A Freight Train Full of Dollars

With less than 5% of the world's population, and 3% of the world's known oil reserves, the US is currently consuming nearly one quarter of the world's oil production. Our American "oil habit" is costing us dearly in more ways than one. To support this oil habit, America imports roughly 10 million barrels of oil every day. At the current price of about $150 a barrel, that equals a whopping $1.5 billion that gets sent out of our country each and every day to keep America "well oiled."

On top of this, consider that we spend another $1/2 billion a day on military expenditures protecting those who supply and produce the oil we import from the Persian Gulf. This figure includes the price tag for the war and occupation in Iraq, which even Alan Greenspan, the former chairman of the board for the Federal Reserve, admitted was all about oil. So, we Americans are racking up a bill of about $2 billion a day for our foreign oil habit. Our trade deficit with China has been described as "astronomical," but at $256 billion in 2007, this accounts for only about one third of what our foreign oil habit is currently costing us. In essence, we are filling up a freight train with American dollars every day and shipping them out of the country, mostly to people who don't give a damn about us (except for our dollars), and many of whom are openly hostile towards America.

We are starting to see some of the economic fallout resulting from our "oil habit." The US government's national debt is growing at a rate of about $1.4 billion a day, with Japan being the largest individual lender (they held over $644 billion in US Treasury notes in 2007), and China following in second place. The value of our dollar is on a nearly continuous downward slide. Would you lend money to a nephew who charges $10,000 on his credit cards every month, but never pays back any of the principle? What happens when that nephew can't keep up with his debt payments and can't borrow any more money from his friends and relatives? What happens when lender nations realize that they can no longer risk lending money to America, because the value of the American dollar continues to drop and shows little chance for recovery? What happens to America if we continue to focus on short term band-aids like military intervention, and maximum drilling to secure more oil, rather than on improved efficiency and sustainable alternatives to help get us of the oil habit? Realize that when our currency continues to drop in value, this has the effect of magnifying the impact of each global market increase in the price of oil. The cost of oil is a significant factor in almost everything we make, the food we grow, and the goods we import from other countries. When the price of oil goes up, so does everything else -- except our wages.

The Bush administration gives lip service to the need for this country to get off its oil habit, but their actions speak louder than words. In June, a republican filibuster blocked the senate bill to renew US tax credits for renewable energy installations. At the same time, they also blocked legislation to remove tax credits and loopholes for the oil industry. Clearly this is a government of the oilmen, by the oilmen, and for the oilmen! If America is to avoid economic ruin, it is time we woke up and realized what our oil habit is doing both to the Earth's environment and to our country's economy.

Germany is a fine example of a country that is working hard to get off the oil habit, and both Brazil and Iceland are terrific examples of what happens to a country's economy when it successfully kicks the oil habit. Much to the dismay (and protest) of its fossil fuel and nuclear based utilities, Germany's Green Party eliminated subsidies for these utilities and shifted those funds to "Feed-In Tariffs" (FITs), which support rapid growth of renewable energy installations. The German economy has been revitalized and these FITs have helped double their country's share of energy produced through renewable means from 6% in 2000 to 12% in 2006 -- a feat that the naysayers in our government say will take the next 25 years to accomplish in America.

In 1970, Iceland was totally dependent upon imported coal and oil for all of their energy needs, and had the lowest per capita GDP of all of Europe. By shifting their energy focus from fossil fuels to geothermal and other renewable sources, Iceland has become energy independent and is a net energy exporter. Now that their former petro-dollars stay at home, Iceland has the 4th highest per capita GDP in the world.

Brazil provides a picture of an economy that has risen from the ashes of a crushing debt load back in the '70s, when they relied heavily on oil imports, to their current state of healthy economic growth and shrinking debt. Brazilian investment in ethanol fuel technologies, considered by many to be a boondoggle after oil prices plummeted in the 1980's, has turned Brazil into a net energy exporter with declining national debt, a healthy annual growth rate of 5%, and steadily improving international credit ratings.

The proactive long-term solution is obviously not to simply drill and pump our declining oil deposits at record speed, but to implement an effective plan for getting off the oil habit as fast as we can. In his recent speech, Al Gore called upon America to make a commitment to the goal of implementing carbon neutral technologies for generating all of America's electricity within the next ten years. When America entered World War II, President Roosevelt gave the directive that our entire domestic automobile production be switched over to manufacturing goods to support the war effort. It took Detroit just six months to accomplish this feat. In later blogs, I will talk about what we can do individually and collectively to shift the course of our world. WE CAN DO THIS! Wake up America, smell the oil, and it does not smell good!

Matthew Stein is the author of When Technology Fails: A Manual for Self-Reliance, Sustainability, and Surviving the Long Emergency from Chelsea Green. For more information, visit chelseagreen.com.

Comments

[Ethanol]

I think we should take some lessons from Brazil when it comes to our energy policy. Thanks to the support from the RFS, the farmers, the ethanol producers and investors, ethanol is on its' way to help lessen our dependency on foreign oil...and in fact, has had some promising accomplishments to our economy...

....A typical 40 million gallon ethanol plant creates 32 full-time jobs and generates an additional $1.2 million in tax revenue for a community.

......and according to the International Energy Agency biofuels are key to keeping the lid on an overheated transportation fuel market. According to Merrill Lynch, without the increase in biofuels production, oil prices would have been 15 percent higher, which at current oil prices translates into a savings of over $80 billion a year to the U.S. economy.....now that is what I am talking about.....Let's keep up the good work and continue to support the ethanol producers of the country, which in turn will help with our energy crisis...and will help with home grown resources. Cheers, Dr. Jeffrey B. Zeiger, Executive Director of the Alternative Fuels Institutue. http://www.fieldstofuel.org

[mjt218]

While I agree that rising oil prices are causing us to reevaluate our daily lives, I think it's important to note that the reason our economy has so much room to fall, is because our dominance of the world's oil resources has allowed us to march to the top.

Japan's imperial ambitions during WWII were in part about oil access. HItler turned East toward oil and his doom. Russia invaded Afghanistan in part to gain access to the Indian Ocean, and thus the Persian Gulf. We rode our domestic produciton through WWII, nurtured relationships with the Gulf States through the Cold War, and as a result we came out on top. Vietnam was probably partially about oil as well. Cheap fuel has fueled the growth of the US into what it is today. Arguing that oil is hurting our economy isn't totally legitimate. If we could snap our fingers and be totally carbon neutral tomorrow, would our economy definitely be better off? I honestly have no clue, but I would imagine we'd be looking at a lot of trade-offs, some worse and some better.

I also suspect that the bright spots of Exxon, Chevron and the like helped many an investor hedge against the weak performance of the financial sector over the last year. Without the oil companies, we just might be in worse shape.

[rwe]

Then Drill Here, Drill Now,,,, Nuke plants, Coal , refinereries , wind and solar...

[BBackSoon]

This will require a different administration. And while quite a few of us think Obama might be our man, never EVER, count out the Repugs. The neocons have no plans to easily give up power.

If and when the US Economy crashes the ultra rich will simply move out of country so when the civil war starts their families are out of harms way. At that time we will need a Simon Wiesenthal type to track down the power players and bring them back for justice.

[Matthew Stein - Huffpost Blogger]

No question we need a change in the administration. Obama, may be our man. Time will tell whether or not Obama becomes our "President Lincoln", tackling today's difficult issues like climate change and our addiction to oil, or if he just talks beautifully but owes his allegiance to maintaining the status quo and business-as-usual.