U.S. addiction to oil puts it at mercy of risky characters
Our pals in OPEC announced the other day that they're boosting daily oil-production targets by 2 million barrels to bring down soaring gas prices.
It was a hollow gesture.
"Most of these guys are already producing near capacity," said Severin Borenstein, director of the UC Energy Institute in Berkeley. "The only ones who really have capacity to spare are the Saudis, and they'd already begun ramping up production.
"So all that's really happened is the Saudis received OPEC's blessing for something they were already doing."
Will that be enough to bring down prices at the pump, which last week were running just over $2 on average nationwide for a gallon of regular unleaded and about $2.30 in California? Probably not. At least not by much.
Kuwait's oil minister, Sheikh Ahmad Fahd al-Ahmad al-Sabah, told reporters at the OPEC meeting in Beirut that the new production quotas would in reality add only about 800,000 barrels a day to the global oil market.
That's just a drop in the bucket -- literally -- when you consider that 80 million barrels of oil are consumed daily worldwide.
"We saw this coming years ago," UC's Borenstein said. "Demand keeps growing in this country but supply doesn't. We have no one to blame but ourselves."
It's a valid point. No matter where you stand on the thorny question of whether more refineries should be built (and in whose back yard), there's no denying that the United States has a petroleum crack habit that puts us at the mercy of drug dealers like the OPEC gang.
The United States accounts for about a quarter of all oil consumed daily. Of this amount, about two-thirds goes to transportation.
Meanwhile, average fuel economy in this country has been steadily slipping from a high of 22.1 miles per gallon in the late 1980s. Last year, the average vehicle on U.S. roads was getting 20.7 miles per gallon.
The reason is that, like junkies perpetually seeking a better high, U.S. consumers keep buying bigger and fatter rides, as evidenced by the unceasing popularity of sport utility vehicles.
The average car or light-duty truck sold in the United States last year weighed a staggering 4,021 pounds, according to the Environmental Protection Agency. This is the first time in almost three decades that average vehicle weights have surpassed 2 tons.
"The 17 million vehicles that Americans are buying every year are vehicles that guzzle gas and increase our reliance on OPEC," said Dan Becker, director of the Sierra Club's energy program.
The Department of Energy estimates that about 45 percent of the price of gas at the pump reflects the cost of crude oil. About 23 percent covers state and federal taxes, and the rest pays for refining, distribution, marketing and industry profits.
The American Petroleum Institute says that profit margins for oil and natural gas companies averaged 6.9 percent in the first quarter of 2004, compared with an average of 7.5 percent for all U.S. industry.
"Many claim that the oil industry is making excessive profit," said Dave Fogarty, spokesman for the Western States Petroleum Association, a trade group. "It's actually at or slightly below the national average."
Even so, ChevronTexaco saw its profit soar 37 percent to $2.6 billion in the first quarter. ExxonMobil saw its quarterly profit climb about 12 percent from a year earlier to $5.4 billion.
Ultimately, it's up to U.S. consumers to wean themselves from their costly addiction to oil, which increasingly is coming from less-than-stable parts of the world. And this will require some tough love.
In other words, higher gas taxes.
The average American now pays about 42 cents a gallon in gas taxes. The average Californian, who pumps a cleaner-burning brew, pays about 52 cents in taxes. These amounts, however, are not enough to deter people from using their cars.
They also don't factor in the risk of importing oil from relatively scary places, which occasionally requires us to send in troops to keep pipelines flowing. Nor do they contribute in any significant way to creation and maintenance of a mass-transit network similar to those in Europe or Japan.
To accomplish these goals, experts say, the United States would need to impose a tax of between $1 and $3 per gallon. And this simply isn't going to happen.
"Name me one leader who's willing to say he's for a $2 to $3 gas tax," said the Sierra Club's Becker.
You can't, because there isn't one.
In 1980, independent candidate John Anderson made a 50-cent-a-gallon gas tax one of the centerpieces of his presidential campaign. He garnered only 6.6 percent of the vote on election day.
In 1993, then-President Bill Clinton proposed a sweeping tax on all fuels as a way to slash the federal deficit and protect the environment. He was forced to settle for a 4.3 cent increase in pump prices.
"My suggestion," said UC's Borenstein, "is for gas prices to go up 10 cents a year for 10 years until they're a dollar higher. Even something as modest as that, though, probably wouldn't pass."
So here we are, married to our SUVs, beholden to OPEC, hungry for our next fix.
It's a bad situation. And it will only get worse.
David Lazarus' column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU's "Mornings on 2." Send tips or feedback to email@example.com.