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Experts Say High Prices of Oil Are Here to Stay


The continuing rise of oil prices on the world market is affecting everything from transportation to agriculture and manufacturing. In the United States, some politicians are blaming big oil companies for the problem, but, as VOA's Greg Flakus reports from Houston, energy experts say national leaders need to confront the realities of growing demand and limited supply.

Demand for oil is being primarily driven by expanding economies in China, India and other developing countries where fuel is needed for factories and transport. At the same time, a growing middle class in those nations is increasing the demand for automobiles, which, in turn, use more fuel.

But a study released this week by Rice University's Baker Institute for Public Policy in Houston shows that demand is also increasing in the United States, which already accounts for a third of the transportation fuel used worldwide and imports more than half of the petroleum it consumes.

One of the authors of the study, Kenneth Medlock, speaking to VOA, says talk of US energy independence is unrealistic, given the current level of demand.

"We have to rely on imports because the oil that is available at lower cost is not domestic. Trying to move to a world in which we import absolutely no oil in a very short amount of time is going to cause the price of fuel to rise dramatically and that is certainly not the outcome that people want," he said.

The study on US Energy Policy and Transportation co-authored by Medlock and his colleague Amy Myers Jaffe calls for efforts to curb demand as well as increases in energy production, not just from oil, but from other sources, including wind, solar and biofuels. Medlock disputes the idea that the world is running out of oil, but he says the increasing cost of producing oil will make alternative energy more attractive in the years to come.

"We'll get there eventually because without a doubt oil is a finite resource and we will eventually get to a point where we choose not to consume it, but that will not necessarily be because we run out, but because the incremental barrel is going to be increasingly expensive to produce and other things will just look better," he said.

One problem that the Rice University researchers and other energy experts see looming ahead is the gap between demand and conventional energy supply that is likely to grow wider before any basket of alternative energies can be fully developed. Some energy sector analysts say oil could go as high as $150 or even $200 a barrel in the coming decade, bringing on an age of fuel rationing and a deep economic downturn.

Such a scenario could be avoided, according to Sterling Burnett, who examines energy issues for the Dallas-based National Center for Policy Analysis. He says the US Congress, instead of hauling oil company executives before committees, should be allowing those companies to develop untouched domestic reserves.

"For a long time we have not been able to go into the Arctic National Wildlife Refuge, where there is probably, conservatively, 16 billion barrels of oil available. For a long time we have not been able to drill off most of the US coastline, despite the fact that there is probably, conservatively, 100 billion barrels of oil available. If we could just go to those two places, we would go from the 11th largest reserves in the world to the fourth," he said.

Burnett is critical of politicians who promise a new energy future based on alternative energies that have yet to make a dent in current oil consumption. He notes that an emphasis on biofuels has caused a run up in food prices for very little energy gain. Burnett says 40 years of investment in solar, wind and other alternatives have not had a significant impact on consumer demand for oil and natural gas. He says all of the so-called fuels of the future will comprise only nine percent of consumer demand by the year 2030.

But Burnett does see an eventual change in energy technology.

"I do not think that oil or natural gas or any of the fuels that we currently use today are going to be the dominant sources of fuel for the next hundred years. Technology will change, as it does. New fuels will be discovered. I do not know what those are. I am not that wise. I do not think anyone living today knows what we will be burning in 2100," he said.

But, Burnett says, in the meantime the economy will run on oil, gas and, for electricity, coal. Demand for energy will also keep rising. He notes that, according to the US Energy Information Administration, the United States alone will need 19 percent more energy by 2030 and that the world as a whole will need 55 percent more. Unless there is a significant increase in supply, prices are bound to rise accordingly.

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