Gulf oil crisis could bring higher gas prices

June 4, 2010 4:41:24 PM PDT
You may not think the oil spill is having an impact on you, but just wait. The spill and the moratorium on deep off shore drilling could cause prices at the pump to go way up. But it may take a while for us to see gasoline prices increase. It seems there is no easy answer to the question of gas prices. Experts have varied opinions about the long term impact of the spill and the resulting moratoriums.

As we drive to and from work and school and run errands and fill our gas tanks the thought of what's going on in the gulf -- the environmental mess and the ongoing and so far unsuccessful effort to stop the spill -- we may not be thinking about the impact one will have on the other. But we should.

Bruce Vincent, the Chairman of the Independent Petroleum Association of America, said, "It absolutely will have a profound effect."

Vincent says there is a lot of cushion in the market now, but with a six month moratorium on new gulf permits and indefinite suspensions of all deep water drilling, that could change quickly.

"It's apt to drive into the four, it may even get to the five dollar range at some point in time," he said.

Some are a bit more optimistic about pricing. There's no current production affected, but the markets could respond with a big spike if that changes and cuts the gulf's 1.2 million barrel a day output.

Bob Tippee, Editor at the Oil & Gas Journal, explained, "If all this ends up condemning or seriously restricting deep water operations in the Gulf of Mexico, then you'll have a major response."

Then there's the perspective of Rice University's Amy Jaffe, who says all bets are out the window if other countries get scared of deep water drilling and slow or stop their efforts to drill.

"Then you are talking about a major impact on consumer pocketbooks because we were counting on offshore oil production to provide two thirds of all the oil we use in the world that was outside the Middle East," Jaffe said.

She says the only sure way to avoid a price spike is to reduce the amount of refined fuels we use now, before the market dictates that we have to. Regardless of the cost of gasoline, all of the experts with whom we spoke say the biggest pocketbook impact on all of us will be the trickledown effect from less exploration -- the loss of jobs and the moving of resources overseas.


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