What a difference a month makes. Just four weeks ago Hezbollah and the Israelis were engaged in the heaviest fighting the world has seen since the US overran Iraq.
When the fighting started, oil prices jumped on concerns that oil exports might be affected. In July there were fears US motorists might draw down the country’s gasoline reserves during the summer driving binge. Soon thereafter, BP noticed that some of its Prudhoe oil pipelines were rusting through, threatening an important share of the US’s West Coast oil supply. Finally, the hurricane season was about to begin.
Here we are at the end of August and everything looks downright serene. Israel and Hezbollah appear happy the fighting is over. A large contingent of troops from the major European powers is on the way to watch over Southern Lebanon. The US driving season has only a weekend to go and gasoline stocks look healthy. It looks like we will get through the first months of hurricane season without damage to oil production.
With all this good news, or more precisely lack of bad news, oil prices tumbled to circa $70 per barrel and nationwide gasoline prices dropped by 15 cents a gallon. As the crunch point in the nuclear enrichment confrontation with Iran still seems to be some weeks away, many US financial analysts are telling their clients oil will be $60 or maybe even $50 a barrel later this year – provided those pesky hurricanes will stay away from the oil fields.
The US mid-term elections are now two months away. Unless a really big hurricane tears up oil production in the next two months or something in the Middle East goes sour really fast, high gas prices and the looming prospect of oil depletion are unlikely to have much of an impact at the polls.
Thus far the government’s response to $3 gasoline has consisted of drilling in “off limits” areas and touting ethanol. The latest “energy bill” to pass the Senate was hyped as “enhancing the energy independence and security of the United States.” The backers raised the possibility of finding 1.2 billion barrels of new oil off the Florida coast.
What the supporters don’t mention of course is that the US’s current oil consumption is now approaching 8 billion barrels a year so the prospective find is only about 110 days worth. Also unmentioned is the worldwide shortage of deepwater drilling rigs to exploit this impressive-sounding bonanza and the opinions of knowledgeable observers that while there may be some natural gas off the coast of Florida, the prospects for finding the 1.2 billion barrels may not be that good.
What we have here is not a real effort to deal with looming energy problems, but a political chimera designed to answer voter concerns about $3 gasoline. Usually, bills such as this would be one of many harmless exercises in political deception. These “brochure bills” allow legislators to assure voters that they have already dealt with the issue and the situation will be getting better shortly. After all, who can argue with a billion barrels of new “American” oil?
The danger is that by pretending to do something rather than leveling with the voters and taking decisive, controversial, and perhaps unpleasant action, the Congress is making the coming hardships much worse. As anyone who studies peak oil soon learns, it will take decades of “adjustments” to the world’s economy and lifestyles to compensate for all that will come with declining oil production.
If there is some sort of upheaval in the November congressional elections, it currently appears that it will have something to do with the situation in Iraq rather than the price or availability of gasoline. But what about the 2008 Presidential election?
In the last year we have learned it is going to take more that $70 or $80 a barrel oil to get the undivided attention of the Congress and the majority of the American people. What it will take to get this attention is hard to say. Perhaps $5 a US gallon will do it; perhaps $10. A major economic downturn coupled with unambiguous statements from the International Energy Agency, the US Department of Energy and the major world governments that indeed worldwide oil production was on the decline and there were no prospects it would ever increase again should be enough.
The most prominent calculators of the coming peak —not wishful thinkers— are coming around to 2010 plus or minus a couple of years as the year of actual peaking. There could, of course, be foreshocks such as marked reductions in world oil exports that could have serious economic consequences. If fact, some people think we are seeing these foreshocks or perhaps even the actual peak right now.
All this suggests that by 2008 there is a very good chance the reality of peak oil will be widely recognized and will be causing such economic hardships that politicians can neither ignore nor pretend a cure with yet another meaningless “energy bill.” If this is indeed the case, by 2008 ways to mitigate the effects of declining oil supplies could become the central issue of elections in America and around the world for many decades to come.