It's time the scientists and engineers find a cheap way to extract the oil from our vast shale oil fields in the west and find a way to burn coal without polluting the air as we have enough coal to last us for a long long time. The other solution is to use nuclear power to product electricity but that too has to be done in such a way as to be safe for the earths residents, no power plants should be built based on the lowest bid system but on experience, quality, and track record of no problems from their work.
By James R. Healey, USA TODAY The average price of gasoline slipped below $3 a gallon Tuesday for the first time since Nov. 4, but a new government prediction cast that as a holiday chimera, warning of an average $3.40 next spring.
Oil struggled to do its part to back up the dire prediction, closing Nymex floor trading Tuesday at $90.02 a barrel, up $2.16 to close above $90 for the first time since Dec. 6. The price drifted down to $89.38 when electronic trading for the day ended at 5:15 p.m. ET.
The price of oil accounts for about two-thirds of the price of gasoline, according to the U.S. Energy Information Administration. Gasoline and oil prices can move in opposite directions temporarily, but over time higher oil prices mean higher gasoline prices, because gasoline is made from oil.
Daily data collected from more than 60,000 service stations by consultant Oil Price Information Service and published by travel organization AAA showed the nationwide average for regular gasoline Tuesday was $2.995 a gallon, down 0.8 of a penny overnight. OPIS predicted the price would continue declining for a few weeks.
EIA's forecast Tuesday said that although gasoline prices have been drifting down, "by the middle of next spring they are projected to rebound to over $3.40 per gallon as the driving season begins." The highest U.S. average for gasoline recorded by EIA is $3.218 on May 21.
FIND MORE STORIES IN: Tuesday | Oil | EIA | John Silvia EIA forecast that diesel will average $3.21 in 2008 and heating oil, used mainly in the Northeast, will average $3.11 next year.
The EIA's prediction did not go unchallenged.
"I think $3.10, $3.20 (per gallon for gasoline) seems more likely," says John Silvia, chief economist at Wachovia. "I wouldn't forecast a record. That seems too aggressive. I don't think you have the strength in the economy," he says. "We're just skating on thin ice," and a cut of one-quarter point in a key lending rate Tuesday by the Federal Reserve won't buoy economic activity, in Silvia's view.
The day's energy price moves came against a backdrop of accusations in Congress that commodity speculating, not supply and demand, sets oil prices.
Sen. Carl Levin, D-Mich., chairman of the permanent subcommittee on investigations, recalled that his previous research showed that speculators trying to make a buck on price moves add $20 to the price of a barrel of oil.
Opening a joint hearing with the subcommittee on energy, Levin skewered petro-speculators: "A fair price is a price that accurately reflects the forces of supply and demand for a commodity, not the trading strategies of speculators who only are in the market to make a profit for themselves by the buying and selling of paper contracts with no intent to actually purchase, deliver or transfer the commodity."
Nonsense, Silvia says. "Congress can always complain about that, but it's not in the ballpark. There always will be speculators who bet on the price going up and speculators who bet on the price going down. It's a zero-sum game."
The average price of gasoline slipped below $3 a gallon Tuesday for the first time since Nov. 4, but a new government prediction cast that as a holiday chimera, warning of an average $3.40 next spring.
Now, remember, if the price nationally is now under $3 and we're paying about $3.20, then when it spikes up to $3.40 nationally, we'll be paying closer to $3.60 - $3.70.
Congress OKs auto fuel economy increase Mandate is the first of its kind since 1975; bill also calls for more ethanol use BY H. JOSEF HEBERT The Associated Press
WASHINGTON — It was in response to the early 1970s energy crisis and gasoline lines that Congress in 1975 directed automakers to improve the fuel efficiency of their cars. That wouldn’t happen again for more than three decades — not until Tuesday. Congress sent to President Bush a truncated, although no less dramatic, energy bill that will require an increase in the fuel efficiency of cars, SUVs and small trucks by 40 percent to 35 miles per gallon by 2020. Bush will sign the legislation at the Energy Department on Wednesday. The energy bill, which also calls for a huge increase in the use of ethanol as a motor fuel and requires new appliance efficiency standards, was approved by the House 314-100 after clearing the Senate last week, 86-8. “This is a choice between yesterday and tomorrow” on energy policy, declared House Speaker Nancy Pelosi, D-Calif., who was closely involved in crafting the legislation. “It’s groundbreaking in what it will do.” In a significant shift to spur increased demand for nonfossil fuels, the bill requires refiners to use 36 billion gallons of ethanol by 2022, a six-fold increase over today’s ethanol production. And it imposes new energy efficiency standards for refrigerators, dishwashers and other appliances as well as lighting, federal buildings and construction of commercial buildings. While some GOP lawmakers criticized the bill for failing to address the need for more domestic oil and natural gas production, 95 Republicans joined Democrats in support of the bill. Pelosi and Senate Majority Leader Harry Reid of Nevada acknowledged that they didn’t get all they wanted — unable to push through a tax package that would have rolled back $13.5 