Can we afford clean fuels?
In 2011, The Economist reported, “Two factors determine the price of a barrel of oil: the fundamental laws of supply and demand, and naked fear.” The volatility of crude oil prices exposes our economy to significant risk and costs on an annual basis. Because demand is relatively inelastic, price increases are typically absorbed, meaning less is spent on other goods. International Monetary Fund finds that a 10 percent increase in the price of crude reduces global GDP by 0.2-0.3 percent in one year, significantly hampering the modest growth our economy has seen in the last few years. In order for our economy to stabilize and be resistant to price spikes, oil expenditures should be at less than 1 percent of the GDP. With so much money being wasted on our oil dependence, the question becomes, “How can we NOT afford new sources of fuel and greater efficiency?”
Many of these new sources, if commercialized, are currently or expected to be cost-competitive with producing petroleum-based gasoline and diesel. Added competition in the marketplace will provide more choices to consumers as well as a buffer against global oil prices.
As petroleum reserves diminish, oil companies must spend significant sums annually on exploration and capacity expansion to assure that supply can continue to meet demand. The five largest oil companies alone invest over $100 billion annually in exploration and capacity expansion, calculated by combining the companies’ public financial statements.
Providing a stronger market signal to diversify investments to cleaner fuels will help ensure that we are developing renewable supplies that will not run out.
In terms of jobs, growth in advanced renewable fuels will require an expansion of new jobs to construct and operate new biorefineries as well as to modify existing refineries with bolt-on technologies.
For more information about what the clean fuel industry might provide to your local economy, see the Clean Fuel Industry pages.