Why Gas Prices Are High

I’m not sure why there is even a debate on this. Sure, I took economics classes in college, but I think I failed some of them and I still get this. I’m not surprised to hear Democrats coming up with strange explanations, but why Republicans can’t explain it or are failing to explain it is beyond me. Supply and demand. When supply goes up, prices go down. When supply goes down, prices go up. When demand goes up, prices go up. When demand goes down, prices go down. It’s that simple.

Ok, it’s really not that simple. It’s that simple in a 100% free market, but we have additional factors in our market. For example, taxes. When the government taxes something, the price goes up. Sometimes the government taxes something to artificially drive up the price so that people will use less of it, like cigarettes (which is French for “small, feminine cigar” and yet macho cowboys still smoke them instead of manly cigars). How the government thinks that by increasing their tax on gas (i.e. windfall profits tax) the price will go down is beyond me. By the way, did you know the government makes more off a gallon of gas than the oil companies do? Something to think about.

But what’s more interesting and meaningful is why supply is where it is and why demand is where it is. Let’s look at demand first. Why aren’t we more like Europe and Asia? Why is it that we drive everywhere and every teenager here has a car whereas in Europe people get around on subways and buses and rickshaws and such? I’ve heard that it’s because Firestone and the other tire companies lobbied the government in the 50s to not build mass transit systems but freeways instead so that more people would use cars and they could sell more tires. True or not, it’s a fact we don’t have the same kind of mass transit systems Europe and other countries do.

I wish we did. I lived in Brazil for two years and took the bus everywhere. It was great. You could leave your house, walk two blocks, and there would be bus every five minutes. You didn’t have to know when it was coming, you just needed to know where and you could go there anytime. A bus comes by where I live now twice per day–once in the morning on the way to Salt Lake City, and once in the evening on the way back. You miss the bus and you’re hosed. I miss a good bus system. Plus the way those bus drivers in Brazil drove it was a sort of adventure. I mean, you didn’t know if you’d make it home again the way they took corners.

But we don’t have that kind of mass transit. Oh, I know they’re working on it, but is it ever going to be close to what they have in Brazil or Europe? I don’t think we’ll ever get there. Part of the reason is that it’s just not feasible in all areas. Sure, mass transit works in large cities where many people are packed into a small geographic area (i.e. New York, Chicago, LA) but in our country people are spread out. Even after all the mass transit plans are implemented the majority of the US population will not use them, and it won’t be a marketing problem. There will always be auto-users, and chances are the number will grow even as mass transit grows. Conservation is all well and good for individuals, but as a whole this country will continue to consume more and more energy, and at the moment the cheapest form of energy is gasoline. That may change in 20, 30, or 40 years, but it’s not changing today or in the next 10 barring some miraculous scientific breakthrough. Until then, it’s all about oil and the demand is not going away.

If we can’t look to demand for a solution to high gas prices, then let’s turn to supply. By now you’ve heard all the people saying that there is enough oil offshore, in oil shale, in ANWR, and inside of polar bears’ heads to keep the US stocked with oil for the next 300 years. Then there are coal to oil technologies and they say there’s enough coal to produce three times the oil the Saudis have. Then there’s nuclear technology as well.

So why don’t we use all this stuff that we have? The answer from those on one side of the political spectrum is that the environmentalist movement won’t allow it to happen. The environmental side says the oil companies already have access to millions of acres of land that they’re not using. The oil companies then say they only have 10 years to use the land once they start, and it takes 8-9 years just to get the permits which leaves them 1-2 years for drilling and harvesting, which isn’t enough to make it worth it.

Now it seems to me that what a true environmentalist would be afraid of is damage to the environment, habitat, and species. The oil companies say they can get the oil out without any major damage to any of the three. Granted, some environmentalists would consider the death of one stinkbug a major disaster, but I think reasonable people simply don’t want huge oil spills ala the Exxon Valdez or to turn ANWR into a huge field of oil pumps winding away, smashing polar bears and caribou in between their parts if they should happen to wander into them. Well, the Exxon Valdez, it should be mentioned, was a ship that was carrying oil to the US from another country, so you could make the case that if we were getting more of oil from our own shores instead of foreign shores it never would have happened in the first place. The oil companies can use one acre of land in ANWR to do what would have taken 10 acres a few years ago, and they would only end up using something like .001% of the land in ANWR. And remember Hurricane Katrina, that big hurricane a few years ago? 3,000–yes, three thousand–oil platforms were in the path of that hurricane. Not a single one was lost, there were no spills, and no lives were lost.

It would seem the technology to harvest oil safely is there. Why not let the oil companies have their way for 10 years and then let’s analyze things and see how they’re doing? We could impose massive penalties in the case of disasters. For example, let’s say that if a company has a major spill they’re responsible for cleanup, compensation to any human victims, and they’re out and their assets in the area get auctioned off to the highest bidder with the proceeds going to straight to the DNC. One strike, you’re out. We could set up rules about the impact on the habitat and Greenpeace and the Sierra Club could send volunteers to monitor things. After 10 years if things are working out let it continue, if not, figure out something else.

If anyone has a convincing argument for why we shouldn’t open ANWR and offshore areas to drilling and Utah and other states for mining oil shale I’d love to hear it. Not because I’m going to have a kneejerk reaction and refute it, it’s just that if there’s a credible argument against these things I haven’t heard it yet. All I hear is ill-formed arguments from politicians who feel obligated to support the environmental lobby but who obviously don’t care about anything but politics and other people who care about the environment and have been misled by those politicians and can’t argue the matter beyond regurgitating what the politicians say, but who can’t go any deeper.

By the way, I’m not on the payroll of the oil companies but I wish I were. If any of them would like to start paying me to post more of this kind of stuff just start sending me checks.