Oil Prices Recede, and So Do Conservation Habits When gas prices hit $3 a gallon in early summer, consumers began to change their driving habits. But now that gas is cheaper, they don't appear as focused on fuel efficiency. Volatile oil prices are shaking things up in the energy industry, leading to new technologies and efforts to find new sources of fuel.
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Oil Prices Recede, and So Do Conservation Habits

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Oil Prices Recede, and So Do Conservation Habits

Oil Prices Recede, and So Do Conservation Habits

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  • <iframe src="https://www.npr.org/player/embed/6697350/6697351" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.


And I'm Robert Siegel.

Gas prices are ending this year higher than they were a year ago. While the cost at the pump has fallen from a midsummer peak, the U.S. Energy Department is forecasting another year of tight oil supplies ahead. Consumers appear to have shrugged off the high prices, while oil producers are scrambling to meet demand.

Now, there is an urgent call for government action on energy from some unexpected sources.

NPR's Scott Horsley reports.

SCOTT HORSLEY: Gasoline prices on average were even higher in 2006 than they were in 2005. But unlike last year, when hurricane-related price spikes temporarily put the breaks on America's growing appetite for gasoline. This year, drivers open the throttle and their pocketbooks.

Daniel Yergin, who heads Cambridge Energy Research Associates, suspects one reason that demand rebounded in 2006 is that even with the high prices, gasoline still accounts for a small fraction of a typical household budget.

Mr. DANIEL YERGIN (Cambridge Energy Research Associates): When prices go up, everybody notices it because gasoline prices are the most visible price in the country. And low-income people are the ones who are really most hit by it. But if you look at the overall economy, it's not as disruptive now as it was, say, in the 1980s.

HORSLEY: For the oil industry, 2006 was a very good year. High prices helped Exxon Mobil, for example, earn $29 billion profit in the first nine months of the year. The company spent about half that much on oil exploration, another capital projects. Chief economist John Felmy of the American Petroleum Institute says the industry is spending more to look for oil, but it could be years before they find it.

Mr. JOHN FELMY (American Petroleum Institute): There's no question that we've seen significant increases in the amount of investment over the last several years. They are, of course, made in a prudent fashion so we've been criticized for not making more investments but we think that the companies are doing what's proper for their shareholders, going forward.

HORSLEY: For big energy users, such as airlines and chemical manufacturers, high prices take a heavy toll. CEO Andrew Liveris of Dow Chemical says high prices have forced his company to shut down 35 U.S. plants in the last five years and cut some 7,000 jobs. Liveris still hopes some good can come from those high prices, if they light a fire under energy policy makers in Washington.

Mr. ANDREW LIVERIS (CEO, Dow Chemical): If the burning platform is high oil price and high natural gas price, fine. But now that we have the burning platform, let's go do something about it.

HORSLEY: Liveris is one of 16 business and military leaders who've joined together in a campaign, complete with T.V. commercials for a new comprehensive national energy policy.

(Soundbite of T.V. commercial)

Unidentified Man: It's time to reduce U.S. oil dependence. The time is now.

HORSLEY: The group wants the federal government to do more, such as, opening new areas to oil and gas drilling, and promoting alternative fuels. Liveris and the other members say the biggest and fastest progress is likely to come from mandating that cars and trucks be more fuel-efficient.

Mr. LIVERIS: The free market economy is not working here. Given consumers the choice between a gas-guzzler and a fuel-efficient car, it's a habit change. And American consumers aren't in the business of changing their individual habits. What they don't understand is the consequence of not changing those habits.

HORSLEY: Whether or not, Washington responds to high-energy prices, investors are already responding. New ethanol and bio fuel plants are under construction. And Daniel Yergin says a gusher of venture capital is flowing into the energy sector.

Mr. YERGIN: There's a great bubbling of technology all along the energy spectrum, and I've never seen this amount of effort going into innovation of every kind.

HORSLEY: But Yergin, who's chronicled the long history of the oil business with his book, “The Prize,” wonders if this newfound focus on energy can be sustained, or will investors, business leaders and government policy makers prove to have short memories, like many American drivers.

Scott Horsley, NPR News.

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