Quenching America’s Thirst for Oil
The United States consumes a quarter of the world’s oil, compared to 8% for China. Even with high Chinese growth expected in coming years, the world will not run out of oil anytime soon. Over a trillion barrels of proven reserves exist, and more is likely to be found. But two-thirds of those proven reserves are in the Persian Gulf, and are thus vulnerable to disruption.
In the past, rising prices had a strong effect on US oil consumption. Since the price spikes of the 1970’s, US oil consumption per dollar of GDP has fallen by half, which also reflects the general economic shift away from industrial manufacturing to less energy-intensive production. After all, it requires a lot less energy to create a software program than it does to produce a ton of steel.
In the early 1980’s, energy costs accounted for 14% of America’s economy. Today, they account for 7%. Adjusted for inflation, oil prices would have to reach $80 per barrel (or $3.12 per gallon of gasoline) to reach the real level recorded in March 1981.