National Press Club

FedEx CEO Says Dependence on Imported Oil Must End

February 25, 2009 | By Ken Dalecki

Calling high oil prices the "match" that has ignited the current international economic crisis, FedEx Corp. founder and CEO Fred Smith told a luncheon audience Feb. 23 that the U.S. must cut its heavy dependence on imported oil by developing electric cars and trucks.

Smith unveiled a cost/benefit study commissioned by the Energy Security Leadership Council that he said shows major economic, security and environmental benefits to implementing the Council's September 2008 recommendations for diversifying U.S. energy supplies. Smith and former U.S. Marine Corp Commandant Gen. P.X. Kelley are co-chairs of the council, which includes the heads of major corporations and former high-level military officers.

"Continued delay risks unacceptable consequences," Smith said. Fresh from a meeting with President Obama's energy advisors at the White House, Smith said he sees a "growing concensus" among policymakers and elected officials in both parties for increasing a host of domestic energy sources, including renewables, oil, gas, coal and nuclear. "I am optimistic in that regard."

He also called for higher vehicle fuel efficiency standards and the imposition of a carbon tax rather than a cap-and-trade system to reduce carbon emissions. Smith said most of the money raised by such a tax should be rebated to consumers.

Advances of battery technology will make it possible for a switch to electic and hybrid vehicles for the nations short-haul transportation needs, the Council says. Such a swtich would substantially cut oil imports from unreliable suppliers because power plants can use diverse sources of fuel to power their generators. Smith noted that the basic infrastructure is already in place, although the power grid and other utility upgrades are needed.

Smith said that as early as 1954 President Eisenhower warned that the importation of 20% of the nation's oil supply presented a security threat. Today the U.S. imports nearly 70% of its oil, much of it from vulnerable suppliers. Smith warned that, aside from terrorism and nuclear proliferation, energy dependence poses the greated security threat to the country.

In answer to questions about the outlook for the U.S. economy and the latest economic stimulus package, the head of the $38-billion FedEx Corporation said he believes "our economy is very strong fundamentally." He predicted increased consumer and business spending as early as summer or fall.

Smith, whose company does business in 220 countries, said the U.S. must remain committed to free trade and that it can significantly trim its trade deficit by reducing oil imports, which cost the nation $3.5 billion last year. He called on Congress to approve tax changes that would allow companies to expense capital and software spending. He said such a change would unfreeze business spending without loss to the federal government.