Saturday, December 27, 2008

The Path to Lower Oil Demand and Gas Prices: A Green Vehicle Revolution Is a Much Better Route Than a Global Financial Crisis

Would a dramatic reduction in demand for oil caused by a green vehicle revolution cause the same type of reduction in oil prices that the global financial crisis has?

Overall, I don't see why not.

In fact, I'm guessing that the eye-opening impact of the financial crisis on oil demand and prices is exactly what major oil producers are afraid of should the world experience a green vehicle revolution.

Think about all the benefits that our society would receive from an oil demand-destroying green vehicle revolution that lowers gas prices via efficient, clean technologies rather than via a global financial crisis:

  • Broad economic stimulus beyond the oil sector: the combination of highly efficient clean vehicles and low gas prices will free up untold fortunes of peoples' gasoline money to be spent on all things non-energy, providing a green injection of economic stimulus far and wide. Previously, I noted that:
    Switching from a car that gets 20 mpg to one that gets 50 mpg will save the average American nearly $1,100/year in gas costs at $3/gallon (given the average distance Americans drive per year – about 12,000 miles; savings rise considerably as gas prices and miles driven go up). That savings is nearly two times the cash provided to us by our 2008 stimulus checks! Multiply that by the 112 million households in the U.S. alone, and that’s $123.2 billion/year that American households are now spending on gas that with a mandate for more efficient vehicles, they would have to spend on…everything else.
    Even at currently lower gas prices, a Clean Vehicle Revolution promises to be a significant stimulative force in our economy.

  • Greater economic stability as we break society free from the whims of increasingly unstable oil markets: I don't know anybody who wouldn't be thrilled to see more stability and predictability in their energy bills. The volatility of gas and other energy prices crimps many a budget -- from families to businesses to whole governments. Another -- and major -- economic benefit is that the U.S. will no longer need to spend untold $billions on military operations to secure oil supplies in the world's most unstable regions -- which cost us dearly both economically and politically. A Clean Vehicle Revolution promises to be a welcome stabilizing force.
  • Massive environmental benefits - climate change and beyond. Not only will global heating carbon emissions be dramatically slashed, but so will emissions of other pollutants that have negative -- and expensive -- impacts on human well-being, like particulates, ground-level ozone, and acid rain-causing pollution. As we've noted previously, these environmental impacts of vehicle pollution inflict untold $billions in health-related, agricultural, and quality of life damages upon families and businesses each year. A Clean Vehicle Revolution will be healthy for our environment, and as a result, for our families and businesses.
  • Significant security benefits will result from cutting off the flow of dollars from our gas and energy purchases that currently end up funding harmful agendas of countries that don't like us. Reports are that the Saudis, Iranians, and Russians -- countries that either showed increasing military boldness as oil prices rose (e.g., Russia and Iran), or are breeding and financing terrorism (e.g., Iran and Saudi Arabia) -- are struggling with their first budget deficits in years. That means less money to spend on military adventurism and support for terrorist groups. Of course, the root causes of terrorism, such as poverty and the associated lack of education and social services, will still need to be addressed.
  • Obviously, there are many more environmental, economic, security, and quality of life benefits that we will realize via a green vehicle revolution. You get the picture. Please feel free to contribute more in the comments below!
A Temporary Window of Opportunity - We Need to Act Now and Act BIG

Unfortunately, unless we act now to implement a green vehicle revolution at World War II mobilization-level speed, the low gas prices that we're currently enjoying will be painfully short lived. In fact, as soon as the economy starts to recover, demand for oil will recover with it, and growth will hit what I call "The Petroleum Ceiling". This is especially likely now because low oil prices are slowing the development of new production projects. Thus, once the recovery begins, oil supplies won't be able to keep up with rising demand, and there is a real danger that we will experience a far worse price spike than this past summer's. Should this happen, it could potentially plunge us into a much more dire economic crisis than the one we're currently experiencing -- one rooted in Peak Oil.

The good news: we've learned this year just how quickly demand destruction can lower oil and gas prices. Now, let's make this demand destruction permanent by implementing a historic green vehicle revolution that stands to become the type of victory story that our history texts tell for generations.

America can lead the way by devising a smart Auto Industry Bailout that propels Detroit into the forefront of a new age of efficient, green vehicles. The result will be both a psychological boost that helps lift America out of our recessionary malaise, and a broad economic boost as the proliferation of next-generation vehicles cuts our energy costs and inspires the creation of whole new sectors of supporting industries.

Jonathan L. Gelbard, Ph.D. is a conservation biologist and communications expert. He is the Executive Director of the Conservation Value Institute and the National Sustainability Producer of the Green Apple Festival.

No comments:

Post a Comment