Oil addiction's slippery slope.

• Author: Reynolds, Lewis
• Position: Public Policy

"[If we] continue on the present path, [we] face a future of escalating oil prices, a deteriorating domestic economy, and further entanglement in foreign conflicts...."

THE U.S. is harboring a poorly kept secret: the country is hooked on oil, and that addiction has deeply destructive consequences. As demand continues to increase and we more and more are politically and economically tied to the petrostates that provide us with oil, our situation becomes increasingly precarious. Our addiction has created a plethora of environmental, economic, and geopolitical problems, and now we are faced with two choices: continue on the present path and endure a future of escalating oil prices, a deteriorating domestic economy, and further entanglement in foreign conflicts or break the chains of addiction and move our focus to producing a safe, clean, affordable, and, most importantly, domestic energy supply.

We quickly are approaching "peak oil"--the point at which world oil production will reach its maximum point and then begin to decline because of supply limitations. Some would argue that peak oil already has been reached. World oil production essentially has been flat since 2004, although some of that may be attributed to political unrest in the Middle East as well as the fact that the OPEC nations sometimes produce less in order to jack up prices. With no viable alternative in place, decreasing supply and increasing prices will culminate in a predicament where people still need oil to go about the business of daily life--but no longer can afford it.

One certainly can envision a world where few can afford transportation, even to go to work. Because transportation is a component of virtually every consumer product, an increase in oil prices translates into a jump in all prices. If the problem became severe enough, movement of goods vital to the economy could stop. Essentially, the American way of life as we know it would come to an end.

Oil is harmful to the environment. Oil spills, global warming, carbon emissions, greenhouse gases--these are just a few of the hazards connected to our dependency. Fossil fuels are dirty substances, and the nature and scale of the international oil extraction efforts guarantee that there will be colossal mishaps. Tankers leak, as was the case of the Exxon Valdez, and drilling platforms explode, as was the case with British Petroleum's Deepwater Horizon. As serious as all of these accidents are, they could be minor compared to the potential impact from what is not an accident--the burning of fossil fuels.

Even if you do not believe in global warming, one thing is indisputable: atmospheric concentrations of carbon dioxide have been increasing for more than a century, and they will continue to increase as more fossil fuels are burned. Whether you choose to ignore well-established science that carbon dioxide is a greenhouse gas and that the greenhouse effect has the potential to affect global temperatures is your choice. Still, wouldn't it be wise to find alternatives to fossil fuels before the effect of global warming is so pronounced that even the skeptics start to believe it?

Oil causes ongoing damage to the U.S. economy (and weakens America's power in the world). Oil dependence slowly is eating away at the true source of American power (the economy), as each year the U.S. exports more and more of its wealth in exchange for oil. U.S. trade deficits have created a situation that forces reliance on overseas capital to support the economy. Much of that capital comes from the petroleum exporting countries that, in turn, get it from oil consumption by American businesses and consumers.

The U.S. economy is based less on producing either goods or services and more on consumption. This drives what is known as the petrodollar system. It begins with the purchase of oil by the U.S. consumer, which sends massive dollar-denominated cash flows to oil-exporting nations. In addition, U.S. consumers buy imported goods resulting in flows of dollars to those countries. In turn, the manufacturing nations must purchase oil, which they accomplish with the dollars they obtain from selling products in the U.S. market. At this point, the oil exporters are awash in dollars, which they either must spend or invest.

The consequence is that, to a large extent, governments in the Middle East are funded by American consumers. The same money you use to fill your gas tank ultimately is funding things like terrorist groups and the Iranian nuclear program but, perhaps more importantly, it is...