Duff0003’s Recent Comments

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  Gas Prices

  Dear David,

   I agree with your recent opinions posted on Gristmill regarding gasoline prices.   Americans drive more than 2.5 trillion miles per year in automobiles, light trucks, and SUV's.  Amazingly, this is equal to 14,000 roundtrips to the sun (Bonsor, Grabianowski).  However, many Americans are naïve about the amount of gasoline we consume each year and the resources we have available to produce gasoline as many have expressed fierce anger about the recent increases and fluctuations in gasoline prices.  Consumers have gone so far as to accuse the oil companies of price gouging.    Rather than blaming oil companies for price gouging, Americans need to be accountable for their own consumption of gasoline and realize that the price will continue to fluctuate as a function of supply and demand.  Americans must consider new energy resources instead of wasting time and energy by misdirecting blame.  

  First, you state "No, high gas prices are not the result of oil-company price gouging or nefariousness.  It's the market balancing supply and demand." I agree with your argument that supply and demand are the main factors causing gas prices to increase and fluctuate. Many consumers blame oil companies, government, and other energy entities for the recent increases and fluctuations in gasoline prices because they do not fully understand how the price of gas and sales profit are determined.   The price of a good is set by supply and demand. When supply falls while demand rises, prices rise quickly (Lanni). Some major factors that have affected the oil supply in recent months are natural disasters and warfare.  Hurricane Katrina damaged oil refineries and reduced oil refining and drilling capabilities, which affected the supply of oil to consumers around the world.  In addition, warfare in the oil-producing countries of Nigeria and Iraq slowed oil production in these regions. Some factors attributed to the demand of oil include substantial demands for gasoline in developing countries, consumers purchasing and driving larger operating vehicles, and an increased amount of recreational driving by consumers.  The demand for gasoline has increased in recent years as countries such as China and India have been experiencing economic booms and a dramatic increase in energy needs (Reed 8).  In addition, consumers have steadily increased their thirst for gasoline by engaging in consumption choices such as traveling more and driving SUV's and larger vehicles that require more operating fuel.  Market conditions affect supply and demand and price is determined by supply and demand.  When demand is greater than supply, prices increase.

  There are several factors that determine the price of gasoline.  The cost of crude oil contributes the largest portion to the cost of gasoline at 59 percent.  Refining costs contribute about 10 percent and distributing and marketing costs contribute about 11 percent to the cost of gasoline. Federal and local taxes make up the remaining 20 percent.  A portion of gasoline expense may also be attributed to a mark up at the service station. The Organization of the Petroleum Exporting Countries (OPEC) determines the prices of crude oil and market conditions affect the cost associated with the other gasoline cost contributors (Bonsor, Grabianowski).  Oil companies, government, and other energy entities do not arbitrarily select the prices they will charge.  These prices are determined daily based upon daily stock trades on the international market as a result of supply and demand.

  Secondly, you state, "Yes, politicians--mostly Democrats--attempting to substitute oil company bashing and demagoguery in the place of real energy proposals deserve only snorts of derision."  I agree that politicians who attempt to pass blame on oil companies while in pursuit of political gain from their constituents should not be taken seriously when they know there is nothing that can be done to control the price of oil.  With the recent sharp rises in gasoline prices, California's Senator Barbara Boxer demanded an investigation of the oil companies. This investigation, like other investigations on this issue, over the years, failed to turn up anything other than supply and demand  (Krauthammer A19).   According to Charles Krauthammer, "nothing can match the spectacle of politicians scrambling for coverage during a spike in gasoline prices." In April of 2006, the pander fest went all the way to the Oval Office.  President Bush joined the braying congressional hordes by ordering the Energy and Justice department and the Federal Trade Commission to launch an investigation into possible gasoline price fixing (Krauthammer A19).  Just like the previous price gouging investigations, this one did not turn up anything illegal.  The investigation findings reported that the gasoline price hikes were attributed to the increased demand and decreased supply of gasoline (Krauthammer A19).  "Big Oil may be an easy target for politicians, but every investigation into high gas prices turns up a single culprit--supply and demand" (Sowell).  