billion in tax breaks for oil companies and used the money to help spur wind, solar and biomass energy development and conservation programs. The House passed the tax provisions, but the Senate fell one vote short of getting it through under threat of a presidential veto and a GOP filibuster. “Were going to be back and get the vote quicker than you think,” Reid said at a news conference with Pelosi. But Democrats said those shortcomings shouldn’t take away from the importance of the approved bill. “This legislation is a historic turning point in energy policy,” said Majority Leader Steny Hoyer of Maryland because it will cut demand for foreign oil and promote nonfossil fuels that will cut greenhouse gases linked to global warming. It increases energy efficiency “from light bulbs to light trucks,” said Rep. John Dingell, D-Mich., a longtime protector of the auto industry who was key to a compromise on vehicle efficiency increases. Many Republicans denounced the Democratic-crafted bill for failing to push for more domestic production of fossil fuels and for mandates some GOP lawmakers warned will not be possible. “What we have here is a mandatory conservation bill,” said Rep. Joe Barton, R-Texas. He argued that the auto fuel efficiency requirements and the huge increase in ethanol use may not prove to be technologically or economically possible. Democrats disagreed. The legislation takes measured and concrete steps that are achievable, said Dingell. The Senate passed the bill last week after discarding billions of dollars in higher taxes on oil companies and a solar and wind power mandate that opponents said would raise electric rates in the Southeast. Bush and Senate Republicans opposed those measures. The centerpiece of the bill remained the requirement for automakers to increase their industrywide vehicle fuel efficiency by 40 percent to an industry average of 35 mpg by 2020 compared to today’s 25 mpg when including passenger cars as well as SUVs and small trucks. Congress has not changed the auto mileage requirement since it was first enacted in 1975. Democrats said the fuel economy requirements — when the fleet of gas-miser vehicles are widely on the road — eventually will save motorists $700 to $1,000 a year in fuel costs. They maintain the overall bill, including more ethanol use and various efficiency requirements and incentives, will reduce U.S. oil demand by 4 million barrels a day by 2030, more than twice the daily imports from the volatile Persian Gulf. The automakers have repeatedly fought an increase in the federal fuel standard, known as CAFE, maintaining it would limit the range of vehicles consumers will have available in showrooms and threaten auto industry jobs.
Jan 2, 1:04 PM EST Crude futures hit record $100 a barrel for 1st time on supply concerns
NEW YORK (AP) -- Oil prices soared to $100 a barrel Wednesday for the first time ever, reaching that milestone amid an unshakeable view that global demand for oil and petroleum products will continue to outstrip supplies. Surging economies in China and India fed by oil and gasoline have sent prices soaring over the past year, while tensions in oil producing nations like Nigeria and Iran have increasingly made investors nervous and invited speculators to drive prices even higher. Violence in Nigeria helped give crude the final push over $100. Bands of armed men invaded Port Harcourt, the center of Nigeria's oil industry Tuesday, attacking two police stations and raiding the lobby of a major hotel. Word that several Mexican oil export ports were closed due to rough weather added to the gains, as did a report that OPEC may not be able to meet its share of global oil demand by 2024. Light, sweet crude for January delivery rose $4.02 to $100 a barrel on the New York Mercantile Exchange, according to Brenda Guzman, a Nymex spokeswoman, before slipping back to $99.48. Crude prices, which have flirted with $100 for months, have risen in recent days on supply concerns exacerbated by Turkish attacks on Kurdish rebels in northern Iraq and falling domestic inventories. However, post-holiday trading volumes were about 50 percent of normal Wednesday, meaning the price move was likely exaggerated by speculative buying. "I would imagine the speculators are the biggest drivers today," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago. It's hard to say whether prices would have risen as quickly on a normal trading day, Flynn said. While crude prices have soared on mounting supply concerns in recent months, speculators have often been cited as a reason for the swiftness of oil's climb. Moreover, many of the concerns about supply disruptions have yet to materialize, but that hasn't stopped buyers from driving prices higher. "Although the (Nigerian) violence has not impacted oil flow out of the country, it has reignited supply concerns as militant attacks have reduced Nigeria's crude output by roughly 20 percent since 2006," said John Gerdes, an analyst at SunTrust Robinson Humphrey in a research note. Nigeria is Africa's largest oil producer. Separately, the Organization of Petroleum Exporting Countries said its member nations may not be able to meet demand as early as 2024, though OPEC also said that deadline could slide for decades if members increase production more quickly. Word that several Mexican oil export ports were closed due to rough weather added to the gains. On top of those concerns, investors are anticipating that crude inventories fell by 1.8 million barrels last week, which would be the 7th weekly decline in a row. "(A decline) is not anything unusual for this time of year, but when it happens for 7 weeks in a row, it starts to add up," said Amanda Kurzendoerfer, an analyst at Summit Energy Services Inc. in