HOW HE SEES IT Gas pump sticker shock will get worse

By PAUL HEISE
GLOBAL BEAT SYNDICATE
ANNVILLE, Pa. -- Gas pump prices crisis -- what crisis? Certainly our leaders in Washington show no signs of concern. With billions of extra dollars coming in for big oil companies, why should President Bush, Dick Cheney and their oil buddies think there is a problem? In recent weeks, we may be feeling pressure on our wallets and sticker shock at the gas pump, and in the short term, we pay and they get rich. Longer term, there is not a lot of room for optimism. This time around, and for the rest of our lives, we should be feeling the pressure to alter our oil-addiction habits.
It is the old Malthusian problem of supply and demand: oil supply is limited and oil demand is not. Quite the opposite. The exploding growth of world demand for oil is rising much faster than new oil reserves are being found or capacity to pump, transport and refine can be built. Oil production worldwide is 84 million barrels per day, of which the United States now uses 22 million. Saudi Arabia currently produces 10.9 million barrels a day and intends to increase that to 12.5 million barrels a day by 2009. It would be difficult for any supplier to increase production much faster.
Known global reserves are difficult to calculate; Saudi Arabia is said to have reserves of about 261 billion barrels; Iran has the next largest reserves (125 billion), then Iraq (115 billion). No one else has more than 100 billion, although Kuwait has close to that.
It is easy to see why Arabs accuse us of going there for the oil -- there is no place else to go if we want to guarantee a supply that meets the growth of our economy.
Demand is the other, bigger problem. We generally ignore our own role: global demand outstrips supply and while we represent 5 percent of global population, we consume 20 percent of all oil output.
China, the other oil-voracious economy, was self-sufficient until 1993, but now imports more than half of its annual consumption of 5 million barrels per day. China expects its consumption to grow with its economy at 7 percent per year, totaling 20 million barrels a day by 2020 -- and global supply cannot be built in that time frame.
Supply, demand imbalance
Our sharply rising domestic gas prices reflect this shortage and the increasing imbalance between supply and demand. We see it at the gas pump now, and we will see it again this winter, with fuel oil pre-payment plans now offering locked-in prices between $2.29 and $2.59 per gallon.
We must do something, but leadership is, at best, lacking.
The long-delayed and hugely expensive energy bill recently passed by Congress and eagerly signed by President Bush is notable mostly because, as of 2007, we take the insignificant step of extending daylight-saving time by four weeks. In reality, it was an August Christmas present of $14.5 billion in tax cuts and subsidies to everyone from power companies to farmers -- everyone except the consumer. Even the bill's supporters said it will do nothing to affect gas pump prices.
To solve the energy problem, we have three options: find new oil sources of oil; find ways to conserve energy; or find alternate fuels. The energy bill talks about all three, but does nothing but retreat from reality into Orwellian rhetoric.
Substantial new sources of oil, such as tar sands, are very expensive to extract, leaving us with all the same old problems. The great Siberian perma-frost would go on melting, Antarctica would continue to break off into mammoth icebergs and some tipping point will make global warming irreversible.
Conservation also has irreducible problems. The people of the world -- and Americans in particular -- are not politically ready to cut their standards of living to deal with their oil addiction. Choosing alternate fuels, whether fuel cells, wind, solar power or some new technology, means a fundamental change in our consumer culture. But we better change our oil-dependant lifestyle, or the simple rules of supply and demand will change it for us.
X Paul Heise is professor emeritus of economics at Lebanon Valley College in Annville, Pa. Distributed by Knight Ridder/Tribune Information Services