|
San Jose
Mercury News Gas Prices |
|
This much is certain: Gas will never be cheap again. News article Weeks of record-setting prices for gasoline - which
reached $4.42 a gallon in California on Saturday - have helped cement that
notion. Less than 10 years ago, gas was 99 cents a gallon. But
since May 2004, when the U.S. average first topped $2, the upward movement
has been fairly steady. The $3 plateau was topped in September 2005, and the
U.S. average could rise above $4 this week - even as it moved closer to $5 in
the Bay Area. The price of gas is directly tied to the cost of oil,
with experts agreeing that every time the oil goes up $1 a barrel, gas goes
up about 2.5 cents a gallon. Short-term forces such as hurricanes, refinery fires
and the 1973 OPEC oil embargo have caused previous price spikes. But this
time, longer-term economic forces are at play, making it nearly impossible to
find an expert who thinks oil prices will fall over the long term, even if
there are periodic dips. Sharp drop 'unlikely' "It's very unlikely, at
least in the next decade or so, to have prices sharply lower than what we're
seeing now," said Jim Sweeney, a Stanford University professor and
director of the Precourt Institute for Energy Efficiency. "These high
prices now are apt to characterize what we'll see over the next several
decades. And it's not just the high prices, it's the volatility." The United States is the world's largest consumer of oil: With less than 5 percent of the population, we
consume about 25 percent of the world's oil. So even as more Americans begin
to trade in their sport-utility vehicles for hybrids, consumption remains
high and is expected to rise 1 percent a year until 2030. "Let's not kid ourselves," said Severin
Borenstein, a business and public policy professor at the University of
California-Berkeley who also directs the UC Energy Institute. "There is
one big gorilla in this market on the demand side, and it's the United
States. We use three times as much oil as China with one-quarter of the
population." At the same time, global demand is skyrocketing. "This is a world oil market," Borenstein
said. India and China are primary drivers because they have so many citizens
- a combined 2.4 billion - and because their economies are becoming more
dependent on fuel consumption. But "a lot of smaller countries also want more
oil, so it's hard to point to (China and India) as the boogeyman." China's demand for liquid fuels, for example, is
expected to grow 3.5 percent a year, more than any other country in the
world, reaching 16 million barrels of oil a day by 2030, according to U.S.
government projections. That would account for 14 percent of the world's
total consumption, nearly double China's share in 2004. Sweeney doesn't have to look back too far to offer some
perspective: Friday's closing price for a barrel of oil, $138.54, is $90 more
than it was on Jan. 1, 2007. Hit to the economy An economics rule of thumb says that
every $10 increase in the price of oil takes away about one-third of 1
percent of the U.S. gross domestic product. That means, he said, that $90
increase has stripped 3 percent from the U.S. economy. "There's not many things that can take away 3
percent of your economy in a year and a half," said Sweeney, who teaches
management science and engineering. Put another way: That $400 billion hit to the U.S.
economy is about three times what was spent on the war in Iraq in 2007, he
said. The U.S. economy will survive, but higher oil prices
will mean higher inflation and more unemployment. For the United States, Borenstein doesn't see many
viable short-term solutions. In the long run, "We need to move toward becoming
a less oil-dependent economy. That's the only place we can get any real
relief on an economy-wide sense." That means driving less, driving more-efficient
gasoline cars, driving electric cars and using mass transportation. Borenstein won't offer a prediction for summer gas
prices, but opines that "gasoline will stay very expensive. Of course,
very expensive is still not all that expensive compared to Europe or to what
it would take for a major change." 'High-water mark' Jim Kingsdale, who writes the Energy
Investment Strategies newsletter, has predicted that oil would reach $115 a
barrel this year. He revised that to $120, then watched it top $135. Now, he said, "my sense is that oil has reached a
price that is more likely than not to stand as a high-water mark for a
while." He added, whimsically, "A 'while' is a technical term
meaning six to 18 months." As for gas prices, he said, they are likely to fall
this summer from this week's peak. They are up 44.5 cents in California in a
month, and nearly a dollar in a year. "We set a new record almost every day," said
Michael Geeser, a AAA spokesman for Northern California and Nevada. By summer 2010, Borenstein forecasts, gas will cost $6
to $7 a gallon. Whatever the price, there's little doubt that high gas
prices affect the economy - both the national one and the one in which people
have to decide between a gallon of gas and a carton of milk. Gas at $3 a gallon persuaded 35 percent of Americans to
make a change in their driving habits, according to a survey released Friday.
That grows to 74 percent at $4 a gallon, said respondents in the telephone
survey of 1,000 Americans conducted by Ipsos Public Affairs for Access
America, a travel-insurance company. Nearly everyone - 85 percent - said they would make
changes to their habits at $5 a gallon. Contact Matt Nauman at mnauman@mercurynews.com or (408)
920-5701.
|
