RateItAll: The Opinion Network

Over the last 30 years the price of gas at the pump has matched the Consumer Price Index. What has hurt, in the pocket book and the economy is the the fact that they gurgle along below the inflation rate for long periods then rise dramtically. The most dramatic rise has been in the post 9-11 period, almost tripling in the last 7 years, the only other big spike on that scale occurred in the late 70's/early 80's when prices more than doubled.

Long term though, it's not the President and his oil patch pals or congress or the sheiks who are going to solely keep gas prices high, low or the same. North America is no longer the only huge customer with a growing thirst for oil. There is now demand competition from the emerging economies of China and India. But those economies don't have a bottomless tolerance for price variations either. Global politics and theological differences aside there remains one fact, we are still customers.

UPDATE: . The price spikes have impacts that result in changes to consumer behaviour. In the 70's and 80's cars got smaller and more fuel efficient, people started thinking about saving energy. We started improving the way we made everything from household appliances to doors and windows. And the predictions of dire consequences and social upheaval didn't really come true. Undeniably there were losers in the sea change, but innovators saw the opportunity and made fortunes too.

We are currently addicted to cheap oil, we need to assess our habit. In addictions counselling I highly doubt that junkies are directed to new and cheaper sources of smack when their problem gets out of hand. We can try desperately to hold on to he way things are today, or make that to the way things were about 5 years ago. Or we can move forward and figure out what to do without cheap oil.

Brazil’s ethanol fuel program is over 30 years old. The Unities States didn't get serious about alternative fuels until recently, we only have ourselves to blame. Put aside taxes. Besides ANWR, there’s oil in them there hills! The United States is sitting on more un-tapped oil than Saudi Arabia. Until an alternative fuel infrastructure can be put in place (10-15 years down the road) Gas supply to Americans should be from American oil. About 50 miles off the Florida Keys reside vast oil reserves available to be tapped by American oil companies. Fidel Castro has hooked up with China to drill there using slant drilling techniques to pump from American territory. To me, this is almost as bad as missiles in Cuba. Something should be done about that.

Liberal Democrats are elated by the high price of gas, anything that prolongs the life of the internal combustion engine is bad, it interferes with their Climate Change agenda. Everyone knows that when the price of crude oil drops (and it will) American driving habits will change with it.

More dangerous than any increase in the price of gas have been the rash responses to it, which would trade almost anything for the promise of a fleetingly lower price yet worsen the problem even from the economic point of view. Many people are adopting a hysterical tone (see Eschew's characteristically hysterical review below) which misses simple economic facts, while others (like SilverFox) are taking much more sensible approaches.

With regard to the economics involved, first understand that taxes might temporarily raise the price of gas at the pump, but they actually keep the price of oil down. The distinction is critical. If you remove the tax on gas, demand spikes and the price of oil rises. It rises, as most economists contend, to the approximate price of gas before the tax. If gas currently costs, say, $3 with a $1 tax, and the tax is subsequently repealed, the new price of gas will quickly rise to about $4. Gas companies pocket an extra $1 which we will soon later owe to rehabilitate the most sadly maintained infrastructure of any First World nation. If you don't think we have enough collapsing bridges now, repeal the gas tax.

For related reasons, ANWR drilling would do little to decrease prices. According to the Department of Energy's own (i.e., GOP-authored) report,

Additional oil production resulting from the opening of ANWR would be only a small portion of total world oil production, and would likely be offset in part by somewhat lower production outside the United States. The opening of ANWR is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light crude oil prices of $0.41 per barrel (2006 dollars) in 2026 for the low oil resource case, $0.75 per barrel in 2025 for the mean oil resource case, and $1.44 per barrel in 2027 for the high oil resource case, relative to the reference case. (p. vi)

In other words, ANWR drilling would, depending on the amount of oil that actually turns out to be there and on the rate of extraction, reduce prices per barrel somewhere between 41 cents to a $1.44. Even CNBC, which is hardly staffed by liberals, is reporting this. Considering that the price per barrel is currently approaching $150 and might be expected to double by the time ANWR would come online in the 2020s, that might eventually translate into a savings of as little as one-tenth of one percent. If you feel comfortable with imagining your grandchildren trying to understand how you could destroy something forever in order to effect a brief reduction in the price of gas of a quarter of a penny per gallon, then go right ahead and do it. You already know what oil companies will do.

