Petroleum         

Another legacy issue.  In four and a half billion years, the planet has created large pools of liquid petroleum in various spots under the surface of the Earth.  The petroleum has been created from decaying vegetation in a process requiring millions of years.

We are planning to use it all up in the next few decades! 

There is some argument over exactly how much there is, and how long we can keep finding it faster than we use it up, but it is only a question of a decade or two.  And as a billion people in China and a billion people in India come to want their share, we will be using it up faster and faster.

In addition to robbing this valuable resource from our children and grandchildren, we are well aware that burning petroleum emits pollutants that are destroying the Earth's atmosphere, and causing climate change of unknown, but likely disastrous, consequences.

As the demand continues to outstrip the supply, we continue to transfer vast power and vast sums of money to those who control the remaining quantities.  This creates extraordinarily rich tyrants and despots in various countries of the Middle East, South America, Africa, and elsewhere.  Most of these abuse their own populations, and deflect the misery of their people by blaming their poor condition on the outside world, particularly the United States.  This has destabilized the world, and created a nightmare for all of us.

We were whacked between the eyes with this problem more than thirty year ago when OPEC first got together and suddenly quadrupled the price of oil, creating economic chaos for us.  A few years later, we where whacked again when the Ayatollah took over in Iran, and they doubled the price of oil again.  All these years later, we have done nothing about it.    

After the attacks of September 11, 2001 wasnt it clear that the first step that should have been taken was to adopt emergency plans to radically reduce petroleum use.  And isnt it clear that in trying to deal with the abusive governments of the Middle East we have radically reduced options because they, so to speak, have us "over a barrel"?   If we were "at war", an obvious step would have been to implement rationing, as we have in previous wars.  We certainly should have re-instituted the 55 mph national speed limit - most cars burn 30% more gas per mile at 75mph than they do at 55 mph.  Before someone says "but the United States does not import much oil from the Middle East", surely we all realize that oil is a fungible commodity.   Whether the oil from the Middle East comes here or elsewhere the effect is the same.  The world supply of oil is in an incredibly delicate balance, with the world consumption virtually equal to the current potential for the world to supply it.  Regardless of where the specific barrels of oil we use come from, if we continue to consume at the level we currently do, we will continue to drive the price of oil up, and continue to create an enormous windfall of money for those who wish to destroy us.  And yet, after the attacks of 9/11, the subject of dealing with oil dependence wasnt even broached.  We certainly recognized that money was a major weapon in the "War on Terror".  We went after bank accounts of suspected terrorist organizations.  We shut down organizations claiming to be raising money for charity if we suspected that they were funneling money to terrorist organizations.  But we ignored the elephant in the room.  If we want to know who it is that is financing terrorists, the obvious answer is: "it is us".  We are sending hundreds of billions of dollars into the hands of every evil despot who has the good fortune not only to have oil under his feet but also to have an incredibly stupid adversary in the United States

Yes, over a period of years, the supply of oil might be increased, or alternative fuels could come into production, but in the near term the situation is precarious.  When a hurricane blows in the Gulf, when Russia shuts down some production to punish the people running Yukos, or oil workers in Nigeria go on strike, or Hugo Chavez has a mood swing, chaos reigns.  Avoiding any interruption in the oil supply is a primary consideration in any policy regarding tyrants in oil producing regions. For instance, in weighing our options of dealing with Iran, first and foremost, is the consideration that they could not only withhold their oil, but that they could shut down shipping oil from the entire Middle East through the Straits of Hormuz.  The world would experience economic collapse. 

No one knows just what technology will replace petroleum fuel, but necessity is the mother of invention.  We should have started artificially increasing the cost of petroleum fuel through a gradual implementation of add-on taxes thirty year ago to the point that we would conserve and we would look for alternatives, and alternatives would become economically viable.  And in fact, the added taxes may only reflect the actual cost of petroleum, factoring in the military costs of dealing with the monsters we have created, and the costs of periodic disruptions to our economy any time there is any disruption to the petroleum supply. 

