So just in time for summer driving season, gasoline prices are inching toward $3 per gallon. And to think, you probably believed all those hopeful news stories about $2 gas for vacation driving. Dream on!
This bit of deja vu is as foreseeable as it is unwelcome for most American motorists. In Houston, crude prices climbing over $70 per barrel in recent days ought to be cause for optimism in our city's powerful energy sector, but the picture isn't that simple.
What the number crunchers and others in the oil patch who decide when to increase drilling and when to stack the rigs and wait really seek is some assurance that prices will remain within a reasonable price range for a predictable time period. A steady $70 per barrel is preferable to an unpredictable roller-coaster ride between $35 per barrel and $140 per barrel.
Anyway, a significant part of the energy business here is focused on natural gas, a sector where prices remain sluggish after spiking up a couple of years ago. The result is shut-in wells and a growing concern that shortages and steep price hikes could be in the offing later in the year.
The crude oil price situation today seems a genuine paradox: Prices have risen above $70 even though gasoline demand in this country remains relatively weak and reserve tanks continue to be filled to the brim. Experts say the reason is that oil speculators the same folks who drove prices through the roof last summer and fall now are cautiously optimistic about a global recovery that would bring an increase in demand. And so, many who had been sitting on the sidelines now are returning to crude oil investments. Thus, the price bump. What is to come? We will leave reading those tea leaves to those who really know how.
Meanwhile, we do call attention to the work of Michael T. Klare , a professor at Hampshire College in Massachusetts, and a frequent commentator on energy subjects. Klare says we should pay close attention to the 2009 long-range forecast made recently by the federal Energy Information Administration, part of the Energy Department.
EIA has revised its earlier numbers for global crude production looking far ahead to 2030, Klare observes. The EIA prognosticators have backed off earlier predictions that global crude production in 2030 would be 107 million barrels per day.
They now say it's likely to be only about 93 million, with the slack taken up by nonconventional sources. The headline here, Klare argues, is that the EIA is finally joining with those who have predicted for years that we have passed the curve of peak oil production and that cheap, plentiful crude is history.
One other thing, according to Klare: EIA has significantly speeded up the timetable for when China would displace the U.S. as the world's largest consumer of oil. That will happen as early as 2014. This all confirms what we already knew: The country is right to be on a track to encourage greater vehicle efficiency while increasing the use of alternative fuel sources. At the same time, however, it is only common sense to also encourage exploration and drilling for new conventional supplies.