 |
   
The Price of Gas (06-09-2008)
Ok, I'm about done with gas prices. We are at $3.89 here in Missouri...and that is fairly cheap compared to elsewhere in the country. So lets have a nice discussion of why gas is this high.
First of all, yes China and India are becoming gas hogs. But even OPEC has admitted that demand is huge...but supply is MEETING it! Yes, back when China and India were more interested in farming dirt than in becoming modernized, there was a glut of oil on the market, which meant lower prices at the pump for the US consumer. So it makes sense for prices to go up as those 2 HUGE consumers came into play. But you are talking about a four-fold increase in gas in 8 years. And that can't all be explained away by the opening and modernizing of two countries.
Problem 1: Oil Refineries
The last oil refinery built in the continental United States was 3 decades ago. This means that even with sufficient supply, these old, inefficient refineries just cannot keep up with turning that supply into usable gasoline, diesel and heating oil. Why aren't newer, modern, efficient refineries being built by the oil companies? Well...it's expensive. That's the end all, be all. It's pricey...and the oil companies don't want to fork over the money to do it.
Problem 2: Exploration
For all of his faults, President Bush tried to do something quite logical and beneficial: he wanted to open the North Slope of Alaska to oil drilling. And he was shot down HARD by conservationists who cried about "the pristine land" and "polar bear habitats". I wonder if those conservationalists are crying about the price of gas today. The continental US is pretty much tapped out in terms of production ability. We are effectively drilling the Gulf of Mexico...with quite good results. But there is no where near the amount of oil present in the Gulf to satisfy our demand. Without further exploration, we are limited in how much we can produce ourselves. This means quite simply: if we want to meet our demands, we have to buy from OPEC.
Problem 3: The Fed
Yes, the fucking Federal Reserve is a huge player in this game. Every time they drop interest rates, the value of the dollar goes down. Furthermore, every time the Fed prints more money, that also causes the dollar's value to go down. What in the world does this have to do with oil? Well, whenever the value of the dollar goes down, the rich investors of the world start putting their money into hedge funds (like oil!) to combat inflation. So they buy oil when the dollar goes down...and buy oil again when it goes down further...so on and so forth. Endlessly! This has been one of the main reasons for the further increase in the price of gas over and above supply-and-demand issues. The Fed has to...it must stop overly printing money and raise interest rates. But it won't...because that will affect the damn rich people of the country. "The rich will stop investing if interest rates are high". Well, bud bud, the economy will collapse if the price of gas doesn't go down to more reasonable levels. And all those nicely rich people will stop being rich.
Problem 4: The Stock Market
This one really chaffs my ass. Oil is traded on the open stock market. And, oh my god, is that ever volatile! All of a sudden, you have to throw "fears" and "worries" and "what might be" into the mix. We aren't dealing with what is. Oh no...this is all what people fear might happen. "OMG, there's instability in Country X, an oil producing nation, and that might affect supply!" And then the price of oil jumps $5 a barrel. Um...moron...there has ALWAYS been instability in most oil producing nations. That's like driving up the price of oil because it is cold in Alaska and the machinery might be affected by it. Duh. So you have a bunch of overly-jumpy, freaking schizophrenics in big time control of the price of oil. Yeah...that sounds like a winning plan.
Problem 5: Competition
Competition among oil companies is pretty much non-existent today. You see, in a Free Market, competition is the main combatant to uncontrolled price hiking. But when all the oil companies are in bed with each other...well there's no driving down force in the market anymore. "You raise prices and I'll raise prices and he'll raise prices and we'll all swim in the money!" They aren't dumb...they finally wizened up. America lives on oil and gas. And they have it. And we need it. And we'll buy it no matter what. So as long as they all work together, they can literally make a killing. Oh don't get me wrong, it's not easy to get all these major oil companies to work together...but as I said, they all finally got smart. They've seen how well they can ALL do when they no longer fight each other. That's called Severe Bad News for the US gas consumer.
Problem 6: Oil Men in the White House
Yes, for the last 8 years, there have been Oil Men in the White House. That is like wondering why you are losing chickens when you know that there are wolves in the hen house. Bush didn't get rich off of selling trinkets at the mall. He was involved with the Harken Energy Corporation. And do I need to go into Dick Cheney's Halliburton connections?? So is it in their financial interest to drive up the price of oil and gas? Indeed it is.
Noticed I haven't even touched on SUV's, the War in Iraq, the Katrina and Rita hurricanes, or the fact that the Big Oil Companies will kill any technology that comes along that will help get us off our dependence of oil until they learn how they can make a buck from it. This problem is deep...severe...and has insane consequences...
Consequences:
Total...Economic...Collapse. I'm dead serious here. Everything moves by truck. Trucks that run on diesel fuel. Even if it goes by train or plain, to get to market, it goes by truck. It's not like there's a landing strip outside of each Wal Mart. Nor is there a train track going right by each shopping mall. If it is in a store, it got there via truck.
Diesel prices today were $4.59! That is insane. Now for the scary part. Companies pass on the increased cost to transport items to the consumer. Let's go back to our premise: everything moves by something requiring fuel. As the price of fuel goes up, the company passes that cost on to the consumer by increasing the price of the product. Fuel goes up, item cost goes up. Fuel goes up, item cost goes up. See a trend here?
This would be ok...IF people's salaries increased as well. But they don't. If you are lucky, you can get a 5% raise at the end of each year. Gas has gone up a ~30% since last year. The price of milk, bread, meats, etc has gone up well more than 5%! Utility companies continually pass their increased energy costs to their constituency. Without further money in their pockets, people will simply stop being able to afford goods and services necessary to the sustaining of the economy. You won't buy that plasma tv. You won't buy that SUV. You won't take that trip to Disney Land. If you don't travel, all that tourist money is lost. And there are a lot of small towns out there that almost solely depend on tourist money. These towns will start to dry up after a while. Why go out to eat and spend $50 on a meal when you can stay home and make one for a fraction of that cost?
Throw into the mix the problem with credit card companies gouging the fuck out of people (afterall, isn't that were most of the Economic Stimulus money is going anyway?? It's where MY stimulus money went!), and you have one hell of a problem. People's limited money will go to the basics: rent, utilities, gas for the car, and groceries. And little else. The US economy cannot handle this and will eventually crack and fall apart. It's the simple, stark reality of the situation. I honestly do not know how we are gonna get out of this one. And that worries me quite a lot.
This Rant Brought To You By Matthew T. Chernay
|
Affiliates:
  
 
|
This Site Is Powered By:
 |
|
|
