Addicted to Oil?

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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By | 2014-09-04T17:09:13+00:00 December 29th, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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