Environmental Engineering Reference
In-Depth Information
FIGURE 4
Brownian-motion random walk of world real oil prices. (Rocky Mountain Institute)
There could have been two times you experienced long gas lines: once
in 1973, when the oil price shot up, and therefore demand grew more
slowly than it had before; or the second oil shock in 1979, when there was
the worst price jump after the Shah of Iran fell. In fact, at one time the price
went up so much that demand actually went down, to the point where—
guess what?—the price came down again, and then demand went up again.
It kind of does what the textbooks say. But if price is perfectly random,
which it seems to be historically, you do not really want to depend on it for
public policy goals. If we had kept on saving oil as rapidly after 1986 as we
did for the previous 9 years, we would not have needed a drop of oil from
the Persian Gulf since then.
The biggest part of our oil thirst has to do with cars, and we did in fact
have a very successful policy called Corporate Average Fuel Economy
(CAFE) standards, which was largely or wholly responsible for cutting in
half the fuel intensity, the gallons per mile, of our cars, except then we stag-
