oil

Stranded in the Minneapolis airport as hailstones the size of quarters pounded the tarmac, I turned to the local Star Tribune. Responding to an article entitled "Is This the End of the SUV?" a letter writer noted that 76 percent of Americans still drive to work alone, mostly in huge, off-road vehicles.

It's the way of things, the writer added: "When supply and demand go through their natural fall and gas seems cheap again, people will buy big cars."

Today's oil troubles are unlikely to fade away like the 1970s Arab oil embargo.

The letter writer has history on his side, but I think he -- and the many Americans who agree with him -- are wrong this time. The Arab oil embargo and the gas lines it engendered did indeed give small cars a great ride for a few years in the 1970s. (At the height of the crisis, by the way, gas was selling for $1.20 a gallon, and oil was $11 a barrel.) When that artificial shortage ended, the big cars were soon back in the showrooms, followed soon after by the first popular SUVs.

But that's unlikely to happen again. The fundamentals are entirely different now. Americans are finally driving less. Demand will likely drop in 2008, a milestone we haven't seen in 17 years. At the same time, more than half the new car registrations are for passenger vehicles, not trucks. The death of the SUV is upon us.

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Arjun N. Murti is an analyst at Goldman Sachs, and he made headlines this week when he predicted that crude oil would soon go to $200 a barrel. You don't really have to be an expert to make that call — petroleum prices are plainly out of control, and there's little reason to expect them to return to pre-crisis levels.

High oil prices: feel the pain.

That price will mean $6 a gallon at the pumps, a level of pain that I'm sure most Americans don't want to contemplate. But contemplate it we must. As I typed this, the price was over $135 a barrel, and Democratic leaders in Congress were having a field day excoriating outrageously compensated oil executives at a hearing that turned into an inquisition. They've done that before -- it plays well back in the districts -- but vitriol alone won't make prices go down. Big Oil is cashing in, but it's riding trends set on the international spot market.

One of the most prescient observers on the subject of peak oil is the writer James Howard Kunstler, whose nonfiction book The Long Emergency envisioned a post-oil economy that disenfranchises large sections of the Southwest (we won't be able to air-condition it) and suburbia (not viable without motorized transportation).

Kunstler's latest book, World Made by Hand, is a novel that takes this idea even further. It envisions a dystopia in which transportation is difficult, food is locally grown and centralized government is slowly disappearing. It's bleak, and maybe unlikely, but definitely a possible future if we can't replace cheap oil.

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