Oil: Too Thirsty For It?

by Dan Schafer

There are many environmental arguments for reducing dependence on oil. But perhaps one of the most pragmatic reasons for the developed countries of the world to find alternative sources of energy is the messy politics of dependence on the Middle East for oil. How might the geo-political state of the world now be different if Twentieth Century politics didn't have oil security as one of its niggling constraints? The end of the twentieth century and the beginning of the twenty-first have cast up events that make the question not just a casual speculation. Terrorism that has arisen in response to perceived injustices has lent a perspective to historical evaluation of the West's policies whose ad hoc pragmatism and inconsistency become more evident on reflection.

None of us can turn back the clock. We cannot undo history. Technology has made great strides in the last two and a half centuries. One of the fuels both figuratively and literally of technological advance was fossil fuel -- first coal and then oil. For better or worse we have come a long way thanks to the availability and usefulness of these natural resources for technological progress. Whatever shade of green our politics, none of us who live in nice homes, turn on our TV's, send our emails, or easily get to and from our schools and jobs -- are in much of a position to criticise the process that has got us the comfort and efficiency of life that we enjoy. Not to speak of having leisure and time for thinking and studying when without technology we could have been wrapped up in the struggle for survival that many people in undeveloped countries face. Therefore, even though we can recognise lack of principle and lack of foresight in past policy making, in the first place resetting the clock is not an option. In the second it is not at all clear that even given the possibility, we could or would have the wisdom and will to set it forward again with a net improvement.

But what is open to us is the possibility of learning from our mistakes. Oil certainly is very useful to us, and practically speaking probably will be more useful to us in the future. That is, given the right nudges technology will probably find better ways to use it in the future—more efficiently and less detrimentally to the environment. If that logic holds, the more of it we can save for the future the greater will be the net good from it.

Politicians fear the price of oil getting too high for the negative impact on the economy, and consequently the negative impact on our fortunes and again consequently, their fortunes. Their fear is, of course, not unfounded. If the oil price were to remain above $40 per barrel, there would be an impact. Dresdner Kleinwort Wasserstein (DKW), an investment bank, reckons that 0.5 percentage points could be knocked off American growth and 0.7 points added to American inflation in 2006. (Economist 15 July, 2004) However, although no politician would choose it, a high oil price -- eventually reduces consumption. Look at what happened after the oil price shocks of the 1970's. Petroleum consumption in the USA peaked in 1978 at about 19 million barrels per day. By 1983 it dropped to about 15 million. World consumption peaked in 1979 at about 65 million barrels per day. By 1983 it dropped to about 59 million.((www.eia.doe.gov). The high prices had their own impact, but they also brought some resolution to do something about dependence on oil, particularly imported oil. But then unfortunately, as the prices came down, the great concern about dependence on oil -- began to fade as we became more concerned about short term prosperity. And oil consumption again was allowed to swell so that by the first quarter of 2004 the USA was burning over 20 million barrels per day and the world over 82 million. (ibid)

None of us should be casual about advocating policies that will cost someone pain. And a slowing economy is bound to have its casualties in unemployment and other economic disruption. But if we are doing business in an unsustainable way, the sooner we start making corrections the better for all. Unless I am a very bad prophet, oil prices probably will start falling again, at least modestly. That will present an excellent opportunity for governments, particularly the U.S. government, to start doing something to curb their economies' thirst for this finite black blessing.

What can be done? I came from a big family—seven kids, five of whom were hungry boys. When Mom baked cookies and called out for us to come and have some, if she just let us eat as many as we wanted, the fastest eaters would have got the most and also the worst stomach aches. That is the role of moms who care about their kids, not to just let them do what they like, but to help them control themselves. And to some degree governments have to do the same to bring order to their countries' economies. Now policies that one has to get the kids to agree to are a little more complicated than just telling the boys, only two cookies each. But I guess moms can win on that one, too, if they have to, and so can governments—both with a little ingenuity. If Mom told us that our restraint would leave us some cookies for tomorrow as well, that would be a start on convincing us about the advantages of her policy. Usually we can be sold on things that are good for us if we trust the truth of what we are told.

In times of crisis, democracies can be convinced to back sacrifices. In the second world war, when Churchill spoke to the British parliament he said, "I have nothing to offer but blood, toil, tears and sweat." It was not a very tantalising offer, but the parliament and the nation knew that though they faced a terrible ordeal, any alternative to Churchill's resolve was unthinkable. I agree if you say that reducing our dependence on oil isn't as tangibly urgent and obvious as the crisis facing Britain in 1940. But if a statesman of vision could take it on himself to demonstrate the connection between the West's convoluted policies in the Middle East and the terrorism threat we are all faced with today -- and if he could then go on to demonstrate how reducing our dependence on oil from the Middle East would begin to free us from distorted world opinion about our intentions there, such a statesman shouldn't have much trouble getting us to make small sacrifices that would gradually bring that vision about.

What sacrifices could he propose? None of the developed countries are the same, but let us address as an example the USA as the biggest consumer of oil. First an increased tax on petroleum products imposed as the price starts falling below $40 per barrel would help maintain in consumers' minds that this stuff is costing them money and they had better continue to consider watching how much of it they use. Another result of maintaining a high price for oil products would be the increased competitiveness of alternative energy sources. Second, since transportation is the main user of petroleum, continued incentives to the automotive industry to develop fuel efficient vehicles would encourage technological advance there.

It is not that these ideas would create any overnight miracles, but by gradual steps we could begin to do what is right for ourselves and the world, and we could begin to again take the moral high ground in our dealing with the rest of the world.

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