Pump It UP!

Articles

Matthew Bastian

Pump It UP!
May 28, 2004

Not really one for flashy cars, I drive a Subaru. Yesterday, for the first time I can remember, it cost me an even $25 to fill my tank with regular unleaded.

Now, I can already hear the chortle from those of you who drive SUV’s or live in California: $25 is probably your cover charge just to get on line at the pump.

But remember that this is a Subaru we’re talking here – basically 4 cylinders and a stereo – and I live in New Jersey, where gas is relatively cheap. That’s usually a good formula for leaving the pump with something still in your wallet and both kidneys still in place.

Not so anymore. Like all Americans, I enter the summer driving season faced with the unfortunate reality of gas prices creeping north of $2 per gallon and beyond. However, while nobody is happy about it, I find any reaction beyond a simple “grin-and-bear-it” to be incredibly shortsighted. This is a simple issue of supply and demand, folks: demand is currently up, thanks not only to our own consumption but also that of growing economies like China, and supply is down.

Ever eager to show that they care, politicians aren’t buying the Economics 101 reason behind the jump in prices. The hunt is on at both the federal and state level to find evidence of collusion, price gouging, and other nefarious activities by retailers and refiners alike. The idea that such a well-organized cabal is behind a national trend is, of course, silly on its face. However, this does not stop our crusading representatives from trying to prove it.

Some senate Democrats, including Tom Daschle and Charles Schumer, favor tapping into the strategic petroleum reserve to offset the current demand. President Bush has resisted this measure, and rightly so. First, many experts doubt that the 30 million barrels requested would have a noticeable impact on gas prices in the long run. Second, the SPR is there for emergencies: $2 gasoline, as unpopular as it may be, hardly qualifies as such.

The SPR is there should, heaven forbid, terrorists blow up a Gulf coast refinery or two – now that would be an emergency. The Daschle plan is like tapping into your family’s rainy day fund because Junior wants a new bike and is throwing a tantrum in the store.

The other aspects of the gas crunch that cannot be overlooked are on the production side. We have not built a new refinery in some 30 years. The refineries we do have are operating at peak capacity (allowing down time for maintenance) and are hamstrung by the number of “boutique” blends that various regulations have mandated. That is to say, for example, that a refinery in Texas might be able to make gasoline suitable for California’s motorists, but not Iowa’s.

And the environmental lobby’s near pathological opposition to any new drilling has not helped the cause, either. Whether offshore, onshore, or in remote, uninhabitable plains of Alaska, new drilling has become a pipe dream (no pun intended).

ANWAR, a God-forsaken tract of frozen tundra that spends most of the year in complete darkness, became a rallying cry for environmentalists everywhere. Arguably the second largest oil reserve in American soil, ANWAR’s drilling “footprint” is expected to be no larger than a football field or two. However, this does not stop the self-styled environmental crusaders and Manhattan socialites who will never set foot in Alaska from fighting the plan.

Alaskans favor drilling in ANWAR. Eskimos favor drilling in ANWAR. And, if they could talk, caribou would probably favor drilling in ANWAR (when similar predictions of environmental catastrophe surrounded the Prudhoe Bay pipeline plan back in the 70’s, everyone was shocked to find that the herds flourished – the warmth of the pipeline was a magnet for amorous caribou).

The bottom line is that we should not be surprised to find that years of environmental stonewalling and tomes of regulations have hindered our ability to produce gasoline efficiently. The people who fight against any new drilling and now have the chutzpah to complain about high prices are the same ones who fight for “open space” and “affordable housing” at the same time.

Whether it’s housing or gasoline, the easiest way to make a commodity more affordable is to either produce more of it or reduce demand. Seeing as Americans don’t appear to have any inclination to end the love affair they have with their cars, the former is our best option.

Maybe Daschle and company should dust off their Econ 101 books for some summer reading at the beach – it would appear that they could use the refresher.

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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

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