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68 comments on Is the Economy Less Sensitive to an Oil Shock?

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JD on October 19, 2005 - 5:40am Permalink | Subthread | Parent | Comments top
1,000 jeans = 50 barrels of oil in the US

Where exactly do you use oil in the manufacturing of jeans? Textile equipment is generally driven electrically, which in China probably means coal, not oil.

The top two most oil intensive industries in the U.S. are petroleum refining and chemicals, and neither has been significantly outsourced.

I think you can get a clearer view of oil intensity by simply looking at where most of the oil goes:

The rough breakdown for 2003 is:
Total oil consumption: 19.7 MMbpd
Transportation: 13.1 MMbpd
Autos/light trucks: 9 MMbpd
Medium/heavy trucks: 3.8 MMbpd
Jet fuel: 1.6 MMbpd
Feedstock: 3.5 MMbpd

Most oil is used to power private cars, SUVs/pickups, trucking and aircraft. Did any of those processes get more efficient, or get outsourced? I think the answer is no.

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mikeB on October 19, 2005 - 7:34am Permalink | Subthread | Parent | Comments top
Where exactly do you use oil in the manufacturing of jeans?

In a word, cotton. Trying planting, growing, fertilizing, spraying, harvesting, processing, and transporting cotton without using oil. Lots of oil.
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mw on October 19, 2005 - 10:42am Permalink | Subthread | Parent | Comments top
There's oil in growing the raw materials, shipping it, dyes, chemicals, fertilizer, manufacturing it, and shipping the finished goods back to us, and trucking the damn stuff all over the place.

But I digress... I was simply using a metaphor.

The reality is that we have outsourced great gobs of manufacturing. Visit any west coast port and you'll see the enormity of the outsourcing. The growing non-petroleum trade deficit is a clear indicator.

In a sideways manner I think your comment validates my point - we've outsourced what we could. The sunk costs in chemical plants could not quickly be struck from the balance sheet and while oil prices were lower, there was no need to. But plant has been built elsewhere for years, and you will see closings, particularly in chemical plants that have a high reliance on NG.

Methanex among others are already on record as shutting down N.A. operations.

What we can't outsource?

Our consumers.

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JD on October 19, 2005 - 8:56pm Permalink | Subthread | Parent | Comments top
Manufacturing is a red herring. On the whole, manufacturers use very little oil, and when they do use oil, they use it at extremely high efficiencies.

Most of the oil the U.S. consumes is used to fuel private automobiles, and that isn't necessary to produce goods and services. If an employee lives 60 miles away from the Walmart where he works, is the gasoline he uses to commute to work everyday essential to supplying the service he provides? I don't think it is. He could move closer to his job, or bicycle, or ride a scooter, or take the bus, or carpool.

If you want to do a 1-to-1 match up between individual goods/services provided, and the oil which must be burnt to provide those services, it's illegitimate to include gasoline for commuting. Susan runs a hair salon, and walks to the shop. Since it is possible to provide hair styling services without using gasoline for commuting, gasoline for commuting should not be counted as energy used to provide hair styling services. If Lorraine also does hair styling, but lives 60 miles aways, her commuting gas shouldn't be counted as necessary to the services she provides. It should be counted as paying for an optional lifestyle choice -- perhaps under the category of leisure or entertainment.

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Stuart Staniford on October 20, 2005 - 12:44am Permalink | Subthread | Parent | Comments top
I think this is a bit simplistic.  It's true that any individual could move closer to his/her job, but clearly everyone cannot move closer to their jobs without major changes in the housing stock (and it may come to that, but folks aren't going to opt lightly to subdivide the houses close to jobs while abandoning the ones far from jobs).  Even for one individual, generally the closer you go to major centers of employment, the more expensive it is to live there.  For example, where I live in the SF Bay Area, it is incredibly expensive to live close to the major employment centers.  So folks with moderate incomes must make a tradeoff between a small apartment close to work, or a larger place further away.  Different people make different choices.

Thus the easiest mode of change is to opt for more efficient transport (which people are now starting to do according to the car sales figures).

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JD on October 20, 2005 - 1:32am Permalink | Subthread | Parent | Comments top
You're definitely right about the difficulty of change, but I think the bottom line remains: gasoline for commuting is not actually used anywhere in the process of producing the relevant goods/services. The raw fact is that hair styling can be done without using 4 or 5 gallons of gasoline a day. Gasoline plays no functional role in providing the service of hair styling. So why should we say that gasoline is needed to provide hair styling's portion of the GDP? That portion of gasoline should be struck from "oil used to produce goods/services" because, just as a matter of bald obvious fact, the gasoline is not being used for hairstyling. There's no physical connection between gasoline and hair styling. People were styling hair for thousands of years before gasoline was even discovered.

This means that oil intensity is greatly overstated because it includes large volumes of oil being consumed for purposes other than actually providing goods/services.

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Donal on October 20, 2005 - 7:08am Permalink | Subthread | Parent | Comments top
Say your furnace or telephone stops working, and you call for service.  The tech will probably drive a very inefficient truck to your house.  He's probably driving around all day to answer calls.  Suppose you have a sore tooth or strep throat.  You probably have to drive to the dentist's or doctor's office.

Without the gasoline or diesel, you'd have to hope that one of your close neighbors was a heating contractor, telephone lineman, dentist or doctor - all with home equipment.  You might get Aunt Mildred to style your hair, but accessing goods and services generally requires transportation.  

Maybe planning or high gasoline prices will induce people to redistribute essential services more locally.  Or maybe some will wait longer for services, do without or be more self-reliant.

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JD on October 19, 2005 - 10:08pm Permalink | Subthread | Parent | Comments top
More generally, suppose you just go out for a drive, and burn x amount of oil to do so.

What product/service was provided with that oil? None as far as I can see. It's just pure waste.

Probably a good 25% of the oil used in the U.S. falls under this same category. Ten mile long twice-daily traffic jams full of idling single passenger vehicles in every major city aren't producing any product/service. It's just waste.

Maybe a more penetrating approach is to total up all the oil which is being burned to produce no product/service at all.

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68 comments on Is the Economy Less Sensitive to an Oil Shock?

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