Turmoil in Libya pushed the price of oil to almost $120 in Europe this week and prompted discussion of the fourth major shock at the gas pump for American consumers since 1970, writes Joseph Lazzaro in Daily Finance:
“Will U.S. policymakers ever learn? The inanity of the nation’s energy policy – indeed, nonpolicy – boggles the mind. The U.S., the largest, most technologically advanced economy in the world, is at risk of being tipped into recession – again – due to its overreliance on oil.”
As Lazzaro points out, America’s lack of an energy policy is based on a complete unwillingness to face facts. For several decades, America has consumed more energy than it has produced. The country is addicted to cheap, imported oil, which, unfortunately, does not look so cheap anymore.
The country can’t meet its daily consumption needs of roughly 18.7 million barrels per day (bpd) through increased drilling, so it has to import to make up the deficit. In November 2010, the U.S. imported an average of 8.25 million bpd, about 2 million of which came from Middle East producers. Unrest in that region could send oil above $125 per barrel this spring, which would probably push the average U.S. price for regular unleaded gasoline – currently $3.25 per gallon – above $3.50. Add the normal price increase stemming from the summer driving season, and a gallon of gas could push past $4 per gallon by the Fourth of July. This assumes that oil’s price tops around $125 per barrel. Other, more-sobering scenarios are also possible. Nomura Holdings Wednesday forecast that if Libya and Algeria halted production, oil could peakabove $220 per barrel.
Read more HERE.