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In particular this has led to the massive growth in SUVs. The tough and independent image of driving an SUV is exemplified in the names of these vehicles – Path Finder, Trail Blazer, Escape, Explorer, Expedition... The growth in large, high petrol consuming vehicles has been massive. SUVs presently account for a quarter of new vehicle sales compared to only 2% of new vehicle sales in 1985. In terms of fuel efficiency SUVs perform poorly – typically averaging only 12 mpg in town.
An additional factor that has contributed to the growth in SUVs is their exemption from the federal corporate average fuel economy (CAFE) standards. These standards set fuel efficiency goals for new passenger cars at 27.5 mpg. However, under the law, SUVs are characterised as light trucks. Light trucks only need to achieve 20.7 mpg on average, which is why some SUVs actually achieve less than this.
What’s the problem?
In September 2005, pump prices in the USA rose above $3 a gallon, as the price of crude oil climbed above $70 a barrel. Surprisingly however, even at $3 a gallon petrol prices are not the highest by historical standards. In 2005 dollar-terms, petrol prices topped $3.11 in March 1981, according to the American Petroleum Institute. This analysis by the US Petroleum Institute also rejected another fallacy that the rise in crude oil prices was the main factor in the increase in petrol prices. Indeed, the analysis found that crude oil costs actually declined by 34% per gallon from $1.92 per gallon in 1981 to $1.58 per gallon by September 2005. The most significant increase contributing to the rise in petrol prices at the pumps has been in taxes. In September 2005, federal and state taxes collected on a gallon of petrol, amounted to 45.9 cents in comparison to 31 cents per gallon in 1981. Thus both taxation and the increasing cost of crude are key areas for concern.
In his State-of the Union speech President Bush highlighted the need for the US to reduce its reliance on imports. Energy-security experts, who have grown in number and visibility since September 11th 2001, have raised fears of the likelihood of a hostile group or regime taking over Middle Eastern oilfields and turning off the taps. With the dependence on oil all too apparent, such a supply shock would be devastating for the world, particularly those countries heavily dependent on oil from the Persian Gulf.
Data from the EIA, reveals that US crude oil and petroleum imports, accounted for about two thirds of consumption in 2005. This was more the result of falling domestic crude oil production, which has contracted every year since 2000. While this appears to be a high level of import dependency, by international standards it is in fact quite modest. Japan, the second largest economy in the world, and Germany, the leading economy in Europe, practically rely on 100% imports. In fact, 80% of Japanese imports of crude oil come from the Persian Gulf.
Moreover, the main sources of US imports are not from the Persian Gulf or even OPEC (Oil Producing Exporting Countries). In 2005, Canada, Mexico, Ecuador and Venezuela, US neighbours, supplied 40% of US imports. In contrast, imports from the Persian Gulf were a mere 17% of consumption. Two thirds of this was from Saudi Arabia a long-standing economic and political ally. Thus, the anxiety over import dependency on Capitol Hill may be misplaced. This view is shared by people such as, Donald Losman who in a paper published by the Cato Institute, calculates that America ‘wastes’ $30-$60 billion a year safeguarding Middle Eastern oil supplies even though its imports from that region totalled about $10 billion a year during the 1990s.
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