So much winning! US drivers are spending $682,500,000 more each day for gasoline

Today's price at a station in Salt Lake City.

I am not a big proponent of cars still, even though in Salt Lake I use a car all the time, much because of my health because while I am much better than I was 2 and 2.5 years ago, I'm still weak when it comes to bicycle riding.

Although one cool thing is in one direction I live one half mile away from a decent shopping center with a supermarket.  And in another direction, 0.8 miles to an upscale market and a couple of other retailers and restaurants on the other three corners.  I will walk to those places--especially if I don't have to buy a lot.  I hate carry groceries so a backpack's worth is about my maximum.

Anyway, the average gasoline price per gallon in the US right now is about $4.50.  That's what it is in Salt Lake, well in the last couple days a couple cents less, even though we have five refineries a few miles away--cost isn't about proximity to nearby produced gasoline that influences pricing, it's world pricing.

The White House spokeswoman Anna Kelly said this in the Washington Post article, "U.S. intelligence says Iran can outlast Trump’s Hormuz blockade for months":

" ... Iran is losing half a billion dollars daily because of the blockade. “During Operation Epic Fury, Iran was crushed militarily,” Kelly said in a statement. “Now, they are being strangled economically by Operation Economic Fury and losing $500 million per day thanks to the United States Military’s successful blockade of Iranian ports. The Iranian regime knows full well their current reality is not sustainable, and President Trump holds all the cards as negotiators work to make a deal.”

Turns out, about 375 million gallons of gas are consumed daily by US motor vehicle operators.  

With the price rise in our area from 2.68 to 4.50, that's an increase of 68%.  $375,000,000*1.82 = $$682,500,000.  

That's more each day for just  gasoline--other prices are rising too (plus the cumulative effect of tariffs; wonder why brie cheese costs more?)--than Iran is losing.

In normal circumstances, a President has no ability to affect oil prices, except on the margin, maybe, by releasing fuel from the Strategic Reserve.  Choosing to go to war with the consequence of the shutdown of the Strait of Hormuz is 100% on Trump.  (My joke about this during the Biden Presidency was "Hey, Joe Biden's not building refineries."  A commenter had the gall to tell me that's not what presidents do.  Like I don't know that?

I don't see how the US is winning when it is spending more on weapons and personnel, taking loses to infrastructure, dissipating its weapons inventory, combined with increased costs to consumers.

Electric vehicles sales surge in Asia: Gerschenkron and EV production in China

A BYD dealership in Phuket, Thailand.

According to Bloomberg "BYD Showrooms Are Bustling Across Asia After Iran Oil Shock," people are reacting to gas price increases resulting from the war with Iran by looking at buying electric cars.

Maybe the US too ("What to Know About Electric Cars When Gas Prices Are Surging," New York Times).  From the article:

In the United States, prices for new electric vehicles have fallen but still average $6,500 more than vehicles that run on fossil fuels, according to Cox Automotive. From a purely financial point of view, an electric vehicle makes sense for people who will save that much on fuel and maintenance during the time they own it.

The New York Times offers a tool to help people make that calculation based on local electricity prices and driving habits. But there is more to the decision than dollars and cents. Some benefits of electric vehicles are hard to put a price on, like the peace of mind that comes from not being at the mercy of geopolitics.

Alexander Gerschenkron was an economist who studied development economics.  

In "Economic Backwardness in Historical Perspective," he makes the point that later developing countries have an advantage when it comes to adopting new technologies, because unlike legacy advanced economies, they don't have billions invested in older technologies.

Vintage Marathon Oil gasoline station in Miami, Oklahoma.

China (in many technologies) is a great example.  One is with motor vehicles.  While their development of the automobile industry started with gasoline cars, many built through joint ventures with then advanced car makers like GM and Toyota, the companies were able to adopt and adapt the technologies for the development of their own domestic auto industry.

But China, seeing fossil fuel as a legacy fuel and making them dependent on the world oil economy, moved to the development of electric vehicles (and solar power, although the country still burns a lot of coal and is adding coal plants, since they have large supplies of coal domestically sourced) ("Chinese BYD cars emerge as threat to automakers," Detroit Free Press).

BYD started making electric batteries before moving to cars.  More recently they've developed a fast charging system that allows cars to go up to 600 miles between charges--except to provide this at scale would require serious electricity transmission upgrades.

