Gas prices only get worse
Era of inexpensive oil is coming to a swift, bitter end, analysts say
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Gas prices continue to set records in Hawaii and across the country.
Hawaii's statewide average for regular self-serve unleaded, which hit the $4 mark on Friday, was at a new high of $4.04 cents a gallon yesterday, according to AAA's Fuel Gauge Report.
Honolulu also set a record at $3.931 a gallon, while prices on Maui climbed 4 cents from the previous day to a new high of $4.37 a gallon. On the Big Island, the price of $4.03 a gallon was 2 cents lower than the record set the previous day.
The nationwide average was at a record high of $3.91 a gallon as motorists hit the roads for the Memorial Day weekend.
High prices might be a permanent condition, with some analysts saying the surge in crude oil prices could be indicative of a decline in global supplies.
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How much of a deal would it be to pay 25 cents for a cup of coffee at Starbucks?
How about a quarter for 8 oz. of merlot at dinner?
What is peak oil?
The concept of "peak oil" was first presented in the early 1970s by M. King Hubbert, a geologist working for Shell Oil Co.
Simply put, it refers to the point when the global supply of crude oil, or any finite fossil fuel, begins to diminish.
The rate at which oil is extracted from a well can be plotted on a bell curve.
When any well is tapped (the front end of the curve) oil comes slowly at first. It then starts to flow more freely (the ascending slope of the curve) steadily increasing until it reaches a point where more than half the well is depleted (the peak of the curve). At that point, production from the well begins to diminish at a rapid rate (the descending slope of the curve) until the well is dry.
Now think of the Earth as a giant well, with a finite amount of oil, and apply the same curve to the planet's oil supply.
Subscribers of the concept say we are either at the peak, or very close to it. Naysayers argue that there is plenty of oil left in the Earth, perhaps for as long as 60 years, but getting at it is the key. -- B.J. Reyes
Now what about that same quarter for a cup of gasoline?
A cup of gas will get a 2,400-pound Honda Fit with four people and luggage from Ala Moana Center to the state Capitol (barring traffic, of course).
Can your latte do that?
Yet, that's what you get at 25 cents a cup or $4 a gallon.
Investment banker and energy analyst Matt Simmons makes this analogy to illustrate a point: Gasoline, in theory, is cheap.
"I can't find anything that's of any value that you can buy for $1 a cup," says Simmons, a former energy adviser to President Bush. "A cup of motor gasoline is really an unbelievable energy miracle. There's so much power in such a small volume.
"This is a scarce, invaluable, energy resource."
One that has been priced unbelievably low for too long, Simmons and other analysts say.
"I think the No. 1 thing that Hawaii needs to know about oil, in general, is that the party's over," says Jim Dator, a professor of political science at the University of Hawaii-Manoa and director of the Hawaii Research Center for Futures Studies. In other words, if you think prices are high now, get used to it.
Hawaii, like the rest of the country, has taken advantage of the "energy miracle" for decades, building an economy on oil and gasoline -- and the electricity they generate -- to fuel our vehicles and get us from suburbia to the city while powering our cell phones, iPods and GPS systems along the way.
It all happened in an age when crude oil was plentiful and easily available, trading in the low double digits -- $20 and $30 a barrel -- and setting gas prices at a fraction of what they are today.
Today, demand for oil has never been higher, as countries such as China and India rapidly scale up their economies, phasing out available land in favor of urban sprawl and more roads and vehicles than ever before.
"There's no possibility that I can see where we will return to the era of cheap and abundant oil," says Dator.
Count Simmons and Dator among the growing chorus of analysts, geologists and others who believe we are at or near a tipping point known as "peak oil." Simply put, peak oil refers to the point where the majority of the world's oil has been tapped, and production begins to decline at a dramatic rate in the face of increasing demand.
"We're either already past it or very close," Dator says. "Even though there may be other sources out there, demand is growing so extremely rapidly in comparison to whatever supply is left that, in effect, we're in a post-peak oil situation."
Opponents of the peak oil concept, primarily oil companies, say there still is plenty of oil, both in untapped areas such as Alaska and the Gulf of Mexico and in many different forms, including oil shale and tar sands.
They say getting at it is the main challenge and the key to extending the life of the U.S. economy until alternative energy can be developed on a large scale.
"The main thing we need to do is produce more oil," says John Felmy, chief economist for the American Petroleum Institute.
That's where policy makers can help, Felmy says.
"They can help us improve efficiency and improve infrastructure," he adds. "In other words, help us build our refiner capacity, help us be able to develop oil that's currently off limits."
Instead, he says, federal lawmakers are focusing on taxing Big Oil and cutting profits.
"That's unfortunate because it won't add a drop of additional supplies," Felmy says. "More supplies can really help."
But getting at those supplies is another issue, says Simmons.
He argues that most of the world's easily accessible light, sweet crude oil -- which is preferred for most refineries, including Hawaii's two facilities, because of its low sulfur content -- has been tapped, and getting at the remainder or converting shale into a usable form would require even more energy.
If nothing is done to reduce demand and consumption, the global economic implications of peak oil could be staggering, peak oil theorists say.
Their worst-case scenario would be World War III, with countries hoarding oil and going to war over what is left. Some point to the Iraq war as the start.
Meanwhile, communities will have to become more self-sufficient, restoring agriculture to no longer rely on shipping food from remote rural areas, the peak oil theorists believe, adding that people will start living closer to the workplace and commuting might become a thing of the past.
"America, in my opinion, is going to go through the most unbelievable transformation back to an industrial economy," says Simmons.
The effect could be greater on Hawaii, which relies on imported fossil fuels for more than 90 percent of its energy needs.
Supplies of everyday goods could be disrupted if fuel costs start to adversely affect shipping companies. Airlines have cut routes, increased fees or shut down altogether, leaving Hawaii's tourism industry vulnerable. Drivers are adjusting by consolidating trips or shifting to public transportation.
Ira Rohter, a UH political science professor who has studied the peak oil issue, says people should not wait for government to act to solve the problem.
"It's at the community level where we can take action," Rohter says. "Food is going to be rising very dramatically, which means we should be looking at community farming.
"People should be looking at how to insulate their homes to cut down use of air conditioning. We're going to be carpooling very soon. It's no longer business as usual."
State lawmakers and Gov. Linda Lingle have recognized the need to wean Hawaii off imported oil. Two years ago, the Legislature passed a broad package of bills aimed at reducing demand and this year the state entered a partnership with the U.S. Energy Department to develop renewable energy technologies.
Whether the shift can happen before dire consequences start to manifest depends on whether oil will continue to be available at current levels.
"I'm not aware of any available technology, or any other process, that can solve our problem other than conservation -- reducing the demand and hopefully buying time," Dator says.