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Thomas A. Hemphill is David M. French Distinguished professor of strategy, innovation and public policy in the School of Management at the University of Michigan at Flint. He wrote this for InsideSources.com.
Petroleum — commonly referred to as “oil” — is a naturally occurring chemical substance consisting of a mixture of molecules (the majority of which are hydrocarbons) and organic compounds found in a liquid state. The term “petroleum” includes unprocessed crude oil and other products created from refined crude oil.
The combustion of fossil fuels — such as gasoline and diesel to transport people and goods — was the largest source of U.S. carbon-dioxide emissions in 2020, accounting for about 33 percent of total carbon-dioxide emissions and 26 percent of greenhouse gas emissions.
Not surprisingly, petroleum, natural gas and coal have been at the forefront of environmental policy efforts to have the nation move away from this “harmful” non-renewable energy source (to generate a given amount of electricity, burning coal will produce more carbon dioxide than natural gas or oil) to renewable sources of fuel, including hydroelectric, geothermal, biomass, wind and solar (which together make up approximately 12 percent of U.S. primary energy consumption by source in 2021) in the coming decades. Moreover, according to the Energy Information Administration, wind and solar sources of fuel, which emit no carbon-dioxide emissions (along with hydroelectric and nuclear electric power), make up 4.68 percent of U.S. primary energy consumption by energy source in 2021.
Additionally, the EIA reports that petroleum made up 36 percent of U.S. primary energy consumption by source in 2021. The EIA further estimates that total U.S. petroleum consumption by major end-use sectors are as follows: transportation (67.2 percent); industrial (26.9 percent); residential (2.8 percent); commercial (2.5 percent); and electric power (0.5 percent). U.S. consumption by petroleum products in 2021, says the EIA, includes finished motor gasoline (44 percent), distillate fuel oil (29 percent), hydrocarbon gas liquids(17 percent), and jet fuel (7 percent).
What is the EIA’s forecast for future U.S. petroleum consumption? Interestingly, the agency forecasts that petroleum and related liquids consumption will increase by 14 percent in 2050 over consumption levels in 2021, with liquid fuels accounting for 36 percent to 38 percent of annual U.S. energy consumption through 2050.
But what is often overlooked in the environmental movement’s efforts to shift America to a “Green Economy” is the fundamental importance of petroleum not only as a fuel for transportation purposes but also its other critical uses in contributing to a vibrant, innovative U.S. economy and modern society. For instance, in the nation’s agricultural sector, petrochemicals are used in the manufacture of ammonia, a source of nitrogen in fertilizer. Moreover, agricultural pesticides are also manufactured from petrochemicals.
What is the economic effect of the U.S. agricultural sector on the U.S. gross domestic product? The agriculture, food and related industries contributed $1.055 trillion to the GDP in 2020 — or a 5 percent share of GDP.
Plastics, oil-based paints and paint additives are also mostly manufactured from petrochemicals, while photographic film has petrochemical ethylene as an ingredient. How significant is the plastics industry to the economic viability of the U.S. manufacturing sector? The “2022 Size and Impact” report from the Plastics Industry Association shows that the plastics industry grew from the eighth-largest to the sixth-largest manufacturing industry in the United States.
Moreover, many pharmaceuticals and cosmetics, including creams and perfumes, are manufactured from petroleum or petroleum byproducts. What is the economic effect of the pharmaceutical industry on GDP? In 2021, it made up a 3.2 percent share of GDP.
There is a wide range of products and industrial uses that are dependent on petroleum or petrochemicals for their manufacture. Distillates of petroleum are used to obtain raw materials used in the manufacture of synthetic detergents, dyes and fabrics, as well as used to varnish wood. Synthetic rubber (often used as a substitute for plastic) is manufactured using petrochemicals, resulting in rubber soles on shoes and tires and other parts used in various vehicle manufactures. Moreover, petroleum-based oils are used as coolants in electric transformers and as machine lubricants for a variety of engineering purposes. And tar — a major component in manufacturing asphalt used in road construction — is also produced from petroleum.
No one knowledgeable of the technological basis of modern American society would deny the crucial importance of petroleum and petrochemicals to its relatively seamless functioning today — and for decades to come. It would be useful to contemplate the long-term, multi-tier consequences of eliminating a crucial component of our economy before effective substitutes are commercially available as viable replacements.