While Congress and the Senate spend another day demagoguing about the increased price of oil and gas, there is at least some recognition of what the real cause of the problem is:
Even after the recent escalation in world oil prices, worries that the global supply will not keep up with demand intensified on world markets Thursday, sending oil prices higher once again.
The price of oil rose above $135 a barrel overnight before falling back slightly to $134.64, up $1.47 compared with Wednesday’s close.
On Wednesday, weaker-than-expected weekly inventory data in the United States stoked fresh worries over oil supplies in the world’s biggest economy, sending oil prices up $4.19 a barrel on the day.
These fears about global supplies intensified Thursday after reports that the International Energy Agency, based in Paris, was considering reducing its assessment of the long-term world supply of crude oil after a study of depletion rates at the world’s 400 biggest fields.
“Clearly this is the issue we have had for a while of an increased deficit in consumption versus production,” said John Kilduff, energy analyst at MF Global in New York. “That’s produced this creep up in the rise in oil prices. The market gets hit on a daily basis.”
There are only two things that can be “done” about this problem, and really one of them is realistic.
First, we can attack the demand side. In some respects this might have some impact, in the long term, but convincing countries like India and China to cut back on their use of oil isn’t going to be easy, and that’s where most of the worldwide growth in demand is coming from. Domestically, there’s not a lot we can do that isn’t already being done except the one thing that nobody is talking about — expanding the use of alternative energy sources, principally nuclear power. France generates almost 80% of it’s electricity from nuclear power, the United States generates about 20% of it’s electricity from nuclear power, and there hasn’t been a nuclear power plant built in the United States in more than 20 years.
Second, we can increase supply by removing government restrictions on oil drilling inside the United States and on the coast, by removing restrictions on construction of gasoline refineries (there has not been a new refinery built in the United States in over 30 years). And all of these are long-term solutions. There are no short term solutions here either.
Of course, that’s not what Congress wants to hear.
May 22nd, 2008 at 10:08 pm
Could not have said it better myself. We must maximize all of our energy resources- petrolium and alternative (including nuclear, and encourage decreased consumption. We are already more than a generation behind, and there is truly no short term fix. But we have to start somewhere, and the longer we wait the worse it will be.