Promising to cut gas prices in half? Associate Professor Dave Gammon takes to task a presidential hopeful for overlooking one half the equation.
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The following column appeared April 8, 2012, in the News & Record of Greensboro, N.C.
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More oil not the cure for our energy pains
By Dave Gammon – dgammon@elon.edu
If Newt Gingrich somehow regains momentum in his bid to reach the White House, we might credit his success to a recent promise to lower gasoline prices by half. All of us are feeling pinched at the pump right now. Imagine a president who could cook up a little economic magic.
But how would that magic work?
Analysts and pundits argue for various strategies to reduce gas prices, such as increased offshore drilling, tapping the U.S. strategic reserve of petroleum, and removing obstacles to the Keystone Pipeline project that would connect Canadian oil to the Gulf of Mexico.
Notice how all these arguments involve increasing the supply of oil. As we learn in Economics 101, increasing the supply of any product should reduce its price. And while any solution to combating higher gas prices ultimately requires us to consider supply, my concern is that we’re oversimplifying and overstating a complex problem. Just how much oil would be available to us simply by drilling from under our own feet?
In the 2011 Statistical Review of World Energy, a publication produced by the oil and gas giant BP using a variety of independent sources, I discovered precise measurements of the proved reserves of every major oil-producing country. You can access the report for free at bp.com/statisticalreview.
The numbers for the United States and Saudi Arabia illustrate the problem well. The Saudis have nearly nine times as much oil as we do (260 billion barrels versus 30 billion barrels). And the Statistical Review reported that Americans consume 19 million barrels of oil a day.
A simple math calculation using these numbers teaches us a scary truth about the fallacy of total reliance on domestic oil: If we “drill-baby-drilled” and sucked dry every known reserve of oil in the United States, we would completely run out of domestic oil in less than five years.
That is why we continue to maintain a cozy relationship with countries like Saudi Arabia. That is why we continue to tiptoe around unsavory, but oil-rich, political leaders like those in Iran and Venezuela.
The good news is that increasing supply is only one way to reduce gas prices at the pump. The other way, reducing demand, is feasible right now in the United States because of the incredible inefficiency with which we now consume oil and other forms of energy.
We live far from where we work. We drive vehicles with terrible gas mileage. We ship food and other products enormous distances. We poorly insulate our buildings. We maintain our buildings at exactly the same temperature all day and all year, regardless of whether people are inside.
These inefficiencies create tantalizing opportunities for businesses, individuals, and governments to reduce our energy consumption dramatically. Many of these changes could occur immediately, and the financial benefits would be felt right away. If enough people managed to reduce energy consumption dramatically, then gas prices would surely plummet.
Of course, many will resist the call to reduce energy consumption. Some feel it is an invitation for the government to invade our personal lives and tell us what products we can and cannot consume. Politicizing the issue, however, misses the larger point and promotes unnecessary conflict.
With or without the help of government, individuals and businesses can save money right now by improving energy efficiency. Doing so would protect us against future price increases and allow us to remain competitive in an uncertain, globally integrated world.
“Efficiency, baby, efficiency!” That’s the kind of slogan everyone should be eager to adopt — even Newt Gingrich.
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Elon University faculty with an interest in sharing their expertise with wider audiences are encouraged to contact Eric Townsend (etownsend4@elon.edu) in the Office of University Communications should they like assistance with prospective newspaper op/ed submissions.