OPINION:
Oil is a complicated global commodity, but it operates on a simple fact: A surplus like the world enjoys now leaves more green in the pockets of consumers. As the center of gravity in the global marketplace, however, oil shakes the fortunes of nations as the price of oil soars and plunges. Like the sorcerer’s apprentice, humbled by forces beyond mastery, President Obama and his cohort can only watch as their green energy dreams are blown about like autumn leaves in the wind. As oil goes, so goes the world.
The cost of a barrel of crude has fallen more than 65 percent during the past year to around $30, and gasoline prices at the pump have plummeted. The American Automobile Association reports the average price of a gallon of regular stands nationwide at $1.95 — the least expensive since March 2009.
In some states with modest taxes on gasoline, such as South Carolina, the average has dropped to $1.70. If oil continues to decline toward $20 a barrel, drivers could fill up for about a dollar a gallon, making gasoline less expensive than bottled water. The decrease from the peak of $4.11 in 2008 has saved consumers billions.
But there’s always a catch. The price of oil is a barometer of the world economy, and there are consequences to the precipitous crude decline beyond the happy price at the pump. China’s headaches in building a consumer-based economy have slowed global oil consumption, weakening Wall Street and bleeding $1 trillion from the 401(k) accounts of Americans.
Saudi Arabia’s yearlong price war to keep its dominant oil market share has broken OPEC’s 50-year grip on oil prices, threatening the economic stability of Russia, Iran and Venezuela, among the biggest producers of oil, and prompting the cartel to consider calling an emergency meeting next month to tighten the spigot. Many of the U.S. oil producers who developed new drilling technology that sets the global standard, however, now face bankruptcy with the declining price of crude. Like a roller coaster, it’s not the speed of the ride that turns stomachs, but the sudden changes of direction.
Not so long ago the status symbol of environmental correctness was the Toyota Prius, the hybrid electric car with the cool dashboard displaying power shifts between the gasoline engine and the electric engine powered by rechargeable batteries. High gasoline prices fed strong U.S. demand from 2005 onward, but falling prices last year led to a sudden 47 percent decline in sales. Sales of all hybrids fell by 17 percent last year in the United States, according to Autodata. The pricey hybrids sip gasoline rather than slurp it, but when gasoline is inexpensive consumers can’t get enough of the bigger cars.
SUVs and pickups are back, clogging traffic in older cities with narrow streets and drivers with more SUV than they can handle. The return of muscular machines has led to a decline in the average fuel economy for new cars by nearly a mile a gallon during the past year, according to a study by the University of Michigan. Biofuels made from corn, grass, weeds and other vegetation, which the Environmental Protection Agency requires as a gasoline additive, are less attractive now. The International Energy Agency says that if oil remains below $50 a barrel, $800 billion in expected fuel efficiency upgrades across the global will not happen. A slowdown in the growth of the green economy may make Mr. Obama and renewable energy enthusiasts blue, but oil rules the marketplace. They’ll just have to get over it.
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