Gas Prices

I should probably say, before I delve into the subject of gas prices, that I come from an oil family. My grandfather worked for an oil company. My father works for an oil company. So do my cousin and Aunt. I decided to make my career in another industry that’s hated for providing people with useful and essential products: pharmaceuticals.

Another blogger asks:

Speaking of Jericho, if people can go that NUTS over a TV series, why can’t John and Jane Q. Public stage an uprising against high gasoline prices? Are we sheep?

Because gas prices aren’t something that we can do anything about. They are driven by market factors that no individual or group of individuals control. Unless you want to pressure the President to nuke China and India, gas prices are going to be high.

Factors that are contributing to high gas prices:

  1. High crude prices driven by volitility in the nations that provide it. Most world oil producers have shitty governments.
  2. Demand from China and India driving up demand for existing oil supplies. That’s more than 2 billion people who all want to drive like Americans do.
  3. Americans love to drive, and they like to drive big cars, and drive them a lot more in the summer.
  4. Refinery shutdowns around the country that are a result of refiners not doing regular maintenance. Because gas prices are high, the costs of shutting down refinery units is high in terms of lost production.
  5. We’ve switched from using MTBE as a anti-knock and oxygenating agent to the much more expensive Ethanol. Thanks corn lobby!
  6. We haven’t built a new refinery in 29 years. Thanks EPA and NIMBYs!
  7. A patchwork of environmental regulations prevents gas from one area being sold in another. The gas formulation for Philadelphia is different than for Houston.

But if you can find somewhere I can set nuts that would solve all these problems, I’d be willing to chip in.

UPDATE: A lot of folks have brought up the issue of the gasoline tax.  Getting rid of gasoline taxes, in the short term, would not lower prices.  In the long term, it would put more profit back into the industry and encourage more resources to be invested in refining and distribution, but over the short term the current price is set by where the supply equals the demand, and tax relief, in the short term, does nothing to increase the supply of gasoline.

5 thoughts on “Gas Prices”

  1. Why is the media and everyone else ignoring the outrageous and punitive taxes by the Federal and State government? Why not require them to take off the taxes before we attack the oil companies? Face it if anyone is gouging it the government who do nothing but make law to collect your money then they blame the corporations !!! Think for a minute… Who is raising the taxes on cigarettes to gouge the remaining smokers? If smoking is really so bad why not make it illegal? Oh, thats right, there would be no taxes to snatch if they did the right thing.

    A sheep to the slaughter

  2. I suppose that the government could end its gasoline tax. Though, I’m not quite sure if this will impact prices. I can’t figure out if prices will remain the same because people are willing to pay that amount or if prices will be cut to sell more gasoline.

  3. If federal taxes were to be dropped, you would save about $.18 on the current dollar. For illinois, you would save an additional $.16. So prices would drop about a dollar per gallon in illinois.

  4. Of course one reason there hasn’t been a new refinery is because the gas companies use enviromental laws to stop competing refineries setting up. Don’t believe the enviromentalists when they say they’re opposed by big business, big buisness loves the red tape that ties up new startups.

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