Why Gas Costs So Much

Contrary to what Ed Markey thinks, oil companies are not the reason our gas is so expensive. The primary culprits are Markey and his do-nothing ilk in congress. For Thirty years they’ve done nothing significant to address the root causes of high gas prices and everything to exacerbate the situation. The issues affecting gas prices are as follows:

1. Increasing domestic and world demand.

Not only are Americans using more oil than ever, but we now face competition for that oil from India and China whose rapidly growing economies consume many times the petroleum they did just a few years ago. This problem will only get worse. Even if Americans significantly reduce their oil usage, it is unlikely that China and India will stall their economic growth so we can pay less at the pump.

2. Decreasing domestic supplies.

When Bill Clinton took office about one third of our oil was from foreign sources. When he left office about two thirds of our oil was from foreign sources. Although it shows a lack of foresight and leadership in this area, President Clinton cannot be singled out for blame, see point eight below. President Bush has done nothing to address this situation in his seven years in office. Like so many of his initiatives, he announced a great plan and then let it fizzle. If we want more oil we either have to increase our dependence on foreign sources and outbid others vying for the same crude, increasing the price even more, or start drilling domestically in places we have set off limits like ANWR and off the coasts of Oregon, California and Florida.

3. We can’t make more gas.

Even if we suddenly discovered a 500 year domestic supply of oil it wouldn’t do anything to increase the availability of gasoline. Twenty years ago our refineries were operating at 60-70% of capacity. Today they’re operating at 100% capacity. We haven’t built a new refinery in thirty years and the difficulty of permitting a new refinery or upgrading existing refineries and the deluge of lawsuits from environmental groups that would accompany any such effort make it unlikely that any oil company will attempt to build a new refinery.

4. Umpteen different gasoline blends.

A minimum of 18 different blends of gasoline must be produced at any given moment. Blends not only differ from region to region, but from summer to winter. Gas made in Texas cannot be used in Oregon. This is why you see gas prices spike in an area when a refinery experiences even a brief shutdown. The establishment of one federal standard for gasoline would have a small impact on overall retail prices, but would do a lot to even out price spikes due to regional shortages.

5. You and me.

How many of us plan our shopping and leisure trips to reduce our miles driven? How many of us have ever said “even thought I can easily afford it, I’m not going to go on that weekend camping/fishing/hiking trip in the car because I want to reduce our dependence on foreign oil?” How many of us are trading in whatever we drive for Prius’s or Matrixes? How many of us can? I don’t know about you, but it would be impossible for me to drive a client and their family around in one of these. Ever try to fit three adults and three kids in a Prius? Remember too that the $20,000 for a new high mileage car is way out of the reach of many people. How many of us have substituted a vacation in Paris or Mexico for a week at home relaxing in the backyard to reduce our dependence on foreign oil? How many of us would go through the expense, inconvenience and trauma of selling our homes every time we got a new job so we could be closer to work and reduce our commute? Even the most ardent greenie is unlikely to do most of this. I may batch my shopping trips, but I’ll be damned if I’m going to give up camping, fishing and hiking. Judging by the crowds at the lakes and trailheads The kind of draconian lifestyle changes that would be required of us to have a significant and long term effect on gas prices are unlikely to be voluntarily adopted.

6. Illegal aliens.

Before you write this off as a wackjob comment, remember that estimates are that there are 20 to 30 million illegal aliens in the U.S. and just like legal residents, most of the adults drive. Think about what a 7-10% drop in demand would do to gas prices. This is not a judgement on the illegal alien issue, merely a statement of fact.

7. Deficit spending.

The value of the American Dollar has gone down thirty percent in the last six years, attributed largely to our continued fiscal irresponsibility. Those are the dollars that buy middle east oil.

8. Lack of Presidential and Congressional will.

The source of all the previous problems. Our government has done nothing to really address the issue of our dependence on foreign oil since the first “gas crisis” in 1973. Conspiracy theorists and the not-so-bright blame the oil companies and cite record profits as proof. If the oil companies made NO profit at all it would reduce the price of a gallon of gas by 10 to 15 cents a gallon. As of my fill up today, that still leaves $3.25. Want to explain that Ed Markey? Oil companies are not in the business of solving the country’s energy problems any more than the baker is in the business of solving the issue of rising wheat costs. They are in the business of finding, extracting, refining and selling petroleum products. We elect presidents and congress people to address issues of national concern. For thirty years the only solutions they’ve implemented are higher gas mileage standards for fleet vehicles and the debacle of corn ethanol. The former is like bailing the Titanic with a Dixie Cup and the latter is like ramming the iceberg a few more times just for good measure. Just once I’d like to see an oil company official really lay it on the line when hauled up before congress in a show trial. “It’s your fault you grandstanding, do-nothing @##$%.”

Even if we were to open up the entire U.S. toi drilling, build 100 new refineries, adopt a single gas standard, drive a whole lot less, kick out all the illegals and balance our budget it would merely be delaying the inevitable for a few more years.

There are only four things we can do to end our dependence on foreign oil and bring down gas prices:

1. Increase domestic production of domestic oil and increase refining capacity.

Akin to bailing the Titanic with a larger bucket, but the only one available to us in the short term.

2. Increase vehicle mileage standards even further.

As previously stated, a short term solution akin to bailing the Titanic with a Dixie Cup.

3. Drive less.

Fat chance.

4. Find another energy source for our vehicular transportation.

The only real possibility for this is electricity, but this would involve the two herculean tasks of dramatically increasing our electrical production capacity, which could really be done with coal or nuclear power (and only nuclear will never run out), and building a national infrastructure of recharging stations. Even though we now have battery technology that would allow us to recharge an electric car in 15 to 30 minutes, the range still maxes out at about 150 miles.

One thing is absolutely certain, if our so-called leaders continue to bury their heads in the sand and engage in useless posturing we are eventually in for a very rude awakening and an economic depression the likes of which we’ve never imagined.