By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa
The question of the year is “how to make Americans and Europeans consume less oil, without drilling, digging and laying pipelines in a rush, and most importantly, without sliding back into recessions but by growing their economies?”
Oil prices are near $100-125 a transatlantic barrel, once again, 5 years after the summer of 2007. Year over year, January 2011 to January 2012, the Bureau of Labor Statistics (BLS) consumer price index (CPI-Urban where most people live) has risen by 3.2.
The Federal Reserve and any advanced economy can tolerate at most 5 per cent rise in consumer prices, food and energy included which are not that volatile anymore without tax changes, government subsidies (which distort prices), economic fluctuations and geopolitics.
Iran
P5+1 (the 5 permanent members of the UN Security Council, United States, United Kingdom, France, Russia, China + Germany) did not want Iran’s oil in 6 months. Iran preemptively imposed that sanction upon itself. It exercised its sovereignty.
The Arab League, as much as they may disagree with Iran’s brinkmanship with the West, do not want another armed conflict in the region between Israel supported by the United States on Palestine (another P5 split) and Iran.
Ahmadinejad of the 1979-Khomeini-revolution-triggered-oil shock has now unilaterally imposed oil embargo on the West leading to a rise in global oil prices, unless other members of the Organization of Petroleum Exporting Countries (OPEC) are willing to offset Ahmadinejad’s withdrawal from the global oil markets by raising production (note that Iran is a member of OPEC).
Short term maneuvering of OPEC, a staple of US policy since the end of the Iranian hostage crisis in 1981 at the expense of energy alternatives and self-reliance, is unwise because it does not solve the root cause of America’s economic problems in this election year, which are here and now, clear and present, in the present continuous tense since Operation Independence of Richard Nixon in 1973.
Doing the same thing over again to arm wrestle OPEC for ensuring US oil imports from Saudi Arabia and readily expecting an eager response when Russia and China voted against the United States on the P5 is akin to running a fool’s errand, besides, of course, the more than offsetting demand for OPEC oil in Asia if the United States is not supplied.
The price of oil will only rise unless some parts of the world consume it less.
Consuming less oil – the speculative part of its price not contributing as much to the overall price of the commodity, given the economic structure of the world economy as a whole which is, on net, more dependent on oil than less despite all the talk about climate change and clean energy, as majors league players such as the Exxon-Mobil and Chevron-Texaco or niche players such as T. Boone Pickens who have been in the oil and gas business since the days of the twin shocks of the 1970s well understand – implies some parts of the world must grow slower or slide into recessions. Most likely, this means United States (US) and European Union (EU), not China and India, will be taking a cold shower once again.
Alaskan National Wild Life Refuge or ANWR, Offshore and Canadian tar sands are necessary, and these should still happen in parallel to be able to readily tap into American domestic oil supplies as the nation’s Natural Strategic Petroleum Reserve (NSPR) without sacrificing the century old spirit of conservation since Teddy Roosevelt.
Tesla Motors, Better Place And The Not So Coming Crash Of 2012
Similar to the cash for clunkers program in Summer 2009, US and EU governments can implement a year long program which will have six components:
1. Facilitate the merger of General Motors (GM) into Tesla Motors for retooling all GM plants in the United States for producing only electric vehicles (EV1 was produced by GM in the 1990s) across all vehicle lines (no plug-in hybrids) for replacing all vehicles on US roads by legislation to zero auto manufacturer corporate taxes for 2012 and 2013 and mandating consumer swaps with their dealers in the same vehicle classes.
2. Eliminate excise taxes on gasoline to lower the price to keep up consumption in parallel until the swaps can take place.
3. Eliminate all tax subsidies for the operations of US multinational oil corporations (MNCs) anywhere in the world.
4. US and EU have better roadways to augment gas stations with battery swapping facilities as proposed by Better Place (American power grid transmits 60 per cent of electricity produced by coal and natural gas and this will not change in the next two years to alternatives. Oil is not used in power production.) The path From THIS to end THIS is Better Place.
6. Permit telecommuting as default in the place of transportation subsidies, given that the US economy is more than 50 per cent services.
The largest consumers of oil will have eliminated the slick from their roads in 2 years, very significantly raising the allocative efficiency of oil by eliminating oil entirely, except in the airline industry, from the transportation sectors of US and EU. Not a bad outcome for all that money stashed under Wall Street mattresses whose purpose it is to save the world from another downturn.
Epilogue: Benjamin Franklin, October 19, 1752
(Source: http://students.cis.uab.edu/mrb35114/Labs/Franklin3.html)
Detroit Electric had built the electric car before there was a good road to speak of. So can the electric car once again change the way Americans live.
