JZSmith: Oil prices are probably going up no matter what we do

On Wednesday morning, while walking near my home, I yelled, "Hi" to a neighbor. "Got a new car?" I said, eyeing a sleek little black sedan in his driveway.

"Yeah," he said effusively. His new fuel-sipping four-cylinder was a night-and-day contrast with his prior vehicle, a hulking pickup costing him $100 a fill-up.

I’m experiencing this with increasing frequency — people telling me how they’re countering the excruciating wallop to the wallet from paying nearly four bucks a gallon for gasoline.

While many are buying smaller vehicles, others are planning shorter vacations (maybe to the Texas Hill Country instead of Colorado) finding a job closer to home (my younger daughter, Amber Weaver, a schoolteacher, is shortening her round-trip commute from 50 miles to six by changing school districts); giving public transit a try (the bus or Trinity Railway Express); driving slower (at least close to the speed limit) or better organizing errands (hitting the post office, cleaners, car wash and supermarket in a single trip).

Most Americans are curbing fuel consumption. Sales of big SUVs and pickups have plunged despite deep dealer discounts. Highway miles traveled fell 4.3 percent nationally in March, compared to a year earlier. You therefore might assume that oil prices and, correspondingly, gas prices, would be falling (crude oil accounts for about 75 percent of today’s gas cost).

No such luck. Oil has zoomed to surreal levels, briefly hitting a record high of $145.85 a barrel in trading Thursday morning. That’s more than double a year ago, despite increasing fuel-conservation measures and a sputtering U.S. economy reeling from six straight months of job losses. The average U.S. gas price nationally for regular is a record $4.09.8.

But here’s what is really scary: Even though oil prices have been rising sharply for several years and that has encouraged additional drilling, the global supply of oil has increased only modestly. Output is actually falling in some substantial oil-producing nations as a result of declining fields, civil war or other issues.

The International Energy Agency, in a troubling new report, predicts that the supply-demand picture will worsen beginning in 2011, with spare production capacity falling "to minimal levels" by 2013. Global demand will grow from 86.9 million barrels per day this year to 94.1 million barrels by 2013, a sizable jump of 7.2 million barrels, the IEA forecasts.

That could put additional upward pressure on prices. Some analysts and government officials in foreign nations are warning that oil could hit $200 to $250 a barrel, with gas prices shooting to $6 or $7 a gallon. There’s an escalating fear that the world is reaching "peak oil," the level at which production will begin an inevitable decline as aging fields gradually peter out.

The supply-demand factor doubtlessly contributes to today’s high prices. But the weak U.S. dollar, heavy speculation in oil futures markets and the persistent threat of curtailed supplies from terrorist attacks or political disruptions are also cited as major factors.

With astonishingly high energy prices persisting, America should be alarmed — but not panicked.

We must dramatically accelerate a 21st-century energy policy focused on developing alternative vehicle engines (plug-in-hybrid, totally electric, hydrogen fuel-cell), creating better biofuels, greatly increasing energy conservation, expanding domestic oil and natural gas production and pushing hard for more cost-efficient wind, solar and nuclear power. We must ramp up now, because it could take 10 to 30 years to realize many of the benefits.

Meanwhile, do like my neighbor who ditched his gas-hog pickup for the little sedan — take steps on your own to ensure you aren’t wiped out by today’s unprecedented energy prices.

You want to be a survivor, don’t you?