We can improve energy efficiency.
The recent rise in gasoline prices has generated a lot of noise. Calls of outrage and demands for change compete with harsh accusations and big promises by politicians. But one field has suffered most: economics. The deeper structural sources of our reliance on petroleum are being ignored.
To be clear: no, I don't mean "the economy" has suffered. The economy is far more resilient to gas price increases than at any time in the past half-century. In fact, gas prices aren't really that high: They are still well below their peaks in the late 1970s and early 1980s, when they were well over $3 per gallon, adjusted for inflation.
Rather, it is our thinking about the economy that has apparently suffered most. As an economist, I am most troubled by the poor economic reasoning that has surfaced in response to the spike in prices.
Gasoline is a commodity. That means a few simple things: Markets move it around easily to the highest bidder; its price fluctuates in quick response to supply and demand; and it is pretty much the same everywhere, so price differentials at a point in time are usually about transportation costs or infrastructure bottlenecks.
The policy implication is simple: You can't really affect prices in the short run, least of all with legislation or short-run boycotts.
This hasn't stopped people from proposing heavy-handed and futile measures. The silliest offender is the spam e-mail that many readers no doubt received, calling for a one-day gasoline boycott on Wednesday, May 19. Supposedly, this one-day hiatus was going to bring the oil industry to its knees. The reasoning was flawed from the beginning: The boycott didn't ask for any change in behavior. So, with consumption the same, purchases would simply spill over to days before or after the boycott, with no noticeable impact on the companies.
Unfortunately, skimpy logic is surfacing elsewhere in less likely places. A recent newsletter from the office of U.S. Rep. Peter DeFazio, D-Ore., featured a short article titled ``Gouging at the Gas Pump.'' Among its demands was a call for a ban on exporting Alaskan oil to Asia.
While it is true that Alaska ships much of its oil to Japan and other Asian destinations, a ban would be completely ineffective: Asian markets would simply grab oil from elsewhere, while U.S. markets would demand a little less, probably from the same places.
Ultimately, the ban would lead only to a shift in shipping patterns - and probably to less efficient patterns, which could ironically result in a slight increase in the use of oil to power oil tankers.
The single effective policy prescription is clear: long-term strategies to decrease demand through increased efficiency. As a country, we are falling short. Vehicle fuel efficiency is near an all-time low, and other than Energy Star labeling on a few product classes, we have no national strategy for energy efficiency in manufacturing, homebuilding or commercial construction. A 2003 report by the Union of Concerned Scientists estimated that the United States could meet all new energy needs through 2020 with efficiency improvements alone, at enormous economic benefit and increased energy independence.
Yet our leaders fail to steer our economy toward these opportunities. John Kerry, the presumptive Democratic presidential nominee, has failed to respond forcefully to gas price rises with a clear message on energy efficiency, asking instead that the administration dip into the national petroleum reserve. This can have a mild short-term effect at best, but it ignores root causes.
President Bush and the House of Representatives have pushed an energy bill that would do little for efficiency, continue our reliance on foreign energy sources and attempt to stave off the inevitable with tax breaks and subsidies for domestic drilling. Only a slim Senate majority has stalled this short-sighted legislation.
Fortunately, better options are on the table, even if those now in power do not favor them. To be fair, DeFazio's newsletter article adds, as an afterthought, that "increased fuel efficiency standards for vehicles (must be) part of any energy bill." Instead, that logic needs to be our first line of attack, well ahead of bad economics, such as a ban on Alaskan exports.
Short-term fluctuations won't matter so much if we address the long-term roots of our over-reliance. Our energy security requires a concerted effort. Let's start with smarter discussion and common-sense economics.
Joshua Skov is research director and a principal of Good Company (www.goodcompany.com), a sustainability research and consulting firm based in Eugene.
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|Publication:||The Register-Guard (Eugene, OR)|
|Date:||Jun 2, 2004|
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