Summer equals driving season in the United States, but the limiting reactant in Americans' motoring equation is about to get more expensive. Refinery glitches, Americans have been told, are responsible for recent gasoline price surges-a reassuring, cozy and true explanation for per gallon prices upwards of $3.20.
But all is not well in this gas-guzzling portion of the globe. Just when Americans were beginning to believe that the cause of their misery in early 2007 was refinery outages and not greedy oil companies or price gouging gas station owners, John D. Hofmeister, the president of Shell Oil Company, made an incredibly self-serving announcement. He told The New York Times that the push to produce corn-based ethanol in the United States was a "disincentive" for investors who might otherwise be interested in constructing new refineries.
Hofmeister's spin made it seem that the production of large amounts of ethanol, or any other biofuel, will somehow be responsible for future gasoline price increases.
What Hofmeister failed to mention was that the real incentive for building refineries in the United States was that the average profit margin on processing crude oil into gasoline in the United States had skyrocketed. According to Associated Press, "American refiners have made a pretax profit of roughly $30 on each barrel of oil they use to produce gasoline, more than three times the margin in Singapore, a major Asian refining center."
Hofmeister's anti-ethanol remarks were soon picked up by the secretary-general of OPEC, Abdalla El-Badri, who warned Western countries that their efforts to develop biofuels as an alternative energy source to combat climate change risked driving the price of oil "through the roof."
The oil cartel, he announced, was considering cutting its investment in new oil production in response to the push for biofuels. El-Badri made his point clear-either you want cheap oil or lower emissions. You can't have both.
OPEC's threat, not surprisingly, came on the eve of the G-8 meeting in Germany, where global warming topped the agenda, but leaders only agreed to disagree on the issue.
Once the summit ended, the International Energy Agency (IEA) hastened to reassure OPEC members (and Shell) that biofuels did not threaten their existence.
"OPEC has nothing to fear. Even in the most optimistic scenarios, the contribution from biofuels would be very small", IEA head Claude Mandill told the Financial Times.
The IEA's message to OPEC was very up-front: "Relax guys, don't take all this biofuel talk at face value, global oil demand by 2015 will rise by close to 10 million barrels a day."
Whichever way the pendulum of emission cutbacks swings, one thing is certain: None of the G-8 countries are considering lowering consumption as part of the solution to the critical problem of global warming.
But this stasis is based on false hope. America and its hydrocarbon addicts will be rocked beyond imagination if America's traditional policy of bending over backwards to please carmakers is maintained.
The Energy Consuming Behemoth
The damning statistic that the United States, with 5 percent of the world's population, uses 25 percent of the world's total oil production and 40 percent of the world's gasoline production has been around for some time. It is often cited on websites of conservation groups and by the American Left, but remains largely ignored by the mainstream media.
California, with a population of 36.5 million, consumes more gasoline a year than the over 1 billion people living in China. Americans consume 20.8 million barrels of oil daily-more than Russia, China, Germany and India combined. The United States is also the world's largest consumer of natural-gas-using 646 billion cubic meters in 2004, almost twice the amount used by the entire Asian-Pacific region.
If the current rate of consumption of natural gas continues and new reserves are not discovered, British Petroleum (BP) estimates that the United States will run out of domestic supplies of natural gas by 2013 and become even more reliant on foreign sources-if they are available.
Making matters worse is that Canada and Mexico, America's main suppliers of gas, are also due to run out of natural gas by 2015 if BP's projections are accurate.
It is highly unlikely that the quantities of liquefied natural gas (LNG) that America needs could be transported by tankers to the United States from Russia, Algeria, Qatar or anywhere else.
What will happen in 2015 is anyone's guess.
The International Impact
America's over-consumption of energy is not solely a domestic problem. The United States won't be the only bad guy for long. The Europeans have kept consumption in check with heavy taxes (last May a gallon of gasoline in London cost $6.36, in Frankfurt it was $6.10 and in Oslo $6.99), consumer resistance to enormous SUVs and non-perpetually running air conditioning units. But China and India rest on the cusp of complete industrialization, and once that happens, the gloves will come off.
The simple truth is that the less energy Americans consume, the more there is to go around. Given the present rate of oil and gas consumption throughout the world, it is very likely that in less than a decade the United States will be engaged in a fierce world-wide struggle for hydrocarbon fuels.
In this struggle the United States will be facing very formidable opponents-China, Japan, Europe and India. Needless to say, these countries will also be competing against each other in a free-for-all.
As luck-and poorly conceived policies-would have it, all of America's future competitors for fuels enjoy a much higher popularity rating on Middle Eastern streets than the United States. What consequences this holds for future energy supplies are not that difficult to guess.
The Fake Choice -Maintaining Lifestyle or Reducing Consumption
American decision-makers claim that the country is faced with a difficult choice, or rather no choice at all; maintaining the present level of prosperity (by burning vast amounts of fuel) or suffering a severe economic turndown by lowering consumption.
This distorted picture is being presented to the public by leaders who refuse to admit that lifestyle and energy consumption are not always related.
According to recent polls, the American public supports energy conservation, among other measures, to prevent a global warming crisis.
However, while realizing that they have no viable alternative but to change the way they live, Americans nonetheless stubbornly refuse to give up an energy intensive lifestyle.
Fortune recently noted that:
Back in 2000, when gasoline was the cheapest liquid around, fuel economy ranked as the 29th most important attribute in buying a car. Today, when gas costs as much as $3.25 a gallon, good mileage still ranks only 22nd. Sound systems and convenience features rank higher as purchase considerations.
In fact consumption of gasoline is rising at an alarming rate. Why?
Part of the answer is that the public has never honestly been told what to expect in case of a drastic reduction of consumption. There has always been a lack of urgency in the energy debate, allowing the public to conclude that the coming crisis will not occur in their lifetime.
Instead of steering the country in the direction of a rational conservation program, some lawmakers continue to promote the patriotic, but futile, slogan of "energy self-sufficiency."
The truth is that America cannot return to energy self-sufficiency given its present levels of consumption. As for alternative fuels, they are indeed part of the solution, not as a means of achieving energy self-sufficiency, but as part of an orderly remake of the nation's lifestyle.
The End of a Romance
The major obstacle to such a remake is that the U.S. economy is overly dependent on the automobile industry, and any reckless and hasty attempt by the government to tinker with the basic mechanisms of this relationship could result in turmoil.
All the auto industry satellite businesses-the oil refining industry, car insurance companies, finance companies, roadside motels, filling stations, restaurants, shops, parts manufacturers, road repair companies, the advertising industry and countless others-employ millions of workers whose livelihoods depend on tens of millions of cars having enough fuel to travel on the nations highways.
For meaningful change to occur, a cutback in hydrocarbon fuel consumption is needed, but for this to succeed it will need the full cooperation of the auto industry.
The stance taken by American auto manufacturers, however, is not promising. In early June the CEOs of the big three U.S. carmakers argued for maintaining (or barely raising) the current mileage requirements for vehicles, saying that improving fuel efficiency would be prohibitively expensive.
For almost a quarter of a century, Detroit's car manufacturers were given a dispensation by Congress on raising gas mileage. Instead of taking this opportunity to design more fuel efficient models, they built low-mileage SUV's-making tons of money in the process.
Congress has the power to repeal the act which allowed automobile companies to classify SUVs as light trucks. The awful gas mileage associated with the SUV contributed to the nation's current gasoline crisis, yet did nothing to improve the life style of its citizens.
All it did, arguably, was allow some drivers to live out their fantasies of driving through the Australian outback while actually on their way to the neighborhood CVS Pharmacy to buy valium and chocolate chip cookies.