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Americans are in for a crude awakening
Whither oil?
That’s the head-scratching question nagging everyone from beleaguered U.S. airlines and automakers to panicky motorists bracing for $4-a-gallon gasoline
Will record crude oil prices, which briefly topped $135 a barrel last week, continue soaring wildly into the stratosphere? Or will they finally come crashing back to earth, restoring sanity to energy markets?
One thing is clear: Today’s almost unbelievably high prices are shaking virtually everyone’s world to a degree that we haven’t seen since oil prices shot from $3 to $35 a barrel from the early 1970s to early ’80s.
American Airlines recently announced plans to lay off thousands of employees, retire as many as 85 airplanes and charge customers $15 each way for the first checked bag. Those moves were engendered by ultra-pricey oil, the raw product for jet fuel.
As American CEO Gerard Arpey lamented: “This industry cannot continue under its current structure. It’s not built for $125 or $130 oil.”
A day later, Ford Motor Co. announced deep production cutbacks, citing plummeting demand for large trucks and SUVs.
So what’s causing these unbearably high oil and gas prices? Bear with me while I unpack a cornucopia of often-cited reasons:
UHeavy world oil demand (86 million to 87 million barrels per day).
UThe weak U.S. dollar (which has encouraged speculative oil futures trading as a hedge against inflation).
UWall Street investment banks predicting that prices could escalate to $140 to $200 a barrel.
UDisappointing production levels in oil-rich countries such as Russia, Mexico, Nigeria, Venezuela and Iraq.
UReduced access to bigger overseas oilfields for private-sector oil giants such as ExxonMobil, Chevron and Conoco Phillips. (National oil companies such as those in Saudi Arabia and Venezuela now are controlling most of the world’s supply.)
UBans on U.S. oil exploration in many offshore areas and the Arctic National Wildlife Refuge in Alaska.
USoaring costs for drilling in an era when most of the giant, low-cost fields already have been heavily tapped.
URising demand for diesel fuel in rapidly developing countries such as China, where the recent earthquake disrupted coal deliveries and hydroelectric power, thus boosting demand for diesel to power generators.
Even energy experts can’t agree on where prices are headed. Some predict a retreat to $70 to $85 a barrel. Others say surreal prices of $200 to $500 eventually could become reality if “peak oil” theorists are correct in concluding that global production (1) already is at or near maximum levels and (2) soon will begin an inevitable decline — this in a world where demand is mushrooming as a result of population growth and rising per capita energy consumption in developing nations.
So what can the good old U.S.A, the world’s largest importer of foreign oil, do to help avert unrelenting pain at the pump?
Americans need to continue buying smaller, fuel-efficient cars and trucks, as we have done with increasing rapidity since oil topped $100 a barrel in February.
New engine technologies
We must expedite the development of new engine technologies: gas-electric hybrids; plug-in, rechargeable hybrids; totally electric cars; and hydrogen fuel cell vehicles. The May 26 issue of Business Week has a fascinating story, “GM: Live Green or Die” — it’s about General Motors’ frenzied effort to market the gas-electric, plug-in hybrid Volt by late 2010. It would sell for $30,000 to $45,000, cost $150 to $300 a year to keep charged and get 100 miles per gallon on longer trips, the magazine reports.
We must develop sustainable communities that reduce driving needs and encourage use of mass transit. We must seek new oil and natural gas supplies in some offshore areas where drilling is now banned, as well as in a limited portion of the Arctic refuge.
Or we could ignore all these remedies and look forward to paying $10 a gallon for gasoline.
X Jack Z. Smith is an editorial writer for the Fort Worth Star-Telegram. Distributed by McClatchy-Tribune.