Jack Z. Smith

writes for the Fort Worth

Star Telegram

Whither oil?

Will record crude oil prices, which briefly topped $135 a barrel continue soaring wildly into the stratosphere? Or will they finally come crashing back to earth, restoring sanity to energy markets?

That's the question nagging everyone from beleaguered U.S. airlines and automakers to panicky motorists bracing for $4-a-gallon gasoline.

One thing is clear: Today's unbelievably high prices are shaking virtually everyone's world to a degree we haven't seen since oil prices shot from $3 to $35 a barrel from the early 1970s to early '80s.

American Airlines just announced plans to lay off thousands of employees and charge customers $15 each way for the first checked bag. Those moves were engendered by ultra-pricey oil.

Last week, Ford Motor Co. announced deep production cutbacks, citing plummeting demand for large trucks and SUVs. Demand is tanking because the average U.S. price for a gallon of regular gas is $4 in many locales and is nearing $5 in Alaska.

So what's causing these unbearably high oil and gas prices? Bear with me while I unpack a cornucopia of often-cited reasons:

Heavy world oil demand (86 million to 87 million barrels per day).

The weak U.S. dollar, which has encouraged speculative oil futures trading as a hedge against inflation.

Wall Street investment banks predicting that prices could escalate to $200 a barrel.

Disappointing production levels in oil-rich countries such as Russia, Mexico, Nigeria, Venezuela and Iraq.

Reduced access to bigger overseas oilfields for private-sector oil giants such as ExxonMobil, Chevron and Conoco Phillips. (National oil companies such as those in Saudi Arabia and Venezuela control most of the world's supply.)

Bans on U.S. oil exploration in many offshore areas and the Arctic National Wildlife Refuge in Alaska.

Soaring costs for drilling in an era when most of the giant, low-cost fields already have been tapped.

Rising demand for diesel fuel in developing countries such as China.

Even energy experts can't agree on where prices are headed. Some predict a retreat to $70 to $85 a barrel. Others say $200 to $500 a barrel could become reality if "peak oil" theorists are correct in concluding that global production (1) is at or near maximum levels and (2) soon will begin an inevitable decline. This in a world where demand is mushrooming due to population growth and rising energy consumption in developing nations.

So what can the good old U.S.A, the world's largest importer of foreign oil, do to help avert pain at the pump?

Americans need to continue buying smaller, fuel-efficient cars and trucks, as we have done with increasing rapidity since oil topped $100 a barrel in February.

We must expedite the development of new engine technologies: gas-electric hybrids; plug-in, rechargeable hybrids; electric cars; and hydrogen fuel cell vehicles.

We must develop sustainable communities that reduce driving needs and encourage use of mass transit.

We must seek new oil and natural gas supplies in some offshore areas where drilling is banned, as well as in limited parts of the Arctic refuge.

Or we could ignore these remedies and get ready to pay $10 a gallon for gasoline.

E-mail Jack Z. Smith at jzsmith@star-telegram.com.