[cnn-photo-caption image=http://i.cdn.turner.com/cnn/2008/images/05/06/risingpowersshrinkingplanetbook292.320.jpg caption="Michael Klare is the author of Rising Powers, Shrinking Planet: The New Geopolitics of Energy" width=292 height=320]
Professor of peace and world security studies at Hampshire College
It is natural to seek the culprits for today’s high oil prices so they can be roundly punished – and maybe, in the process, we can see some relief at the gas pump.
The big oil companies are obvious candidates, given the colossal profits they’ve been reporting over the past few days. On Thursday, Exxon Mobil posted first-quarter earnings of $10.9 billion, its highest ever except for the fourth quarter of 2007, when it raked in $11.7 billion. But while the oil giants are certainly amassing vast fortunes at our expense, the rise in gasoline prices is the product of many factors – some building for many years – not the greed of oil companies alone.
Two underlying conditions are at the root of our current dilemma: The worldwide demand for oil is skyrocketing at the precise moment when the global energy industry has hit a wall in its ability to grow supply.
For years, the global thirst for petroleum was largely driven by consumers in the United States, Europe, and Japan; but now, tens of millions of newly-affluent consumers in China, India, and other developing countries are buying automobiles, and this is pushing world oil demand to unprecedented levels. That wouldn’t be a problem if the world’s oil fields were pumping out sufficient additional crude to satisfy this increased demand – but that’s not happening. Rather, we are seeing a negligible increase in world oil output, and this is largely responsible for the rise in oil prices.
On top of this, many of the world’s leading oil producers are riven by ethnic and religious conflicts, are located in dangerous neighborhoods, or are ruled by corrupt and rapacious officials, thus causing production to fall below maximum attainable levels. In Nigeria, for example, a tenacious insurgency in the Niger Delta region (where most of the country’s oil production is concentrated) has forced foreign oil companies to suspend production on about half of total national output -– a major factor in the recent spike in world prices.
The rise in prices at the gas pump is thus the product of a perfect storm of deep-seated, systemic factors combined with day-to-day events like the insurgency in Nigeria. This suggests it cannot be fixed by band-aid measures like a temporary reduction in gasoline taxes or a suspension in additions to the nation’s Strategic Petroleum Reserve, as suggested by numerous politicians.
Rather, it will take long-term efforts to reduce oil demand through improvements in fuel efficiency and public transportation, combined with the accelerated development of petroleum alternatives such as second-generation (non-edible) biofuels, liquids derived from coal, and hydrogen-powered fuel-cells.
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