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The Detroit News: Where ‘personal virtue,’ market meet

Sunday, December 2, 2007
Froma Harrop
In June 2000, newspapers ominously noted that oil had “surged” to more than $31 a barrel and that, come summer, gas might average a lofty $1.50 a gallon. Nonetheless, the gas-guzzlers were flying off the lots.

A year later, gas topped $2 a gallon. That “high” price was deemed politically problematic for the new President Bush. But rather than encourage Americans to burn less oil, Vice President Dick Cheney famously remarked that saving energy was a “sign of personal virtue,” not a basis for “a sound energy policy.” The guzzlers continued to fly.

As the price moved past $40 a barrel, $50, $60, economists kept wondering when Americans would start reacting to the higher costs and cut energy use. Now the price of oil is “flirting” with $100 a barrel, and a gallon of gas has zoomed past $3.

And it’s happened. Americans have responded. People who don’t need trucks to visit the mall are looking for more fuel-efficient vehicles, and the guzzlers are sitting on the lots. Seems to be a recent change.

To find out how recent, I consulted an oil-price analyst — not just any energy expert, but Henry Groppe, a Houston-based veteran and independent thinker. “All our work indicates consumption has actually been flat these three years,” he said.

In 1980, when the Iranian revolution sent oil prices soaring, everyone else — Exxon, Shell, the U.S. Department of Energy — predicted that a barrel of oil would soon cost $80, $85, $100 a barrel. In a contrarian forecast, now legend, Groppe said oil would fall below $15 a barrel. And that’s what happened.

Why did his firm, Groppe, Long & Littell, expect the price collapse? “We thought there would be a significant drop in consumption,” he said.

Groppe sees consumption dropping now. “Everybody is still in denial about the magnitude of the changes.” He predicts the annual average price of oil will fall back to $60 to $80 a barrel in the next several years.

The faulty forecasts, Groppe says, reflect a reliance on the flawed work of the International Energy Agency. His group gathers its own data.

For example, the IEA last year forecast a major rise in production by nations outside of the Organization of Petroleum Exporting Countries. The actual increase was tiny.

“The Saudis made a mistake taking the IEA forecast seriously and cutting production when they should not have done it,” Groppe said.

That raised prices to the point where consumers started using less energy. The Saudis want us hooked.

As for the Americans’ part in this, Groppe thinks that “the most important thing is more efficient usage — particularly greater mileage performance of our vehicles.”

President Bill Clinton pushed for higher fuel efficiency standards but was stopped by the Republican Congress. Bush, meanwhile, has never worked on the demand side of the oil market — the one thing that Americans could have influenced — while OPEC continued to manipulate the supply.

Last week, the gas pump flashed past $45 and I gasped. After all, it was only a Honda Accord. How many twenties were the Navigators sucking up?

Fuel economy was one reason I bought the Accord eight Aprils ago. A friend questioned my concern. “Gas is cheap,” he shrugged. But it wasn’t just the money. It was the environment. It was that we had recently sent half a million Americans to the Gulf to liberate Kuwait’s oil fields from Saddam.

As happened in the ’80s, conservation may again depress the price of oil. Saving energy sounds like more than “personal virtue” to me. It sounds like a sound energy policy — unlike the one we’ve had these last seven years.

Froma Harrop writes for the Providence Journal. Her column is distributed by Creators Syndicate, 5777 W. Century, Suite 700, Los Angeles, CA 90045. Reach her at [email protected]. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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