Louisville, Ky. Oil prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today. At the pump, meanwhile, gas prices rose 0.6 cent Wednesday to a national average of $3.049 a gallon, according to AAA and the Oil Price Information Service. Gas prices, which typically lag the futures market, have edged higher in recent days, following oil's approach to $100. Gas prices peaked at $3.227 a gallon in May as refiners faced unprecedented maintenance issues and struggled to produce enough gasoline to meet demand. A similar scenario is expected this spring, when gas prices could peak above $3.40 a gallon, according to the Energy Department's Energy Information Administration. The EIA's inventory report, delayed until Thursday this week due to the New Year's holiday, is also expected to show gains in gasoline supplies and refinery activity, and a decline in supplies of distillates, which include heating oil and diesel. In other Nymex trading Wednesday, February heating oil futures rose 9.06 cents to $2.74 a gallon while February gasoline futures climbed 7.92 cents to $2.57 a gallon. February natural gas futures advanced 26.7 cents to $7.75 per 1,000 cubic feet. In London, February Brent crude rose $3.11 to $97.58 a barrel on the ICE Futures exchange. ---
High gas prices make drivers rethink trips AAA official says people changing behaviors BY JESSICA HARDING Gazette Reporter
With the price of a barrel of oil touching $100, some New Yorkers are starting to change their daily routines to save money at the gas pump. They include people like Don Darling of Amsterdam and his wife, who have sacrificed their shopping trips to Albany to save money. “We try to stay close to home and not use too much energy,” he said. Darling is a retired General Electric employee and he said Thursday he’s glad he’s retired because the cost of commuting to Schenectady for work would have cost a substantial sum. Darling drives a Chevrolet Impala, which he said gets about 22 miles to the gallon. He tries to keep the tank at least half full, especially in the winter, he said. It used to cost him about $20 to fill half the tank, but now it’s nearly $30. “I’m not happy,” he said while filling up at the Stewart’s Shop on Route 30 in Amsterdam. According to Eric Stigberg, public affairs manager for AAA Northway, the big picture is the dwindling world oil supply and geopolitical tensions that are contributing to the increasing cost of gas. What is helping temper prices is that demand seems to be decreasing, Stigberg said. “We are finally at the price where people are starting to change their behaviors,” Stigberg said. Heather Ryczek, 26, of Broadalbin, drives a Ford Explorer and her husband drives a large truck. She said they both need four-wheeldrive vehicles because they live in a rural area, but her SUV typically costs $50 to fill. Ryczek drives about 40 minutes round trip to her work on Guy Park Avenue in Amsterdam. She said her husband, who is a carpenter, drives much more, spending nearly $75 per week on gasoline. The price of gas plays a factor in a lot of her daily decisions, she said, including taking shopping trips to Albany during Christmas time, which have to be planned and done efficiently. “Even simple things like going to the grocery store, I think about it,” she said. Ryczek said she doesn’t have children but she can’t imagine what it’s like having to drive youngsters to various practices and other commitments. “I’m sure even the kids are missing out on things,” she said. “It’s really too bad it has to be this way.” According to statistics from AAA, the national average for a gallon of regular gasoline is $3.05, but in New York the average price is $3.28. Stigberg said statistically the price of gas falls during January and February and picks up again during the spring and summer months. He said the record-setting price of gas in the winter is not a good sign of things to come. “Unfortunately gas prices don’t have much chance of going down any time soon,” he said. “Last year the price of a barrel of oil was around $50, now it’s nearly $100. We are headed for record territory nationally and here in our area as well.” Stigberg advised those seeking to save money to carpool when possible, make sure their vehicles are running properly and take the most fuel efficient vehicle on long trips. For Jeff Wojacik of Charleston, gas prices are just something with which he has to deal. Wojacik travels 30 minutes one way to reach his job as a Thruway toll collector in Amsterdam. He said it costs him $55 to fill up his GMC Jimmy and that only lasts him about four days. Wojacik said he has been working extra shifts to make up for increasing gas costs. He said he believes the only way people are going to see relief from gas prices is for the United States to decrease its dependence on foreign oil. “Nothing is going to change unless we do something about it,” he said.
Forget oil, the new global crisis is food BMO strategist Donald Coxe warns credit crunch and soaring oil prices will pale in comparison to looming catastrophe
Alia McMullen, Financial Post Published: Friday, January 04, 2008
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Scott Olson/Getty ImagesCorn grows in a farm field near Seneca, Illinois. Rising demand for grain to make fuel, food and livestock feed has helped push the prices of corn and soybeans. A new crisis is emerging, a global food catastrophe that will reach further and be more crippling than anything the world has ever seen. The credit crunch and the reverberations of soaring oil prices around the world will pale in comparison to what is about to transpire, Donald Coxe, global portfolio strategist at BMO Financial Group said at the Empire Club's 14th annual investment outlook in Toronto on Thursday.
