Oil Crests $100 a Barrel; No Respite for In Sight for Truck-Heavy Automakers

Glenn Swanson
by Glenn Swanson

CNNMoney.com reports that the price of oil has topped $100 a barrel, for the first time ever. (Happy New Year!) U.S. crude priced for delivery in February has gone up $4.02, to reach $100 a barrel on the New York Mercantile Exchange, Inc. (NYMEX). Ira Eckstein, president of Area International Trading Corporation, says you ain't seen nothin' yet: "This market is really gonna fly.” CNN lists several reasons for the rise, including civil unrest in Nigeria and rumors of a potential cessation of Mexican supply (no reason given). And then there's the ongoing decline of U.S. oil supplies. Oh, and a “surprise fall” in US manufacturing, which could lead to lower interest rates, which could further ding the value of the dollar, which could lead investors bail out of U.S. equities and into commodities, which would drive up the cost of imported crude. No mater how you slice it, gas prices are sure to arc upwards, putting yet more pressure on a beleaguered market for gas-hungry SUVs and pickups.

Glenn Swanson
Glenn Swanson

Glenn is a baby-boomer, born in 1954. Along with his wife, he makes his home in Connecticut. Employed in the public sector as an Information Tedchnology Specialist, Glenn has long been a car fan. Past rides have included heavy iron such as a 1967 GTO, to a V8 T-Bird. In between those high-horsepower cars, he's owned a pair of BMW 320i's. Now, with a daily commute of 40 miles, his concession to MPG dictates the ownership of a 2006 Honda Civic coupe which, while fun to drive, is a modest car for a pistonhead. As an avid reader, Glenn enjoys TTAC, along with many other auto-realated sites, and the occasional good book. As an avid electronic junkie, Glenn holds an Advanced Class amateur ("ham") radio license, and is into many things electronic. From a satellite radio and portable GPS unit in the cars, to a modest home theater system and radio-intercom in his home, if it's run by the movement of electrons, he's interested. :-)

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  • Casper00 Casper00 on Jan 03, 2008

    This problem has nothing to do with growing demands in US or Asia or any other place. I've seem as many cars out on the street today as 15-20 years ago. The truth is that the people that is running all these oil refineries just got a little smarter when it comes to oil production and pricing.....and heres a thought, pretty soon alot of the baby boomers will soon retire this will lead to a decrease in driving activity, so lets wait and see if the price goes up or down...so stop pointing fingers at each other.

  • Allegro con moto-car Allegro con moto-car on Jan 03, 2008

    I believe the best energy policy for America is a continuation of current energy policy; that would be no credible mandatory fleet MPG requirement. I would even advocate tax deductions for new gas guzzler purchases. (A Chevy suburban gets the most, something like $10,000; a 6 cyl Accord gets the least, something like $1,000.) This should allow the D 2.8 to continue to operate with excess capacity of the wrong types of vehicles, with money losing incentives to move the metal. The longer we can keep people commuting in gas guzzlers, the faster we get to $6 gas. With $6 gas, most commuters switch to 4 cyl diesel hybrids that get 100 MPG, and the only people driving to church on Sundays in a guzzler are the truly wealthy CEOs, not the pretentiously credit card wealthy doctors and lawyers. So to break Americans from their 'God-given, God-guaranteed right to waste oil' mindset, they must first waste it feverishly. I am very serious.

  • Dean Dean on Jan 03, 2008

    casper: the oil refineries buy crude oil and refine it into other products such as gasoline, diesel, kerosene, etc. They often have nothing at all to do with oil recovery, exploration or pricing. I believe your argument would be appropriate if the discussion were about gasoline prices, however. ihatetrees: you are willing to ignore geologists and believe that economists are the authorities of record when it comes to the amount of oil that is available? The average economist is clueless: they work with idealized models of economic behaviour. The typical economic model assumes that infinite economic growth is possible and desirable (I won't argue with desirable, but the earth and its resources are finite and will collapse under demand long before we have the capability of expanding at a large scale into space). Landcrusher: nobody I has ever read suggests there is some big industry/government conspiracy about peak oil. It is mere head-in-the sand ignorance, or pollyanna cornucopian-ism. The point with peak oil is not that we're running out. There is still a shite-load of oil in the ground. The point is that when you hit the downside of the production peak, and the supply and demand curves begin to diverge, you will get a steady and inexorable rise in the price of oil. No conspiracy, just simple microeconomics. Since our society is built on cheap oil (and energy in general) something will have to give. Either society will fall (the apocalyptic scenario you refer to) or we re-arrange our society and way of living based on expensive energy. And yes, new oil fields will be discovered, and new methods of extraction developed, but we will not see cheap energy again. If we keep denying that we are in an age of increasingly expensive energy, then we will not do anything about it until too late. The longer we wait, the more likely the apocalyptic scenario is to play out.

  • Engineer Engineer on Jan 03, 2008
    Since our society is built on cheap oil (and energy in general) something will have to give. Either society will fall (the apocalyptic scenario you refer to) or we re-arrange our society and way of living based on expensive energy. Who says our society is built on cheap oil? Not so long ago, some argued that the Brittish empire was built on slavery, and outlawing it would be disasterous. Oil prices over the last seven years have quadrupled. Society has not come to a screething halt. I bet another doubling of oil prices won't do it either, though it would start affecting behaviour in ways that might reduce consumption. I guess we'll know two years from now...