Enough with the Gas Price Emails, Already!

The latest one helpfully starts out this way:


This was sent by a retired Coca Cola executive. It came from one of his engineer buddies who retired from Halliburton. If you are tired of the gas prices going up AND they will continue to rise this summer, take time to read this please.

No, it’s not the gas boycott email, but it makes just about as much sense. To believe that this sort of thing is the answer to the gas price issue is to ignore some crucial facts about gas prices. To understand what will work, you have to realize a few things:

What goes into the price of gas?

The reality is that nearly 80% of the cost of a gallon of gas is simply the price of crude. That isn’t determined by Exxon, Mobil, or any other gas company. It’s determined by OPEC, and we don’t have the right to tell them how to set their prices. Their price is based on speculation, not actual operating costs. Simply put, OPEC guesses about what’s going to happen to the oil supply / demand, and adjusts their price accordingly.

Once they set the price of crude, the crude has to be obtained, transported, refined, and made into the obscene amount of different specific blends required by law in different areas. Since only a limited supply of each blend is made, they cost more. It’s simple: since there are fewer gallons of the blends, the cost per gallon to make the stuff is higher.

Then there are the transportation costs.

And then the real fun begins. When you think about it, “Big Oil” actually makes very little profit considering what they do. For every gallon you pump, somebody has to research oil reserves, pump it out of the ground from some pretty dangerous areas (doing a pretty dangerous job), transport it to the refineries, make the blends, and transport it to your local station.

With all that, “Big Oil” makes less than a dime a gallon in profit. Pretty generous, actually. Far less profit than on bottled water, which is a heck of a lot less work to get.

Where you get hit the biggest, proportional to the work done, is taxes. How much? Well, the Federal government, which does absolutely nothing to help get the oil, gets about 30 cents a gallon. States take more. Then there’s sales tax.

So instead of sending those millions of messages to Exxon and Mobil, why not tell Congress to get their paws out of a till they do nothing to create?

Which brings us to the next point – why boycott Exxon and Mobil?

As we’ve already established, they’re getting less than a dime a gallon. And they’re public companies, which means they have stockholders to report to. What do you think those stockholders are going to do if next year Exxon and Mobil only get a nickel a gallon? You got it – raise holy hell.

Oh, and while you’re boycotting Exxon and Mobil, who are you going to buy that gas from? Hopefully not Citgo, which is owned by Venezuela, which is run by a socialist nutjob who is a stated enemy of the United States.

Supply and Demand

If you really want to do something about gas prices, the single biggest thing you can do is realize that capitalism works. More supply = lower prices. Legislation now prevents the drilling for oil in this country (we have more here than in the Middle East – enough to make us completely self-sufficient for quite a while), and it also prevents the building of more refineries. Oh, and we’ve also now stopped filling the strategic oil reserves. And finally, next week, they begin debating the Cap and Trade legislation – which, if it goes through, will likely single-handedly result in a price increase of $1.50 per gallon – or more. $4.00 a gallon is going to seem like a bargain.

Basically, if anything results in a long-term oil shortage, we’re pretty much screwed, which is really scary when you realize what’s coming within the next decade.

Current oil production is about 85 million barrels of oil a day. Within the next ten years, China – alone – will be using 85 million barrels of oil a day. That’s right. If we don’t increase production (and OPEC isn’t going to do that – why should they? If they’re the only game in town, they can charge whatever they want), China will need the ENTIRE CURRENT DAILY PRODUCTION of oil to keep themselves afloat. No wonder they’re currently buying up all the oil and oil interests that they can.

No war for oil? Everyone, everywhere, will be willing to go to war for oil when there’s none available.

Then there’s ANWR. The reality is that not one caribou – or one tree, for that matter, exists within 700 miles of where we want to drill in Alaska. And though we’re not trying to get there, other countries are. Remember when Russia wanted to claim the North Pole? Why do you think that is? Maybe, just maybe, it’s the significant oil reserves up that way. Whoever gets to the oil first – no matter whose country it’s under, owns the oil. Russia and Canada are very likely drilling sideways, right now, for oil we could get to going straight down.

You really want to drop the price of oil? Drop the semi-socialist “naughty big oil” stuff. The solution is pretty simple:

1. Increase supply – our supply. Drill here, drill now, pay less.

2. Cut taxes, encourage development.

3. Build more refineries

4. Aggressively pursue other options (hydrogen, clean coal, shale oil, cars that run on Milky Way bars, whatever)

What isn’t going to help is punishing big oil for bringing you a product you need at a price that’s a pretty good deal compared to the price of milk.

So please – enough with the gas price emails.

And don’t get me started on Ethanol…