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The Prius Solution: Defunding the Middle East

There's more to buying a gas/electric hybrid than taking personal responsibility for improving the air I breathe.   It's also about economic strength and national security.

Thirty years ago, living in Boston, I went out to cut firewood to keep my family warm. Neighbors did the same for their families. We did that because the world changed in 1973. The Arab oil embargo resulted in major shortages of home heating oil. There were also long lines at gas stations.

Since then, all of us have been at the mercy of the Middle East because it happens to have 2/3rds of the world's oil reserves. Thirty years is a long time. I was 32 when this started.   I'm 62 now.  

By the late 70's we were sending so much money to the Middle East--- and stock prices were so depressed--- that analysts were calculating how many months it would take before Saudia Arabia owned every company on the New York Stock Exchange. Since then we've had a series of small, middling, and large worries about the supply and price of oil. Energy is so important that monthly changes in the consumer price index are reported with, and without, energy price changes. Food is the only other item given that distinction.

But the CPI only measures the direct price of energy. The hundreds of billions we have spent on Middle East oil have financed enormous collections of weapons. The same exported wealth allowed Osama Bin Laden to pursue his passion for global terrorism.

Among the items we don't include in the real cost of energy is the higher cost of defense--- the billions spent to secure a continuing supply of oil. No, I don't mean to suggest that we are at war with Iraq because it has the world's second largest pool of oil reserves. I merely suggest that a portion of our defense spending exists to defend our supply of oil.

But let's get back to personal action.   In lieu of a national policy to conserve energy, I'm starting my own. I hope you will join me. From now on, I'm going to pay attention to energy consumption. I'm going to work, rather militantly, on ways to reduce it. Call me eccentric. Call me weird. I think it will be an interesting hobby. Unlike many hobbies, it will pay for itself.

If enough of us did it, we could change the stability of the world an iota or two. We might also contribute to preserving, or improving, our standard of living.

The first step in my personal energy policy was the purchase of a Toyota Prius. The 45-mile per gallon car replaced an 18-mile per gallon car. By my calculation, we'll cut our gasoline purchases by about 500 gallons a year.

That's a $750 saving on current gas prices in most of Texas. It's a $1,000 saving on $2 a gallon gasoline. Either way, the saving is larger than the tax cut 80 percent of all Americans would receive under the tax cut proposed by the Bush administration.

According to a Brookings Tax Policy Center analysis, households in the middle quintile would receive a tax cut of $256.   For upper-middle-income households--- those in the top 60 to 80 percent of income--- it would be $574. As you can see, energy efficiency is as big a lever as anything they've got in Washington.

So imagine what would happen if having a Personal Energy Policy became trendy. Energy guru Amory Lovins has estimated that a national auto fleet just 2.7 miles per gallon more efficient would eliminate the need to import oil from the Persian Gulf. Since the Prius gets nearly 27 more miles to the gallon, only one American in ten would need to own a hybrid--- and the Middle East would be defunded.

Sounds like a goal to me.

Estimates of the Bush tax cut, by income decile

Amory Lovins on energy security

Only published comments... Apr 15 2003, 10:41 AM by scottb
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Registered Investment Advisor said:

By Scott Burns According to the trip meter on our 2003 Prius, my wife and I have covered the last 2,200

April 25, 2008 3:05 PM

About scottb

Scott Burns has covered the changing world of personal finance and investments for nearly 40 years. Today, he ranks as one of the five most widely read personal finance writers in the country. Scott began his career as a newspaper columnist at the Boston Herald in 1977 where he was also the financial editor. Nationally syndicated in 1981 and now distributed by Universal Press, the column appears in newspapers from Boston to Seattle. In 1985 he joined the staff of the Dallas Morning News where his column quickly became one of the most widely read features in the paper. He left the Dallas Morning News in 2006 to become one of the founders of AssetBuilder and its Chief Investment Strategist. Burns is a graduate of Massachusetts Institute of Technology (1962). He has written four books, including "The Coming Generational Storm" (MIT Press, 2004) coauthored with economist Laurence J. Kotlikoff. His fourth book, also coauthored with Kotlikoff, was published in 2008 by Simon & Schuster. The paperback edition will be available in January, 2010.  "Spend Til' the End" uses consumption smoothing to demonstrate the errors of conventional financial planning. His business experience includes working as a staffer for a major consulting company and service as a director and audit chairman of a NASDAQ listed manufacturing company. He and his wife now live in Dripping Springs, a "hill country" town about 25 miles outside of Austin.


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