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Monday, June 9, 2008
$12 gas?
The Atlanta Journal-Constitution
While Congress does nothing but play the games that Nancy Pelosi and Harry Reid think will put Barack Obama in the White House, oil prices jumped in a single day Friday by as much as a barrel of oil cost just a decade ago. A barrel closed at $138.54, up $10.75, oil’s largest one-day rise ever.
A prediction earlier this year by Charles T. Maxwell, senior energy analyst for Weeden & Co., is beginning to look possible. Maxwell, who spent a dozen years in the oil industry and another 40 on Wall Street, told energytechstocks.com back in February that the price of a gallon of gas could rise to the $12-$15 range by 2015.
The problem, he said, is that production grows about 1.2 percent per year, while demand grows at 1.5. The gap is being filled by current inventories, but by 2010 the demand will exceed that supply. By 2012, he expects prices to start rising again. By 2025, alternatives like cellulositic biofuel and electric vehicles, should provide alternatives.
Over the weekend, energy chiefs from the Group of Eight industrialized nations met to weigh the ramifications of skyrocketing energy prices. Samuel Bodman, U.S. energy secretary, said the problem is not so much speculation and uncertain inventory levels, but supply and demand. “We’re in a difficult position where we have a lid on production and we have increasing demand in the world.”
Production has been static at 85 million barrels per day for three years, while the rapid expansion of economies in China and India has pushed world demand higher. Both China and India subsidize consumer fuel prices.
Bodman didn’t mention it, but a weak dollar has also fueled the problem.
He did point out, however, that the International Energy Agency reports that the world needs another $22 trillion investment in energy supply infrastructure by 2030. “We have a situation where we have these high prices and the only solution is to diversify your resources, diversify your sources of fuel,” he said. He mentioned nuclear energy, natural gas, wind and hydro.
There’s no question that for the U.S. that includes drilling off-shore, in the Artic National Wildlife Refuge, more rapid expansion of nuclear power, additional refinery capacity, and an examination of requirements, like those for designer fuels, that contribute to higher gasoline prices.
This quick spurt of fuel prices has demonstrated the folly of mandating higher fuel standards for automobiles and trucks. When gas reaches an average of $4 a gallon, as it did this weekend, the gas-guzzlers get parked and the itsy-bitsy car-etts fly off the dealer lots.
