Oil Hits a High; Some See $4 Gas by Spring:

Gasoline prices, which for months lagged the big run-up in the price of oil, are suddenly rising quickly, with some experts fearing they could hit $4 a gallon by spring. Diesel is hitting new records daily and oil closed at an all-time high on Tuesday of $100.88 a barrel.

The increases could not come at a worse time for the economy. With growth slowing, high energy prices that were once easily absorbed by consumers are now more likely to act as a drag on household budgets, leaving people with less money to spend elsewhere. These costs could exacerbate the nation’s economic woes, piling a fresh energy shock on top of the turmoil in credit and housing.

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In the early 1980s, at the height of the last energy crisis, energy accounted for more than 8 percent of household spending. As prices fell and the economy became less energy intensive, energy costs fell under 4 percent of household spending in the early 1990s.

With the run-up in prices in recent years, economists say energy’s share of disposable income is slowly creeping up again. Last December, that figure reached 6.1 percent, the highest level since 1985. The increase of two percentage points — amounting to $200 billion — is a huge sum, a little less than half what Americans spend each year on new cars and automobile parts.

“You’re adding an oil shock on top of a crunch on credit and a housing collapse,” said Nigel Gault, an economist at Global Insight. “Even the U.S. economy cannot withstand all of that at the same time.”

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Mr. Kloza said he expects gasoline to peak around $3.50 to $3.75 a gallon nationwide. Geoff Sundstrom, AAA’s spokesman, echoed that view and added that $4-a-gallon gasoline is possible this summer. “We’ve gone from a worrying situation for gasoline to one that is quite alarming,” Mr. Sundstrom said.

Oil prices are unlikely to drop any time soon, analysts said. Barclays Capital recently raised its long-term prediction, saying prices could reach $137 a barrel in 2015, up from a previous target of $93 a barrel.

“The remorseless move up in long-run prices has not yet fully played out,” Barclays analysts said in a note to investors.

While demand keeps growing, producers are struggling to catch up. They are not replacing the oil they are pumping out of the ground fast enough because of various restrictions on access to fields, as well as rising costs. Meanwhile, demand from China, India and the Middle East is expected to push oil consumption up by more than 1 million barrels a day, each year, for the next decade.

“An oil crisis is coming in the next 10 years,” John Hess, the chairman of Hess Corporation, said at a recent conference in Houston hosted by Cambridge Energy Research Associates. “It’s not a matter of demand. It’s not a matter of supplies. It’s both.”

Dear OPEC,

I’m sure all the members of your organization are well aware of the facts described in the above article. In fact, considering the money you can spend on research, I suspect you’ve known about this developing situation and how it intersects with the state of your own reserves and production (still a mystery out here in non-OPEC-land) for longer than most of your customers would prefer to acknowledge.

So, let me take a minute or so your time to ask for a favor, as you prepare to meet next week and decide what to do about production quotas for your member countries: Please restrict production. A lot. And then ignore the inevitable pleas from the rest of the world to pump more oil. Furthermore, announce a policy of curtailing production on a set schedule for the next several years, so that it will be painfully obvious to even the most disinterested observer/voter/consumer where prices are headed.

You know as well as I do that four-dollar gasoline in the US is the economic equivalent of a bad knock-knock joke. So, show us what you’ve got. Aim much higher. Five or six dollars would be good, especially coupled with those promised higher prices in the long run.

Am I joking? Is this a set up for some sort of U-turn? No, it’s not.

Peak oil is coming, with the run up in prices as we approach the peak already well under way. Global warming is already taking a horrific toll on the environment and human beings. But far too many governments in OPEC’s customers are cowards, so terrified of telling their constituents the terrible truth about the world oil supply that they’re doing no more than barely shuffling in the right direction instead of rallying their countries for a sprint.

In the short run, the inelasticity of demand for oil guarantees that you’ll actually make more money by selling less oil. And face it, at least some of your members will delight in putting the screws to the US, in particular, for the way we’ve acted for decades. All those acts of overthrowing governments (or trying), chasing phantom WMD’s, and generally acting as if the old one-liner–how did our oil get under their land?–were an article of faith and not merely a bad joke.

In the longer run, you’re covered, as well. You know how long it will take a country like the US to substantially wean itself from your oil rigs, and I’m sure you know that your production will peak before then. And don’t expect China or India or Europe or Japan to turn on a dime, either. We’ll still be buying your oil for a very long time, so you have no incentive to let us expand right up the peak and then crush our economies as we go over the top; a seller without a healthy buyer is in just as much trouble as someone with nothing to sell. And who knows, if we substantially transition away from oil quicker than most are predicting, some future US president might be substantially less inclined to conjure up some Bushian monster as an excuse to invade Venezuela or Iraq or Saudi Arabia.

Plans don’t get much simpler than this: You force us to do what’s needed now, you leave more carbon in the ground (and not in the air), you make more money, and you buy yourself a little insurance against crazy Americans with too many weapons. What’s not to like?

OK, sure, you’ll take a pretty big public relations hit if you do what I suggest. Honestly, why should you care? It’s not like the man-on-the-street consumers in the importing countries think you guys are all saints, or our elected leaders don’t know what’s coming, oil-wise. Yet we keep buying your oil and swearing at you as we hand over immense sums of money, so what’s another 10 or 20% added to the animosity scale? Heck, many Americans are convinced that high gasoline prices are purely a case of the “big oil companies screwing us”, so you won’t even get all the blame.

So there it is, OPEC. It’s in the world’s best interest for you to do to us what we won’t do to ourselves. Give it to us with both, um, perhaps just one, barrel.