What basic supply-and-demand economics tells us is that there is no way to overcome the problem with escalating gas prices on the supply side. You can only win it on the demand side. The concept shouldn't be that difficult to understand.

UPDATE: I just paid $4.33 yesterday, the cheapest I could find in my part of Silicon Valley. I think Genghis was right, prices will head up to $5.00 and will never go down again. I agree that what we need to do as a nation is to reduce demand for oil by concentrating on alternative fuels, which would not only free us from dependence on the Middle East but also reduce harmful emissions. As others have noted, the solutions that are available immediately include hybrids and flex-fuel vehicles, although we need to switch from corn-based ethanol to cellulosic ethanol. On the near horizon are electric vehicles. Hydrogen cell vehicles are a long way off, I think, though they may be the best ultimate solution.

As I noted in my original comment, one way to conserve gasoline is to reduce vehicle speeds. According to FuelEconomy.gov, driving over the speed limit at highway speeds will reduce your vehicle’s gas mileage by between 7 and 23%. No one can afford to sell off a 2-year-old SUV (many dealers won't even take them as trade-ins now), but anyone can reduce their speed to reduce fuel consumption. Even though I drive a hybrid Camry, I have dropped my freeway speed to the 65 mph limit in the far-right slow lane (the only time I find myself going to the "far right") in order to save on gas, but I'm taking my life in my hands from those who sit on my bumper and want me to get out of their way. Those include not just the big new SUVs and tricked-out trucks but also the 10-15 year-old "beaters." It affirms my belief that speeding is so ingrained with most people that the money they could save by driving their big gas-guzzlers at the speed limit will never be enough to break their habit. Speeding is likely to continue no matter how high the price of gas goes up, unfortunately, even though driving at 85 mph also endangers others.

ORIGINAL COMMENT: Someone said people would start conserving gasoline when prices hit $3.00 a gallon, and now prices are headed significantly higher. But most people seem to have adjusted to the price, at least judging by the number of people driving their SUVs 80-85 mph on the freeways here in Silicon Valley. I have no idea what price it will take to get people to slow down and drive the speed limit. Probably won't ever happen regardless of price.

What your crackerjack media refuses to portray is the jubilant dancing in the streets by the environmentalist wackos/anarchists in the US. Their goal has always been to artificially bump up the price of oil by adding taxes (consider several western European countries with economies in the tank for decades, double digit unemployment, as ours hovers around 5%) and now, through no accomplishment of their own the price is spiking and will not stop anytime soon.

With nobody in the entire country making a case for drilling in ANWR, and Congress parading the oil company executives in for monthly water-boarding sessions, the US as a country, as an economy, has done absolutely nothing to ease the pain at the pump either in the short term or the long term. Incredible.

The lamest liberal partisans blame Bush. Wrong, as always. But the real story is the demasculation and total surrender of the republican party. Remember them, the party which favored and encouraged the interests of American business? The party that owned a majority in both houses of Congress AND the White House? They are gone now, silenced and terrified like Jews under siege in the heart of Berlin in 1938. No leadership, no plan, no platform. Nothing to even indicate they might have the will to get up off the mat. Who is the head of the RNC whose ass is being kicked daily by the craziest of the crazies, Howard Dean? How far the mighty have fallen in 3 years.

Well, from a personal standpoint, it means that when my car finally croaks (which won't be long), I won't be able to buy a small truck like I really want. 20 mpg just won't cut it anymore. At least most large cars with some leg room get somewhere between 25-30 mpg on the highway. I was driving my parents' van last week, and I spent close to $50 to fill it up. This is getting ridiculous. And now that I'm getting married this summer and moving, I'll be doubling the distance (but at least not time, it's just extra highway miles) of my commute.

