Live from Davos -- The Oil Squeeze

There was a time when we thought that the main oil-producing countries were our friends and would keep prices relatively low and stable so that we could grow our economy. That time is over.

Here in Davos, the head of OPEC made it clear what OPEC's intentions are. Abdalla Salem El Badri, the Secretary-General of OPEC, said:

We are not happy with $40 a barrel or even $50. This is not enough to permit our member countries to invest and if they don't invest now, there will not be enough capacity to meet the increased demand when the economy recovers.

Somehow OPEC was investing when oil was $20 a barrel but now needs $80 a barrel to meet that bar. OPEC will use any excuse it desires to continue its cartel and control prices.

How long will America sustain the delusion that a few hybrids and a small dash of ethanol is going to make any difference in this disproportionate dependency? The US has more than 250 million cars on the road -- 30% of all cars in the world. Putting out even a few hundred thousand hybrids barely moves the meter.

The Economist makes the point this week that America's massive trade deficit is partly to blame for the current global crisis. Half of the trade deficit is payment for imported oil.

When will the US wake up to the stark reality that OPEC will squeeze every last dollar from every barrel?

Obama has promised to cut in half the amount of oil that is imported. Where is that plan?

Comments

[scartooth]

The HOUSE OF CARDS will FALL. You cannot get taxes from those that are UNEMPLOYED unless you only TAX the RICH and I cannot see that happening. We are losing are industrial infrastructure and the Foreign forces at work in our Government and Financial Corporations is shipping JOBS out through the NAFTA policies and it will bring down all jobs in the USA. As seen in the NEWS release about AP hiring 1200 high paying high tech jobs and giving and requesting foreign workers to be paid with American Tax dollars. NOONE is IMMUNED. These people are out to bring down the American people and they are doing it with our OWN MONEY. So do they think that WE are ALL without backbones and either unwilling or unable to retalliate against this? I believe so. We as AMERICANS have a NEW mentality that is quite different from our FOREFATHERS. We have become selfish self centered individuals. They have us where they want us. Divide and Conquer and we have divided ourselves. If we are to win our country back WE must STAND UP to these ATROCITIES and stop them from SPITTING in OUR FACES. We must learn to buy our own products and take care of our own people. That time is NOW. IF not there will be nothing left. WE also need to show these PEOPLE that they are not IMMUNED to the retalliation of the AMERICAN PEOPLE.

[mjt218]

Why shouldn't OPEC countries squeeze every $ possible out of their oil? I think it would be pretty irresponsible of them to waste their meal ticket.

[JPHR]

Mr Hidary.
The US is definitely in for some change.:
-Using 25% of world production with 5% of world population will not be sustainable
-Yes is getting increasingly costly to explore for oil so investment in new oil will require a stable oil price of $70 or more
-Continuing to print $ to finance that deficit (budget, trade) will not be sustainable too.
-Populist policies have kept taxation of energy in the US very low relative to western Europe, so investment decisions in the US have been based on that lower price for the last three decades. The result is that the US economy is much more energy intensive. Also is will be forced to adapt much more abruptly and in already difficult times. Still the US is very well able to grow its economy and make it less energy intensive too.
-Even during this economic crises it might be better to tax energy more to force that necessary transition and use the proceeds to stimulate the economy than simply lowering the price of energy.
-So Obama's promise might imply that the US will simply have to do with less energy.

[freshnotbitter]

With 3 billion consumers in China and India in line to buy oil when they have developed sufficiently, it would seem logical that oil producers would have no problem keeping their oil in the ground awaiting that date rather than sell their low hanging fruit for $40 a barrel now.

here in the US we are told we will have all electric vehicles like the volt from GM in 2 years but I wonder where the electricity is coming from. Are we going to double our power plants overnight for the volt?

it seems to me that the government ought to start subsidizing hybrid vehicles immediately to get the production plants up and running and get maximum number of low emission/low consumption vehicles on the road before the oil price spikes again. Besides, there will be less health care cost when the air cleans up.

You'd think that all those harley bikers out there would be cheering hybrids on so they don't have to suck on all that cancerous gas while waiting for a green light.

[dadw5boys]

So many people that mass transit is a must. They could not build enough highways to carry all the people in India in single cars China either.

Mass Transit or High Speed trains will be a large part of the future.

[KillTheMessenger]

On average a Harley is no more fuel efficient than a Prius.

OK, fun facts aside, the problem could have been solved 30 years ago by raising fuel efficiency standards. Just because it's 30 years later does not mean the same solution does not apply.

And the natural way to pay for the necessary changes are gasoline taxes. It's well understood by transportation planners that gas taxes could pay for any and all necessary changes. So why don't we raise taxes? For the same reason we didn't raise them back then... it's unpopular and the majority rather suffers the consequences of a poorly designed transportation system than to pay for the solution, even if that, in the long run, is a devastating economic miscalculation.