Americans have watched the recent unfolding drama of political and social change in the Middle East with deep ambivalence. Our better selves find hope and some measure of gratification in the collective expression of shared aspirations for individual autonomy and economic opportunity: these ordinary people clearly deserve better.
Of course, our keen interest in Middle Eastern political developments does not derive exclusively, or even primarily, from our beliefs about human dignity and social justice. One eye is always fixed on the price we pay for transportation fuels, sourced in part from this region and OPEC in general. Social chaos and rapid political change can potentially wreak havoc on the stability and security of the long, vulnerable supply chain that brings this fuel to our shores.
Commodity markets are much more focused on – if no more capable of – valuing the risk of imminent social chaos than the long-term benefits of an enfranchised citizenry. The crude oil market is perhaps the poster child for this phenomenon. While the U.S. Department of Commerce deems energy prices too volatile to merit inclusion in its monthly estimate of “core inflation,” most of us intuitively gauge the purchasing power of the U.S. dollar through our regular visits to the gas pump. Lately we’ve had reason to worry: oil prices rose sharply in February in reaction to the uncertain circumstances surrounding future Middle East crude production and availability. The future price path for crude oil can be charitably characterized as uncertain.
Recall, however, that oil prices had already doubled over the past two years without any help from the Arab street. Bankers, finance ministers and financial speculators around the world suspect the U.S. dollar is in long-term decline and are reacting accordingly. An abrupt and enduring crude oil shortage would only exacerbate the financial woes that our current and anticipated national trade and budget imbalances already have caused.
Our reactions to heightened oil supply instability, as individuals and as a nation, are and will be as disparate, conflicting and complex as the contributing causes. Mature Western economies, including our own, are on a long-term path to reduce and eventually supplant our reliance on insecure hydrocarbon fuel supplies and the environmental hazards they pose. We now recognize the environmental impact of releasing carbon accumulated and stored over hundreds of millions of years in the relative blink of an eye: a mere couple of centuries. Today, however, and for several decades to come, the global economy and our continuing shared prosperity will be critically reliant on petroleum, an abundant, concentrated and easily transportable energy source.
Public and governmental recognition of these problems, plus the technological evolution of our species, will combine to create and gradually deploy cleaner and more environmentally benign substitutes for this miracle product that takes us farther and faster than our ancestors could even conceive. This cannot and should not be achieved through a massive scale-up of liquid substitutes for oil-derived fuels available today. We have seen the consequences of rushing into subsidies to produce ethanol, which is now widely recognized as an unwise substitute for gasoline and diesel fuels, because of the amount of energy it takes to produce and the consequence that it has for commodity prices. Truly sustainable and affordable petroleum substitutes for the gas tank will only be forthcoming from the application of the future fruits of human inquiry, such as the controlled genetic manipulation of prolific and highly efficient natural solar collectors such as algae to produce energy-rich liquids we can directly substitute for petroleum products.
In the interim, we must muddle through. Oil supply disruptions from the Middle East will no doubt occur sporadically as the political geography of the region continues to lurch forward in fits and starts. The world is not “running out” of petroleum-based fuels in any meaningful sense. We have consumed roughly a third of the Earth’s allotment of the recoverable conventional crude oil resource base. Lower quality and technically challenging resources such as oil shale and tar sands can extend the remaining supply for many decades if necessary.
Other hydrocarbon substitutes – primarily the abundant global and domestic reserves of natural gas – can play a much larger role in our nation’s transportation fuel mix and reduce carbon emissions in the process. Electric vehicles can and will play a growing role in urban mobility. Along with higher petroleum prices, the appeal (and range limits) of electric vehicles will encourage changes in the way we choose to live and work, slowly reducing transportation fuel demands and the resulting roadway congestion that alone causes us to waste billions of gallons of motor fuel each year.
Despite all these gradual adaptations, the only short-term accommodation to major disruptions in oil imports is price-based supply allocation. These periodic accommodations will strain the already frayed American social compact balancing individual economic opportunity against the inevitable resulting wealth disparities. Airplane ticket prices will periodically soar, reducing the travel options for many middle-class Americans. People who value the personal mobility of the automobile will be economically compelled to seek mass transit and car-pooling alternatives. We will grumble but adapt.
The ongoing and generally positive political overhaul in the Middle East will no doubt be messy, discomforting and prolonged, but does not signal the abrupt or protracted cessation of regional oil exports. As each domino fits into place, whoever assumes political control of that region of the Middle Eastern or other OPEC oil reserves will still need and want the income derived from oil exports to fund new political agendas for good or ill. We can and will continue to invent and deploy workable substitutes to petroleum for transportation fuels. We will muddle through as always, but not without some rude shocks. Considering what the world has been through over the past century or so, this should hardly come as a surprise or insurmountable challenge; neither is it a reason to predict inevitable national decline or to announce a mandate to compel the massive deployment of immature and problematic alternatives. Rather, it is another powerful nudge to change some bad habits we can no longer afford and ultimately, through our own ingenuity, will not miss.