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Apr 6, 2012

The Pursuit of Low Gas Prices is Bad for the U.S.


It's a fallacy that we can drill our way to low gas prices, and trying to do so not only threatens our health, but also wastes our money and misdirects innovation. If we stop focusing on the problem of high gas prices and who’s to blame and start pursuing solutions to the true problem—our oil dependence—we might find we agree more than we think.

Oil price volatility carries a huge economic cost. High oil prices have preceded every recession since 1973, and have put mobility industries especially at risk.

Savvy companies get this. FedEx (which burns 1.5 billion gallons of petroleum-based fuels) is now betting on electric or hybrid vehicles, and adding biofuels and natural gas to the mix for its delivery van, truck, and jet fleets.

The relentless pursuit of low gas prices forces us to spend trillions and risk young Americans' lives. The Pentagon gets this, and has made “more fight, less fuel” a central part of its sweeping strategy to not only reduce through efficiency the amount of oil the military uses, but also to replace it with alternative sources.

The North American Council for Freight Efficiency’s fleet efficiency survey shows that once the leaders in trucking started adopting efficiency measures, they continued doing so even when diesel prices dropped. Now that fuel prices are rising again, that investment is rewarding them even more.

Many have pointed to the Obama Administration and its energy strategy, in spite of the fact that gas prices and volatility are tied to the world market (which pays little regard to who is president).

Energy Secretary Steven Chu is in hot water for having said in 2008—before he was energy secretary—that, “somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” Politically inconvenient given Chu’s position now, but did he have a point?

Higher prices create incentives to move toward efficiency and away from oil. People respond to incentives, whether they are created by government or by the market.

If gas prices rose and stabilized, people would have greater incentive to buy fuel-efficient vehicles—a phenomenon we’re seeing today. Automakers are seeing sales of fuel-efficient vehicles rise and GM just announced that the Volt sold a record 2,289 units in March, a 50 percent increase over the previous record.

Reinventing Fire shows how new business models and competitive strategies can shield our economy from the volatility of oil price shocks. Across buildings, transportation, industry, and electricity, Reinventing Fire show promising ways to win the clean energy race, not forced by public policy but led by business for durable advantage.

The political blame game is a waste of time and energy. The fact that the U.S. economy has been whipsawed by volatile oil prices for decades under administrations both Republican and Democrat makes this clear. It’s time to move on.

Highlighted Resource

Easing the Pain at the Pump

Innovative Transportation Solutions Foster Immunity to Oil Price Shocks. Read More

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Showing 1-4 of 4 comments

April 12, 2012

It is not the pursuit of low gasoline prices that is the problem. It is the pursuit of fossil based petroleum, coal, and natural gas that is the problem.

Grassoline is a real alternative. It is produced by heating grasses and wood biomass in the absence of oxygen and with the right catalysts to produce high quality gasoline, diesel fuel, or heating oil. At worst these fuels are carbon neutral. At best the charcoal residue from the process can be treated with micro-organisms and made into a soil conditioner, making the process carbon negative.
A company is coming to market this September with a unit that produces about 1000 gallons of grassoline per acre of switchgrass. At this rate about 10% of the US non-arable land could produce the gasoline consumption of the peak year 2007. And produce it at a cost of about $1.00 to $1.15 per gallon before the additives process.
So cheap gasoline that actually reverses the trend in increased CO2 is not only possible, but coming to market this fall. One company is Cool Planet Energy Systems (www.coolplanetbiofuels.com).

April 13, 2012

It appears that despite good intentions, RMI has yet to have its collective "peak oil moment".

April 13, 2012

Unfortunately, whether it be grassoline or standard petoleum fuel, once it is put into the tank of an automobile with an internal combustion engine, we know that 80% of that precious commodity will be wasted from the inefficiency of the ICE as waste friction and heat. It's a hard truth that is often overlooked.

April 14, 2012

Although high gasoline prices may create powerful incentives for greater fleet efficiencies, these longer term benefits don't ease the immediate pain of higher fuel costs on millions of drivers trapped in low mileage vehicles. I own and operate a retail flooring business in Connecticut. My installers, like virtually all home improvement workers, use low mileage vans. Rising gasoline prices cost these workers significant percentages of their daily income, and the weak economy presents powerful obstacles to passing these costs on to the consumer.
The impact of higher prices is felt with a daily immediacy that creates anger, resentment and contempt towards those who would argue that higher fuel costs are good. Think tank solutions and comments by our Nobel laureate energy secretary simply don't cut it for the millions of Americans already burdened by years of recession. That kind of talk is insensitive and demeaning towards those who face a daily financial struggle. It also creates powerful support for supply side solutions--to the detriment of the demand reduction/efficiency improvement arguments.
A more thoughtful and politically sensitive and intuitive argument needs to be promoted by those who so blithely urge the benefits of higher fuel prices, carbon taxes, etc. if they are to hope to earn support rather than the back of the hand by a very large number of Americans.