Peak Oil News: Pump Dreams

Monday, October 04, 2004

Pump Dreams

The New Yorker

Many Americans also appear to believe that they are entitled to cheap fuel, regardless of how much they consume. When gasoline hits two dollars a gallon, they look for somebody to blame—this despite the fact that gasoline is still cheaper than it was in the nineteen-seventies, after adjusting for inflation, and that it costs a lot less than it does abroad. In the United Kingdom, for example, a gallon of gasoline costs more than five dollars.

No prominent politician will say it publicly, but from an energy perspective an extended period of higher fuel prices might well be just what the country needs. Many of the problems we now face can be traced to the nineteen-nineties, when oil prices collapsed. Between 1976 and 1985, when gasoline prices were high, drivers switched to smaller, less wasteful cars, and oil consumption fell by ten per cent. Once oil prices slipped back, Americans returned to their beloved gas-guzzlers. Between 1985 and 2000, the demand for oil rose by almost twenty-five per cent.

Higher energy prices would have many beneficial effects. Besides encouraging gasoline conservation, they would help the renewable-energy sector, which can’t compete at today’s prices, and they also would make it economical to start exploiting nonconventional supplies of oil, such as oil shale in the Rockies, tar sands in Alberta, Canada, and heavy oil in Venezuela’s Orinoco Belt. “Under any reasonable economic scenario, in twenty-five or thirty years we will be using more alternative fuels,” Jeffrey Sachs said. “We will be gasifying coal and we will be liquefying tar sands, and doing a lot of things that mean opec’s bargaining power will be reduced.”

The most straightforward way to keep energy prices up, and the one that most developed countries adopt, is to tax hydrocarbons—a policy proposal long regarded as political suicide in the United States. The federal tax on gasoline hasn’t gone up since 1993, when President Clinton raised it a paltry four cents a gallon. Americans prefer lower prices at the pump even if they have to pay hundreds of billions of dollars in taxes to support a U.S. military presence in the Middle East. Amy Myers Jaffe has calculated that the cost to taxpayers of oil-related military activities is equivalent to about ten cents per gallon of gasoline. “We are being taxed on energy in this country,” she said. “It’s just hidden.”

Given the public’s ignorance about energy issues, and the entrenched interests that dominate the industry, many analysts are skeptical about the prospects for change. Jaffe believes that it will take a repeat of what happened in the seventies to force meaningful reforms. Joseph Romm said, “If people cared about oil imports they would buy different cars. In response to 9/11, people started putting flags on their S.U.V.s and buying Hummers. That tells you something.”

Before any progress can be made, the political debate will have to move beyond the myth of energy independence. “Sooner or later, we are going to have a lot of hybrid cars, electric cars, and, perhaps, at some time in the future, we are going to have a hydrogen economy,” Robert Mabro told me. “But, until we get there, to talk about energy independence is foolish. The two candidates, with due respect, are lying to the people, or they don’t know what they are talking about.”


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