Well, I told you so. In a 1989 trade journal article that not many thought was important I pointed out that global oil supply and demand were getting closer to balanced , and projected that prices would firm late in the 20th Century.

What I didn't know then was that the price of oil would be determined by others than the companies and countries producing the oil. Privately-owned oil companies no longer control the price of oil, despite the rhetoric in letters to the editor in local and national newspapers and cries of anguish from the halls of Congress.

Voters could cause the price to decline for the time being if they wished. That's because the price of oil and gas is not fully controlled by how much resource is left to drill. Political and social agendas have significant influence on the price of your gasoline.

Why has oil, and thus, gasoline, become so pricey? Part of it is supply and demand, part is increased costs and capital requirements to find more oil, but much of it is due to speculation by traders on the New York Mercantile Exchange (NYMEX) and the lack of access to the resource itself, owing to actions by groups claiming to be "environmentally sensitive."

Supply and demand are easy to diagnose. Global consumption is about 90 million barrels a day, nearly matching global production. Any interruption in the production process could shrink production to less than demand. Ergo, the price goes up. But oil is in trans-shipment across the ocean, so that the price should not be immediately reflected at the pump, but lags by a few days to a week or two. Consumer demand is easily manipulated among sellers by pricing. At one time, the global price was determined by the price of a barrel of West Texas Intermediate crude at Cushing, Oklahoma, set by purchasers who bought oil for refineries. At that time the major producing companies were also the major refining companies. Now, the price of oil is set by traders in New York, who never actually touch the oil. They set prices by bidding on lots of oil in the pipeline or yet to be produced, and bid based on their assessments of production security (wars, insurgencies, political unrest, fires, etc.) and on new discoveries, announcements of production fall-offs, or recalculated reserve forecasts. Or, perhaps, on whether they have a hangover from the night before.

Media commonly hype that there are sufficient reserves of oil already discovered to solve any supply crisis, implying that the reserves could be tapped to meet any shortage. Nothing could be further from the truth. When a new well is successfully put on line, the maximum daily production of that well is established. Thereafter, every month it will produce at a lower rate. That is called its "decline." The total amount that the well will eventually produce is its reserve. Reserves can be produced only at the decline rate, so that there is no excess capacity to supply the world with additional oil unless production is purposely kept off the market. As far as I know, there is little surplus capacity left in OPEC, so we are looking at a constant decline in global production, barring any new discoveries and extension of existing fields. And demand is ratcheting up in India and China.

Reserves do not equal increases in production. Wells produce ever decreasing quantities of oil until they reach their economic limit, then are plugged.

Exploring for oil is risky. Many more wells are dry than produce. The capital costs of drilling are staggering and increasing, as the areas to which companies must go to find new oil are ever deeper, darker, colder, and violent. In the continental United States, wells that cost a million dollars a few years ago might cost three million now. If they are horizontal, then they might cost eight million. Wells that are drilled in water or in remote locations cost proportionately more. The requirement for high risk capital is huge. That's why there has been so much merger in the oil industry, and why names like Amoco, Arco and Texaco are gone. The profits of the large companies fund new drilling. Without new drilling, global oil production will fall. The profits also go to reward stockholders, including large pension funds, who have put up a lot of capital to own the stocks, and who get relatively small dividends in return for their risk.

New drilling is crucial to maintaining oil supply. But the drillers have to have places to drill where oil is likely to be found. And that's where you voters come in. The United States daily production has been falling for years, and not necessarily because we don't have the oil resources to drill, but rather drillers can't get access to resources. In a National Petroleum Council study a few years ago, it was demonstrated that trillions of cubic feet of natural gas and billions of barrels of oil are locked up from use in the Rocky Mountains, Alaska, in the eastern Gulf of Mexico, and offshore east and west coasts of the United States. Some Congress members argue that we need to become energy self sufficient, but they continue the constraints placed on access to the resource base.

Why the constraint on access? Because some organizations litigate and politic to keep development of the resources from occurring because they believe that it is environmentally harmful. For instance, the recent litigation successfully sought to declare polar bears endangered because in the future they might be harmed by global warming caused by use of fossil fuels. In reality, the polar bear population is the largest it has ever been in history, they have survived several major warmer episodes in the past, including the Medieval Warm Event, and there is absolutely no published data showing that fossil fuel consumption actually has affected climate. The effect, and we assume, the intent, of the litigation was to stop oil drilling in northern Alaska. The rationale for not drilling offshore east and west coast and in the eastern Gulf of Mexico is that some don't wish to see the development from their ocean-side homes, but the development is likely to be more than 17 miles offshore and thus not visible. The 1002 area in Alaska could supply 5% of the nation's oil supply for twenty years, from an area the relative size of a Kansas University basketball poster in a Kansas wheat field.

The question voters must eventually consider is whether the development of resources will cause irreparable harm to the environment or whether lack of development will cause irreparable economic harm to all, especially the poor and the middle income people of the United States. You are seeing the first effects now. The petroleum exploration and production industry cannot supply you with the transportation and other energy you need without your concurrence.

Your choice. Make it wisely.

Dr. Lee C. Gerhard, Senior Scientist Emeritus and retired Director of the Kansas Geological Survey, lectures widely about environmental impacts of natural resource development. He is an honorary member of several professional organizations, and a member of the Kansas Oil & Gas Hall of Fame. He can be contacted at leeg@sunflower.com.