ABSTRACT

The national security argument for drilling for more oil, or for projecting military force to induce others to part with their oil, has been made for so long that it seems to have become the last refuge of scoundrels. The asymmetry between supply and efficiency initiatives continues to dominate public policy and many private-sector attitudes. In view of this potentially large return to consumers and society, it is long past time for entrepreneurs—especially the in the oil industry drilling against ever greater odds—to give careful thought to how they can capture the rent from car efficiency. The historic behavior of US car buyers, while complex in detail, is surprisingly simple in broad outline. The majority of the savings was due to technical gains in energy productivity. A closer look at what drives improving oil productivity reveals that 1986 combined many extraordinary and uncharacteristic events.