Demand Likely to Drive Gas Prices Higher
SCOTT SIMON, host:
This is WEEKEND EDITION from NPR News. I'm Scott Simon. Coming up, a novel idea: reading novels to learn lessons about leadership.
But first, record-high gas prices posted this week in many parts of the country as crude oil prices hit above $74.00 a barrel. Now, if you adjust the cost of crude oil for inflation, the price is still below its peak during the Iranian Revolution and the Iran/Iraq War, and consumption is as strong as ever. But many experts expect prices to continue to rise. Paul Roberts is an analyst who follows the oil market and has written a book, The End of Oil on the Edge of a Perilous New World. He joins us from member station KUOW in Seattle. Mr. Roberts, thanks very much for being with us.
Mr. PAUL ROBERTS (Analyst): It's good to be here, Scott.
SIMON: Iran's oil minister said this week that crude oil prices could reach $100.00 a barrel by next winter. Do you see a tipping point where Americans begin to make individual decisions and even corporate decisions that affect the way we live in this country based on the price of oil?
Mr. ROBERTS: Yeah. I mean, we're already seeing a tipping point in the corporate world, you know, companies, industries that are highly dependent on oil like airlines and trucking already investing in new, more efficient technologies, and they're kind of reconsidering business models that are going to allow them to operate using less energy. Consumers are another story. We're still buying large cars, we're still driving more each year. So we're not there yet in terms of the consumer, and that's really the big question mark.
SIMON: In your judgment, Mr. Roberts, who or what is to blame for the rising price of oil?
Mr. ROBERTS: Well, first of all, it's not the oil companies. I mean, you know, I don't work for Exxon-Mobil, but I've got to tell you that this is a cyclical kind of blame game, and first of all, it's inaccurate and it's unconstructive. What's driving oil prices is demand. It's the same thing that has driven it throughout history, and the reason that these oil companies, these oil producers like Saudi Arabia, can charge so much for their oil is because we're willing to pay for it. We want it. And I think that's the reality that is unattractive to American consumers and politicians, but it's a reality nonetheless.
SIMON: Members of the Congress and the Administration are floating all kinds of proposals to cushion the burden of high gas and oil prices and maybe avert them down the road. What are some of the steps you see short-term or long-term that could responsibly be taken that might make an actual difference?
Mr. ROBERTS: Well, really, you know, you have to bring your solutions to near medium and long-term, and in the near term there's not a lot that a president or Congress can do. I mean, as fun as it might be to blame President Bush, the best that he can do is take a positive rhetorical stance; that is, to say, look, there's an oil problem, American consumption is one of the drivers of that problem and until we get consumption under control, we're going to face that problem every year.
Then the question is, well, how do you reduce demand? And there's two ways. One is you become more efficient, cars that get better gas mileage, you know, houses that use energy more efficiently. I mean, there's all sorts of ways to do that, and that's one side. The other side is to find other fuels and technologies that aren't oil, bio-fuels or you can begin exploring hydrogen. Both these pathways of conservation and alternatives reduce your demand for oil and in the medium and long-term will reduce the price.
SIMON: But I have to ask, if you're able to reduce the price of oil substantially, does the whole cycle start all over again because then people will say, gas is so cheap, I might, well, you can fill in that blank.
Mr. ROBERTS: Precisely, and this is what we've seen in the past. I mean, those high prices you were talking about in the '70s, everyone got the fear of God in them, and Detroit began, with a little prodding from Congress, began making fuel-efficient cars, consumers began behaving as if there was an end to oil. And then in the mid-'80s our demand for oil dropped so significantly, there was a glut of oil in the market. The price dropped. It went from in the $70.00 range down to, you know, 10 and 15 dollars. And people just said, well, there's no problem.
But high prices are good because high prices indicate that the market is moving toward a new state of equilibrium. It may take a while to get there, but high prices encourage conservation, they encourage the development of new technologies, they encourage the movement of our economy away from a fuel that everyone knows is unsustainable.
SIMON: Paul Roberts, author of The End of Oil on the Edge of a Perilous New World, speaking from KUOW in Seattle. Mr. Roberts, thanks very much.
Mr. ROBERTS: Oh, it's my pleasure.