Editorial: Oil going up, up and away

Tuesday, April 4, 2006 | 7:15 a.m.

Those who are planning a summer vacation that requires any amount of driving might want to increase their transportation budget. The news over the past few days about world oil is that the price is climbing steadily toward $70 a barrel. The last time oil prices reached this level - last September following Hurricane Katrina's damage to refineries in the Gulf of Mexico - gasoline prices surpassed $3 a gallon.

Analysts are confidently predicting that the shock of $3 gasoline has worn off and that motorists will simply shrug their shoulders when it happens again. That might indeed be their first reaction, based on what they saw happen after Katrina. Pump prices over the next three or four months fell by about 50 cents a gallon, back to a level where drivers have become accustomed.

The danger now is that oil prices will continue to steadily increase, as opposed to falling back within U.S. consumers' comfort zone. Reasons are many for this worry. With the exception of Iraq, the members of the Organization of the Petroleum Exporting Countries are already pumping at near capacity, and world demand is growing daily. In Iraq's case, its production is well below capacity because of the war and the unending insurgency.

Also posing a grave danger to world oil prices now is the deteriorating relationship between Iran and the United Nations, and particularly the United States. Iran, OPEC's No. 2 producer, is a threat to defy the world and develop nuclear weapons. Last week Iran's foreign minister vowed that his country would not use oil as a weapon during this crisis, but oil companies are not likely to place much credibility in that remark as they set prices based on potential future events.

Additionally, Nigeria's production of 550,000 barrels a day has halted because of mounting violence there against foreign oil companies. Also, U.S. oil production in the Gulf remains well below normal, and the consistency of supplies from other international sources is a constant worry to analysts. They fear disruptions from terrorism and weather patterns, and they are concerned about the constantly escalating cost of oil exploration.

There is one sure way of avoiding a world in which high oil prices drive up the cost of nearly every other commodity we need, and that is to reduce our demand. If demand drops for oil, so too will prices.

With the U.S. hurricane season just two months away, and with so much uncertainty in the international oil market, we see a need for drivers to be prepared for gasoline prices to drastically rise again - and stay there. In our view, one of the best defenses now is either a hybrid vehicle or one that can burn both gasoline and another fuel, such as ethanol or biodiesel. The world is changing and consumers need to change with it.