Why IS gas so expensive?
I’m watching all of you solomoms and dads, all you families and young folks just starting out. I’m watching you open your wallets and watch the moths fly out from within empty, cavernous regions.
I’m listening to irate writers demanding more off-shore drilling, more drilling in Alaska.
I’m hearing crazy politicians try to stick it to the ‘orl sheeks’ and demand a drop in the cost of orl oil.
Andrew Leonard’s article in Salon (Why gas is so expensive) takes a valiant stab at sorting the whole mess out. Please read the whole thing, even as I reveal the punchline:
It seems reasonable to assume that the price of oil will rise to a point at which even the seemingly bottomless appetite of China begins to slake. At that juncture, we could see a massive bubble pop, as traders scramble to unload their futures positions. But it also seems increasingly likely that the world has reached that critical point at which it is simply impossible to find and develop new sources of cheap oil to replace what we have already discovered and are daily consuming.
In that case, price will be the ultimate regulator of both the market and consumer behavior. A few years back, when crude oil and gasoline prices were just getting started on their historic run-up, American driving habits failed to change much in response, and we heard that demand for gasoline was what economists like to call “inelastic.” In other words, our willingness to consume wouldn’t stretch up or down as prices fluctuated. People had to drive to work or to the grocery store or to the kids soccer tournament. So we filled our tanks and cut back on the fine dining.
But the drumbeat of record gas prices has changed that equation. We now realize that we just hadn’t reached the proper price point necessary to make a real difference in our behavior. Today, Americans are driving billions of fewer miles than they did a year ago. Sales of fuel-efficient cars are surging and the price for a used Ford Expedition is plummeting because the market is glutted by SUV owners desperate to unload their gas guzzlers. It’s clear that millions of Americans, just like me, are staring gape-mouthed at their filling station receipts and thinking, “There’s gotta be a better way.”
And there is. But it’s not likely to come about by political attempts to twist OPEC’s arm or legislating lower prices. Nor can (or should) Americans try to stop Chinese or Indians from buying new cars and installing air conditioning. Instead of striving to remake the world so it gives us cheaper gas, maybe we should listen to what the price of a gallon of gas is trying to tell us: Use less.
America is at a crossroads in so many ways. It’s sink or swim time, people. Let’s stop paving our farmlands for more sub-developments. Let’s develop an alternative transportation system that gets people off the roads and onto mass transit (mass transit powered by electricity, natural gas, and other forms of energy not dependent upon the blood of dinosaurs). Let’s live and work in the city, walk to school, ride our bikes, enjoy our apartments, and give up our McMansions and our SUV’s out in the country.
Look into your wallets and tell me: do you really want to keep driving down this road? Can you see the horizon from here? It looks like a disaster.
Tags: afford, budget, economics, family, gas, gas prices, high cost of living, oil, politics, single-mom, single-mother
7 opinions for Why IS gas so expensive?
Betsy
Jun 4, 2008 at 10:17 am
As a single mom on a limited income who lives in the country, I don’t have many options. I have to drive to work (about 3 miles from home & NO public transportation around). Luckily my babysitter lives next door so I can walk my child to her house. My 1996 Jeep Cherokee is paid for and I can’t afford payments on a vehicle that can get better than 15 MPG.
Remember gas prices soared after Katrina (for whatever reasons the gas companies what to give) and have never gone back down, only up.
worker bee
Jun 4, 2008 at 11:50 pm
this is why i don’t mind paying a little more in rent and living so close to the metro.
when i first moved here, i was driving to work, 8 miles in an hour each way, plus driving around town, visiting friends, going to rehearsals, driving home to New Jersey. gas was purchased at least once a week, if not twice. a full tank, too.
since bus/metroing to work, i’m now moving my car once a week during Revels time, and only on weekends if necessary. i don’t drive home anymore - i take amtrak. (no hidden fees, no exuberant taxes. the fare is what you get. and trains are awesome.) i buy gas, maybe once every two weeks, and only $15 worth. whatever that puts in my car, that’s how much i have. (a little less than half a tank.)
the difference is incredible. my car is behaving better. she’ll now last me twice as long as i had anticipated. and my money can go towards better things, like living near the metro and hanging out in my savings account.
but i agree. those of you out in areas with no transportation, it must be hard. hopefully enough of us who can make a difference, do, and it will filter down to you.
Betsy
Jun 5, 2008 at 9:29 am
I know that I have to drive anywhere I want to go. But I do have upsides to MY situation. It only takes 5-10 minutes to get to work and both WalMart & Kroger are between my home & work. Which makes stopping for that forgotten milk/bread/bologna/…. not as inconvenent as it could be.
I’m also about 30 miles away from much cheaper gas than in my town. It’s a larger community across state lines. So every other week or once a month (depending on what’s going on), I make a trip over there to shop at a mall, see a movie, shop at a larger walmart (more selections),….. and I take gas cans to fill up also. With mowing season and 2 vehicles (which 1 of them sits a lot) to fill, saving 25-50 cents a gallon is worth it.
Gas in my hometown is $3.93 right now. And where I buy volume gas at across state lines is #3.64 right now. And as fate has it, my sister had a massive heart attack and has been in/out of the hospital in that town over there since April 20. So I tie in visiting her with my gas purchases and shopping trips and eating out somewhere besides fast food (which is about all my town has).
christina
Jun 7, 2008 at 4:53 pm
Betsy, it’s difficult no matter how you try to slice it.
christina
Jun 7, 2008 at 4:54 pm
Bee, it is nice to be less dependent upon a car, isn’t it?
JP
Jun 8, 2008 at 11:04 am
Thanks C, the Salon article was interesting. Having followed oil policy since 1981, I’ve come to the firm conclusion that the oil producing states are far more interested in price stability than gouging — they saw what happened in the U.S. & Europe in the 1970s in moves toward non-fossil fuels and don’t want that to happen again. Commidity futures traders and oil companies, oin the other hand, want and benefit from high oil prices, even at the expense of stability (actually, that is exactly the point for the commodity futures traders).
Get the CFTC to change the exception that allows speuclators to buy futures contracts for oil (leaving it for companies that need to lock in fuel pricing so they can set their own prices). Then pass damn near confiscatory windfall profits taxes on the oil cpmpanies — with a big loophole: 80% of the tax can be deducted from the cost of investments in fuel cell, biomass, wind, solar, geothermal or any other energy source that is not fossil fuel based except nuclear. If they want to be the energy companies of tomorrow as well as today, it’s in their interest to do this anyway. And use some of the 20% of the actual tax to examine the books on those making investments to ascertain that they are not simpl white elephants.
Micro strategies of cindividual consumers are important, but the problem — as the Salon piece notes, is structural. Ergo, so must be any solution we propose.
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