Author’s note: I wrote this column in 2004, and it was published under the heading “$2 gas may soon seem cheap.” I add some current thoughts at the end.

We’ve heard dire warnings of impending oil shortages all our lives, but this time the wolf may actually be at the door.

Most news coverage of $2 gasoline has been focusing on U.S. refining capacity and vacation driving, but the real story may be much more dramatic. World oil production could begin declining at any moment, driving prices sharply upward and crippling the global economy.

Stuart Long

 

U.S. prosperity was built on cheap oil, $2 to $3 a barrel until the 1960s. As recently as 1994, oil sold for $13 a barrel. In the wake of recent (2004) terrorism in Saudi Arabia, buyers were bidding $42 a barrel.

Oil is vital to transportation, industry, agriculture, etc., in every country under every economic system. World demand rises as more countries try to copy western industrialization and consumerism. China just passed Japan as the world’s No. 2 importer of oil.

What is rarely reported is that the oil-producing nations are straining to keep up with demand. When Saudi Arabia reaches full production in the next few months, there will be no more excess capacity anywhere in the world oil economy.

As anyone who has ever studied economics knows, when demand exceeds supply, prices rise. If the condition is permanent, then the price increases are, too.

In the oil industry, this historic moment is known as Hubbert’s Peak. In 1956, geologist M. King Hubbert predicted that U.S. oil production would peak in the 1970s and then start falling. Almost nobody believed him at the time, but he proved correct.

That’s why the United States imports an ever-increasing share of the oil it consumes, about 55 percent. The United States consumes 20 million barrels of oil per day, a quarter of world demand.

This fact of life also may explain why the U.S. military is so invested in the Persian Gulf area. That’s where 65 percent of the world’s proven oil reserves are.

Using Hubbert’s mathematical models, one major study of global oil production identified the peak year as 2004; another put it in 2008. Stated another way, of the 2 trillion barrels of oil in the ground, half already have been pumped.

Competition for the remaining oil will be fierce. In the last global war, oil was the strategic goal of Germany’s invasion of Russia and Japan’s attack on the United States.

At full production, Saudi Arabia will pump 9 million barrels per day. Iraq, which is second only to Saudi Arabia in proven oil reserves, produces just 2 million barrels per day, less than Venezuela.

President George W. Bush and Vice President Dick Cheney are former oil men. Their interest in exporting democracy to Iraq is directly proportional to their desire to see Iraqi oil exploited.

They also want to increase supply by more offshore and Alaska drilling. One Republican proposed suspending state pollution laws to ease refining. Domestic energy politics will grow more strident, too.

There is no magic bullet technological solution in sight. But when gas prices climb high enough — just imagine $5 gas — we will all become conservationists.

* * *

Current thoughts: Industry secrecy clouds the issue, but peak oil worldwide may have occurred in 2005. Many economists believe the resulting price increases to $140 a barrel last summer triggered the global recession. Enjoy the present low gas price ($2.50) because it’s only temporary.

Americans are so in love with their cars that they will sacrifice almost everything before giving them up. When gas hits some unbearable price like $10 and the former middle class no longer can afford to drive, gas and guns will become chaotically intertwined.

No matter whom we elect president or to Congress, the U.S. military will occupy the Persian Gulf until all the oil is gone or we can no longer afford the occupation.

Americans eventually will have profound regrets about the money we have wasted on suburban sprawl and highways since World War II.

Commercial aviation is a lost cause.

The United States should invest what we can right now in improving our rivers, canals and railroads (towboats and locomotives can run on coal or wood if necessary).

Stuart Long is a retired newspaperman, citizen volunteer and serious library patron.