The Oil Drum: Australia/New Zealand

When my talk to the Royal Society of Chemists was first arranged this summer, oil cost over $130 per barrel, and we wondered where the price would be in October. Since then much has happened. The credit expansion bubble was pricked in part by inflation stemming from high energy prices, and the global banking system is teetering on the brink of collapse, reprieved only by the spread of social ownership throughout the OECD.

With the dramatic increase in oil prices over the last decade, and even more dramatic dive since July, the perception for urgency regarding long term energy change is on a roller coaster ride of its own. As former Sec. of Energy James Schlesinger sums up "Americans have only two modes when it comes to energy - complacency and panic". Unfortunately, as financial deleveraging grabs center stage, we have shifted to full complacency mode, while simultaneously our long term energy situation is deteriorating rapidly. Changing our energy mix and more importantly, how we use it, has been relegated to the sidestage, as concerns about credit, jobs, and 401ks override. After all, crude oil is under $70 per barrel, and gasoline is cheap and plentiful. What's there to worry?

Below is an energy report from the General Accounting Office presented to Congress in 1979, (hat tip energymaven), followed by my own conclusion. After reading the GAO report (pdf warning), it becomes clear, almost painfully so, that we have missed a generation of opportunity.

A number of days ago, on a website of a particularly enlightened economist, I came across an excerpt from a speech given by Sen. Robert F. Kennedy on March 18, 1968, at the University of Kansas. He was on the campaign trail in the US 1968 presidential race, and that context makes these words even more amazing. Less than three months later, he was shot and killed in California. Embedded above is a video montage with words from the speech, and the text follows below.

On theoildrum.com, we discuss the particulars of our energy supply/consumption situation. Less frequently do we have content outlining potential macro solutions that may be necessary to mitigate problems facing human systems. This is such a post - adapted from a paper from last week's Sustainable Development Commission written by Herman Daly, who popularized the term "Steady State Economy" over 3 decades ago. While it doesn't discuss energy per se, it does get at the heart of how we value and use energy - for growth - and the systems underlying this growth.

It is doubtful we can adequately inform energy policy without addressing the linkages between equity, the environment, finance, and our end goals. I post this on theoildrum not only because Herman is one of my tribal elders but because his eloquence, courage and foresight on these issues have historically been, and continue to be, ahead of the curve. During his resignation speech from the World Bank, Herman recommended the Bank take "a few antacids and laxatives to cure the combination of managerial flatulence and organizational constipation giving rise to such a high-pressure internal environment." To improve interactions with the external world he prescribed "new eyeglasses and a hearing aid."

Nearly 15 years later, here is Professor Daly's current synopsis of the state of economics and his prescriptions for change.

Prices of a short gallon of gasoline in US$ around the World. Source: AA Motoring Trust via USAToday and Wikipedia. Click to enlarge.

Stuart and I have been emailing back and forth regarding his post on modeling state gsp using vmt as an independent variable.

Paula, both here and on her blog, correctly suggested that education should also be considered as an independent variable. So, what I did was pull together some data on % college educated for each state and include it in with the data Stuart had already collected...and then I conducted a multivariate regression on the data, which is presented below.  That regression allows us to find out what the effects are for all of these independent variables on gsp/cap after controlling for the effects of the other variables.  This allows to get a better picture of what's going on (though we lose the visual facility that Stuart had with his bivariate graphs).  Much more under the fold.

So, what's the takeaway?  Stuart's right: states with higher vmts have lower gsp/cap, even after controlling for education and population density.

This is one of those analyses that I started with a firm opinion: I thought I knew where it was going. And then it went somewhere else and ended in a bit of a mystery. Details of my puzzlement below the fold.

The graph to the right shows Gross State Product/Capita (source: BEA, 2003) plotted versus Vehicle Miles Traveled/Capita (source: FHWA, 2003 table VM-2) for 48 of the 50 US states. Click the graph to enlarge it.