Morrison

The failure of American policymakers, in the public and private sectors, to chart a long-term sustainable course for their nation's use of energy was dramatically uncovered last year. Then, oil prices had skyrocketed, setting a record of over US$140 per barrel. Moreover, volatile markets threatened to send prices to US$200 per barrel or more, territory considered unimaginable 10 years earlier when oil traded at less than US$10 per barrel.

As the summer driving season arrived and gasolene prices went over the US$4 per gallon danger mark, panic set in. Ultimately, high energy prices, combined with the financial crisis to tip the US and the rest of the global economy into the worst recession for over 60 years. With their wealth savaged and jobs disappearing at record pace, there was swift adjustment by Americans to energy use in their transport sector.

Almost overnight, American motorists abandoned gas-guzzling SUVs, turned to riding the trains, and bypassed low-mileage cars from dinosaurian American carmakers GM and Chrysler. Soon, these giants of US industrial supremacy were teetering on the brink of bankruptcy. But some observers still doubt that Americans are ready to give up their appetite for big cars.

efficiency-enhancing steps temporary

Bred on cheap foreign oil for generations, US consumers had been sporadic in attempts to restrain their profligate use of energy when confronted by previous oil-price shocks in 1973-74 and 1979-80. Though efficiency-enhancing steps were taken and technical innovations cut energy used in producing each $1,000 of goods and services by over 15 per cent, their voracious appetite was only curbed temporarily. In the same period, the Japanese, Germans, British and Scandinavians had achieved reductions of 20-30 per cent By the late 1980s and 1990s, America was back on a course that intensified its consumption of energy to the point where in 2007, it accounted for over 20 per cent of world oil consumption, though its population was just five per cent of that of the entire globe.

Long ago, before Jamaica ceased being a British colony, we had begun the shift into the American cultural orbit. This accelerated with the massive migration in the 1960s, 1970s, 1980s and the first half of the 1990s, leading to the full assimilation of American tastes and mind-set in many aspects of Jamaican life. Profligacy in energy use is one of these, except that the intensity of energy use in Jamaica has hardly shown in any decline since the 1980s.

In 1987, Jamaica used 3.59 barrels of oil, or its equivalent to produce each US$1,000 of goods and services, but this increased by 37 per cent 10 years after in 1997. Over the same period, the consumption of energy per person had moved up from 5.61 barrel per year to 10.31, or by nearly 84 per cent. And judging by the steady growth in electricity consumption by households, up to the mid-2000s, this figure would have climbed.

A big influence on our growing demand for energy would have come from the modernisation of living conditions. Specifically, the aggressive push since the mid-1970s to bring electricity to rural areas and even dense urban centres in poorer communities lifted the number of the Jamaica Public Service's residential customers from 230,366 in 1988, to over 500,000 by 2007. Access to refrigerators, televisions and a wide range of modern appliances has obviously expanded massively.

The real surge has been in the use of energy for transport and particularly road transport, which stood at around four million barrels of oil equivalent in 1992, but reached roughly 6.4 million barrels by 2006, an increase of 60 per cent. With the liberalisation of motor vehicle imports, this society has spent a huge chunk of its capital on cars.

capital short

Indeed, prior to the freeing up of the system, car imports amounted to just US$46.5 million in 1992, but had quadrupled by 1997, reaching a whopping US$183.9 million. In all, we spent US$1.4 billion on cars in the 1991-2001 period, or an average of nearly US$130 million per year. At the same time, the banks were telling us that capital was short for retooling the productive sectors. And up to three years ago, when interest rates were relaxed, we were bombarded with bank ads offering special terms for car loans.

But the population went along; and critics of this plunge into a car-centric culture were derided because owning a car was the in-thing. Political leaders dared not show foresight as to the consequences, for in the market where they compete for voters this is not something which is rewarded. Thus, the voices in support of public transport were muted even as the danger signs were already clear that, left unchecked, our oil bill would escalate to unsustainable levels. Last year's oil-price shock should have brought this fully into the public consciousness.

Now we know that our economy is uncompetitive at current rates of energy use and as oil prices rise, things will only get worse. Moreover, a rapidly increasing oil bill adds enormously to the country's foreign debt. This means that standards of living will fall unless our energy systems and pattern of use are overhauled.

Americans in both the public sector and in business are readying themselves to make radical changes. As yet, there are few definite signs here, and our business sector especially, still appears lethargic in getting to work on the energy problem.

Dennis E. Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.