by John Dillin
18-09-05
Gasoline prices set a new record earlier in the wake of hurricane Katrina,
but costs were already rising fast before the super storm collided with the Gulf
Coast.
The average price of regular gasoline has more than doubled since 2002, when it
stood at just $ 1.36 a gallon. Since reaching $ 3.01 earlier, topping the 1981
high of $ 3.00 (adjusted for inflation), consumers are worried. Will this
four-year price spiral stop? Or could we be headed for $ 5 gas?
Right now, prices are falling as the summer driving season ends and Gulf
Coast refineries return to service. Yet the long-term outlook appears shaky.
That's because the future price of oil, which hinges on everything from OPEC
policies to Chinese energy demands, could easily keep going up.
But there are at least four areas where oil-importing nations can dampen the
effects of a rise in oil prices. The United States has fallen short in
anticipating all four, energy experts say. For example:
-- Refining capacity.
"Oil companies want to make money with refineries, and they did not want to get
excess capacity by over-investing," says Lehi German, president of Fundamental
Petroleum Trends, a weekly newsletter. Oil companies felt that if America
suddenly needed more gasoline or diesel fuel, "then import it." So today, even
if the Saudis and their oil allies filled up 1,000 tankers and sent them
steaming to the US, it's not clear that gas prices would fall very much.
The problem is twofold: US refiners' lack of capacity to handle the extra load,
as well as technical problems with the types of heavy crude produced in much of
the Middle East.
US firms are expected to rectify these shortcomings, but it will take years.
Meanwhile, supplies of refined product are so tight that the US is now importing
gasoline, not just oil, from Canada and Europe.
-- Government policy.
Back in the 1970s energy crisis, which included an OPEC oil embargo, Congress
got tough with actions that included creation of the Strategic Petroleum
Reserve, minimum gas-mileage requirements for cars and trucks (CAFE standards),
and "double nickel" (55 mile-per-hour) speed limits.
By comparison, this Congress and president took less decisive measures. They
have subsidized alternative energy and passed an energy bill this year. The
White House has proposed raising CAFE standards slightly. But it was too little
and too late to head off the price spike. Both branches of the federal
government could become more active if prices keep moving up.
-- Auto efficiency.
The nation's Big Three automakers -- General Motors, Ford, and DaimlerChrysler
-- have made the bulk of their profits in recent years with large and not
particularly fuel-efficient trucks and SUVs. Very often, technical improvements
to engines, which could have been used to boost gas mileage, went instead to
increase horsepower and speed.
There were exceptions to the trend, especially among Japanese automakers Toyota
and Honda. Both developed hybrid-model cars (the most popular of which is the
Toyota Prius) that combine gasoline and electric engines to increase mileage
into the 47-to-66 miles-per-gallon range.
Source: The Christian Science Monitor