Archive for Wednesday, June 25, 2008

No easy fix to gas prices

June 25, 2008

Filling up the gasoline tank is becoming an increasingly distasteful endeavor as prices rise to hitherto unheard of prices.

News stories are filled with politicians scurrying to "make America less dependent on foreign oil" by allowing offshore drilling or opening up the Arctic Wildlife Refuge in Alaska to drilling. Other "greener" ideas to bring down the price at the pump include instituting a "holiday" from gasoline tax collections, striking out at speculators on the oil futures market and instituting a windfall profits tax on oil companies that have reported billions in profits.

Yet when political rhetoric is removed from those ideas, there is a stark bottom line: None of them would do much to bring us back to $2-a-gallon gasoline. (Hard to imagine yearning for those "good-old days," isn't it?)

Simple economics would tell us supply and demand is driving up the price of gasoline, not just in the United States but around the globe.

Forbes magazine puts worldwide oil demand at 86 million barrels per day, so it's easy to see why Saudi Arabia's offer to increase production by 200,000 barrels a day will have limited effect on overall prices.

Nevertheless, demand is beginning to temper somewhat as prices have continued to rise. In China, the second-leading oil consumer behind the United States, officials are raising state-subsidized prices by up to 18 percent in an effort to stem demand. The results of Beijing's initiative won't be known until later this year.

Such maneuvers, however, are aimed at the short run. Any long-term "fix" to the situation will require more than lowering gasoline subsidies, a new tax on oil company profits or approval to drill wells in environmentally sensitive areas. It will require new ways of thinking and, perhaps, vast changes to everyday life.

Oil is not in infinite supply, and the sooner we realize such a lesson on a practical level, the better.

Meanwhile, we do what we can to ease the pressure on our pocketbooks: driving slower; keeping our tires properly inflated; carpooling; combining errands to cut down on unnecessary trips; using mass transit, the bicycle or walking more often; etc.

And when we do have to make our way to the pump, we shake our heads and bear it.

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