Petroleum has been cheap:  Cost of pumping it from liquid pools under the ground a few dollars a barrel.  Cost of refining it a few dollars more.  Cost after we use it all up Priceless! 

With the added taxes, gasoline today might cost six or eight or more dollars a gallon, but the beauty of raising the price through taxes is that the money goes right back into our own pocket not to greedy oil tycoons or evil despots.  The revenues produced can simply allow us to reduce other taxes elsewhere.  Also, you the consumer might not even spend any more for gasoline than you do now.  If you pay two to three times as much per gallon but use one half or one third as much per mile, your total outlay for gasoline might be the same.  Look at the Europeans, who have high priced fuels, driving their Smart Cars and riding on their Vespas.  And they are developing radical technology like the French car that runs on compressed air!

By creating a predictable increase in the cost of fuel years into the future, much of the good that can be accomplished by this slow steady increase in add-on taxes will occur long before the actual increases even take place.  When you buy the new car, if you know that gasoline prices will increase 50% over the next five years that you intend to keep it, it will certainly influence your buying decision.  Not only will you know how your cost of operating the car will be increasing, but you can also consider: will there be any resale market for a gas-guzzler five years from now?  Certainly, the people designing cars, in addition to the people making decisions regarding tooling and facilities for cars that will be built three to five years from now, will be able to predict and take into consideration what effects the increasing costs of fuel will have on the desires and demands of the public.  If you are running an oil fueled furnace in your house, factory, or commercial building, knowing what the costs of heating oil will be years down the road will enable you to better calculate the pay-back from a conversion to a more efficient furnace, or to a different fuel, or to electric heating, or to adding solar panels.  If you are running an oil company, you will know that you had better start putting a lot more emphasis and money into R&D for the next generation of fuels.

Of course, the taxes would be adjusted for fuel containing ethanol, bio-diesel, or other non-petroleum elements.  The taxes would also be adjusted to compensate for higher cost petroleum derived from oil shale, tar sands, or other non-traditional sources.  This would equalize the higher cost of these fuels, make them economically viable, and encourage their production and use.

And the added cost of fuel would certainly make trucking companies more aware of maximizing their fuel efficiencies.  It would give a big boost to a preference for buying merchandise from local suppliers, and minimizing the need for shipping.  It might tip the balance in favor of more shipping by rail or by boat.  Who knows what innovations in commercial transportation might result if there were sufficient incentive to seek them?  This morning's Chicago Tribune carried an article about engineers from the Illinois Institute of Technology developing a very affordable kit to convert diesel trucks and busses to hybrids.  Their research showed that the busses could get double the miles per gallon and emit half the pollutants.

For a little while, when gasoline prices first spiked over $3 per gallon, automobile ads began to feature fuel efficiency numbers.  Those numbers have virtually disappeared from the ads again.  Does no one care?  Or do the automobile makers and sellers not care?  Is fuel efficiency just not sexy?  They would rather feature gargantuan vehicles climbing mountains and crossing streams?  How high do we need to raise the price of fuel until the public will care?  And when the buying public cares, the ads will again feature fuel efficiency numbers, and the manufacturers will be in a race to see who can offer the most attractive vehicle with the most attractive fuel efficiency.  It isnt that I dont prefer to drive a big SUV.  But we are all spoiled rotten and perpetuating a myth that we can do anything we want, drive the biggest most inefficient vehicle we want.  The phrase "We are Addicted to Oil" is nonsense!  We have no craving for oil; we have an utter disregard for oil!  What we are addicted to is satisfying our every whim without regard to the consequences.  If we make the monster car unaffordable, we will adjust!  We do adjust our expectations and even our desires to economic reality all the time.  I might actually prefer to have my chauffer to be driving me around in my Rolls Royce, but I have never felt deprived because I dont have a chauffer, nor a Rolls Royce.  We will adjust, we will get used to driving smaller more efficient vehicles, and maybe we will all feel better about ourselves knowing that we have not robbed a precious resource from our children and despoiled their planet.  

