As Washington looks for a deal to avoid the pending fiscal cliff, it is important for policymakers to solve the root problems of our nation’s economic troubles. Oil dependence is one such root problem.
Driven by higher oil prices, U.S. consumers will spend about $600 billion more on petroleum fuels in 2012 than they did in 2002. The average U.S. household now spends about $2,700 per year on gasoline, more than double the $1,200 it paid in 2002. Unsurprisingly, economic growth suffers when consumers are forced to spend more on oil products. When gasoline prices averaged about $3 per gallon in 2010, household spending and overall growth were trending positive. The following year, rapid growth in global demand for oil, combined with the Arab Spring, sent gas prices soaring by almost $0.90 per gallon in the first half of 2011. Our fragile economic recovery was stymied. GDP growth plunged to nearly zero.