May 24, 2008

Without a doubt the question on the minds of the general population and Corporate America is, “can oil continue to go up forever?” As of this writing, oil is over $130/barrel and the consumer has never quite felt this much pain at the pump outside of the gas rationing of the 1970’s. Nonetheless, we are right on track to see the same kinds of problems as were seen back then, if things don’t quickly change. We lack refining capacity and our dependence on foreign oil places us in a perilous situation for the times that we live in and the security threat that it poses.

Much of oil’s current run is being attributed to supply shortages world-wide, and that is a legitimate argument. However, there are some who believe that new oil supplies from places such as Nicaragua that are starting to come on to the market could help with these supply issues. A recent article published in the Telegraph, states that even though the long-term outlook for oil costs coming down is bleak, on a short-term basis it is too much too soon. There are articles out putting forth Armageddon like scenarios, where in the United States, gas prices could go as high as $12-$15 dollars a gallon, and even Goldman Sachs states that oil could go as high as $200 barrel eventually in the next 6 months.

What are we to make of all of this? Absolutely nothing! Forecasts such as the ones previously mentioned assumes the status quo, and discounts human ingenuity from being able to do something about this crisis. If nothing changes, then yes, oil skyrockets, and we face a dilemma that our country hasn’t seen since the Depression Era. However, if throughout history, the status quo never changed, then we would still be riding horse and buggy and communicating with one another via the Pony Express. The point I’m trying to make here, is that with all the major advances this country has seen, they came out of desperate necessities. When the United States became so large in land size, and horses no longer fit the bill, railroads emerged, and then the Model T came thereafter. When time was of the essence, the Wright Brothers discovered flight, and now we can travel from coast to coast before our lunch break. Now the call is for the manner in which these great achievements in human history are dependent on for operating, namely oil, to cheapen and make more affordable so that the consumer can continue to use these valuable assets of ours parked in garages and terminals across the world.

In the world of experimentation of alternative energy sources, solutions are plentiful and are bound to hit the markets in abundance. For example, there are those who are experimenting with the idea of taking the use of nuclear energy (currently used on our air-craft carriers and submarines) and making it mainstream, and to do so in a safe manner. Others have found ways in which water can be used as an alternative to gasoline. Other options include advances in wind and solar power that will eventually be ready for public-at-large and their benefit.

In all of this, what is important to remember is that the more oil goes up, the greater the call will be for a solution to the energy crisis that we are buried in, and like all the great epics of the past, free markets and human creativity will solve this problem and prove once again why the status quo of today will be a reminiscence of tomorrow’s past.