“We’ve had problems with car design, but you don’t stop driving,” Graham said Friday, according to The Greenville (S.C.) News. “The Challenger accident was heart-breaking but we went back to space. The biggest beneficiaries of this proposal to stop drilling would be overseas oil interests, OPEC and regimes that don’t like us very much.”

Graham’s comments come as gulf state politicians from both parties, including Sen. Bill Nelson (D-Fla.) and Gov. Charlie Crist (R-Fla.), urge President Obama to shelve his proposal for expanded drilling, at least until the current crisis is resolved and investigated.

Graham, who was one of three senators working on comprehensive climate legislation but dropped his support to protest the prioritization of immigration reform, also explained his shift on the climate bill to the News:

I’ll take political risks, but I’m not stupid. I would never have engaged with energy and climate discussions as seriously as I have believing that on the Friday before the Monday rollout we’d be talking about an immigration bill that Harry Reid was going to bring up. That’s toxic politics.

h/t EnviroKnow

Here’s his math: 2 million 2010 Toyota Priuses would cost $46 billion and, at 50 miles per gallon, would reduce gasoline consumption by 1.4 billion gallons a year. That’s equivalent to 17 days’ worth of OPEC oil (we use 83 million gallons a day). Continue giving out 2 million cars annually for ten years, and now we’ve eliminated the need for 170 days’ worth of OPEC crude each year.

Sure, it’s impossible for about a thousand reasons. But on a hypothetical level, it actually makes some sense. Neil writes:

Crazy? Really? I would like to hear of another plan that in 10 years and at a cost of $400 billion (probably high, since we’d be buying in such bulk) could achieve such bankable savings in foreign oil, trade and carbon.

Public transportation? Please. We could hire Las Vegas showgirls as conductors and people still wouldn’t take light rail. As for the objection that such a thought experiment constitutes wild, stark-staring collectivism, let’s offer a free Prius to a few hundred thousand Texans and see if they decline out of free-market principle.

But I have a feeling Detroit and its lobbyists might decline. Still, a few strong and well-placed incentives could help persuade Motor City to shift its resources to hybrids and American consumers to buy them. The impact, as Neil points out, could be huge.

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Win a free Prius when you follow TWI on Twitter! Well, no. Not really — but it’s still worthwhile.

Flickr: Lodigs

After a summer of grimacing at the pump — with gas prices reaching an average of $4 a gallon — consumers are finally getting some relief. Just a few months ago, the cost of crude oil was as high as $140 a barrel. Now it is down below $65 a barrel, the lowest point in more than a year.

This is clearly good news for consumers — at least in the short term — and bad news for oil companies — whose stocks are plummeting. It’s really bad news for the Organization for Petroleum Exporting Countries, which Firday hastily cut daily output by 1.5 million barrels a day Friday. The oil cartel is predicting a decline in global oil demand for 2009.

Over this year, oil consumption has dropped significantly. From January to August 2008, petroleum demand declined by 4 percent, according to the American Petroleum Institute. That’s the biggest drop in the U.S. since 1982, say API economists.

Illustration by:Matt Mahurin

Faced with high energy prices, individuals and businesses had changed their everyday lives. But now that energy prices are falling, economists are asking what consumers will do next.

Some expect to see a consumers return to  their old oil habits. Others say Americans have learned and internalized an important lesson about the risks of depending on oil. Most economists and analysts agree, though, that since cheap oil comes within the context of a faltering economy, consumers will act accordingly.

“Everyone’s continually getting surprised,” said David Pumphrey, deputy director of the energy and national security program at the Center for Strategic and International Studies, or CSIS. When it comes to fluctuating oil prices, he said, “We’re in such uncharted territory right now that it’s pretty hard to get a sense of what might happen next.”

With petroleum demand shrinking, Pumphrey said, the U.S. is in an unusual situation. The continuing financial crisis and accelerating global economic crisis are also unprecedented. In this context, Pumphrey expects the price of oil to hover between $75 and $90 a barrel for the rest of this year, and probably into next year as well. Economists at the Energy Dept.’s Energy Information Admin. project the “absolute floor” for oil to be between $60 and $65 a barrel.

