Is the current oil crisis a natural phenomenon, the inevitable result of too much demand meeting too little supply? Or is it the consequence of market speculation or of bad government policies? To get at the answers, we decided to drill deep into government data and other sources to see what the numbers told us.

—- Jay Bookman, for the editorial board (jbookman@ajc.com)

1. THE PROBLEM

Just in case you haven't noticed, the price of gasoline has risen by almost a dollar a gallon in the past year and by more than $2 a gallon in the past five years, even after accounting for inflation.

Part of the explanation for the rise in oil prices has been the fall of the dollar compared with the euro and other currencies. And with summer just beginning, gasoline is now more expensive than it has ever been in this country.

GASOLINE PRICES

June 2003 —- June 2008

(All prices adjusted for inflation, expressed in 2008 dollars)

Bar chart compares price increases, specifically:

'03: $1.75

'08: $3.90

—-

U.S. DOLLAR TO EURO

June 2003 —- June 2008

(Monthly prices)

Chart tracks the value — specifically:

June '03: .86 and .91

June '08: .64

"It depends on what will happen when you have a very unstable situation in the Gulf and the expectation that there will be an attack on Iran and Iran would respond, and if they do respond it's $200 or $300 per barrel could be the results of that —- but it's a big if.''

Sheik Ahmed Yamani

former longtime Saudi oil minister

"Assuming that world oil markets continue to work as they do today, [OPEC] could neutralize any potential price impact of ANWR by reducing its oil exports by an equal amount."

U.S. Energy Information Administration

"Analysis of Crude Oil Production in the Arctic National Wildlife Refuge"

2. THE CAUSE

Why is it so expensive? Because demand for oil is rising quickly while the supply of oil is rising slowly. When demand outpaces supply for an extended period of time, the price rises. (Federal officials are also investigating claims that speculation has driven prices artificially high, but so far no direct evidence has surfaced).

China and its booming economy account for a lot of that growth in demand. China's oil consumption tripled between 1990 and 2006. However, the United States has also made a considerable contribution to demand growth. Between 1990 and 2006, China's oil consumption rose by 4.9 million barrels a day; in the United States, consumption rose by 3.7 million barrels.

By 2030, the federal government predicts, the United States will still be consuming 11 million barrels a day more than China, which has four times our population.

OIL CONSUMPTION

in U.S. and China

1990 —- 2006

Bar chart compares barrels of oil consumed per day in '90, '96, '00, '05 and '06 — specifically:

'90:

U.S.: 16.98 million (Barrels per day)

China: 2.29 million

—-

'06:

U.S.: 20.68 million

China: 7.20 million

3.

TOP TEN OIL PRODUCERS

2006

a bar chart comparison:

(Barrels per day)

Saudi Arabia: 10.66 million

Russia: 9.67 million

United States: 8.33 million

Iran: 4.14 million

China: 3.84 million

Mexico: 3.70 million

Canada: 3.28 million

United Arab Emirates: 2.94 million

Venezuela: 2.80 million

Norway: 2.78 million

SUPPLY AND DEMAND

The United States is the third-largest oil producer in the world, trailing only Saudi Arabia and Russia. We produce more than twice as much oil every day as Iran, the fourth-largest producer. Yet the 8.3 million barrels of oil we produce every day don't come close to meeting our demand of 21 million barrels a day.

And as our petroleum use has increased, our proven oil reserves —- the amount of oil that we know is waiting in the ground to be pumped —- have fallen dramatically since the peak in 1970, right after discovery of large oil reserves in Alaska.

U.S. CRUDE OIL PROVEN RESERVES

(In barrels)

Chart tracks from 1960 to 2006:

'60: 31.61 billion

'70: 39 billion (peak)

'06: 20.97 billion

—-

4.

TOP 10 COUNTRIES EXPORTING OIL TO THE U.S.

March 2008

(Barrels per day)

a bar chart comparison:

Canada: 1.79 million

Saudi Arabia: 1.53 million

Mexico: 1.23 million

Nigeria: 1.15 million

Venezuela: .85 million

Iraq: .77 million

Angola: .38 million

Algeria: .24 million

Equador: .23 million

Kuwait: .19 million

WE DEMAND, THEY SUPPLY

To meet its enormous energy needs, the United States imports oil from all over the world, most notably from North America, South America, Africa and the Middle East. And with oil selling at around $140 a barrel, that means we ship almost $2 billion to other countries every day to pay for imported oil.

PER CAPITA OIL CONSUMPTION

2004 (*2006)

(Barrels per day per 1,000 people)

a bar chart comparison:

Canada: 71.7

United States: 70.5

Netherlands: 58.1

South Korea: 44.6

Japan: 43.6*

France: 32.3*

Germany: 32.1

United Kingdom: 30.5

Russia: 17.4*

China: 5.0*

"At a time when the growth of consumption is lower than the growth of production and the market is full of oil, prices are rising and this trend is completely fake and imposed.... It is very clear that visible and invisible hands are controlling prices in a fake way with political and economic aims."

Iranian President Mahmoud Ahmadinejad

5. FALSE SOLUTION A

The rising price of gasoline is blamed by some on the fact that no new refinery has been built in this country since the 1970s. As the story goes, environmental regulations have made it impossible to build needed new facilities.

