Please enjoy my office’s newsletter discussing oil dependency, how we got here and what we can do about it.
How We Got Here
The automobile did not come to dominate American transportation by chance or by public choice. It happened as part of a plan by automakers to buy up and destroy mass transit companies. Between 1938 and 1950, National City Lines and its subsidiaries, American City Lines and Pacific City Lines—with investment from General Motors, Firestone Tire, and Standard Oil—gained control of transit systems in about 25 cities.
Beginning in the 1920s, General Motors began investing in mass transit systems. According to historian Marty Jezer (and Congressional hearings held in 1974), between 1920 and 1955, General Motors bought up more than 100 electric mass transit systems in 45 cities, allowed them to deteriorate, and then replaced them with rubber-tired, diesel-powered buses. Buses are more expensive, less efficient, and much dirtier than electric/rail systems. (And of course, automobiles are even less efficient than buses, by far.)
In 1949, General Motors, Firestone Rubber, and Standard Oil of California were convicted by a federal jury of criminally conspiring to replace electric mass transit with GM-manufactured diesel buses; in a noteworthy illustration of justice for corporations, the court fined GM $5,000 and forced H.C. Crossman, the GM executive responsible for carrying out GM’s policy, to pay $1.00.
At this point, the vision of America’s future switched from rails to roads. Shortly thereafter, the United States had an interstate highway system which led to the creation of suburbs, shopping malls and many of the other business/hallmarks we associate with suburbia.
Oil now has great power over us, with nearly everything we use—transportation, medicine, plastics, the commodities that lubricate our economy and run our entire civilization—being made from crude oil.
Oil dependency is much worse today because now the United States is no longer the main country using oil. Global demand has increased, and China, with its growing population and middle class, now has a greater demand for crude oil than the United States. China has become a consumer society, with China being the world’s largest car market.
Currently, the United States represents a small percentage of the world’s population but accounts for nearly 20% of the world’s oil use.
In 2008, with oil hitting $147 per barrel, prices for everything rose and the stock market fell 177 points. Studies and history prove that the unemployment rate and the price of oil correlate—unemployment soars with the high price of oil. We become dependent on oil and the corporations who control oil continue to control us.
However, there is no need to worry because we, as a society, do not need oil to run our economy. The power oil has over us can be destroyed with competition. Nikola Tesla invented the electric motor and Elon Musk, the CEO of Tesla (who named the car company after the inventor of the electric motor) has shown that cars can use effective lithium-ion batteries like the ones you find in your laptop.
A country can drastically reduce its need for oil and Brazil serves as a prime example of that. Lula da Silva, the former President of Brazil from 2003-2011, eliminated Brazil’s dependency on oil. In Brazil, every service station has an ethanol pump and every car can run on ethanol. Ethanol is a type of flex-fuel which every car can be easily converted to run on.
Lula da Silva made Brazil totally independent from foreign oil, which was one of his central goals. He believes oil dependency can be broken because, in his own words, “I’m a dreamer and believe we can conquer this” —which segways nicely into the topic of next month’s newsletter on entrepreneurship.