It’s popular now to say that America is addicted to oil. But I’m not sure that this is helpful.
When gas prices go up, we drive less, buy hybrid cars, and turn down the thermostat. When prices go down, we change our behavior and consume more. That doesn’t sound much like an addict’s behavior.
When an addict uses something, it doesn’t really matter what the price is. It doesn’t matter who gets hurt. It doesn’t matter when he last got “fixed”; he just wants his next hit.
By contrast energy prices matter a lot to us. We care very much about the consequences of our oil consumption. And we’re not stopping at every gas station just to get a hit. What we do us consumer more of a resource when it’s cheaper, and less when it’s expensive. Pretty normal.
No, “addiction” doesn’t explain our oil usage. But the medical terminology allows some people to rationalize massive (government) intervention “for our own good.” And to avoid making rational economic arguments for alternatives.
Our use of energy resources is price-dependent, economically motivated, and utilitarian. When a more convenient, cheaper alternative to oil comes around, we’ll switch. Nothing addictive about that.
Douglas R. Tengdin, CFA
Chief Investment Officer
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