when should we start to panic??? we need a real solution now, full electric cars NOT hybrid

Tuesday, June 3, 2008
Brian J. O'Connor: Money & Life
Our efforts to conserve won't stop oil surge

Now that Americans are trying to cut down on our oil dependency, when will prices for crude drop? Next month? Next year?

How about never?

According to investment analyst Stephen Leeb, oil's headed up to $200 a barrel and it won't come down -- no matter how little we drive.

The surging economies of China, India, Brazil and Russia are going to lap up any oil that American conservation efforts create. Meanwhile, any surplus that would be created might well be temporary -- one group studying the issue predicts worldwide production of oil will peak by 2010.

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Global surge in oil demand
"We will conserve in this country, there's no doubt about it," Leeb says. "There might not be an SUV sold next year. But it's not going to offset the surging demand from half of the world's economy."

Leeb is a money manager, investment newsletter publisher and co-author of "The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel."

His prediction that oil prices will continue to zoom is echoed by at least a few other analysts. And while others disagree, Leeb has a track record: His 2004 book, "The Oil Factor" predicted oil would climb to $100 a barrel, an estimate that, in a year when oil was less than $40 a barrel, seemed laughable.

No one's laughing now, least of all Leeb.

While inflating prices for everyone from manufacturers to consumers, higher oil also puts the brakes on the economy, simultaneously creating deflation and inflation.

"There's nothing good about rising oil prices," he says. "Oil is the ultimate horror for the economy."

Reshaping our lives
It's already scared U.S. consumers, who've cut back on driving to the point where U.S. oil consumption in March dropped 3.3 percent from the same month last year. All told, the International Energy Agency says developed countries will cut their oil use by 300,000 barrels per day this year.

But raising mileage rules and trimming trips to the cottage won't cut it, Leeb argues. Oil supplies will start dwindling just as rapidly industrializing counties that dwarf the U.S. and Europe rev up new economies with an unquenchable thirst for oil similar to our own.

Even the wholesale changes contemplated by Detroit's Big Three won't be enough, Leeb says. If every driver in the world today switched from gas-powered cars to plug-ins like the pledged Chevrolet Volt, world oil consumption would drop by just 25 percent.

"This is going to be reshaping our way of life," Leeb says. "We need desperately to get an alternative energy policy. This really is a critical time."

In the meantime, it makes sense to conserve for the current sake of your wallet, even if it won't change the future of our economy.

Reach Money & Life Editor Brian O'Connor: (313) 222-2145 or boconnor@detnews.com.