Finding solace in $3-a-gallon gas
High gas prices are a doomsayer's delight. Trips to the mall are fewer, vacations shrink, heating bills rise, inflation rises, the economy slumps. Those harmful effects need to be addressed, but in the long term, such prices can actually serve consumers.
If oil prices manage to stay above $40 a barrel for years, which many experts now say is possible, then the alternatives to oil, from solar cells to liquefied coal, look very attractive to energy investors. (Current oil prices seem stuck above $60, or more than 50 percent higher than a year ago.)
Then the world can start to make the inevitable shift to a new energy era independent of crude.
That transition is coming anyway in this century. It's better to start paying the "replacement cost" now for the eventual depletion of oil reserves and move to a range of alternatives. Many of them are cleaner, renewable, or - get this - not imported from a few terrorist- infested nations.
Since 1973, of course, high oil prices have come and gone like bad romances. But that's the way OPEC prefers it. Not only has this cartel of petroleum giants helped to keep prices way above production costs, it has also occasionally moved to drop oil prices when they were too high.
That trick has left a lingering threat of roller-coaster prices, scaring off multibillion-dollar investments in many alternative energy sources or in expensive conservation steps that require years, even decades, of use in order to justify costs. If potential investors can now have some assurance of making a profit in many oil alternatives within a few years, there could be a rush from crude.
Indeed, OPEC's ability to make prices gyrate - which affects investors much as currency fluctuations do - could be over. Many of its wells are pumping at near capacity. Some experts say the giant Saudi oil fields are nearing a peak of production and could see a decline. On the demand side, China and India show little signs of reversing a rising demand for cars and petroleum.
Despite all that, oil-price predictors remain divided. Last month, the US Energy Information Administration (EIA) forecast prices would decline to $31 a barrel (in 2003 dollars) before reaching $35 per barrel in 2025. But it also warned the latest price rises could push up those numbers.
The EIA doesn't have much hope for renewable energies, predicting they will maintain only an 8 percent share of world energy consumption. That may reflect, however, a stronger interest in producing oil from nontraditional sources such as coal and oil sands - all in abundance in North America.
Coal liquefication, which South Africa perfected from Nazi technology during the embargo against apartheid, is a technique sought by China, which also has big coal deposits. In the US, coal-to-oil production probably needs at least a $30-a-barrel price to break even. Canada's giant oil-soaked sandpits, meanwhile, appear to have become a profit center.
A continuing frontier is the wringing of more efficiency out of oil use. Hybrid gas-electric cars are a good conservation leap, but government still needs to demand higher fuel efficiency from automakers, or to push harder for non-oil vehicles.
It's difficult to cheer for consistently high oil prices; consumers feel the pinch. But cheer we must. •