Outside Editorial: Coming soon to a pump near you: Gas at $5 a gallon

Posted: Thursday, January 06, 2011

The following editorial first appeared in the St. Louis Post-Dispatch:

Good news: With recession loosening its grip, about 1.1 million more Americans bought new cars last year than in 2009.

Not only did sales pick up, more Americans opted for bigger vehicles. Sales of midsize SUVs like Jeep Grand Cherokees and Honda Pilots jumped 41 percent during the first 11 months of the year.

That increase came at the expense of smaller economy cars, whose sales remained flat in 2010. Sales of some models like the Honda Civic and the Toyota Corolla actually declined.

Bad news: The former head of Shell Oil told an industry publication last month that he expects gas to hit $5 a gallon in 2012.

John Hofmeister, a former Shell Oil CEO, told Platts Energy Week last month that prices would be pushed higher by increasing global demand and “inadequate responses by the federal government.”

It’s no surprise that Hofmeister, a former board member for the industry trade group the American Petroleum Institute, would favor more aggressive oil drilling.

But that doesn’t mean he’s wrong about the direction of gasoline prices.

It also doesn’t mean he’s right about $5-a-gallon gas in 2012.

The U.S. Energy Information Administration, an independent agency that analyzes trends for the federal government, predicts a somewhat more modest increase. It forecasts gas prices averaging about $2.67 a gallon in 2012, up 14 percent over 2009 prices but still well shy of $5.

In fact, the EIA predicts gasoline prices below $4 a gallon all the way until 2035.

In part, the lower prices result from the agency’s forecasts of an 8 percent increase in domestic oil production by 2012, compared to an increase in demand for gas of just about 2 percent.

But the trend is clear: long-term increases in gasoline prices and, indeed, in all energy prices.

That may be bad news for many of the consumers who bought SUVs this year.

Many of the popular midsize models that sold well in 2010 get less than 20 miles per gallon. In contrast, many of the economy cars whose sales were flat or falling average more than 30.

That brings us back to Mr. Hofmeister and his contention that an “inadequate response” by the federal government is driving prices higher.

He predicted little or no new deep-water drilling in the Gulf of Mexico because of tighter federal regulation in response to the BP oil spill.

“When American consumers are short (of gasoline) or prices are so high _ $5 a gallon for gasoline, for example, by 2012 _ that’s going to set a new tone,” he said.

Tighter regulation is an appropriate response to the BP spill, which demonstrated the continuing inability of oil companies to respond quickly to blowouts in deep-water wells.

But what’s really driving energy prices is global demand. We can’t drill our way around that, no matter how recklessly we try.

Between 1990 and 2020, world energy consumption is expected to grow by about 66 percent. U.S. energy consumption, in contrast, is forecast to grow by less than half of 1 percent.

Chinese energy consumption will grow by 56 percent. India, too, will be consuming more energy.

We’re not being critical of consumers who opted for SUVs over economy cars. But such choices have consequences. And American consumers aren’t the only ones making them.



CONTACT US

  • Switchboard: 907-586-3740
  • Circulation and Delivery: 907-586-3740
  • Newsroom Fax: 907-586-3028
  • Business Fax: 907-586-9097
  • Accounts Receivable: 907-523-2230
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING