Pay No Attention to the Price of Oil…
…or to the man behind the curtain. Or the energy monster under our bed. Today, OPEC president Chakib Khelil warned that oil prices would stay above $100 for the remainder of 2008 based on:
“speculation, geopolitical tensions, particularly due to the Iranian nuclear affair and the crisis between Venezuela and ExxonMobil,” APS reported. The world economy could get some help with the arrival of a new U.S. president, and possibly a new economic policy, “and with this new situation it is very probable that the dollar will start to recover and thus permit a readjustment of the (oil) market,” Khelil said.
Oh, really. So $107/barrel oil has nothing to do with the imbalance in supply vs. demand. It has nothing to do with our conspicuous consumption, nor the voracious appetites of parts of the world such as China and India, where people in large numbers are getting access to affordable automobiles for the first time. It has nothing to do with the essentially flat level of world oil production, which has remained at 84-85 million barrels per day since about 2005.
As the head of OPEC, Khelil is saying what the head of any waning cartel must say: “there are no supply worries, this is just a spike in price. Go back to your lives and your big cars and keep paying us more money.”
And apparently, despite the drain on their wallets, people are listening to him.
What $107 oil means is far more than $4.00/gallon gasoline. It means more expensive goods, not the least of which being food. It means further pressure on airlines which are already stretched to the breaking point. It means a reorganization of commuting patterns as people realize they can no longer afford to drive as far to that subsistence job. It means they have less money in their wallets to buy everything else except their food and energy. The ripple effects are vast, including downturns in travel, tourism, and every level in an economy already reeling from the twin shocks of the mortgage crisis and dollar devaluation. It is a vicious cycle that can only end in one of two ways: massive inflation to wipe out deficits, or some courage, sanity and a serious push toward renewable and sustainable methods at every level of American life. At this point, even if we do our best, we still might not avoid substantial disruption.
But Khelil would have us believe that we should simply tighten our belts and wait for easier oil in 2009. I say BULLSHIT!!!
What’s it going to take for Americans to understand: OPEC is not our friend. They are the crack dealer on the other side of the tracks. When their product risks becoming scarce or unaffordable, they have to go into full scale damage control. Part of that strategy involves this kind of deceptive P.R. sleight of hand–where they insist the exorbitant prices are the result of anything but the economic fundamentals.
Let’s start by examining the claims: That the Iranian nuclear crisis has caused high oil prices. How much sense does that make? That crisis was essentially over several months ago as the Bush administration acknowledged Iran had abandoned its weapons grade program in 2003. So it affects today’s price of oil how?? O.K. so it must be Chavez’ little dustup involving $12 billion with Exxon. You heard that right. We’re supposed to believe that something involving money equivalent to about 10 days worth of U.S. oil imports will affect the world price of oil for the next year and beyond. All right, then the weak dollar. Well we know a weak dollar (that has been trading at an all time low of over $1.50 to the Euro) can cause high commodities prices–Khelil admitted as much. But the dollar’s predicted recovery in 2009 creates more oil how? None of it adds up.
Essentially OPEC has gotten away with this song-and-dance routine because Americans don’t want to face the awful truth that they just might have to stop driving their dualie 3/4 ton crew-cab pickups loaded with ATVs at 90 mph down the road. On my recent trip around the country, where I drove 2,800 miles in my Prius loaded with gear on about 60 gallons of gas, I was passed more times than I could count by such grotesquely overwrought vehicles screaming past me like banshees–thumbing their noses at both high prices and any remote grasp of climate issues.
If these clueless freaks end up losing their vehicles and homes because of the crashing economy, in some ways they have only themselves to blame. But we’re all in this together, and we need to start letting the price signals focus our minds on the real problem.
As my friend Lou Grinzo over at The Cost of Energy says often, OPEC should actually cut production further. This would cause prices to rise even faster, and make their little diversionary routine harder to carry off. But they won’t do that. They know they can only push their black tar addicts so far before we say “ENOUGH” and learn to make our own fuel.
Fortunately, many American companies are starting to do just that. But it’s not anywhere near fast enough to prevent a meltdown.
Oil is going away–permanently. In the meantime, it’s going to get a LOT more expensive. If you’re thinking about buying a car, don’t plan on even $4.00 gas in five years. It will probably be double that. I’m looking at the current $3.50 a gallon price very much like I looked at the $0.35 price when I was growing up. That coincided with the U.S. peak of oil production in about 1971. By 1981, ten years after U.S. peak, gas was $1.40 a gallon. You see where this is going?
We are now at or near world peak oil. So I don’t think I’m out on a limb at all when I say $14.00/gallon gasoline is entirely possible by 2018 or 2020. That’s petro-gas, of course. And that’s assuming no mitigation measures. By then, there will no-doubt be dozens of companies making all forms of synthetic fuels which should help moderate prices. The financial incentives will be enormous. And a lot of us will be driving electric cars.
But that assumes we’ve got an economy left to make the trillion-dollar investments necessary to fund replacing all our cars, and building thousands of biofuel plants around the nation. And that the transport sector hasn’t already been wrecked. This is a crisis. The sky is not falling, but we are getting an unmistakable signal that serious change is mandatory. The sooner we all realize that and take steps to make the transition, the less pain and suffering we will all have to endure in the process.
Let’s tell the liars of OPEC exactly where they can stick their oil!
