Oil Vs. Alternative Energy Sources

No government is perfect, and each faces its own issues of varying degrees. America, like any other country, certainly has its share of problems. Obviously, the government cannot tackle them all at once. Some concerns must take precedence over others, though. These more immediate and important ones may affect or even be the cause of others. The most urgent concern our country faces at present is oil prices. Data presented by Inflation Data show that oil prices have risen every year since 1946 and are only reaching even higher price levels (Inflation Data). This one resource impacts our economy tremendously and, therefore, is one of the most important issues our government must deal with.

Oil is the backbone of our economy, so to speak. It is the chief foundation of our transportation system, which affects each aspect of our lives. Without the means to power our transportation, the economy would suffer greatly. There would be a massive negative impact on trade, which, consequently, would lead to a lower standard of living.

Have you ever noticed how when the cost of gas prices goes up, everything else eventually does too? Gas prices don't only affect the price of what goes in our gas tanks. It affects the price of what goes in our shopping carts too. Even something as simple as the price of potatoes will sky rocket when gas prices increase because food items such as these have to be hauled in large gas guzzling trucks. Put in that perspective, whether we realize it or not, oil prices affect almost every aspect of our lives.

Obviously, transportation is a necessity. Yet, with the depletion of our natural resources, it is also becoming apparent that we need to find some other source of energy to replace crude oil. There is only a limited amount of natural resources, and we are constantly consuming it. What are we going to do when these resources are gone? We have become much too dependent on oil and need to find another source of energy. According to the Energy Information Administration (EIA), Americans consume 9.286 million barrels of motor gasoline per day (Energy Information Administration). With technology at the point it is today, there's no reason why we shouldn't be able to develop or discover some other energy source. In fact, hybrid automobiles have already been developed and marketed, proving that there are other means to support transportation than gas-powered vehicles.

What can the government do to help solve this crisis, though? Of course, the government cannot be expected to solve the problem in its entirety. There are, however, many steps that the government can take to help address and redefine this issue. As has been stated previously, the most effective thing that can be done to remedy this dilemma is to implement alternative energy sources. Yet, this goal is much too broad to be achieved all at once. There are three courses of action that the government can take to help achieve this end, though.

First of all, the government can impose a price ceiling on gas. As basic economic principles tell us, a price ceiling will cause a product to fall below its equilibrium level, the point at which the quantity supplied meets the quantity demanded. At the lower price, suppliers won't produce as much crude oil as consumers demand, thus, creating a shortage. This, in turn, will force consumers to purchase other substitutes for oil, which will also, consequently, provide incentive for other suppliers to produce more alternative energy sources to gasoline. (Gwartney, Stroup, Sobel, and Macpherson)

Furthermore, the government can establish an import quota on foreign oil. With a legal limit set, producers will be compelled to either drill within the country or, once again, look elsewhere for energy sources. Due to a limited amount of this resource within our borders, chances are more favorable that they'll have to pursue the latter course of action.

Lastly, the government can encourage alternative energy development by providing funds in the form of categorical grants that are intended for the purposes of research and development of newer and more efficient energy sources. According to The White House, the government spent more than 4 billion dollars on foreign aid in 2007, not including the aid that the nation used for public assistance and such (The White House). If some of the money that is currently being spent on aid were relocated to better programs of use, such as alternative energy development, the economy will benefit more so than it would otherwise. Not only could the government provide grants for research, but it could provide advertising and educational grants to further promote the cause.

Alternatives to crude oil would benefit the United States in many ways. One of the most distinctive benefits would be less dependency on foreign oil. With alternative energy sources, the U.S. would be less dependent on foreign countries for resources. Independency is always a state for a nation to strive for in that it makes the nation stronger and more powerful. Dependency on other countries for oil can (and may have already) lead to conflicts and controversies that could otherwise have been avoided. A quote from T. Boone Pickens states that, "America is in a hole and it's getting deeper every day. We import 70 percent of our oil at a cost of several hundred billion a year. I've been an oil man all my life, but this is one emergency we can't drill our way out of. But if we create a new renewable energy network, we can break our addiction to foreign oil." In addition, he suggest a whole plan outlining how we could achieve this called the Pickens Plan, which I found to be a very noteworthy source (Boone Pickens).

Secondly, the development of other sources of energy would generate more domestic jobs. Consequently, this new generation of jobs would decrease the unemployment rate. Furthermore, a lower unemployment rate provides for grosser domestic product, which causes the economy to be more productive and efficient, therefore, increasing the standard of living.

Lastly, but certainly not least importantly, the environment would greatly benefit from other sources of energy. Gasoline exhaust fumes are one of the worst forms of pollution. This harmful exhaust contaminates our air supply, destroys our ozone layer, and contributes to global warming, in addition to other hazardous effects. Safer and less pollutant and toxic sources of energy would improve the atmosphere of the world we live in.

Crude oil as our primary source of energy is, in my opinion, the largest economic problem that the U.S. faces today. Development of alternative sources of energy is crucial. The government's support by way of price ceilings, import quota policies, and grants is vital as well. It would benefit the economy by providing less dependency on foreign nations, more job generation, and less environmental contamination. Clearly, with a bit of economic structuring, the government could contribute to the elimination of this crisis, thereby benefiting our economy as a whole.

Links: http://www.whitehouse.gov/ask/20061201.html

Other sources: Gwartney, Stroup, Sobel, and Macpherson. Macroeconomics, Private and Public Choice. 12^th edition.http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbblpd_a.htm