Blogs » Politcs Plus » What's with the high price of gasoline?



Ever since I was a little boy, I've heard complaints of the high price of gasoline; I remember all the uproar when gasoline went from 19.9¢ to 31.9¢ a gallon. I remember my stepfather and others blaming whoever was president at the time, for the high price of gasoline because it's the heart and soul of our everyday needs.

It's easy to blame the speculators and the president for the high price of gasoline because it's much easier to blame them, than to trace down the problem. Right off the bat, we can look at refineries as being a bottleneck, but right now we are running at a 79.8 % capacity. Some refineries are down for routine maintenance that is scheduled right before the summer vacation period. Why should Exxon, who is making record profits with the status quo, build an expensive refinery? Demand has slowed because of the economic crisis causing us to have an excess refining capacity. ConocoPhillips is starting to get rid of their refineries as part of their “shrink to grow" strategy. ConocoPhillips wants to reduce its oil refining capacity to below 1.8 million barrels a day, down from its current 2.4 million barrels a day. Shell Oil and Exxon are placing a higher value on the chemicals than the gasoline that comes out of the refining process. Shell's intention is to produce more natural gas than oil in 2012.

According to the Department of Energy, the United States consumes about 20 million barrels of oil products s day. About half of that is used for motor gasoline, and the rest is for distillate fuel oil, jet fuel, residual fuel and other oils. Each barrel of oil contains about 42 gallons, that same barrel yields about 20 gallons of gasoline. We consume about 178 million gallons of gasoline a day.

Prices usually increase when the world crude- oil market tightens and lowers inventories. Yes, we could drill here and keep it here but OPEC would reduce their output, keeping the price the same. We have about 727 million barrels of oil in our Strategic Petroleum Reserve (~60 day supply), but if we used that, OPEC will lower their production, to counter. Then there is routine maintenance, industrial accidents, refining problems, turbulent weather, wars and conflicts, speculators, and schemes that don't work like corn ethanol that will normally raise the price of gasoline. Each dollar you spend on gasoline, 13¢ will go for taxes, 8¢ will go for distribution and marketing, refining is 14¢, and crude oil is 65¢. The cost could vary from state to state because of their distance from oil refineries, the amount of taxes they impose, and competition. We already know that we are 5% of the world's population, but we consume 25% of the world's oil. We might as well get used to a higher price because countries like China and India are competing for every drop of oil, it's not likely that price will drop much.

I hear a lot of talk about forgetting about the worst environmental disaster in our history and just go back to issuing deep- shore drilling permits; we'll worry about inspecting them later, as an answer for lowering gasoline prices. Even if we did that, we probably wouldn't see an impact on gasoline prices until the year 2030. If all the conditions were perfect (no accidents, break downs, etc.) the price at the pump would only fall about a nickel according to the Energy Information Agency. We can do a lot better than that by just raising the CAFE standards to 60 MPG; that would cut the price at the pump in half.

It's no secret where I stand on fossil fuels, and I know most of the problems that we have with alternative fuels but I'm afraid I'm going to go to my grave knowing my generation never made a serious attempt to adopt an energy policy that will carry us into the next century. We settled for the cheaper alternative because of political pressure, but we will eventually pay for the innovations of another country that doesn't bear out problems. I hope I'm wrong.