Wake Up Before It's Too Late

Maybe what this country needs is a good alarm clock — one so shriekingly loud that it blows you right out of bed.

How else can you explain the widespread apathy toward the nation's reliance upon foreign sources for 50% to 60% of its oil, especially from the increasingly volatile Middle East, making us vulnerable to all sorts of unpleasant scenarios. And if you think it can't happen, remember 9/11.

Ironically, since that infamous date gasoline prices actually have tumbled. Some canny entrepreneurs posted up to $5 per gallon immediately following the 9/11 attacks. Great Americans.

I've recently made several long trips in the East and South — a dozen states in all — and I've seen prices as low as 89.9 cents and as high as $1.229 for regular. I reckon the average has been $1.159.

Only a year ago, gas reached $2 in some areas and $1.70 (and don't forget the 0.9 cents) was common. Supplies got so tight that we had to tap the strategic petroleum reserve to avoid an energy crisis. It should have been a wakeup call, but it was soon forgotten.

Against a backdrop of California's energy crisis and then-escalating global crude oil prices, President Bush assigned Vice President Dick Cheney to form an energy task force. Last May he recommended expanded oil and gas drilling on public land, specifically in the Alaskan Wildlife Refuge, stirring a firestorm of protest. He also urged rejuvenation of moribund nuclear energy projects.

Not much has happened yet, and the Task Force quietly closed shop on Sept. 30, just 19 days after 9/11. Great timing. As for Mr. Cheney, he has seldom been seen or heard since.

Meantime, crude oil prices have been falling. On 9/11, crude was hovering at $30 a barrel. Now it's around $20, says the independent New Jersey-based Oil Price Information Service (OPIS). OPEC, the Organization of Petroleum Exporting Countries, cites the slowdown in the world economy for the price deterioration. If pumping plenty of oil helps avert recession, that obviously benefits OPEC longer term.

Now that Afghanistan has been conquered — if that's the right word, as bandits and warlords take over where the Taliban and AlQaeda left off — Washington hawks are eyeballing Iraq, a major oil producer, as a likely next target in the war on terrorism. Perhaps not widely known, Iraq exports an estimated 2 million barrels each day under the Oil for Food program. Some 800,000 barrels end up in the U.S., purchased by major American oil companies through third parties.

With friends like Saddam Hussein, what happens if we take on Iraq? Or even worse, Saudi Arabia, the mother of all petroleum lodes, which now is also being labeled as the mother of all terrorists?

Obviously any interruption from these sources would have a potentially calamitous impact on global crude oil availability and prices. OPIS estimates that for every $1 increase in crude, Americans pay 2.5 cents more per gallon. Tom Kloza, OPIS's chief oil analyst, observes that “The price of crude is inherently unpredictable. I asked some experts the other day what prices might be this year, and I got everything from $10 to $60 a barrel, with some in the teens.” Twenty years ago crude was selling at $35 per barrel, with dire warnings of $100 on the horizon.

Still, even if crude prices remain stable, predicting gasoline prices is difficult. No new American refinery has been built in 30 years, and existing upgraded facilities are running “against the wall” at 110% capacity, Kloza underscores. “Right now we're swimming in gasoline because demand is always low during the winter months,” he says. “That's a major reason why prices are so low. But in the spring and summer, demand goes up, so we have to import more, and prices go up.

“I saw a headline that said the auto companies are building more than 60 different SUVs (and crossover vehicles),” he adds. “You may be able to fill up an SUV for $20 during the fall and winter, but it may cost you $50 in the spring and summer. Going to football games may be OK, but not baseball games.”

Putting those thirsty SUVs on the road could be costly and challenging if supplies from the Middle East are seriously interrupted. Canada, Mexico and Venezuela also are major U.S. oil suppliers, and we still pump a considerable amount from our own fields. Americans younger than 29 weren't born when OPEC placed export embargoes in 1973 and again in 1979, but the images of steep prices and long lines remain etched in the minds of older Americans.

Since then, the automotive world has drastically changed. At first, everyone “downsized” to improve fuel economy, then federal mileage standards kicked in and the race was on to improve engines (turbochargers, superchargers, electronics) designs (aerodynamics) and materials (aluminum, lightweight steel and plastics) to eke out the best fuel performance.

With fuel prices remaining relatively stable for nearly two decades, auto makers engaged in an unbridled horsepower marathon that continues. The Cadillac Cien concept unveiled in January is powered by a 7.5L, 12-cyl. engine putting out 750 hp, making the $273,000 Lamborghini Murcielago, also shown last month, a piker with its 575-hp V-12.

And then came the SUV craze. J.D. Powers & Associates reports that in 1995 there were 28 different SUVs. That has risen to 67 (including 22 crossovers) in the 2002 model year and is projected to reach 85 (with 39 crossovers) by 2004.

During the Clinton Administration the government spent $1.5 billion subsidizing the 80 MPG (3L/100 km) car, but never came close. Now that program is dead, replaced by the Bush Administration's new partnership called “Freedom Cooperative Automotive Research” aimed at speeding development of pollution-free vehicles powered by hydrogen fuel cells.

Automakers have had fuel-cell projects under way for years, but few experts expect the technology — and the infrastructure necessary to support it — to take hold significantly until at least 2010. Meantime, the clock is ticking….