Fueling frenzy

79-cent gas? Remember the days? Joy and her readers at Karagraphy do. The simple memory snapped Joy out of her so-called blog sabbath.

Joy's not alone in her mention of the price of petrol. It seems like it's all that's on the news. And forget small talk about the weather, now it's the price of gas. Truthfully, I'm weary of the chatter.

The fact that relatively few years ago the price was a third of what it is now is the major stumblingblock that perturbs people. How can it jump so high, so fast? they say.

It's easy to get indignant about the prices we're paying now, but it's actually a complicated topic. In fact, I don't have a complete opinion on the topic, so I've got a few points to consider. My points here deal specifically with oil as an energy source; starting down the road of alternative fuels, such as electricty, synthetic gas sources, and hydrogen would get too complicated in this topic.

• I'm in favor of a free-market economy. Sellers should have the right to sell their goods at the price the market will bear. That's simply the law of supply and demand. As long as we buy gas at $2.50 or whatever we're paying for it, why shouldn't the suppliers charge those prices?
• With the majority of our oil coming from OPEC member countries, are we dealing with a true free market? After all, they decide how much of their supply to release so that it will impact the prices they can charge. Think of it this way: if Ferrari made as many cars as Ford, they couldn't charge such premium prices. Thankfully for most of us, Chevrolet, Ford, Toyota et al do make plenty of cars so that we can afford to buy them (secondhand, anyhow). OPEC, though, creates a monopoly on the oil supply (thanks to America's hesitancy to tap into its own supply).
• If America would look within its borders for crude oil, it's little secret that plenty of oil is there for the taking. We know that the Gulf of Mexico and the tundra of Alaska have plenty of oil. Pulling oil from those areas would have to drive prices down in the United States, but we've hamstrung ourselves by paying so much heed to the environmental lobby.

  I would think that modern technology could make oil production in both the Gulf and Alaska much more productive and safe than it has been before, although I've not devoted the time to study it out. I do know that the Alaskan oil fields in Anwar pose little threat to humans, and likely, the ecosystem. Having been within miles of the Arctic Circle, I know that it's barren wilderness as far as the eye can see.

  News reports show that American refineries are woefully inadequate, thanks to the environmental lobby. So even if we did drill for new oil within our border, the refineries wouldn't be able to keep up.



• As for producing oil, how is it that we're still paying more per unit for bottled water, soft drinks, and so on without complaining about it? Water is a renewable resource. Everyone knows where to find it, and those places aren't hard to get to. Oil, on the other hand, is hard to find and hard to get to. Sure, modern technology is making it easier to find, but that technology is not cheap. When oil is found and "mined," a lot has to happen before it's gasoline for our cars (especially if you're in California). While I may prefer to pay $0.99 per gallon of gas, it does makes sense that it cost more in relation to a 12-pack of Aquafina. Even at $2.50, unleaded gas is still not as expensive as bottled water.


• While I favor the free-market economy, how do we keep the quickly rising gas costs from triggering inflation? If the rising prices were in the sweet potato industry, who would care? But oil is crucial for the production and distribution of everything that we buy from new socks to paper towels to lawn equipment to electronics and so on. If it costs companies more to produce the goods, they will have to raise prices. Consumers, who are paying more for their own transportation, will have to pay more for their groceries and household needs. The dollars they take home from work won't go as far.

Sure, the increase in gas prices makes a dent in finances, but maybe next time you pay for a drink somewhere, you'll be glad that gas doesn't cost $1.69 for 16 ounces.

Posted by JRC at August 18, 2005 10:45 PM | TrackBack