It's one of the most enduring perceptions about the U.S.: America is a giant, slobbering energy hog. Insulated by wealth and low gas taxes, Americans steadfastly refuse to alter their consumption of oil and gas in response to higher prices. What's more, America's insatiable appetite for oil keeps prices on the global market aloft.
Compared to economies such as Europe and Japan, which have higher gas taxes, smaller cars and more mass transit, that may be true. But in recent years, the U.S. has shown an ability and willingness to alter consumption in the face of higher prices. Alas, conservation over here won't necessarily lead to lower prices over there. For there are plenty of countries whose Hummer-like oil consumption habits make the U.S. look like a Prius. And a look at their habits suggests the high price of oil may prove resistant to whatever action the U.S. takes on conservation, production or taxation.
Take Saudi Arabia. As the world's largest producer of oil, it's one of the chief beneficiaries of $100-per-barrel oil. But as this article in the Financial Times notes, the Saudi regime buys legitimacy in part through massively subsidizing electricity (often produced by burning oil) and gasoline. "In the desert outside Riyadh, young Saudis spend entire nights drag racing," the FT notes. "There are few other options for entertainment in the kingdom, and such car races are an economical way of letting off steam." Drag-racing is economical because gas costs about 45 cents per gallon. And so with a population of about 30 million, Saudi Arabia consumes about 3.2 million barrels per day, a good chunk of its 8.8 million barrel-per-day production. Because the country's growing population has no incentive or desire to cut down on use, consumption is growing rapidly. An official interviewed by the FT fretted that if consumption patterns don't change, Saudi Arabia in 2028 will have to devote almost all of its current production level to domestic use.
By contrast, the U.S. economy, where a population of about 300 million uses about 19 million barrels of oil per day, is far less energy-intensive than Saudi Arabia's — and it grows less so each year. Unlike Europe, the U.S. has a lot of room for improvement on the efficiency front. With every passing month, the U.S. car fleet gets marginally more fuel-efficient, and companies such as UPS are cutting fuel costs by, for example, using technology to eliminate left turns in its delivery routes.
U.S. crude oil consumption fell in 2009, to 18.77 million barrels per day from 19.5 million barrels per day in 2008. Consumption rose in 2010, but the International Energy Agency projects oil consumption in the U.S. will decline in 2011, with gasoline use falling 1.5 percent: "Gasoline demand in the U.S. will average 8.9 million barrels per day in 2011, down 1.5% from the previous year." The chart accompanying this article in the Financial Times projects 2011 demand will drop by 194,000 barrels per day in the U.S. in 2011, compared with 105,000 per day in Europe.
The problem is that people in other parts of the world with different incentives and different costs and perspective are using more — much more. It's not just Saudi Arabia. The same chart shows daily oil consumption for 2011 rising by 1.05 million barrels in Asia, 255,000 in the Middle East and 216,000 in Latin America. In other words, the reduced consumption of nearly 300,000 barrels per day in the U.S. and Europe is easily outweighed by higher consumption of 1.582 million barrels per day in the rest of the world.
The upshot: Reduced U.S. consumption can help take the edge off energy prices, but it won't make much of a dent in them. And were the U.S. to increase production significantly, most of the excess would simply go into a thirst global market. It wouldn't be preserved for domestic use. As has been shown over the past two years, the best way to insulate our pocketbooks and economy from the high price of oil is to figure out how to use less.
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