However, both claims are exaggerations. While no new refineries have been built, that is the result of market-based decisions by private investors, not government agencies. Until very recently, we actually had a glut of refining capacity in this country, which made it difficult for refiners to make money. Excess gasoline refining capacity in Europe —- created as European drivers moved from gasoline to diesel to power their vehicles —- also undercut American refineries' profits. And even without new refineries coming on line, companies have managed to expand domestic refining capacity by expanding existing facilities.

"Excess refining capacity historically caused profitability of the refining sector to be low compared to many other industries," the Government Accountability Office concluded in a report last year. In the first quarter of 2008, for example, Chevron made an overall profit of $5.17 billion, but its profit from refining amounted to just $4 million.

"OPEC needs to open the production lines to a greater extent, increase global oil supply. ... The G8 provides an opportunity to apply the blowtorch to the OPEC organization —- and it's time that happened."

Kevin Rudd

Prime minister of Australia

6. FALSE SOLUTION B

Would opening the Arctic National Wildlife Refuge and other coastal areas to oil drilling have any effect on gasoline prices, as many politicians claim? No, it would not.

Let's take ANWR as an example. Many Americans would be surprised to learn that oil produced in ANWR would be sold to Americans at whatever the global price for oil happened to be. There's no "hometown discount" —- U.S. consumers would pay 100 percent of the global price for ANWR oil, just as we do now for oil produced from Alaska, Texas or the Gulf of Mexico.

That's because all oil produced in this country goes into the world oil market. All oil sold in this country is bought off the world oil market. So there's only one way that opening ANWR and other areas could lower the price of gasoline here in the United States: It would have to put enough "new oil" on the global market to drive down the price of oil worldwide.

A newly released study by the federal Energy Information Administration says that would not happen. According to the EIA, if drilling began in ANWR this year, oil production from that region would peak around 2027-2030. At peak production, ANWR would produce enough oil to lower the world price of oil by about 1 percent. If gasoline is selling at $5 a gallon in 2030, that would amount to 5 cents a gallon.

That EIA prediction has actually been confirmed recently in the oil markets. Saudi Arabia has announced it would increase production by 500,000 barrels a day. But analysts call that a modest boost when you consider total world consumption of about 85 million barrels a day; not surprisingly, it has had no discernible impact on world oil prices.

Furthermore, the EIA predicts that as ANWR oil came on the world market, OPEC would simply reduce its production, thus keeping the global oil supply —- and the global price —- unchanged. So in the end, drilling in the wildlife refuge and offshore areas would have little or no impact on oil prices.

7. THE HARD TRUTH

So what's the solution? There isn't one. The higher gasoline prices we see today are probably permanent and may go higher still. Some energy analysts even believe that world oil production is now peaking and will begin to decline just as global demand has begun to soar. If so, today's historically high petroleum prices will seem like a bargain by 2018.

Major automakers understand that a fundamental change is under way —- they're closing plants that make SUVs and pickup trucks and focusing instead on high-mileage cars. And there is strong if early evidence that Americans are making changes in their daily lives that would have seemed impossible just a few years ago.

In response to $4 gasoline, for example, we have begun driving fewer miles and turning more often to mass transit. For the first time in history, the number of miles driven on U.S. highways has begun to decline.

According to the Federal Highway Administration, Americans drove 11 billion miles fewer in March than they did in March 2007, a decrease of 4.3 percent. (In Georgia, the decline was even sharper, with travel falling 5.8 percent.) At 25 miles per gallon, that means gasoline consumption nationwide dropped 440 million gallons in March.

And in the first three months of 2008, transit ridership increased 3.3 percent, according to the American Public Transportation Association.

U.S. TRANSIT RIDERSHIP

First quarters of 2007 and 2008

a bar chart comparison:

2007: 2,540,687

2008: 2,625,404

—-

VEHICLE MILES TRAVELED

First quarters of 2007 and 2008

a bar chart comparison of January, February and March — specifically:

March

2007: 257.3 billion

2008: 246.3 billion

8. FUTURE SHOCK

There are no "outs" —- building more refineries or opening new areas to oil drilling cannot alter the global nature of the changes now under way. Overall, an economy and lifestyle built on cheap oil will be forced to undergo wrenching changes in a fairly short period of time.

The impact will not be uniform. For example, high gasoline prices are having a disproportionate impact on rural areas, where distances are longer, incomes lower and public transit isn't an option. (Already, travel on rural roads in Georgia has fallen significantly faster than in urban and suburban areas.)

In suburban areas, sprawling development patterns will become the real estate version of the Hummer, both relics of an age of cheap energy. The same is true of transportation solutions built around such ideas as double-decking highways.

Rail will become a more economically viable means of moving goods as well as people, the airline industry will contract, and given the importance of oil as an agricultural "input" —- it is used for everything from fertilizer and pesticides to running tractors —- food prices are likely to stay high as well.

Overall, the fundamental forces of supply and demand now in play are simply too powerful to be denied. Until alternative energy sources are developed and scaled up, adaptation, not denial, will be the only rational course.

U.S. & WORLD REFINING CAPACITY

1970 —- 2008

a bar chart comparison —- specifically:

'70:

World: 47.04 million

U.S.: 12.02 million

'80:

World: 79.87 million

U.S.: 17.98 million

'08:

World: 85.29 million

U.S.: 17.43 million

Sources: U.S. Energy Information Administration, Reuters

 MICHAEL DABROWA / Staff

10 charts within the story text

Sources: U.S. Energy Information Administration, Reuters