$4 Gas: Fueling Our Fears

By Tim Christie, The Register-Guard, Eugene, Ore.

May 30–The average price for a gallon of regular gasoline crossed the dreaded $4 per gallon threshold Thursday in Eugene and Springfield, after the price of oil doubled in the past year to more than $130 a barrel. According to the AAA, regular gas in area now averages $4.02 a gallon.

Some analysts say the prices are driven by speculators, and that they can’t stay this high. But Walter Youngquist, a petroleum geologist in Eugene, says it will only get worse. We’ve only just begun to feel the effects of the declining supply of a finite resource.

“I don’t think people recognize what peak world oil production really means,” Youngquist said. “The peak and then decline of world oil production, which is upon us now, will affect more people in more ways than any other event in human history.”

The concept of peak oil was developed in 1956 by a Shell Oil geologist. While the idea remains controversial, rapidly rising oil prices are lending credence to it. Texas oilman T. Boone Pickens is among the believers, recently predicting oil will hit $150 a barrel by the end of the year.

Youngquist was a geology professor for the University of Oregon in the 1950s and 1960s, and worked in the oil industry for nearly 50 years, checking oil prospects in more than 70 countries. In a 1999 article he and co-author Richard Duncan surveyed oil production data from 42 countries and concluded world oil production would peak in 2007.

Youngquist has seen nothing since then to make him think he was wrong.

“We have gone through, in 200 years, essentially the world supply of oil,” he said.

Last year, the world consumed 31 billion barrels of oil, and found new supplies totalling about 14 billion barrels, Youngquist said.

“Since 1981, the world has used more oil than it has found,” he said.

Declining supply and increasing demand means oil is “going to be more and more expensive.”

Youngquist’s fears are shared by Tim Brooker of Veneta. Brooker is a grandfather, a businessman, a commuter, and the mayor of the small town where he lives. And he is concerned on all of those levels.

“I don’t know what the latest numbers are… how long the oil reserves will last, but then it’s gone,” Brooker said. “There’s no way of replacing it. There are no alternatives today, we should be planning today for what those alternatives are and we’re not.”

Brooker is worried about the short-term and long-term.

In the short-term, prices are going up so sharply, as worldwide demand for oil rises, that some people are already struggling to cope. “The condition is not going to go away,” he said.

“People will start making decisions… if they’re commuting long distance to go to work, and making minimum wage, they’ll start weighing ‘Is it worth it?’ until businesses have to step in and do something drastic in order to keep employees on the job,” said Brooker, who commutes daily to his job in order management at Levi Strauss in Eugene.

“The real concern that I have is that price increases will not only be in gas, but in heating oils, in everything — food prices have already gone way up. It will really make life miserable, particularly for low-income people. What happens to folks who have to make a choice between food, heating oil and gasoline when it reaches $7 a gallon?”

The ripple effect of rising oil prices extend throughout the economy, Brooker said. “I’m getting close to retirement age, I’m seeing my retirement fund that I’ve been working on for years start to shrink in value. What’s going to happen to me? What’s going to happen to my grandchildren?”

In the longer term, Brooker is worried about what is going to happen in a world where more and more oil is being consumed every day.

He sees some isolated cases where changes are happening, to reduce dependence on oil. Increasing use of public transit can help reduce demand, he said.

And, “I read an article just the other day, that communities are going to have to re-think how they’re going to repair roads, using materials that aren’t as expensive to make. As oil prices rise, and oil reserves diminish, we can no longer afford to make repairs (using petroleum-based products).”

But what about all the other things that use petroleum, Brooker said, down to the plastic items people use every day. “How are we going to make those changes?”

He has some hope for research into alternative fuels, he said, although at this point “it’s a small effort.” Most of all, Brooker is frustrated by what he sees as a lack of leadership at all levels.

“Our leaders really need to make change and it’s not being done,” he said. “Not to the point where the public can actually see it being done. If something is being done behind the scenes, usually you’ll see something about it. We’re not hearing anybody answer those questions for us.”

“People are just to the point where they don’t know what to do individually and there really isn’t any group effort going out to it. There isn’t any public outrage going out to it. Even my generation, and civil disobedience came easy to it. Even my generation is just transfixed.”

About all that people seem to be able to do, he said, is “make that wish that some scientist comes up with something.”

Youngquist doesn’t think that’s going to happen.

He sees growing demand for oil worldwide as China’s and India’s economies grow, enabling more of their people to buy cars, increasing competition for a scarce resource.

Until 1950, the United States produced more than half of the world’s oil, Youngquist said. By 1965, we weren’t producing enough to take care of domestic needs, Youngquist said. By 1970, domestic production peaked in the United States.

“Now we’re just one of the boys, bidding for the last half of the world’s oil reserves,” he said.

“The American public thinks they can get in any stupid predicament they want and scientists will bail them out,” he said. “The dust of history blows over past civilizations right now that ran out of resources.”

Bill Harbaugh isn’t ready yet to get out his dustpan.

You could call Harbaugh, an economics professor at the University of Oregon, an optimistic skeptic. He isn’t convinced that rising oil prices spell economic doom.

Harbaugh wrote a guest column for The Register-Guard in 2006 that accused proponents of peak oil of crying wolf, and of failing to account for the power of markets and incentives.

Today, he said he’s less skeptical about the prospect of peak oil, but no less optimistic about the ability of the economy and consumers to adapt to rising oil prices.

“I’m less optimistic about big increases in the supply of oil,” he said. Very little new oil is coming onto the market even as prices soar, he said.

But he added: “The peak oil people did predict scarcity would lead to drastic economic consequences. That prediction has been a total bust.”

“The economy is not even in recession yet as far as we can tell — maybe a mild recession,” he said. “It’s astonishing how flexible the economy has been in dealing with huge increases.”

If high gas prices persist, consumers will adjust by buying more fuel efficient cars, moving closer to their jobs, and as a result high gas prices will have less effect on the economy, he said.

Peak oil proponents were right about the price of oil skyrocketing, he said, “but I was right about the economy adapting. Give it time and it will adapt even more than it has.”

The underlying problem is a global population that has reached 6.8 billion, he said. The world is confronting a “head-on collision” between a growing population and the decline of fossil fuels, for which there is no good comprehensive substitute, he said.

“We’ve far overshot the carrying capacity of the earth,” he said.

While there are alternative energy sources, such as solar, wind, and waves, oil is deeply entwined in our economy and in the way we live, he said. Forty percent of oil is used for things other than gasoline, such as plastic, medicine, cosmetics. Oil also is used to make tires and to pave roads.

Industrialized countries have the farthest to fall and the most to lose, he said.

Business editor Ilene Aleshire contributed to this report.

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