About those rising gas prices


iconThere has been a lot of whining about rising gas prices lately, but very little has been done to propose realistic solutions to the problem. What it comes down to is simple economics. That is, demand remains high, so there is no economic pressure to lower prices. If you are serious about wanting to pay less at the pump, there are several things that can be done to alleviate the price pressure. (Not that I expect the United States to actually do anything intelligent when it comes to oil.)

Please understand that this list is by no means comprehensive:

  • Make ANWR and other areas currently off limits available for oil drilling. No matter what, something must be done to meet the demand for oil in the short term. The problem is that the enviroweenies don't care about looking for more oil. Even if we found an endless supply that could be gotten easily and cheaply (and without killing any caribou), the hippy types would still insist that we find a car that runs on free love and good karma. ANWR is made up of millions of acres of barren wasteland. Setting up a small drilling operation wouldn't hurt that much, and the heat generated by oil pipelines has actually shown to be good for the wildlife population.

  • Eliminate regulations that make it too expensive to drill for oil domestically. Let's face it, our government doesn't exactly make drilling for oil a cheap process. I'm not saying that we should get rid of all regulation, but the law of diminishing returns means that at some point it is more expensive to keep drilling than it is to empty the well. A lot of oil is left in the ground simply because the cost of drilling it is too high. Lower the cost and you get more oil.

  • Build more refineries. New refineries haven't been built in the United States in nearly 30 years. Even if we had the oil, we couldn't do anything with it without refineries.

  • Settle on one or two blends of gasoline for the whole country. Federal and state regulators pass silly laws that require specialized blends of gasoline for different areas. Since some blends can only be used in some areas and not others storage and distribution becomes a lot more complex. That translates into seasonal shortages and spikes in price.

  • Promote alternative fuel sources so that we are not as dependent on oil. This is about more than electric cars. Since electricity is still derived from fossil fuels, driving electric cars only moves the problem to someone else's neighborhood. Depending on amount of driving done, you might even be using more oil than less. But if we find alternative fuels not just for cars but for our homes, the demand for oil would wane enough to be seen at the pump. For instance, eliminating the de facto ban on nuclear power will reduce our burning of fossil fuels for electricity.

  • Eliminate regional price controls. There is a reason why gas costs more downtown than it does in the suburbs. This is about more than clean air laws. Some cities actually set minimum prices to keep companies like Wal-Mart from coming in and giving local businesses too much competition.

  • Lower gas taxes. Lower taxes=lower prices. That's an easy one.
Keep in mind that this doesn't even take into account that nearly every product on the market is in some way derived from petroleum (ie: anything polymer or plastic).

Something else that is interesting is that they keep wondering why people aren't opting for more fuel efficient cars in the light of higher gas prices. Considering that people are buying $40,000 SUVs, it comes as no surprise to me that they aren't worried about an extra $150 a year for gas. Over the life of their car, that's just pennies a day.

But when it comes to gas prices, unless something is done about American supply and demand, expect to continue paying more at the pump.

This item was originally posted March 8, 2005.

Related articles:
Kerry's gasoline flip-flop -- 10/13/2004
Who to blame for high gas prices -- 05/19/2004



Comments (9)      top   link me

Comments

``Lower gas taxes = lower prices''

No. Limbaugh proposed that and I was amazed at the economic stupidity.

When the supply is fixed, the price rises to whatever is necessary to get you to stop driving as much as necessary to get demand to fall to meet supply.

The price must rise to this level, as seen by the consumer, to get him to stop.

If you eliminate the tax component, the profit component must take up the slack.

That's not true long term, when supply is free to rise as well. Then the profit component has other effects, like generating additional supply. The last guy online is not making much profit, in that case, but is contributing to the supply.

Gas prices are a solution, not a problem. The gas tax is no different from any other tax in reducing the standard of living.

Posted by: Ron Hardin at September 1, 2005 6:50 AM

Drill ANWR it's noting but moss and ice, there is no wildlife there. We need to be dependant on ourselves not the theives in the middle east.

Posted by: Derek at September 1, 2005 8:45 AM

The problems with this rationale are
1) makes sense
2) we have to get rid of enviro whackos first

Posted by: Sgt Fluffy at September 1, 2005 9:10 AM

Time to start drilling in the ANWR and screw the enviromentalists and hollywood wackos why dont the eco-freaks go and feed the polar bears and killer whales and maybe these critters will decide to have little greens in their diets

Posted by: screaming eagle at September 1, 2005 2:40 PM

Good reasoning, very similar to things I've posted around the net. Your "extra $150" is off a bit though. Less than 2 years ago gas cost $1.50 here. Yesterday a gallon of regular went for $3. Three weeks from now I expect it to cost $4, maybe $5. So fuel costs have doubled already and will triple soon. Even the folks who get 40mpg still use 500 gallons a year, which will soon equate to $1000 difference. $3000 at least for SUV drivers. Still, we are such an affluent country that this is little more than beer money, and will make no difference at all to nearly all of us.

Posted by: Drew at September 1, 2005 3:53 PM

I say we use up as much Saudi Arabian oil as possible. The faster we use it, the faster they will run out. Once they run out, their economy will go down the tubes and their importance will shrink to nothing.

Then we can drill ANWR (or that shale oil stuff, if need be).

Posted by: Alcibiades at September 2, 2005 1:57 AM

Drilling in ANWR, right now, is probably not the answer. Drilling in the Gulf of Mexico would probably yield more oil sooner and more cheaply and is probably less likely to generate the level of opposition that ANWR already is seeing. After all, we are already doing some drilling there (just not as much as we could).

Posted by: Andrew Upson at September 2, 2005 1:50 PM

Its up to $324 here in northern calfornia want anymore reason to tell the eco-wackos to screw it?

Posted by: screaming eagle at September 2, 2005 9:34 PM

We have untapped reserves off the Oregon and Washington coast ... the oil companies are too scared of the greenies and the 9th to explore.

I favor Nuclear-Powered SUVs ... 45 years between refueling with Strontium-90 powered batteries.

Posted by: Kristopher at September 6, 2005 3:37 PM

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