June 26, 2008

Bargain Hunter World Likely to Use All of Its Oil By 2042


The Foundation for American Communications in Pasadena hosted a phone seminar Tuesday about gasoline prices with oil expert and Boston University professor Robert K. Kaufmann. Below he answers burning questions about pump prices.

Q: Why do gas prices rise faster than they fall?

A: As demand declines, producers slow refining and sell from stocks, which slows the price drop. As demand rises, refinery capacity limits supply response.

Q: Have environmental regulations slowed the building of new refineries that could increase supply?

A: No, there's very little evidence that environmental regulations have slowed refining capacity growth in the U.S. Reduced capacity has mirrored reduced demand.

Q: Why are gas prices so high?

A: Demand has grown significantly since 2003, but not so dramatically that it is the main culprit. Supply is. The supply of crude can be divided into two categories: Oil from the Organization of Petroleum Exporting Countries and oil from non-OPEC sources. OPEC production is nearly back to 1970s levels. In the past, non-OPEC sources made up the difference. However, non-OPEC production has not increased at all since about 2004.

Q: What about drilling in the Arctic National Wildlife Refuge in Alaska?

A: In the best-case scenario, the ANWR would produce 1million barrels a day, says the U.S. Geological Survey Open File Report of 1999. That would probably not significantly reduce prices or U.S. oil imports.

Q: Will we run out of oil?

A: Taking today's usage patterns into account, that day will come on Nov. 23, 2042. But it's more important to look at when oil production will peak. Production will peak between 2014 and 2035.

Within a decade of the peak, production will fall below 10million barrels a day -- the current level of production in Saudi Arabia.

Q: What should we do about the oil crisis?

A: "We really have to start thinking about what the alternatives are, what we're going to do, and start acting on it," Kaufmann said. "Prices may go up and down in the near term, but over our lifetime this is a transition that we are going to have to make and our children are going to have to make."

Q: When was the last time the U.S. met its own oil needs?

A: 1947.

For Kaufmann's answers to more gasoline questions visit www.insidesocal.com/bargain.

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