Indeed, hardly a day goes by without my 10-year-old son — no doubt twisted by his daddy’s constant babble about money — taking note of the price of gasoline at QuikTrip as we drive by.
“Three dollars and seventy-four cents,” the budding economist intoned last week. “Wow.”
This is usually followed by a brief but passionate dissertation on the merits of ethanol.
My boy, like many kids his age, fancies himself an environmentalist. He’s keenly aware that our country sends enormous sums of money to other countries for a commodity that contributes to global pollution. And he’s also aware that his granddad, an Iowa farmer, is doing better than he has in decades because of high grain prices supported in part by the biofuels boom.
Despite good times down on the farm, my pop also is fretting fuel.
It’s been a wet spring, and planting has been later than usual. As a result, the soil has been so tacky that it has needed more than one pass to prepare the seed bed for planting.
This, of course, irks my pop, who like all farmers finds the cloud with every silver lining. Last week, despite the fact that corn and soybean prices are at multiples of what they were just a couple of years ago, he groused that he can hardly cross a field without pondering the price of the fuel he’s burning.
I told him I could relate. And that’s one reason why we didn’t head north to visit over the Memorial Day weekend.
You see, I’m also obsessing over every move I make these days behind the wheel. I catch myself idly calculating the round-trip distance of my daily commute — just 13 miles, thank goodness — and coasting down some hills. I routinely thank my lucky stars that we replaced an old gas guzzler last year with a crossover vehicle that gets about 25 percent more miles per gallon.
We’re not alone. Soaring crude oil and gas prices are beginning to have an effect on the demand side of the energy equation. Americans are driving less and consuming less gas for the first time in years. Demand for compact and subcompact cars is soaring compared with SUVs and pickup trucks.
Even though millions of similar decisions have reduced total demand for gas in this country, it doesn’t offset growing demand in emerging economies such as China and India.
Some folks contend the recent spike in crude oil past $135 a barrel is the last move higher before a price bubble bursts. When you chart the parabolic rise in oil prices over the past couple of years, it looks eerily similar to the tech stock and housing bubbles of the last decade. And just like those bubbles, skeptics contend, oil prices are bound to tumble.
I’m not convinced. The simple fact is that worldwide demand for oil and gas is growing faster than supply, which will inevitably push prices higher until demand is destroyed. And only so much demand can be destroyed until enough viable alternatives have been developed to serve our basic energy needs.
Smarter people than me agree.
Last week, legendary oilman and investor Boone Pickens predicted crude oil prices will crest $150 a barrel this year. He also noted that he has placed a massive order for wind turbines from General Electric.
Meanwhile, Goldman Sachs analyst Arjun N. Murti, who has been remarkably astute with his oil price predictions, recently reaffirmed his call that crude oil will reach $200 a barrel — a price that would almost inevitably lead to $6-per-gallon gasoline.
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