In Praise
Of Higher Fuel Prices
By William E.
Rees
24 May, 2004
CommonDreams.org
North
Americans complain about fuel costs. But to avoid a possibly unprecedented
human crisis in coming decades, they should be urging their governments
to allow the price of oil and natural gas to rise even more.
The present world
energy market obscures the true price of hydrocarbon fuels. The Washington-based
International Center for Technology Assessment, for example, has calculated
the full cost of running automobiles. In addition to the price of gasoline,
this includes construction and maintenance of roads and highways, oil-industry
subsidies, and pollution-driven medical expenses. Depending on the range
of subsidies included and the quality of available data, this fuller
accounting puts U.S. gasoline prices between $5.60 and $15.14 per gallon.
American consumers
enjoy the most underpriced fuel available in any major industrialized
country, with Canadians not far behind. And as every economist knows,
the consequence of underpricing is overuse. Wealthy and middle-class
North Americans live in ever-larger energy-inefficient houses and vehicles,
and so are squandering in a few decades a nonrenewable resource that
took tens of millions of years to accumulate.
On top of this,
the world is running out of cheap oil. Recent price hikes may be mere
tremors heralding the shock to come.
Oil production
-- really extraction -- peaked in the United States about 1970 and in
North America as a whole in 1984. Several recent studies project global
oil output to peak as early as 2010. The conservative International
Energy Agency predicts that supply will fall short of demand by nearly
20 percent by 2020. Others show that by 2040, total oil and natural
gas output may fall to 60 percent of todays supply.
Keep in mind that
oil is also the raw material for thousands of products besides fuel,
including medicines, paints, plastics, fertilizers and pesticides.
The human population
has grown sixfold in less than 200 years. The global economy has quintupled
in less than 50. No factor has played a greater role in this explosive
growth than abundant, cheap fossil fuel. No other resource has as greatly
changed the structure of economies, the nature of technologies, the
balance of geopolitics and the quality of human life.
Little wonder that
some scientists believe that passing the peak of oil production will
shock the human enterprise like no other event in history. Population
and consumption are still on a steep trajectory, but the rocket is running
out of fuel.
The problem is solvable
only with positive action and wide-ranging policy innovation. Universities
should be leading the way in energy alternatives and conservation.
Meanwhile, citizens
should urge governments to get real about energy pricing. All direct
and indirect subsidies to oil and gas producers must end to induce conservation
of remaining reserves, to encourage efficient technology, and to make
inherently more expensive but necessary alternatives more competitive.
This would help render the entire economy more efficient as the energy
market tightens.
An unfair burden
on low-income families must be avoided, but without abandoning the overall
objective. Failure to act now may bring even greater inequity.
If we ease our society
gradually into a world of scarce fossil fuels, problems should be relatively
short-lived. Both producers and consumers respond to higher prices.
People would not much mind paying twice as much for gasoline if their
cars were twice as efficient -- which they would be if manufacturers
hoped to stay in business.
And keep in mind
that European countries already have much higher energy costs than North
America, with no appreciable harm.
Governments have
known about the coming scarcity of fossil fuels for years, yet they
have sacrificed the public interest to benefit the energy and automotive
industries. We must begin hiking energy prices now to signal the real
scarcity to come.
Without higher fuel
prices, we will not invest in the technology needed for a smooth transition
to the post-petroleum age. If we don't act soon, the remaining life
expectancy of industrial society, as energy analyst Richard Duncan has
argued, may be less than 40 years.
William E. Rees
is an ecological economist and professor at the University of British
Columbias School of Community and Regional Planning. This essay,
prepared for the Land Institute's Prairie Writers Circle, is a condensed
version of one that appeared in the institute's Land Report. The institute
is in Salina, Kan.