The International Monetary Fund, not always known for making accurate, long term economic forecasts, predicts that global markets are entering an era of increasing oil scarcity, urging governments to switch to “sustainable alternative sources of energy.”
IMF economists and central bankers, meeting here this weekend for their annual spring gathering, say the global economy faces a period in which world oil supplies have slowed down as “production constraints are beginning to bind in some major oil-exporting economies, where oil fields have reached maturities.”
“Threats to oil supplies, including geopolitical risks, imply that oil scarcity could be more severe and may materialize in large and abrupt changes. The negative global growth effects would be correspondingly larger,”
the IMF said.
“The origins of this scarcity can be traced to the tension between the upward shift in global oil consumption growth due to fast-growing emerging market economies and supply constraints, which have led to a downshift in oil supply growth,” the IMF said.
The IMF analysis in its latest World Economic Outlook is music to President Obama’s ears because it echoes the “we-are-running-out-of-oil environmental policy that his administration has been peddling to budget-strapped Americans suffering from $4 a gallon gasoline fueled by oil prices that have hit $110 a barrel.
But instead of escalating U.S. development of our vast resources here at home in deep water off-shore oil fields, the Arctic region and elsewhere, his administration has slowed down the pace of drilling permits, and strapped the oil industry with suffocating moratoriums and industry-wide regulations.
While Americans are paying through the nose to gas up their cars just to get to work, if they have a job, Obama has been pushing for federal subsidies to develop costly, and dubious, biofuels that are decades away from becoming economically viable, if they ever can be, while urging Americans to buy very expensive electric cars and hybrids to reduce our dependence on foreign oil.
“We have to discover and produce cleaner, renewable sources of energy,” Obama said last month, parroting the IMF “And we have to do it quickly.”
But a growing number of economists say Americans are paying a big price for the administration’s hostility to domestic oil exploration.
“Administration energy policies are pushing up the cost of driving and making the United States even more dependent on imported oil and indebted to China and other overseas creditors to pay for it,” says University of Maryland economist Peter Morici.
In a bullish economic forecast, released in January, the IMF said the global economy would be expanding 4.4 percent this year as a result of “strong growth in emerging markets and stronger U.S. output fueled by tax-cut extensions.”
But that’s not the way top American economists view the direction of the U.S. economy under the looming crush of higher oil and gas prices on everything we produce, buy and export.
“The surge in oil prices since the end of last year is already doing significant damage to the economy,” says Moody’s Analytics chief economist Mark Zandi.
The meteoric rise in oil prices to over $110 a barrel has cut a half point from this year’s first quarter growth rate and if it continues to climb, say to $125 a barrel, that would push the economy down by at least a full percentage point, Zandi says.
The economy grew by 3 percent in the last three months of 2010, though not enough to make a serious dent in the nation’s nearly 9 percent unemployment rate. Half of all the states had unemployment rates of between 9 percent and 14 percent
Zandi says the economic growth rate in this year’s first quarter will be a feeble 2.6 percent that could drive jobless rates back to higher levels again.
Bernard Baumohl, chief economist at the Economic Outlook Group, has also lowered his first quarter growth rate forecasts — as a result of higher oil and gas prices — from 3.5 percent to 2.8 percent. Not a good sign.
Indeed, even the IMF is now forecasting that the U.S. growth rate will now slip back too 2.8 percent because of higher oil prices. You aren’t hearing any of this from the White House.
But recent polls reveal that U.S. consumers are cutting back on discretionary purchases, as their pocket books are squeezed by higher prices at the pump. “Two-thirds of Americans say they expect rising gasoline prices to cause hardship for them or their families in the next six months,” according to an Associated Press Gfk Poll last week.
Seventy-one percent say they’re cutting back on other purchases to offset higher gas bills; 64 percent were driving less; 53 percent said they were cutting back on vacation plans and staying “closer to home.’
The United States imports roughly 51 percent of the crude oil that we consume to meet our energy needs. As our country grows, so, too, will our energy needs, if we are to maintain a rising standard of living.
We cannot afford to depend on an unproven technology to fuel our cars from wood chips, switch grass and plant waste, while failing to use the abundant oil resources we have here at home.
The economic and national security of our country is at stake.