Tuesday, September 27, 2011

Thoughts on Gasoline

Last weekend it cost me $80 to fill up the tank of my car, much more than it used to.  As the parent of a travel hockey player, the increase has been very significant to my family's overall expenses.  Just for the fun of it I searched the web for a chart of historical gasoline prices and found the following:  http://www.randomuseless.info/gasprice/gasprice.html  

As you can see, the price rise has been extraordinary, from an average of approximately $1.20 per gallon for premium from 1980-2000 to the present price of approximately $3.80, it has more than tripled.  And since gasoline is a relatively inelastic part of many of our lives (like I said, travel hockey), the crowding out effect on other purchases, at least in my case, has been very meaningful.

Now what's particularly pernicious about this situation is that it's not like it takes any more people to sell gasoline that costs three times as much--and we're not letting oil companies search or drill to any great extent in the lower United States (and most definitely not in Alaska).  So even though they reinvest most of what they earn in exploration and development, most of that reinvestment--and the employment that goes with it--is occurring in places like Russia, Brazil, Canada and the Middle East.

So, in a nutshell, we're paying more for gasoline and shipping the jobs that go with producing it to other places.  Now that would be understandable if we were like Japan, which has no local energy sources.  The United States, though, has purposefully decided NOT to fully use much of its ABUNDANT energy resources and in so doing has done not only itself, but the entire rest of the oil consuming world, a huge disservice--because we are not the only ones paying the new high prices.  By reducing the total supply of oil, we raise the price of energy worldwide!  [Imagine what would happen tomorrow to oil prices if Russia, which is actually the world's largest single nation producer of oil suddenly decided to stop all exploration and production because it wanted to save the planet. I imagine that the world might not be happy--so much so that China might, with our blessing, decide to make an extended visit.]

If we can agree that a major oil producer shuttering its production wouldn't be a good thing at the current time (maybe solar power is viable in 25 years--it ain't now), can we also agree that another major oil producer--say the United States--purposefully producing far less than its own needs when it has the ability to meet them is also not a good thing?  It's certainly not very neighborly.

It's also not very smart.  How many jobs would be created if we permitted our own companies to drill on our own public land?  What would happen to the price of gasoline?  Or the businesses where you and I spend the money we don't spend on gasoline?  Or the businesses which themselves spend less on gasoline?  How much money would the government receive from royalties?  Wouldn't becoming less reliant on Russian thugs and Middle East dictators be a good thing?  

Environmental concerns are obviously legitimate.  But having concerns doesn't mean we give up on producing the most economically viable energy source now available.  It just means we look for ways to solve them.  And besides, aren't we being selfish by using oil produced in other nations while holding back our own production, driving the price up for everyone else in the world?  We need them to produce as much as they can yet we won't reciprocate?  Don't other countries have environments too?  With its current energy policy the United States is behaving like a little kid hoarding his own piece of cake and eating everyone else's.  And no one likes that kid.

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