Monday, September 13

Fixing The Economy: Imported Oil

Throwing Away MoneyHow much oil do we import? Would you believe that we import approximately 10,000,000 barrels per day of oil? That's according to the EIA. Guess how much money that costs. At $75 per barrel this represents $750,000,000 per day. That's $273,750,000,000 per year. Perhaps we can just round it to $275 billion...

I don't know about you but I can't help wondering about how many domestic jobs that type of expenditure could support. For example, what if we stopped sending some amount of that money overseas and used it to provide incentives to promote use of domestic alternative energy sources? What if our cars were all hybrid vehicles? What if all that money was spent on domestic products, that our citizens were being paid wages to produce and service, instead of overseas to our friends?

I know. We can't simply stop using imported oil overnight. We also can't replace all of our oil usage with alternative energy supplies. I do know that. However, if we as consumers were spending much of this money on goods and services made right here there would be a lot more jobs. So, how can we at least start moving in this direction?

From time to time there are policy steps that might help. We have regulations that provide for the fuel economy of consumer vehicles. More efficient vehicles provide for more economic activity with less money being sent overseas due to imported oil. We've also provided some money for research activities. We may even subsidize the creation of ethanol.

However, I think we are leaving a lot of things off the table. Perhaps it's because our culture is geared towards all-or-nothing thinking.

Why don't we create our cities in a way that reduces the amount of transportation required on a daily basis? Doing this would involve putting a lot of effort into zoning regulations such that consumers would often be able to live closer to the places they work and play.

Why don't we provide serious alternatives to driving a car to work every day? Time and time again we hear about public transportation but nobody wants to ride on it. Make it timely and efficient. Keep it clean and safe. Then, make it difficult or expensive to find parking. Watch more people start using public transit.

Even better, give people the ability to walk, roller blade or ride bicycles. We often see a paltry bike lane or two and then deride the fact that hardly anybody uses it. If you want to seriously promote bicycle use, or other modes of exercise as transportation, you have to do much better than that. You need to provide a safe and clean place for people to change into and out of their work clothes. You have to provide a safe and secure place for people to put their gear. You have to create efficient routes that allow people to bypass traffic obstacles and dangerous traffic areas.

I can hear the skepticism. Who's going to do this? I guess that means you aren't willing to talk to your local politicians and ask them to focus on these long term issues? Perhaps we can do this via an incentive policy also. For example, states are already given incentives to set speed limits within a certain range. It would certainly be possible to offer increased payments to states or communities based on increased levels of public or human powered transportation.

Another interesting idea is the Pickens Plan. The idea here is that we replace some foreign oil use with domestic natural gas. It's not hard to replace gasoline with natural gas. It simply requires vehicles to be modified. A good place to start would be with the trucking industry. Something like this can be done with government legislation. I know, many people dislike government action in the markets -- however, if all trucking companies face the same regulations they will continue to compete with a new level playing field. For more information go read the Pickens Plans for yourself.

Big changes can come about from making things possible, convenient, or financially attractive.

For example, if you were sure you could sell excess electrical power back to the local utility, would it help you consider private wind generation? Overnight your small inexpensive wind turbine could generate and store enough electricity to provide hot water for your morning showers. Excess electricity, if any, would be sent through the grid and reduce your monthly utility bill. Of course, this doesn't seem to have much to do with imported oil... or does it? A home generator would be a great way to charge a hybrid car.

So, with good ideas this easy to generate, I have to wonder why we haven't really made much progress over the last decade or more. Is it politics? Is it lobbyists? Is it propaganda from big oil companies? Is it simple apathy? I don't know what it is but I do know we'd be a lot better off today if anybody were taking this seriously a decade ago.

Imported oil costs us $275 billion a year in direct costs. We'd better take it seriously.

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Hannah said...

Those are some staggering numbers. I think improved public transportation (and "incentives" like more expensive parking garages) could help in a lot of areas.

Frugal Guy said...

Hannah, thanks for leaving a note. It's not as hard to influence change as people think... it's not all about massive systems and programs.

Pat said...

Wow... thanks for "doing the math." I hadn't. That much money poured into our economy would make a big difference.

As I read, I kept thinking that each of us can do our part to cut back on using oil. It's something that a lot of people waste without thinking.

When I was growing up, we went to town no more than twice a month... now some people shop or run errands twice a day!

Frugal Guy said...

Pat, that's a good point.

It does seem that wasting fuel is simply ingrained in our lifestyles.

Doing some more math it looks like we can easily equate filling the tank with importing a barrel of oil.

The following is from the EIA gasoline FAQ page...

U.S. refineries produce between 19 and 20 gallons of motor gasoline from one barrel (42 gallons) of crude oil. The remainder of the barrel yields distillate and residual fuel oils, jet fuel, and many other products. Refinery yields of individual products vary from month to month as refiners focus operations to meet demand for different products and maximize profits.

Just think of filling the tank as a $75 donation going to your least favorite country in the middle east... that might spur some conservation!

JD said...

Until the big oil companies and all who follow under them want to make a change, our dependence on oil won't lessen. Gasoline is 20% of our unrefined crude and diesel is 10% the rest goes to jet fuel and things like plastics. Changed would have to happen across the board, not only with fuel.

Mr Frugal Frank said...

I wish people would cut back on oil useage... Somewhere US the American people only want what is for I and no one else...Sallow your pride carpool,ride a bus,stay home a day,use less plastic....Do what is good for the Fellow Americans and not what is good for the oil companies Thank U Mr Frugal Frank

Greg Johnson said...

Great article.....however....You speak as if legislation will help. Dig deeper into the Perkins plan and similar ideas and you will see that government and regulation IS the problem! We are not allowed to have the alternative fuels or use them. In regards towards fixing America it is really about realizing we dug our own grave. Its not about what we need to do......its about what we need to stop doing. While they you on "safety" you realize their true motive all along was money/power.