America’s Gas Guzzling Days May End Next Year

Reuters reports:

Demand for gasoline in the United States, which accounts for a tenth of global oil consumption, is expected to peak next year as engines become more efficient, WoodMackenzie analysts said.

Global demand for gasoline, which accounts for more than a quarter of the world’s oil consumption, is set to peak as early as 2021 even in the face of relentless growth in the vehicle fleet, according to the Edinburgh-based consultancy.

Since the Energy Crisis of 1973, when Arab nations boycotted the United States for its support of Israel during the Yom Kippur War, American policymakers have dreamed of energy independence.  So too have all energy importers.  As oil remains a key resource for both military and civilian sectors, anyone who controls the spigot can exact powerful influence over those who must drink.

But the United States has made great strides in overcoming foreign oil.  Greater fuel efficiency in vehicles, greener energy sources, and shale oil have all combined to drop oil imports from their 2006 peak of 3.6 million/thousand barrels to 2015’s 2.6 million/thousand barrels.  That drop brings US oil imports back down to the levels of the late 1990s.

This is not a straw that break’s anyone’s back, but it will cause considerable panic in one place: Saudi Arabia, which has staked its geopolitical future on an unbreakable alliance with the United States.  After 1973, the Kingdom’s oil people concluded that the embargo had been a strategic failure: rather than encouraging America to ditch Israel, then a stalwart Cold War ally useful in the proxy struggles with the Soviets in Syria, Egypt, and Lebanon, it forced the Americans to seek alternative energy and get off foreign oil altogether.

The Saudis realized they could not bully a superpower.  Instead, they decided to become a model ally.  They have prevented any new embargoes, used their oil wealth to buy almost exclusively American military kit, hire American contractors to develop the Kingdom, and invest in the United States itself.

Oil wealth also has allowed the Saudis to develop a cradle-to-grave welfare system for its citizens while soaking the upper echelon of Saudi’s royalty in luxury.  Yet each decade has made both more expensive, and there is a real fear in Riyadh that it is not oil that will run out, but the world’s appetite for it.

Thus Saudi Arabia’s 31-year-old Prince Mohammed bin Salman, the deputy crown prince and Defense Minister, has embarked on Vision 2030, a dramatic economic modernization program designed to save the Saudi monarchy and the Kingdom itself from a world that won’t pay high prices for its light sweet crude.  There is good reason to doubt this will succeed: Saudi Arabia lacks virtually every resource but oil and oxygen, making development exponentially more difficult and expensive.

There is a historical model of successful forced modernization: Stalin’s brutal industrial march in the 1930s.  The more resistance Stalin encountered to his program, the more bloody progress became.  Will Saudi Arabia’s Mohammed bin Salman follow a similar path?  Declining gas demand in America may tempt.

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