In announcing the closure of General Motors Corporation’s Janesville assembly plant June 3, Tony Clarke, President of GM North America called the decline in SUV sales “startling.”
I almost threw up.
What’s worse, the Milwaukee Journal Sentinel reported it as just that, startling, as if people should be stunned SUV sales are dropping like the price of Lake Delton shorefront. The report was written as if the rise in oil and gas prices came out of nowhere, just as the GM execs would have us believe.
But of course, none of that is true. I’m hardly an energy expert, but even a cursory reading of trends over the last few years gave us a good indication of where energy prices, and oil in particular, were heading. Geologists began coming to a consensus that all the oil that could be easily (read, cheaply) extracted from the earth had been already, and that it was going to become increasingly expensive to do so.
Couple that undeniable reality with the coming of India and China (and their 2 billion people) to the party of economic powerhouses, with economies growing three times the rate of ours, and the only startling aspect was how obvious the coming rise in prices was.
So why the surprise?
We spent the last 30 years lowering the fuel economy of the nation’s vehicle fleet, with gas-guzzling Hummers and SUVs touted as symbols of patriotism (there are few pictures more disingenuous and ill-informed than a “Support Our Troops” ribbon stuck on a Hummer or SUV getting 12 mpg).
How can our politicians act shocked? How much more obvious evidence could they have chosen to ignore when they refused to mandate greater fuel efficiency from Detroit? Mr. McCain and Mrs. Clinton both supported a gas tax holiday in April, and other representatives have proposed a windfall profits tax, as if that would have meaningful impact on prices.
Joe Public is allowed to whine, but we elect our leaders to be pro-active, to address problems before they arise.
So if not proposing a gas tax holiday, what should Congress be doing? For starters they could start shouting the following instructions:
• Drive less and drive fuel-efficient cars if you must.
• Design better towns and cities centered on walkable cores where the emphasis is on people, not vehicles.
• Propose a suburban tax? No, not on the vehicles, but on living in the suburbs, to encourage people not to live in developments that only promote further dependence on cars and discourage further sprawl.
• How about a tax credit for those who drive 6,000 miles a year or fewer?
• Finally, here’s one sure to be popular – increase the gas tax! You want to see new technology in a hurry, raise the tax another dollar. Thomas Friedman of the New York times proposed a $2 gas tax four years ago, with the expectation it would raise prices enough to get Americans to change driving habits, demand more fuel-efficient cars, and spur Detroit to produce them and not lose their business to the Japanese.
Turns out he was pretty close on the magic number for changing habits and waking up Detroit, and if we had gotten here three, five, or ten years ago, maybe the American automakers wouldn’t be desperately scrambling to stay relevant.
For decades Detroit lobbied against increasing fuel-efficiency standards and swore the technology wasn’t there to do so. Then Toyota started selling the Prius, gas prices skyrocketed, and suddenly hybrids started flying onto our roads.
Congress let the automakers get away with the implausible argument that in the midst of the most rapid technological acceleration in history, the one thing human minds couldn’t improve upon was fuel-efficiency.
Governor Jim Doyle said he feels betrayed because the state gave GM $10 million to refurbish the Janesville plant a few years ago. Hey Jim, where was your vision? How did your administration not see that the SUV was doomed and tie the gift to a commitment to converting the factory to hybrid production, or the building of one in Wisconsin? Or just not give them the money and instead stick it into renewable energy?
Jim Doyle, Russ Feingold, Herb Kohl, Garey Bies, Mark Green, Hillary Clinton, George W. Bush – where have you been on this?
We should not let our representatives play dumb on this issue, bribing us with a few pennies savings at the pump. We directed our nation’s focus and resources into war at a time when we should have been focused on adjusting to a world in which the European Union, India, and China would be larger players than the United States. We debated who was the bigger patriot when we should have been debating how to transform into a sustainable society and corner the burgeoning market of renewable technologies.
And quit looking for a quick fix from Congress, because there isn’t one. They need to work on a plan, not a fix.
Boone Pickens, CEO of BP Capitol and an oilman his whole life, described the situation simply in a CNBC interview recently.
“Eighty-five million barrels [of oil] a day is all the world can produce,” he said. Meanwhile, “demand is 87 million. It’s that simple…it’s just a fact of supply and demand.”
Many pro-oil folks say we simply need to ramp up production, but it’s not so easy. Pickens figures that no later than 2006 the world reached Peak Oil, the point at which half the oil that ever existed had been extracted. That means it’s only going to get more difficult and expensive to get at the rest. Oil production, after rising for a century, has plateaued since 2004 at 85 million barrels per day.
“The Saudi’s claim they have more oil, but they don’t,” Pickens said. And the claim we can just drill more to lower prices is a fraud.
As Tom Saler said in a recent column in the Milwaukee Journal Sentinel “the argument that all would be well if only oil companies were allowed to drill anywhere and everywhere seems rooted in wishful thinking.”
The United States Energy Information Administration said offshore drilling would take decades to impact prices, and as those decades passed, India and China would be increasing demand at a pace far quicker than the most wishful estimates for production increases.
In short, industrialization in Asia means that cheap oil is history.
So yes, our ire should be directed at Congress, but not for failing to bring gas prices down today, but for their decades of negligence.