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New Oil Reality
Steven Mufson
Washington Post
Sunday, July 27, 2008
The two events, half a world apart, went largely unheralded.
Early this month, Valero Energy in Texas got the unwelcome news that Mexico would be cutting supplies to one of the company’s Gulf Coast refineries by up to 15 percent. Mexico’s state-owned oil enterprise is one of Valero’s main sources of crude, but oil output from Mexican fields, including the giant Cantarell field, is drying up. Mexican sales of crude oil to the United States have plunged to their lowest level in more than a dozen years.
The same week, India’s Tata Motors announced it was expanding its plans to begin producing a new $2,500 “people’s car” called the Nano in the fall. The company hopes that by making automobiles affordable for people in India and elsewhere, it could eventually sell 1 million of them a year.
Although neither development made headlines, together they were emblematic of the larger forces of supply and demand that have sent world oil prices bursting through one record level after another. And while the cost of crude has surged before, this oil shock is different. There is little prospect that drivers will ever again see gas prices retreat to the levels they enjoyed for much of the last generation.
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Unlike the two short, sharp oil jolts of the 1970s, the latest run-up has been accelerating over several years as ample supplies of crude oil have proven elusive and the thirst for petroleum products has grown. The average price of a barrel of oil produced by the Organization of the Petroleum Exporting Countries doubled from 2001 to 2005, doubled again by March this year and jumped as much as 40 percent more after that.
For American motorists, a full tank of gas costs nearly twice what it did at the start of last year, racing past the $4-a-gallon mark, and has begun cutting into other household spending.
“What can you do? You need gas,” said Barry Modeste, a construction worker who stopped his van at a Shell station in Takoma Park one recent morning to add $15 worth. It was enough, he said, to get him to a cheaper station in Rockville. “If you don’t have gas, you can’t get to work. And if you can’t get to work, you don’t get paid. And if you don’t get paid, you can’t buy food. We’re at their mercy.”
Last month, 51 percent of the respondents in a Washington Post poll said rising gas prices were causing a serious financial hardship for them or others in their household. It was the first time a majority had said that since the poll began posing that question eight years ago.
The rising prices are also adding to inflation, aggravating the U.S. trade deficit — oil now accounts for about half of it — and taking a toll on businesses already struggling with the economic slowdown caused by the housing and financial crises.
“I’m a very small businessman. If I get any smaller, I’ll be out of business,” said independent trucker Lee Klass, who was driving through the Texas Panhandle this month with a 33,000-pound load of plastic containers bound for Colorado. Klass had just paid $636 for fuel, enough for the trip but no more. Filling the tank would cost nearly twice that much.
Abroad, riots shook India after the government trimmed fuel subsidies. Truckers in Britain, France, Spain and South Korea have clogged the roads to protest rising fuel prices. In the Philippines, soaring prices for oil and petroleum-based fertilizer have derailed the economy and ignited calls for a cut in the tax on oil imports. With her popularity at a record low, President Gloria Macapagal Arroyo is expected to confront the issue in a nationally televised speech scheduled for tomorrow.
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10 Responses to “New Oil Reality”
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July 27th, 2008 at 9:38 am
i think that Americans should protest in the street just like they do in the foreign coutries over high fuel costs and food costs. We are just to busy or are most watching Family guy and not paying attention to the fact that we are losing our country to the ELite. wake up before the train rolls in n gathers your sorry rears and ends it all for ever for all.
July 27th, 2008 at 10:26 am
There is no OIL SHORTAGE… it is all a scam to run the price up. In fact there are more proved oil reserves then ever in the history of the world. They are cutting production of oil to spike the price, that along with speculation is the begginning of why we have high prices. If competition were actually introduced on a local level then prices would drop to the Rock Bottom of what energy should actually cost.
July 27th, 2008 at 10:37 am
Yeah but a major protest would just help usher in the martial law n.w.o. scenario, it’s all part of their plan!
July 27th, 2008 at 4:02 pm
It is like the electricity shortage back when Enron was booming. Look what happened to them. The workers lost there life savings and retirements while the CEO’s took all the money and got away with it when 911 happened. Building 7 had all the records for Enron prosecuting cases
July 27th, 2008 at 5:01 pm
there seems to suddenly be complacency because gas prices went down from the surrealistic to only outrageous price per gallon.
it is amazing how the “dimmer switch” works so well on Americans!
what a sorry State of affairs!
for those of you who missed the revolution, go back to sleep.
for those of you who want to do something to fight back effectively there is Water4Gas – watch the real video testimonials at http://mywater4gasengine.com
July 27th, 2008 at 9:11 pm
To the whole of the American people. Welcome to the real world. For your information most of the world (excecpt those nations that have subsidized fuel prices) has been paying between $4 and $8 per gallon for about 10 years.
You have been conned into believing that you MUST have a large high powered automobile (it must be a V8) to go shopping at the local mall. Naturally you have to have one for every member of the family and it MUST be the very latest model.
Your Congress has resisted every attempt at mandating better fuel consumption with often ridiculus arguements. Incidently when henry Ford produced the first T Model ford it returned about 28 mile per gallon, although I understand it ran on keresene and was only a four cylinder motor.
Over the past centry there has been techonlogical advances but this has not improved the fuel efficiency, in fact it has resulted in a reduction if anything. Anti-pollucion measures are one example of that.
The internal combustion engine only give about 60% efficiency mainly due to the high number of moving parts needed. there is about 10,000 moving parts in an average motor vehicle and a lot more for your SUV.
July 27th, 2008 at 9:15 pm
By the way the TATa Motor announcement got wide global media coverage maotly from talking heads saying it will increase global warming or simply not possible to make a vehicle for that price.
July 28th, 2008 at 7:07 am
Why is PrisonPlanet posting articles that advance the supply and demand fallacy of rising oil prices? And that rising oil prices are “adding to inflation”?
Inflation is INCREASE IN THE MONEY SUPPLY by Federal Reserve and U.S. gov’t monetary policies. Inflation is the cause, rising oil prices are the effect.
Inflation and speculation are the primary reasons for rising oil prices, ’supply and demand’ has nothing to do with it.
July 28th, 2008 at 3:05 pm
Scott you are definately right on the money with the cause and effect. Since Ron Paul has been gaining public access to address many of the negatives of a Private Bank making money off the government to print its own money, you can see we are held hostage by the FED RESERVE and not the oil companies who have actually cut production to keep prices high. There is some room to ad in other factors besides inflation but that is probably the key that got this mess to insane levels for energy prices. Supply and Demand, supply is at a level too high for the majority therefore demand has dropped like a rock… seeing alot more gas stations actually closing down these days…
July 28th, 2008 at 3:41 pm
When something better comes along that isn’t suppressed by the fuel companies…I hope they don’t come whining to me about the waning profits – they can be sure of a swift and hard kick to the glutes.