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Drop in Oil Consumption Signals Power of Free Market

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Like many people, my faith in capitalism was badly shaken by the crash of 2008 and its aftermath. I sat by, appalled as some capitalists denied climate change and used the economy as an excuse to continue their planet-destroying practices.

I rooted for regulation, until Obama, who once seemed to be the environmentalist's last great hope, declared his second-term energy policy would be "all of the above."

Given this lack of resolve, I was surprised to read in last week's environmental website Sightline that U.S. oil consumption is actually falling:

"U.S. Energy Information Administration suggests that total oil consumption in the United States fell by about 1.5 percent last year -- meaning that the country as a whole used about as much oil in 2012 as it did in 1994... (even as) population grew 19 percent."

How can this be? Since Sightline's comparison goes back to 1994, we can't credit the recession. The large bulk of oil consumption is from transportation, and as laid out in painful detail on SmartPlanet, the drop is not due to greater vehicle efficiency. So what is driving this drop? The timing suggests the drop is price-related: per capita oil consumption has fallen most dramatically since 2004, when oil prices started rising sharply. To the planet's everlasting gratitude, higher oil prices lasted long enough this time to launch a revolution in transportation. Think about what's happened just over the last month:
  • Car-sharing moved into the mainstream. Avis, which leads the industry in CSRHub's social responsibility ratings, paid $500 million for the largest car-sharing company, Zipcar.
  • United Airlines completed the first all-biofuel commercial jet flight. The company subsequently placed an order large enough for biofuel companies to scale to cost effective levels.
  • The Department of Defense, the world's largest consumer of energy at 17 billion gallons in 2011, is courting Cleantech venture capitalists. Washington's Clean Technology Alliance hosted a conference last week in Seattle that featured Robert Gates, former Secretary of Defense and Sharon Burke, Assistant Secretary of Defense for Operational Energy. Why are these heavyweights giving their time to a Cleantech meeting? Price instability puts its budget at risk; far worse, having to move oil in battle zones creates human risk. Solar-powered mortar pits were Burke's exemplar, formerly fueled by highly dangerous helicopter missions.
  • Most exciting, after completing 300,000 of test miles, the driver-less car is road-ready. As described in Chunka Mui's outstanding series for Forbes magazine, this innovation could save 1.9 billion gallons of gas a year and their resulting emissions in the U.S .alone, at a cost to consumers that is somewhat less on average than owning and operating a car. The technology has been road tested by Google for 300,000 miles as well as several car manufacturers and is looking for a market.

And U.S. consumer acceptance is "closer than you think," according to Mui, who sites the younger generation's comfort with technology and population segments such as the elderly and the disabled who are unable to drive themselves. The early forces that held back air travel -- fear of crashes - are also selling points for the driverless car, which promises to reduce accidents by 90 percent.

These examples are democratic capitalism at its finest. After 50 years back-and-forth on conservation and environmentalism, gas prices creep out of America's comfort zone and national public opinion shifts. Over the next few years, investors get serious. Bedrocks of conservatism like the DOD, the airline industry and car-makers find the will to act.

Climate change has found a potentially scenario-changing champion in capitalism.

Am I just the relentless optimist to think that capitalism can save us? I'm all for increased regulation of the capitalist money machine to control unfettered greed. But here is the free market system at its best. Makes you want to believe again, doesn't it?