A thunderstorm knocked out power at an Illinois refinery Wednesday night, spiking gasoline prices. This is representative of how tight oil supplies are. Gasoline at more than $3 a gallon in some parts of the country is a symptom of a global problem— the slowest increase in oil reserves in 15 years.
There are political problems in almost every oil-producing country, including:
- Terror threats in Saudi Arabia and the death of a king,
- A defiant new leader and a nuclear showdown in Iran,
- Kidnappings and disputes over oil profits in Nigeria,
- and an anti-U.S. president in oil-rich Venezuela.
There is what oil traders call a “terror premium” at times, as much as $10 a barrel, every time al-Qaida threatens a pipeline or tanker.
“If there is any disturbance in the oil market — a strike in Nigeria, riots in Venezuela, a storm in the Gulf of Mexico, any thing like that, you have very little ability on the producer side to up production sufficiently to meet that problem,” says Ann Korin, an energy security expert, and co-director of the Institute for the Analysis of Global Security.
Then, there’s outdated technology. Countries like Russia and Mexico have run out of ways to get at hard-to-find oil.
Robbie Diamond, is president of the “SAFE,” Securing America’s Future Energy, which states its non-partisan aim is to reduce America’s dependence on oil. “The easily-tapped oil has been tapped and so its not just how much they are investing, but its also how much its costing and how hard it is for them to get it out,” says Diamond.
Finally there’s demand: Economic growth in China, India, and the United States is soaking up more and more oil, even at today’s prices.
As bad as prices are today, the surprising fact is that gasoline is still not as expensive as it was in 1981, when adjusted for inflation.
Still, that is small comfort as the summer driving season hits it peak, with no price relief in sight.