Skip to: Content
Skip to: Site Navigation
Skip to: Search


The Monitor's View

What to do when oil hits $100 a barrel

Congress must be bolder in forcing oil substitutes for transportation. It did that for electric utilities.

January 4, 2008



For the first time, oil prices have nosed above $100 a barrel. Gasoline is higher by 73 cents a gallon from a year ago. In past decades, such price jumps brought a knee-jerk reaction to conserve or to find more oil. The world has done both. Yet prices continue to rise. So what's left to do?

Skip to next paragraph

Congress tried to mandate more conservation last month when it insisted on better fuel efficiency in automobiles (from 25 to 35 miles per gallon by 2020). But some evidence suggests that better gas mileage creates an incentive for people to drive more, or even faster.

Consumers have also seen fuel prices go down for long stretches – just nine years ago, oil was at $10.35 a barrel. Making expensive investments in conservation or alternative transportation makes little sense to many. Ever since the oil shocks of the 1970s that saw prices rise to levels well above costs of production, Saudi Arabia has often jerked around prices to keep the world addicted to oil.

And in recent years, large, poor countries with a growing middle class, such as China, have jumped into the car culture. That has pushed up demand to the point that OPEC and the private oil industry can barely meet it. New oil fields are more difficult to find and to tap, and much of the oil is controlled by authoritarian governments that aren't very efficient at exploiting it.

So thin are supplies that market concerns over interruptions now account for much of today's higher prices. The latest upswings, for instance, were caused by tensions in Nigeria and Pakistan, bad weather in Mexico, and China's refineries running full tilt.

Reliance on a car for daily life is seen as so essential that people would rather absorb the extra cost than do without a car or seek alternative transportation. By some estimates, gasoline prices would need to rise fourfold to begin to see a significant drop in oil consumption.

Today, transportation accounts for most oil use. To substitute different fuels for transport would take bold government action. Battery-driven vehicles are possible for many modes of transport, but are still limited because of few breakthroughs in that technology. Congress put a big down payment on biofuels in last month's energy bill, although it's still pushing corn-based ethanol, when less-energy-intensive biofuels would be better.

But such steps are short of the massive oil-substitution program needed to wean people off oil-based transport.

Brazil has moved quickly since 2003 to become independent of oil imports by forcing the use of cane ethanol for vehicles. That may not be the exact course for the US to follow, but the precedent is there for bold action in oil substitution.

In 1978, Congress all but ordered US electric utilities to end their oil use. As a result, the percentage of electric power produced from oil dropped from 17 percent to 3 percent. Can the same be done in transportation? The choices are out there for other ways to run vehicles: electricity, methanol, hydrogen, ethanol, etc.

For the sake of the economy, national security, and global warming, Congress must now use this highly visible crossing into triple-digit prices for oil – symbolic though it may be – to make the hard choices for an oil-substitution program in transportation.

Permissions