we just went through, the twin sister or brother. so we have to deal with this issue as a streenategic militar and geo political issue that cannot be solved in the shorlt run just by domestic production. it has to be a part of the equation and we support all of it. but it's going to take us doing all of those things and not be on the right or the left about that, but to be an american about the problem. >> let me turn to general conway for a second to comment on your remarks about iran and future of u.s. energy security. >> yeah, well, fred's exactly

right. the figures scare us all. that 17 million a day constitutes 20% of the world's oil simply and you know, i honestly think that the situation with iran is the wolf closes to our sled. happily, there are negotiations taking place right now. i'm pessimistic about their outcome, quite frankly, because i think we'll see delay and little tangible result. iran has said they want to develop a nuclear capability so that they have sustained energy over time. @@" like say eskimos need freezers because they've not more energy right now than they know what to do with and they will for generations to come. we have said that position's unacceptable because terrorism is recognized element of national power. from an iranian perspective and 33 other nations of the world agree with us on that. so i'm afraid we're headed towards confrontation.

and i think there is a window of time here for negotiation but a window that's closing rapidly because the israelis, we see the issue as a problem. israelis see it as existential to the survival of their nation. and you know, the unfortunate part is if they do attack, it will be with american made problems dropping american made bombs and they'll defend israel -- so we'll be perceived as being a vital part of all that takes place. we don't need another war, but could be pulled into one through the actions of another nation. options available to us in the near term limited attack? we'll delay, but it will not stop an iranian program. in the process, we poke the tiger. a full scale attack is regime change i guess is always an option, but there aren't any beaches close to tehran and so

it would be long, bloody. tens of housands of iranian would die. thousands of others. we'll also find that a very difficult task. there's another option, that's change from within. we did not take advantage of unrest inside the country to help off set the problem. if iran let me put it like this. if i were an iranian general giving my best advice -- it would be don't avertly close the straits because the american navy will kill us, but if we simply drift off every once in a while on undisclosed attack that sinks a tanker or two, the insurance coapanies will do the

rest and we will start this effort of bringing the west to its knees through gas prices in our country, probably in excess of $10 a gallon. so, there are a lot of tools they have that can be used to manipulate us. it's pretty challenging to think about. >> let's open it to the audience for questions and we'll begin with my colleague, director of economic studies here. >> do i need a mike? >> yes, sir. please speak into the microphone and identify yourself. >> you just did. >> i did. >>. >> i've been jousting with conservatives on this question of security. and not just having meet their reaction to the fact that

environmentalists want to get us off fossil fuels. i might say mr. lutz that you were as unkindly treated by cnbc this morning as anything fox might have arranged. so you apparently do have a problem selling this to conservatives. and i agree. here's the problem. and perhaps you can help me. what fred is suggesting is that somebody's going to have to pick a winning technology. and somehow make it happen. that because oil markets are distorted, we can't rely only on the private sector to do that. >> right. >> so, now we're into government subsidizing when it perceives to be winners. that's a conservative difficulty.

second, when we call for an energy policy, that's an actual plan. now, from what i've heard today, is this problem solved since this is a security problem, by having general conway and general kelly suggest that the funding for these technologies come out of the military budget? >> who are you direct iing the question to? >> well, fifrl, i'm sorry. fred, i wonder how you get over this question of picking of winners and second of all, i wonder if military friends would accept the burden of funding these received winners from the military budget since this is a security problem and markets can't seem to handle it. >> well, first of all, everybody in this room that has a, on your person at the moment, a cell

phone, raise your hand. are you telling me there are a large group of people back there that don't have a cell phone? everybody that owns one, raise your hand. everybody in the room, isn't it? if you don't, you're one of the tiny minorities. that issue has been decided. every cell phone regardless of whether you have an android or iphone or whatever the case may be, is powered by lithium ion battery. there's nobody that's arguing over whether l.e.d. acid batteries or wtever the case may be, are going to be a source of power. that issue has been decided. it's more akin to the situation of the early days of aviation when the united states realized that there was a high likelihood that these tiny little airplanes that had been so important in world war i were likely because of technology, to become

