Why Americans have become more vulnerable to oil price spikes

More than a decade ago, when Americans were facing soaring prices at the pumps, policymakers crafted a vision to wean people off gas and...


More than a decade ago, when Americans were facing soaring prices at the pumps, policymakers crafted a vision to wean people off gas and oil: more efficient cars, more compact communities and within walking distance, more renewable energy.

“We have a serious problem,” warned George W. Bush in his 2006 State of the Union Address. “America is addicted to oil, which is often imported from unstable parts of the world.” It was a powerful statement for a Republican president with deep ties to the oil industry.

His remarks — made as oil prices were rising and eventually hit $100 a barrel for the first time in the country’s history – marked the start of several years of a remarkable bipartisan push to wean the nation off oil and gas and better insulate Americans from price shocks in the global oil market.

Officials drafted the first increased fuel economy standards for cars and trucks for decades. National plans to save oil have won broad support in Congress to address energy dependence as well as the grave threat of climate change. Transit advocates have launched “Empty the pump» days to entice commuters to take trains and buses.

Then the country lost momentum. A rise in oil and gas production at home, along with a flood of cheap crude overseas, ushered in an era of lower energy prices. Increasing supply, rather than controlling demand, has come to define America’s drive toward energy independence.

Flooded with fuel, Americans bought bigger cars and homes that needed more oil and gas to power them. Cities have built more highways, public transport use has declined, and suburbs have expanded.

Yet the expansion of drilling in the country over the past decade – which has made the United States the world’s largest oil and gas producer – has ultimately left households vulnerable to volatile price swings. US oil and gas companies say they have no control on high prices at the pump, citing a confluence of global factors: the Covid pandemic, supply chain disruptions and Russia’s invasion of Ukraine.

“No matter how often ‘drill, baby, drill’ is touted as a solution,” said Michael Greenstone, professor of economics and director of the University of Chicago’s Energy Policy Institute, “the economics of base is the US economy.is still a small share of global capacity and global production, and therefore cannot affect the global price much.

During periods of falling prices, Americans change their behavior, buying bigger cars that use more gas, for example. “And then when those unexpected shocks happen, we’re much more exposed,” he said.

Conservation has now become a toxic concept in American politics. Petroleum industry groups framework retaining energy as a deprivation. As the midterm elections loom and Republicans use high gas prices to attack President Biden’s policies, few Democrats have floated the idea of ​​cutting back on consumption. Mr Biden himself, who came to power promising bold action on climate change, has urged oil companies to increase productionthough administration officials argue that the United States needs to move away from fossil fuels in the long term.

“If you could convince the Americans to hold on, it would probably have a much more dramatic and immediate impact on lowering prices,” said Patrick De Haan, oil analyst at GasBuddy, a Boston-based company that operates apps and sites. Web that help people see. Real-time fuel prices at gas stations across the United States.

“But asking Americans to consume less seems like a threat — many see it as a threat to their freedom in some way,” he said.

President Biden’s climate program has attempted to address some demand-side issues. the infrastructure bill he signed last year includes the biggest investment ever in public transportation, with more than $100 billion for trains and buses over five years.

Yet the mood was evident in the response to a 10-point plan to reduce oil consumption published by the International Energy Agency last month, which recommended measures such as implementing car-free Sundays in cities. The IEA argues that if advanced economies implemented its 10 recommendations, they could reduce oil demand by 2.7 million barrels per day, matching an expected global shortage of Russian oil, as buyers increasingly avoid.

“Energy Watchdog Issues Draconian Recommendations,” a Fortune article said. “Don’t plan to leave the house on the weekends.”

Some economists argue that on a macroeconomic scale, increased domestic energy production has insulated some aspects of the US economy from the worst effects of the crisis, for example by creating more jobs and profits in the oil and gas sector. Compared to Western Europe, where there is little benefit from an oil shock because it produces far less oil, the effect on the United States, on the whole, is more modest. “said Gian Maria Milesi-Ferretti, senior fellow at the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.

Yet this is hardly comforting for individual households, who are more dependent than ever on fuels whose prices rise and fall according to global trends.

The United States has instead relied on technology and efficiency improvements to control energy consumption.

Between 1970 and 2018, on-road passenger vehicle fuel consumption in the United States roughly doubled for cars and light trucks, for example. And that trend is expected to accelerate as the Biden administration moves to reinstate tougher fuel economy standards, after an attempt by the Trump administration to roll them back. Transportation is by far the largest oil consumerand the biggest contributor to climate change.

Several factors, however, have dampened the effect of these improvements, said Eric Masanet, who studies emerging environmental technologies at the University of California, Santa Barbara. Americans buy a lot more cars: from 1970 to 2018, the American population grew by 54%, but in total car and truck registrations increased by 141%. And vehicle travel, in miles, has continued to rise, which is one of the main reasons the United States uses more energy per passenger and per distance traveled than other major countries, he said. -he declares. Public transport ridership, already in slow and steady decline since the mid-2010s, in crater during the pandemic.

And while all vehicle classes have become more fuel-efficient, the U.S. fleet has gradually shifted to a mix dominated by larger, heavier vehicles such as pickups, vans and SUVs, further slowing gains. overall efficiency. IEA recently estimated that switching to larger vehicles had negated 40% of the fuel savings that would have been achieved under the stricter fuel economy rules.

“It was a step forward, a step back,” Dr. Masanet said.

It’s a similar picture for US homes. Americans now power and heat their homes much more efficiently than a few decades ago, thanks to improved space heating, which is why direct energy consumption and carbon dioxide emissions have not increased as rapidly as the population.

But these gains were offset by an increase in house size.

Average single-family homes built today are about 50% larger than comparable homes built in the early 1970s, with home sizes increasing rapidly through most of the 2010s before slowing somewhat in recent years. according to census data. American houses are among the largest in the world.

And although it can be difficult to measure the sprawl, there are indications that it is growing. Although some cities are getting denser, “it’s also clear that if you look at new housing starts, there’s more new housing starts on the outskirts of cities that are contributing to low-density urban development, single-family homes to low density”. said Karen Seto, professor of geography and urban science at the Yale School of the Environment. “We are going in the wrong direction,” she said.

Undoubtedly, some of these gains have raised the standard of living for millions of Americans. Always a recent United Nations report notes that wealthy individuals have a high potential to use less energy – and to reduce their emissions of planet-warming gases – while maintaining their standard of living. According to the report, the world’s richest 10% are responsible for about 50% of greenhouse gas emissions, with much of this amount concentrated in the richest 1%.

“The conspicuous consumption of the rich is the cause of a large part of the emissions in all countries, linked to expenditures such as air travel, tourism, large private vehicles and large houses,” the report notes.

It concludes that overall, actions taken by nations to reduce their total energy demand, such as investing in public transport, could help reduce emissions in key sectors by 40-70% by 2050, compared to the reference scenarios.

“That’s a lot of potential,” said Felix Creutzig, lead author of the UN report and chair of sustainable economics at Technische Universit├Ąt Berlin. “This makes it easier for each sector to reduce its emissions.”

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Newsrust - US Top News: Why Americans have become more vulnerable to oil price spikes
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