THE FUTURE AND OIL

Growing up my focus on the price of oil and more obviously gasoline was minimal. I have memories of pulling into Martin gas stations in the Chicago area with my mother and father. My father would fill up the Ford with 18 cents a gallon gasoline (in a gas war, it might even be less) and, in addition, with every 10 gallons, my mother would get a choice of a free glass or bar of Ivory soap.

The issue became more critical after the Yom Kippur War in 1973 when suddenly we had to wait in lines and pay 35 cents a gallon for gasoline because of the Arab oil embargo. Since then Americans have lived as if oil is an infinite commodity while watching the price gradually climb. Not until last year has the price really spiked--up to 2$ a gallon and now it looks like we will be headed toward 3$ a gallon by fall ( in some parts of the country, it has already reached that price). Interestingly, gasoline consumption is higher than ever and, up until the last few months, people seemed to be buying SUV's with no concern of what they would be paying for a fill-up. However, as energy prices escalate, eventually American consumers will have to stop spending on other commodities--the 1990's lifestyle cannot continue forever.

I am not sure if between inflation and higher wages the American public will once again absorb these price increases. However, I am increasingly seeing articles that indicate oil is not a limitless commodity. Even if the economies of the oil-consuming nations weaken, the supply of oil will not keep up with demand (also reserves are not being discovered rapidly enough). It appears as if we are on the edge of an energy revolution similiar to the late 1800s when the world economy moved from coal and whale oil to oil. The world appears to be entering a qualitatively different energy era which we need to be prepared for. But for the last 10 years politicians of both parties have neglected how the US can fuel its economy and maintain the standard of living we have enjoyed for so long.