$100 Oil Is Coming, And This Time We’re Ready

December 27, 2010

Nearly three years ago, on the first business day of 2008, the price of oil rose above the symbolic mark of $100 a barrel. Later in the year, the price spiked to $147 a barrel, with gas prices surpassing $4 a gallon. That event dramatically shifted consumers toward hybrids and other fuel-efficient cars. The possibility that gas could return to $4 a gallon continues to linger in the minds of car buyers.

As we approach the beginning of 2011, a number of analysts are now predicting that the coming year we’ll bring back $100 oil. January crude futures ended last week at a two-year high of $91.51 a barrel.

Strategists from Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co. and Bank of America Merrill Lynch all see rising global demand pushing oil to $100 next year. Some are ringing the warning bell even louder. Joe Petrowski, CEO of Gulf Oil and the Cumberland Gulf Group, told CNBC that crude oil could reach to $150 by summer. Economist Dian L. Chu wrote in her blog that crude oil could hit $110 to $115 a barrel as soon as March. “At that level, gasoline at the pump could hit $3.70-$3.80 a gallon range,” Chu wrote.

Oil price volatility might be a cause for alarm for American consumers, but it’s not a concern for Saudi Oil minister, Ali al-Naimi. “You guys really worry too much about prices,” al-Naimi told reporters earlier this month. “They go up, they go down. What’s new?”

When Al-Naimi was asked if $100 a barrel for oil is acceptable to producers and consumers, he threw up his arms and said, “What else do you have?”

No Excuses This Time

Al-Naimi must not have heard about the major shift toward greater efficiency and vehicle electrification going on in the United States. What else do we have? Unlike previous gas price spikes, consumers will have real choices for cars that use little or no gas during the next one.

Saudi Oil minister, Ali al-Naimi

Ali al-Naimi, Saudi Oil minister, sees no problem with high oil prices. Do you?

Start with the fuel-efficient triumvirate: the all-electric Nissan LEAF, the mostly electric Chevy Volt, and the 50-mpg Toyota Prius. Beyond these three signature vehicles, the manufacturers are preparing entire families of EVs, plug-in hybrids, and gas-electric hybrids.

During the past decade, sales of hybrid vehicles in the United States have moved in lock step with rising and falling gas prices. Unfortunately, we Americans have proven ourselves fickle when it comes to high-mpg cars. More than two years ago, then President-elect Obama called it “shock and trance.” In a 60 Minutes interview, he said, “Oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down and suddenly we act like it’s not important, and we start, you know filling up our SUVs again.”

Like a long line of presidents before him, Obama called on Americans to change our habits. “It’s part of the addiction…that has to be broken. Now is the time to break it.” Since making that call to action, automakers have introduced the first couple of plug-in cars, a lot more hybrids, and a number of gas- and diesel-powered cars that get more than 40 miles to the gallon. Expect dozens more new electric-drive cars to hit the market in the next year or two.

$100 oil could become the new reality in 2011. This time, we’re ready.


Posted in Economics, News, Oil Dependence
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  • Janni

    $4 a gallon for gas is very cheap. In europe we pay $8 now. This will only be worse as we are past peak oil…

  • Anonymous

    First, plug in options will not become available in significant numbers until mid 2012. Second, the first generation plug-in batteries cost too much per Kwh. When the NMC (or superior) batteries become available (late 2012 to 2015), only then will we have available technology to end our addiction to foreign oil. Yes, many of us will make a statement with our plug-in’s before then, but we will not significantly reduce dependence until the 2013 model year at the earliest.

  • MrEnergyCzar

    $100 oil is dirt cheap considering we only sit on 2% of the world’s reserves. People can be more efficient living at home besides just their car. I attached a video to help people powerdown their homes.

    http://www.youtube.com/watch?v=PUCl1TruUfo

    MrEnergyCzar

  • Anonymous

    you should really check out:
    http://www.li-ionmotors.com

  • Anonymous

    In Europe, Healthcare is free, but here in USA we have to pay a lot for that. Also they have the public transport option (Bus & Train) in every city.

    On top of that, if people are asked to pay $3 for gas, it causes lot of pain.

    Luckily this time, there are lot of 40 MPG cars (Fiesta, Cruze, Elantra) which does not cost as much as a Hybrid and expect people to jump into these vehicles. Best this is do carpool, use public transport wherever possible and that will help us keep our vehicles longer and also cut the oil consumption.

  • Anonymous

    Yes, 2008-01-02 was the 1st day the Oil Prices crossed the $100 / barrel. It may be repeated again in 2011. Chinese have absorbed 1/2 the OPEC spare capacity and as the capacity declines, more the price of Oil. Get ready for that.

