Before the oil runs out: How US can cope when gas prices surge

• Energy planners. Both government and private officials didn't foresee the current oil squeeze. So they didn't promote policies to encourage construction of new refineries, foster training of more oil-field experts, and reverse a recent decline in the fuel mileage of America's auto and truck fleet.

An oil industry specialist, speaking on background, notes that during the 1980s, when activity in US oil fields went into sharp decline, as many as 1 million people, many with valuable knowledge, were let go by the oil industry. Even now, Americans seeking advanced degrees in skills valuable to the industry are few and far between.

With specialists again in demand in US oil fields, some major companies are having trouble getting geologists and petroleum engineers.

The most crucial factor affecting gas prices, of course, is the price of oil. And OPEC, the Organization of Petroleum Exporting Countries, is doing little to meet rising demand.

Thirty years ago, this oil-producing cartel of 11 nations, led by Saudi Arabia, had the ability to produce about 30 million barrels of crude per day. Today, they have the capacity to produce about ... 30 million barrels per day (b.p.d.). "So far, they are not really doing anything," says Ed Porter, research manager for policy analysis at the American Petroleum Institute.

There's a risk in this tight-market strategy by OPEC. In the early 1980s, during the second oil crisis when gas shortages rippled across the US, prices went up swiftly. As a result, many companies and individuals sought other sources of energy, such as natural gas and coal. Eventually, OPEC lost crude oil sales of 10 million b.p.d. because prices went too high.

Tuesday, in an effort to calm markets and dampen price speculation by traders, OPEC agreed to make available an extra 2 million barrels of oil a day for the next three months. But cartel officials insist that current prices are too high and worry about an oil glut next spring. "That's the period we have to watch," warns Edmund Daukoru, Nigeria's oil minister.

One big reason for the price surge: China, whose booming economy has generated huge demand internally for new automobiles despite having to import much of its fuel supplies. China has also suffered from a lack of electricity because of a slowdown in construction of new power plants during the Asian fiscal crisis of 1998-2002, according to an economist with the Chinese Embassy in Washington. When the economy took off again in 2003 and 2004, brownouts and blackouts hit the nation. To keep factories going at full speed, companies installed diesel generators, which helped boost oil use by 16 percent last year. Those effects still linger.

China is one of two wild cards that could send oil prices soaring or bring them under control. It accounted for 40 percent of total growth in world energy demand from 2000 to 2004, according to Cambridge Energy Research Associates (CERA). If that continues, it will have a "heavy long-term impact" on prices, says a recent report by the energy advisory firm based in Cambridge, Mass.

The other wild card is OPEC. In a report this summer, CERA predicted production will rise both in and out of OPEC through at least 2010. If so, that will be good news for the world's economies - and for all those SUV drivers.

• Second of three articles. Thursday: The search for alternatives.

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