self-sustaining in a commercial way themselves. and so, what the government did is to try to help that technology cross the chasm by offering airmail contracts to insent the man factturers to build new, productive airplanes and evtually, douglas did that with the dc 3 and famous c47 end of it, which was a big part of our victory in world war ii. so what the government needs to do today in my opinion, not try to pick winners and losers among general motors or ford or whatever the case may be, but to provide the incentives for the private sector to build vehicles and help drive the cost of the battery down and increase the

range so that forlight duty vehicles, there is an alternative to fossil fuels. it's not going to replace it. plenty of internal combustion engines are going to be built for a long time. so i think that's different than picking a winner and it's certainly not the same as the government putting money into solyndra or putting money into solar or what have you. that is worth an environmental history. we have lots of power generating fuels in the united states. we have coal. we have natural gas. we have geothermal. we have -- we have certainly solar and wind, but they're a tiny traction. we have bdear and so forth, so we don't have to pick a winner or loser of the power sector, which is the primary prepulse

capability, which i think and bob lutz knows more about this than i'll ever know, pu i @hi that the trajectory of the battery density and the price and range of the vehicles in a few years are going to be cost competitive on their own. but there is no competitive technology that can fight the lithium ion technology. >> over to general kelly of the question of movement of technology in a battery sector where it's going. >> well, anyone who's worked with electric vehicles or work ed in the battery industry knows that there are significant, significant breakthroughs in the wings both at the national

leve qniversity and a lot of private start-up companies and the work is concentrated to some extent on the cathodes, by improving the officialsy, you could probably double the efficiency. but also on the horizon is is something called lithium sulphur, which is about four years away and will improve energy density by a factor of five. so today is a 40 mile range battery in a volt becomes a 200 mile battery. a little further on the horizon is is lithium air, which today demonstrates already ten times the energy density of today's lithium ion. one tiny problem. nobo

nobody's figured out how to recharge it cht it's a primary battery. works once and then is disposed. i think the recharging thing will be settled. some historic figures. when we started working on the volt, lithium ion was quoted at $2,000 per kilowatt hour. through negotiation with various man factturer, we got it down to 1,000, then 950 per kilowatt hour. mean it's come far enough down on the cost curve to the last i checked, t was $350 per kilowatt hour and still dropping. to the point that fred made about it will soon be self-sustaining. i am a board member of a company called via, which takes general motors produced full size pick-up trucks and vans minus the engine and transmission, installs lithium ion batteries, an electric motor and a very,

very small fuel efficient v-6 engine. works just like a volt. 40 miles electric, then the rest of the time, you're on the piston engine replenishing the battery. these things today, there's a heavy, heavy, heavy demand for fleets including federal express. because the combined monthly am mortization of the vehicle plus the fuel costs, monthly fuel costs, the sum is less than the monthly am mortization plus the fuel cost of a conventional pick-up and that's at $3.50 a gallon, plus the equation tips even farther. here's a home vehicle category that already is not d@pdndent on government incentives and in fact, from a purely private enterprise, which one's the best

solution for me, already pays off for fleet use. in a brief time, government tax credits will no longer be necessary for the support of electric vehicles, which one more reminder as i get a chance to present, bill o'reilly has a larger audience than i do, but obama gets blamed for the $7,500 tax credit r for buying an electric vehicle. that tax credit was in fact created under george w. bush to set the record straight. >> not sure that would have many fans here otherwise. let me turn it back to general kelly and ask about or back to the question about the military assuming some of the costs. >> could i stand up? >> absolutely.

>> you probably noticed when i walked in, a problem walking. when i saw the surgeon and bet es ta, he said, what have you been doing, that's the worst back i've ever seen. i said you don't jump out of airplanes a couple of hundred times and come back clean. i said i'm not asking your opinion. what can you do to fix it? and he said well, when my team sees that back, they're going to think it's unfixable. but with that said, let me sit down, and then i'll answer your question. with that said, i said i will get, make a deal with you. i'll make a deal with you. i will let you operate if you can do it up on the eighth floor, which is the orthopedic ward for the young kids coming home as opposed to the bip

suites @ll the admirals and genera so, he said, yes, he could do that. and it was one of the best decisions i think i've made in my 37 years as a marine to and be with these young kids. one night, i woke up in great pain and looked over and there's a young marine standing there and i said, what are you doing here? he said i'm guarding you. i said, from what? and i looked over and here he is stda there guarding me on one leg. and i mentioned that story i think only because every time i meet a wonderful group like this, i want you to know there's young kids out there doing a great job for this country in every way. but to answer your question, the answer generally speaking and

