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.
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.