August 5, 2011
Missing Some Points on Oil and the Economy
U.S. dependence on foreign oil is decreasing, according to this article. This reduced dependence comes from new ways of measuring the amount of oil imported, as well as increased production of U.S. oil, increased use of biofuels, and a drop in demand.
The main reason oil production is up, and U.S. consumption of oil is up, is that prices are high. At $4 per gallon, there's lots of oil available in this country. And continued consumption of oil as our primary transportation fuel simply defers our dependence on foreign-sourced oil, unless there is some way to link increased U.S. oil production with transitioning to a new fuel source. (I'm not away of any such link.)
The article also asserts:
No one is saying that the United States will be able to avoid importing petroleum. But there is a chance to replay what Jay Hakes, author of “A Declaration of Energy Independence,” describes as a forgotten victory.
In 1977, the United States imported enough oil to meet 47 percent of demand. Five years later, the country needed only enough to meet 28 percent of demand, in part because of better automotive fuel economy standards, rising Alaskan oil production and cuts in the amount of fuel oil used to generate electricity.
The problem, of course, is that U.S. oil consumption is often a measure of economic strength. Notice the other parallel between 1977 and 2011? Perhaps, the economy? If this parallel holds true, it's going to be a long five years.
It is true that the economy grew slowly from 1977 to 1985 (about one percent a year inflation adjusted). But it's a stretch to attribute most of a 50 percent CUT in oil imports to slow economic GROWTH. By 1985, when growth reach more traditional rates, imports were still at 1982 levels. Factors that should be considered: Alaska oil pipeline, decontrol of oil prices, tough efficiency standards for vehicles, improved insulation in heating-oil dependent NW, backing electricity generation off oil, etc.
Posted by: Jay Hakes | Aug 10, 2011 1:02:08 PM
I appreciate the comment, and your point is well taken. I admit that I may have been overstating a single factor, although I still think the state of the economy is a significant factor, especially when considering all circumstances, including those you suggest. Today's global oil demand is far larger and more diverse (especially India and China) than in the late 1970s and early 1980s, and high oil prices today, combined with new technologies are making U.S. oil more competitive again. I agree there are major differences between the two eras. I just think that a slow growing economy in the late 1970s and a struggling economy today are key parts of significantly reducing oil imports in both cases.
I look forward to reading your book for a broader perspective. Perhaps a closer look will lead to a change of heart. Either way, I plan to provide a follow up at some point.
Posted by: Josh Fershee | Aug 11, 2011 8:49:09 PM