Now China is years ahead of the American auto industry, which is losing billions of dollars trying to compete in the electric vehicle market ("Carmakers Took a $50 Billion Loss on EVs," Autoweek). And they are an increasing force in global markets ("How America’s EV retreat is increasing China’s control of global markets," CNBC).

During the first Trump Administration, I remember the Economist writing about this ("America’s domination of oil and gas will not cow China"), and Trump's preference for coal ("Trump orders coal revival, but market favors natural gas," NPR) and oil, stating that in energy, China is the future, and the US is the past.  China is an electro-state and the US is a Petro-state ("The Petro States of America," Bloomberg). 

Foreign Policy Magazine develops this thesis further, ""How the Iran War Could Consolidate China’s Energy Dominance: Amid global oil and gas disruptions, China stands prepared for the electrostate era."

Petro states as a sub-national phenomenon.

Wind turbines operate at a wind farm near Whitewater, California. Renewables tend to be lower risk than oil projects, but they also tend to deliver lower returns. / Getty Images

I apply the concept of petro states at the sub-national scale as well--many states in the US are pro fossil fuels, and have hampered the development of alternative technologies ("Making oil is more profitable than saving the planet. These numbers tell the story," NPR).  

In large part, it's because excise taxes on oil and natural gas are a huge revenue source for states ("Congress gave a break to coal producers. Wyoming worries it’ll carry the loss," Wyoming Public Radio).  From the article:

Over the last 50 years, the state of Wyoming made bank from coal – billions of dollars to fund the government, schools, roads and parks. The state now has its own sovereign wealth fund thanks to coal.

Here’s how it works: When coal is mined on federal land, the mining company pays royalty fees. Half of those royalties go to the federal government and the other half goes to the state, and only Congress has the power to change that ratio.

President Trump’s GOP spending bill lowers those royalty fees for mining companies from 12.5% to 7% through 2034.

Or they continue to provide tax incentives for increased production ("Tax credit for huge oil producer raises questions about Utah board’s transparency," Salt Lake City Weekly) and other ways to promote production ("Supreme Court backs Utah oil railroad expansion, endorsing limited version of key environmental law," Colorado Public Radio).

For example, Oklahoma, with oil and natural gas interests (fracking especially) is fully committed to fossil fuels, but is toying with solar and wind ("As demand grows, Oklahoma considers its energy path forward," Daily Oklahoman).  Tulsa and Oklahoma City are home to many regional headquarters and a few national firms.

North Dakota ("Studies underscore oil and gas industry’s significant impact on North Dakota’s economy, communities").  Kentucky ("Heavy reliance on coal has eroded a KY economic advantage. Can Trump reverse the trend?," Kentucky Lantern). While New Mexico, which has a good producing section of the Permian Basin, and Pennsylvania--home to the nation's first oil well, but a center for fracking, are less committed.

It's the rare state, like California, pushing a sustainable fuel future despite historically having been a large producer.  Maybe the switch is due to significant drops in production ("As oil industry in California wanes, what will become of shuttered refineries?," Daily Breeze).

An oil pump jack stands near a field of wind turbines in Nolan, Texas. Oil companies are under pressure to pivot more swiftly toward renewable energy. Here's one reason why that's not happening so quickly: It's still incredibly lucrative to sell oil. / Getty Images

Texas is the mother lode of oil production in the US.  It is also a major wind power producer.  

Like the Trump Administration ("Trump Officials Weigh New $1 Billion Deal to Stop Offshore Wind Farms," New York Times), some pro-oil interests are working to deemphasize wind in the state's mix of energy sources ("The War on Wind Rages in Texas," Earth Day).

Originally the Humble Oil Building, named before Humble Oil and Refining Company was fully integrated in Esso (which later became Exxon, then ExxonMobil).  Now it's the ExxonMobil Building.

Texas is the big winner nationally as Houston is the center of the oil and gas industry.  For example, Chevron is moving there from California.  The company in various forms has been headquartered in the SF Bay region since 1879.  

Production and supporting services companies often relocate from regional centers ("The economic impact of Expand Energy moving headquarters from Oklahoma to Houston," News9 OKC), as the oil industry business cluster there continues to intensify.

