HOME | POLITICS | SPORTS | LIFE | SCI/TECH | OPEDS | HELPFUL TIPS
|
May 11, 2006 Call it a momentary lapse of reason, but I leased an SUV last month – not the smartest choice in the world with gas creeping towards $3 per gallon. After a few weeks of nothing but local driving, I’m firmly convinced that my new vehicle is just a notch above an M-1 Abrams tank in terms of gas mileage: just backing the thing out of the driveway seems to guzzle a quarter of a tank. It’s safe to say that, in terms of timing, my vehicle choice ranked right up there with buying real estate in Pompeii, Italy, circa 79 AD. (“Spectacular mountain views!”) Adding insult to injury, I have distinct memories filling up my trusty, if less roomy and masculine, import sedan in early 1999 for ten dollars. The cheaper gas stations in New Jersey had regular unleaded for 79 cents a pop. My purchasing misadventures aside, how did it get to this point? For the politicians, some sort of bogeyman must be to blame: Big Oil, ‘obscene’ profits, and price gouging by individual filling stations are just a few of the culprits that have been deemed guilty until proven innocent. Congressmen and Attorneys General alike are nearly tripping over themselves to show their concern and be at the forefront of the crusade. Everyone is feeling the pinch and someone - or something - must be held accountable. If only it were that complicated. Gasoline, like any other commodity, has a price driven by supply and demand: for the past few years, booing economies in India and China, combined with our own insatiable thirst for stuff, have driven demand into the stratosphere. Like it or not, the world can’t get enough gas right now. On the supply side, geo-political factors have resulted in some serious hiccups in the flow of crude oil: the war in Iraq, Iran’s nuclear saber rattling, and unrest in Nigeria to name a few. Unfortunately, much of the world’s supply lies in areas not exactly known for stability. One must also consider the quality of available oil, which comes in different flavors, if you will: light or heavy (a measure of density) and sweet or sour (an indication of the sulfur content – an impurity – of the oil). The lighter, sweeter variety is easier, and therefore cheaper, to refine into gasoline. The heavier, sourer crude generally found in Russia, the former Soviet Republics, and much of the Middle East is better suited for products like fuel oil. In short, much of the available crude oil requires more intensive processing to make the final product most in demand. Throw in a few other factors like environment roadblocks for new drilling and 30 years without a refinery built in the United States and, voila: $3 gas. Which, in the grand scheme of things, isn’t all that bad. Europeans have paid similar prices – per liter - for years. However, Europe enjoys two factors we do not when it comes to transportation: thorough, efficient rail systems and relatively short drives. If a Dutchman motors three hours from Holland, he’ll be in Germany or France. Drive the same from New Jersey and you’re in…Maryland. We Americans are a stubborn lot. Come Memorial Day we expect to be able to load up very large vehicles with kids and coolers, drive hundreds of miles to a beach or campground, and not have the price tag for the ride hit triple digits. When basic economics has the nerve to crash the party, we get indignant and demand action. Much of that anger is directed towards the oil companies – how can they dare to make so much money in our time of need? We need to be careful, however, about turning ‘profit’ into a four-letter word. Profit is what allows oil companies to expand, hire more people, invest in exploration and new technologies, and do all the other things successful companies do when profits are up. Let’s pick on ExxonMobil as an example. The oil giant had a net income of $8.4 billion for the quarter ending March 31, 2006 – a 6% increase from the same period in 2005. In March 1999, right around the time I was getting a full tank for a sawbuck, their income was $1.02 billion – a 43% decline from the first quarter of 1998. If the numbers from 2005 to 2006 are ‘obscene’ profits, were those obscene losses from 1998 to 1999? Or did we not care to notice because it didn’t hit our wallets at the time? My money is on the second pony. If mad cow disease were to ravage herds in the Midwest and milk prices went up as a result, would we blame “Big Dairy” for price fixing? Of course not. Why, then, must the gasoline issue have a villain? It’s as if we expect to stumble across a smoky room in Texas somewhere filled with oil fat cats, all slapping Dick Cheney on the back and lighting their cigars with $100 bills. And while we huffily demand something be done, expecting politicians to wave a wand over the situation is simply asking for trouble: price controls will limit supply (as they did in the 1970’s) and punitive, “windfall profit” taxes on the oil companies will reduce their incentive to reinvest in exploration or do anything else entrepreneurial. As consumers, we have choices: drive less, walk more, or opt for more fuel-efficient vehicles. However, we also need to face up to the unfortunate reality that 79-cent, even $2, gas may be a thing of the past. This year, Memorial Day may have to be spent in the backyard instead of at the Brickyard. As for me, I’m stuck with my gas-guzzler for the next three years and will be kicking myself every time I stop at the pumps…which at the current rate should be about twice a week. ------------ About Matthew Bastian: Recovering socialst, part-time drummer, long-suffering Brewers fan, and all-around beach hound, Mr. Bastian lives in central New Jersey. Email Matthew Bastian: mbastian19@hotmail.com Comment on this article here! ------------ All articles are EXCLUSIVE to Useless-Knowledge.com. Please link to this article rather than copying and pasting it onto your site (which would be unauthorized and illegal). |
||||||
|
|
|||||||
|
