1-17-08 by dugan
As most of us don’t remember offhand, the price of crude oil a year ago was $52 a barrel. I looked it up after reading a speech that Red Cavaney, longtime head of the American Petroleum Institute, delivered in Washington yesterday. His defense of today’s $90 a barrel oil price cites exactly one fundamental thing that’s really changed over the year. See if you can pick it out:
"There are a number of fundamental factors that are contributing to the run-up in crude oil prices. These include: strong global oil demand; tight spare production capacity; rising geopolitical tensions; falling U.S. crude oil inventories; a weak U.S. dollar; domestic strife in Nigeria that has lowered production; and declines in worldwide production."
Yes, the dollar is lower.
If U.S. oil inventories are lower, that’s because the oil companies are reducing imports. And the International Energy Agency reports that December 2007 world oil production was up sharply, as was the whole 4th quarter, though production was stagnant earlier in the year. Overall, no worse than a wash. The IEA also said its latest projections show little to no increase in worldwide demand in 2008. And production in Nigeria, says the IEA, has been stable. Geopolitics is no worse than the usual mess and nothing has changed about "production capacity."
Cavaney also says the public is woefully ignorant of the oil business. He expressed shock that an oil industry-sponsored survey found that only 7% of Americans picked the right answer when asked how much money oil companies invested between 2000 and 2005 in "emerging energy technology." The API’s "correct" answer was $100 billion, but what the heck does "emerging energy technology mean?
He also bemoans Americans’ mistaken belief that a lot of their oil comes from Saudi Arabia, even though it’s a belief that they picked up from hearing oil companies complain for years about how they’re just captives of Middle East oil producers.
And, to sum up, Mr. Cavaney still wants to be able to drill along any U.S. coastline.
He also didn’t mention global warming, conservation or renewable fuels, probably because he was speaking to an industry audience that didn’t need the dose of greenwash.
It must be comforting to live in a place where all that’s needed is for government to free oil companies to do what’s needed. Instead of a place where oil and energy prices are driving inflation and putting the economy into free fall.