Oil Prices Levitate While Energy Pundits Ponder

The NYT has a short answer: yes & no, depending on whom you talk to. Very much of the price bubble is simply based on the frenzy of Nymex traders who "go with the flow" of rumors and innuendo. In olden days of yore, a planted story of a coup attempt in Riyadh could move the price up 10% in a day. Multiply that with endemic problems the US has been unable to surmount due to tree-hugging caribou-loving nutjobs in the House & Senate [Barbara Boxer comes to mind, but there is an Al Gore chorus of mindlessness abroad in the "marketplace of ideas" which has painted US energy policy into a dark corner.]

So new refineries are not built, saddled with countless congressionally-mandated restrictions and requirements that none can get built---especially since NIMBY finally reached Texas, which before the '80s was immune to such concerns.

A cacique in Venezuela, tribal BigMan-wannabes in Nigeria, a stubborn King Abdullah in Saudi not amenable to the subtle suasions his predesessor King Fahd allowed to keep him producing and expanding production to keep Opec in check---these are just some of the variables which boost the price above $100.

Ed Morse, Larry Goldstein & Dan Yergin are economists who can see a way back to a double-digit dollar price per barrel---I watched the price go from $40 to $10/bbl in four years in the eighties.

Of course, the skyrocketing price of oil makes previously uneconomic plays now feasible, such as the Bakken array of difficult-access prospects in the Williston basin. Offshore is also more attractive, and the salt-domes of the Gulf of Mexico look good, although periodic hurricanes ravage the platforms & introduce another variable into the mix.

But now burgeoning demand in China, India, and other Asian tigers plus a weakening dollar make everything even dicier. And the natural order of demography and economic vigor has put the US in a less-commanding position in the world economy---as Fareed Zakaria never tires of pointing out

Zakaria may be right. The 20th century certainly ended up being the American century, but America's thirst for fossil-fuel energy may turn the 21st into a whole different order. Turning the Mojave Desert into a massive solar array might not be economically feasible, but the direction that an irresponsible Congress has pushed the US makes such rolls of the dice inevitable.