  Politicians should be spending more time proposing an effective energy plan to the American people, instead of investigating the energy industry and trying to intervene in the free market to control gas prices (Simon A14).  Some alternatives a gasoline consumer can do to reduce the cost of gasoline and the overall consumption of oil is to start driving smaller, compactable cars that require less gasoline to run.  A consumer could also purchase a hybrid car that mainly runs on a battery.  Another option would be to purchase vehicles that use E85 fuel.  This type of usable fuel is made from a blend of 85% ethanol and 15% unleaded gasoline (Wise Geek).  Corn is the main ingredient in E85 fuel, which makes it renewable resource (Wise Geek).  More and more auto industries are beginning to manufacture cars and trucks that can run on this type of fuel.   Now, we need to come together and urge the energy industries to continue to explore new energy possibilities.    Americans must learn to understand that supply and demand affect gas prices.  Americans should demand their politicians to pursue other alternative energy sources rather than investigating oil company activities.

  Finally, you state, "No, it would not be a good thing for gas to be cheaper.  It's been artificially cheap in the U.S. for a long time, but it's inevitably going to rise.  Get used to it."  I agree with you. I do not think it would a good idea for gas to be cheaper.  If there were a decrease in gasoline prices, we could have a huge energy shortage. "Free-market prices allow the marketplace to efficiently allocate scarce resources" (Lanni). When goods are intentionally sold at prices lower than the market will bear, shortages result (Lanni).  Higher prices force conservation (Lanni).  The cost of gasoline in the U.S. has been reasonably priced for a long time and we should be grateful for that.  "As Americans contemplate the misery of a summer of $3-per-gallon gas, drivers in Britain and much of continental Europe looks on with resigned envy" (Sullivan A12).  High taxes, which were created long ago, make gasoline in Europe, some of the world's most expensive.  There, a family car is deemed more a luxury than a necessity.  Many people in Europe rely extensively on public transportation networks to get around (Sullivan A12).

  Although the recent gasoline price spikes can be explained by economic theory, it is not surprising that Americans have not been able to accept the reality that gas prices are a function of supply and demand and they are here to stay.  Americans are likely emotional about the changing gas prices because we are a society highly dependent on gasoline for the majority of our energy needs.  The price of gasoline not only affects the basic single-family household, but it also affects all small businesses, corporations and industries in the United States.  High oil prices raise the cost of food, clothing, and energy for homes, cars and housing.  For example, my family's economic and social situation has been greatly affected by recent gasoline price increases.  I commute a total of 62 miles back and forth to work each day.  Just two years ago, gasoline cost me an average of $200.00 a month.  Now that price has more than doubled to $425.00 each month.  The increasing gas prices have definitely had an impact on my family.  We have had to sacrifice extra activities such as taking fewer family vacations and driving to our cabin less.  Gas prices are also affecting small businesses. According to the survey conducted from consumer affairs, more than 85 percent of small business owners expect their revenue to decline this year, which is the result of the increasing gas prices (Benton).  Business owners say it is getting harder and more challenging to be a small business owner (Benton).  According to the survey, 31 percent of small business owners will have to lay off their employees, if their revenue continues to have negative effects (Benton).  Rising gas prices are also affecting large corporations and entire industries.  For instance, the auto industry has experienced a very negative impact from the increasing gasoline prices.  One of the largest auto companies being affected is Ford Motor Company.  Ford has been forced to shut down many of their manufacturing plants and is now laying off thousands of their employees.  One of the main reasons for these business decisions is consumers in general, are less likely able to afford new vehicles nor are they in economic positions favoring driving larger vehicles.  There is no doubt that this is a terrible time for many, however, situations such as these are consequences of the current supply and demand of gasoline.

  The United States, alone, consumes 130 billion gallons of gasoline per year (Bonsor, Grabianowski).  Instead of Americans spending energy complaining about the price of gasoline, they should invest their time searching for alternative energy and resources to use.  Researchers estimate that there is only three trillion barrels of crude oil left in the world (Benton).  Consumers have used one trillion barrels so far.  There is still time for the consumers of the world to look into alternative energy sources before our oil supply is depleted.  It is every person's responsibility to start conserving energy.  There are far too many people in this world who drive big trucks and SUV's.  As a society, we need to come together and become more aware of alternatives.    Until there are abundant alternative energy sources to choose from, we must accept the new reality that high gasoline prices are here to stay due to supply and demand.On Gas prices posted 2 years, 11 months ago 28 Responses

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  Gas Prices

  This is a very interesting topic, and I'll have more to say later.On Gas prices posted 3 years, 1 month ago 28 Responses