Will $100 oil, or the U.S. government, cut demand?
SAN ANTONIO, Texas (Reuters) - Oil over $100 a barrel, if accompanied by gasoline at $3.50 or $4 a gallon, will slow energy demand more than the run-up from $50, but how much would depend on public policy, a panel of energy executives said Thursday.
"I suspect that somewhere in that $100-plus range .. there's a certain emotional barrier," said Bruce Vincent, president of Swift Energy (SFY.N). "You get gas at $3.50 or $4, you're definitely going to see people hit in the pocketbook."
But panelists said the industry has been watching and waiting for economic impact as oil prices have consistently set fresh records, racing to a new $98 high on Wednesday, and so far there has been little slowdown in growth.
George Kaiser, president, CEO and owner of GBK Corp, said whether price will slow demand is unclear and that government may intervene before market forces play out.
"I think it's a function of how quickly the price rises because people become accustomed to almost anything," Kaiser said.
"I think, however, the precipitating event is going to have to be public policy ... and I think we're going to see a change in public policy," Kaiser said.
He said he does not expect energy consumption taxes, even if Democrats keep Congress and win the White House in 2008. But he said the federal government could affect the market in other ways, such as buying 65,000 plug-in electric vehicles for government service to stimulate that alternative.
Another panel participant, Tom Ward, chairman and CEO of Sand Ridge Energy, said Democratic control could be good for the natural gas segment of the petroleum industry because gas is a relatively clean-burning fuel.
"The Democratic Party is always more environmentally friendly," he said.
Kaiser predicted, however, that Democratic control would cost oilmen money, through reducing the reach of the alternative minimum income tax and paying for it by letting recent tax cuts expire, and through environmental policies that will be paid for by taxes on industry.
"I think they'll pay for environmental policies with a tax on the conventional oil industry," Kaiser said.
Panelists said the industry should support development of alternative energy, arguing the oil and gas industry cannot meet all the expected demand and needs to be consistent in pushing for U.S. energy security.
"I think the only way we can have credibility is to recognize that we need to do 'all of the above'," Kaiser said.
