We all know that sooner or later world wide oil production will peak out and the oil industry will not be able to meet rising world demand. Thereafter, prices must rise to ration the limited supply. Accordingly, it seems to me, we would be foolhardy if we fail to anticipate that the advent of the petroleum production peak will be accompanied by a hefty increase in the price of oil. A $1 a gallon price hike would drain $400 billion dollars annually out of our economy.
But that is only part of the story. America, of all nations, is by far the most dependent on the automobile. Our suburbs are that part of the automobile city that extends beyond the limits of the former transit-dependent cities. Without the automobile, suburbia would have to shrink back to transit-dependent city dimensions. These former cities have small, densely populated neighborhoods where people can easily walk to bus stops. The disappearance of the automobile from these neighborhoods would revitalize the transit system and provide an alternative to the automobile.
No such alternative is available to suburbia. The neighborhoods in suburbia are very large and sparsely settled. Prolonged reductions in the supply of gasoline could lead to chaos on a monumental scale. We now have 60,000 square miles of suburbia with 60 million single-family detached homes housing 150 million people. Millions are young families bought the largest home they could afford at the furthest reach of the city where land was cheapest. They expected future pay raises would ease their ability to pay the monthly costs of their mortgage and car payments. They would be forced to improvise cheaper but less convenient travel arrangements or even to try to sell their home in suburbia to seek a home in an area served by transit. They would find that the value of their home has plummeted and that housing costs in the transit areas have skyrocketed. Perhaps millions of mortgages would not be paid.
Suburban property values would drop. Using an average value of $65,000 per home, these 60 million homes would be worth $4 trillion. A mere 10 percent annual drop in their evaluation would equal a loss in wealth of $400 billion. Add that to a $400 billion loss from a $1 gasoline price increase and we have the potential for an $800 billion annual loss in American wealth. Clearly, we must urge the Congress and the Administration not to let this happen. But we must also provide them with a plan. Accordingly, I offer such a plan.
My research has shown that one-third of the intercity vehicle miles occur on less than 20,000 miles of the main highways. I have also made a rough estimate that an additional 8000 miles of urban roads carry at least one-third of the urban vehicular traffic. Thus, we see here the possibility that by installing 28,000 miles of guideway, we might achieve a one-third reduction in gasoline usage in America. This is equal to about one billion barrels of oil annually, or one seventh of American oil consumption. However, the total reduction in oil consumption would probably be much higher because of the guideways ability to attract traffic to itself. The high velocity of the HiLo guideways is sure to concentrate travel along its path. Its high capacity will easily handle this added traffic. We may find that by the time we complete 28,000 miles of guideway, we will have reduced the demand for oil by 1.5 billion barrels.
We can achieve further reductions in the demand for oil if we can provide incentives to people to convert to 60 mpg cars and to electrical cars and also to convert from oil furnaces to natural gas furnaces and heat pumps. We can use an energy fuel tax to achieve these purposes. Tax receipts could also be used to build the new guideways. A 25 cent energy conservation tax on every gallon of oil sold in America would generate $100 billion per year, all of which would be recycled back into the economy. I propose that no less than 5 cents of this tax be used to reimburse the cost of replacing oil furnaces. I propose that the balance of the tax be used to build electric guideways. I also propose that 60 or more mpg cars be reimbursed for the 25 cents energy conservation tax they have paid. Perhaps the total reduction in demand might reach 3 billion barrels by the time we complete 28,000 miles of guideways.
The forecasts of when world oil production will peak out are in dispute. One scientific estimate states that demand will overtake production in 2004. Another estimate suggests some kind of peak will occur in 2016. Prudence dictates that we should prepare for 2004 and do our best to lower demand enough in the next three years to postpone the occurrence of the peak at least a year or two. [See: Another Wolf at the Door]. As our plan takes further hold, further reductions in demand will occur. Again, we postpone the occurrence of the peak. Rapid progress in implementation of the plan might even result in staying ahead of its occurrence through 2010 but clearly, it will be touch and go. But let us hope that 2004 is an incorrect forecast. If this plan is deemed to be the best plan to follow, we must implement it quickly. [See: Annual Energy Outlook 2001 with Projections to 2020]
Will the imposition of this tax succeed in reducing Americas use of oil by one-half by 2010? If the answer to this question is yes, then our energy situation may become much rosier. By 2010, the tax receipts from oil sales will have been cut in half, but the additional revenues from the guideway tolls would make up the loss and might be enough to allow continued expansion of the guideway system. By 2020, perhaps enough of the travel would have been converted to the electric guideways to ease the severity of the transportation energy problem. By then, we will have created a sufficiently large alternate fuels industry to handle the remaining automotive travel needs. Also, cars will not have to be as sturdy. They will be lighter in weight and perhaps will be able to achieve 90 to 100 miles per gallon of oil.
I think legislation is needed to accomplish four activities: (1) pass the 25 cent oil conservation tax; (2) develop the HiLo dualmode technology; (3) begin building the guideways; and (4) help industry build the electric power plants we will need to replace oil as an energy source. I would start construction of the guideways in the Northeast corridor and in the Los Angeles area where the heaviest traffic occurs.
I realize that this may not be the best time to push for a new tax. But, I have no doubt in my mind that the danger we face from the threat to our transportation is greater than the threat of terrorism. We have the military and diplomatic and, hopefully, the medical means of handling the terrorist attacks. We do not have a ready substitute for oil.
Last modified: October 24, 2001