Apocalypse Now?

In the words of The Hives, “I hate to say I told you so.”
Remember when the rising gas prices were threatening our very way of life and every politician who wanted a future in D.C. was playing the part of Chicken Little?

In the past few weeks, there have been many positive occurrences in the gas problem in the United states. On July 14, President Bush lifted the executive ban on offshore drilling. The price of a barrel of crude oil dropped 6% and gas is now at its cheapest since June 5 at $123.29 per barrel. Now, before you start writing your congressman in a tizzy about the little fishies and bottom feeders who are going to have a massive hole drilled through their habitat, realize this. President Bush’s actions actively DO NOT DO ANYTHING. His gesture was enough to ease the minds of speculators and, therefore, the price drops. If you want to even greater results, bug your congressman to support lifting the congressional ban on offshore drilling. Of course, there are a number of governors who, even if the ban is lifted, will refuse the drill (The Govenator is on the record saying this) and effectively butcher his (or her) state’s economy.

Another eeason prices are slowly dropping is because the American people, is of the ridiculous gas prices, have been conserving gas. Everyone gets to keep a little bit of extra cash and it helps limit harmful emissions into the atmosphere. Everyone wins, right? HA!

About 18.4 cents out of the 4 or so dollars you pay for each gallon of gas go to the government (a.k.a. TAXES). People buy less gas, and the government (Congress) makes less revenue.  With less money, Congress cannot afford to move forward with the plethora of programs to “raise the lifestyle of the common American”. One would expect that Congress, especially the Democrats (remember, the oneswho have been pushing conservation for decades now), would re-evaluate the necessity of some of the programs and cut a few to make up for the cut in revenue… but that would make too much sense. Your buddies (you know, the Democrats) want to raise the Gas tax around 5 cents more per gallon to makeup for lost revenue.

If you read that last part and the next words out of your mouth were “W.T.F.” you officially have more Common sense than at least half of Congress. It makes no sense. We do what politicians ask of us to help relieve the pressure of the gas prices, and we are punished by it. Thankfully, this tax increase has yet to be voted through and, with any luck, will die…a fiery painful death.

Keep things like this in mind when you go into the voting booth this novermber (or mail in your absentee ballot like me). If your senator or congressman is up for re-evaluation, please make sure he has taken Econ 101. Electing people with little to no knowlege of basic economic concepts to a body that affects our economy so greatly is like asking for Brittny Spears to perform quadruple bypass surgery on you. Every election always brings us painfuly close to oblivion (or so it seems based on the News). Don’t be responsible for it.

Fueling the Fire

Here is an opinion of mine which I believe 99.999% of the American people will agree with me:

Gas prices suck.

WIth the average cost of a gallon of REGULAR gasoline approaching $4 (as of 6/2/08 it was $3.97 according to the department of energy) we can all agree that something needs to be done. Some common approaches that have been suggested in the past:

Solution 1) Use less gas.

It’s a good idea, but will only have a marginal effect compared to the impact it will have on life as we know it. Though crude oil is a commodity and, therefore, subject to the market forces of supply and demand. The problem lies in the fact that a large percentage of the price of gas is determined based on speculation; what might happen. Also, most of the supply comes from foreign sources (more on that later) and the demand is determined on a global scale. The system of obtaining oil from OPEC with a little domestic production on the side worked fine a few decades ago (1980 aside), but now that China and India have emerged from the 18th century, the demand has skyrocketed. China and India together have a little less than 9x the population.

Solution 2) Have the government set gas prices so gas never gets this expensive.

TERRIBLE IDEA. Need proof? Look back to the economy under President Jimmy Carter. Setting prices will throw a monkey wrench into the market forces and the rules that govern the capitalist system will act with a vengeance. AS of April of 2008, 73% of the price of gas comes from the price of crude oil, 10% is from refining the oil, 6% is based on distribution and marketing, and the remaining 11% comes from taxes. When the government sets the price, do you think the cut comes from the tax portion of the prices.

Of course not.

The price cut will most likely come from the distribution and the refining. That means less gas will be produced from the crude oil, and from the lessened supply, a smaller percentage will be distributed to gas stations across the country. What does this mean for us, the consumer, you ask? If you aren’t old enough to remember, go ask your parents about gas lines in the early 1980′s.

Solution 3) Use alternative fuel sources

AMAZING IDEA … but nit yet. We currently do not have the technology to harness hydrogen energy, and biodiesel fuel does not make economic sense (an issue worthy of its own post). Also, hybrid cars, the “environmentally-friendly” craze that has been sweeping the nation, are actually less energy efficient than one may think. A friend of mine sent me a link to an article in the Wired blog network
( See Here).

Solution 4) Get more domestic oil

Best Idea. There is plenty of oil in the United States and off of the Gulf Coast, but our buddies in Washington, such as Senator Ken Salazar D-CO, don’t want us to drill. They say that the oil reserves are about to run dry. For the record, politicians have been saying that for years and it has yet to happen, but what do I know… If it’s not that then they are saying that it will destroy the environment. I don’t know if any of you are familiar with the children’s TV show, Captain Planet, that has been on since I was a child, but the villans in that show are people who get their kicks off of dumping non-biodegradable waste into ponds just to watch little duckies choke to death. I seriously doubt there is anyone like that on this planet. With all of the restrictions “protecting” the environment, it is almost impossible for oil companies to damage it by drilling, that is IF they are allowed to drill.

Senator Salazar, whom I mentioned earlier, slipped a law into a large spending bill last December that placed a morotorium on shale oil production on federal land. His excuse – to slow things down in order to make sure environmental standards are kept. Sounds responsible, no? What he assumes is that people don’t make the connection that this will raise gas prices because of stunted production while the leftist democrats (not the sane ones) slam oil companies for their ridiculous prices. Jury says: Political play. It’s a power trip. Many people think the oil companies are just “greedy, evil corporations” who are extorting the American people for money. Do you remember the statistic quoted earlier about how the price of gas is determined? 6% is for marketing and distribution. Somewhere in that 6 percent is where the wages for the entire company come from.

Let the oil companies dig in the United States. The world will not tilt off of its axis, the Ice Caps won’t melt, we will be able to live to tomorrow, and, most important of all, gass prices will DROP.