US thinks it's doing better from war blowback than other nations

JD Vance bragged that the US isn't as impacted by the shutdown of the Strait of Hormuz as other countries ("'Overseas' doing worse with petrol prices than USA: Trump's vice president," 9News Australia).  But it's a global economy ("Iran war will scar the global economy," Financial Times). 

Bloomberg notes the Administration is looking at the wrong impact, as oil is used in so many other products ("The White House Is Using the Wrong Oil Price for the Iran War"). 

Also see, especially the comments where I update with other articles, "Oil dependent economies are vulnerable at all times, but especially during wartime in the Mideast | From energy dominance to energy vulnerability."

Other countries will hardly look upon the US with favor.  The Toronto Star, "How can Canada protect itself amid a global energy crisis?," lists some of the effects on Canada.

A friend's brother runs a grain elevator operation in Montana, including the sale of fertilizer in large quantities.  He's getting stiffed on deliveries.

From the Star:

Yet Canadian consumers are hostage to a volatile world price for oil and gas. And the crisis extends beyond oil. 

• It is a threat to world food security with looming shortages of the natural gas and other key ingredients of fertilizer produced by Persian Gulf States. As they plant for this year’s harvest, Canadian farmers can choose to absorb higher costs for fuel and fertilizer or cut back and suffer lower crop yields. Either way, food prices, already high, will rise further. 
•  Options for protecting Canadian consumers include the cap on pump prices that has been imposed by South Korea and other countries. 
•  China is among major oil consumers that are curtailing fuel exports to hoard domestic supplies. Brazil is cutting federal taxes on fuel and will tax oil exports to offset the revenue loss. 
• The Philippines has mandated four-day work weeks to conserve energy. 
• Some Asia-Pacific factories are scaling back production to preserve fuel and spare themselves higher production costs. 
• In a worst-case scenario, there will be more factory slowdowns and shutdowns in the global supply chain. 
• If prolonged, that disruption will raise the price of Canada’s imports, risking a resurgence of inflation. 
• Canada would be self-sufficient in oil and gas if it chose to redirect a large portion of its exports to refineries in Central and Eastern Canada that rely on imported oil. That would require construction of an east-west pipeline.
• Canada could also build strategic reserves of oil and LNG readily available to Canadian refineries to keep fuel prices under control. Canada is the only G7 country without a strategic oil reserve to draw upon in times of crisis.
• One of the few certainties of the moment is that Iran can bottle up Middle East fuel and fertilizer supplies whenever it chooses after the current conflict ends. The Economist warned of further Iranian attacks on the world economy in coming years, saying that “disruption of energy markets will come and go with geopolitical tensions, especially if Iran concludes that it needs a nuclear weapon to be safe.”

Gasoline is up 49% today in Salt Lake, in response to Trump's Beautiful War with Iran

After a series of price increases since the commencement of the US/Israeli War Against Iran.  It was $2.67 per gallon just before.  From the Bloomberg article "The White House Is Using the Wrong Oil Price for the Iran War":

US President Donald Trump has seemingly turned the price of West Texas Intermediate crude oil into a referendum on his war against Iran. Thumbs up if WTI stays below $100 a barrel. Thumbs down if it rises above. Even if he succeeds in keeping that particular gauge below the triple digits, it would be a pyrrhic victory.

What matters for the American economy isn’t the price of WTI, but the cost of refined petroleum products — and they’re rising rapidly. While the price of Texas crude is up 60% since January, the cost of key everyday fuels has risen by between 85% and 120%.

Image from Etsy.

Oil dependent economies are vulnerable at all times, but especially during wartime in the Mideast | From energy dominance to energy vulnerability

Gasoline prices here have gone up about 25% since the start of the War with Iran.  And Salt Lake has five refineries refining oil produced in Utah, Wyoming and near by states.

It's hardly news that oil is a worldwide commodity, and even though it is produced and refined all over, world prices are set in Europe and the US and factor in supply risk.

The War ("Why Escalation Favors Iran," Foreign Affairs).  From the article:

The strikes that have killed Iran’s leadership demonstrated tactical mastery. Tactical mastery, however, is not strategy. Iran’s retaliation—geographically broad, economically disruptive, and politically calibrated—aims to reshape the conflict’s structure. By widening the theater and prolonging the war, Tehran is shifting the contest from a battle of military capabilities to one of political endurance.

