Gasonomics

Since gas prices have been in the news continuously I'll start by answering the question "Why am I paying so much at the pump?" It all comes down to supply and demand, but most people don't know how we got to this point "without any warning". The warnings have been there since the '70s but we have chosen to ignore them.

Over the past several years demand for gasoline has increased tremendously. There are new economies in China and India. In China alone, between 2003 and 2004, the number of private cars grew from 5 million to 9 million. That number is expected to be about 140 million by 2020. That's only cars. Next add the new power needs from factories, office buildings and bringing electricity to new areas of these nations. The US population alone has grown from 225 million in 1980 to just over 300 million currently and half of those people own cars, live in powered homes, work, etc. Europe has grown, North Africa, South America...the list goes on. All of this growth is the reason demand has grown tremendously all over the world.

Since we have seen demand growing steadily over the past 40+ years, we have prepared for this...right? Wrong.

As the demand throughout the world grew, foreign sources of oil kept up with world demand outside of the US. The world production was able to keep up until about 2003-2004 when the exploding demand began.

So why can't we meet the demand? Mostly because of the beaurocracy and stifling by the US government. Here are the biggest contributors that tied the hands of oil companies and kept them from being able to increase supply:

1) The last time a refinery was built in the US was 1976. This is not because oil companies do not want to build any new refineries. There is so much regulation and red tape, it makes it impossible to build one and make any kind of profit. Because of this, the US not only has to import oil, we also have to import refined gasoline to meet our needs.

2) The ability to drill for oil is restricted tremendously. In 1995 Congress passed a bill to allow drilling in ANWR to retrieve its' 10.4 billion barrells of oil, but President Clinton vetoed it. The biggest complaint about the bill was "it won't make a difference for 10 years". It has been 13 years since then and look at the mess we are in. There are 1.8 trillion barrells in midwest shale oil, (that can be up to 8 times Saudi Arabia's total oil reserves available) but leases to oil companies were made off limits last year by the Democrat controlled Congress attaching a provision in the omnibus spending bill to make sure the President could not veto it. That same congress refuses to pass the ANWR bill again for the President to sign. The last place drilling is restricted is in the Gulf of Mexico. China is currently drilling with the help of Cuba in areas where American oil companies are restricted. The Congress is working on a bill now, but it still restricts drilling within 50 miles of the coast. The problem is...that's where the oil is located. They want to make it look like they are doing something while continuing to blame the oil companies and speculators.

3) We have been extremely slow moving on truly viable alternative energy sources. Nuclear energy is clean and extremely efficient. It is such a great resource, France derives nearly 80% of its' electric power from Nuclear power, but the US has not built a nuclear power plant since 1996. Wind and solar energy are still not powerful enough to make a big difference, yet those are the only "alternatives" even being considered by Congress.

4) There are currently 45 different kinds of gasoline that are required in different states. This makes the already limited number of refineries have to shut down, clean out and retool to make the next kind. These requirements come from EPA mandates by unelected officials. If there is any disruption in supply of one type of gasoline and it is not currently being produced there is a big delay while the refinery shuts down, cleans out and retools. That is what is causing the current lines at gas stations in Georgia.

So the problem with the current high gas prices all boils down to lack of supply with the government being the cause of this low supply through over-regulation and beaurocracy. You will hear politicians saying it's oil companies trying to keep the price high and make more money, but that makes no sense. The oil price is set by the world market and American oil companies are a tiny fraction of the total market. Expensive, imported oil is driving the price up. American oil companies make about 10 cents per gallon at any price so they would much rather be able to bring the price down and sell more gallons of gasoline to increase their profits. These politicians are beholden to extreme environmentalist groups who lobby them and contribute millions to their campaigns. They are only interested in re-election so that is why Congress does not pass anything that makes it easier for us to get our own oil to help bring the price down for your family. Remember that the next time you go vote.

The blame lies squarely on Congess and groups like MoveOn.org, ELF, Sierra Club and Greenpeace