Explaining the High Price of Gas

There is lots of misinformation out there about why the price of gas is so high. I’m certainly not an expert but when I listen to the ‘experts’ not one seems to be able to offer a simple concise description of the problem. Listen to enough of them though and a pattern emerges.

It all boils down to the American public being caught between three interrelated factors: the oil exporting nations holding down supply, the industrializing nations like China & India greatly raising demand and US environmental interests blocking any changes they don’t like.

That’s it in a nutshell.

For a more complete explanation of these factors and real solutions in principle, read on.

The most active environmentalists and therefore the most influential are on literally a religious mission to ‘save the planet’… facts and reason be dammed in the face of their sought for ‘holy grail’. Religious fanatics do not acknowledge facts nor do they listen to reason, their fanaticism does not allow for it.

Since the ‘environment’ has become a ‘sacred cow’ within the Democratic Party, they are blocking any Republican congressional efforts to alleviate the problem. That is because they believe that the Republican ‘cure’ is worse than the disease. Short-term they are mistaken, long-term they are correct that short-term solutions are inadequate. But all they are looking at is the long-term issue, meanwhile the cost of energy is bankrupting the country and funding terrorism. Those are, at the very least, equally valid issues.

The rise of China, India and other industrially developing nations has greatly increased demand for oil on the world market. The importance of that factor cannot be overstated. To service that demand and keep worldwide prices for oil affordable, we have to increase supply. 

The Middle Eastern OPEC nations are using the situation and limiting supply so as to raise the price and literally sucking hundreds of billions of dollars out of western and developing nations. (Incidentally, as this is a form of usury (interest) it is hypocritical in the extreme for Muslims to betray Islamic precepts by ignoring this reality.) The ME nations are then using the ‘profits’ to buy ‘positions’ in key western companies…that reality alone makes this a National Security issue.

There are two aspects to the problem; short-term and long-term. The hard truth is that short-term there are no substitutes for nuclear power, coal to liquid processing, synthetic oil, offshore exploration and increased drilling.

Since we are in a crises situation, immediate short-term relief is needed.  

As long as this country is dependent upon foreign oil we will of necessity have an interest in the Middle East. At this time and for decades to come our dependence upon oil is as total as a newborn baby’s need for its mother’s milk. We cannot survive without it, our civilization would collapse and just in the US hundreds of millions would die should the oil stop or even fall below necessary levels.  

Most Americans have bought into activist/media hype surrounding environmental concerns. To such a degree that since the mid 70’s there has been no new oil exploration, drilling or new refineries built in this country or off our coasts.
 
The same situation applies to nuclear power. Earlier concerns regarding nuclear waste are no longer valid as the French have been reprocessing used fuel successfully for decades, greatly reducing the amount of waste (down to 3% of plants that do not reprocess used fuel).
 
Proven and established technologies exist for the conversion of coal into liquid form. US coal deposits alone are sufficient to provide for the energy needs of our nation for the next 200 years but environmental special interests are blocking their implementation. No company will even attempt to try to proceed with development given the regulatory and permit process (thousands of required studies & permits needed). All of this is of course intentional but it is no longer the 70’s. 

It is developing into a national security problem for the US but those are ‘dirty’ words among liberals. Just as Republicans focus exclusively on short-term solutions, Democrats focus only on the necessary cost and disadvantages of short-term solutions. Thus they attempt to obfuscate the problem. ‘Misdirecting’ ordinary citizens with talk of the ‘evil’ oil companies and their ‘windfall profits’. But an ‘inconvenient’ truth is that the oil companies make less than a 9% profit margin.

That is hardly excessive. Oil companies have no control over the cost of crude oil. All they do is process it into gasoline. The oil exporting nations set the price of a barrel of oil, which directly determines the cost of gasoline ‘at the pump’. Windfall profit taxes will not lower the cost of gas at the pump so its disingenuous to tout it as ‘doing something about the problem’ at best it’s a delaying tactic.

By the way, ‘Excess’ profits go to shareholders, who are not just ‘fat cats’ but retirement funds, middle class investors, union and public employee pension funds. Profits do not “just go into greedy people’s pockets”. With the occasional exception of an Enron, in any major corporation every penny in a companies income is supervised, overseen and specifically directed. Management’s compensation is fixed both to salary and percentage of profits.

Profits also go toward exploration, research and development; such as Canada’s oil sands, a highly significant future source of oil for the US. Take away those ‘windfall’ profits and the law of unintended consequences will bite us right on the ass…  
 
Eventually, if the cost of gas rises high enough public outrage will compel Congress to actually do something to address short-term needs. Meanwhile it sucks to be us…doesn’t it?

However, Long-term, only alternative energy technologies will prevent future energy crises. There is no substitute for development of new choices in energy sources; they are also a necessity. They are also a National Security issue. In time, practical alternative energy solutions will be developed.

The resources do exist. Enough sunlight falls on just an area the size of Saudi Arabia to power all of the worlds present needs for electricity. The moon has vast quantities of helium3 lying on its surface. Helium3 is like uranium on steroids. That resource alone could power the world for millions of years. Clean fuel cells are mere years away from commercially practical mass-production.

Ironically, as is generally the case in a dispute, each side is partially right. The problem is that neither side will acknowledge the valid points each side is making. As always, there is no substitute for sincere cooperation in achieving solutions.

On a positive note, all of this is temporary (20-50 yrs), once we develop truly practical alternative energy technologies these problems will fade away. But right now, it’s a serious problem.

Democrats have to agree to limited but adequate, development of short-term solutions.

Republicans have to agree to legislation with real technical safeguards, regulatory oversight and mandatory financial and legal consequences for businesses that violate environmental parameters regarding exploration, drilling and development of new oil, coal and nuclear resources.

Republicans and Democrats have to agree on federal legislation with near-permanent incentives and rewards for development of alternative energy solutions. Place a big enough carrot in front of companies, entrepreneurs and creative individuals and they will rush to fill the need.

That is the proper role of government. Set the rules of the game, make it worth playing on that field and fairly referee the action! Then get out of the way and let the players, play!

Geoffrey Britain

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2 thoughts on “Explaining the High Price of Gas

  1. Pingback: Blog about Oil Pumpers » Blog Archive » Quick Roundup

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