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$2.50 per gallon
Retired UT economist has dim view for energy situation


The United States cannot become independent of Middle East oil in the foreseeable future, an economist told members of Farraugt Rotary Club during its meeting Wednesday, March 14.

Dr. George “Tony” A. Spiva, retired economics professor at The University of Tennessee, told members and guests that the United States and other countries have a fossil fuel-based economic system, and that there is “no way we can become independent of Middle East oil,” based on what is known today.

Spiva added that contrary to popular opinion, there is no shortage of oil, and the real problem is access to oil at reasonable prices. Five Mideast countries, including Iran, Kuwait and Saudi Arabia, primarily control the price of oil regardless of where a country purchases its oil, because they dominate the market.

Spiva said these five countries do not want to cause problems with the U.S. economy, because they would lose one of their largest buyers. On the other hand, they want to make as much money as possible, so they “set” the target price per barrel at a high amount that the United States can still afford. Not so long ago, the target price per barrel used to be around $35, but today it hovers around $60.

It might dip into the low-$50s, as it did recently, or it might climb towards $65 or even $70, but ultimately these countries try to keep it around $60 per barrel so that the United States will not begin to seriously consider alternative fuel sources.

“Alternative fuel sources,” Spiva said, “such as ethanol, are extremely inefficient. In the case of ethanol, it costs money to plant, fertilize, apply pesticides and harvest the corn before ethanol can be manufactured. And in the end, the United States will only be slightly less dependent on foreign oil. Learn to live with gas around two-fifty per gallon.” Spiva’s comments about oil were sparked by a question from Rotary member Tom King. Following the meeting, King said he wasn’t surprised Spiva suggested consumers accept gas prices, because “as long as there are Mideast issues, it’s going to affect oil prices.” But added, he wishes the advice could have been different.

In addition to acceptance, Spiva said the United States needs to build better relationships with the oil-controlling countries.

“I think we all know now that the war in Iraq was a big mistake,” Spiva said, “and as a result of both the war and [President George W.] Bush’s economic policies, other countries are beginning to have lower opinions of the United States. Unfavorable opinions could render the U-S government ineffective in negotiations with any oil-controlling country.”

Spiva also discussed issues such as tax reform, NAFTA, Social Security reform and the deficit.

Spiva currently is a consultant to the U.S. government and Synovus Securities, a subsidiary of the Synovus Financial Corporation of Columbus, Ga., and was the Phillip Moffitt Distinguished Scholar in Economics at UT prior to his retirement in 1992. He received an alumni award as outstanding teacher at UT in 1987.

Farragut Rotary meets at 12:15 p.m., Wednesdays, in the Fox Den Country Club Clubhouse.

 

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