"It's not a matter of if, but when," he warned investors. "It's going to hit this year hard."
Mr. Coxe said the sharp rise in raw food prices in the past year will intensify in the next few years amid increased demand for meat and dairy products from the growing middle classes of countries such as China and India as well as heavy demand from the biofuels industry.
"The greatest challenge to the world is not US$100 oil; it's getting enough food so that the new middle class can eat the way our middle class does, and that means we've got to expand food output dramatically," he said.
The impact of tighter food supply is already evident in raw food prices, which have risen 22% in the past year.
Mr. Coxe said in an interview that this surge would begin to show in the prices of consumer foods in the next six months. Consumers already paid 6.5% more for food in the past year.
Wheat prices alone have risen 92% in the past year, and yesterday closed at US$9.45 a bushel on the Chicago Board of Trade.
At the centre of the imminent food catastrophe is corn - the main staple of the ethanol industry. The price of corn has risen about 44% over the past 15 months, closing at US$4.66 a bushel on the CBOT yesterday - its best finish since June 1996.
This not only impacts the price of food products made using grains, but also the price of meat, with feed prices for livestock also increasing.
"You're going to have real problems in countries that are food short, because we're already getting embargoes on food exports from countries, who were trying desperately to sell their stuff before, but now they're embargoing exports," he said, citing Russia and India as examples.
"Those who have food are going to have a big edge."
With 54% of the world's corn supply grown in America's mid-west, the U.S. is one of those countries with an edge.
But Mr. Coxe warned U.S. corn exports were in danger of seizing up in about three years if the country continues to subsidize ethanol production. Biofuels are expected to eat up about a third of America's grain harvest in 2007.
The amount of U.S. grain currently stored for following seasons was the lowest on record, relative to consumption, he said.
"You should be there for it fully-hedged by having access to those stocks that benefit from rising food prices."
He said there are about two dozen stocks in the world that are going to redefine the world's food supplies, and "those stocks will have a precious value as we move forward."
Mr. Coxe said crop yields around the world need to increase to something close to what is achieved in the state of Illinois, which produces over 200 corn bushes an acre compared with an average 30 bushes an acre in the rest of the world.
"That will be done with more fertilizer, with genetically modified seeds, and with advanced machinery and technology," he said.
But Mr. Coxe warned U.S. corn exports were in danger of seizing up in about three years if the country continues to subsidize ethanol production. Biofuels are expected to eat up about a third of America's grain harvest in 2007.
The amount of U.S. grain currently stored for following seasons was the lowest on record, relative to consumption, he said.
Scary thought. And will be an expense for us no matter what type of fuel we use. Cheap fuel is a thing of the past.
The price of a barrel of crude oil passed the psychologically significant $100 level this week for the first time, and while gas prices are still slightly below their record highs, chances are they won’t remain there for long. As a story in yesterday’s Gazette pointed out, winter is the slowest driving season of the year, and it’s only a matter of time before the weather starts improving, people start driving more and gas prices really start to climb. More record pump prices are probably inevitable, but motorists still have some say over how high they’ll eventually go. Gas prices, like crude prices, reflect demand, at least to some degree: The more people use, the higher prices rise (and they typically do in spring and summer, the busiest driving seasons). Thus by reducing demand, consumers can mitigate the impact of higher world oil prices on local pump prices. Will they? An official with AAA Northway (the local branch of the American Automobile Association) said in yesterday’s story that he thinks the $3-a-gallon threshold for gas has already begun affecting motorists’ driving habits. Indeed, subjects interviewed for the story said they were taking fewer trips and planning the ones they do take for maximum efficiency. They need to do more, of course — like sharing rides and forming carpools; taking public transportation (CDTA does acknowledge a recent increase in ridership); walking or biking instead of riding; taking their most fuel-efficient car on their longest trips; making sure their cars are at peak operating efficiency (with fully inflated tires and tuned engines); and slowing down: The fuel penalty for speeding is roughly 10 percent for every 10 mph over 60 a car is driven. They also need to stop making bad decisions in the showroom. For several years now, more than half the new vehicles purchased in this country have been so-called light trucks and sport utility vehicles — heavier and less fuel-efficient than cars. Most people don’t need vehicles that big, and buying them is not only a waste of their own money, it forces gas prices up for everyone. While President Bush did recently sign a new energy bill that will raise mileage standards for most cars and light trucks by 30 percent over 13 years, he could achieve that kind of fuel savings a lot faster by endorsing a stiff gasguzzler tax. Needless to say, all these measures, aside from helping keep a lid on prices, would reduce the nation’s output of greenhouse gases. What are we waiting for?
