Record U.S. Gasoline Price Reflects Dwindling Global Oil Reserves

Jan Lundberg

Berkeley, Aug. 15 , 2005 – Jan Lundberg, veteran petroleum analyst who joined the environmental movement and fought industry expansion, has a different explanation for record gasoline prices than the one provided by his former firm, Lundberg Survey, which on Aug. 14 attributed them only to high crude oil prices.

“The peak of world oil extraction is approximately now, although reserves data from the oil industry and OPEC are notoriously unreliable. Shortage of crude oil has started to make itself felt, as strained production levels of the most useful crudes reflect tight supply. It is true that oil demand has managed to reach record levels (82.2 million barrels a day; source: IEA), but oil fields inevitably peter out,” he told Fox News Radio.

Nearly 20 oil-exporting countries are past their peak in production. Also, Saudi Arabia is showing signs of leveling off. Another sign of dwindling geological resources is when industry does not invest in drilling new wells-despite record profits for oil-and rather buys up oil reserves via corporate mergers. “Refining capacity is almost maxed out, but industry sees little point in building more refineries when crude supply is in doubt,” Lundberg added. World discoveries peaked by 1965, and the trend in declining discovery is unalterable. U.S. production peaked in 1970.

Lundberg stated, “Growth of the economy ends when petroleum is in short supply. When the market really feels the gap between supply and demand widen, the price will go through the roof. Alternative energy sources are not ready. The coming oil shock will signal an historic flip-over from expanding our civilization via petroleum dependence to seeing the commencement -after “petrocollapse”-of a reversion to sustainable living based on local ecological capacity. The short answer to ‘What do we do now?’ is conserve, radically.”

Lundberg also told Fox News that it is erroneous to calculate that the adjusted price for gasoline, including inflation, is under the price of two and a half decades ago. This is because “subsidies-direct, indirect and hidden, such as the War on Iraq-to oil and refined products, if included in the price, would make oil cost perhaps $120 per barrel today. This is one reason people must work longer hours and obtain extra jobs,” he explained.

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