In the course of my research I started to notice a pattern. Starting in the late 1920s, the magazine ran an article warning that we were running out of oil. And once a decade or so after that there would be another article, written by a different editor, interviewing a different expert who predicted essentially the same thing--that we'd be running out of oil in the next 15 to 20 years.
That got me into looking at the historical price of gasoline in this country, and the data is illuminating ( click here to see gas prices since 1919). The price of gasoline plummeted after WWI. It soared in the late 1930s as war broke out in Europe and Asia. Then it slid for nearly thirty years after WWII. In the 1970s, two oil crises pushed the cost of gasoline to all-time highs. And that was followed by a collapse in prices. As recently as 1999, the price of oil was only $17 a barrel! Today, of course, the price is soaring again.
But the point is: the history of oil shows a big run-up in prices every two to three decades followed by a collapse. And what are we in today? A big run-up in prices. Do you see where I'm going with this?
There's no question that demand for oil is pushing up prices. China, India and other developing nations are as thirsty for this stuff as we are. But increasing demand is not what made the price soar. That was the terrorist attacks of 9/11, the war in Iraq, the attempt to blow up Saudi Arabia's largest pumping station, the confrontations with Iran, political troubles in Angola, and the billions of dollars speculators are pouring into oil market futures.
Clearly it's the war, political unrest and speculation that primarily pushed the price up nearly five-fold in only seven years. History shows that won't last.
At a time when so many are worried about the impact of high oil prices on the auto industry, I'm worried about the opposite effect. What if, just as the industry is pouring billions into hybrids, clean diesels, fuel cells and other fuel-saving technologies to meet a 35 mpg CAFE by 2020, the price of oil slides back down to, say, $30 a barrel? Will consumers happily pay for this costly technology if gasoline suddenly drops to $1.50 a gallon in the US?
I'm not talking about this happening anytime soon. I figure it'll take about a decade for prices to settle down again. But in automotive terms, that's only two design cycles away.
I know, I know, everyone tells me the price of oil will never, ever go down to $30 a barrel again, not even if you adjust it for future inflation. They all give me a bemused smile that says, "This guy's off his rocker!"
But I point to history. It's on my side.
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