ENERGY INDEPENDENCE ON THE HORIZON - The Power Surge: Energy, Opportunity, and the Battle for America's Future - page 72

taking seventy-i ve cents from that person and throwing it in the trash.
(If oil prices rise strongly but more slowly, perhaps over the course of
several years, greater reliance on domestic oil production can provide
more insulation, since companies have more time to reinject their prof-
its into the broader economy.) I hasten to add that this doesn't mean
corporate proi t or spending is bad; it just means proi ts ot en translate
slowly into spending—too slowly to immediately compensate for a sud-
den loss of broad-based individual wealth. h e net impact on the U.S.
economy isn't as bad as if the money went to the Middle East—some of
the windfall is now being quickly spent at home—but it's still nowhere
close to removing most of the ugly near-term consequences that may
exist.
h ere is, however, one more important piece of this puzzle:
lower average oil prices could also mean smaller price spikes. A sud-
den loss of a million barrels a day from world oil supplies could
raise oil prices by more than 50 percent. 41 If the starting point is
one-hundred-dollar-a-barrel oil, that means a i t y dollar rise, which
translates into a tax of a billion dollars a day on American consumers.
If abundant oil supplies drop average prices to i t y dollars a barrel,
though, the starting point is dif erent. h e shock to the system still
raises prices by 50 percent, but this now works out to just twenty-i ve
dollars. h e new tax on Americans is only half what it was before, and
the danger to the U.S. economy is reduced. It's this dynamic that may
hold the most promise for translating U.S. oil abundance into greater
security in a world of volatile oil.
I should pause briel y and point out something important: I haven't
actually said anything about how dangerous high and volatile oil prices
are, or even claimed they're all that bad. All I've shown is that if they're
as bad as many people think they are, more domestic oil production
won't change the conclusion much. I'll revisit the more basic question
of the real dangers of high oil prices in Chapter 5.

S o far, new oil production looks good, though not nearly as good

as some of its boosters have claimed. New U.S. oil output would
lower world crude prices, but the consequences probably would be
marginal rather than dramatic. More U.S. output would also help shield