What do Energy Secretary Steven Chu and a couple of cartoon potheads have in common? Answer: They're both feeling jittery about the possible debilitating effects of repeated oil price spikes.
Chu, reports Reuters, is worried that the currently rising cost of oil (which hit a new one-year-peak of $80-per-barrel in intraday trading on Tuesday) could upset the global economy's slow road to recovery.
"Even $80 is making me nervous," he told the Reuters Washington Summit.... He pointed out that last year's oil price spike was a "disaster" for the world economy.
"We've repeatedly said what the world wants and needs is stable prices," Chu said. "They have been inching up recently and it's a little bit concerning."
Also today, The Oil Drum shines a light on a cartoon by John Kinhart titled "Hubbert's Peak." In the cartoon, two men pass a pot pipe back and forth while discussing the economic implications of peak oil. After one deep toke, one of the characters explains his "slow crash" analysis.
"You know how I think it's gonna happen? Last July's oil price crippled the economy by October. Then oil demand went down causing prices to drop. The economy recovers a bit, but not all the way. Soon, oil will spike again. Further weakening an already crippled economy. Once again, demand drops, prices drop, recovery and then spike again. The cycle repeats, each time taking us down a little bit further. Like waves eroding a shoreline."
A few other factors contributed to the crippling of the economy in addition to the oil spike, but there's an element of truth embedded in the stoner epiphany. Oil price spikes are not healthy for growing economies, and if supply is constrained, prices spikes will keep on coming.
Chu tells Reuters that more "transparency" would help achieve stable prices, but that seems like pretty weak beer. Taxing the hell out of fossil fuel consumption, so that sharp spikes affect a smaller percentage of the total price would be a better idea. But no matter what we do here in the United States, demand from emerging nations is going to continue to grow, further eroding that shoreline.
Reuters also has the latest word on that front, reporting the news that China plans to expand its crude oil processing refinery capacity to 11 million barrels a day by 2015. That would be almost double its 2008 capacity of 6.25 million barrels a day (as reported by the Energy Information Agency. The total is still well off the current refining capacity of the United States of over 17 million barrels a day, but at the rate China's growing, parity with the U.S. in the not too distant future seems a certainty.
Neither transparency nor a few more tokes is going to cut it under this scenario. Only massive investment in and deployment of renewable energy technologies will do the trick. It was gratifying to learn today, from no less than the vice-president himself, that the U.S. is going to expand Berkeley's innovative solar power financing model into a national framework, but we're going to need a lot more where that came from.
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