Got a good laiugh out of his quote:

"The most interesting thing about the run-up in oil prices -- from roughly $10 to $30 a barrel during the past year -- is that almost no one predicted it."

just the CIA, the State Department, the Gartner Group, etc, in testimony on y2k before the Congressional Committee....

Where will the oil price hike take us?

Source: The San Diego Union-Tribune

Publication date: Feb 24, 2000

The most interesting thing about the run-up in oil prices -- from roughly $10 to $30 a barrel during the past year -- is that almost no one predicted it. Just about everyone who knew anything about global oil considered OPEC (the Organization of Petroleum Exporting Countries) a toothless cartel. This has turned out to be wrong, at least for the time being, and the consequences could range from the annoying (a slight rise of inflation) to the dangerous (a recession or a crisis over Iraq).

By all odds, we don't face a repeat of the "energy crises" of the 1970s. Compared with the early 1970s, the economy now requires only about half as much oil per dollar of output (Gross Domestic Product), says economist Mark Zandi of Regional Financial Associates. Growth has emphasized "services." At $1.40 a gallon, gasoline prices are -- after adjusting for inflation -- less than half their 1980 level. Cars' fuel efficiency has risen by more than 50 percent since 1973, from 13 miles per gallon then to 21 mpg now.

If oil remains at $30 a barrel, inflation may rise one percentage point, says Zandi. The economy might slow slightly, by about 0.5 percent of GDP. This would hardly be a calamity. Federal Reserve Chairman Alan Greenspan already fears the economy is growing too rapidly.

There are other contrasts with the 1970s. Then, panic reigned. People thought the world was running dry. Prices would rise forever. With hindsight, these alarmist forecasts seem farfetched. The day that the world exhausts its oil seems distant. Between 1973 and 1998, world oil consumption rose about about 25 percent to 26 billion barrels annually. However, proven oil reserves jumped more than 50 percent to 1 trillion barrels.

One reason is improved technology, says Mark Rubin of the American Petroleum Institute. There are fewer "dry holes" because three- dimensional computerized seismic maps of underground formations improve discovery prospects. Similarly, horizontal drilling means more oil can be recovered from known fields. (A vertically drilled hole taps an oil reservoir at only one spot, from top to bottom; by contrast, a horizontal drill -- the pipe turns once it hits oil -- can run along a reservoir for thousands of feet and drain it more thoroughly.) Deepwater drilling has opened new fields. Fifteen years ago, oil companies couldn't practically go beyond 1,300 feet of water. Now that's 7,000 feet or more.

None of this has stabilized oil prices. The law of supply and demand endures. The simplest explanation of the recent rise is the preceding collapse. In 1998, oil prices dropped about 50 percent. Everything conspired to depress them. Asia's economic crisis slowed demand. OPEC miscalculated and increased production. Too much supply chased too little demand.

For producers, the results were devastating. In the United States, exploration and drilling dropped. The American oil industry lost about 65,000 jobs. Abroad, oil-producing nations suffered huge revenue losses. The effect was traumatizing, says Robert Priddle, director of the International Energy Agency (IEA) in Paris. OPEC's internal quarreling subsided and the cartel concentrated on curbing production.

In March 1999, it agreed to cut output. Cheating had doomed earlier agreements. By contrast, compliance with March's agreement has ranged between 75 percent and 85 percent, estimates the IEA. One reason was the election of Hugo Chavez as president of Venezuela in late 1998; he reversed the policy of flouting OPEC quotas. Significantly, four non-OPEC nations (Mexico, Russia, Norway and Oman) also agreed in March to cut their combined output. This, too, strengthened OPEC.

What now? Possibly nothing. Some big producers -- again, a contrast with the 1970s -- recognize that it's suicidal simply to gouge consuming countries. There's too much economic interdependence. In a global recession, some producers (like Mexico) would suffer through the loss of other exports. OPEC next meets March 27. The Saudi and Mexican oil ministers have hinted that quotas might be relaxed to reduce prices to about $25 a barrel.

But surprises happen. Alone, higher oil prices might not cause a recession. However, interest rates are also rising. The stock market is drifting lower. All these developments could weaken consumer spending -- the pillar of America's economic boom. There are other hazards. Oil economist Philip Verleger thinks that prices could drift up from $30 a barrel. The result, he says, is that Saddam Hussein could demand the end of economic sanctions against Iraq "because the world will need Iraq's oil to maintain price stability." Interestingly, a confrontation might occur just before the U.S. presidential election.

This highlights the true oil problem: Two-thirds of known oil reserves lie in the Middle East. While this is so, catastrophic disruptions remain a chronic threat. We ought to fortify ourselves against the worst by expanding our strategic petroleum reserve (we haven't) and prudently discouraging oil use through taxes (we haven't). Oil power endures. We ignore it at our peril. Publication date: Feb 24, 2000 ) 2000, NewsReal, Inc.

http://beta.newsreal.com/cgi-bin/NewsService?osform_template=pages/newsrealStory&ID=newsreal&storypath=News/Story_2000_02_26.NRdb@2@22@3@88&path=News/Category.NRdb@2@7

-- Carl Jenkins (Somewherepress@aol.com), February 27, 2000

Answers

This highlights the true oil problem: Two-thirds of known oil reserves lie in the Middle East. While this is so, catastrophic disruptions remain a chronic threat. We ought to fortify ourselves against the worst by expanding our strategic petroleum reserve (we haven't) and prudently discouraging oil use through taxes (we haven't). Oil power endures. We ignore it at our peril.<<

We haven't because we are a stupid, blind, short sighted species. You'd think by the way we act towards oil that it was a renewable resource. If gas prices rose to over $2.50 a gallon and stayed there, you'd better believe you'd see a rush to develop other options. Heck, I live in Arizona were the sun shines for over 300 days out of the year. You'd think we'd lead the world on solar power research, but noooo, our local utlitiy company is spending a billion dollars on another gas powered generating station to be competitive in the new deregulated electric utilities market. Our greed and stupidity will be our doom.....

-- Rob (celtic64@inficad.com), February 27, 2000.

Rob, you're so right. The 1970's gave us the first shot across the bow, and we didn't pay much attention. Solar (and wind) power could have been further developed -- had they not been forced to compete against very low oil prices. Tax treatments (credits as well as added taxes) could have been used to steer us in the proper direction.

The direction chosen was maximum expansion of the economy by means of low oil prices. Any presidential candidate who advocated higher oil price and the pump in order to develop an energy policy would have been unelectable. We the people need an oil shock to wake us up. Now we have truckers blocking highways, calling for lower oil prices. If they got them tomorrow, they'd go back to business as usual, instead of looking ahead.

Question: How many architects or home designers have paid the least bit of attention to solar heating/cooling? These things work, and they're cheap. But, they aren't offered.

-- rocky (rknolls@no.spam), February 27, 2000.

Rocky,

can you give me a concept of Solar Cooling that works and is cheap??? Would love to try that at home, or at least crunch the numbers.

-- W (me@home.now), February 27, 2000.

Solar cooling design:

Light colored building materials; especially white roofs, and shade trees used in designs.

-- Rose (r.1@juno.com), February 28, 2000.