Stuart Staniford put together a chart showing that U.S. oil efficiency has been improving dramatically of late, as crude prices have risen. It’s not just that people are pulling back on driving their cars. Every time oil starts spiking, Americans figure out how to wring more and more economic activity out of a single barrel of crude:
You can trace the history of America’s love affair with oil in this chart. Before the 1970s, Americans hardly agonized at all about prices at the pump. Then the OPEC shock came, and Americans started improving their oil efficiency in a hurry (thanks, in part, to the introduction of strict new fuel-economy standards for cars and light trucks in 1978). We started getting complacent again in the 1980s and 1990s, when Saudi Arabia flooded the market with oil and prices collapsed. But that changed in the 2000s, when global production plateaued, millions of middle-class consumers in China and India started owning vehicles, and oil prices spiked again.
In this environment, the only way for the United States to grow its economy is to do more with less. Which we appear to be doing, albeit slowly. Some of Staniford’s commenters suggested that this improved efficiency has been due to the “financialization” of the U.S. economy (Wall Street doesn’t need too much fuel, after all), but the statistics don’t seem to bear this out. Nor does the improved oil efficiency appear to be due to the fact that U.S. manufacturing jobs have been fleeing overseas. True, the United States has outsourced about 11 percent of its carbon emissions to countries such as China (they pollute and we buy the products), but most of that appears to be in the form of coal and natural gas used to power heavy industry.
So the United States is legitimately getting more oil-efficient as crude prices have risen. For example, the University of Michigan’s Michael Sivak keeps a handy data set showing that the average fuel economy of new vehicles sold in the U.S. has risen in recent years. That should improve further once new, stricter CAFE standards for cars and light trucks kick in.
The trouble is that this increase in efficiency hasn’t been fast enough to offset the rising price of oil. The United States might be consuming less and drilling more, but it’s still at the mercy of global forces that affect crude prices everywhere. To take one example, there’s been a lot of hype over North Dakota’s Bakken shale field, which now produces an impressive 500,000 barrels of oil per day. But that’s only about the size of the one-year uptick in Chinese oil consumption between 2010 and 2011.
So even with increased efficiency, the United States is still getting hammered by rising oil prices. One place to see this is in import data. America now imports 15 percent less foreign oil than it did in 2005. Yet prices remain stratospheric, thanks to healthy demand overseas and the tense situation in the Middle East (Libya last year, Iran this year). And so, even with imports falling, the United States still paid more for foreign crude in 2011 — $326.5 billion — than it did in any year save for 2008. Likewise, Americans are driving less, but they still paid $102 billion more for gasoline last year than they did in 2010.
We might be able to squeeze ever more economic activity out of a given barrel of oil. But if oil prices rise even faster, that can still lead to less economic activity overall. And right now, we’re still losing the race against oil.