As in Vietnam, the United States may win most engagements. As in Serbia, it may ultimately prevail after sustained pressure. But in both cases, the decisive arena was not the initial shock of airpower. It was the politics of an expanding war.

The decisive phase of this war began not with the first strike but with the regional crisis that followed—air defenses activated across multiple capitals, airports suspended, markets jolted, and alliance politics strained. Whether this conflict is merely a contained episode or it becomes a prolonged strategic setback for the United States will depend not on the next volley of missiles but on whether Washington recognizes the enemy’s unfolding strategy—and responds with one of equal clarity.

Energy independence as a form of dependence.  Even though the US is now the largest producer of oil in the world, under the Trump Administration it has promulgated policy that prioritizes fossil fuels and diminishes renewable energy sources  ("Trump Returns to Gasoline as Fuel of Choice for Cars, Gutting Biden’s Climate Policy," New York Times, "The owners want to close this Colorado coal plant. The Trump administration says no," NPR).

The Administration is also all in on nuclear energy, which isn't a fossil fuel per se, but is an extremely expensive form of energy, not once a plant is open, but the cost of building fission facilities has bankrupted many firms over the years.

Even though renewable sources diversify the energy mix and reduce system vulnerability ("Trump order halts offshore wind projects for at least 90 days," PBS, "Trump administration quietly canceled the nation’s largest solar project," CNN, "Wind and solar power frozen out of Trump permitting push," Reuters)  For example, electric vehicles are much less dependent on oil as the base fuel for electricity generation.

The Administration calls this "Energy Dominance" but "Energy Dominance" can just as easily be robust and include non fossil fuels as part of the mix ("Energy Dominance or Renewable Resilience?," German Marshall Fund, "Power up! Why the US needs every energy source to stay dominant," ING Bank, "Donald Trump’s call for ‘energy dominance’ is likely to run into real-world limits," AP, "How Trump’s ‘Energy Dominance’ Agenda Is Dominating You With Dirty Energy," The Contrarian).

Plus US nominal control of oil in Venezuela and Canada ("Trump Now Has His Very Own Oil Empire," Bloomberg).

Let’s do the math. Start with the oil production of the US and add Canada. Then include Venezuela and the rest of Latin America, from Mexico to Argentina and everywhere else in between: Brazil, Guyana, Colombia. Like it or not, all of them are living under the “Donroe Doctrine” — an increasingly belligerent Washington’s sphere of influence over the Americas. Together they account for nearly 40% of the world’s oil output.

... Having de facto control of the Western Hemisphere’s petroleum wealth is a geopolitical game changer. For decades, US military adventurism was constrained by the impact of any war on energy costs. Today the White House has primacy over oil-producing allies and adversaries alike — whether it’s Saudi Arabia or Iran, Nigeria or Russia.

The US and China and global preeminence: Does it come down to energy policy?.  Another way to think of this is as looking forward versus looking backwards, a classic example of Alexander Gerschenkron's thesis that over time newer economies have an advantage in being able to invest in new technologies without incurring huge stranded costs.

China still buys a lot of oil, and they use coal powered electricity because of large domestic supplies.  But the focus on EVs is just one of China's green energy policies ("China, the climate superpower," "China, Energy and Climate: The Time has Come," special package, The Economist, "How China came to dominate the world in renewable energy," Washington Post).

As a slogan, “energy dominance” evokes images of the United States towering over the rest of the world, with prodigious production, as what Trump calls “a global energy superpower.” But the truth of energy dominance has nothing to do with empowering folks at home.

The administration has been rigging the game in favor of dirty energy — and giving fossil-fuel producers a license to dominate American consumers. In the process, Trump is boxing U.S. households out of cleaner alternatives and leaving Americans with less choice, higher energy bills, and an overheating climate.

Worse, by hobbling America’s green-energy industries, the administration is destroying jobs, even as it clears a path for China to dominate the next generation of energy production.

... A study out of Princeton University finds that Trump’s signature “Beautiful Bill” will reduce capital investment in our electrical system and clean fuels by half a trillion dollars over the next decade. It will also slash future solar capacity by about 140 gigawatts and wind capacity by about 160 gigawatts. (The Hoover Dam, by comparison, has a capacity of about 2 gigawatts.)

