(2 of 3)
Not quite. Oilman T. Boone Pickens has long made a similar case, and President Bush addressed those concerns by suggesting last week that refineries could be built on decommissioned military bases. But refinery capacity is not the major driver of higher gas prices. "The greater shortage is in the oil itself," says Rogers. Gas prices have been rising along with the price of crude. If gas prices were climbing while crude oil's remained flat, that would tell you there was a bottleneck pushing up prices. That hasn't been the case.
•Is there a smart way to invest when oil prices are rising?
Yes, but it isn't necessarily in oil. Rogers says he isn't buying oil right now. But he is watching certain regional economies very closely. "A lot of places in the U.S. are going to boom," he says, because they are rich in oil or other natural resources. As a result, he adds, "retailers in Texas are going to do a lot better than retailers in Massachusetts."
•Why is demand for oil rising?
Look at China and India. The world's two largest countries are experiencing blazing economic growth, fueling a booming thirst for oil. The rest of the world's appetite for oil hasn't diminished. Use in the U.S.--still far and away the world's largest oil consumer--is growing along with economic activity by 200,000 barrels a day annually while domestic crude-oil production stagnates. Britain, long an oil exporter from its North Sea reserves, will soon become a net importer. Last year world oil production increased, but demand for oil rose faster.
•Will technologies like hybrid cars, which run on a combination of gasoline and electricity, lower the price of oil?
Eventually, yes. As long as tight supplies exert upward pressure on prices, the only way to get relief is to knock down demand for oil. Any technology that makes cars more efficient would do that, and hybrid cars are nearly 50% more fuel efficient than even the leanest conventional cars available today. The government offers tax credits for people who buy hybrids, but hybrids may not take off unless gas prices climb significantly higher. "At $3 a gallon, they start looking pretty sensible," Wyss says. Hydrogen-powered cars could make an even bigger dent in oil demand, but they won't be commercially available for 10 to 20 years.
•Will higher oil prices cripple the U.S. economy?
The doomsday scenario, outlined most alarmingly in the recent book The Long Emergency, by James Howard Kuntsler, goes like this: gasoline will soon get so expensive that most Americans simply won't be able to afford it. Suburbs, strip malls, interstate highways, the infrastructure of the modern U.S. economy just won't work anymore without cheap oil, and the U.S. will have to reinvent itself or risk falling into decay. That dire prophecy, though, is really all about timing. Georgia Tech's Shelton, an engineering professor and oil-futures expert, says the extent of the economic damage depends on how fast oil prices rise. A slow climb "gives people time to adjust," he argues, and affords industry time to develop new or more efficient technologies. Crude prices have been steadily rising over the past two years--to nearly $60 a barrel, compared with $30 in early 2004. While individuals are certainly feeling the pinch, the economy overall so far has continued to grow.