Why High Gas Prices Are Bad For Oil Producing Countries

With news that oil producing countries like Saudi Arabia are reaping record profits, most people think that record high oil prices are great news to oil producing countries. And while that may be true in the short term, it’s not going to be in the future.

Think I’m crazy? Maybe, but let’s look at the facts:

$3/gallon gas prices didn’t really affect oil consumption in the U.S., however, $4/gallon gas has certainly seen people using less oil.

Public transportation use is at record high numbers.

More people have started working from home or telecommute a few days a week so that they don’t need to drive to work every day. Many businesses and even some local governments have started allowing employees to work four 10 hour work days instead of five 8 hour days which allows them one less day of commuting.

Gas guzzling SUV sales have plummeted with brands like Hummer seeing a 36% decrease in sales and several other large SUV lines seeing similar declines.

All this translates into less consumption which means that we need less oil. While the reduction in oil use hasn’t become dramatic, it is certainly making people clamor for alternatives, and they’re willing to pay for it.

And in the capitalistic society that we live in, companies will go where the money is and the money is in alternative fuel technologies right now. Just yesterday I posted about a company that is using bacteria to turn waste products into oil. Last week I talked about a car that gets 300mpg, and several car companies are working on bringing electric cars and hydrogen fuel cells to the market.

Right now it’s looking like 2010 is going to be an excellent year for ultra fuel efficient vehicles with GM releasing its Volt platform which can run for 40 miles on battery power before the gas engine kicks in and VW releasing a car that gets of 200mpg and several other car manufacturers will be following suit.

All this means less oil being consumed, and many countries are working on making themselves self sufficient on oil as well, further reducing the need for foreign oil. And for those who think that emerging countries like India and China will pick up the slack if we reduce our demand for oil, in our global economy, we’ll be happy to export our technology to those countries to help them use less oil as well.

So when I heard that Saudia Arabia had decided to ramp up oil production to 10 million barrels a day (the highest in its history) it only made sense to me. Oil is pretty much the only resource that Saudi Arabia has, and it’s a resource that has made the country incredibly wealthy. However, if the global demand for oil declines, that means that prices will drop. And the higher oil prices go, the faster we’ll transition to technologies that don’t have us depending on oil or that help us use far less of it.

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Posted: June 17th, 2008
at 6:41pm by Fuel Saver

Categories: Gas Prices

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