Hurray for High Gasoline Prices

By David L. Brown

Even though they are preparing to take to the road in greater numbers than last year for Memorial Day weekend, $3+ gas is slowing down American drivers. The AAA says more drivers plan to stay closer to home, a positive sign that high gas prices are changing “hearts and minds” about driving habits.

Further evidence that high pump prices are causing drivers to modify their plans is provided by a quick poll currently on the FoxNews.com web site. It asks the question “Will you modify your summer travel plans due to gas prices?” The responses at the time I write this are 52% “yes,” 45% “no,” and 3% “not sure.”

I am aware that most people consider high gasoline prices to be a problem, not a blessing, but it might better be characterized as Al Gore might put it as an “inconvenient truth.” And yet in the overall scheme of things it is my opinion that in the long run only sustained higher gas prices will quench the American thirst for oil and possibly save us from even greater economic effects in the future.

In the past, OPEC thugs led by Saudi Arabia and in collusion with Big Oil have consistently intervened in world markets to hold petroleum prices down whenever they began to rise to levels uncomfortable to consumers. That had the effect of stopping development of alternative energy sources in its tracks, while keeping consumers happily burning vast amounts of the oily stuff. The strategy was made possible by the fact that there was enough oil readily available to boost supply in order to meet demand and push down prices when desired, particularly in the big Saudi fields where they could simply turn on the taps and top-quality crude would simply flow out of the ground.

History will look with anger and disgust at the greed that drove this price manipulation during several decades during which the world could have prepared for the oil shock that was always inevitable as predicted a half century ago by M. King Hubbert. If we had made steady progress toward developing new, sustainable energy sources, learning conservation habits, and changing the world’s infrastructure, we would find ourselves today in much better shape to deal with the threat of economic collapse, climate change, and other dangers that a collapse of the oil supply could cause.

Despite their claims that there is still plenty of oil left in the ground, the Oil Sheiks and Big Oil are losing control because it is becoming clearer each week that we have for all practical purposes reached Peak Oil. As Val Germann pointed out here the other day, the only thing that is keeping production even at its present level is heroic use of heavy oils, tar sands, and other uneconomic and environmentally unsound sources that are of poor quality and require a lot of resources just to convert into a feedstock for gasoline. Despite rhetoric from Big Oil, their petroleum engineers are failing to find any major new fields and old ones are drying up, as happening in the North Sea, Mexico, Alaska and many other places.

Even in Saudi Arabia itself the end has come for easy extraction of vast quantities of oil. Here is an excerpt from a news story reported in the English online archive of the Arabic news service Al-Jazeera more than two years ago (read it here):

Speculation over the actual size of Saudi Arabia’s oil reserves is reaching fever pitch as a major bank says the kingdom’s – and the world’s – biggest field, Gharwar, is in irreversible decline.

The Bank of Montreal’s analyst Don Coxe, working from their Chicago office, is the first mainstream number-cruncher to say that Gharwar’s days are fated.

Coxe uses the phrase “Hubbert’s Peak” to describe the situation. This refers to the seminal geologist M. King Hubbert, who predicted the unavoidable decline of oilfields back in the 1950s.

“The combination of the news that there’s no new Saudi Light coming on stream for the next seven years plus the 27% projected decline from existing fields means Hubbert’s Peak has arrived in Saudi Arabia,” says Coxe, referring to data compiled by the International Energy Association’s (IEA) August 2004 monthly

So, unpopular though my opinion may be, I applaud high gasoline prices and the fact that they will doubtless continue to rise steadily higher as supplies remain tight. Only when demand drops will prices be able to go lower again, and that will signal that important changes in demand and usage have taken place.

As fuel becomes a growing factor in millions of family budgets, ideas will begin to change. New vehicles will be chosen with greater attention to fuel efficiency. Local travel will be planned more carefully and with less frequency; for example, going to the supermarket once a week instead of every other day. Workers will consider car pooling, using public transportation, riding a bike or even (gasp!) walking. Business travelers will consider teleconferencing whenever possible to replace face-to-face meetings. Home based work models will become more common, saving workers the cost of commuting altogether.

With Peak Oil no doubt upon us, there will be no alternative to high gas prices anyway so no matter how much politicians may posture and point fingers at each other, and no matter how much edible food is turned into fake gasoline, we are going to pay more for the unprecedented ability to freely careen around the landscape in our SUVs, pickup trucks, and giant RVs.

This is a model that must change, and it must change fast because we are in the midst of hitting the unforgiving wall of Peak Oil. There is no benefit to waiting for the “good old days” to return, because they are not going to. Like it or not, we must face the facts and move forward toward reduced dependence on petroleum. We must do it now, lest there soon be no tomorrow.

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