The Price of Gas
It was with some interest this week, that I participated in a discussion at work about the current price of gas. It seems like the volume is being turned up on the debate to allow more domestic oil drilling, in an attempt to increase supply of gasoline and thereby reduce the price of gas for us all.
Seems logical, more supply, less demand, lower prices. Economics 101.
The major oil companies hope to convince enough consumers that expanded drilling rights is the cure to $4 gas. C'mon, Alaska would look great with those oil derricks scattered across it's vista. How about drilling off the eastern and western U.S. coastline... The chances for an environmental disaster aren't that big, are they? What could possibly go wrong with that plan? Those pesky National Parks are hiding the key to cheap gas. Why go camping when you could go drilling?
The ONLY thing holding us back from $2 per gallon gas is expanded drilling rights.
Except that's not the way it works.
We forget that oil is bought and sold in a world market. Even if we produce more gasoline domestically, does anyone really believe that Exxon Mobil, will sell it to us for a reduced price when they can get $4 (or $5 or $6) in the World market? Major markets like China and India are becoming major oil consumers. They're adding to the demand far faster than anyone can supply.
Lobbying by the oil companies is distorting the truth. They know it won't drive prices down. But it will grant them access to additional supply upon which they can generate more profits. Because the name of the game is not to serve its customers, its to serve shareholders.
And they have done THAT, very well.
Want proof?
The U.S. gets most of its oil from ,,,,wait for it......Canada. Not Saudi Arabia, Iraq or Iran. Canada.
If you apply the same reasoning the US Oil giants are pitching, where greater supply equals lower prices, then you also need to explain why Canadians are paying MORE for gasoline than we do HERE! They EXPORT oil, for heavens sake!
Aside from a couple of examples of dictatorships, in whose countries gas is artificially kept inexpensive as a means to staying in power, free market economics are in effect.
The bad news is that gas will never return to 2005 prices. Ever.
The good news is that if we seize the opportunity, perhaps we can rid ourselves of this dependency over the next thirty years.
In the meantime, get ready for higher prices.
Seems logical, more supply, less demand, lower prices. Economics 101.
The major oil companies hope to convince enough consumers that expanded drilling rights is the cure to $4 gas. C'mon, Alaska would look great with those oil derricks scattered across it's vista. How about drilling off the eastern and western U.S. coastline... The chances for an environmental disaster aren't that big, are they? What could possibly go wrong with that plan? Those pesky National Parks are hiding the key to cheap gas. Why go camping when you could go drilling?
The ONLY thing holding us back from $2 per gallon gas is expanded drilling rights.
Except that's not the way it works.
We forget that oil is bought and sold in a world market. Even if we produce more gasoline domestically, does anyone really believe that Exxon Mobil, will sell it to us for a reduced price when they can get $4 (or $5 or $6) in the World market? Major markets like China and India are becoming major oil consumers. They're adding to the demand far faster than anyone can supply.
Lobbying by the oil companies is distorting the truth. They know it won't drive prices down. But it will grant them access to additional supply upon which they can generate more profits. Because the name of the game is not to serve its customers, its to serve shareholders.
And they have done THAT, very well.
Want proof?
The U.S. gets most of its oil from ,,,,wait for it......Canada. Not Saudi Arabia, Iraq or Iran. Canada.
If you apply the same reasoning the US Oil giants are pitching, where greater supply equals lower prices, then you also need to explain why Canadians are paying MORE for gasoline than we do HERE! They EXPORT oil, for heavens sake!
Aside from a couple of examples of dictatorships, in whose countries gas is artificially kept inexpensive as a means to staying in power, free market economics are in effect.
The bad news is that gas will never return to 2005 prices. Ever.
The good news is that if we seize the opportunity, perhaps we can rid ourselves of this dependency over the next thirty years.
In the meantime, get ready for higher prices.
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