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Wednesday, August 17, 2005

Michael Silence looks at escalating gasoline prices, and links to some Tennessee bloggers who have something to say about it. I've decided to throw in my $0.02 (which, right now, buys me about .008 gallons of petrol).

Gasoline prices are rising very quickly right now, far outpacing inflation. I have to admit having a bit of sticker shock lately, watching the price here in East Texas climb from $1.98 when I moved here to $2.52 now. However, a few points bear mentioning:
  1. President Bush is not the cause of inflation as it relates to gas prices. Period. Could the President help mitigate costs in the short term? Yes, by releasing oil from the SPR (as his predecessor did in the 90s). But the President, unlike his critics, does not wish to play politics with a commodity that is the lifeblood of the Western economy.
  2. Much has been made in the blogosphere about the "profiteering" of "Big Oil". This argument is very similar to the one being made that pharmaceutical companies are gouging the public with their pricing schemes, and it is just as specious. Global supply of crude is not the problem; refining capability is. Oil companies see the global demand for fuel, and need to acquire additional refining capacity to keep up. Much of the profit for the oil industry is reinvested in exploration, refining capacity, and technology. This is just how the business works. Further, these companies do not exist to provide a cheap commodity. They exist to maximize the return on investment to the shareholder. Remove the incentives to profit, and then watch how quickly the global oil supply dries up.
  3. Finally, gasoline prices, and crude oil prices for that matter, are not at all time highs in terms of real dollars. The peak occurred in the late 70s/early 80s during the OPEC oil embargo. Gas prices in today's dollars were around $3 per gallon. Crude oil was around $90 per barrel.

So please... don't blame the President, don't cry about the "greedy oil companies", and don't kid yourself into thinking gasoline prices are at an all time high. Like it or not, we are not entitled to $1, or even $2 gasoline. I don't like paying $45 for a tank any more than the next guy, but the market dictates such pricing, and I am certainly not for any sort of Keynesian intervention by the benevolent government. If you don't like the prices we have to pay, don't pay them. If enough people agree with you, prices will come down.


.: posted by Dave 8:47 AM

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