Can we all stop whining about $4 gasoline long enough to take steps to stave off $10 per gallon gasoline by 2012?

Yes, you read that right: 10 bucks for a gallon of gasoline—and we’re probably talking the corn-fed, taxpayer-subsidized variety that reduces your MPG while padding Big Ag’s collective wallet, not the Hi-Test Supremo anyone without a Ferrari Testarossa or ’73 VW Bug would be silly to use.

Got your attention, didn’t it? I just pulled that number out of the air, but don’t be surprised to see it as the next benchmark in the escalation of the ever-hyperventilating Oil Forecast War among investment bank analysts.

Actually, $7 a gallon by 2010 is the latest forecast from an I-bank apparently designed to frighten the livestock and send the kiddies ducking under the covers. CIBC World Markets projects a benchmark West Texas Intermediate (WTI) crude oil price of $200 per barrel by 2010 and with it a resulting 7 bucks a gallon for gasoline.

This follows Goldman Sachs a couple months ago predicting $150-200 per barrel of WTI in the next 6 to 24 months.

The point is this: The only feasible way to bring oil and gasoline prices down is through reduced demand or increased supply. Four bucks a gallon by itself is already starting to squeeze demand, even if that’s offset by still-rising demand worldwide. And China’s move to reduce fuel subsidies will add to the squeeze. Beyond that, pretty much everything else to cut oil demand significantly either represents a dramatic change in our lifestyle or is at least a decade away.

Increased supply? Well, we could ignore the law and Congressional intent in creating the Strategic Petroleum Reserve and probably relieve pressure on oil prices for a few months by drawing down the SPR. Whoops, there goes our oil supply security blanket at a time when Iran, Venezuela, and Nigeria are prospects for supply disruptions and hurricane season looms in the Gulf of Mexico.

What about OPEC? Aren’t they “holding us hostage,” “bleeding us dry,” “robbing us?”

Contrary to the daily abuse heaped on the oil exporters’ group by many of the—for lack of a better G-rated term—leaders in this country, OPEC (read: Saudi Arabia) has a limited capability to add to supply. The Saudis have 80% of the surplus capacity, and much of that is heavy crude for which they are now enhancing the discount to refiners. The kingdom has also announced plans to jack up production by 500,000 barrels per day. And those moves were shrugged off by a market that promptly sent WTI to another record.

What about Big Oil? Speaker of the House Nancy Pelosi, seeking to blunt efforts to end bans on drilling off most of America’s coasts and in Alaska’s Arctic National Wildlife Refuge, offers this gem that was immediately regurgitated by a dozen of her Democrat minions:

“The fact is there are 68 million acres onshore and offshore in the US that are leased by oil companies—open to drilling and actually under lease—but not developed. If oil companies tapped the 68 million federal acres of leased land, it would generate an estimated 4.8 million barrels of oil a day—six times what Arctic National Wildlife Refuge would produce at its peak.”

Apparently Speaker Pelosi subscribes to H.L. Mencken’s (probably apocryphal) dictum that “Nobody ever went broke underestimating the intelligence of the American public.” I will defer to Rep. Don Young’s (R-Alaska) humorous dismantling of Pelosi’s claim, a Big Lie so audaciously stupid (or cynically pandering, perhaps?) that I fear for the survival of the species should it gain traction: http://republicans.resourcescommittee.house.gov/PRArticle.aspx?NewsID=1674 (Disclaimer: Shameless plug follows).

As it so happens, there is a tremendous amount of untapped oil in the US, and it’s not in Pelosi’s imagination. It’s in already developed, declining fields and the target for enhanced oil recovery (EOR) techniques largely uneconomic before now. A groundbreaking new multiclient study published by Oil & Gas Journal Research Center, Future Oil & Gas Supply: A Quantitative Analysis, by renowned petroleum consultant Dr. Rafael Sandrea, develops a powerful case to show how EOR is tomorrow’s hot new oil play and a must if we are to meet future oil supply needs. Check it out at http://www.pennenergy.com/index/resourcecenter/reports/new_future_global.html

So a big push on EOR that’s now economically attractive could help stem the US oil production decline over the next 2-4 years (and help with that pesky greenhouse gas issue too—see the study). That alone could help moderate future upward pressure on oil prices, along with price-induced fuel conservation, efficiency, and switching to alternatives. Throw in an end to offshore moratoria and drilling in ANWR, and we could see a sharp upturn in that US production curve in, say, a decade. Doubling the world’s surplus oil productive capacity could probably halve today’s oil price.

Don’t hold your breath. Instead, many Americans choose to threaten and heap abuse on the main suppliers of oil—OPEC nations and oil companies—while we continue to consume a commodity that we know, in our hearts, will provide the bulk of our transportation fuels for another generation…

…and while we continue to lock up the oil resources that, had they been developed as originally proposed, could have saved us from this dilemma in the first place.

There’s a word for that:

Hypocrisy.

Tags: Arctic National Wildlife Refuge, EOR, gasoline prices, offshore drilling, US oil supply

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