America's Oil Addiction: Tensions and Tradeoffs
President's Introduction: Oil Déjà Vu?
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We devote this issue of Resources to oil--the largest source of energy fueling American prosperity and indeed, the global economy. But the concentration of oil reserves in the Middle East has confounded our foreign policy, raising significant security risks, while projected growth in global consumption ensures that oil will continue to be the largest source of carbon dioxide (CO2) emissions for decades to come. The price of oil has powerful impacts on a host of investor decisions, consumer choices, and government actions. Recently, as gasoline moved toward $3 per gallon, a new fervor arose for fuel-efficient vehicles and substitutes for gasoline. Those of us who dealt with similar issues in the 1970s understand Yogi Berra's feeling of "déjà vu all over again." |
When prices spiked in 1973 and 1979, intense interest was exhibited in the market and in politics for reducing oil use. Most of this interest was dramatically undercut by the nosedive in prices in 1986. With the slide in prices in recent months, it remains to be seen whether the demand for conservation measures will be sustained and actually reduce our dependence on oil.
The conventional wisdom--at the moment--holds that oil prices will remain substantially higher than they were just two years ago. However, 30 years of hindsight suggest that great humility is warranted when predicting oil prices, much like predicting the direction of the stock market or election returns.
Three decades later, however, the challenges are considerably different. Higher oil prices have not had the predicted negative impact on our economy. China, India, and other developing nations are growing oil consumers.
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The adequacy of oil supply is subject to intense debate. Strong voices argue that current reserves are so overstated that production will soon be outpaced by demand. The more widely held view contends that while we are unlikely to find major new supplies of conventional or easy-to-get oil, reworking old fields, drilling for harder-to-get deepwater oil, and developing unconventional oil sources like tar sands and shale oil will meet world needs for the foreseeable future. But some of these sources require considerable energy to produce, resulting in even greater CO2 emissions. |
The most compelling difference from the 1970s: the intensifying scientific view that emissions of CO2 and other greenhouse gases must be controlled to slow global warming. Whether motivated by concerns about adequate supply, security, or climate change, the United States and other nations are once again searching for effective policies to reduce oil use over time. If any of these policies are to genuinely work, we will have to avoid the on-again, off-again pattern of the past.
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Senior Fellow Richard G. Newell's research and outreach efforts focus on the economic analysis of incentive-based policy, technological change, and the operation of markets. He served on the Council of Economic Advisers in 2005-2006 as senior economist for energy, environment, and resources. | ||
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In his nearly four decades at RFF, Senior Fellow Joel Darmstadter has conducted research centered on energy resources and policy. His recent work addresses issues of energy security, renewable resources, and climate change. Robert J. Weiner, the 2005-2006 Gilbert White Fellow at RFF, is professor of international business and international affairs at George Washington University. From 2001 to 2005, he was chairman of the university?s Department of International Business. He concurrently serves as Membre Associé, GREEN (Groupe de Recherche en Économie de l'Énergie et des Ressources Naturelles), Département d'economique, Université Laval, Québec. | ||
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An RFF scholar for almost 30 years, Senior Fellow Raymond J. Kopp is an expert on energy issues that go beyond power generation, with a focus on climate change and the important role played by fossil fuels. He studies the environmental aspects of energy policy and technological responses to environmental issues. | ||
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Joseph E. Aldy, a fellow at RFF, conducts research that addresses questions about climate change policy, mortality-risk valuation, energy subsidies to low-income households, and energy policy. From 1997 to 2000, he served on the staff of the Council of Economic Advisers, where he was responsible for an array of environmental and resources issues. | ||
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RFF Senior Fellow William A. Pizer is widely recognized for his research into the design of policies to address climate change risks caused by manmade emissions of greenhouse gases. In addition to his work at RFF, he is a senior economist at the National Commission on Energy Policy and served as senior economist at the Council of Economic Advisers in 2001-2002. | ||
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