America’s Energy Crisis: The Realities the Politicians Won’t Talk About

The United States faces a severe energy crisis that is compounding its broader economic and military predicaments. The highly visible tip of the energy crisis can be seen at the gas pumps where Americans are paying an average of $3.60 a gallon for regular gas this week.

On the campaign trail, Senators McCain, Clinton and Obama have been debating the 18.4 cent a gallon federal excise tax on gasoline. While McCain and Clinton want to remove the tax for the busy summer driving season, Obama correctly notes that this is a diversion from serious discussion of energy issues. Although the Illinois senator has a grip on reality on this minor issue, the major politicians are not telling Americans the hard truths about the energy crisis:

· Americans pay much lower gasoline prices than people in other industrialized countries. Their average price tag comes out to 95 cents a liter, which compares to $1.25 a liter, the average price this week in Canada. Looking further afield and going back to gallons, the U.S. price of $3.60 a gallon is low compared with the $7.60 paid in France. The difference in price between the U.S. and other advanced countries is a consequence of the lower gas taxes paid by Americans.
· Lower gasoline prices in the United States are one reason the American automobile fleet is so much less efficient than the fleet in other countries. The average American vehicle (there is a wide range depending on the vehicle) gets 22 miles to the gallon, compared with over 40 miles per gallon in the countries of the European Union, and over 45 miles to the gallon in Japan.
· The United States, which accounted for half the global output of petroleum as late as 1950 now imports over half the petroleum Americans consume. Most Americans believe they receive most of their imported oil from the Middle East, which they do not. Their largest foreign source is Canada, which is followed by Mexico, Saudi Arabia, Venezuela and Nigeria. While they may regard Canada as a safe and secure supplier, they are going to have to grapple with the fact that about half of the oil from Canada comes from the oil sands in northern Alberta, and over the next decade that source will make up an ever larger proportion of the Canadian imports. The oil sands, as Canadians are aware, are a problematic source of oil. Huge amounts of natural gas and water are used in separating the bitumen from the sand to produce synthetic crude oil. Oil sands operations scar the landscape. This week five hundred ducks died because they landed in a tailings pond at an oil sands (Syncrude) plant. And the greenhouse gas emissions from oil sands production are enormous. They are the single biggest reason Canada is getting nowhere near meeting the targets it signed onto when it ratified the Kyoto accord. (The current Conservative government, with its close ties to the petroleum industry has abandoned Canada’s efforts to meet the Kyoto targets.)
· The United States will soon be paying close to half a trillion dollars a year to import oil. This is simply unaffordable. The annual American trade deficit is already $827 billion and this is going to grow much larger very quickly as the oil bill skyrockets. The U.S. current account deficit (which includes profits, interest payments and tourism as well as goods) is running at $738 billion a year. This is why the United States is plunging into debt with the rest of the world, a net debt that is now well in excess of two trillion dollars. And that’s why foreign central bankers in China and Japan who hold two trillion dollars in U.S. treasury bills and other government securities have now become so vital to keeping the U.S. dollar from plunging even further against other currencies.
· The bleeding of the U.S. dollar against the Euro and other currencies is tempting petroleum exporting countries to set their prices in Euros rather than dollars. When this happens, the price shock for Americans will be immediate and enormous.

Those who would occupy the White House ought to level with Americans about these realities. Americans are going to have to make enormous changes in the efficiency of their vehicles---and this means getting the SUVs, vans and pickups off the roads---and they are going to have to make vast investments in improving urban public transit, and establishing inter-city high speed rail systems. They are going to have to redesign their cities. The day of the low density suburb is coming to an end. American cities in the future are going to have to be more densely populated than they have been in the age of cheap oil, to allow public transit to work. And the redesign of the cities will have to be carried out so as to be socially fair----otherwise the rich will invade the city centres, take the most desirable properties and drive everyone else to the peripheries. (This has already happened in Manhattan and has gone much further in London.)

The investments required to prepare the United States for the realities of the new age are enormous and make the tax plans of people like Senator John McCain utterly ludicrous (what can you expect from a man whose economic ideas are poorly learned versions of 18th century thought). In fact, Clinton and Obama have not done much better in facing up to reality.

The good news----and it is really good---is that if the United States faces up to the changes it has to make, Americans will no longer have to import petroleum, from the Alberta oil sands or from anywhere else, and will no longer feel compelled to listen to politicians who claim that it is in the vital national interest to control the lands of the Persian Gulf by dispatching young men and women to a war zone.

Come to think of it, cutting the defence budget in half, which would still make the U.S. by far the largest military spender in the world, would free up the capital to make the changes America needs.

Earlier this week though, I saw footage of George W. Bush decked out in a green tie as he told his Rose Garden audience that the only way ahead is to drill for oil in the lands of the Alaska National Wildlife Refuge. Talk about fiddling while Rome burns. He ought to change his middle name from Dubya to Nero.