The end of oil
The NY Times has a terrific article on oil which is well worth reading. I've been reading a lot lately about people wanting to boycott gasoline pumps for a day in order to 'teach' the oil companies a lesson. News flash: the only way prices are going to come down is for demand to decrease. A one-day boycott isn't going to do it. What will do it is a change in behavior and most people (read: Americans) are unwilling to give up the luxury of driving their own vehicles or gas-guzzling vehicles or do much in the way of 'sacrificing' in order to bring down the price of oil. The general attitude is, "Oh, we can always get more from Alaska." Um, no.
Global demand is 84 million barrels of oil a day, and the US alone consumes more than 20 million of that total a day. Nearly 50 percent of the crude consumed in the US is in gasoline. Demand is projected to grow by approximately 1.8 million barrels a day, and non-OPEC production will grow at a rate of 0.7 million barrels a day. I think you can see the problem, yes? It's easy to make OPEC the bad guys in this scenario, but really, they are doing all they can. The only OPEC country with spare capacity is Saudi Arabia (Iraq, while a member of OPEC, hasn't been counted in the quota since 1998). In June, OPEC raised its quotas by half a million barrels a day, and theoretically, that should have sent prices down except for the fact the market suspects OPEC has been exceeding its production quotas all along and the declarations of increases only legitimitized what they were already doing. (Also, it should be noted the US's top suppliers are the non-OPEC producers, Canada and Mexico. OPEC producers Saudi Arabia, Venezuela, and Nigeria round out the top five).
Alaska is touted as America's saving grace, but at current consumption, the estimated 10 billion barrels of oil in Alaska aren't going to last very long. Also, what people don't realize is that it takes a really, really, really long time to get oil to market. If drilling in ANWR is approved today, it will still take another 7 to 10 years for that oil to hit the pipe -- providing the global majors (who have pulled out of Alaska) bite, and the infrastructure is in place to allow for transportation. And anyone who thinks all of that Alaska oil is going to benefit only the US is dreaming. Given Alaska's location and transportation logistics and costs, chances are (MHO) that most of that crude is going to go the West Coast or across the Pacific to China and Japan, both major consumers of crude (the other alternatives are transport the oil by tanker down to the Panama Canal and up to the Gulf Coast, where the majority of refineries are or build a pipeline across Canada into the US; I don't know whether the latter is even on the table, but the former will certainly add to the cost of fuel -- making any savings due to increased supply non-existent)). By the time Alaska oil comes on line, consumption will have risen to a point that Alaska's drop in the barrel won't make a difference (and it really is a drop -- which is why the global majors are more interested in West African oil fields than Alaskan).
Another issue is capacity. Even if by some miracle, another Saudi Arabia is discovered in Russia or Indonesia or Nigeria, who's going to refine the crude? There hasn't been a new refinery built in the US for 30 years or so (I think 1976 was the last time a new one came online) and capacity during the summer driving season is around 96 percent. If you can't turn the crude into something you can use, then there's no point in spare production. Some people say, "Well, build a refinery then." Well, sure, except for the fact no one wants to live near a refinery. They are foul, foul things, prone to explosions and stink and pollute the air, and are eyesores. Really, be honest: would you be willing to live next to one?
Someone mentioned the 700 million some odd barrels in the Strategic Petroleum Reserve. Even if President Bush released that oil, we're once again talking about a very short term solution. At a consumption rate of 30 million barrels a day, we're not talking about something that's going to slow the market down much. There are other issues that go along with supply: capacity, war, terrorism, outages, declining fields, and demand. Once the reserve is depleted, the high prices will be back, and it'll be necessary to once again fill that reserve with high prices.
The rub is very simple: we are never ever going to get all that oil we've consumed. You can drill all you want, but at the end of the day, there are 84 million barrels of oil less than there were the day before. It doesn't matter when oil production peaks (and some people say it already has). Technology doesn't matter either. Oil is a finite resource and the sooner people realize that, the better. It'll last longer and will cost less if we use less.
I'd love to see the President stand up and say, "I haven't asked you to sacrifice anything since 9/11, but now I'm asking you to take measures to reduce your oil consumption. Each of us Americans consumes approximately 3 gallons of oil a day apiece. If we reduce that even by a third, we'll have reduced our dependence on foreign oil. We won't have to worry about what will happen to us the next time Chavez in Venezeula throws a fit, or when terrorists attack an Iraqi pipeline. If we carpool more, we won't have to worry about what happens when Putin decides to take control of Yukos or when civil unrest breaks out in Nigeria." But he won't say that, and instead, he'll give tax breaks to the global majors -- already making record profits and with no incentives for further E&P -- and we'll keep on keeping on.
Further reading: The Energy Information Administration has plenty of information on US and global markets and you can track futures prices at NYMEX and spot prices at ICE.