Tuesday, May 25, 2004

Boycotting the oil companies is pretty naive, since one has to buy it eventually anyway. A better far better idea (IMHO) is to fire the current crop of politicians whose endless myopia has contributed so heavily to the current mess.

Then again, even politicians & society had done a better job on energy issues, we'd probably be undergoing a price spike up to $1.50, and complaining just has hard......

I've been looking up information on gasoline prices. First point: after you adjust for inflation, todays gasoline prices are no big deal. The long term average since 1919 is about $2/gallon (adjusted for inflation). Here's an interesting graph (I hope this comes through!):

Another feature of gas prices is that the overall trend is downward (after adjusting for inflation), as production has become more efficient. Also, there is a trend upward since 1997.

What is not obvious here is that US production peaked around 1978 (if I remember right), resulting in increasing dependance on imported oil since then. With their increasing market power, OPEC muscled up oil prices in the 70's & 80',s resulting in the 1981 peak oil price (I sure remember paying $1.50 a gallon in '81--which is equivalent to nearly $3/gallon in today's dollars).

The other thing impacting the graph is the jump in automotive fuel efficiency that was legislated in the late 70's. Consequently, the average fuel efficiency of new cars peaked at 22.1mpg in 1987. As those fuel efficient cars replaced older, less efficient cars, demand for oil was greatly reduced. Improved efficiencies in supply contributed as well, but the bottom line is that without the fuel efficiency gains, our demand for oil would have been much higher, and (by the law of supply & demand), so would gasoline prices.

Obvious on the graph is an increasing trend in fuel price over the last few years. A big part of the problem there is that the fuel efficiency of new vehicles has fallen by 6% since 1987 (largely thanks to increased sales of light trucks & SUVs). Increasing demand = Increasing prices.

I figure that with our 2 drivers and 3 cars, fuel efficiency standards save us at least $2000 to $4000 per year (it's hard to say, because it's hard to know how much fuel prices would be without the standards). The savings are both direct & indirect: direct saving is through buying less fuel, indirect saving is through lower prices for fuel due to the lower demand. Not to mention lower prices for heating oil, and the prices of things transported using oil.

With 90 million American households, the automotive fuel efficiency standards easily save the American economy more than $200 billion per year (that would be about 2% of GDP). (This also partially explains the booming economy in the 90's)

So, instead of boycotting oil companies, a far better idea would be to fire the current crop of politicians who have been stonewalling any increases (or reforms) of fuel efficiency standards. Congress, in their infinitesimal wisdom, has even forbid the energy department from studying the problem of improving (or reforming) automotive fuel efficiency standards.

The National Academy's of Sciences recently published a report (I have a draft copy) on automotive fuel efficiency standards. Current standards save about 2.8 million barrels of oil per day, and with current technology, fuel efficiency can be increased by about 30-40%.

What does this mean? Well, the Arctic National Wildlife Reserve might yield about 1 million barrels of oil per day, or about 5% of US energy needs. (Or ZERO. The amount of oil in ANWR is somewhat a moot point, because it has to come through the trans-Alaska pipeline, which limits capacity to about 1 million barrels/day. The pipeline is also an 800 mile long terrorist target, and if Saudi Arabia ever falls to the fundamentalists.......). Since US cars & trucks burn about 8 million barrels/day, every 12.5% increase in fuel efficiency is worth about one ANWR.

My congressman thinks the presidents plan to save "6 billion gallons of gas over the next 5 years" is great. I think he takes his electorate for fools, since no one uses such large numbers of such small units unless they are trying to deceive. Translated, it comes down to an average of about 10 gallons per year per vehicle, and is less than a 1% increase in fuel efficiency.

Here's a Washington Post editorial on the gasoline prices which expresses some of my views (namely, that the lust for low fuel prices has been pretty darn foolish).


And another:


These are editorials, and hence are more opinion than journalism. But they seem to cover the bases.

Here's an another excellent article on energy issues. It's a bit old, but still timely. The author's contention is that energy efficiency would play a major role in shifting US energy use. As a statistician, nothing impresses me like accurate predictions, and the 1st graph is particularly impressive since it shows the accuracy of predictions the author made in 1976.


At any rate, I'm already boycotting Exxon oil because of their stance on climate change. They are trying the same strategy that the tobacco companies did about 20 years ago, by attacking the science and the scientists. It's crazy when you think about it.

And I'm expecting oil prices to drop some after awhile, but to show a long term increase. Existing cheap oil reserves are being depleted, and potential future oil reserves are either high cost or high risk (like Saudi Arabia & Azerbajan (sic)).

such are my thoughts & rantings.... I'll post this on my weblog for posterity.

-----Original Message-----
Sent: Thursday, May 20, 2004 1:21 PM
Subject: FW: try anything

>Subject: FW: try anything
>Okay everyone, I don't know if this is just a sneaky ploy from one of their
>competitors or if this is real. All I know is I drive an SUV and I'm in the
>market for an economy car because gas is killin' me. I am willing to try
>anything that might work


> I hear we are going to hit close to $3.00 a gallon by the summer.

> Want gasoline prices to come down? We need to take some intelligent,
> united action. Phillip Hollsworth, offered this good idea: This makes
> MUCH MORE SENSE than the "don't buy gas on a certain day" campaign that
>was going around last April or May! The oil companies just laughed at that
>because they knew we wouldn't continue to "hurt" ourselves by refusing
>to buy gas.

>It was more of an inconvenience to us than it was a problem for them.
> BUT, whoever thought of this idea, has come up with a plan that can
>really work. Please read it and joi! n with us!

> By now you're probably thinking gasoline priced at about $1.50 is super

>Me too! It is currently $1.97 for regular unleaded in my town.

> Now that the oil companies and the OPEC nations have conditioned us to
> think that the cost of a gallon of gas is CHEAP at $1.50 - $1.75, we need
> to take aggressive action to teach them that BUYERS control the
> marketplace....not sellers With the price of gasoline going up more each
> day, we consumers need to take action. The only way we are going to
>see the price of gas come down is if we hit someone in the pocketbook by
>not purchasing their gas! And we can do that WITHOUT hurting ourselves.


> Since we all rely on our cars, we can't just stop buying gas. But, we
>CAN have an impact on gas prices if we all act together to force a price

> Here's the idea: For the rest of this year, DON'T purchase ANY
> gasoline from the two biggest companies (which now are one), EXXON and
> MOBIL. If they are not selling any gas, they will be inclined to reduce
> their prices. If they reduce their prices, the other companies will have
> to follow suit. But to have an impact, we need to reach literally millions
> of Exxon and Mobil gas buyers.


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