Why Are Americans More Sensitive to Oil Price Surges?

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More than a decade ago, when Americans faced rising prices at the pump, policymakers developed a vision to discourage people from gas and oil: more efficient cars, more compact and walkable communities, more renewable energy.

“We have a serious problem,” warned George W. Bush. 2006 State of the Union address. “America is dependent on oil, which is often imported from unstable parts of the world.” It was a powerful statement for a Republican president with deep ties to the oil business.

Statements made by rising oil prices and eventually reached $100 per barrel For the first time in the country’s history, it marked the beginning of several years of remarkable bipartisan pressure to steer the nation away from oil and gas and better insulate Americans from price shocks in the global oil market.

Authorities took the first step increase in fuel economy standards for cars and trucks for decades. National oil conservation plans have gained broad support in Congress to address the serious threat of climate change as well as energy dependence. Public transport advocates take action”drain the pumpDays to call commuters to board the train and bus.

Then the country lost momentum. The surge in oil and gas production at home and the flood of cheap crude oil overseas ushered in an era of lower energy prices. Increasing supply rather than curbing demand has begun to determine America’s pressure for energy independence.

Drowning in fuel, Americans bought larger cars and homes that required more oil and gas to power themselves. Cities built more highways, public transport use declined, and suburbs sprung up.

Still, the country’s expansion of drilling over the past decade – making the US the world’s largest oil and gas producer – has ultimately left households vulnerable to volatile price fluctuations. American oil and gas companies say they don’t have controls Due to high prices at the pump, citing a combination of global factors such as the Covid pandemic, supply chain disruptions, and Russia’s invasion of Ukraine.

“No matter how often ‘drill, baby, drill’ is brought forward as a solution, its core economy is the United States,” said Michael Greenstone, professor of economics at the University of Chicago and director of the Energy Policy Institute. It is still a small share of global capacity and global production and therefore cannot affect the global price very much.”

During times of lower prices, Americans change their behavior, for example, by buying larger cars that use more gasoline. “And then, when these unexpected shocks happen, we’re much more exposed,” he said.

Conservation has now become a toxic concept in American politics. Petroleum industry groups energy-saving framework as a deprivation. With the midterm elections approaching and Republicans using high gas prices to attack President Biden’s policies, few Democrats talked about the idea of ​​reducing use. Mr. Biden himself, who took office pledging to take bold action on climate change, said: He urged oil companies to increase productionalthough administration officials argue that the US should move away from fossil fuels in the long run.

“If you can persuade Americans to save money, it’s likely to have a much more dramatic and immediate effect on lowering prices,” said Patrick De Haan, oil analyst at Boston-based company GasBuddy. Real-time fuel prices at gas stations in the United States.

“But asking Americans to consume less seems like a threat – many perceive it as a threat to their freedom in some way,” he said.

President Biden’s climate agenda has attempted to address some of the demand-related issues. This infrastructure law signed last year It includes the largest ever investment in public transport, with more than $100 billion for trains and buses over five years.

Still, the mentality was evident in the response to a question. 10-point plan to reduce oil use Measures such as the implementation of traffic-free Sundays in cities, published last month by the International Energy Agency, are recommended. The IEA claims that if advanced economies implement its 10 recommendations, they could reduce oil demand by 2.7 million barrels per day, on par with the expected global deficit in Russian oil, as buyers increasingly avoid it.

“The energy watchdog publishes ruthless advice,” he said in a Fortune article. “Don’t plan to leave the house on the weekends.”

Some economists say that increased domestic energy production on a macroeconomic scale has insulated the US economy from the worst effects of the crisis, for example by creating more jobs and profits in the oil and gas sector. Compared to Western Europe, where the oil price shock has little upside because it produces much less oil, the impact on the United States is “more modest overall,” said Gian Maria Milesi-Ferretti, senior member of the company. Hutchins Brookings Institution Center for Financial and Monetary Policy.

Still, that’s little comfort for individual households, whose prices are rising and falling in line with global trends, dependent more than ever on fuels.

Instead, the US has relied on technology and efficiency improvements to keep energy use under control.

Between 1970 and 2018, the fuel economy of passenger cars on the roads in the United States, for example, roughly doubled for both cars and light trucks. And that trend is expected to accelerate with the Biden administration’s move to reinstate stricter fuel economy standards following the Trump administration’s attempt to roll them back. Transportation by far the largest oil userand is the biggest contributor to climate change.

However, Eric Masanet, who studies emerging environmental technologies at the University of California, Santa Barbara, said several factors blunt the effect of these improvements. Americans are buying far more cars: From 1970 to 2018, the U.S. population increased by 54 percent, but overall car and truck records increased by 141 percent. And vehicle travel in miles continued to increase, which is a major reason why the United States uses more energy per passenger and distance traveled than other major countries, he said. Public transport passenger numbers, which have already shown a slow and steady decline since the mid-2010s, cratered during the pandemic.

And while all vehicle classes have become more fuel efficient, the US fleet has consistently shifted towards a mix dominated by larger and heavier vehicles such as pickups, pickup trucks and SUVs, further slowing overall efficiency gains. IEA predicted in the near future That the move to larger vehicles eliminates 40 percent of the fuel savings that would have occurred under stricter fuel economy rules.

Dr. “It was one step forward, one step back,” Masanet said.

A similar picture for American homes. Americans now run and heat their homes much more efficiently than they did a few decades ago, due to advances in space heating, which explains why direct energy use and carbon dioxide emissions aren’t growing as fast as the population.

But these gains were offset by the increase in house sizes.

The average single-family homes built today are about 50 percent larger than similar homes built in the early 1970s, and home sizes have been growing rapidly for most of the 2010s before slowing slightly over the past few years. according to census data. american homes are among the largest in the world.

While the spread is difficult to measure, there are indications that it is growing. While some cities are getting busier, “if you also look at new home startups, it’s also clear that there are new home startups contributing to low-density urban development, low-density single-family homes on the fringes of cities.” said Karen Seto, a professor of geography and urbanization science at the Yale School of the Environment. “We’re going in the wrong direction,” she said.

Undoubtedly, some of these gains have raised living standards for millions of Americans. still a latest United Nations report He states that wealthy individuals have a high potential to use less energy and reduce emissions of gases that warm the planet while maintaining their living standards. The report states that the world’s richest 10 percent are responsible for an estimated 50 percent of greenhouse gas emissions, with most of that amount concentrated in the richest 1 percent.

“Conspicuous consumption by the rich is responsible for a large proportion of expenditure-related emissions in all countries, such as air travel, tourism, large private vehicles and large homes,” the report says.

It concludes that overall, steps taken by nations to reduce overall energy demands, such as investments in public transport, could help reduce emissions in key sectors by 40 to 70 percent by 2050 compared to baseline scenarios.

“This is huge potential,” said Felix Creutzig, lead author of the UN report and head of sustainability economics at the Technische Universität Berlin. “It makes it easier for every industry to reduce their emissions.”

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