Oil companies profit, consumers pay.© Getty Images
Have we already reached peak oil—the point where its availability falls short of meeting growing demand (see "The Outlook on Oil," cover story, January/February 2006)?
Prices rose sharply in the early days of the summer driving season. The national average for a gallon of regular grade gasoline on May 21 was $3.22, up 11 cents from the week before. The Center for American Progress report explains that these prices will restrict family vacations, send middle-income families digging deeper into their savings and keep consumers away from restaurants and shopping venues.
Daniel Weiss, a senior fellow at the center, says that rising gas prices can be attributed to three factors: lower inventories, increased demand and limited refining capacity.
"The Big Five oil companies try to ensure no growth in oil refineries so that gas prices do not decrease," says Weiss. These same companies made a profit of $118 billion in 2006, a figure higher than the Gross Domestic Product (GDP) of New Zealand in the same year.
Alternative fuels remain promising but problematic. Although five million cars in the U.S. could use ethanol, Weiss says, its availability remains far too limited to be a reasonable substitute for oil. No mass-market electric vehicles (EVs) are currently available. Prepare for continuing high prices at the pump. Experts say many Americans will be taking out their planners, shaving a few days off annual family vacations and scheduling group trips to the grocery store.