The Oil Economy Outrage

This post begins by exploring the relationship between the U.S. economy and worldwide oil consumption, and then explores the environmental implications of how we measure world economies today.

I believe this country is in a recession. I believe that the media’s effective dodging of the issue out of fear is only worsening the problem. And I believe it is going to get worse, and spread around the world. Why? For those of you who don’t realize, oil is the basis for our economy. It takes fossil fuel to create about 75% of the energy that runs everything. The mining equipment for ore runs on oil. The chainsaw to cut timber runs on oil. Machines running on gasoline plant and harvest the food you eat and the cotton you wear. Then, it takes more energy (provided by fossil fuels) to turn raw goods into the manufactured products we hold so dear. Fossil fuels ship these goods to the store where you buy them, and in most cases gasoline brings the items to your home. Finally, more often than not, it takes energy for you to enjoy these products. (Playing your new radio, watching the new plasma TV, running your new washer and dryer, etc.) Oh, and by the way, plastics are basically made of oil. In short, there is not a step in the creation of goods in which fossil fuel does not play a vital role.

What does this have to do with a recession? Fossil fuels are not a renewable resource. What we have on the planet right now is all we are ever going to have;* we are not getting any more. Now, I’m sure you studied supply and demand in school: when the supply of a good (fossil fuels) is decreasing (from powering our lives), and the demand is increasing (i.e. population expansion and industrialization in developing countries) the price is bound to go up. We’re in a recession? No wonder! We based our entire economy on a commodity that, even if the price dips for a short time, is destined to continue to become more and more expensive until we run out. What’s the answer? Increased energy efficiency and the expansion of renewable energy technology. Use less gas, people!

If we want to continue to have healthy and sustainable growth, we need to move away from an economy based on a resource that will run out. It is hard to put a definite answer on how long we have until fossil fuels effectively run out, but regardless of the time frame, we know it will happen eventually.** I do not see why the time frame should even matter. If we do not change over our economy now, we will be leaving the problem to our children, or at the least our grandchildren. Plus, making changes now while we have the benefit of making a gradual and planned transition will be significantly easier and cheaper than it will be in a few decades when it becomes a crisis.

Another reason to use less energy: every time you fill up your car or turn on a light, you are sending your hard earned money to the pocket of some oil company CEO. Just today an article was published reporting on Congress’s recent meeting with top oil execs. What transpired? Oil execs (who made $123 billion*** last year) deny that they are responsible for gas prices being so high. That is partially true. As previously mentioned, gas prices will consistently rise in the future. However, the billions of dollars in tax breaks given to oil companies also have something to do with gas prices. These tax breaks give the oil companies an artificial advantage over renewable energy producers. What’s to be done? Use less gas! The oil lobby is strong, and not filling up on Tuesday or Wednesday, or going to Shell vs. Mobile or Exxon vs. BP is not going to make them care about what the cost of gas is doing to American families. Doing any errands you can on foot or by bike, or buying more efficient appliances and vehicles is the most effective way to bring about change. Turning off lights that aren’t in use, or using better light bulbs will make a difference. Building your own solar generator for as little as $300 and using it to charge your laptop and cell phones will make a difference. I offer this from a purely economical stance; benefit to the environment, decrease of carbon emissions and healthier air to breathe aside. Take a stand, and stop the rich from getting richer.

While we’re on the topic, I would also like to question for a moment the idea that our GDP even needs to increase. Here in the U.S., we’ve been taught for years that economic growth, and an increase in GDP is not only a good thing, but absolutely necessary for us to continue to improve our quality of life and maintain our standard of living. We have been raised to listen to the news, hear that our GDP is up however many percentage points from the previous year, and thank our wonderful politicians and businessmen for bringing economic growth.

Now, GDP is not just a tool for measuring the “strength” of an economy. GDP is the estimated value of all goods and services produced over a period of time, most often a calendar year. That means that when the GDP goes up, it is because we have produced more goods and services than we did before. Do you recognize the environmental implications of this? If we produce more goods (and all services depend to some extent on goods) then we are using more stuff than the year before. Each year we are extracting more from the earth than the year before, and creating more trash. Of course, the environmental impact does not affect GDP for years or even generations. But are we so arrogant as to feel that we are entitled to extract everything we can from the planet, leaving the consequences to future generations?

Now, it may sound radical, but what if…. our GDP stayed exactly the same every year. Don’t panic! Most Americans (and other global citizens) turn a bit anxious and queasy at this proposition, but hear me out. If GDP is the same, and each year we produce the same amount of stuff as the year before, and items are recycled or safely returned to the earth, we have no global footprint. We live in harmony with the earth, and our economy acts more like a biological system. If efficiency of energy production, use, and recycling of materials increases, it is possible to even increase our standard of living while our GDP may stay the same.

Another flaw of GDP is the way it is currently calculated. Say a company manufactures a product, any product will do. The amount of product produced and sold counts towards the GDP. Now, say the factory has an accident, and a few thousand gallons of gasoline or some toxic chemical are released into the stream adjacent to the factory. The dollars that the factory spends on cleaning up the spill are also counted towards the GDP. Another example is a company that manufactures a faulty device that results in injury. The sale of the device counts towards GDP, as well as the medical costs of the injured. GDP does not distinguish between positive or negative goods and services. GDP should be calculated differently, so that dollars spent on fixing problems are subtracted from GDP. This has been proposed by many economists, and they suggest redefining GDP and changing its name to Genuine Progress Indicator (GPI).

For More Information:
Extremely important and influential (and unbiased) article “The End of Cheap Oil” http://66.102.1.104/scholar?hl=en&lr=&q=cache:76wKCOFm9MkJ:www.nyswda.org/LegPosition/Documents/SAmerican.pdf
Excellent link on the economics of Oil: http://www.lifeaftertheoilcrash.net/Index.html
Good site discussing how long we have till we run out of fossil fuel: http://www.umich.edu/~gs265/society/fossilfuels.htm
Herman Daly’s seminal work on no-growth economies: http://dieoff.org/page88.htm
A scientist’s musings on the no-growth economy: http://scitizen.com/screens/blogPage/viewBlog/sw_viewBlog.php?idTheme=14&idContribution=1158
More on re-defining GDP and GPI: http://www.rprogress.org/sustainability_indicators/genuine_progress_indicator.htm
*Unless we perfect space travel, and go to another planet that has carbon-based life, and find that that life has not used up all their fossil fuels too. I mean it’s possible…
**Fossil fuels will not literally run out in the same sense that your car will run out of gas and stall. They will simply decrease in volume and increase in price to such a degree that they will effectively run out. At that point, it will be costly and difficult to switch over technology. If we can change the foundation of our economy now, we will be significantly better off in the long run.
***123 billion? Do you have any idea how much that is? To put it in perspective, it has been estimated that there are 100 billion STARS IN OUR GALAXY. A billion M&Ms candies laid out touching but not overlapping would cover over 6 ½ acres. (My own calculation.)