ABSTRACT
Oil is essential for modern economies, providing, among other things, the foundation for the transportation systems which facilitate human mobility. The security of oil supplies at reasonable and stable prices is one of the highest priorities of any government. The discovery of petroleum and the invention of the internal combustion engine radically transformed human existence in the 20th century, by providing for individual mobility across wide geographic spaces. While Americans in particular have long enjoyed the luxury of personal automobiles, millions of Chinese and Indians are set to experience such liberty for the first time as their countries become richer. However, the seductive freedom of the automobile comes concomitantly with a dependence on petroleum, which most countries must import from unstable regimes. Oil has facilitated the modern industrial economy and yet given rise to negative externalities,
from pollution and negative effects on public health to a corrosive impact on governance, particularly among producer nations. These effects have become increasingly salient as the consequences of global climate change have become clearer. At the same time, the links between oil dependence, authoritarian oil producing regimes and terrorism have crystallized public awareness of the oil security externalities that are not incorporated within market prices.2 In 2005, it appeared that US $70 per barrel oil prices might have provided the market signal that consumers should ready themselves for the post-oil future.3 However, while technological developments may yet yield rapid transitions to a much less oil intensive economy, without creative government policies and aggressive efforts by industry, present trends will only deepen global oil dependency. Even as sophisticated alternative energy enthusiasts suggest a swift transformation in fuels and transportation platforms is possible,4 most mainstream analysts of energy markets believe petroleum will remain the predominant source of fuel in the transportation sector for the next several decades.5