Gas prices may force new ways of living, governing BY EDUARDO M. PENALVER The Washington Post
The collapse in the housing market and high gasoline prices are bad news for middle-class homeowners left to sift through the wreckage. But if there is consolation to be found amid the rubble, it may be that the inexorable spreading out that has characterized American life since World War II might finally be coming to an end. Given the connections between car-dependent suburban development and social ills from climate change and the destruction of wetlands to obesity and social isolation, the end can come none too soon. American sprawl was built on the twin pillars of low gas prices and a relentless demand for housing that, combined with the effects of restrictive zoning in existing suburbs, pushed new development outward toward cheap rural land. Middle-class Americans, unable to find affordable housing in existing suburbs, kept driving farther into the countryside until they did. Gridlock in the suburbs and the expense of providing municipal services to sparsely populated communities imposed their own limits on how far we could spread. As a result, the density of metropolitan areas, which fell steadily in the postwar years, had begun to creep back up in the 1990s. Despite these infrastructural restraints, the housing boom and cheap gas kept pushing the edge of new development farther into rural America. WILL DECLINE LAST? Over the past year or so, both of these forces have dramatically weakened. With credit tight and the demand for housing drying up (sales of new homes fell last month to the lowest level in 12 years) new construction in the exurbs is grinding to a halt. The result is a decline in the building industry’s appetite for rural land on the urban edge. The question now is whether that decline will last. In the past, a sudden drop-off in demand for housing in the exurbs would have represented merely a hiatus. Builders would have bided their time until the housing market recovered, and the outward push would soon have begun again. But persistently high gas prices may mean that the next building boom will take place not at the edges of metropolitan areas but far closer to their cores. People are more willing to drive 20 miles each way to work every day, burning a couple of gallons of gas in the process, when gas costs less than milk. But as gas prices climb, long car commutes become a rising tax on exurban homeownership, and the price people are willing to pay for homes in remote areas will fall. Increasing gas prices may not be enough to cause people to move, but it can influence where people choose to live when they are forced to relocate for other reasons. The evidence that this is already occurring is, at this point, still somewhat anecdotal, but it is very suggestive. As the New Urbanist News reported this fall, homes close to urban centers or that have convenient access to transit seem to be holding their value better than houses in car-dependent communities at the urban edge. A recent story in the Minneapolis Star Tribune blamed flagging growth in the Twin Cities’ outer suburbs on rising gas prices. If prices at the pump continue to increase, as many analysts expect, the eventual recovery of demand for new housing may not be accompanied by a resumption of America’s relentless march into the cornfields. PRESENTING CHALLENGES The death of sprawl will present enormous challenges, chief among them the need to provide affordable middle-class housing in areas that are already built up. Accommodating a growing population in the era of high gas prices will mean increasing density and mixing land uses to enhance walkability and public transit. And this must happen not just in urban centers but in existing suburbs, where growth is stymied by parochial and exclusionary zoning laws. Overcoming low-density, single-use zoning mandates so as to fairly allocate the costs of increased density will require coordination at regional levels. This in turn will require overcoming the balkanization of America’s metropolitan areas. This shift toward a more regional outlook will force broad rethinking of how we fund and deliver services provided by local governments, most obviously (and explosively) public education. Although the end of sprawl will require painful changes, it will also provide a badly needed opportunity to take stock of the car-dependent, privatized society that has evolved over the past 60 years and to begin imagining different ways of living and governing. We may discover that it’s not so bad living closer to work, in transit- and pedestrianfriendly, diverse neighborhoods where we run into friends and neighbors as we walk to the store, school or the office. We may even find that we don’t miss our cars and commutes, and the culture they created, nearly as much as we feared we would.
