Even if the price of oil doesn’t breach the $100 mark, its recent rise will soon start to
bite--at the pump, the airline ticket counter and possibly in home of people.
The price of a barrel of oil has pulled back in recent days, but even at a current $96, gas prices could soon top their all-time record from last May of $3.22 a gallon, CNN reported.
“There’s no doubt, gasoline prices are rocketing higher,“ said Stephen Schork, publisher of the industry newsletter the Schork Report. “By Christmas, we could be paying more for gas than we were during the start of the summer driving season.“
Gas prices rose 14 cents last week and now average $3.04 a gallon nationwide. Many states have had gas over $3 for some time.
In the past few months, drivers have gotten off easy--gas prices hadn’t kept up with the increase in oil prices. The main reason: Demand has been fairly tame.
But now, demand is set to pick up into the holiday season.
At the same time, supplies of gas could get tight as many US refiners are undergoing maintenance, according to Schork. And they stand ready to decrease production if gas prices don’t move higher, according to Kevin Norrish, a commodities analyst at Barclays in London.
“The relative price of gasoline is low, and that’s unsustainable,“ said Norrish.
As for next spring, when gas prices usually spike on anticipation of increased demand over the summer, Schork noted that in all likelihood we’ll be going into the season with much less in gasoline inventories than last year.
“You’re that much closer to $4“ a gallon gasoline, he said.
Higher oil prices also mean higher airfare for travelers. As the price of crude rises, jet fuel prices also increase.
Last week, American Airlines--the nation’s biggest carrier--raised the price of US round-trip tickets by $20, and other major airlines followed suit.
American said it increased fares in an attempt to offset losses from rising crude oil and jet fuel prices.
The Air Transport Association (ATA), the airline industry’s main trade group, announced last week that higher fuel prices drove second-quarter costs 5.6 percent higher. That’s more than twice the rate during the same period last year.
“Jet fuel has been going up consistently for the last 3 to 4 years to the point where it’s affecting the airlines bottom line,“ said Will Alibrandi, an analyst for the aviation market analysis firm Forecast International. “Any cost gets returned to the customer, so they’ve been bumping up ticket prices to make up the difference,“ he said.
Rising oil prices could also mean higher heating bills for those who use oil--mostly that means households in the Northeast, or about 7 percent of the country.
For them, oil’s rise will be particularly painful: a 22 percent increase in bills from last year, according to the Energy Information Administration.
The rest of the country doesn’t face such steep increases, but they won’t exactly get a free ride.
Roughly 50 percent of the country uses natural gas to heat their homes. And while natural gas prices aren’t tied directly to the price of crude, those who use natural gas could see a 10 percent increase in home-heating bills. Norrish expects natural gas prices to rise only modestly in the near future.
People who heat with electricity, about 30 percent of the nation, can expect to pay 4 percent more.
One fear is that higher gas prices will lift the costs to transport all goods, whether by truck, ship or plane--and that manufacturers and retailers will respond by raising prices for consumers.

In its annual report, the International Energy Agency (IEA) investigates global energy trends. One of those trends is that the energy demands from India and China will grow. The report, entitled “World Energy Outlook“, also says that the spiraling cost of fossil fuels like oil will have little impact on consumption.
Energy analyst Michael Lynch of the US-based think tank Strategic Energy and Economic Research Inc. explains some apparent contradictions in the report, and told RNW’s Bram Posthumus that he does not entirely share the IEA views. For one thing, energy demand seems to be increasing more slowly than the IEA thinks, especially in Europe and the US. China’s demand also continues to grow, but at a slower pace of about 6 percent this year, down from 10 percent, Netherlands.nl said.
Coal will continue to be an important source of energy, the IAE predicts, together with other fossil fuels like oil. This may seem unexpected after all the calls for cleaner forms of energy, like wind power and renewables. Michael Lynch explains that coal has the reputation of being bad and dirty, but being by far the cheapest source of energy, it remains the dominant one. The bulk of energy for power plants, for instance, is still coming from coal.
Burning fossil fuels leads to the emission of vast quantities of carbon dioxide gas (CO2), which is considered a major cause of global warming. Although the IAE report foresees a continued use of oil and coal, it also predicts a reduction in CO2 emissions. That may appear unlikely, but Michael Lynch is confident that advances in coal burning technology will lead to a reduction in carbon dioxide output.
Moreover, excess CO2 gas will increasingly be sequestrated: taken out of the environment by storing it deep in exhausted oil and gas fields, for instance. At a later stage, storage under the ocean may become a reality.
The projected use of energy does not seem to be affected by the doom and gloom that has been spread by bodies like the Intergovernmental Panel on Climate Change, which argues there is a link between fossil fuel consumption and global warming. According to Michael Lynch consumers act mainly on economic impulses, largely ignoring the prophets of doom.
“When they look at what they’re going to buy and what they are going to consume, they tend to think very much more of the economics. Occasionally people make green choices, but frankly, it’s the price of oil that matters a lot more to the size of car that people buy than it is the CO2 emission.“
Even substantial fuel price rises will not deter people from purchasing gas-guzzling cars. Michael Lynch believes the market will have to make new technologies desirable.
“People are not going to go out and spend 200 thousand dollars for a hydrogen fuel car. What they do is if the hybrid electric vehicle gets better mileage, and it’s not too much more expensive, then that becomes the desirable choice.“
Even though the IEA report focuses on the consequences of increasing energy consumption in rapidly growing economies like China and India, traditional energy users like the US and Europe are not let off the hook. Every little bit helps, says energy analyst Michael Lynch:
“Places like the US, and Canada especially, use a lot of oil per person. Oil and electricity and other fuels. And really a little bit of offset from us, percentagewise, can allow a lot more usage in places like China and India. So you really got to have everyone on board, you can’t have one person out there sailing the Titanic as it were.“