Plus the effect on jobs ("‘Deeply demoralizing’: how Trump derailed coal country’s clean-energy revival," Guardian).

Ethanol and other bad decisions.  Granted the US has some dumb policies.  One is the support of ethanol production as a feedstock for gasoline.  Unlike in Brazil, where the feedstock is used up sugar cane, here we spend money growing corn to convert to ethanol.  

Ethanol has less energy compared to gasoline.  So we're dedicating farmland to gasoline, which has a negative cost benefit.

And EVs primarily powered by coal and natural gas are less sustainable than those pow ered by renewables.

Ending EV tax credits forces the US automobile industry to double down on gasoline powered cars, while China and increasing Europe are shifting to EVs in substantive ways.  (Part of the concern in Europe is getting cleaner air--many of their cars are diesel, and comparatively high when it comes to polluting).

The Strait of Hormuz is extremely vulnerable.  While only 20% of the oil produced in the Mideast passes through the Strait, 80% goes to Asia, and 100% of Liquid Natural Gas to Europe, airplane fuels too.  Also 33% of fertilizers ("American farmers dealt new blow as Trump's Iran war escalates," Newsweek), and of course other goods.

That increases vulnerability across the globe, separate from the impact on the US economy, which isn't just on the cost of gasoline, but on farming, the transport of goods, the production of chemicals and other products, etc. ("Saudi Arabia Starts Oil Cuts as It Races to Reroute Exports" Bloomberg).

The lessons from the 1970s oil shock.  During the Israeli-Arab War and later in the decade, Middle Eastern Countries significantly raised the cost of gasoline, and took control of production and sale from the multinational oil companies.

I have often written that the US mobility paradigm is pretty much homogeneous in that it decidedly supports automobility and provides dribbles of support to other modes.  

By contrast, Germany, a leading car manufacturer (but not much of an oil producer), has a heterogenous policy.  It supports cars to the max, especially with its no speed limit autobahns, but recognizes cities are best served by transit, supports regional rail service despite its love of autobahns, and walking and biking--the Federal Biking Plan for the county is one of the best.

I contrast Denmark and Netherlands to the US in terms of response.  Not producing oil, and not having much of a car industry, Denmark and the Netherlands recognized that shifting to an automobile centric mobility paradigm made them vulnerable to cuts in supplies.  

An analogous example is how in the US, gasoline supplies are often interrupted during extreme weather events, leading to long lines and disruption in all sorts of activities, because people seemingly lack alternative ways to travel ("Oil dependence | The US as a Petro-state and gasoholic | and war").

Being poor before WW2 and for awhile after, the countries had been more walking (compact cities, no sprawl), biking and transit oriented.  They were giving this up in favor of the automobile as their economies became more successful.

Amsterdam.  Bike parking, lots of bikes, and transit in the background.

Not only cuts in supply but a significant raise in prices made their countries extremely vulnerable.  So they shifted away from the car and back to transit and biking in the development and transportation policies and practices.  

Unlike the US, which says transit and biking is okay, but primarily invests in automobility, they made their policies congruent with the new paradigm, for example significantly increasing gas taxes and car registration fees.  

Of course, the countries like others in Europe also refocused attention on energy efficiency in all elements of their economy.

The US: Still vulnerable to oil shocks.  By contrast, while the US did adopt some energy efficiency mechanisms, including mpg standards for cars, mostly the US focused on maintaining access to oil supplies.  

That meant refocusing military resources on the Mideast ("There are two winners in Iran. Neither one is America," Washington Post) and creating the Strategic Oil Reserve which bought and stored oil for use, holding it for sale when prices get "too high."  

A Permian Basin oil pumping station.

And increased production, which was was boosted on steroids in the late 1990s with the invention of fracking ("The economic benefits of fracking," Brookings, "How Has Fracking Changed Our Future?," National Geographic).  

Note that fracking has major environmental effects, the use of water, contamination of the aquifer, and air quality.

Article.  Another side of dependence.

But it didn't make the US less vulnerable to the fissures in the supply chain, not so much with access to oil, but in all the other ways an oil dependent economy experiences higher costs as increased oil costs make their way through the supply chain of various goods.