Who is responsible for $150 oil? Thanks to Nelson Schwartz’s NYT primer on 30 years of benighted US energy policy, we can list the following villains, in approximate order of responsibility. Note the absence of “speculators,” Russia, and OPEC. Also note the inclusion of both Democratic and Republican administrations:
- Americans, who consume 25% of the world’s oil (21 million barrels a day out of 85 million used worldwide), despite constituting 4% of the world’s population. Secretly blaming the Chinese for $4 gas? We use twice as much oil every day as China and India combined. But wait–haven’t we always been oil pigs? Yes, but our consumption has increased 25% since 1990, after remaining flat for a decade (because in that decade, we were actually concerned about conservation and efficiency).
- America’s transportation systems, which consume 70% of those 21 million barrels a day, or 15 million barrels a day (18% of global consumption). Most of this is consumed by individual drivers.
- World economic growth without oil conservation, which has helped boost global daily oil usage to 85 million barrels from 76 million in 2000. The US, of course, is responsible for more than 1 million of that 9 million increase, or 10%.
- The weakened dollar. The dollar has dropped about 40% against the Euro in the past six years and a lesser but still profound amount against other major currencies. Absent this decline, oil might be about $100 a barrel (which would still be the highest level in history, even adjusted for inflation).
- The US Congress and Administrations of 1985-2007, who ignored report after report of an eventual crisis and refused to increase energy taxes, encourage investment in alternative energy, or mandate higher fuel efficiency. Americans like their cars big and powerful, our politicians said, as they shot down every forward-looking policy brought their way. Never mind that Europeans once liked their cars big and powerful, too, before their leaders decided to actually lead–by vastly increasing fuel taxes and efficiency. Gas in Holland costs $10 a gallon, with $5.57 of thatcoming from taxes. Gas in Britain costs $8.71 a gallon. US federal taxes are about a dime per gallon. US cars, meanwhile, average 24 miles per gallon. European cars average 44 miles per gallon (headed to 48 by 2012). Have Europe’s responsible policies destroyed it? No. Europe has adjusted. European economies have continued to grow, and citizens haven’t resorted to revolution.
- Ford (F), General Motors (GM), and Chrysler, who lobbied fiercely against higher fuel efficiency, threatening to shut down production plants in states whose senators supported higher fuel efficiency standards. Higher standards, the car companies argued, would hurt sales of huge gas guzzlers, thus favouring foreign competitors. Never mind that American car companies were perfectly capable of building smaller cars, too–they just chose not to. Now, $150 is killing sales of huge gas guzzlers anyway, and American car are on the verge of bankruptcy.
- American oil companies, which complain forever about not being able to drill in the Alaskan Wildlife Refuge, off the Atlantic coast, and elsewhere, but don’t drill in many areas that they’re permitted to. The companies would have to be drilling a lot more to really make a difference, however. The best-case estimates for ANWR drilling would be to reduce oil prices by $1.44 a barrel by 2027, 19 years from now. Offshore drilling wouldn’t reduce prices until 2030.
It’s an election year, so it’s a good bet we won’t hear about anything other than “speculators,” OPEC, and greedy oil companies. But it’s worth knowing who is really to blame.