Last week, the Tesla Model S, an electric-powered car, received the National Highway Traffic Safety Administration’s highest mark in its history of ranking cars. Consumers Reports granted the Tesla Model S ninety-nine out of 100 points in their overall measure of vehicles and Motor Trend magazine named the Model S the 2013 Car of the Year.

While Tesla’s increasing appeal may lead the way toward increasing market penetration for electric vehicles (EVs) in the future, real competition, at the present time and for some time to come, will depend upon opening up the present-restrictive gasoline market to alternative fuels, like natural gas, its derivative methanol and possibly ethanol. Restrictions placed on the use of flex fuels and flex-fuel vehicles by Congress and administrations, both Republican and Democratic, over the years have limited these alternatives. Administrative regulations, combined with oil industry behavior, restrict the use of natural gas, ethanol and methanol.

While natural gas and its derivatives are not perfect as transitional replacement fuels, they are much superior to gasoline with respect to environmental and atmospheric pollution. And unlike electric power, methanol and ethanol fuels can be used in older cars, once these cars are converted to run on flex fuel. The expense will cost on average fewer than $300.

Both electric cars and replacement fuels are two sides of a needed strategic policy and behavioral change to open fuel markets to competition.

How high a policy priority is it to provide consumers with more fuel choices at the pump/station? What are the regulatory and economic barriers to significant penetration of electric and replacement fuel vehicles and what, if anything, should government be doing about it?

Read more work by Marshall Kaplan on his blog, Over A Barrel.