  • JamesDavis

    The oil countries are pulling the same ol’game on Obama they pulled on Bush. Since the demand for oil has dropped considerably since the $4.15 glut; oil should be around $40.00 barrel. They will try to suck us as dry as they can until electric cars flood the market and they are made affordable so people can replace their gas guzzlers with the all electric. I wonder what excuse the oil countries are going to use then to jack the price of oil up.

  • david

    All I can say is bring on the EV’s! We have to end our dependency on oil. Seriously.

  • Alexei

    In Europe health care is free for those who do not work. For example in UK those who work pay 11% tax called National Insurance Contribution.

  • Anonymous

    http://www.autoevolution.com/news/byd-takes-over-the-usa-with-three-green-dreams-at-2011-naias-28819.html

    This company still talks big about EVs. Their E6 which has 300 km (180 mile) range and a Plugin Hybrid which has 60 km (38 mile) on Electric and another 300 km on Gasoline.

    But we cannot depend on EVs alone.
    Already Worldwide, there are
    19 million Flexfuel vehicles
    14 million LPG vehicles
    12 million CNG vehicles

    We can use every time of fuel to reduce the oil consumption.

  • Anonymous

    http://www.bloomberg.com/markets/commodities/futures/

    While the WTI crude price has gone down today, the Brent Crude still has increased 14 cents to $93.91 / barrel and thats the benchmark for 2/3 of the Worlds crude. So $100 oil is not far away.

    As per this site
    Brent is the marker for 70% of the World’s crude.
    http://www.thepeninsulaqatar.com/business-news/124664-volatile-crude-benchmarks-open-way-for-brent-in-asia.html

  • Anonymous

    http://money.cnn.com/2010/12/27/markets/oil_commodities/index.htm

    Shell Oil’s former chief says that gas prices could hit $5/gallon by 2012. Actually at $4/gallon itself, the US economy could collapse as it happened in 2008.

  • Karkus

    A few of us are ready, but let’s face it, 90+ % of the Americans still aren’t. Unfortunately, hybrids still only make up a few percent of all cars solds, and the % of other high MPG cars can’t be much higher. We’re moving in the right direction, but much more slowly than the change in gas prices. The fleet US fuel economy only went from 20.5 to 23.5 in the last five years! So basically it went from awful to bad.
    The problem is that even if EVERYONE suddenly bought only high MPG cars starting right now, it would take many years before it started making a real difference. Most cars stay on the road for about a decade.

  • JJJ

    People buy new cars every 5 years or so.

    Sales show that the 2008 warning did nothing. The number one selling vehicle is still a massive pickup, and the entire hybrid market sells less than any vehicle in the top 5.

    People aren’t going to rush out and buy a hybrid when has hits $3.50 or $4 again, especially if they just bought a new non-hybrid 2 years ago.

    I know this is a hybrid website, so obviously hybrid appears to be the solution for everything, but that’s not the case.

    In the short-medium term, people will just drive less. Less road trips, less visits to theme parks or ski resorts, less driving to costco 20 miles away when there’s a supermarket 1 mile away.

    Many will return to mass transit, and some will take up bikes, but the majority will stay home and complain. And as soon (if) gas hots $2 again (unlikely), they will run out and buy another F-150.

    I do hope that when people are home complaining, they aim their complaints at the (mostly republican) politicians that have held back mass transit programs. NJ, Wisconsin, Ohio all had major rail projects canceled in the past 6 months. If gas hits $4 next summer, I wonder how many folks will regret voting for the man that ran on the “stop the train” platform.

  • Lad

    The economy is directly affected by the price of transportation. We are still being affected by the last spike of $4 gasoline; you only need to see the increase in UPS shipping to understand how sensitive we really are. If the price of oil continues upward to $4-$5, the price of just about every retail item also increases. When these prices go up, your middleclass lifestyle goes South, along with your money.

  • janni

    More things that we can do to save on the finite resource that fossil fiels are is:
    - Fly less
    - Cruse travel less
    - Eat more vegitarian food. About 20% of the oil used in the world today is used because people eat animal foods. Have a look at ‘Meat The Truth’ at http://www.youtube.com/watch?v=b8Jfgkp_mRM

  • David

    By the end of 2011, I will no longer have a car payment. My 2002 Camry will be paid off (I bought it in ’07, replacing a Dodge Intrepid). I’ll have to start weighing the pros and cons of taking on a new car payment and saving some money at the pump versus paying a LOT more than the $250/mo that my Camry started costing me in ’06 when I bought it. Believe me, I *want* to be able to buy something like a Volt or a plug-in variant of an Escape Hybrid but economics may dictate otherwise. I’m still getting just shy of 30MPG on my mostly-highway usage.

  • veek

    IMHO we still need a progressively introduced fuel tax (say, 15 cents/gallon the first year, 25 cents the next, etc. up to about a couple of dollars per gallon after 5 years). This will add some stability to fuel prices, will allow the US to keep more money spent on oil, and will give US consumers and business people more certainty as they plan for new equipment. The way things are now, many fuel customers are likely to say, “well, oil prices are up now but will come down again just like they always do.” If they know for sure that prices will go up, they can plan accordingly.

