In absolute terms, the price of oil is at its highest ever: $53/bbl. Despite the fact that in the past, such high prices were thought to doom a president's popularity, and that John Kerry has a long litany of complaints, surprisingly the price of gasoline hasn't been brought up by him. Has something changed in the body politic in the US, or was the conventional wisdom about the currency of this issue overblown? I note that President Clinton opened the strategic oil reserves at the slightest hint of high oil prices.
As a threshhold matter, even though $53/bbl is the highest ever in absolute terms, it is not the highest inflation-adjusted price. But beyond that fact, our economy is much less oil-intensive than it once was -- i.e., the consumption of oil and other energy products has not kept pace with economic growth.
Perhaps it is wishful thinking to imagine that oil price politics will cease to have any more currency than the politics for other commodities, such as copper. But the lack of urgency on the issue in politics today is telling.
I think both candidates are very afraid of the issue.
Posted by: DS | October 18, 2004 at 07:10 AM
I don't think that's the case. There doesn't seem to be a sense of crisis in the American public this time around. Please see John Zogby's polling on the issue in May. And it seems even less of an issue right now.
http://www.bizjournals.com/columbus/stories/2004/06/14/editorial3.html
And here's an article on the most important issues facing the country. Gasoline is only rated among the most important issues by 3% of the US public.
http://money.cnn.com/2004/09/28/news/economy/icr_july/
Posted by: Dan Schmelzer | October 18, 2004 at 12:26 PM
... and why drum up a bee hive when it's not going to get you any votes anyway?!
Posted by: Dominic Schmelzer | October 18, 2004 at 04:24 PM
I think you're right that the economy is less oil dependent than it used to be, and I think that's why were not in recession right now. Analysts don't expect this situation to last above $60-$70 a barrel though, and at that stage recession could become imminent.
I think the US public isn't yet concerned about oil because gas prices have stayed lower than their previous highs. Once they move beyond previous highs and above $3 a gallon I expect people will become more concerned. Above that, I wonder whether it will be panic, anger, disbelief, or resignation.
Posted by: Kevin Parkin | October 27, 2004 at 09:43 PM
Dan, looking through the previous posts it doesn't look like you've heard of the energy multiples yet. Economics may spur technology that can extract oil from the hardest of places, but it hasn't been able to do much about the declining energy return.
I.e. earlier in the last century the energy you got from a given amount of oil was 100 times greater than the energy you invested to extract it. That multiple has declined to 20-30 and is falling, as it is for coal and natural gas. At some point, it will take more energy to harvest the fuel than you produce from it (this is probably the case with biodiesel). The energy return on solar panels is only 2:1, so it will still be several decades before we exhaust the oil, coal, uranium, and thorium to the point where existing solar panel technology becomes attractive, assuming current consumption rates, and that we don't worry about global warming.
Shale oil has exactly this kind of energy return problem. It's not really oil. The people who are trying to make shale oil into real oil are the modern day equivalent of the alchemists who tried to make gold out of lead.
Posted by: Kevin Parkin | October 27, 2004 at 10:06 PM
As I understand energy yields, they only drive in part the economics of the proposition. For instance, two sources of energy with the same energy yield may have very different economic profiles. Further, these energy yields vary a lot by the assumptions that are made. Lastly, technology has quite a bit of impact on the energy yields of some sources, such as photovoltaics. Already, under some sets of assumptions, there are alternative sources that have superior energy yields to oil (wind, for instance), but are impracticle due to a lack of a good alternative store of energy to oil.
Posted by: Daniel Schmelzer | October 28, 2004 at 12:07 PM