Oil + Autos = Recession

A few commentators have noted the striking resemblance of the Bush administration's self-inflicted disaster in New Orleans to the stated objective of conservative strategist Grover Norquist who wants to shrink the government to a size that he can drown in the bathtub.

Well, a more likely outcome is that the man-made catastrophe in New Orleans—combined with the mess in Iraq—will drown the Bush-Rove-Norquist wing of the conservative movement instead. The question that remains, however, is whether Bush's right wing ideologues will also be pushed out by a third debacle, a deep economic recession.

Two stories in this week's issue of The Economist struck me as sounding a major warning bell for the powerful in their boardrooms. The first, entitled, "Katrina And Oil Prices: No Safety Net [1] ," quotes oil industry guru Daniel Yergin as saying Hurricane Katrina could lead to "one of the biggest energy shocks since the 1970s, perhaps even the biggest."

But that's not all. Because gasoline consumption is relatively inelastic, meaning price increases will not push suburban families to change their driving habits until they reach withering heights, as gas prices increase, families will have to cut back in other areas of consumption. Et voila , a Wal-Mart led recession.

And, to top it all off, America has now entered one of its most vulnerable periods. A recent policy exercise hosted by the group, America's National Commission On Energy Policy, decided to explore what would happen to oil prices if there were two shocks to the world oil system in rapid succession. The result was oil reaching $160 a barrel.

And to add to that happy news, The Economist also reported on the state of the global auto industry [2]. In a special report, the economist wrote that "some experts predict that over the next 20 years more cars will be made than in the entire 110-year history of the industry." According to the Bush energy plan, cars made in those 20 years will be powered by internal combustion engines. That means unsustainable demand for oil and a massive increase in greenhouse gas emissions.

It seems to me that some folks at very senior levels in government and industry are simply not doing the math. Indeed, The Economist did not place these two articles in much proximity. Yet event ExxonMobil [3]  has stated that it expects global oil production to peak in five years. Combined with the current blow to our energy infrastructure, this is the perfect time to shift our economy decisively off of its dependence on the auto-industry and suburban sprawl.

If we don't do it soon, we may not have much of an economy left. And that creates quite a leadership challenge for Democrats. With the Bush administration's ideology revealed as irresponsible, odds are, conservatives will lose significantly in the coming mid-term elections. But strong self-inflicted negatives on the other side will not force Dems to come up with viable economic strategies. They just have to show up, to some extent.

That tendency must be thwarted. Now is the time to prepare an economic blueprint for a sustainable America. It must be based on sustainable economic growth a la 1945—not government entitlements a la 1964. Time's a wastin'.