Time to pay the pumper...

Everybody's screaming about the price of gas & oil, and they should be. The price today is far too low. Yup, that's what I think, at $3.10/gal gas is too damn cheap. Unless we set a price for petroleum that represents its true cost, one that's equivalent to what they are paying today in Europe, we're going to fall further and further behind economically while we slowly choke in our sprawling ex-urbs on the fumes of our cheap energy folly.

Here are a few tidbits regarding our oil habit (compiled from (http://epb.lbl.gov/homepages/Rick_Diamond/LBNL55011-trends.pdf) & http://fpc.state.gov/documents/organization/59901.pdf & http://europe.theoildrum.com/node/2653):

1. In 1956, Eisenhower signed the Interstate Highway Act, and we started building roads from coast to coast. Bus and train companies went out of business, as Americans moved from the cities to the suburbs. Per capita consumption of gasoline in America quadrupled between 1950 and 2000.

2. From 1950 to 2000 the "inflation adjusted" price of gasoline per gallon averaged $1.50, with one brief exception. In the late 1970s, as OPEC formed and established strict production controls to limit supply, the price of gas & oil rose to about $3.00 a gallon (again in inflation adjusted dollars).

3. This sudden price rise in the late 1970s had a dramatic effect. Americans stopped buying big gas guzzlers, and turned to small, efficient cars (which led to the rise of Toyota, Honda and Nissan, since American car companies were reluctant to make small cars). We turned down our furnaces, and insulated our attics. We installed solar hot water heaters, and hung our clothes out on the line. In the late 1970s we Americans, for the first time in the past 50 years, actually cut our consumption of oil by 10%. For about 3 years.

3. Reagan took office in 1981. His first act that January was to remove the solar panels (that had been installed by Jimmy Carter) from the White House roof. At the same time, a global recession coupled with North Sea oil coming online and differences of opinion between OPEC members, led to a flood of oil on the market in the early 1980s, and an equally steep drop in prices.

4. We quickly abandoned our gas-sipping ways, and got back to guzzling. In the mid-1980s Congress's CAFE standards for vehicle mileage went into effect, which had the perverse effect of making driving cheaper. Between 1980 and 1990, as vehicle efficiency rose and gas prices dropped, the fuel cost of driving one mile dropped from 15 cents to 7 cents. We could have kept on driving our little cars and pocketed all that savings. But what fun would that be? We opted to trade in our compact cars for SUVs and pickup trucks (which today make up 50% of all passenger vehicles) and get back to doing what we love most, which is driving. Between the 1980s and today we SUV-loving, road-tripping Americans increased the number of miles we drove and the amount of gasoline we consumed by about 60%. Yeehah!

5. Today the US has a standard of living (measured in GDP per capita) equivalent to Japan, the UK, Germany and France. We consume more than twice as much petroleum to generate $1000 of GDP as any of these other countries.

6. The average price of a gallon of gasoline in the US is about $3.10. The average price in the UK is about $7.15. The average price in Germany is $6.98. In France a gallon of gas costs about $6.50. In Japan the price is about $4.20.

7. The average American single family home is now 2,349 square feet, compared to 1,695 square feet in 1974, even as the average family has shrunk from 3.1 people to 2.6 people.

8. Today the US produces 23.4 tons of GHG (greenhouse gases) per capita. France produces 8.8 tons of GHG per capita. Germany produces 12.3 tons per capita. Japan produces 10.7. The UK produces 11.0 tons.

Our energy mindset is idiotic and bass-ackwards. On the one hand, we are coming to understand the depth and breadth of the problem. We wring our hands about the risks and costs of our dependency on oil imports. We are (most of us) greatly concerned about greenhouse gas emissions and climate change. We worry about smog, ozone, traffic congestion and the snaking growth of suburbia - all brought about by our lust for automobiles.

But we remain in denial about the solution. We do all these asinine things, like pouring billions $$ down the ethanol rat hole, and putting a few million $$ into subsidizing some windmills, all to avoid talking about consumption. We are loathe to admit that the solution is to consume LESS! We approach our petro-gluttony like the fat guy who switches to Diet Pepsi but refuses to stop eating donuts.

We have to drive smaller cars, and drive less. We have to build communities that are more compact, more livable and more efficient. We have to live in smaller, more efficient houses. We have to turn down the lights, raise the temp on the air conditioners, turn down the heat, hang our clothes on the line and a whole bunch of other things that are just common sense.

The reason we don't do these things today is because we hide the real costs of energy from ourselves. The price we pay at the pump (www.icta.org/doc/Real Price of Gasoline.pdf ) doesn't include the costs of suburban sprawl. It doesn't include the costs of military bases in the middle East. It doesn't include the cost of tax subsidies for biofuels, solar power and windmills. It doesn't include the costs of tax subsidies to the oil industry. It doesn't include the costs of the environmental destruction due to acid rain and global warming. It doesn't include the human health costs of mercury or ozone pollution.

Nor are all the externalities of falsely cheap fossil fuels on the cost side of the ledger, there's also our loss of competitiveness. We know that it takes twice as much oil for the American economy to generate $1000 as it does Japan, or Germany. We also know that the demand for global oil is increasing exponentially due to the growth of the economies of India, China, Indonesia and other developing nations. Barring a global depression, oil prices are only going to rise steeply for the next several decades. If we don't find a way to become as petro-efficient as Europe and Asia, then our oil dependence will price us out of the global market.

We know what we need to do. We have to radically reduce our per capita consumption of petroleum. We know what that takes, at least we have lived through one period of time (the late 1970s) when we actually accomplished that. We love our free market economy, and we know that in a free market the consumption of a commodity falls when the price goes up. The only way we are going to make ourselves reduce oil imports, reduce air and water pollution, stop destructive extraction practices, reduce our production of greenhouse gases and make our economy more energy efficient is to cut consumption. The only - ONLY - way to cut consumption of petroleum in a free market is to raise the price.

A reasonable goal is to double the price we pay for gas & oil by imposing a tax of 25 cents per gallon per year (every year) for the next ten years, such that we're paying $6.00/gallon by 2018. As we do this, we should cut income taxes by the same amount, so as to make this gas tax income and revenue neutral. As we have demonstrated in the late 1970s, we can and will adjust quickly. If gas and oil cost twice as much, and we halve our consumption, we can hold our energy expenditures to the level they are now. This is quite doable, because there's a tremendous amount of slop in our current energy habits. Our lives and lifestyles would suffer very little, if we trade in our Toyota Tundras (such irony in that name) for Corollas, and put clotheslines in our backyards. Most important, this one simple but painful measure would do more for our children and grandchildren than all of the proposed CAFE standards, biofuel subsidies, coal gasification initiatives, solar subsidies and carbon caps, combined.