$100 per barrel Rising oil prices significantly altering world’s economy and balance of power BY NEIL KING JR., CHIP CUMMINS AND RUSSELL GOLD The Wall Street Journal
The surging price of oil, from just over $10 a barrel a decade ago to $100 Wednesday, is altering the wealth and influence of nations and industries around the world. These power shifts will only widen if prices keep climbing, as many analysts predict. Costly oil already is forcing sweeping changes in the airline and auto sectors. It is intensifying the politics of climate change and adding urgency to the search both for fresh sources of crude and for oil alternatives once deemed fringe. The long oil-price boom is posing wrenching challenges for the world’s poorest nations, while enriching and emboldening producers in the Middle East, Russia and Venezuela. Their increasing muscle has a flip side: a decline of U.S. clout in many parts of the world. Steep gasoline prices also threaten America’s long love affair with the automobile, while putting strains on many lowerincome people outside big cities, who must spend an increasing share of their budgets just on fuel to get to work. No one can say for sure whether sky-high oil — part of a price boom in a wide range of commodities, from gold to wheat — is here to stay. But most in the industry agree that a 20-year stretch in which oil was consistently cheap is long gone. The global thirst for oil shows little sign of retreating, and large new discoveries are few. Some in the industry say prices could go far higher; others suspect that speculators — or an economic slump in the U.S. or China — could send prices falling in the near term. Wednesday, with a single trade, crude-oil futures hit an intraday high of $100 a barrel, a record for the U.S. benchmark. For the day, they rose $3.64 to a record close of $99.62 a barrel. Crude is still shy of the inflationadjusted peak of $102.81 a barrel set in April 1980, amid political turmoil in Iran and unrest elsewhere in the Middle East. The 1980 peak in nominal terms was $39.50 a barrel. The arrival of $100-a-barrel oil adds to the pressure on the U.S. economy, which has sustained a big blow from a drop in housing prices and a wave of foreclosures. Even at today’s prices, though, the oil spike alone isn’t enough to push the world into recession, economists say. When crude oil hit its 1980 high, drivers squealed and the economy slumped. So far there is no comparable pain, and America, which consumes a quarter of the world’s crude, retains its taste for big cars and energy-devouring homes. That’s largely because the U.S. economy is more efficient and most Americans spend less of their disposable income — about 4 percent — on gasoline than in 1980, when they spent about 6 percent. SURGING DEMAND The robust economies of Asia, especially China, have so far swallowed the price surges with relative ease. That’s because the price spurt this time is itself largely caused by surging demand within the developing world, not by politically induced supply shocks as in the 1970s and early 1980s. But there are signs of strain. China, in a bid to limit demand and the huge fuel subsidies it gives consumers, announced in October that it would impose an almost 10 percent increase in domestic prices for gasoline and diesel fuel. Other countries that heavily subsidize domestic fuel use, which include the oil-rich states Iran and Venezuela, are feeling the pinch as prices climb. Oil’s run-up is bringing the most startling changes of all to the Middle East. Big producers like Saudi Arabia and the United Arab Emirates are using their billions in profits to build their economies with roads, schools, airports and entire new cities. The value of hydrocarbon exports from the Middle East and Central Asia is expected to approach $750 billion this year, almost four times the level in 2001, according to the International Monetary Fund. The region’s new wealth has triggered a bout of deal making that has bankers rushing to the petrostates of the Persian Gulf. McKinsey & Co. estimates that the world’s biggest investors of petrodollars — including state-owned vehicles known as sovereign-wealth funds — now manage as much as $3.8 trillion in assets. The Abu Dhabi Investment Authority, which McKinsey estimates manages $900 billion in assets, is today among the world’s largest financial-market participants — about the same size as the Bank of Japan. Underscoring the region’s new global financial heft, Abu Dhabi recently swooped to the rescue of Citigroup Inc. with a $7.5 billion cash infusion as it struggled with write-downs from this year’s credit crisis. OIL WEALTH Even before that deal, Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the United Arab Emirates, which includes Abu Dhabi, spent about $124.3 billion in the past three years buying up foreign companies, real estate and other assets, according to London-based Dealogic. One transaction underscores the region’s financial-markets ambitions. Dubai, also part of the UAE, agreed to a complex deal with Nasdaq Stock Market Inc. that essentially gives Dubai major stakes in Nasdaq, the London Stock Exchange and Nordic exchange OMX AB. This wave of oil wealth is blunting America’s influence. Oil money has galvanized the might of Russia under President Vladimir Putin. He has overseen a dramatic consolidation of power and rollback of democracy in Moscow, while sticking a thumb in the West’s eye on issues ranging from independence for Kosovo to the U.S. bid to build an anti-Iran missile-defense system in Europe. Surging oil prices have also weakened the Bush administration’s efforts to use financial pressure to get Iran to back off its nuclear program. China, eager to secure all possible access to energy, increasingly is turning to Iran as a trading partner, with oil going east and Chinese technology heading the other way. High oil revenue, meanwhile, has kept the otherwise rickety Iranian economy humming and Iran’s current government firmly in power. In Khartoum, the once-drowsy capital of Sudan, glimmering skyscrapers are rising along the Nile as oil riches attract investors from Asia and the Persian Gulf. Sudan, accused by Washington of supporting terror groups and killing