What to do when oil hits $100 a barrel
Congress must be bolder in forcing oil substitutes for transportation. It did that for electric utilities.
For the first time, oil prices have nosed above $100 a barrel. Gasoline is higher by 73 cents a gallon from a year ago. In past decades, such price jumps brought a knee-jerk reaction to conserve or to find more oil. The world has done both. Yet prices continue to rise. So what's left to do?
Congress tried to mandate more conservation last month when it insisted on better fuel efficiency in automobiles (from 25 to 35 miles per gallon by 2020). But some evidence suggests that better gas mileage creates an incentive for people to drive more, or even faster.
Consumers have also seen fuel prices go down for long stretches – just nine years ago, oil was at $10.35 a barrel. Making expensive investments in conservation or alternative transportation makes little sense to many. Ever since the oil shocks of the 1970s that saw prices rise to levels well above costs of production, Saudi Arabia has often jerked around prices to keep the world addicted to oil.
And in recent years, large, poor countries with a growing middle class, such as China, have jumped into the car culture. That has pushed up demand to the point that OPEC and the private oil industry can barely meet it. New oil fields are more difficult to find and to tap, and much of the oil is controlled by authoritarian governments that aren't very efficient at exploiting it.
So thin are supplies that market concerns over interruptions now account for much of today's higher prices. The latest upswings, for instance, were caused by tensions in Nigeria and Pakistan, bad weather in Mexico, and China's refineries running full tilt.