Oil declines and price increases

Global oil production is running at maximum capacity with no surplus in sight. Prices exceed $44 barrel. Any disruption in supplies could send prices skyrocketing. Some expect $50/barrel oil by December. Others suggest prices could reach $100 barrel if a major disruption occurred.

The oil industry has a long history of limiting oil supplies to control prices. The Texas Railroad Commission limited oil shipments to maintain prices during the depression of the 1930’s. Internationally, OPEC was formed to keep world oil prices within a desirable range to maintain profits and markets. The United States has relied on Saudi Arabia’s oil surplus to keep oil prices in a desirable range to maintain economic stability. The recent California energy crisis illustrates how supplies can be manipulated to enhance profits. With these historic precedents, some citizens remain skeptical regarding oil shortages.

Others see the current supply crunch as the arrival of the energy turmoil predicted by peak oil advocates. According to the Energy Institute, 18 major oil producers are in decline. Global production has been declining at the rate of 1 million barrels per day. Doubt is being cast on the size of Saudi Arabian oil reserves. Shell Oil cut its reserve estimates by 20 percent. Peak oil followers argue oil supplies will continue to dwindle with major adverse economic impacts. The situation could give rise to ongoing military conflicts to control the remaining supplies.

If we are entering the end of oil, there are options to adjust to a changing energy situation. Our 47-day Strategic Oil Reserve can be used to offset short-term supply shortages. If vehicle owners eliminate one in 10 average vehicle trips, oil consumption would drop accordingly. In a crisis, citizens could quickly learn to distinguish between essential and non-essential travel.

If we are faced with the prospect of declining supplies, we need a long-term strategy to make a transition to a sustainable energy future. The annual Illinois Renewable Energy Fair provides a perspective on what a sustainable and renewable energy future involve. It provides individuals and communities with ideas on how to take more control over their energy services through efficiency, conservation and renewable energy sources.

Even with high energy prices, Americans continue to favor less fuel-efficient vehicles. However, an increasing number of people are drawn to hybrid vehicles. As more models appear, their appeal should broaden. Toyota recently announced their intent to increase their supply of hybrid vehicles in the United States by 50 percent. While more widespread hybrid use is helpful, declining oil supplies will require a far larger change in how we and the world at large use energy.

If the energy challenge is as large and pressing as peak oil advocates postulate, the sooner we incorporate energy efficiency and renewable energy into our lives and our communities, the better off we will all be. Many of the practices are cost effective now and pay for themselves within a few years. Others make sense on their own merits and warrant immediate action. Some rely on appropriate government action to increase their marketplace acceptance. In such case, political representatives must hear from citizens regarding their support for programs to increase energy efficiency and the use of renewable energy sources.

As we approach the end of oil, a long-term strategy to increase our energy independence through efficiency and renewables is essential, cost effective, job creating and a means to rebuild our economy.

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