The price of oil is heading south. Where it will settle is anybody’s guess. Oil has fallen over 40 percent since hitting a high of $147 per barrel this summer, although it is curious that the price of gasoline has declined less than 25 percent.
Some experts are predicting that oil will drop to $65 per barrel and others suggest it could go as low as $40. Forty dollars a barrel would equate to $1.50 gasoline. Haven’t we seen this before? Yogi Berra would say “it’s deja vu all over again.”
In the 1970s, after the Organization of Petroleum Exporting Countries oil embargo, we saw oil rocket up to the $35 dollar range only to plummet to $10. Where it will settle on this swing is not clear but it is clear that the price is unlikely to stay down. Speculation and demand caused the current run-up. The decline was triggered by reduced consumption around the world heightened by the current financial crisis.
In the ’70s and early ’80s planners were crying for conservation and alternative forms of energy. After all we were importing nearly 45 percent of our oil (today we import about 65 percent). Solar hot water was of particular interest. Technologically it was more advanced than solar photovoltaic cells and wind generation. Solar companies sprouted everywhere and the government offered tax incentives for installing solar systems. I had a solar hot water system installed in my home and found it to be very cost effective.
Speed limits on the nation’s highways were dropped to 55 mph. With much of the country mobilizing behind energy savings, the consumption of oil dropped significantly and the price of oil followed. At $10 a barrel it was less than 1/3 of the peak price.
Here we are 30 years later facing a similar situation. The numbers are larger now but considering inflation the playing field is about the same. As we all know Americans shifted back to cheap oil. Automobile companies responded by building bigger and more powerful cars and trucks. Why worry? Oil was cheap and plentiful. Heating efficiencies were ignored in new home construction. Longer commutes became fashionable allowing for more house for the money in the outskirts of the cities. How short sighted this looks now in hindsight but human nature is what it is – what else would one expect?
The challenge now is to not fall into the same trap. We must learn from history and use the time to prepare for the inevitable return to high oil costs. Unfortunately, we are already seeing some of the effect. As oil prices decline the production of ethanol is taking a hit. New ethanol plants are being put on hold and some operating plants are cutting back or even closing.
The world economic crisis is a wildcard in the mix today so the reduction in oil prices becomes a blessing for some and may well provide the impetuses for continued conservation. Congress included in the bail-out bill a continuation of tax credits for solar, wind and other forms of alternative energy. These incentives were effective with oil at more than $100 a barrel, but will they still work with the price half of that? Will there be investment dollars to continue the move to oil independence? Will the air go out of the balloon for the Pickens plan for massive wind generation in the Midwest, the Gore plan of 100 percent renewable energy in 10 years or the Angus King off-shore wind plan for Maine?
In these uncertain times we must not lose sight of the need for oil independence. The high road may not be the easiest path or the least expensive but it is a road that we must travel none the less. The nation’s future depends upon it!
Jack Bash is a resident of Cornish and the past executive director of the Hydrogen Energy Center in Maine. He has recently retired from the Graduate School of Oceanography at the University of Rhode Island where he served as Marine Superintendent and Science Officer. He can be reached at bash@hydrogenenergycenter.org.
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