civilians in Darfur, had been hobbled for years by U.S. economic sanctions. Those restrictions are having less effect now, with the desire for oil resources high and with both know-how and capital pouring in from the Gulf and Asia. Venezuela will continue to use its oil prod, perhaps more aggressively than any other country. In 2005, in one of a series of jabs at the U.S., Venezuelan President Hugo Chavez began offering cut-rate heating oil to poor neighborhoods of the northeastern U.S. He also has used favorably priced fuel to prop up Fidel Castro and win friends in South America, while shouldering aside U.S. efforts to champion regional trade deals. OIL SHOCK For poor nations that don’t produce oil, the past several years have been a full-blown oil shock. The price rise adds another obstacle to providing modern energy to the estimated 1.6 billion people who have no access to electricity and the 2.4 billion who cook with traditional sources like wood, coal or dung. A recent World Bank study concluded that a sustained $10 increase in the price of a barrel of oil translates roughly into a 1.5 percent knock to the gross domestic product of the world’s poorest countries. Few places have been harder hit than Malawi, a small southern Africa country with annual per capita gross domestic product of just $179. According to the World Bank report, a $10 oil-price increase is expected to translate into a 2.2 percent fall in the GDP of Malawi, where tobacco is the dominant cash drop. Malawi subsidizes the price of gasoline and paraffi n, a petroleum-derived fuel its people use for lighting and cooking. But according to an IMF study, the government is now passing along to the population all fresh increases in energy costs, and then some. Pump prices in Lilongwe, the capital, climbed about 19 percent in October, to the equivalent of $5.16 a gallon. “When gasoline goes up, everything goes up, so we really have to struggle to earn a living,” said James Mdachi, 43, an assistant accountant for the government. He and his wife, a teacher, bring in about $200 a month, to support three children and five other dependents. A world away, U.S. industry has so far managed to take the oil surge in stride, although economists fret that this may not last long. Auto makers, for instance, may have even more reason to fear high oil prices today than they did in the late 1970s, when price shocks and gas lines tipped Detroit’s auto giants into crisis. Then and now, surging petroleum prices caught U.S. auto makers with model lineups full of powerful rearwheel-drive vehicles designed for an era of cheap gas. CLIMATE FEARS Auto makers have more things to fret about now. Surging oil prices embolden political leaders to call for tougher fuel-efficiency standards and other moves to discourage car use, such as fees that London and some other big cities levy on commuters who drive into congested districts. These ideas are gaining traction because of concern that petroleum-fueled cars and trucks exacerbate climate change. Groups worried about global warming are finding allies in more-conservative circles whose main concern is to enhance security by reducing reliance on oil from unstable nations. After 20 years of largely leaving fuel-economy standards alone, the U.S. in December enacted an energy bill that requires auto makers to boost the average efficiency of their newvehicle fleets to 35 miles a gallon from 27.5 by 2020. Auto makers got some important concessions, such as credits for building vehicles designed to burn ethanol and a new classification system that will make it easier for them to continue to sell larger vehicles. But the bill marks the end of an age in which the industry was able to make vehicles heavier and more powerful without making significant gains in fuel efficiency. Moreover, the 2007 energy bill may not be the last auto makers hear from Washington. As part of her presidential campaign program, Sen. Hillary Clinton has proposed a target of 55 miles per gallon for cars and trucks by 2030. These proposals threaten a fundamental automotive marketing strategy: Bigger is better. Industry executives, particularly in Detroit, worry that without the freedom to market large, powerful vehicles, their businesses will be decimated. The fall of the Ford Explorer is emblematic of how $3-agallon gasoline has undermined Detroit’s profit model. In 1999, Ford sold more than 428,000 of the midsize sport-utility vehicles, at an estimated $4,000 in profi t each, and earned record profits of $7.2 billion. In 2007, through November, Ford sold just 126,930 Explorers. Costly fuel gives a further edge to Japanese makers like Toyota Motor Corp. and Honda Motor Co. because of their expertise in small-vehicle and small-engine design. And if more markets tilt toward small, efficient diesel engines, as Western Europe already has, that’s a plus for European companies such as Volkswagen AG or Renault SA. General Motors Corp., the biggest U.S. car maker, is gambling that it can develop its own technology for plug-in hybrids and fuel-cell vehicles fast enough to stay in the game. GM is heavily promoting its plug-in hybrid Chevrolet Volt model, even though it isn’t due to hit the market until 2010. AIRLINES FACE CHANGE In the global airline industry, meanwhile, pessimists just a few years ago were predicting that some carriers would fail if crude hit $45. The industry has proved adaptable, with airlines grounding their oldest and thirstiest planes, raising fares and drastically reducing labor and operating expenses. But if oil’s ascent keeps pushing up jet fuel prices, travelers are sure to feel a squeeze. John Heimlich, an economist for the Air Transport Association, predicts that if oil stays where it is or goes higher, airlines will identify their worstperforming routes and then cut the number of flights assigned to them, substitute smaller planes or cancel the routes. Oil’s rising cost is sure to put a sharper focus on calls to promote alternative fuels and curb burning of carbon-based fuels. The record there so far is decidedly mixed. Pricey oil and a quest for “energy independence” have led to an ethanol boom, but higher corn prices now pinch that industry’s profits. Historically, ethanol