Thursday, April 27, 2006

Thoughts about high gas prices:


There has been a lot of talk about high gas prices, and possable price gouging by "big oil companies". Everyone from the President, to members of congress, to even my close friends and family have compalined about the current state of Gas prices. I would like to formalize my thoughts about all this, and maybe offer a little bit of insight of my own.

A few days ago, Mr. Bush spoke about the daneriously high gas prices, and what he and his adminerstration are going to do about it. Mr. Bush spoke of a multipoint plan in which the dependency of foregin oil will be reduced and hence the price of pump gas will go down. His plan called for

-Increse of domestic production

-Increse of alternative fuel development

-A temperary halt of oil to the nation's reserve

-A temperary relaxing of gas blend standards

-An investgation into the possablity of price gouging

There is a small problem with this plan, that is, it lacks logic. I have supported the President on many other issues thus far, and I am in no way "Bush-bashing"--that must be made clear right now, if you think I am taking potshots than stop reading now. I'll address each point one at a time...

Increse of domestic production: Almost all of the current manufactering facilites are working at peack production. An increse in production will cause them to lose effecency, and we (the public) will be at a disatvantage.

Increse of alternative fuel development: As you all know I am a big supporter of E85, I love the stuff but I also know that we could be just as dependant on corn and trash as we are of oil now. As such, I also support the development of other fuels and other methods of transportation all together. We cannot expect this to be an answer to our current problems and this should have been in a different speech, other than that there is really nothing of value here.

A temperary halt of oil to the nation's reserve: This is total crap. halting the supply to the nation's oil reserve, and directing it to gas pumps around the nation has little, if any, economic affect. the savings that Mr. Bush thinks will be pased on from the government to the oil company to the gas truck driver to the gas station owner to public will ammount to about 1/1,000,000,000,000,000,000 of a cent.

A temperary relaxing of gas blend standards: This is the same thing as the nation's reserve. Any savings here would not ammount to a real and tanagble benifit. Also, in the process, there are now God knows how many gallons of substandard gas being pumped into vehicles around the nation and poluting more than before.

An investgation into the possablity of price gouging: This is the last straw as far as I am conserned. there have been four reports that I know of showing that there is little, if any, evdience of price manipulation on any level. Now, I admit that a few single owner gas stations may have a local monolopy where they are the only station for a few miles (this is the case for one place in my home town) and as such he rases his prices higher than other stations further away. This is not price manipulation, this is economics at work. A gas station owner is going to charge the higest price he can for a gallon of gas, while the consumer is going to pay the lowest price he can for the same gallon of gas.

Also the price of gas is really less as it was 30 years ago... A gallon of gas in 1975 cost about $1.50 depending on where you lived at the time, that same $1.50 costs about $5.62. Thats right, now the national avgrage when Mr. Busg was making his speech was $2.91 a gallon, that would mean gas would have cost 78ยข in 1976. With that in mind, about the same percentage of income goes toward the purchce of gas for you car now as it did 30 years ago.

There is a little good about the President's speech the other day, and that is Light, sweet crude prices droped to a june devlivery price of $70.74 a barel from a high of $75. If this is because of the speech, or if it is just the market adjusting it self is yet to be found out. I would think it is simply the market adjusting it self... Spikes are almost alwasy followed by a slight drop in price before leveling out somewhat.

There is one more point I want to make here... If you think you are paying too much for gas, than dont drive any more. If your driving an SUV that gets crappy MPG, than buy a car that gets better fuel economy. If your driving a puris and still think your getting screwed at the pump, than walk, carpool, take the bus/train, or bike to work, the store, your friends house. Dont go out as much, the older among us will tell you durring WWII they stayed inside and the government requested that they not travel unless nessary. In fact, there were gas cards given out to people and gas (and distance) was alloted by which card you had. For example, if you had an "A" card you may get less gas than someone with a "D" card.

Be smart America!

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