The Oil Drum

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

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JD on October 19, 2005 - 8:56pm

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

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

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

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.