Record prices may have silver lining for oil-thirsty US - Yahoo! News

WASHINGTON (AFP) - Record high oil prices pose a risk to the United States but may be a blessing in disguise by forcing the world's biggest consumer of oil to look at conservation and alternative energy.

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The jump in crude oil to records above 75 dollars a barrel, and resulting surge in gasoline prices to over three dollars a gallon (3.8 liters) has created intense worries about the US economy.

Companies such as Wal-Mart have expressed concerns about energy costs being passed through to many goods while also crimping consumer spending.

"With the consumer, the transport sector and low-end retailers set to be buffeted by these price spikes, we may in the process of seeing the knockout blow being delivered to the consumer and the economy, but it's too soon to say for sure," says John Kilduff, analyst at Fimat USA.

Yet the crisis may also be an opportunity. It has led to more talk, even from President George W. Bush, about energy alternatives.

"Keeping America competitive requires affordable energy," Bush said in his January State of the Union message. "And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world."

On Saturday Bush warned of a "tough summer" for US consumers as the high cost of gasoline showed signs of becoming a big political issue.

But even as more Americans expressed discontent over the price of filling up their gas tanks, Bush suggested there was little his government could do in the short term.

"The American people have got to understand what happens elsewhere in the world affects the price of gasoline you pay here," Bush said as he toured a California facility developing hydrogen-powered vehicles.

Bush also blamed the higher prices on a shortage of refinery capacity in the United States, and on an ongoing shift in fuel additives and mixes that has caused supply hiccups in certain areas.

"When that price of gasoline goes up, it hurts working people. It hurts our small businesses. And it's a serious problem we've got to do something about."

Although the United States is the third largest oil producer behind Saudi Arabia and Russia, it remains the biggest importer as well to meet the country's vast energy needs.

The potential for a conflict with Iran -- the fourth largest oil producer and in Bush's eyes part of the "axis of evil" -- has contributed to the recent surge in oil prices.

Bush is touting alternatives such as switchgrass, ethanol and clean coal, and has pressed on several occasions for new nuclear electric plants. No such plants have been authorized in the US since the Three Mile Island accident in 1979, although the last one came into service a decade ago.

Even with fuel prices at historic levels, Americans appear to be wedded to their automobiles -- including a large number of fuel-guzzling sport utility vehicles. But even that scenario is seen by some as an opportunity.

General Motors chairman Rick Wagoner said in a recent interview that although the SUV segment may not be growing, the use of grain-based ethanol is on the rise.

GM is equipping a large number of vehicles to run on E85 -- a mixture of 85 percent ethanol and 15 percent gasoline.

"E85 is a huge opportunity that could develop surprisingly fast," Wagoner said.

But US refiners are moving slowly in developing ethanol, which is now being used as an additive in most motor fuels to replace the cancer-causing MTBE.

Some say the energy crisis may lead to other kinds of solutions such as telecommuting.

"The average worker commutes 16 miles (25 kilometers) each way to work every day. That adds up to more than 8,000 miles (13,000 kilometers) per year going to and from work," said John Challenger of the consulting firm Challenger, Gray and Christmas, arguing that the latest spike may boost the number of those working at least part of the time from home from the current level of 20 percent.

"Companies will be forced to help ease the financial burden of higher gas prices or risk losing their workers to companies located closer to their homes or companies that offer primarily telecommuting."