FORT WORTH, Texas – The price of crude oil temporarily broke through the historic $50 per barrel level Tuesday, rekindling a debate argued by a growing number of experts: that the days of cheap oil are gone, perhaps forever.

The apparent inability of oil producers to keep ahead of surging worldwide demand pushed oil to close Tuesday at yet another record high: $49.90 on the New York Mercantile Exchange. The price reached an all-time high of $50.20 during the day, then fell.

With the world using almost every drop of the 82 million barrels pumped each day, demand is giving supply a run for its money. And most of the new oil discoveries and promising fields lie in parts of the world marked by treacherous terrain, inclement weather or torn by civil and political strife.

All that means that motorists may never again pay the $1 per gallon gasoline prices from as recently as early 1999, when oil was below $15 a barrel.

The Organization of Petroleum Exporting Countries, which in the past could turn on the spigots to tamp price spikes, no longer has extra well, pipeline and transport capacity, the experts say.

“For most of the last decade, the world has had a spare capacity buffer of around 3 to 5 million barrels per day, but no more,” said Cambridge Energy Research Associates in its weekly report. “Trouble in Iraq, Nigeria or Russia or bad weather in the Gulf of Mexico can lead to strong upward price movements.”

The United States stands relatively helpless in the face of international oil economics.

The country consumes about 21 million barrels of oil each day while pumping 5.5 million barrels. About a quarter of that comes from Texas.

The U.S. position was further weakened most recently by depleted inventories after production in the Gulf of Mexico was interrupted by Hurricane Ivan.

Besides the demand squeeze, worldwide instability, led by the war in Iraq, has roiled markets all this year. Still, a consensus of analysts in March predicted that oil would hover in the low-$30 range for the year, a prediction that has since been refined several times.

The latest problem has been Nigeria, the fourth-largest U.S. source, where rebels have threatened to take over its oil-rich provinces. A month ago, the world’s oil markets were shaken by the prospect of interruption of Russia’s production, plus more political turmoil in Venezuela and the increasing boldness of attacks against oil installations in Iraq and Saudi Arabia.

“There’s no question that we’re in a new range of high and low prices, with the potential for prices to go higher,” said Stephen Brown, director of energy economics for the Federal Reserve Bank of Dallas.

Analyst Ted Harper of Frost Bank in Houston forecast average prices “well above the $35 level that we used to think was the absolute high.”

Houston energy banker Matthew Simmons, who advises oil companies in merger deals, noted that “what new oil is being found in the world is hard to drill and very expensive.”

Unlike the oil shocks of the 1970s, which threw the economies of the United States and Western Europe into recession and caused political turmoil, the current run-up in crude prices has generated relatively little disturbance.

The Dow Jones Industrial Average closed up 96.88 points at 10085.22 Tuesday even as crude oil pierced $50 in intraday trading.

Similarly, the cost of energy has elicited little heat in the presidential campaign, even though $35 oil was a significant reason for President Carter’s defeat in 1980.

On an inflation-adjusted basis, oil is still relatively cheap.

The $35 oil that so rattled the American economy in 1980 would be almost $80, adjusted for inflation today.

Furthermore, economists say today’s high prices are less likely to lead to the double-digit inflation that struck the U.S. economy a quarter-century ago. Most utilities and industries that once used fuel oil have switched to natural gas, and the American transportation fleet is more fuel-efficient than a quarter-century ago.

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“The economy is less sensitive to oil prices today than in the early 1980s,” Harper said. “We’re estimating that oil prices will take about six-tenths of 1 percent off expected economic growth next year, but when we’re expecting 4 percent growth, that still leaves us in fairly good shape.”

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Texas won’t enjoy the kind of boom it did in 1979-82 when prices soared. Conversely, the state is less vulnerable to the downturn it experienced beginning in the mid-1980s when crude prices dipped to $10.

“Texas nonfarm employment no longer seems to be affected by oil price fluctuations,” Brown said. “The energy industry is a smaller share of the state’s economy now, and oilfield activity is less sensitive to price fluctuations.”

Harper and Brown say consumers may be starting to change their behavior. Both note the softening of the sport-utility vehicle and big-car markets in recent weeks.

“Trouble is, people can change some of their discretionary driving, like for vacations and on weekends, but they can’t change their driving for work or school,” Brown said. “And it takes awhile for changes in the automobile market to work through the economy.”

Still, Americans will spend an estimated $68 billion more this year on fuel than they would have been expected to had prices stayed at the $31 per barrel average of 2003.

And some sectors of the economy will be harder hit than others.

The transportation industry, particularly airlines, is struggling to cover higher energy costs. Railroads have been choked with record traffic as long-haul shippers shift more loads onto more fuel-efficient trains.

In the end, Simmons notes that if demand continues to rise, particularly in China and India, “the world will need 4.3 million barrels of oil per day more than it is producing now, and nobody knows where that new oil will come from.”

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(c) 2004, Fort Worth Star-Telegram.

Visit the Star-Telegram on the World Wide Web at http://www.star-telegram.com.

Distributed by Knight Ridder/Tribune Information Services.

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GRAPHIC (from KRT Graphics, 202-383-6064): oil prices

AP-NY-09-28-04 2103EDT