There are several potential solutions and/or temporary band-aids, including flex-fuel, hybrids, and hydrogen fuel cells, but all of these ideas have their own problems, and none of them seem to be a clear answer.

pretty damn bad. we drive around less as it is now even more so. pretty sad when my husband and I have to tell our grown kids if they want to go anywhere this weekend they have to chip in for gas.[two bucks a piece}our cars sit in the driveway most of the time and we consolidate all of our trips and errands. pain in the butt. bad enough since the prices of everything is going up and this too.frustrating. glad we do not have to commute.it makes it more dangerous to drive too since people run red lights more so they do not "waste gas" actually heard someone say this that they are not stopping for red lights at these gas prices. real nice! I would like some kind of proof why these prices have gone up so much. Oh sure I have read all kinds of excuses, but which one is true?

yikes!I just noticed so far this morning it's actually 109.00 per barrel,while scanning the morning headlines,i've long since changed my driving habits,52 bucks to fill up a mid size sedan is steep even if i get good gas mileage.I use to enjoy taking road trips,things like that are in the past,heck I even drive a hybrid..the thing I can't accept is how fast it's happened,i remember in spring of 04 stopping in florida to get gas and hearing people complain that gas was going so high,and at the time it was 1.94/regular. now 2.50 a gallon seems like a steal.

It's our current president that is the cause of this. Once he leaves on Jan. 20, 2009, we hope that gas will be back to the level to when I was 8- $1.30 for unleaded (eventually in my lifetime.)

Oil prices recently breached the $100 mark for the first time. The other day, I heard theories suggesting that oil prices might make it up to $200 a barrel. I suppose forecasters like round numbers! I don't expect oil prices to reach those lofty levels any time soon. In fact, I think they might drop off somewhat. We're not going to run out of energy because we lack resources. These predictions of $200 oil are based on the idea of "peak oil". This idea of peak oil is the exact reason why I'm betting against high oil prices.

Peak oil rests on the notion of depleting a known stock of oil. It's logical to assume that as supply declines and demand rises that the price of oil will also rise. However the supply of oil will also rise as its real price rises too. New oil fields are constantly being discovered, most recently off the coast of Brazil. Oil exploration companies are hard at work looking for new sources. Supply won't stay fixed as the peak oil idea requires! And neither will demand. As oil prices rise, demand for oil will go down, and people will turn to alternative sources for energy.

If oil prices do reach $200 in the near future, it won't be doomsday, for there are multiple sources of energy. In real terms, $200 oil is a high enough price that businessmen will be working very hard to bring more oil into the market and to bring into the market other sources of energy. Of course, this all depends on how well the free markets in energy operate. However, as the price of oil rises, so does the incentive to develop other sources of energy to compete with oil. They will also look for ways to more cheaply extract the oil. Economics will also demand that "energy-efficiency" be engrained into the culture. Everything from light-bulbs to building design will be altered to be more energy efficient. Much of this is already going on, some of it is partially mandated by government, most of it is not.

Demand from countries like China and India have shifted oil prices upwards in recent years, above median highs. Historically though new supplies have come to market and offset the rising demands of industrializing countries. The same thing will happen now, and that means that prices will likely stabilize and decline in the long term. There are bigger concerns than peak oil or prices in my view, like the effects of burning those fossil fuels into our atmosphere.

tip of the iceberg, and we're all on the titanic!

Forgive me for being a pessimist, but we probably haven't seen the worst of it yet (hence the "3" rating).

Business Week posted 10 likely events for Year 2008. Among them is oil above $100. It happened too fast - on the second day of the New Year. The oil prices trend will go up and up, so expect open your pockets even more at the pumps. It will also change the geopolitical situation, giving more power to the oil producing monsters, as Middle Eastern countries and Russia.

I feel sorry for the people that have to heat their houses on gas, I pay $340 for 125 gallons of propane, rott in hell you money whores!!

GTH is right that the ever increasing cost of oil will have a major effect on the United States. With many in this country facing tough times after the 2007 mortgage crisis, rising gas prices will be even more hard to take. This might seriously force developers and lawmakers to alter their current way of operating in order to create communities that are self sufficient without the use of individual automobile transportation.

Oil is never going to go down, and we shall see gasoline move towards the $5.00 a gallon mark. This will radically change American society, and will be the beginning of the end of suburbia or at least exurbia. People driving 90 minutes to work will become a memory.