National Fuels Initiative

National Fuels Initiative - Amends the Internal Revenue Code to modify the alcohol fuels tax credit and the alternative fuel tax credit by calculating such rates based on a formula related to the average price of a barrel of oil. Extends such credits. Eliminates the small ethanol producer tax credit.

Amends the Clean Air Act to require the Secretary of Energy to promulgate regulations to ensure that each major oil company that sells gasoline in the United States through wholly-owned or branded stations provides pumps that dispense E-85 fuel at not less than a specified graduated percentage of all of its stations.

Amends federal transportation law to require manufacturers of new automobiles that can operate on gasoline or diesel fuel to manufacture such automobiles by increasing percentages after model year 2007.

Revises the definition of automobile to require including all automobiles up to 10,000 pounds (currently, not all automobiles up to 10,000 pounds are required to be included in the definition). Continues applying the current minimum corporate average fuel economy (CAFE) standards for non-passenger and passenger automobiles to automobiles manufactured through model year 2011, but, for passenger automobiles, adds an increase of four percent per year in such standard for model years 2009 through 2011.

Requires an average fuel economy standard of 27.5 miles per gallon for all automobiles manufactured by all manufacturers for model year 2012, with an increase of four percent in the average fuel economy from the level for the prior model year for model year 2013 and beyond.

Requires the average fuel economy standard in a model year for a manufacturer's domestic and foreign fleetwide passenger automobiles under calculation of average fuel economy provisions to be at least 92% of the average fuel economy projected by the Secretary for the combined domestic and foreign fleets manufactured by all manufacturers in that model year.

Permits lower fuel economy standards if they are: (1) technologically unachievable; (2) materially reduce auto safety; or (3) not cost effective.

Amends the Internal Revenue Code to: (1) terminate the limitation on the number of new qualified hybrid and advanced lean burn technology vehicles eligible for the alternative motor vehicle credit; and (2) allow an advanced technology motor vehicles manufacturing credit.