In an email, Adam Sieminski, chief energy economist at Deutsche Bank, discussed what realistically constitutes an extreme low in this day and age. For oil prices to return to “long-run historical averages,” said Sieminski, they would have to reach $35 a barrel. “However, we believe that important changes in the market, especially the geographic location of marginal demand and supply, suggest that $60/barrel represents a more realistic characterization of ‘cheap’ oil.” That’s largely because OPEC has cut production.

Those who study oil markets have differing opinions on how consumers will respond. Pumphrey of CSIS expects that consumers may revert to earlier behavior. “I would not be at all surprised,” Pumphrey said, “to see a return somewhat to the habits that we had before.”

This summer, he said, when gas prices rapidly climbed, “people responded very quickly.” Such a reaction could potentially take place in the opposite direction. “One of the big questions is: Have we seen a structural change in the way people behave or is it just a temporary phenomenon?” he said.

It’s probably a little from Column A and a little from Column B, he says. For example, the increase in small-car sales may suggest a structural shift, but Pumphrey says we’re also likely to see more gas-guzzling SUVs on the road if gas prices stay low over some time — which he believes they will. Pumphrey says the prospect of new oil production overseas  will bring some slack to the oil market, preventing major price spikes next year.

But some groups say the price of oil is likely to climb once the economy recovers. “Next spring,” said Sierra Club spokesman Josh Dorner, “gas is going to climb up again to $4 a gallon.”

Skyrocketing gas prices “kickstarted” efforts to reduce oil dependence, Dorner said. Americans have become aware of the extreme price volatility of oil, he continued, and it has significantly affected consumption habits.

“Obviously, as the price is lower, people are going to consume more,” he said, “but people understand that we need to make a change. I think that message got through loud and clear [this year], so I don’t think [lower prices] are going to dampen enthusiasm for moving in a new direction.”

With the current economic crisis, Dorner explained, businesses and individuals have an interest in cutting energy use. “Anytime the economy is hurting, we use less oil and less energy in general,” Dorner said.

People now realize, he added, that “cheap gas” is a thing of the past. “$2 gas is not coming back. $3 gas maybe, but that’s still not cheap,” he said.

Michael Morris, an economist for the Energy Dept.’s Energy Information Admin., agrees that oil prices won’t stay low for long. He also agrees that consumers won’t significantly increase their energy use in this economic crisis. “I think we’re entering into a recession, so oil prices are not going to do much,” he said.

In addition, Morris says the current pump price is still higher than before gas costs soared this year. The price of oil is unlikely to drop much more than it already has, he said. “I don’t think there’s much more room for downward movement in the price unless the worldwide economy really collapsed,” he noted.

Ron Planting, an economist with the American Petroleum Institute, the trade group for the oil and gas industry, says the sharp decline in consumer demand indicates fundamental behavioral changes. “Some of the changes are persistent,” he said. “People who are thinking about more fuel-efficient cars are going to keep doing that…. People changing jobs think more about their commuting patterns…. People have learned a little more about planning trips — like I’ve discovered that the train works very well.”

As for where oil prices will go next, answers vary, Planting says. “No one has a single-point forecast, because we know how volatile prices can be,” he said. “That kind of risk is just part of the business in terms of exploring for oil and natural gas.”

In the middle of economic and energy crises, says the Dept. of Energy’s Morris, the one thing that can be certain is uncertainty.

“We know this is a very uncertain time; it’s very hard to make predictions,” he said, echoing many other economists and energy experts.

With the global economy in shambles, oil demand and consumption continues to fall. It’s been on the decline since January 2008 and sharp spikes in oil prices this summer — up to $147 a barrel — certainly didn’t help.

One of the uncertain parts of this equation is the variable of what consumers will do next. How will businesses and individuals respond to oil as low as $63 a barrel and gas prices as low as $2.82?

I’ll have some of these answers in a piece later today.