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This Time, It's Different

Oil industry executives met with leaders of oil producing and consuming nations in Jeddah, Saudi Arabia on June 22 to address the tightening of oil markets caused by a world demand growing faster than supply.
U.S. Oil Imports

Grim-faced, British Prime Minister Gordon Brown followed a half-step behind a smiling Saudi King Abdullah as they entered a palatial conference room with marble walls and glittering chandeliers.

Dignitaries in flowing robes and business suits from 35 nations, seven international agencies and 25 companies were seated in a horseshoe arrangement. The king, flanked by Brown and China's vice president, was perched on a dais in the center and politely listened to entreaties from U.S. Energy Secretary Samuel Bodman and others for higher oil output. In the end, Abdullah bestowed only modest assurances while admonishing consuming countries for "selfish interests, increased consumption."

This exercise in oil diplomacy did nothing to stop the relentless rise of petroleum prices. If anything, the summit showed the inability of consuming nations to change today's prices and the relative indifference of producing countries, who blame high prices on Western "speculators."

But Bodman insisted that high prices were a question of supply and demand, and he urged the Saudis to boost output. "I believe that most of us agree on one thing: Prices are too high at present," he said. "And unless we act, the situation will remain unsustainable."

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What makes it unsustainable is that cheap oil has been a building block of the American economy and society, from big cars and big planes to interstate highways and commuters living in remote exurbs.

For the better part of a century, U.S. policy contributed to this pattern of development. Taxes on gasoline were set aside for highways, which opened up more vistas for new communities. This in turn promoted even more driving, more gasoline consumption and more tax revenue for highways. Today U.S. automobiles use more than 9 million barrels of gasoline a day, more than any other country.

The high price of oil has sparked recent efforts by technology experts, venture capitalists, alternative energy firms and even some oil companies to come up with ways to wean the world economy off its addiction.

Developing countries like China and India, however, are in no hurry to embrace this new vision. They want to join the ranks of economic powerhouses and question why they should be forced to temper their aspirations, why their oil use should be more constrained than those who came before.

A century after Henry Ford's Model T revolutionized American life, Tata's Nano could do the same for India. Unveiling his company's concept for the car early this year, Chairman Ratan Tata placed the Nano in a narrative of technological endeavors that led from bicycle to jet. He called it "a journey that embodies the human spirit of change . . . the drive to stretch the envelope . . . the quest to lead and the quest to conquer."

But in an era of scarce oil, the Nano could take the world down a rough and costly road.

Staff writer Simone Baribeau contributed to this report.

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