The Nation's Pulse

Over a Barrel

Can't afford gasoline these days? Dieting might help.

By 5.28.08

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"Suddenly, $50-per-barrel oil is within reach, a number unthinkable at the beginning of the year."

That was the news from MSN Money, Aug. 20, 2004.

Now we're in the range of $130 a barrel, the price of gasoline is approaching $4, and OPEC's president is saying we haven't seen anything yet.

Chakib Khelil, Algeria's energy minister and the president of OPEC, the Organization of Petroleum Exporting Countries, said on April 27 that oil prices could hit $200 a barrel in the near term. With the rule of thumb that each $1 increase in the price of crude adds 2.5 cents at the pump, that $70 hike to $200 translates into a wallet-emptying price increase of $1.75 a gallon, an increase from $4 per gallon to $5.75 a gallon -- $115 for a 20 gallon fill-up.

Khelil blamed the price increases on the weakness of the U.S. dollar and global political insecurity.

Echoing Khelil, Qatar's energy minister and deputy premier, Abdullah bin Hamad Al Attiyah, said on April 29 that he wouldn't rule out a jump in oil prices to $200 a barrel within the next seven months. "Everything is possible," he said, "depending on economic circumstances and the situation of the tumbling dollar."

Iran's oil minister, Gholamhossein Nozari, joined the chorus, saying an increase to $200 a barrel was possible if existing conditions in the market continued.

The price forecast from Deutsche Bank's chief energy economist Adam Sieminski is worse. "There is a huge risk," he warned in early May, "that oil prices simply continue to escalate until it gets to some level, possibly $250, when demand finally collapses because ordinary people can no longer afford to burn as much energy as they are burning now."

At $250 a barrel, that takes the price of gasoline in the aforementioned example to $7 a gallon.

When gasoline goes from $3 to $4 per gallon, the added cost for a driver in a car getting 15 miles per gallon and driving 15,000 miles annually is $1,000 a year. With a jump from $3 to $7 per gallon, the added cost is $3,000 a year, not counting the increases in other consumer prices that spill over from higher fuel prices.

ONE SOLUTION TO ALL THIS, at least in Pittsburgh, my hometown, is to eat more. Our largest grocery chain is Giant Eagle and we get bigger gas discounts if we buy more food. The down side is that we end up fat and get fewer miles per gallon. Professor Sheldon Jacobson at the University of Illinois at Urbana-Champaign, studying the "extra drain of body weight on fuel economy," concluded that "nearly 1 billion gallons of fuel are consumed each year because of the average weight gain of people living in the United States since 1960," i.e., we're heavier by 24 pounds, on average, the size of a nice Thanksgiving turkey.

At the pump, at $4 a gallon, that new mileage-cutting fat is costing $4 billion a year.

The good news on the technology front is the diesel-powered, low weight Loremo (standing for "low resistance mobile"). The car, scheduled to enter mass production in Germany next year and on the showroom floors in Europe and North America, respectively, in 2009 and 2010, has a sticker price of $14,700 and gets upwards of 150 miles per gallon. It's enough to make a sheik cry.

In other good news, Amory Lovins, president of the Rocky Mountain Institute, stated last year in a speech at Stanford University that Brazil has replaced 26 percent of its gasoline with sugar-cane fuel grown on 5 percent of its crop land and that Sweden expects to be fully independent of oil by 2020 by using wood waste for biofuel.

The United States now gets about 65 percent of its oil from foreign sources, with Persian Gulf nations accounting for 23 percent of those imports. "The sending of billions of dollars overseas to people determined to destroy us is crazy," says Frank Gaffney Jr., president of the Center for Security Policy.

That craziness can be partially reduced by way of increasing our efficiency. At www.fueleconomy.gov, the Department of Energy provides the official fuel-efficiency rankings. The best five (1) Toyota Prius, 48 mpg city, 45 mpg highway, (2) Honda Civic Hybrid, 40 mpg city, 45 mpg highway, (3) Smart-for-two, 33 mpg city, 41 mpg highway, (4) Toyota Yaris, 29 mpg city, 36 mpg highway, and (5) MINI Cooper, 28 mpg city, 37 mpg highway.

Note that no American car company is on the list, in spite of decades of warnings about our current situation, but that's another story.

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About the Author
Ralph R. Reiland is the B. Kenneth Simon professor of free enterprise and an associate professor of economics at Robert Morris University in Pittsburgh.