I liked Ezra Klein’s column over the weekend on the true cost of oil, but I thought this was a bit of a false note at the end:
That gets to the bigger issue, which is that energy sources are cheap or expensive only in relation to one another. And the heaviest anchor beneath our reliance on oil is that, at this point, there’s nothing to replace it with.
“We’re pretty much stuck with our dependency on oil,” Parry says. “We don’t have any substitutes. Even if we hugely increase the price on oil, we’d only have limited impact on it. People need to drive and get to work.”
Obviously there’s some truth to this, but I think it’s important to not to unduly bewitched by thinking about technical innovations. For one thing, we have perfectly good substitutes for the fifteen percent of oil we use for heating and could get people to switch away from that quite quickly if we cared to. People who are driving to work and other places can be more or less conscious of how much driving they do. While many Americans live in places where there’s no decent walk/bike/transit option, many other Americans do live in places where such options exist.
More to the point, over the medium-to-long term price signals will get people to make different fixed investments. Completely leaving aside the possibility of future technological developments, right now some cars burn much less gasoline than other cars. And almost every car currently on the road will be replaced at some point. If gasoline is very expensive, people replacing their cars will be inclined to replace them with efficient models. Similarly, over time people we’ll keep building new houses and offices and shops and new pieces of public infrastructure. Low-oil technologies such as busses, trams, trains, and apartments over retail exist already in 2010.
None of that is to deny that substantial adjustment wouldn’t be easy or that technological improvement wouldn’t be desirable. But per capital oil consumption varies dramatically from country to country even though we all have access to the same technology. Americans consume a lot of oil because of policy choices, not because of a lack of technical know-how.