In part one of this series of posts, I explained that I am against our government intervening with the rising prices at the pump. But, that isn’t my main point. I really believe that high energy prices will be beneficial for America.
Before I get started with this line of thought, let me address a couple of things that have come from my first post. I’ve received some input that our government is subsidizing the oil industry. I did some web research, and I couldn’t find anything conclusive. If its true that oil companies are receiving money to help offset the expense of pursuing new oil, then that should stop immediately. Those funds should be used for something else, maybe to research alternative energy.
Now on to my main point. First, understand that we are the third largest population in the world. China is the largest, India is second, and then the United States. In fact, India’s population is almost four times greater than ours. To put that another way, if our population were to triple in size, we would still be number three on this list.
Next, know that the United States currently consumes about a quarter of the oil produced in the world. The second place is China, consuming less than a tenth. In fact, if you combined the oil consumption of China, Japan and Russia they would still be less than America’s. This does not take into account our consumption of coal or natural gas, though we’re also high on those lists.
We are comparatively small in the world population, yet consume more energy than any other country. Putting all of this together, if energy prices increase, we will feel the pinch more than other countries. If we’re going to get all lathered up about gas prices, to the extent that our government is considering intervening, then it just makes sense for us to also consider cutting back on how much we use.
My source for this data is GeoHive. I did find the same information on other sites, but this site in particular had it available in a very concise way. Before you start questioning the accuracy of my numbers, understand that I am only concerned with the magnitude of the ratios. In my mind, my argument would be equally valid if we were twice our size and consumed half as much oil as we do.
This is where I think high energy costs become an asset to our economy. We’ve all felt the pain at the pump as we fill up our cars and trucks. But, I believe this is going to become even more expensive for us.
Until this point businesses have absorbed their fuel costs. The various products we use on a daily basis have not increased in price, though the cost of getting those products to us has increased along with the higher fuel costs. Companies cannot cover these costs indefinitely, at some point this expense is going to be passed on to the consumer via higher prices.
For the sake of clarity, I’m not saying that the sky is falling. I don’t believe that this is doomsday, or that America is on the brink of financial mayhem. But, I DO think that America’s market for large SUV’s and four door pickups is waning, and the market for smaller, more economical models is increasing.
Detroit has been putting out large SUV’s and four door pickups for years now. And I certainly don’t mean for that to be an indictment on the manufacturers, because the public has wanted them. There’s a good reason why long time car makers like Volvo, Honda, Volkswagen and Porsche have added SUV’s to their lineup.
European and Asian countries have been dealing with high energy costs for years now, so their auto makers have a leg up on America when it comes to efficient cars. Japanese auto makers are doing a great job of making hybrid vehicles appealing by offering both small economical and high end luxury models with this technology. European manufacturers are also contributing by advancing diesel technology. We’re behind in the game.
What is the solution that American auto makers have proposed? Slashing profits to draw buyers with incredible deals. Last year GM offered employee pricing to America for about six months. Dodge and Ford followed suit. For a while it was less expensive to buy a brand new car than it was to buy a two year old model.
This year several American auto makers are offering free gas for the first several months after you purchase the car. This can’t go on forever. At some point they’re going to have to start producing cars that people actually want, at full price, without incentives.
Meanwhile, what are Japanese engineers doing? Experimenting with everything from aircraft engines to organic soybeans, in an attempt to stay ahead of the competition in advancing new technology. According to one news source, Honda and Toyota each spend ~$3000 per vehicle in research. Compare this with GM’s budget of ~$1600 per vehicle. Heck, I’m pro-American cars, I drive a Ford, and this stat alone makes Honda more appealing to me.
How does all of this add up to benefits for America? First, energy costs drive the price of living in America up. Everything from gasoline to computers to groceries becomes more expensive as the fuel costs are factored into the final price of our goods.
Next, the average American citizen can either no longer afford, or no longer wants to spend $400 per month in fuel costs, so the market for economical cars increases. This prompts Detroit to start pursue new technologies for efficient cars.
If Detroit got behind the effort to conserve fuel, and started producing quality cars that are efficient, it would give America a boost. First, a company like Ford or Chevy would begin to pursue new technology. Engineers & scientists would be hired for research and development. Small companies would be formed to support this new technology, on both sides of the table.
On the front end, engineers would need to develop the technology, which involves a lot of research, done by teams of people. And, typically, smaller businesses play a supporting role via consulting. On the back end, mechanics would need to be trained on how to support the new technology. So this is a win, win, win. The auto makers win. The American public wins. And small business wins.
And in the process of all this research, as is typically the case, we’d come up with new technology apart from hybrids and fuel cells, which fosters more good business as that new technology advances to other auto makers. It trickles over to other industries like aviation and ship building.
America is very familiar with how to do this. We not only started, we set the standard for quality production aircraft. And computers. And internet technology. And copiers. And many others.
And the American public is the primary benefactor; better jobs, which means more incentives for education, more opportunities for small business to bloom, and long term economic viability.
$1.25 per gallon fuel is gone, and its not likely to come back. I personally don’t see this as a bad thing. But, we can’t afford to be lazy, we have to act. Until this point, American industry has done very little other than complain. If congress caps fuel costs, I believe it will ultimately cost us far more. I say its time to accept the fact that fuel costs are higher, and find ways of making it work for us. Lets embrace the change and search for sustainable solutions.