Rising oil prices could hold down U.S. economy
Monday, January 7, 2008 8:00 AM PST
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E-mail this articleThe price of crude oil rising to a record $100 per barrel wasn't the sort of news we'd hoped to receive in the first week the new year. But there is was last Wednesday -- headlines screaming that a symbolic barrier had been broken and energy analysts assuring us that the price of oil on the world market will only continue to rise over the long haul.
The speed of this upward march in energy costs has been breathtaking. Just a year ago, the per-barrel cost of oil was under $55. Four years ago, it was around $25. And, amazingly, crude oil was selling for about $11 per barrel just a decade ago.
Rising demand in the growing economies of China and India have had a lot to do with the cost increases over the past few years. Violence in petroleum-rich Nigeria was said to have provided last week's $3-plus, one-day price spike that pushed the cost of oil over $100 a barrel. Chronic instability in the Middle East, Indonesia and other oil-producing parts of the world also contribute to the market turmoil and can be counted on to continue to do so.
High-priced energy is something we'll have to accept for now and the foreseeable future. Adjustments, such as new efforts to conserve and to develop alternative fuel sources, will be needed. Conservation would seem particularly important in the short-term, because developing alternative sources will take many, many years. And failing to reduce our dependence on oil carries economic and strategic risks that are fairly immediate.
Securing America's Future Energy, a Washington, D.C.-organization advocating for less dependence on oil, reports that each $1 increase in the average price of oil costs Americans some $4.6 billion a year. The group cites a recent study by the Oak Ridge National Laboratories that estimates oil dependence has cost the U.S. economy more than $4 trillion since 1970.
The strategic risks stem from our need to import roughly 60 percent of our oil each day. And, according to the U.S. Department of Energy, this dependence on imported oil will grow in future years. That means more U.S. dollars will flow abroad and this nation's economy will be more at the mercy of unstable, oil-producing countries.
The many presidential candidates haven't been talking about this issue. It needs to be on the radar screen of every candidate who has even a slim chance of ending up in the White House. Perhaps breaking this symbolic, $100-a-barrel cost barrier will put it there.
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