sold at a premium to gasoline; today there’s so much ethanol available that it’s selling at a discount. Even in abundance, ethanol is a tiny factor in the U.S. fuel market, displacing a little more than 200 million barrels of crude oil annually, according to the Renewable Fuels Association. The blend of 85 percent ethanol and 15 percent gasoline called E85 is available at only bout 1,400 of the roughly 170,000 U.S. fuel stations. And though ethanol is blended into most U.S. gasoline, at up to 10 percent, calls to dial up that percentage have sparked controversy because of concern this might increase certain forms of air pollution. Paradoxically, the high oil price in some ways hinders the quest to curb greenhouse-gas emissions. The oil price makes it economic to develop unconventional deposits such as Canada’s oil sands. But the gummy substance is mined, and turning it into usable products takes extensive refining. Gallon for gallon, producing gasoline from oil sands emits far more carbon dioxide than making it from conventional crude. IMPACT ON AIR QUALITY The price rise has a similarly dirty impact at power plants. In the 1990s, when natural gas was cheap, many countries pushed to use more of that, in place of coal, to make electricity. This was good for the environment, because per unit of energy generated, natural gas emits about half as much CO2. But natural-gas prices roughly track oil prices, and they’ve been rising too. Their rise has prompted a resurgence in coal use, one reason greenhouse-gas emissions are going up faster than many expected. China, the secondlargest oil user after the U.S., still meets the bulk of its energy needs with coal. Oil’s price run-up is fanning support for a revival of clean but controversial nuclear energy. The International Energy Agency, an energy watchdog for the U.S. and 25 other wealthy nations, has become a big promoter of nuclear power. Still, its latest annual outlook predicted the use of nuclear energy would grow by less than 1 percent annually world-wide between now and 2030, while coal usage would rise three times as fast. The great oil boom of the 2000s has also wrought dramatic changes within the oil industry itself, which high prices will only intensify. Oil-rich nations, seeking to take greater command of their resources, are marginalizing the once-mighty Western oil companies. For the first time since World War II, the future of oil and gas production isn’t in the hands of Texas-educated engineers working for U.S. companies but of executives at companies like Qatar Petroleum and Russian behemoth OAO Gazprom. Gone are the days when companies such as Exxon Mobil Corp. and Royal Dutch Shell PLC had an unmatchable combination of financial clout and technological know-how. Thanks to several years of high prices, government-controlled oil companies have the financial muscle to bankroll their own projects. And they have access to the latest tools for finding oil and drilling holes. During the last downturn, in the 1990s, big oil companies outsourced many of these tasks to oil-field-service companies. Now the national oil companies can hire these service companies directly, bypassing integrated Western oil giants. Schlumberger Ltd., the largest oilfield-service company by market value, has said its revenue from national oil companies tripled from 2002 through 2006, while its work for Western oil companies rose just 60 percent. “The growing influence of national oil and gas companies on the world energy market is abundantly evident even to the casual observer,” ConocoPhillips Chief Executive James Mulva said in March. CONTROLLING RESOURCES As the state-owned giants grow more confident and selfsufficient, they have begun to compete aggressively for resources beyond their borders. Last year, Libya put some potentially oil-rich acreage out for bids. While Exxon Mobil won some of it, so too did statecontrolled oil companies from Russia, India and China. More than from their bank accounts, national oil companies’ strength stems from their control of resources. Exxon Mobil, with a market capitalization of around $500 billion, is one of the largest and most successful publicly traded companies ever. But there are 12 state-controlled oil companies, such as Saudi Aramco and PetroChina Co., that control more oil reserves. Driving this power shift is geology. Major new finds in North America and Europe have been rare for two decades. Western oil companies now control only about one in 10 barrels of the world’s proven reserves. As the Western giants struggle to find fresh oil, the Aramcos of the world are only likely to rise in importance in the years ahead.
Here we go again in regard to the fuel crisis, back to the 1970s — same story, different time, billions of dollars poured into research in shale oil, etc. Who couldn’t see it all coming? All good things do come to an end. Look at past history. There really is a reasonable answer. As anyone in the 70-or-older age bracket, such as I, would know, the nasty word is “rationing.” It worked in the ’40s, when gasoline was 20 to 30 cents a gallon and needed for the war effort; it could work now. People who need (and that is the real word — need) gasoline for travel to work come first, because without people working, all else fails. Industry comes next, then, of course, trucking and rail for needed commodities. We have school buses, so no more nice shiny cars for pupils, and housewives can have hubby get the groceries, etc., on his way home from work. Retired people no longer need to be all over the place everyday (including myself), so they go to the bottom. Of course, rationing will never happen because elected representatives would be banned from the planet, and besides, we have mostly all become so greedy and spoiled. Well, it could work, but then who has the guts to even mention trying it? DOUGLAS KIPP Esperance
The writer forgot to mention the people who live 3 to 4 hours from where they work and comute every day. Is it right to penalize any group of individuals so an elite group can have gas to guzzle?
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Tom Tierney of Rotterdam pumps gas at Cumberland Farms on Duanesburg Road in a file photo. 
