Fuel's Progress
03 Apr 2000
What an upset! Oil-burning New Englanders watch their heating bills double. Truck drivers protest higher diesel costs by jamming Washington, D.C., streets with their rigs. Congress, in its wisdom, offers to combat a 60-cent jump in gasoline prices with a four-cent tax cut. Our energy secretary runs around the Middle East begging for just a measly couple of million more barrels a day of oil, none of which can arrive in time to ease heating costs, or even in time to bring down the cost of driving SUVs on summer vacations.
What pain! What agony!
Okay, I'll stop; there's no need for me to be sarcastic. Plenty of other commentators are doing it for me.
They're pointing out that present prices look bad only because we got way too comfortable with an unexpected drop over the past few years to prices lower (after correction for inflation) than the younger generation had ever seen.
They remark that these prices we're whining about are still less than half of what our colleagues and competitors in Europe and Japan have been calmly paying for decades.
They tell us that we use twice as much oil per capita as any other industrial nation. Our growing population, multiplied by increasing miles driven per person, multiplied by vehicles that get fewer miles per gallon, means that our oil consumption rose last year by the same amount as all of Asia, which has 10 times as many people.
If, they say, you're a homeowner griping about your fuel bill and also a driver of one of those gas-guzzling SUVs, stop blaming the Arabs. You're doing it to yourself.
The truth is, it took a combination of ourselves and the Arabs to make this price spurt.
OPEC energy ministers, as opposed to our own, have a sensible long-term policy. Their aim is to keep oil prices as steady as possible, right around $25 per barrel. That keeps their revenues rolling in and their governments funded. Furthermore it's a high enough price to keep consumers from gobbling up SUVs, raising oil use, and draining OPEC reserves too fast -- OPEC energy ministers want to be sure their governments will be funded long into the future. At the same time it's a low enough price to keep energy-conserving and solar-based alternatives uncompetitive.
Very smart. If you were an OPEC energy minister, that's exactly what you would do.
But OPEC doesn't control all the world's oil, only about a third of it, and it can't always maintain discipline among its own members. So over the past few years too much oil was pumped worldwide. Prices fell to those historically low levels we accepted as if they were our birthright. Last March OPEC finally got it together to rein in the pumps by 1.6 million barrels per day (mbd) -- that's in comparison to the 74 mbd the world was using at the time. Just a 2 percent cutback. A minor price correction.
It took all this time -- about eight months to the heating fuel tanks, about a year to the gas pumps -- for that small cutback to percolate through the refineries and the delivery and storage systems so we finally noticed and panicked. Of course anyone who was paying attention could have known a year ago that it was coming. And any production increase now will take equally long to work its way through the system.
What neither OPEC nor anyone who was paying attention could have known a year ago was that OPEC overshot; it cut back too far. The price went up over $35 a barrel this March, higher than OPEC intended. That was largely because of America's orgy of SUVs and light trucks, spurred on by those low gas prices. While OPEC cut back by 1.6 mbd, our oil consumption soared in just one year by 0.6 mbd.
The price would have soared even higher, but for the fortunate fact that our friends in Europe and Japan cut their oil consumption a bit last year. They did so because they never saw that low price. Their governments, as opposed to our own, have a sensible long-term policy. They maintain a high oil tax in order to keep the price high and steady, balancing out the world market's ups and downs. That gives corporations and consumers a predictable energy cost. It makes that cost high enough to encourage the very technical adaptations -- from energy efficiency to wind power to hydrogen fuel cells -- that will lead their economies to the post-petroleum future.
That is the only policy that can foil OPEC. Our own policy, in contrast, tosses us around with the market, induces us to make very wrong decisions about energy technologies, and brings our energy secretary begging to OPEC's doors.
Why is our government the only one in the civilized world with a stupid, short-term energy policy? Why do our elected officials consider a European or Japanese-type energy tax not only unpassable but undiscussable?
Because our politicians are owned and operated by, among others, oil and car companies who pay for campaign costs and profit by the consequences.
It's just incredible how much it costs us not to get serious and tough about campaign finance reform.
What pain! What agony!
Okay, I'll stop; there's no need for me to be sarcastic. Plenty of other commentators are doing it for me.
They're pointing out that present prices look bad only because we got way too comfortable with an unexpected drop over the past few years to prices lower (after correction for inflation) than the younger generation had ever seen.
They remark that these prices we're whining about are still less than half of what our colleagues and competitors in Europe and Japan have been calmly paying for decades.
They tell us that we use twice as much oil per capita as any other industrial nation. Our growing population, multiplied by increasing miles driven per person, multiplied by vehicles that get fewer miles per gallon, means that our oil consumption rose last year by the same amount as all of Asia, which has 10 times as many people.
If, they say, you're a homeowner griping about your fuel bill and also a driver of one of those gas-guzzling SUVs, stop blaming the Arabs. You're doing it to yourself.
The truth is, it took a combination of ourselves and the Arabs to make this price spurt.
OPEC energy ministers, as opposed to our own, have a sensible long-term policy. Their aim is to keep oil prices as steady as possible, right around $25 per barrel. That keeps their revenues rolling in and their governments funded. Furthermore it's a high enough price to keep consumers from gobbling up SUVs, raising oil use, and draining OPEC reserves too fast -- OPEC energy ministers want to be sure their governments will be funded long into the future. At the same time it's a low enough price to keep energy-conserving and solar-based alternatives uncompetitive.
Very smart. If you were an OPEC energy minister, that's exactly what you would do.
But OPEC doesn't control all the world's oil, only about a third of it, and it can't always maintain discipline among its own members. So over the past few years too much oil was pumped worldwide. Prices fell to those historically low levels we accepted as if they were our birthright. Last March OPEC finally got it together to rein in the pumps by 1.6 million barrels per day (mbd) -- that's in comparison to the 74 mbd the world was using at the time. Just a 2 percent cutback. A minor price correction.
It took all this time -- about eight months to the heating fuel tanks, about a year to the gas pumps -- for that small cutback to percolate through the refineries and the delivery and storage systems so we finally noticed and panicked. Of course anyone who was paying attention could have known a year ago that it was coming. And any production increase now will take equally long to work its way through the system.
What neither OPEC nor anyone who was paying attention could have known a year ago was that OPEC overshot; it cut back too far. The price went up over $35 a barrel this March, higher than OPEC intended. That was largely because of America's orgy of SUVs and light trucks, spurred on by those low gas prices. While OPEC cut back by 1.6 mbd, our oil consumption soared in just one year by 0.6 mbd.
The price would have soared even higher, but for the fortunate fact that our friends in Europe and Japan cut their oil consumption a bit last year. They did so because they never saw that low price. Their governments, as opposed to our own, have a sensible long-term policy. They maintain a high oil tax in order to keep the price high and steady, balancing out the world market's ups and downs. That gives corporations and consumers a predictable energy cost. It makes that cost high enough to encourage the very technical adaptations -- from energy efficiency to wind power to hydrogen fuel cells -- that will lead their economies to the post-petroleum future.
That is the only policy that can foil OPEC. Our own policy, in contrast, tosses us around with the market, induces us to make very wrong decisions about energy technologies, and brings our energy secretary begging to OPEC's doors.
Why is our government the only one in the civilized world with a stupid, short-term energy policy? Why do our elected officials consider a European or Japanese-type energy tax not only unpassable but undiscussable?
Because our politicians are owned and operated by, among others, oil and car companies who pay for campaign costs and profit by the consequences.
It's just incredible how much it costs us not to get serious and tough about campaign finance reform.
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