Economy of Fossil Fuels

American society is vernacularly known for its high consumption and large scale living style. This trend of flamboyant living requires high amounts of energy to support it. According to the US energy information administration, the federal agency tasked with collecting data of energy consumption states that “primary energy consumption in the United States reached a record high of 101.3 quadrillion British thermal units (Btu) in 2018, up 4% from 2017 and 0.3% above the previous record set in 2007”. The increase in 2018 was the largest increase in energy consumption, in both absolute and percentage terms, since 2010 (McFarland). For these reasons, it would be easy to conclude why the United States of America (US) is heavily reliant on cheap and reliable fossil fuels that are, in theory, able to sustain the high demand of energy efficiently.

Unfortunately, these methods of energy including coal, natural gas, and petroleum are known to come at an expensive environmental premium when used and excessively and international bodies such as the UN have set in motion plans to attempt to reduce the global Greenhouse emissions (GHE). An often-overlooked side of the fossil fuel industry is not how it hurts our environment but how it hurts our economy. The energy industry’s economic inefficiency is created through the nations over-reliance on production of fossil fuels, underspending on research to diversify the national energy portfolio and successful lobbying by big oil companies to secure government subsidies

The heavy reliance on fossil fuel to fuel the economy has left open the possibility of the emergence of an economical void if resources are compromised. Certain events where the availability of oil has been compromised has already proven to have the capability to destroy our economy. Take the 2008 economical crisis, for example, In a paper presented at the Brookings Panel on Economic Activity, University of Calif.-San Diego renowned economist James Hamilton crunched some numbers on how consumer spending responds to rising energy prices and came to a surprising result: Nearly all of the 2008 economic downturn could be attributed to the oil price shock (Hamilton).

When an over-reliance on oil occurs, the inevitable event of the fossil fuel running out becomes increasingly worrisome as it would bring down the economy with it. Historically the longevity of oil and fossil fuels alike has been predicted to have a grim and short life cycle yet somehow it seems to be proven wrong time and time again. As author and chief of the department of cybernetics at the University of Reading explains on one of his many works over oil, “From as early as the nineteenth century there have been warnings of oil exhaustion that have proved premature. Many of these, however, (including some enumerated by the U.S. DoE) correctly indicated that production from a particular region or country would decline, but overlooked the scope for new discoveries elsewhere.” these repeated mistakes by the scientific community to set an accurate forecast have left an impression “ boy who cried wolf” (Bentley).

Unfortunately, one thing is for certain, while the exact date of perishability is unknown, one definitely exists and when that day comes, havoc will ensue. The 2017 U.S. Energy and Employment Report (USEER) finds that the Traditional Energy and Energy Efficiency sectors today employ approximately 6.4 million Americans. These sectors increased in 2016 by just under 5 percent, adding over 300,000 net new jobs, roughly 14% of all those created in the country. Most of these jobs are centered around nonrenewable energy and thus are not stable in the long term (US department of energy). With current estimates predicting the end to this industry in as early 2040s, failure to transition dependance into more stable energy resources has the potential to spark mass unemployment and a lack of energy. Further, this possible lack of energy would not only hurt the 14% in the fossil fuel industry but would most likely hurt those involved in multiple other sectors; lack of production for these companies means lack of profit and thus stimulation.

America’s overdependence on fossil fuels not only eludes to possible economic horrors but is currently causing them. A lack of government investment in departments that produce R&D is jeopardizing the future and present. James Ellsmoor, the founder of the Virtual Island Summit, a Forbes 30 Under 30 entrepreneur, and a Forbes writer with a dedicated passion for sustainable development and renewable energy states that a new International Monetary Fund (IMF) study shows that USD$5.2 trillion was spent globally on fossil fuel subsidies in 2017. “The equivalent of over 6.5% of the global GDP of that year, it also represented a half-trillion-dollar increase since 2015 when China ($1.4 trillion), the United States ($649 billion) and Russia ($551 billion) were the largest subsidizers” (Ellsmoor).

Further, the same IMF study also stated a reduction of subsidies into what they were in 2015 would not only reduce the carbon footprint but would also increase GDP by 3.8% (Coady, David, et al.). This high expenditure is extremely counterproductive. Not only has the rato of expenditure between fossil fuels (dirty) and clean energy rise to 10:1 but currently the ratio of expenditure between dirty energy and education by the government is 7:1(NCES). According to an article with Art Jahnke, an award-winning journalist, and writer for Boston University, 70- 80% of able and published research is funded by the government as without the government money completion would not be possible (Wetzler, Lee, et al.).

Absence of able funding in institutions such as universities and private sector energy companies, which often do a large amount of groundbreaking research, puts a strain into the capabilities that the nation has in transitioning into a more efficient and cost-friendly clean energy future. In a paper published by the Environment America Research institution, the researchers concluded that the United States has the ability today to produce this energy, and to help “Americans use energy more efficiently in their homes, businesses, and vehicles” through apt funding and research from outlets like that of private corporations and universities. (Payne, Dudzdik, and Figdor).

Lastly, the economic inefficiency of fossil fuels stems from corruption. As mentioned, most spending on energy and all subsidies goes into dirty energy in some cases for obscure reasons. According to Oil Change International, between January 2011 and June 2012, dirty energy companies spent at least $43.5 million on influencing federal elections in America.

This figure includes money spent not only on contributions to sitting members of Congress, but also to congressional candidates who lost elections, presidential races, and the money flowing into Super PACs. This corruption negates clean energy companies from receiving support and keep fossil fuels cheap while inflating the cost of green energy as no support is given economically nor politically. Wal van Lierop a supporter of the idea that subsidies yolk energy progress, Ph.D. of economics and president of CEO of sustainably aimed Chrysalix Venture Capital, states in a Forbes article that BP, Shell, ExxonMobil, Chevron and Total spend a combined $200 million per year on lobbying “designed to control, delay, or block binding climate-motivated policy,” and spend an additional 195 million on advertisements made to appease the public and pain a false image (Lierop). These actions made by “Big Oil” keep taxpayers funding the ventures of these companies and neglects smaller clean energy companies the economic boost they would need to compete with “Big Oil” who essentially has built a monopoly on the industry.

American society has become complacent and reliant on dirty energy. The current situation of the energy industry, while it does meet with local demands of most individuals, is not sustainable. Through this process of burning fossil fuels, America is not just hurting the economy, its environment but the global environment. A study published by a group led by the International Institute for Applied Systems Analysis (IIASA), concluded that eliminating fossil fuel subsidies could curb global greenhouse gas emissions by as much as 5% through 2030 while saving the American people money (Jewell, McCollum, et al.). Further, this reduction of money spent can be reintroduced as money supporting clean energy and other institutions that aid the American future such as education and environmental preservation. Continued uncontrolled use of dirty energy will not only hurt America but the global future. Necessary acts must be taken now to secure a sustainable and productive road ahead.

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