An old saying goes, “What is good for the country is good for General Motors.”
On Monday, the Associated Press reported that “General Motors Corp., the century-old automaker battered by the economic downturn, mounting debt and management problems, will file for bankruptcy as part of an Obama administration plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government.”
The Associated Press said GM’s filing It will be the largest industrial bankruptcy in U.S. history.
What battered GM and what battered the global economy is our heavy dependence on fossil fuels. The global economy thrives on progress and the fuel that drives progress is oil.
As the economy of the world grew, so did its need for oil. That increased oil costs to more than $140 per barrel last year.
Energy costs were unsustainable. Then the economy collapsed and so did oil prices. But for such a large company like GM, that sudden collapsed was too much to handle in such a high stakes business with intense international competition. Several years ago GM lost its ranking to Toyota as the world’s largest car company and China the world’s largest car market.
The United States isn’t defined by its auto industry, but bankruptcy will mean the downsizing of GM. Chrysler has also filed bankruptcy and will more than likely emerged with a new foreign owner — Italy’s Fiat.
What is hard to figure out is how did the U.S. auto industry fall so flat on its face when there were 244.2 million motor vehicles registered in the United States in 2006. About 134 million of them were cars, according to the U.S. Census Bureau.
The answer boils down to a lack of a credible energy policy in the United States. According to the US Government’s Energy Information Administration, the United States consumes about 400 million gallons (1.51 billion litres) of gasoline every day. That figure equates to about 20 million barrels of oil every day.
The figure above is where lies that answer to not only the downfall of America’s auto industry, but also the downturn of our economy.
But now energy costs are the rise and some economic experts saying the economy is emerging from recession. According to a new report from the U.S. Energy Information Administration projects that world marketed energy consumption will grow by 44 percent between 2006 and 2030.
According to EIA, the increase in energy costs is driven by strong long-term economic growth in the developing nations of the world.
But how much of that growth will be driven by oil? If the world’s economy heats up again and it’s fueled by oil, the next economic collapse (and it will surely happened in an oil dependent world economy) will be even more devastating.
According to the Nebraska AAA Daily Fuel Gauge report, last wee regular gasoline in Grand Island was selling for an average of $2.516 per gallon. A month earlier it was $1.933 per gallon. A year ago, the average was $3.87 per gallon. On July 16, 2008, gasoline prices in Grand Island hit a record high of $4.10 per gallon.
According to Wally Tyner, a Purdue University agricultural economist, even though gas prices are climbing, motorists should not experience the historic highs of one year ago.
He said pump prices traditionally rise in late May with the beginning of the summer driving season.
“For the rest of the summer, we can expect to see gasoline prices higher than this spring, but nothing like last summer,” Tyner said.
A combination of factors is driving gas prices higher, Tyner said.
“First, there are higher oil prices,” he said. “Crude oil is now around $60 per barrel, driven by signs of economic recovery and by violence in Nigeria — an important supplier of crude for the United States.”
In addition, Tyner said the falling U.S. dollar means that much of the rest of the world is not seeing the higher crude oil prices in their own currency, so they are not seeing higher gasoline or diesel prices.
The poor economy also is having an affect on gas prices and could do so for some time to come, Tyner said.
“Even though there are ‘green shoots’ evidencing prospects for eventual economic recovery, we will continue to be in recession through the summer and into fall,” he said.
Tyner said overall demand for petroleum products is still down, led by a decline in jet fuel demand of more than 10 percent. He said gasoline demand had been down 3.5 percent, but recently demand has picked up so that we are only down about 1 percent, leading to higher gasoline prices.
“From December 2008 until this May, gasoline had been priced lower relative to crude oil than by historic norms,” he said. “But today, even though crude oil stocks are still high, gasoline inventories are now considerably lower than historic norms. In essence, gasoline prices have now caught up with crude oil prices.”
According to the EIA report, the current global economic downturn will dampen world energy demand in the near term, as manufacturing and consumer demand for goods and services slows.
However, with economic recovery anticipated to begin within the next 12 to 24 months, EIA said most nations are expected to see energy consumption growth at rates anticipated prior to the recession.
EIA estimated that total world energy use will rise from 472 quadrillion British thermal units (Btu) in 2006 to 552 quadrillion Btu in 2015 and then to 678 quadrillion Btu in 2030.
World oil prices have fallen sharply from their July 2008 high mark.
As the world’s economies recover, EIA reported that higher world oil prices are assumed to return and to persist through 2030, with world oil prices rising to $110 per barrel in 2015 (in real 2007 dollars) and $130 per barrel in 2030.
Total liquid fuels and other petroleum consumption in 2030 is projected to be 22 million barrels per day higher than the 2006 level of 85 million barrels per day, according to EIA.
Conventional oil supplies from the Organization of the Petroleum Exporting Countries (OPEC) contribute 8.2 million barrels per day to the total increase in world liquid fuels production, and conventional supplies from non-OPEC countries add another 3.4 million barrels per day.
In addition, EIA said unconventional resources (including biofuels, oil sands, extra-heavy oil, coal-to-liquids, and gas-to-liquids) from both non-OPEC and OPEC sources are expected to become increasingly competitive.
According to EIA, world production of unconventional resources, which totaled 3.1 million barrels per day in 2006, increases to 13.4 million barrels per day in 2030, accounting for 13 percent of total world liquids supply in 2030.
The rapid increase in world energy prices from 2003 to 2008, combined with concerns about the environmental consequences of greenhouse gas emissions, has led to  renewed interest in the development of alternatives to fossil fuels.
Renewable energy is the fastest-growing source of world electricity generation, supported by high prices for fossil fuels and by government incentives for the development of alternative energy sources.
From 2006 to 2030, world renewable energy use for electricity generation grows by an average of 2.9 percent per year, and the renewable share of world electricity generation increases from 19 percent in 2006 to 21 percent in 2030. Hydropower and wind power are the major sources of incremental renewable electricity supply.
That trend needs to continue and it needs to continue at an even higher accelerated pace. What will save the U.S. auto industry and the U.S. economy will be a major shift toward vehicles that use less gas and an economy geared toward renewable energy.