And were not really talking sacrifice here.  My Pontiac Vibe is a bargain priced four door five passenger vehicle that is built like an SUV put the bike rack on the back, the canoe on top, or fold the seats down and there is plenty of room to load in a stack of eight foot  long lumber - and it gets over 30 miles to the gallon.  The Ford Escape Hybrid is an SUV that gets 36 miles per gallon.  The Toyota Prius Hybrid is a four door five passenger sedan with all the luxury features, and it gets up to 60 miles per gallon.  If the technology for fuel efficient cars exists right now, today, why arent all the manufacturers adapting it to all their passenger vehicles?

I pulled up alongside a humongous new SUV the other day, and checked the web site to see if it was really as big as it seemed.  Yep!  Three tons of shiny black steel and chrome, 18 feet long, 6 feet high, 6 feet wide, with 400 surging horses under the hood.  Boy does that validate your manhood!  Driving around town it gets 13 miles to the gallon.

If we want to make a dramatic improvement in the twin problems of scarce petroleum and atmospheric pollution from burning petroleum in the next few years, there is no other way to do it than to replace the American fleet with cars that are available today and that burn vastly less petroleum fuel per mile.  Talking about changing our driving habits, biking to work, walking to the corner store, or even riding public transportation - all are good things to do.  But none of them are going to put a dent in the amount of gasoline we burn.  And waiting for new technology who knows for how long?  And as new technology is developed, we still have the years required to replace the cars currently on the road before we will substantially reduce petroleum usage.

One concept that has not been discussed is the development of a small inexpensive car specifically intended for commuting, powered by batteries with seats for two people, no cargo, and a seventy mile range.  Commuting and short drives around town account for up to 90% of most peoples driving.  A family with two drivers/workers might have two commuter cars (that together fit in one space in the garage where they recharge overnight), and one family car that sits in the other space to be used for the 10% of the time that it is really needed.  Businesses could put metered recharging stations in their parking lots, and downtown parking lots could add recharging stations as well.  There could be metered recharging stations along the curb in city residential neighborhoods for those who park on the street overnight.  People could drive their electric commuter car most of the time, and if they dont own one, rent a larger gasoline powered vehicle for an occasional road trip or other event that required it.

But no one in Congress has dared mention "higher taxes" to create "higher priced gasoline and heating oil".   The concept that it, in fact, would just be a trade-off and not really cost anyone anything seemed too complicated to try to explain to the public, too much risk of turning off voters.  So instead of doing the right thing, they did what they always do - they added more regulations, and added more giveaways.  They passed CAFE standards - the Corporate Average Fuel Economy act.  It attempts to require that manufacturers produce vehicles with increasing average fuel efficiency across all the vehicles they produce.  Ultimately, though, the manufacturers must produce the vehicles that consumers want to buy.  CAFE standards do nothing to change the preferences of consumers.  During the time they have been in effect, we have seen the advent of bigger, heavier, and more inefficient SUVs vehicles designed to carry eight or nine passengers while driving through fields and streams and up mountains.  Activities for which they are never used. Prior to implementing CAFE standards, there were almost no SUVs, Conversion Vans or Pick-up Trucks with luxury four door cabs, all of which are "Light Trucks", and now comprise a substantial portion of our passenger carrying fleet.   Of course, CAFE standards were made to allow "Light Trucks" to be much more inefficient than "Passenger Vehicles".  And although passenger cars have become somewhat more efficient, with the advent of the "Light Trucks" replacing a large portion of the "Passenger Vehicles" the average miles-per-gallon of U.S. vehicles has scarcely improved at all.  CAFE standards do nothing to promote car pooling, use of public transportation, moving closer to the work place, or any other means of reducing the amounts of fuel used.  And, of course, CAFE standards do nothing to promote the development of alternative fuels or energy sources.  And as ineffective as they are, the U.S. Auto Manufacturers are busy lobbying Congress for looser standards.  Do they not see the handwriting so clearly emblazoned on the wall?  With the U.S. Auto Manufacturers rapidly losing market share and going broke, cant they see that continuing to try to prop up a market for monster cars isnt working?

