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Happy Independence Day.

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Old Glory

On this day in 1776 we declared our independence from the Kingdom of Great Britain.  That was the easy part – we then had to fight for our freedom during the Revolutionary War which ended by a Treaty on September 3, 1783.  Today’s blog is not a history lesson but a call to action of a different sort.  We need to declare our independence from foreign oil.

Since the Oil embargo in 1973 we realized our dependence on foreign oil was a threat to our national security and to our economy.  That Oil embargo was 38 years ago.  Let that sink in for a moment – 38 years and no substantial changes have occurred to reduce our dependence on foreign oil.  We need to do more to make the Organization of the Petroleum Exporting Countries (OPEC) irrelevant in our lives. 

Let me enlighten you about the price we have been paying for gasoline since the end of World War II. The price has been generally decreasing when adjusting for inflation except for a 10 year period from 1973 to the early 1980’s when the embargo and upheaval in Iran kept prices above the inflation adjusted price of 2.50 per gallon.  Beginning in about 1984, the price plummeted from $2.50/gallon to below $2.00/gallon and hitting rock bottom just below $1.50 per gallon by the late 1990’s. In the 1980’s until the late 1990’s gas was in fact cheap and the size of cars began to grow in size due to the affordability and availability of gasoline.  Beginning in the late 90’s until today the trend in gasoline prices has been generally steeply upward back to the $2.50/gallon level (or higher).  Please refer to the link below to see a good graphical representation of what I speak.

http://inflationdata.com/Inflation/images/charts/Oil/Gasoline_inflation_chart.htm

In my opinion, the supply shock of high gasoline prices lead to the dismal economic times from 1973 to 1984 and the boom times of the late 80’s to the late 90’s and again contributed to the economic slowdown since 2000.  When will we learn? It is estimated that we drive about 3 trillion miles per year in the United States.  If the vehicles we drive average 25 miles per gallon that means we use 120 billion gallons of fuel per year.  A 50 cent increase in a gallon of gasoline takes 60 billion dollars out of the economy which is not insignificant. 

What are we to do?  I believe we need to continue with all efforts that we have made so far and look for other options.  Let’s build smaller, fuel-efficient cars, invest in domestic oil resources which are plentiful and create good jobs in the Unites States.  Let’s encourage innovation in electric cars – they are not for every person but are ideal for city commuters who don’t need to travel long distances.  The upward trend in gasoline prices is going to continue as the United States demand for gasoline and in the developed world in general has been flat since 2004. In the emerging economies of Brazil, India and China to name a few it is increasing dramatically causing continued upward pressure on gasoline and other commodity prices.   An example of that is GM selling more cars last year in China than they did in the United Sates!

In closing, we can see the facts and have known for decades that we have a problem. Let’s declare our independence on foreign oil now.  Remember, declaring Independence and winning the war are two different things.  Let’s have the same resolve as our forefathers did 235 years ago and make our independence a reality.

Have a great 4th of July and a great week.  If we put our collective minds together we can win our freedom – freedom from the grip that foreign oil has on us.

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Written by pacelinebiz

July 4, 2011 at 3:21 pm

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