Gas prices drop, but for how long?

The AP is reporting that gas prices have dropped an average of 25 cents per gallon in the past two weeks. The drop is being attributed to refineries in the Gulf Coast "steadily" resuming production.

Prices now range from $2.66 for regular to $2.86 for premium.

Here in southern Minnesota, gas prices are holding steady at about $2.30 to $2.35. I have never quite understood why gas prices in the midwest are almost always lower than gas prices in other areas of the country, but it's something I haven't questioned and I'm grateful for. Even immediately after Hurricane Katrina, the highest gas prices got around here was around $3.00, which lasted only for one or two days.

I somehow doubt that gas prices will ever drop below $2.00 again, though. James Howard Kunstler recently wrote an article for The American Conservative in which he seems to agree. He refers to what he calls "peak oil," and says that "peak oil" is generally misunderstood:

It’s not about running out of oil. It’s about the remorseless decline in production following the all-time worldwide peak and a desperate competition to control the remaining supplies, which happen to be inequitably distributed in a few select regions of the world. The U.S. happens to be one of them, but we are into the twilight of our own supplies. We began production back in 1859, ramped up over many decades to a peak of over 10 million barrels a day in 1970, and have now fallen off to under 5 million barrels a day of conventional crude—with the numbers headed yet more steeply down. We have 28 billion barrels of conventional crude left, and we burn through more than 20 million barrels a day or 7 billion barrels a year. Of that, we import nearly three quarters of the total. The math isn’t very reassuring.

It's a very disturbing article, especially when he writes that the Department of Energy’s Energy Information Administration and various global oil corporations put the peak in oil production around 2030, only 25 years away. Other authorities and Kunstler himself think we are at or very near to peak right now. One possible example of this? Despite repeated promises to do so, Saudi Arabia has failed to increase production while oil prices have skyrocketed.

According to Kunstler: "It would tend to mean there is absolutely no spare oil capacity left in the world that has been seeing stupendous industrial growth."

I think Kunstler is a bit too pessimistic, since he dismisses most alternative fuel ideas as "delusions." But here in Minnesota, ethanol (or "grain alcohol") has become a proven alternative fuel option that is growing increasingly popular and has the public support of our governor. Ethanol wouldn't completely eliminate our dependence on oil, but it would certainly cut it by a large amount.

Still, Kunstler's article is very interesting and thought-provoking. It makes us think more about the long-term future, which is something we don't always do.