The other method for Congress to deal with the problem is to pass energy bills with giveaways. Giveaways that actually do cost you and me they are giving away our money.  And there is no evidence for the assumption that Congress either knows where best to give it, or that they even make their decisions on that basis.  Congress is motivated by what sounds good, and what will produce more campaign contributions, and more votes, not on what will best solve real problems.  Giving money to Midwest corn farmers sounds great and plays well in a campaign.  Giving money to Archer Daniels Midland to build more ethanol plants elicits great campaign contributions.  But the viability of ethanol from corn as an automotive fuel is highly suspect.  There is considerable evidence that producing corn ethanol requires burning more fuel than it produces.  That when all the pollutants created in the process of growing, harvesting, and converting corn to ethanol fuel are taken into account, that the amount of pollutants dumped into the atmosphere is greater than if we burned gasoline.  Also, it is estimated that to produce enough corn to satisfy all our energy needs would require a land area several times that of the United States. 

Sugar is a vastly better crop for producing ethanol than corn, and inherently produces ethanol at a cost at least 25% below the cost of producing ethanol from corn.  Ironically, as short sighted as we have been, it is fascinating to note that Brazil foresaw the coming problem decades ago, at a time when their supply of petroleum fuel was still plentiful and cheap.  They began planting millions of acres of sugar cane, developing improved methods for using it to produce ethanol fuel, and building refineries to do so.  They heavily subsidized this activity for all these years and some said they were crazy.  But who has the last laugh now, when they are completely energy independent, with an entire fleet of non-polluting cars. 

And in fact, Brazil has enough farmland to triple the 4.6 billion gallons of ethanol per year they are currently making, and could increase their production to be able to supply enough ethanol to replace 5% of the oil consumed worldwide. (Chicago Tribune 3/14/07).  But our Congress has, of course, enacted a protective tariff making it impractical for us to buy ethanol from Brazil.  It also has enacted protective tariffs to protect us from imported sugar, which is rapidly driving all of the candy manufacturers out of the United States.   And are we doing anything to dramatically expand sugar production in the U.S, and develop a sugar based ethanol industry?  Or would that upset the corn farmers lobby?  How much acreage is there in the U.S that would be suitable to growing sugar?  Could we promote joint ventures with Mexico, Central American nations, and Caribbean Island nations to vastly expand sugar farming, and build plants for the production of sugar based ethanol?  And, at the same time, provide an enormous economic boost to some nations that could surely use it?  And, perhaps, reduce the incentive for people from those nations to add to our problems with a flood of immigrants?  Is anything being done along these lines?

As it happens, the relation between supply and demand of petroleum does come and go over the years.  From time to time the price of petroleum fuels soars, and we all become very concerned, vowing to "do something".  We pledge that our next car will be fuel efficient.  We wring our hands and talk about the need to develop alternative fuels.  In the 70s, after the first "oil crises" investors poured millions of dollars into developing the extraction of the oil from the oil shale in the Rockies.  But then, there will be a period where oil suddenly seems plentiful.  There is, in fact, very little storage capacity, so if supply temporarily exceeds usage even by a little, suddenly there appears to be a glut of oil.  In the late 90s, briefly, the price of oil dropped under $10 per barrel, and a gallon of gasoline sold retail for under $1.00.  We promptly forgot all about an "energy problem".   The investors in Rocky Mountain shale oil lost their millions.  And investors are reluctant to pour money again into such fickle long term ventures. 

No, our government trying to regulate and trying to select the technologies to back with giveaways is not the answer.  Ultimately, the market price of petroleum fuels will permanently rise to the point that the market will force solutions - some combination of conservation, public transportation, alternate fuels, lifestyle changes, or other as yet unforeseen innovations.  But we could speed that process up, avoid depriving our children of a valuable resource, avoid despoiling their planet, and avoid giving away trillions of dollars to the oil cartel and the oil tycoons.

Anyone who has been in Congress over the past three decades that we have been so acutely aware of this impending disaster and done nothing about it should be ashamed of themselves.

Running Amok is available for purchase at most online book sellers, including:

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