  • Anonymous

    people have short term memory. as soon as the price dropped many went back to gas guzzling. most will not be ready for the next wave. i pity them fools.

  • Anonymous

    1. Even at $100 a barrel, I doubt it reflects the ‘true’ cost of oil (including its environmental costs: wasteful of water resources and restoring landscape after production – like tar sand production in Canada);

    2. “Start with the fuel-efficient triumvirate: the all-electric Nissan LEAF, the mostly electric Chevy Volt, and the 50-mpg Toyota Prius. Beyond these three signature vehicles, the manufacturers are preparing entire families of EVs, plug-in hybrids, and gas-electric hybrids.”

    It may look good on paper that finally there are viable alternatives like BEV, however, I think the first year production plan for both Volt and Leaf are relatively small scale (~12k for Volt?). We’re in the first step of moving away from fossil fuel, but like our initial ‘success’ in lunar exploration, we’re still far away from meaningful impact by any measure.
    Until they are proven in the market to be well accepted by consumers (without ridiculous gov’t subsidies), emergence of quick charge technology (without affect battery longevity) and wide-spread of rechargers along major trunk ways, BEVs would still viewed as niche products for fanatics and we’re far from the position of saying ‘we’re ready’ this time.

  • Anonymous

    Well, YOU pay it.

  • Joe

    much of that money is going for benefits for the people and i dont really see that happening here. the majority of our gas price hikes will go into someone’s pocket.

  • Pierre

    Reuters: Oil Nears $100, 2008-Style Surge Not in Cards
    (http://www.cnbc.com/id/40886776)

  • Anonymous

    @pierre

    i had a good chuckle when i read the article… reminds me of bush jr’s “mission accomplished” banner. well, no fuel problem… business as usual then!

    no doubt someone is trying to preempt another economic collapse and soothe fears of the economy. i can appreciate that.

  • Bob Smith

    Nothing is free. You are pay taxes silly.

  • John K.

    “Unlike previous gas price spikes, consumers will have real choices for cars that use little or no gas during the next one.”

    “$100 oil could become the new reality in 2011. This time, we’re ready.”

    Unfortunately, you are wrong and Al-Naimi is right.

    For *at least* the next 2 yrs, OPEC will have us by the you-know-whats. Realistically, we’ll be in that position until ~2015-’16. Other than the Prius, Honda and Fusion hybrids, what’s being produced that could both have a major impact on people’s mpg AND be massively ramped up in prodxn to satisfy a major increase in demand? Nothing.

    Plus, as noted above, even if EVERYBODY that bought new cars bought either a Prius or Fusion hybrid in 2011 and 2012, each year only a fraction of all the cars (not incl SUVs and trucks), are new cars.

    Look at what hybridCARS published on 7 Jan 2011: “Forecasters predict the number of conventional hybrids to rise to 40 or 50 models in the next three years—doubling adoption to perhaps six or seven percent of the new market (even as pure electric cars are fighting for a single percentage point at the same time).” http://www.hybridcars.com/hybrid-clean-diesel-sales-dashboard/december-2010.html

    My timeline (best estimates):
    2013-2015: practical 60W LED light bulbs will be massively produced

    ~2013: inexpensive photovoltaic arrays will come on the market

    ~2013: Li ion prdxn ramps up, Li ion prices drop and lots of plugins become available; use of Li ion packs in homes to “flatten” electricity demand and reduce electricity costs

    2015: NiMH patents expire, competition starts to drive NiMH down prices which then causes further declines in Li ion prices.

    Unknowns: Pickens Plan’s future; windmills; viability of Vehicle2Grid; Eestor’s future

    IMO, the best way to get off of OPEC crude is by Honda producing a Civic GX (CGN) Li ion hybrid. CGN gets you off of oil RIGHT NOW w/o breaking your budget. The hybrid tech recaptures energy otherwise lost via heat and further reduces both your carbon footprint and the size of the Civic’s CGN tank. Li ion would help save space and weight in a Civic.

  • Anonymous

    “Demand for big pick-up trucks has been unusually strong in recent months, accounting for 13 per cent of US industry sales in December, the highest in almost three years.
    According to a survey published by Consumer Reports, an independent consumer watchdog, only 28 per cent of car buyers cited the environment as an important factor in their choice of vehicle, down from 40 per cent in 2008.”

    From FT (http://www.ft.com/cms/s/0/225043bc-18f2-11e0-9c12-00144feab49a.html#ixzz1AbWJ4fkI)

  • Anonymous

    Even if, as forecasted, sales of hybrids rise to six or seven percent of the market, that means, for about every 16 vehicles there is one hybrid sold. Too little, too late.