For the tens of millions of American motorists patiently waiting for gas prices to come back to Earth, the news from the oil markets is not encouraging.
For the last year, government forecasters have reassured us that the unusually high oil prices we've seen since 2002 — around $30 a barrel — were temporary: As soon as global markets recovered from the mess in Iraq, oil prices would drop and gasoline prices would eventually follow.
Yet nearly 12 months after "victory" in Iraq, oil prices are at an eye-popping $38 a barrel, or about $15 above the two-decade average, and some forecasters are now offering a far less sanguine prognosis: Not only will oil stay high through 2005, but the days of cheap crude are history. These aren't exactly glad tidings for a global economy designed to run on low-priced oil, nor for a White House that gambled it could deliver low oil prices with a mix of diplomatic muscle and market liberalization.
What happened? In simplest terms, what we're seeing are the final months of a 25-year oil boom. That boom was sparked by the oil shocks of the 1970s, when sky-high prices touched off a feeding frenzy among oil producers. Eager to cash in on the good prices, oil companies and oil-rich states drilled thousands of new wells, built massive pipelines, developed fantastic exploration and production technologies and generally expanded their capacity to find and pump oil.
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