11-7-08 by dugan
The big consumer news today is continuously dropping gasoline
prices, down to $2.31 a gallon nationally and below $2.00 in one state,
Missouri. Drivers are still keeping their cars in the garage and their
wallets closed in down-spiraling economy. Crude oil is about $60 a
barrel ($1.43 a gallon). But there’s thunder on the horizon, a credible
prediction that oil will top $100 a barrel again, probably long before
world economies fully recover, because oil companies refused to spend
their bloated profits on drilling and discovery.
Don’t we all want to get off this roller coaster?
The oil price prediction comes from the International Energy Agency, which released a summary yesterday of a larger oil report due out in a few weeks. From the New York Times report:
The
global economic slump that has curbed energy demand and pushed oil
prices down in recent months may provide only a short-lived respite for
consumers, according to the world’s top energy forecaster.The
International Energy Agency, which advises industrialized nations on
energy policy, warned on Thursday that the supply shortfalls that
pushed oil prices into triple-digit territory this year are far from
resolved, and could lead to a new period of high prices. …As a
result of higher prices and lower growth, the energy agency slashed its
forecast for global oil demand by more than 10 million barrels a day
over the next two decades. It now expects oil consumption to reach 106
million barrels a day in 2030, up from 86 million barrels a daythis
year.
But even with the lowered demand
forecast, the agency warned that the period of lower prices may not
last as producers fail to increase oil supplies to meet the developing
world’s rising needs. It expects prices to average more than $100 a
barrel through 2015, and possibly rise to $200 a barrel by 2030.
The report concludes:
"The future of human prosperity depends on how successfully
we tackle the two central energy challenges facing us today: securing
the supply of reliable and affordable energy; and effecting a rapid
transformation to a low-carbon, efficient and environmentally benign
system of energy supply."
Well, yeah. But as for reliable supply, oil companies said when oil was zooming over $100 a barrel last spring that the costs of materials and labor were too high
to ensure a 30% profit, so they were unproductively buying back tens of
billions of dollars of their own stock instead of drilling. Now,
they’re already saying they can’t spend to build because the price of oil is too low.
The only winner in this whipsaw is Exxon and friends. They make more
money by producing less oil and fuel, thus shoving up the price.
It’s a good sign that the transition team of president-elect Obama is keeping a sharp focus on energy
even as prices fall. There’s continued talk of an "Energy Security
Council" that would cover both environmental and energy policies. That
kind of advisory council wouldn’t be so necessary if the Energy
Department and Environmental Protection Agency were functioning well
and communicating with each other. But both were diminished and badly
politicized under the Bush administration. The EPA suffered near-censorship of its scientific reports and the Energy Department was headed by powerless ciphers–White House yes-men.
No
matter what agency or council takes the lead, the new White House can’t
take its eye off the energy ball, no matter what happens in the short
term to oil and fuel prices. Only cutting back on oil through
conservation and renewable energy will get us out of the clutches of
petroleum’s me-first business model, and into permanently cleaner and cheaper energy