the answer is no. if you start taking out any more for either people or quipt, you're going to degrade the combat capabilities of the united states of america. as a young two-star, i was sent by the marine corps to the european command and i gave 52 presentations. on the capabilities of the marine corps. operating in that theatre of operations. and one of the things i was more focused on than anything, i know marines can fight, is the question of how you get there and what i saw was we were having @fi die in determining how we were going to get there. as an example, i was up in bud

da in in norway and a great big norwegianen air force general got very annoyed with some of the things i was saying. he came over and punched me in the chest and said you can't come to my country and tell me how i'm going to fight my war. well, his boss, who was a three-star, told him to sit down and he reminded him, said anytime, said you've got to have something to fight with before you can fight. i thought that was great answer for somebody who was getting very antagonistic. the following year, i went to the pacific area and gave about 50 pereiresentations and from t, we built a bidding block of unique and historic capabilities. numb mne was essential during the gulf war. the maritime positioning of ships. those ships would be ppelocated offshore or in close proximity

to the target area. completely loaded with simplied a ands and equipment for 30 days, so transit time cut down to practically nothing. and also, we built 50 more c5 airplanes. we rewinged all of the 141s. we did a lot of things to improve our capability to get there. but now th the issue was once you get there, how are you going to fight? i think the marine corps during that period of time and now has made such a 100% improvement. i don't know how much of you have ever known, we had one who was happened to be, not telling him what he wanted to hear.

it wasn't one of us. and in a meeting one day, i told him what he didn't want to hear. and he did got very antagonistic and what i said essentially was if you do that, we have to sell all 10,000 marines just to pay that bill. and he didn't believe me. until we proved it to him and so with that, then we had to borrow money from peter to pay paul. from what i'm reading now that's coming out of the pentagon is they are really starting to scrape the bottom of the barrel. and so the answer to what your question is, yes, there are probably some items that you can get along without for a period of time. on the other hand, i don't think there are many. and so if this great country of ours is going to be a global

force and have capabilities that are global, then we've got to pay the penalty that it cost us and don't expect it to come from the young troops who can't hardly afford it. i heard a story once and i'm not invading your territory, but when you are commander in the gulf war in the iraqi war, that your column of trucks were some 60 miles long. >>cdal. >> trucks. 60 miles long. imagine in refuelling capability and i told, stepping on your toes, that because we had inflight refuelers and we're the only service that does, we could land those on the roads and off load the fuel into our conta

containers and that's what we did. so of all of the services, let me be very candid about this. of all of a sdrvices, i think we are probably the most care and loving care for the dollar bill and what it costs to go to war. there are no flourishes, nothing that you can say is something you shouldn't have. and so, the point is the answer to the question was the very, very -- make sure we got specific for some things that might be a trade off. but i would doubt it very seriously. >> fred smith. >> first off, let me put this in perspecti perspective. i'm fully in favor of a strong military. i believe in the action based on my own military service. if you need a platoon, send a

batallion. you want to deal with the overwhelming force and we're feeling the best military in the history of the world, but the energy security leadership counsel's recommendation and it's offshoot, the -- has worked on this issue. correct me if i wrong, the incentives which were recommended total over a ten-year period, $15 billion? is that close? over ten years. and it is a tiny fraction of the money we spend on the military, which is $550 billion a year or something like that. that doesn't count the cost of combat operation. this country has spent in iraq, in afghanistan, well north of a trillion dollars. a prominent conservative mentioned to me this morning,

well, the original afghanistan war wasn't really about oil. that's as i said earlier, osama bin laden declared war on the united states in 1998 because our troops were in saudi arabia and our troops were this saudi arabia because of the gulf war one. and president george herbert walker bush said the war was about oil. alan greenspan repeated it in his book. president nixon thought about invading saudi arabia after the first arab oil embargo. 10 this is -- you're talking about $15 billion over ten years to try to incent movement towards electrification. we at fed ex have also supported either vehicle mileage taxes or an increase in the fuel tax in order to fund the appropriate infrastructure in this country. we won't raisete x.