Posted: Thursday, March 03, 2011 11:00 AM
Once again Americans find themselves on the wrong side of the crude-oil supply-and-demand equation.
Strife in the Middle East, surging demand in China and India and an uncertain supply have pushed crude oil prices over $100 a barrel. Nationally, gasoline prices early this week averaged $3.29 a gallon, while on-road diesel averaged $3.57 -- a 74-cent increase from a year ago.
Tom Kloza, chief oil analyst at the Oil Price Information Service, told The Associated Press that he expects gas prices to reach as much as $3.75 a gallon under current conditions, but will go even higher if Middle East chaos worsens. Every 25-cent increase costs consumers an extra $3 billion at the pump.
The timing of this couldn't be worse. Americans are still reeling after more than two years of economic downturn. On the farm, filling up the tractors that will power spring plowing and planting will cost 14 percent more than last year. The cost of inputs will rise, as will the cost of transporting goods to and from the farm.
Much of the oil we use for gas and diesel comes from the Middle East and other relatively unstable locales. Unfortunately, there's not much we can do about political unrest in those places. But we are not without significant oil resources of our own.
President Obama has spoken eloquently on the need to reduce our dependence on foreign oil. His initial energy policy, although heavy on incentives for the production of alternative fuel and energy sources, nonetheless seemed to acknowledge that much of the economy still runs on gas and diesel.
The administration's actions in general, and its response to the current situation in particular, do not include any steps that would remove the hobbles placed on domestic oil production.
The president initially endorsed an increase in offshore drilling leases. In light of last year's oil spill in the Gulf of Mexico, he backed away from that pledge and clamped a blanket moratorium on any deepwater drilling permits.
Since October, the administration has ignored a federal court's order that it lift its ban on deepwater drilling permits in the Gulf. Last month U.S. District Judge Martin Feldman held the administration in contempt of court.
The administration has reneged on arctic oil leases. Its Environmental Protection Agency has increased regulations on refineries that have led to decreased output.
The president is right -- as have been all presidents since at least Jimmy Carter -- that we must find viable alternatives to crude oil that will supply our energy needs. But that's not going to happen in the immediate future. There is another way to more quickly reduce our dependence on foreign oil.
As unpopular as it may be in certain circles, the American economy is fueled by petroleum. Boosting our domestic production is the only sensible solution until a viable alternative is perfected.