Go fill up NOW, folks. I know I'm leaving right now to do just that. We'll have $3-$3.50 gas prices for a couple of months, so go buy gas while it's still below $3 (according to WMAZ). And for those of you who feel like reminiscing, does anybody else remember this?
http://www.usatoday.com/money/autos/2001/11/16/gas.htm
So what is the difference in November 2001 and now? First, OPEC has since cut production. Second, the Chinese demand has increased by over 40% in the last 4 years, according to the Energy Information Administration (throw in the surge in Indian demand, and overall world demand has skyrocketed). Third, political instability in some oil-producing regions (Venezuela) and anti-American sentiment in others (the Middle East) are leading to some disruptions in supply. Fourth, Katrina is the fourth named tropical storm to pass through the Gulf region this hurricane season (weather.com), disrupting drilling and (much more importantly) refining capabilities. You'll hear some on the left talking about the oil companies making huge profits and price gauging all of us. Don't listen to them. The oil companies make less than a 7% profit margin (American Petroleum Institute; http://api-ec.api.org/filelibrary/Third%20Quarter%202004%20Oil%20and%20Gas%20Profit%20Margins.pdf). Add in the other factors present, and the oil companies are making much larger NET profits, but not because they're the ones raising the prices. In fact, the government makes more money than the oil companies when you pay for gas. Total (federal and state) gas taxes come up to about 44 cents per gallon, which varies by state (this was the tax rate indicated on a few pumps in my home county in North Carolina this summer).So what solutions are there for the high gas prices? Here's a hint: They all involve smaller government! First, cut government regulation on the oil market. There are over 40 different blends of unleaded gasoline being sold in the United States. Fortunately, the EPA today (and Sonny Perdue in Georgia) cut the volatility and sulfur regulations, effective until September 15. This should be done permanently. There is no reason why a gas station in Georgia should be selling unleaded fuel any different from that sold in Iowa, or California, or New York. This will bring down the cost for the oil companies, and therefore the cost for us as consumers at the pump. Second, allow the oil companies to drill for and refine more oil in America. Under the Gulf of Mexico are oil reserves that dwarf those in the Middle East. Let's start pumping oil out of there so we can increase worldwide supply and bring down costs in America. Of course, we would have to refine the oil somewhere. That somewhere is going to have to be in the United States. As it stands now, the biggest problem with gasoline supplies is that we do not have enough refinery capacity. A refinery has not been built in the United States in over 30 years. Let's start building them now. Third, allow for the production of nuclear energy in the free market. Nuclear power is the cleanest and most efficient form of energy known to man, and the waste is much easier to dispose of than the radical left would have you believe. Let's use that resource to decrease the overall oil demand. Fourth, cut the gasoline tax. It's just another way of Uncle Sam getting into our pockets. Let's make him take his hands out of our pockets a little bit. In other news, I should be on the air starting next week. Keep watching to find out--I'll let you know before my first day on the air.
4 comments:
I have not heard any such news from this area, although I have seen long lines at gas stations. I agree with you over the long run (people should not be filling up every day to avoid the prices for the next day), but on a short run everything will be just fine. Filling up now is a normal market response to a projected shock; no damage will be done to the market.
As for the Bush Administration's response, the Administration has (as usual) held us hostage to the left and the Saudis. Bush needs to quit treating the Saudis like allies, and start being more forceful in pushing for domestic production instead of just cowering to the environmentalist wackos on the left. For once, I want to see the President come out and actually push for a policy that will help, instead of passing an energy bill that does nothing but give tons of federal subsidies here and there. The energy bill should have reduced regulations on the energy industry so that the market can give us a real solution to energy prices; instead, it's just a case of smoke and mirrors and pork barrel spending.
HAHA!!! Filled up for 2.59 a gallon right before lunch. Drove by the same station later, and the price was 3.20.
I wonder if the hippies still think we shouldn't drill in ANWAR, or that we shouldn't build any new refineries. Newsflash, lefties...we're going to be using oil for a good while longer. Even if some highly efficient clean energy source was developed tomorrow (which we still need to work on developing in order to become more self-sufficient in terms of energy production), it would take years to make the switch from oil. In the meantime, we need to continue drilling AND build new refineries for processing. If we had more refineries, this wouldn't be nearly as large a crisis as it is now.
Also, for home and business energy purposes, I agree we need to build more nuclear plants. Then we can bury the waste in France. It's win win! (except for the French, which doesn't matter because they always lose)
There's a slight problem looking at topping off your tanks from a supply and demand perspective. You can't put off filling up your tank for very long. If gas were a commodity that you could wait a month or two before purchasing again, and could purchase more than a limited amount (in most people's cases, the limit is the fuel capacity in their car, obviously) , then the sudden demand to fill up would cause prices to rise faster. But in the end lesser amount you pump to top off what little gas you used balances out the ill-effects of rushing to top off.
I guess the simpler way to put it is that as we use the same amount of gasoline in the long run (and by long run I mean a week or two, not months.), that demand stays relatively the same even with the "top off before prices rise" mentality, thus causing the price to change only due to supply shortages.
The problem is the supply for the east coast is draining rapidly even with normal demand thanks to the loss of the pipelines (which were up and running again at 25% capacity last time I saw, with predictions of it being at 60% capacity by the weekend.). The loss of supply is causing stores to hike the prices so that they may hold out and not have to close down for the time being.
Also, this temporary hike in prices has brought the purchase of a motorcycle back into my mind as a serious idea. 50-60 miles to the gallon and still <10 dollars to fill up is nothing to be laughed at as a boyhood dream now.
Also jeff, if you haven't seen this already, you might want to check out www.livejournal.com/users/interdictor
It's the blog of an ex-soldier who now works as a crisis manager for Zipa and directNic, two server housing companies. He's defending their servers and his employees in a 27 story building from the rabble outside, and it's quickly gaining attention in the media as an insight into what's happening street level.
I agree with the fact that we need an alternative source of energy. I can't wait to have hydrogen cars, simply because hydrogen is so cheap and easy to produce, and therefore will be cheap to put in a car. Unfortunately, they haven't figured out how to harness the hydrogen so we can prevent our cars from becoming little Hindenbergs. I don't think mass transit is the answer simply because of the typical attitude taken towards mass transit--that it is the government's responsibility. The government does not have a responsibility to build mass transit systems. If somebody in the private sector builds an efficient mass transit system, then I will fully support it. Also, it is NOT government's job to decide when we have alternative-fuel vehicles. The marketplace will dictate that, just as it did over 100 years ago when we went from horse and buggy to automobiles. In the meantime, we need to be more energy-independent, and we should conserve on the individual level (the government shouldn't be requiring any kind of conservation).
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