I went up to Baltimore last Saturday to see the Notre Dame – Navy game. It turned out to be a typical ND-Navy game, hard fought right to the end. It featured monsoon-like rains in the fourth quarter and two straight successful onside kicks for Navy, the kind of thing that only happens in the movies. Luckily for my Irish, we held them off.
The second most interesting thing I saw in Baltimore was gasoline for sale for $1.97 per gallon. That’s a price that seemed impossible just a few months ago (I wonder what happens now with all those car dealers who promised someone who bought their car that they’d have gas for $2.99 per gallon for a full year. Certainly over the summer, $2.99 seemed like a good price).
Anyway, it got me to thinking about a point I have made in this space before. When oil was selling at more than $140 per barrel, it just seemed certain that this country would finally make those hard decisions necessary to not only achieve energy independence, but also to develop alternative sources of energy and other technologies and an energy policy worthy of the name. The sort of thing that had been promised so many times before, and then was forgotten when prices came back down.
But as the price came down these past three months, first below $4, then below $3.50, then below $3, $2.50 and now, in some places, below $2, it seems almost like the idea of a real energy policy has disappeared into thin air.
If we let that happen, we will deserve what we get the next time prices spike, probably to $200 per barrel or more. I’m no economist, but I am old enough to know that the recessions of the early 1970’s, the late 70’s and early 80’s, early 90’s and now 2008 were (and are) all accompanied by fuel price spikes. I’m sure someone has written an academic book about why this is so; but all I have to go on are my own eyes. It is undeniable that fuel price spikes and hard economic times go together like peanut butter and jelly. By the way, if you look at those periods of history, they are came with enormous national security challenges. It is all intertwined.
When will we learn? If we don’t learn this time, when will we learn? Certainly, in our industry, the impact of fuel prices is more than acute and lasts long past that time when prices retreat to what seem like more normal levels.
I watched President-elect Obama’s interview the other night on 60 Minutes. Steve Kroft asked him about this, and whether the lower prices have made the need to move on energy less important. The President-elect’s answer was the right one: he said that it has never been more important and that we can’t be lulled into a false sense of security on this because prices have come down some. Music to my ears, and I hope he is able to make progress on this important issue.
In the end, the important issue really isn’t price alone. It involves prices for sure, it also involves availability, it involves the environmental impacts, it involves national security, it involves business confidence, and it involves a whole host of things. Oil price spikes are an indicator that bad times are upon us. But the challenge isn’t just to avoid spikes, it is to develop and implement a real national energy policy that makes oil price spikes irrelevant.
I will be traveling to Panama later this week to attend the ACI-Latin America/Caribbean annual conference and look forward to reporting on events and trends from that fast growing region.