Destruction of Indonesia’s peatlands to make way for the production of palm oil is leading to a significant increase in greenhouse gas emissions, a problem that will get worse as demand for biofuel grows, Greenpeace reported on Nov. 9.
The environmental group said Indonesia’s carbon-rich peatlands are being razed, drained and burned to make way for plantations of oil palm trees, which are used for the production of palm oil, Telegraph.co.uk said.
Palm oil is used in food products ranging from potato chips to cream cheese and is also used for biofuel.
The destruction of the peatlands releases 1.8 billion tons of greenhouse gas each year, Greenpeace said. That figure represents 4 percent of global emissions from an area representing 0.1 percent of the land on earth.
“We’re talking about enormous carbon stores basically being released into the atmosphere when these forests are being burned and cleared,“ said Andy Tait, a forests campaigner for Greenpeace Tait said the razing of the peatlands is so destructive that the planting of palm oil trees cannot make up for the greenhouse gases emitted in the process.
In a report released on Nov. 9 titled “Cooking the Climate,“ Greenpeace also said only a third of the land cleared since 1990 has been planted with oil palm plantations.
Greenpeace said large food and consumer product companies including Unilever, Nestle, and Procter & Gamble are driving the peatland destruction because the companies account for a significant volume of global palm oil use.
These companies, Greenpeace said, “are complicit in the expansion of palm oil at the expense of Indonesia’s peatlands.“
The group called on companies that use palm oil to make sure it does not originate from destroyed peatland.
In response to the report, Procter & Gamble said it is committed to sustainable palm oil and shares guidelines on sustainability to its suppliers.
“We encourage our suppliers to follow sustainable practices and we support various initiatives for the sustainable production and use of palm products, such as the Roundtable on Sustainable Palm Oil (RSPO),“ Procter & Gamble said in a statement.
Greenpeace said the RSPO’s efforts are hampered because member companies often can’t trace the palm oil beyond the processor, leaving companies unable to determine whether it comes from destroyed peatlands.
Tait said the problem will get worse as demand for biofuel increases. Greenpeace said compared to 2000, demand for palm oil is predicted to more than double by 2030 and triple by 2050.
But Tait said using biofuel from crops connected to deforestation defeats the purpose of trying to produce an eco-friendly fuel.
“Using biofuel made of palm oil to tackle climate change is like putting gasoline on a fire to put it out,“ he said.
To highlight the effects of peatland destruction, Greenpeace focused on the Indonesian province of Riau, where it said a quarter of the country’s oil palm plantations are located and more are planned.
The group said that if Riau’s peatlands are destroyed, the resulting greenhouse gas emissions would be equivalent to the amount emitted by the rest of the world in a year.

Norway does not produce enough electricity to power large parts of its offshore sector, meaning that new power plants would have to be built.

Norway’s center-left government pushed ahead on Nov. 9 with controversial plans to power some offshore oil and gas platforms by electricity produced on land, in an effort to cut carbon emissions by the oil industry.
The Energy and Petroleum Ministry linked its approval for BP’s Skarv field development with pledges by field partners to help develop technology that brings electrical power to offshore platforms or floating production vessels, Reuters reported.
“The license partners will take part in a program to develop this technology,“ ministry spokeswoman Sissel Edvardsen said, adding that the project has not yet been detailed and that the ministry did not expect Skarv to be powered from shore.
Norway’s oil lobby has criticized such plans, saying that Norwegian emission rules were already among the strictest in the world and that long power cables would boost production costs, especially with new discoveries increasingly found in hard-to-reach places, such as deep-water or the Arctic.
Offshore platforms or floating production vessels are now mainly powered by burning some of the fuel they produce.
BP Norway said it was pleased that the government passed the 31 billion Norwegian crowns ($5.90 billion) Skarv development plan to parliament and that it was looking forward to helping develop technology to power production vessels from land.
The Skarv development envisages a floating production vessel, a cheaper and more flexible alternative to a traditional concrete platform, that would tap the field’s 16.4 million cubic meters of oil and 34.5 billion cubic meters of gas.
Critics say that Norway does not produce enough electricity to power large parts of its offshore sector, meaning that new power plants would have to be built or it would have to raise imports of electricity generated by coal or nuclear power.
And since Norway has already exploited its vast hydropower potential, the new plants would probably have to be gas fired, which would also produce unwanted emissions until technology is developed to store the carbon dioxide underground.
Another alternative could be floating windmill farms near fields, an idea already being developed by StatoilHydro, the biggest operator on the Norwegian shelf.