The Peak Oil Crisis, Part 7: The Government Intervenes

Falls Church News-Press

June 16, 2005

By the time gasoline passes $5 per gallon, or, there are shortages causing lines at the pumps, nearly everyone will have realized it is time for government intervention at all levels in the looming oil crisis.

On the way to $5 gasoline of course, there will much demagogy with politicians calling for tax cuts accompanied by denunciations of oil companies, regulators, speculators, Arabs, Chinese and anybody else who has a finger in the oil market. But, gradually all this will subside and there will be a general reconciliation to the notion that oil from beneath the ground will become increasing expensive and scarcer for all time.

While state and local governments will be fully occupied in helping people cope with reduced energy, it is the federal government that will be critical in setting nationwide policies and establishing new relations with the outside world.

One major issue as the world enters an era of scarcity will be who gets how much of remaining OPEC exports. When there was a nearly unlimited supply, nations could buy as much as they could store, use, and pay for. This resulted in a situation where the US , as the richest country, ended up building an infrastructure consuming some 25 percent of world oil production despite currently having some 4.6 percent of the world’s population.

Now that China and India are taking an increasing share of a depleting resource, there are bound to be troubles ahead unless the major oil consuming nations can get together and agree on a “depletion protocol” specifying shares of a fast-shrinking resource. Such a protocol is already being discussed by European thinkers who are several years ahead of America in coming to grips with this problem.

The alternative, for those who have the military power, is to occupy and control uncooperative oil producing states in order to “protect” oil supplies. Indeed, many believe this may be happening already.

Another major role for the federal government is to establish the policies that will govern the transition from a petroleum-based economy to one based on other forms of energy. This will not be easy in the current Washington environment for, whatever way the government moves, some industry’s bottom line will be hurt -- at least temporarily. However, as gasoline moves above $5 per gallon, the mood of the voters will become more akin to 1932 than 2004 and Congress will come to see the wisdom in attempting to mitigate the situation despite the protests of lobbyists.

Federal intervention can take many forms ranging from tax incentives through heavy taxes on “undesirable consumption” to outright rationing in which individuals or organizations are allocated a fixed amount of energy for use on a project or during a period of time.

The long-term goal of any federal intervention, of course, is to get the country through the period of transition from fossil fuels to renewable forms of energy. As we have taken few steps toward this goal, there are clearly some 20 or more years ahead during which our real incomes drop significantly and our lifestyles will change radically.

Some steps for the government to take are so obvious they scream for implementation as soon as possible. As the world’s most massive waster of energy, major conservation programs can be implemented with little or no harm to anyone except those that make money selling energy to the rest of us.

Electricity is the obvious place to start. Our homes, offices, businesses, streets, highways, and skies are lit to the heavens. Our temperatures are too warm in the winter and too cool in the summer. I would suspect a serious conservation effort involving heavy monetary penalties for overuse of electricity could result in savings of 50 percent or more after several years of education and conversion.

Initially, rationing of gasoline will, to some extent, take care of itself through higher and higher prices. At a certain price point, each of us will cut back sharply on our discretionary travel in traditional cars and will either stay at home, or seek other more cost-effective forms of transportation -- hybrids, electric cars, public transit.

While this rationing by price is bound to happen anyway, it will not solve the whole energy problem, for life threatening situations due to lack of gasoline or fuel oil will quickly arise so that governments will be impelled to intervene and begin allocating fuel or other assistance to those who simply cannot survive without help.

http://www.fcnp.com/515/peakoil.htm