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 ECONOMIC SCENE; A Country Less
 Dependent on Oil Is Free to Make Other New
 Year's Resolutions
 By AUSTAN GOOLSBEE
 Published: January 4, 2007
                                                                                     E-MAIL

 Well, another New Year's Day has come and gone. A string                            PRINT

 of holiday meals and sitting on the couch have, no doubt,                           PERMISSIONS

 started another wave of resolutions to get some exercise                            SAVE

 and go on a diet. But after seeing gas prices pass $3 a
 gallon last year, hearing all the talk about global warming
 and having a bad feeling about all the bluster coming from
 the Iranian president, Mahmoud Ahmadinejad, a great
 many folks wish the economy would go on a diet, too, and stop using so
 much energy.

 Some of the fear over energy and the economy, certainly, resides in people
 old enough to remember some grimmer New Year's Days. In 1973, OPEC
 imposed an oil embargo against the United States and Western Europe for
 their support of Israel in the Yom Kippur war. New Year's Day 1974 came in
 the middle of the first great energy crisis. Oil prices shot up with the
 embargo and the American economy collapsed into recession -- but not
 without igniting inflation first. The Organization of the Petroleum
 Exporting Countries had birthed our first stagflation.




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 New Year's 1980 was even worse: the Iranian revolution, American
 hostages and oil prices pushing $40 a barrel. The second great energy crisis
 once again plunged the American economy into a recession coupled with
 high inflation.

 Our past seems to show that when oil prices rise too much, our economy
 cannot grow. These lessons have been taken to heart by Mr. Ahmadinejad
 and Osama bin Laden as each has contemplated ways to cripple the
 American economy.

 But the data shows that much has changed since the wrenching days of the
 1970s, for American industry at least. The energy used for each dollar of
 gross domestic product in 1980 was almost 70 percent greater than it is
 today. While we have collectively wrung our hands over the decline of
 manufacturing in the country, it has also reduced the relationship between
 energy prices and growth.

 Manufacturing industries consume about 25,000 B.T.U.'s of energy for
 each dollar of gross domestic product they generate. The most energy-
 intensive sectors, like the steel, iron ore and aluminum industries, consume
 about 70,000 B.T.U.'s. Outside of manufacturing, the economy uses less
 than 6,000. Hospitals, law offices and banks just are not the same as blast
 furnaces and smelters.

 So now when the price of oil goes up, as when it almost hit $80 a barrel in
 2006 (close to the highest it has ever been, even accounting for all the
 inflation since the previous energy crises), it does not automatically mean
 recession. Indeed, it caused only a ripple this last year. Unemployment and
 inflation both stayed quite low.

 Somewhere in the world, Mr. Ahmadinejad and Mr. bin Laden may be
 poring over the statistics on the Energy Information Administration's Web
 site and feeling a nagging pang in their gut. OPEC's ability to impose an oil
 embargo on the West the way it did in 1974 and bring the economy into



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 recession is highly limited today.

 Paradoxically, although the economy seems somewhat less prone to
 disruption from energy crises, there remains one enormous group that
 suffers from high prices: us, the car drivers. Industry has become less and
 less dependent on energy over time, but the average American commuter is
 now more dependent.

 From 1980 to 1990, rising Corporate Average Fuel Efficiency standards
 forced automakers to improve car mileage significantly. Average miles per
 gallon rose very much in parallel to the energy improvements in the wider
 economy. That ended in 1990, however. The fuel economy standards on
 cars stopped rising. Our regulations are now much less stringent than those
 in Europe, Japan and even China. We also shifted to driving trucks and
 sport utility vehicles. We moved farther from our places of work and drove
 a lot more. Since 1990, the number of gallons we use, even on a per vehicle
 basis, rose substantially.

 So as the price of oil neared $80 a barrel last year and gasoline exceeded $3
 a gallon, it did not bring the economy to its knees, the way previous oil
 crises did. It just hit all of us driving our cars. Mr. Ahmadinejad may not
 have the ability to terrorize the economy, but he can certainly aggravate
 soccer moms in their minivans or commuters stuck in traffic by making
 them pay more.

 If it were November, perhaps the message would be to be thankful for what
 we have been able to change. But it is not. It is New Year's so the message is
 different. Forget about New Year's resolutions for the economy and stick to
 your own. Next time you need to get somewhere, toss the keys and walk.

 Austan Goolsbee is a professor of economics at the University of Chicago
 Graduate School of Business and a research fellow at the American Bar
 Foundation. E-mail: goolsbee@nytimes.com.




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