Oil & The Economy

That seems to be the big story in the US today. Oil futures hit $140 a
barrel in today's trading and a minister from OPEC predicted it will
go as high as $150.

And where does that money go to? A good part of it goes to the middle east. They are building skyscrapers in the desert with American money. But it was not stolen, it was Americans who forked it over. If the 70s Oil Shock taught us anything, it should have been to reduce our need for oil for energy. However, we obviously weren't paying attention when US gas prices were the lowest in the world. Now they've doubled in less than a year and people are upset. But Hummer, truck, and SUV owners aren't the only ones who will be hurt by higher oil prices. Oil prices are at the core costs of shipping and transport, gasoline, jet fuel, etc. Everything that has to be shipped, and that is mostly everything we consume, will have a higher cost. What we have today is stagflation. Inflation and recession.

The biggest farce though, are the talking heads on TV blaming everyone but Americans. They blame speculators, China, India and emerging markets, they blame OPEC and the middle east, the oil companies, everyone else. But the truth is, the US is the biggest consumer of oil in the world by far!

Top World Oil Consumers, 2006 (thousand barrels per day)
1 United States 20,687
2 China 7,274
3 Japan 5,222
4 Russia 3,103
5 Germany 2,630
6 India 2,534
7 Canada 2,218
8 Brazil 2,183
9 South Korea 2,157
10 Saudi Arabia (OPEC member) 2,068
11 Mexico 2,030
12 France 1,972
13 England 1,816
14 Italy 1,709
15 Iran (OPEC member) 1,627
Source: US Dept of Energy

The USA uses over 20,000,000 barrels (1 Barrel is 42 gallons) or 840,000,000 gallons of oil a day! Nearly a billion gallons a day! With a population of right about 300,000,000, that's 2.8 gallons a day for every person in the US.

That is almost triple that the consumption of China. Obviously, American consumption has the largest effect on the price of oil. It seems Americans are adverse to using less than we already do, so what do we do? I think we need a energy plan with the same ambition and technological scale as when we tried to land a man on the moon. Rather than the government allowing offshore drilling and sending troops into Iraq for oil, why don't we develop renewable energy technologies that gives us the means to wean ourselves off the addiction to oil. At the comsumer level, we have started to see a shift in comsumers from gas guzzlers to fuel effiecient cars. According to the United States Environmental Protection Agency, the 2008 Toyota Prius is the most fuel efficient car sold in the U.S. and in May 2008, worldwide cumulative sales of the Toyota Prius passed 1 million. So consumers are making the shift. I think our government can help in the transition by investing our country's capital resources and scientists towards turning the US into the safe and renewable energy leader of the world.