Getting real about gas prices
Woe! Woe to the politician who is perceived to be failing to do something about the soaring price of gasoline, which has jumped about 20 percent in the past six months. Every week, drivers feel the bite on their pocketbooks as they pull up to the pump. AAA estimates the average two-car household will consume more than 1,200 gallons of gasoline a year. That means the 50-cents-a-gallon increase over the past year has families spending an extra $600 of after-tax money each year, squeezing middle- and low-income families the most.
Americans can't stop driving, but this means they'll have to spend less on other items. For every penny that gas prices rise, about $1 billion comes out of the pockets of consumers, so the 20 percent increases at the pump will wipe out about half the expected $60 billion in tax cut benefits flowing to households this year.
The Democrats blame President Bush, saying he doesn't care because higher prices mean bigger profits for his oil-industry buddies. The Republicans attack John Kerry for his one-time support of a 50-cents-a-gallon tax hike and other votes in favor of gas-tax increases.
Chinese drivers. This time nobody is sure that the spike in oil prices will be short-lived. The money-grubbing OPEC countries, having regained their grip on the world market, have announced another reduction in output to drive prices even higher, exploiting a global market that is heating up primarily because of demand from Asia. Global oil demand grew by about 14 million barrels a day over the past 15 years. Worldwide oil consumption is estimated to jump another 45 million barrels a day by 2030--and demand for natural gas will also soar.
The big story, though, is Asia. Who could have imagined that India and China would become such big consumers? Chinese demand grew by 33 percent last year and by an additional 20 percent this year, pushing consumption to over 6 million barrels a day. China is on the verge of an exploding demand for automobiles. Gasoline consumption will have risen from about 10 percent of China's oil needs 10 years ago to an estimated 40 percent by the end of this decade, when private car ownership is expected to soar to almost 28 million. Those people with incomes high enough to afford autos in India and China are growing by about 12 percent a year. No longer will 80 percent of the world's energy be used by only 20 percent of the world's population.
And what about supply? No one is paying attention to the experts' warnings, any more than they did nearly 50 years ago. Back then, the United States was the world's biggest oil producer, pumping more than half as much again as the Soviet Union and twice as much as many Middle Eastern countries. But the Cassandras, as it turned out, were right. U.S. production peaked, in 1970, at about 10 million barrels a day and is now at least 30 percent below that. As for the OPEC countries, we know very little about their potential for new energy sources. Most of their oil comes from a handful of old oil fields, concentrated in a small area called the "golden triangle." It has been years since any significant new fields have been found. Whether Saudi Arabia could step up production from its current level, 8 million barrels a day, to 20 million barrels a day by 2020 is questionable. Political turmoil, meanwhile, besets producers like Venezuela and Nigeria.
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