We should base policies on the idea of “Difficult Oil.” The times when supplies of easy, cheap, relatively politically stable oil are ending, and the era of difficult oil—expensive (both in terms of price and volatility), geologically and technologically challenging, environmentally unsustainable oil is upon us. Leaving aside the morality of using oil that’s involved in cycles of poverty, civil war, corruption, and human rights violations in the states where it comes from, the stuff just isn’t that easy to get anymore because developing countries are competing for it too. The market’s perception of this difficulty is part of the reason—not all—for today’s amazingly high oil prices. Even if we could get our hands on more cheap oil, our fuel delivery infrastructure was built in our grandparent’s time, and it’s straining to hold our increasing demand. What’s more, our global competitiveness is severely limited by the fact that our energy productivity (ability to turn fuel into GDP) is the lowest in the developed world [according to a report by consulting giant McKinsey & Company].
Meanwhile, today Americans are shelling out $800 million more for gasoline per day than we were five years ago. Inattention to the realities of difficult oil has left us in a bad spot. On a personal and national level we need to remodel our lives and economy to use less energy, and in particular less oil, while making things (or at least ideas) that the world wants to buy.
EW: Let’s dismiss the McKinsey study on U.S. oil usage against expanded GDP. Much is made of America’s use of 25 percent of the world’s oil output, but always in contrast to our population’s percentage of the world’s: the direct comparison is that the U.S. uses 25 percent of the world’s oil and creates 25 percent of the world’s GDP. Further, by improving energy efficiency America has doubled its GDP per barrel of oil since the seventies.
We would be wise to start thinking of oil as what it really is, a replacement for other forms of labor. Consider this: a single trucker can load 50,000 pounds of goods in Los Angeles and drive it 1,400 miles to Dallas using approximately 289 gallons of diesel, or one gallon for every 173 pounds of goods delivered. Without oil, how many drivers, horses, and wagons would it take to deliver those goods? How many humans would it take, carrying the goods on their backs? It is the extremely concentrated energy stored in oil that makes it so valuable. As consumers, we focus only on how much per gallon gas costs, not on how much in costly labor it saves.
The search for alternative fuels and energy should be considered key to long-term growth. But we have been searching since the dawn of the Oil Century, and yet even at today’s prices no substitute has been found with an equally low cost of production and equally high-energy output. Until that cost/benefit line can be crossed, oil it is.
LM: Dismiss the issue of American competitiveness? Give a gallon of oil to Japan and they’ll turn it into twice as much GDP as we do, even though we’re all paying the same price for the oil on the international market—that puts us at a disadvantage. (If we were as productive as Japan we’d be producing well more than 25 percent of the world’s GDP.) I don’t have the figures for your hypothetical trucker, but let’s say we’ve got a hard-working organ donation institute employee who needs to drive coolers around in a car. Her European counterpart will use 37 percent less oil to go the same number of miles, which means she can deliver a third more organs, and generate more GDP.